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Gladstone PLC (GLD)

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Friday 24 April, 2009

Gladstone PLC

Interim Results

RNS Number : 0908R
Gladstone PLC
24 April 2009
 



Press release

24 April 2009


Gladstone plc


("Gladstone" or "the Company")


Interim Results


Gladstone plc (AIM:GLD.L), the leading provider of software solutions and services to the heath & leisure and education markets, is pleased to announce its interim results for the six months ended 28 February 2009.


Highlights: 


  •  

Turnover at £4.35 million in line with last year's result (H1 2008: £4.36 million)

  •  

Underlying operating profit before exceptional expenditure up 6% to £698,000 at the interim stage (H1 2008: £660,000) 

  •  

Second half order pipeline for Health and Leisure as well as Education at a healthy level

  •  

Net tangible assets now at a significant £6.3 million level (H1 2008: £5.9 million)


Commenting on the results, Dr Said Ziai, Chairman and Chief Executive of Gladstone plc, said: "The Board of Gladstone is pleased to report yet another set of positive interim results. This is significant as we have achieved them despite the unprecedented adverse market conditions and our significant efforts in defending against Constellation's hostile moves. 


"We see additional opportunities ahead of us for the second half, with several sales initiatives mitigating the worst impacts of the downturn, and in particular with the completion of several education sector projects during the summer period.  Gladstone is uniquely positioned to benefit from the continued consolidation across the health and leisure market as well as benefiting from its early entry into the growing Education Facilities Management Solutions market.


"We are in an ideal position to continue with and accelerate our growth initiatives, and leverage the strategic value of our ongoing product development as well as our strong cash position. We cautiously look towards the future with confidence."


For further information, please contact:


Gladstone plc


Peter K. Doyle, Head of Marketing

Tel: +44 (0) 1491 201010

[email protected]

www.gladstoneplc.com


Financial Adviser and Nominated Adviser to Gladstone:


Grant Thornton UK LLP


Gerry Beaney

Tel: +44 (0) 20 7728 2589

David Hignell

Tel: +44 (0) 20 7383 5100


Stockbroker to Gladstone:


Fairfax I.S. PLC


Adam Hart

Tel: +44 (0) 20 7598 5368 

Simon Bennett

Laura Littley




Media enquiries: 

Abchurch Communications Limited


Chris Lane / Monique Tsang / Jack Ballantyne 

Tel: +44 (0) 20 7398 7712

[email protected]

www.abchurch-group.com


Notes to Editors 


Gladstone plc's innovative software products and services, currently targeted at the global health and leisure and education markets, are used daily by thousands of front line staff, managers, end users and students.


Gladstone Health and Leisure is the market leader in the provision of member relationship management solutions for a wide range of health and leisure organisations including trusts, leisure centres, and major private leisure chains and is established as the de facto standard for UK local authorities. The Company enables all its clients in both public and private sectors to utilise central database facilities for central and cross-site on-line bookings, Customer Relationship Management ("CRM") and membership management, centralisation of administration, marketing and reporting.


The Company also provides a wide range of integrated systems and software-based solutions for the rapidly expanding Education Facilities Management Solutions ("EFMS") market across the entire spectrum of educational establishments and is a key supplier to the UK Government's Building Schools for the Future ("BSF") initiative.


Gladstone is focused on extending its solutions capabilities, which enable its clients to maximise resource usage, retain customers and improve operational performance, thereby making cost efficiencies, into new vertical and geographic markets aligned with its growth strategy.


The Company's current solutions include the comprehensive Plus2TM product suite which incorporates advanced functionality including web-based remote booking, advanced analysis and the use of kiosks, as well as Gladstone OnRecordTM which serves the education industry with e-registration, biometric and smart card recognition, cashless payment systems, extensive information portals, libraries usage and access control.


Based in Oxfordshire, the Company has sales offices in GlasgowDublin (Ireland) and Sydney (Australia), in addition to development facilities in Sonderborg (Denmark) and Karachi (Pakistan).


For further information, visit www.gladstoneplc.com



CHAIRMAN & CHIEF EXECUTIVE'S STATEMENT


It is with pleasure that I present Gladstone's interim results for the six months ended 28 February 2009. Our solid performance in the first half has been marked by the unprecedented and rapid downturn in financial markets and deterioration in economic outlook across all sectors. In addition, we had to spend significant resources and time to defend other shareholders' interests against a hostile and unsolicited takeover offer by Constellation Software Inc. ("Constellation") which lapsed on 30 December 2008, followed by Constellation's failed requisition on 16 March 2009 to appoint its chairman and president, Mark Leonard, onto our board.

    

The Board of Gladstone hopes that the unsolicited approaches by Constellation will now cease. The Board met with Mark Leonard on 26 March 2009. This meeting was cordial and constructive. In the long term interests of all shareholders, Gladstone has always welcomed the opportunity to continue an open and constructive dialogue with all its shareholders including Constellation who are currently our largest shareholder.


We maintained our focus and delivered a robust set of results during the first half, with revenues in line with those of last year. This is particularly important as many businesses have experienced a rapid decline in revenues from September 2008 onward. Indeed we see additional opportunities ahead of us for the second half, with several sales initiatives mitigating the impact of the downturn and in particular a more prominent weighting towards expected completion dates for education projects during the summer period.


Gladstone is uniquely positioned to benefit from the continued consolidation amongst private and public sector operators across the health and leisure market and from its early entry into the fast growing Education Facilities Management Solution ("EFMS") market. The inherent stability in Gladstone's services and capabilities as a long term business partner is now increasingly clear to our potential clients. Some of Gladstone's recent contract wins are a clear testimony to our strength and stability.


We plan to continue with and accelerate the growth initiatives that we have already started. We are increasingly leveraging the strategic value of the investment we have made in our market and product development work undertaken over the past three years. Our growth opportunities are not confined to the UK but also exist across other markets. The current adverse market conditions mean that we can leverage our financial strength and ultimately enhance shareholder value.


Financial Overview

Our core business is seasonal, being weighted towards the second half of our financial year. There is now a heavier emphasis on the second half as we increase our market position in the education sector. Last year we were still uncertain whether the turmoil in the financial markets and the tightening of credit would have any significant impact on the activity levels of our private and public sector clients. This year we have witnessed a clear deterioration across the market. There has been a discernable slowdown and hesitation on the part of certain private sector clients to commit to orders during the first half. 

Gladstone has been fortunate in mitigating a large proportion of the rapid slowdown in orders by having created a pipeline of new product extensions such as Kiosk and Connect and by offering enhanced services. I am pleased to be able to report that existing and new major clients in the health and leisure market converting to Gladstone's solutions have been able to justify the further investment in their systems by virtue of the value added to their operations through efficiency gains, customer retention and improved services.


Our turnover of £4.35 million, during the first six months, was in line with last year's (H1 2008: £4.36 million).  Our current pipeline of orders already indicates a strong second half performance despite the difficult market conditions.  Underlying operating profit of £698,000 before exceptional items and share based payment charge during the first half was up 6% on last year's result (H1 2008: £660,000). This is a robust performance given our continued commitment to investing in additional resources for Gladstone Education and other areas of the business. We did however incur exceptional costs of £690,000 primarily as a result of the costs associated with defending Constellation's hostile bid.


The Australian economy has also experienced a rapid and severe slowdown, affecting business opportunities in both the private and the public sectors. Despite this our results in Australia have held up well with a continued contribution to Group profits and an increasing maintenance revenue stream. Valuenetics A/S, our Danish subsidiaryalso contributed to Group profits in line with our plans. We continue to invest in Gladstone Education in anticipation of substantial future growth.


Net tangible assets now stand at a significant £6.3 million (H1 2008: £5.9 million). We have £4.2 million in net cash with additional freehold property assets last valued three years ago at £2.0 million. The properties will be revalued this summer. Approximately, 8.6% of Gladstone's own share capital, worth close to £1.0 million, is held in treasury.  Unfortunately the Board's ability to resell these shares back to the market when the right opportunity arises, has been blocked as the appropriate resolution was not passed by shareholders at the AGM. Our strong balance sheet highlights the financial strength of Gladstone relative to its peer group and gives the Group financial flexibility to further leverage its position.


In accordance with IAS 12 (37), the Group is required to re-assess its deferred tax asset with regard to unused tax losses at each balance sheet date to the extent that it is probable that future taxable profit will be available against which such losses can be utilised. Gladstone plc has consistently made profits over the past few years and therefore, a deferred tax asset had been recognised. It has not been considered necessary to adjust the value of this deferred tax asset as at 28 February 2009. However losses brought forward in Gladstone Education Limited have now been provided for in the same way, resulting in a deferred tax credit of £93,000 being recognised in the income statement for the 6 months to 28 February 2009.


Operations Overview

Our operations have evolved and improved considerably over the past three years.  Gladstone is now stronger than ever in its management team composition and focus. This will further assist us to realise value from new business opportunities.


UK and Ireland

Notwithstanding the challenging economic conditions in both markets, we have a strong sales order pipeline in our core market of health and leisure as well as in education. The sharper focus of our sales and delivery teams and the introduction of integrated and automated sales and delivery tracking systems are now demonstrating their worth by widening our market reach and the quality of our customer service.


Gladstone's subsidiary, Gladstone MRM Limited, which trades as Gladstone Health & Leisure, consolidated its position as the leading supplier to local authorities and leisure trusts in the UK winning notable contracts and replacing competitor systems in South Lanarkshire, Bromley Mytime, and in Hounslow and Oxford City working with Fusion Lifestyle.


In England other major client acquisitions included Three Rivers District Council, Stroud District Council, Harlow Sports Trust incorporating a major new state-of-the-art sports complex, and in Ireland Kildare Sports and Leisure Trust.  Major university orders have been received from the University of WalesNorthumbria University (one of the Company's more established customers), and three specialist sports colleges in Comberton, Impington and Bassingbourn.


Working with major national private and public chains Gladstone extended their service provision with Greenwich Leisure, Leisure Connection, and SLM, through additional sites and also continued to further roll out the customer self service solutions Kiosk and Connect.


We have continued an extensive upgrade programme of our education product suite to better serve the future needs of this market. Our close work with key ICT (Information & Communications Technologies) partners has created a number of development opportunities which will put Gladstone at the cutting edge of solutions capability in the EFMS sector. Following the successful implementation of OnRecordTM Cashless Catering and e-Registration solutions as an integral part of Phase-One Bristol BSF (Building Schools for the Future) initiative last year, we have continued to win further prestigious contracts in partnership with a number of other education ICT providers. We formally completed implementation of our flagship Gladstone OnRecord Identity ManagerTM, Cashless Catering and e-Registration solutions in The Gateway Academy in Tilbury with Lorne Stewart and Keir Regional - one of the largest single site projects in the UK. Within this pioneering site Gladstone has also facilitated the provision of additional solutions including Library Management, Asset Tagging, Access Control and CCTV enabling a fully integrated application with OnRecord at its core.  This project now acts as a showcase benchmark for our integrated systems capabilities in the education market.


Gladstone Education continued to strengthen its position in the BSF sector with successful completion of Phase One of the Bristol BSF programme. We expect to continue to contribute to this project in its future phases in partnership with both Northgate Education and Skanska FM. Gladstone Education also worked with Civica to successfully install its Identity Manager and Integration capabilities to the first of the Sheffield BSF contracts at Yewlands School, and it deployed its flagship OnRecord e-Registration application throughout the subsequent three Sheffield BSF Schools in December 2008.  Gladstone will continue to develop the Civica relationship with a phased roll-out to all Sheffield BSF schools, as they are announced over the next five years.


Within the UK Government's £5 billion Academies Programme, Gladstone Education completed the Burlington Danes and Evelyn Grace projects with XMA and Ark Academies, and implemented in partnership with XMA at the Corby Academy and Nottingham Emmanuel. Gladstone Education has also continued to develop its relationship with European Electronique by successfully implementing OnRecord Cashless Catering into Wren Academy and Merchant Academy as they continue to strengthen their position in the Academies build space with Gladstone Education.


We remain convinced that the significance and long-term value of our move into the rapidly expanding EFMS sector will increasingly become apparent as we develop a wide range of key partnerships across the UK market and deliver our products within the extensive £45 billion investment in the BSF programme to be rolled out by the UK Government over the next ten to fifteen years.


Australia

Gladstone's products and our team's commitment to service are now widely recognised across the health and leisure sector in Australia. This has provided us with the resilience to withstand the rapid slowdown in market activity across both the private and public sectors in Australia. We recently won a major contract with Lismore City Council and further built on our relationship with the City of Wanneroo Council in Western Australia. Virgin Active has now implemented its new site in Melbourne which has started pre-sale with a due open date in early June. We also implemented Plus2 at Melbourne University, Toongabbie Leisure Centre in Sydney, Cockburn City Council's Youth Services and PCYC facilities in Ashmore, Nerang and Toowoomba.


OrbitTM, our latest technology platform, was also showcased at the Australian Fitness Expo 2009 Exhibition, the Annual Health & Leisure show in Sydney, on 17 April. Early indications are that a number of target prospects have shown keen interest in Orbit ProfessionalTM, recognising its unique capabilities.


Europe

Our development team in Demark has made significant contributions to the rapid development of the Orbit platform and in getting the first stage product, Orbit Professional, ready for market. Valuenetics A/S in Denmark has also continued to build on its relationship with one of its major clients in the heating sector, Danfoss, enhancing its revenues and the capabilities of its PCM (Product Content Management) solution.


Development

Gladstone has invested in developing an industry redefining technology platform, Orbit, which is a comprehensive web-based membership relationship management ('MRM') solution. This will further enhance and secure the Group's market leadership position across the whole of the health and leisure market internationally as well as securing our existing customer base. With the expansion of development facilities in SønderborgDenmark and our development resource in KarachiPakistan, we have significantly enhanced our international development capacity. This has provided a vital extension to our UK based resources and our ability to increase and maintain our lead over the competition by a wide margin, thereby creating a significant competitive advantage.


Strategy

We have on several occasions noted the long term inevitability of further consolidation in the health and leisure market through M & A activity, operational consolidation and organic growth. There is an ongoing need for greater sophistication and intelligent systems driven by an increasingly demanding health conscious public. There is also a need for more appropriate and personalised services. These needs must all be provided for within facilities that maximise the financial returns for their operators. The legacy fragmentation that has emerged from the early genesis of the market, when the pioneering systems were not capital and time intensive to develop, further necessitates consolidation.


Based on our review of the market conditions and the views of a large number of our clients, we have noted that the market is rapidly approaching a paradigm shift as service providers will have to demonstrate a much wider range of capabilities to be able to respond to the new and changing levels of demand from their customers. Against this backdrop and the deteriorating market conditions, Gladstone has, as a market leader, a particular advantage. It is financially robust, has a dedicated development resource, a mature and committed support team with one of the most comprehensive solutions, Plus2, widely used across the market.


Gladstone had traditionally focused on serving the needs of the most complex and comprehensive operations in the health and leisure market. A proportion of the potential clients, in particular smaller single site facilities had previously been content to utilise the more basic and entry level products and services offered by a number of the smaller scale solution providers. This mind set is now rapidly changing as all leisure facilities, whether a single site or a very large chain, are increasingly required to deploy comprehensive mission critical systems. They need these systems to help them manage their facilities more efficiently and proactively, provide a higher quality customer experience and maximise returns on their investments. Our ongoing review of market trends highlighted the significant shift in health and leisure operators' awareness of this change and the consequences on the sustainability of their operations into the future. This recognition we now find has been accelerated by the more challenging economic conditions. Leisure facility operators need to introduce more comprehensive and intelligent system solutions.  Gladstone leads the provision of such solutions and is recognised to set the quality benchmark.


This change in attitude of our long standing clients as well as our new customers is welcomed by Gladstone. These clients greatly value the stability and scale of our organisation in serving their current and future needs. They recognise that Gladstone is not only uniquely positioned to serve their needs today but will also be able to invest heavily to deliver ground breaking and innovative solutions for the emerging paradigm shift.


Gladstone has put in place a robust and clear roadmap of developments to deal with these exciting challenges. Not only have we continued to enhance our flagship product, Plus2, with new features and functionality that we have also been developing an extensive new technology platform, Orbit. This new platform is focused on delivering many of the changing services and future capabilities which health and leisure operations, large and small across different markets, are aiming to adopt over the next several years. Having introduced Orbit at the LIW (Leisure Industry Week) show in September 2008, we are now about to launch Orbit Professional as the first phase product from the Orbit platform into the single site market. This will essentially open up a new market for Gladstone.


Based on our core competencies, Gladstone is also in a very strong position to extend its solutions into the education sector and in time into other strategic vertical markets. Our existing systems are already being deployed across many schools' and universities' leisure facilities to help the management of such facilities providing a high value added service to the education establishment as well as the local community. We are now providing cashless catering, e-registration solutions and access control systems using smart cards or biometric technology across many schools and other educational facilities. ICT expenditure on these solutions across the education sector is predicted to rise over the next decade.


Outlook

Our patience in consolidating our current relationships through improved services as well as broadening our market position whilst pursuing extensive new development in line with our well defined long term strategic roadmap, is now beginning to show significant value. We believe our competition is in its weakest position ever and their clients are actively seeking Gladstone's support and services in order to help them improve their services and business performance. The result of our development work, in areas such as Kiosk and Connect for our flagship product Plus2, has started to generate significant interest amongst our existing clients as well as a number of potential major new clients currently under served by the competition.


The development of our new technology platform, Orbit, progresses on target with its first phase launch set for early May. We expect this new platform to redefine the software solutions applications in the health and leisure market in the UK as well as other geographic markets. We also plan to extend the application of Orbit into other vertical markets.


Our current order-book and quarterly sales pipelines are healthy despite very difficult overall market conditions. We have made significant progress in our education business, with a number of key partnerships with ICT providers already in place.  We look forward to a robust performance in the second half, backed by the visibility on a number of key prospects. Despite much more difficult market conditions relative to last year in Australia, we have confidence that the business will continue to prosper.


In summary, we are a clear market leader in the UK and are focused on ensuring our continued success here whilst aiming to rapidly grow in other vertical and geographic markets. We have established an attractive business model, long term approach and well established infrastructure. We have demonstrated that we fully understand the dynamics and the economics of our market place and are supported by a strong management team. With a robust balance sheet, we are committed to continually review all possible and strategically relevant opportunities to put in place further options to maximise shareholder value.


People

Our staff numbers have largely stayed in line with last year's numbers, whilst maintaining our focus on improving the quality and expertise of our staff through enhanced management of all resources to better match our new initiatives across a wide range of activities.


Our long term success depends on the abilities and professionalism of our people.  Gladstone's employees have responded well to the recent challenging times. On behalf of the Board, I thank all our employees for their hard work, commitment and contribution in helping the Group reach its business objectives and to be recognised as a key long term partner for our clients.




Dr Said Ziai

Chairman and Chief Executive Officer


23 April 2009


CONSOLIDATED INCOME STATEMENT



Six months

Six months

Year



ended

ended

ended



28 February

29 February

31 August



2009

2008

2008



(Unaudited)

(Unaudited)

(Audited)



£

£

£






Revenue


4,345,620

4,356,098

9,551,267






Cost of sales


(732,169)

(719,244)

(1,719,957)



_________

_________

_________






Gross profit


3,613,451

3,636,854

7,831,310






Operating expenses excluding exceptional items


(2,927,028)

(2,986,538)

(6,161,463)






Other income


11,625

9,705

21,330



_________

_________

_________






Underlying operating profit before exceptional items and share based payment charge


698,048

660,021

1,691,177






Exceptional items


(690,007)

-

(86,218)






Share based payment charge


(4,878)

(20,001)

(77,210)



_________

_________

_________






Operating profit


3,163

640,020

1,527,749






Net finance income


94,690

116,186

226,081



_________

_________

_________






Profit before taxation


97,853

756,206

1,753,830











Taxation


(17,851)

493,894

349,868



_________

________

_________






Profit for the period


80,002

1,250,100

2,103,698



========

========

=======

Attributable to:





Equity holders of the company


80,002

1,240,794

2,094,392

Minority interests


-

9,306

9,306



________

________

________








80,002

1,250,100

2,103,698



========

========

=======

The results shown above relate to continuing operations.





















Six months

Six months

Year



ended

ended

ended



28 February

29 February

31 August



2009

2008

2008



(Unaudited)

(Unaudited)

(Audited)

Earnings per ordinary share based on underlying operating profit before exceptional items and share based payment charge (pence)





Basic


1.33p

1.26p

3.22p

Diluted


1.31p

1.24p

3.18p



=======

=======

=======

Earnings per ordinary share (pence)





Basic


0.15p

2.37p

3.99p

Diluted


0.15p

2.34p

3.94p



=======

=======

=======






EBITDA (earnings before interest, tax, depreciation and amortisation)


£

£

£

EBITDA before exceptional items and share based payment charge


791,158

754,020

1,908,198






EBITDA


96,273

734,019

1,744,770



=======

=======

=======







CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE



Six months

Six months

Year



ended

ended

ended



28 February

29 February

31 August



2009

2008

2008



(Unaudited)

(Unaudited)

(Audited)



£

£

£






Exchange differences on retranslation of net assets of foreign currency operations


43,026

62,974

89,638






Deferred tax credited to revaluation reserve


2,750

-

5,500



________

________

________






Net income and expense recognised directly in equity


45,776

62,974

95,138






Profit for the financial period


80,002

1,250,100

2,103,698








________

________

________






Total recognised income in the year


125,778

1,313,074

2,198,836



=======

=======

=======

Attributable to:





Equity holders of the company


125,778

1,303,768

2,189,530

Minority interests


-

9,306

9,306



________

________

________






Total recognised income in the year


125,778

1,313,074

2,198,836



=======

=======

=======


CONSOLIDATED BALANCE SHEET


28 February

29 February

31 August


2009

2008

2008


(Unaudited)

(Unaudited)

(Audited)


£

£

£

Assets




Non current assets




Intangible assets

974,188

333,197

621,343

Goodwill

7,307,025

7,255,299

7,272,972

Property, plant and equipment

2,549,092

2,661,013

2,594,292

Deferred tax asset

648,028

400,174

558,248


_________

_________

_________


11,478,333

10,649,683

11,046,855


_________

_________

_________

Current assets




Inventories

36,247

77,259

36,694

Trade and other receivables

2,597,053

2,690,808

3,578,929

Current income tax asset

41,100

-

31,592

Cash and cash equivalents

4,190,979

4,055,244

4,584,663


_________

_________

_________


6,865,379

6,823,311

8,231,878


_________

_________

_________

Total Assets

18,343,712

17,472,994

19,278,733


========

========

========

Liabilities




Current liabilities




Trade and other payables

554,822

725,510

1,046,054

Current income tax liability

-

188,353

-

Accruals and deferred revenue

2,682,350

2,767,757

3,364,608


_________

_________

_________


3,237,172

3,681,620

4,410,662


_________

_________

_________

Non current liabilities




Provision for liabilities

13,615

11,085

12,174

Deferred tax liability

482,747

304,189

418,665


_________

_________

_________


496,362

315,274

430,839


_________

_________

_________

Total Liabilities

3,733,534

3,996,894

4,841,501


========

========

========

Net assets

14,610,178

13,476,100

14,437,232


========

========

========

Equity




Issued share capital

4,228,773

4,224,887

4,226,434

Share premium account

15,319,395

15,262,830

15,279,444

Treasury shares

(981,875)

(981,875)

(981,875)

Special Reserve

4,667,133

4,667,133

4,667,133

Revaluation reserve

639,199

660,415

646,271

Translation reserve

134,640

64,950

91,614

Other reserve

243,302

181,782

238,424

Retained earnings

(9,640,389)

(10,604,022)

(9,730,213)


_________

_________

_________

Total equity

14,610,178

13,476,100

14,437,232


=========

=========

========


The interim report was approved by the Board of Directors on 23 April 2009.


S. Ziai

Chief Executive Officer



CONSOLIDATED CASH FLOW STATEMENT


Six months

Six months

Year


ended

ended

Ended


28 February

29 February

31 August


2009

2008

2008


(Unaudited)

(Unaudited)

(Unaudited)


£

£

£

Cash flow from operating activities




Cash generated from operations before exceptional items

487,337

234,749

1,250,628

Exceptional items

(566,940)

-

-


_________

_________

_________

Cash generated from operations after exceptional items

(79,603)

234,749

1,250,628

Interest paid

(40)

(1,802)

(2,375)

Income tax paid

(50,307)

-

(270,069)


_________

_________

_________

Net cash generated by operating activities

(129,950)

232,947

978,184


_________

_________

_________

Investing activities




Interest received

94,730

117,988

228,456

Acquisition of subsidiaries, net of cash acquired

-

(50,010)

(50,010)

Payments for property, plant and equipment

(47,909)

(44,564)

(100,865)

Development expenditure

(352,845)

(233,045)

(521,191)


_________

_________

_________

Net cash used in investing activities

(306,024)

(209,631)

(443,610)


_________

_________

_________

Financing activities




Proceeds from issues of equity shares

42,290

39,213

57,374

Purchase of treasury shares

-

(981,875)

(981,875)


_________

_________

_________

Net cash used in financing activities

42,290

(942,662)

(924,501)


_________

_________

_________

Net (decrease)/increase in cash and cash equivalents

(393,684)

(919,346)

(389,927)





Cash and cash equivalents at the beginning of the period

4,584,663

4,974,590

4,974,590


_________

_________

_________

Cash and cash equivalents at the end of the period

4,190,979

4,055,244

4,584,663


========

========

========


NOTES TO THE UNAUDITED INTERIM REPORT


      General Information

    

Gladstone plc is a company incorporated in England and Wales. The addresses of its registered office and principal place of business are disclosed at the end of the interim report. The group is listed on AIM, the Alternative Investment Market of the London Stock Exchange, and has the TIDM code GLD. Information required by AIM Rule 26 is available in the investor relations section of the group's website at www.gladstoneplc.com.


These interim results for the six months ended 28 February 2009 are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial statements for the year ended 31 August 2008 have been delivered to the Registrar of Companies and the auditor's report on those financial statements was unqualified and did not contain a statement made under section 237 (2) or section 237 (3) of the Companies Act 1985, with the latter version of the Companies Act having been current during the previous reporting period. 


 

1.     Accounting policies


The Group has adopted the accounting policies set out below in preparation of this financial informationAll of these policies have been applied consistently throughout the period unless otherwise stated. The accounting policies are consistent with those used in the preparation of the audited financial statements of the Group for the year ended 31 August 2008, and those to be used in the year ending 31 August 2009.

 

1.1    Basis of preparation

 

         The financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting".


The financial information has been prepared on the historical cost basis except for the revaluation of certain non-current assets.


1.2     Basis of consolidation


The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.


All business combinations are accounted for using the purchase method of accounting.


Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

 

1.3    Revenue recognition


Revenue represents the value of sales of software and related services to third parties, exclusive of value added tax or equivalent. Software licences are recognised on delivery of the software licence. Maintenance renewals are recognised rateably over the period of the maintenance contract. Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

 

1.4         Employee benefits


The Company has defined contribution plans under which fixed payments are made to employees' personal pension schemes. The payments are charged to the income statement when they are due.


Accruals are made for holiday pay, based on a calculation of the number of days holiday earned during the year, but not yet taken.

 

1.5         Share based payments


The fair value of all share based payment arrangements granted after 7 November 2002 that had not vested prior to 1 September 2006 are recognised in the financial statements.


Where employees are rewarded using share based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact on non-market vesting conditions.


All equity-settled share based payments are ultimately recognised as an expense in the income statement with a corresponding credit to reserves.


If vesting periods apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are revised subsequently if there is any indication that the number of share options expected to vest differs from previous estimates.  


Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options that have vested are not exercised.


Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital and, where appropriate, share premium.


A charge has been made in the six months of £4,878 (2008: £20,001) to reflect the fair value to the Group of issuing employee share options. This charge has been calculated using the Black-Scholes model to apply a fair value to the options issued and to spread that charge over the vesting period. 

 

1.6         Intangible fixed assets – research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred. Development costs incurred after the point at which the commercial and technical feasibility of the product has been proven, and the decision to complete the development has been taken and the resources made available, are capitalised. The expenditure capitalised includes the cost of direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Development expenditure is amortised on a straight line basis over the estimated useful life of the product.

 

1.7    Intangible fixed assets - goodwill 


Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the fair value of the group share of the net identifiable assets of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

 

1.8    Impairment of goodwill


The determination of whether or not goodwill has been impaired requires an estimate to be made of the value in use of the cash generating units to which goodwill has been allocated. The value in use includes estimates about the future financial performance of the cash generating units, including management's estimates of long term operating margins and long term growth rates. 

 

1.9     Investments


Fixed asset investments are stated at cost less any provision for impairment.

 

1.10   Property, plant and equipment


Other than revalued land and buildings, tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:


         Freehold properties                                                        2% straight line basis

         Office equipment and computers                                   20% reducing balance basis

         Fixtures and fittings                                                     25% reducing balance basis

         Motor vehicles                                                             25% reducing balance basis


The freehold property is carried at its revalued amount. The property is revalued once every 3 years, the last time being as at 10th November 2006. An impairment review is carried out each year to ensure the value being carried forward is appropriate. 


Depreciation is charged on the revalued amount so as to write off the asset over its expected useful life, being 50 years. An equal amount to the excess of the annual depreciation charge over the historic cost depreciation charge is transferred annually from the revaluation reserve to the income statement.

   

1.11   Inventories 


Inventories are stated at the lower of cost and net realisable value. 


The cost of inventories comprises the purchase price, carriage and other costs directly attributable to the acquisition of goods, less any trade discounts deductable.


Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

 

1.12   Cash and cash equivalents


Cash and cash equivalents comprise cash balances and short term (with an original maturity of less than three months) deposits. Bank overdrafts that are repayable on demand form a part of the cash and cash equivalents for the purpose of the cash flow statement.

 

1.13   Treasury shares


Where any group company purchases the company's equity share capital (treasury shares), the consideration paid is deducted from equity until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received is included in equity.

 

1.14   Taxation


Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.


Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.


Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. 


Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.


The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

1.15   Leasing


Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

 

1.16   Foreign currency translation


The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in UK £ which is the functional currency of the Company and the presentation currency for the consolidated financial statements.


In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.


Results of the overseas subsidiaries are translated into sterling at the weighted average rates for the year, which is effected by translating each overseas subsidiary's monthly result at exchange rates applicable to each of the respective months. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the foreign exchange rate ruling at that date. Differences on exchange resulting from the translation of overseas assets and liabilities are recognised directly in equity.


As permitted by IFRS 1, transition differences arising prior to 1 September 2006 are deemed to be zero at the IFRS transition date, and any amounts recognised in accordance with UK GAAP at that date have been included in retained earnings.

 

1.17   Critical accounting estimates and judgements


When applying the Group's accounting policies, management must make assumptions and estimates concerning the future that affect the carrying amounts of assets and liabilities at the balance sheet date and the amounts of revenue and expenses recognised during the accounting period. Such assumptions and estimates are based upon factors such as historical experience, the observance of trends in the industries in which the Group operates, and information available from the Group's customers and other outside sources.  


The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include: 


Goodwill


Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.  


2.      Earnings per ordinary share 


The basic earnings per ordinary share has been calculated using the profit for the period and the weighted average number of ordinary shares in issue during the period as follows:



Six months

Six months

Year


ended

Ended

ended


28 February

29 February

31 August


2009

2008

2008


(Unaudited)

(Unaudited)

(Audited)


£

£

£





Profit attributable to equity shareholders

80,002

1,240,794

2,094,392





Share based payments charge

4,878

20,001

77,210

Tax

17,851

(493,894)

(349,868)

Finance income

(94,690)

(116,186)

(226,081)

Minority interest

-

9,306

9,306

Exceptional items

690,007

-

86,218


________

________

________

Underlying operating profit before exceptional items and share based payment charge

698,048

660,021

1,691,177


=======

=======

=======






Number

Number

Number

Weighted average of number of shares:




For basic earnings per share

52,601,891

52,361,983

52,466,899

Adjustment for outstanding share options

867,016

750,932

733,134


_________

_________

_________

For diluted earnings per share

53,468,907

53,112,915

53,200,033


=========

=========

=========






Pence per share

Pence per share

Pence per share

Earnings per share based on underlying profit before exceptional items and share based payment charge:




Basic

1.33p

1.26p

3.22p

Diluted

1.31p

1.24p

3.18p





Earnings per share:




Basic

0.15p

2.37p

3.99p

Diluted

0.15p

2.34p

3.94p


The earnings per share on the underlying operating profit before exceptional items and share based payment charge has been presented because, in the opinion of the directors, this provides shareholders with a more appropriate measure of the earnings derived from the group's business.


3.  Intangible fixed assets

        



Development



Goodwill

costs

Total


£

£

£

Cost




At 1 September 2008

7,272,972

1,355,216

8,628,188

Costs capitalised during the period

-

352,845

352,845

Retranslation of goodwill on foreign acquisitions

34,053

-

34,053


_________

_________

_________





At 28 February 2009

7,307,025

1,708,061

9,015,086


_________

_________

________

Amortisation




At 1 September 2008 

-

733,873

733,873

Charge for the period

-

-

-


_________

_________

________





At 28 February 2009

-

733,873

733,873


_________

_________

________





Net book values




At 28 February 2009

7,307,025

974,188

8,281,213


========

========

========

At 31 August 2008

7,272,972

621,343

7,894,315


========

========

========

At 29 February 2008

7,255,299

333,197

7,588,496


========

========

========







4. Treasury Shares


The total number of shares held as treasury shares as at 28 February 2009 was 4,525,000 (8.63% of the total ordinary shares of 1p each).



5.  Statement of movements on issued share capital and share premium account



Issued share capital

Share premium account


£

£

Six months ended 28 February 2009



At 1 September 2008

4,226,434

15,279,444

Shares issued

2,339

39,951


__________

__________


4,228,773

15,319,395


=========

=========

Six months ended 29 February 2008



At 1 September 2007

4,222,200

15,226,304

Shares issued

2,687

36,526


__________

__________


4,224,887

15,262,830


=========

=========

Year ended 31 August 2008



At 1 September 2007

4,222,200

15,226,304

Shares issued

4,234

53,140


__________

__________


4,226,434

15,279,444


=========

=========

            


6.  Statement of movements on reserves






Share



Treasury

Special

Revaluation

Translation

based

Retained


shares

Reserve

Reserve

reserve

payments

Earnings


£

£

£

£

£

£

Six months ended 28 February 2009






At 1 September 2008

(981,875)

4,667,133

646,271

91,614


238,424

(9,730,213)

Transfer from reserve to retained earnings

-

-

(9,822)

-

-

9,822

Deferred tax credited to revaluation reserve

-

-

2,750

-

-

-

Share based payment

-

-

-

-

4,878

-

Release of share based payment reserve following exercise of share options

-

-

-

-



-

-

Exchange differences on retranslation of net assets of foreign currency operations

-

-

-

43,026

-

-

Retained profit for the period

-

-

-

-

-

80,002


_________

_________

________

________

________

__________








At 28 February 2009

(981,875)

4,667,133

639,199

134,640

243,302

(9,640,389)


========

========

=======

=======

=======

=========







Six months ended 29 February 2008






At 1 September 2007

(275,000)

4,667,133

660,415

1,976


164,953

(11,847,988)

Purchase of treasury shares

(706,875)

-

-

-

-

-

Share based payment

-

-

-

-

20,001

-

Release of share based payment reserve following exercise of share options

-

-

-

-



(3,172)

3,172

Exchange differences on retranslation of net assets of foreign currency operations

-

-

-

62,974

-

-

Retained profit for the period

-

-

-

-

-

1,240,794


_________

_________

________

________

________

__________








At 29 February 2008

(981,875)

4,667,133

660,415

64,950

181,782

(10,604,022)


========

========

=======

=======

=======

=========







Year ended 31 August 2008






At 1 September 2007

(275,000)

4,667,133

660,415

1,976

164,953

(11,847,988)

Purchase of treasury shares

(706,875)

-

-

-

-

-

Transfer from reserve to retained earnings

-

-

(19,644)

-

-

19,644

Deferred tax credited to revaluation reserve

-

-

5,500

-

-

-

Share based payment

-

-

-

-

77,210

-

Release of share based payment reserve following exercise of share options

-

-

-

-



(3,739)

3,739

Exchange differences on retranslation of net assets of foreign currency operations

-

-

-

89,638

-

-

Retained profit for the period

-

-

-

-


-

2,094,392


_________

_________

________

________

________

________

At 31 August 2008

(981,875)

4,667,133

646,271

91,614

238,424

(9,730,213)


========

========

=======

=======

=======

=======


7.  Cash generated from operations    

    


Six months

Six months

Year


ended

ended

Ended


28 February

29 February

31 August


2009

2008

2008


(Unaudited)

(Unaudited)

(Audited)


£

£

£





Operating profit before tax and finance income for the period

3,163

640,020

1,527,749

Exceptional items

690,007

-

86,218


_________

_________

________

Operating profit before tax, finance income and exceptional items for the period

693,170

640,020

1,613,967

Depreciation charges

93,109

93,999

217,021

Share based payment expense

4,878

20,001

77,210

Decrease/(increase) in inventories

447

(23,911)

16,654

Decrease/(increase) in trade and other receivables

981,876

515,310

(504,811)

(Decrease)/increase in trade and other payables

(614,300)

(297,785)

(63,459)

(Decrease)/increase in accruals and deferred income

(682,257)

(724,147)

(127,296)

(Decrease)/increase in provisions

1,441

(17,456)

(16,367)

Foreign exchange loss/(gain)

8,973

28,718

37,709


________

________

________





Cash generated from operations

487,337

234,749

1,250,628


=======

=======

=======

GROUP INFORMATION


Directors

Dr Said Ziai

(Chairman and Chief Executive Officer)


Roderick Chamberlain

(Non-executive director)


Robert Critchlow

(Non-executive director)




Company secretary

Nicholas Montgomery





Registered office

Gladstone House



Hithercroft Road 



Wallingford 



Oxfordshire OX10 9BT





Nominated Adviser

Grant Thornton LLP



30 Finsbury Square



London  EC2P 2YU





Brokers

Fairfax I.S. PLC



46 Berkley Square



Mayfair



London  W1J 5AT





Solicitors

Gibson, Dunn & Crutcher LLP



Telephone House



2-4 Temple Avenue



London  EC4Y 0HB






Pitmans



The Anchorage



34 Bridge Street



Reading 



Berkshire  RG1 7LU





Registrars

Capita Registrars



The Registry



34 Beckenham Road 



Beckenham



Kent  BR3 4TU





Principal bankers

Royal Bank of Scotland plc



P O Box 12264 



3rd Floor



1 Princes Street 



London  EC2R 8PB




INDEPENDENT REVIEW REPORT TO GLADSTONE PLC



Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 28 February 2009 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Recognised Income and Expense and the Consolidated Cash Flow Statement.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules For Companies.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 28 February 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules For Companies.


UHY Hacker Young LLP

Chartered Accountants

Registered Auditors

London

23 April 2009


This information is provided by RNS
The company news service from the London Stock Exchange
 
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