Half-yearly Report
Embargoed release: 07:00hrs Thursday 28 August 2008
SOPHEON PLC
("Sopheon" or the "Group")
RESULTS FOR THE 6 MONTHS TO 30 JUNE 2008
BUSINESS REVIEW AND OUTLOOK
Sopheon plc ("Sopheon") the international provider of software and services
that improve the return from innovation and product development investments,
announces its unaudited interim results for the six months ended 30 June 2008
(the "period") together with a business review and outlook.
Highlights:
* Revenue: £4.3m (2007: £3.1m)
EBITDA: £0.5m (2007: £0.1m)
Profit after tax: £0.1m (2007: loss £0.1m)
* We completed 24 license transactions including extension sales, delivering
40% revenue growth compared to the same period last year. EBITDA for the
period rose to £0.5m, and the result after tax improved to a profit of £
0.1m. Amortisation accounts for over £0.3m of the difference between EBITDA
and profit after tax.
* Revenue visibility now stands at £7.7m for full year 2008 performance
compared to visibility of £5.1m for 2007 at this time last year. Sopheon's
total revenues for 2007 were £6.3m.
* We signed our 150th licensee customer, reflecting a business momentum that
prompted AMR Research to recently conclude that Sopheon has the greatest
traction among all best-of-breed product portfolio management solutions in
the marketplace.
* We introduced the most significant new release of Accolade in six years,
offering functionality that positions the solution for the heavy
manufacturing markets. The combination of Accolade and Vision Strategist is
the first in the industry to integrate and automate strategic product
planning and product development execution.
Sopheon's Chairman, Barry Mence said:
"We are pleased by our period-over-period financial performance. It is
testimony to the appeal of our solutions and the strength of our strategic
position We believe it is also a sign that the market opportunity upon which we
are focused is continuing to mature, and we are excited by the implications for
our company and its shareholders."
For further information contact:
Barry Mence, Chairman Sopheon plc Tel : + 44 (0) 1483 685
735
Arif Karimjee, CFO
Vikki Krause Hansard Communications Tel : + 44 (0) 207 245
1100
Paul Davies Seymour Pierce Corporate Tel: +44 (0) 20 7107 8000
Parimal Kumar Finance
Claire Verhagen Citigate First Financial Tel : + 31 (0) 205 754 010
About Sopheon
Sopheon (LSE:SPE) is an international provider of software and services that
help organisations improve the business impact of products innovation.
Sopheon's Accolade® solution automates the product innovation process and
provides decision support for the management of product portfolios. Its Vision
Strategistâ„¢ offering automates the strategic product roadmapping process,
allowing users to visualise and forecast the future of products, markets and
technologies. Sopheon is listed on the AIM Market of the London Stock Exchange
and on the Euronext in the Netherlands. For more information, please visit
www.sopheon.com.
CHAIRMAN'S STATEMENT
Trading Performance
Consolidated revenues for the period rose to £4.3m compared to £3.1m in the
first half of 2007. This represents period-to-period revenue growth of 40%,
reflecting 51% revenue growth in our US business, and 26% in our European
business. The improvement was underpinned by a rise in the proportion of
license revenues to 47% (2007: 36%). The overall revenue mix between license,
maintenance and services was 47:27:26 compared to 36:29:35 for the same period
last year. The Alignent business acquired in June 2007 accounted for £0.5m or a
12% share of total revenues recorded in the first half of 2008.
Sales performance included 17 new licensed customers and seven license
extension orders from existing customers, in addition to a number of
consultancy and services contracts. Renewals of license rental, maintenance and
hosting contracts also held up well in the period, and at June 30 our
annualised base of such recurring business has climbed to £3m from £2.6m coming
into the year. This indicates strong underlying growth in our business, but as
always we emphasise that individual sales cycle times and transaction values in
our business do fluctuate, and this may continue to influence performance.
Gross profit, which is arrived at after charging direct costs such as payroll
for client services staff, improved to £3.2m from £2.2m the year before,
representing a rise in gross margin percentage to 75% from 72%. We expect the
gross margin percentage to continue to fluctuate in a fairly narrow range from
period to period, in line with variation in our revenue mix. Within the
services business, margins may also be affected going forward by the
involvement of partners. The effect will depend on whether an individual
project is subcontracted by Sopheon or if the partner contracts directly with
the customer. We are actively encouraging partner involvement - often through
subcontracting as an initial phase - as part of our strategy to grow the
awareness of, and increase the deployment capability for, our solutions.
Operating Costs and Results
As explained in more detail in our annual report for 2007, we increased
staffing levels last year from 65 to 92 including 10 employees connected with
the acquisition of Alignent in June 2007. We exercised a degree of caution in
recruitment during the first half of 2008, and accordingly headcount levels
were held to 96 through June this year. Nevertheless, the majority of our new
staff joined after the first half of 2007 and this accentuates the apparent
increase in such costs reported for the first half of 2008. Excluding £170,000
of amortisation of intangible assets acquired in the Alignent transaction,
operational overheads have increased by £641,000 compared to the first half of
2007. Just under half of this increase is due to higher investment in sales and
marketing, and a further third linked to higher R&D expenditures. The remaining
increases in administrative expenditure are primarily connected to higher
facility and depreciation costs, arising from both the higher headcount and the
addition of the Alignent business.
The overall operating result for the business is a profit of £132,000, compared
to a loss of £78,000 for the same period in 2007. After net finance costs,
which include interest on debt taken on to finance the Alignent acquisition,
the final profit reported for the period is £54,000 (2007: loss of £73,000).
This result includes interest, depreciation and amortisation costs amounting to
£480,000 compared to £155,000 for the same period last year. The majority of
this increase is connected with the Alignent acquisition. The EBITDA result for
the first half of 2008, which does not include these elements, was accordingly
£533,000 (2007: £82,000).
Corporate and Balance sheet
Net assets at the end of the period stood at £3.5m (2007: £3.6m) and include £
3.7m (2007: £3.6m) of intangible assets. This includes £1.5m being the net book
value of capitalised research and development (2007: £1m) and an additional £
2.2m (2007: £2.5m) being the net book value of Alignent intangible assets and
goodwill.
As part of the funding raised for the Alignent acquisition, Sopheon secured
$3.5m of medium-term debt from BlueCrest Capital Finance LLC ("BlueCrest"). The
debt is being repaid in 48 equal monthly instalments, and is secured by a
debenture and guarantee from Sopheon plc. BlueCrest also offered the enlarged
group an additional $750,000 revolving credit facility secured on accounts
receivable. At 30 June 2008, the balances outstanding on the medium-term debt
and revolving credit facility were $2.8m and $750,000 respectively.
Gross cash resources at 30 June 2008 amounted to £2.1m (2007: £2.4m).
Market and Product
The product lifecycle management ("PLM") market is currently estimated by AMR
Research ("AMR"), the global IT research and advisory firm, at $12.7 billion
worldwide. It also predicts that this market will expand to $20 billion by
2012, based on a forecasted five-year compound annual growth (CAGR) of 9%. It
is expected that the product portfolio management ("PPM") submarket in which
Sopheon's Accolade software system is classified will remain one of the
fastest-growing segments of PLM; AMR estimates that the market for PPM
solutions will expand at a CAGR of 17% through 2012.
Sopheon's Accolade continues to lead the PPM market both in terms of functional
richness and market penetration. In a December 2007 report, AMR characterised
Accolade as the most mature PPM solution available. In a report issued in July
2008, the firm noted that the Sopheon offering has the greatest traction among
all best-of-breed product portfolio management offerings in the marketplace.
In March we launched Accolade Version 7.0, the most significant new release of
our flagship software since it entered the market six years ago. A number of
existing customers have now upgraded to the new offering and their reactions to
its capabilities have been enthusiastic. Many of its principal features spring
from the experience of working with customers such as General Motors and
Electrolux. These enhancements position Accolade to move beyond the process
manufacturing markets that we have targeted in the past and into the large
aerospace, defense and automobile sectors. We have been pleased with the
initial market response to our earlier announced integration of Accolade with
Vision Strategist, the product that came to us through last year's acquisition
of Alignent Software. This is the first time in the history of PLM that
automated support for strategic product planning and product development
execution has been combined in a single solution.
Our product advances are being augmented by investments in a go-to-market
strategy aimed at creating business opportunities in the automotive sector.
This effort will be led by a recently hired business development professional
who has extensive experience in automotive markets. His sales efforts will
include both Vision Strategist and Accolade.
Sopheon entered 2008 with 135 licensee customers. In June, we achieved a growth
milestone, announcing that we had signed the 150th licensee of our software
products. Recently acquired accounts, representing both Accolade users and
adopters of our Vision Strategist solution, include Bell Helicopter, Burger
King, Novartis and the U.S. Army.
Outlook
The achievement of 40% period-to-period growth is satisfying, as is the fact
that our EBITDA result has climbed to £0.5m and our bottom line is now in
positive territory. Our balance sheet is in good shape and looking forward, the
sales funnel remains robust. Since the end of the first half we have continued
to add both new and extension sales, and this additional business has increased
visibility for 2008 to £7.7m compared to £5.1m for 2007 a year ago. Sopheon's
total revenues for 2007 were £6.3m.
Sopheon's strategic position continues to strengthen, with a customer base that
now includes more than 150 licensees the majority of which are global brands,
and market recognition that is underpinned by growing analyst attention. We are
now considered not just as a best-of-breed offering, but as the most mature. We
believe it is critical that we capitalise on our leadership position and
maintain the momentum of our first half performance. On this basis, we are now
hiring selected additional staff.
We remain focused on improvement in profitability alongside building revenue
and delivering strategic progress, and will continue this balanced approach as
we plan for 2009. We look forward to a continued growth and achievement in 2008
and beyond.
Barry Mence 28 August 2008
Chairman
Visibility
Visibility at any point in time comprises revenue expected from (i) closed
license orders, including those which are contracted but conditional on
acceptance decisions scheduled later in the year; (ii) contracted services
business delivered or expected to be delivered in the year; and (iii) recurring
maintenance, hosting and rental streams. The visibility calculation does not
include revenues from new sales opportunities expected to close during the
remainder of 2008.
EBITDA
EBITDA is defined as earnings before interest, tax, depreciation and
amortisation and can be arrived at by adding back these charges, which amount
to £480,000 (2007: £155,000), to the profit for the period of £54,000 (2007:
loss of £73,000).
Trademarks
Accolade® and Vision Strategisttmare trademarks of Sopheon plc.
Stage-Gate® is a registered trademark of the Product Development Institute.
AMR Research®is a registered trademark of AMR Research, Inc. Statements
attributed to AMR Research are drawn from the Product Lifecycle Management
Market Sizing Report, 2007-2012 published in July 2008.
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2008(UNAUDITED)
2008 2007
£'000 £'000
Revenue 4,298 3,062
Cost of sales (1,067) (851)
Gross profit 3,231 2,210
Sales and marketing expenses (1,489) (1,165)
Research and development expenses 775 533
Amortisation of acquired intangible assets 170 -
Other administrative expenses 665 590
Total administrative costs (1,610) (1,123)
Operating profit/(loss) 132 (78)
Finance revenue 33 20
Finance costs (111) (15)
Profit/(loss) before and after taxation 54 (73)
Profit/(loss) for the period 54 (73)
(all attributable to members of the parent company)
Earnings per share - basic and diluted (pence) 0.04p (0.05p)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 JUNE 2008(UNAUDITED)
2008 2007
£'000 £'000
Exchange difference on translation of foreign 24 (10)
operations
Net income/(expense)recogniseddirectly in equity 24 (10)
Profit/(loss) for the financial period 54 (73)
Totalrecognisedincome and expense for the period 78 (83)
(all attributable to members of the parent company)
CONSOLIDATED BALANCE SHEET AT 30 JUNE 2008 (UNAUDITED)
2008 2007
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 164 184
Goodwill and intangible assets 3,689 3,552
Non-current receivables 10 10
3,863 3,746
Current assets
Trade and other receivables 2,415 2,170
Cash and cash equivalents 2,054 2,393
4,469 4,563
Total assets 8,332 8,309
Liabilities
Current liabilities
Bank loans 778 324
Deferred revenue 1,746 1,348
Trade and other payables 1,367 1,593
3,891 3,265
Non-current liabilities
Bank loans 986 1,445
Total liabilities 4,877 4,710
Net assets 3,455 3,599
Equity and reserves
Share capital 7,279 7,279
Other reserves 73,570 74,289
Retained losses and translation reserve (77,394) (77,969)
Total equity (all attributable to members of the 3,455 3,599
parent company)
CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2008(UNAUDITED)
2008 2007
£'000 £'000
Operating Activities: profit/(loss)before and after 54 (73)
taxation
Adjustments for non-cash and financial items 551 201
Movements in working capital (5) 174
Interest paid (111) (15)
Net cash from operating activities 489 286
Investing activities (313) (2,294)
Financing activities (185) 3,369
Net (decrease)/increase in cash and cash equivalents (9) 1,361
NOTES
1. Basis of Preparation
The interim financial information for all periods has been prepared on a basis
consistent with the recognition and measurement principles of International
Financial Reporting Standards ("IFRS") and Interpretations issued by the
International Accounting Standards Board as adopted by the European Union, and
those parts of the Companies Act 1985 which apply to companies preparing their
financial statements under IFRS. The six month figures to 30 June 2008 and 30
June 2007 are un-audited and do not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The principal accounting
policies are set out below and are expected to be applied for the full year.
There is a possibility that the directors may determine that some changes to
those policies are required when preparing the full annual financial
statements, since the IFRS and IFRIC interpretations that will be applicable
and adopted for use in the European Union at 31 December 2008 are not known
with certainty at the time of preparing this interim financial information. The
policies have been applied consistently to all the periods presented, and on
the going concern basis. The interim accounts were approved by the directors on
28 August 2008.
2. Going Concern
The interim financial information has been prepared on a going concern basis.
In reaching their assessment, the directors have considered a period extending
at least 12 months from the date of approval of this information and have
considered both the forecast performance for the next 12 months and the cash
and financing facilities available to the group.
In the first half of 2008, the group achieved revenues of £4.3m and generated a
profit of £54,000 representing significant improvement on the results for the
same period in 2007. The directors are positive about the direction, focus and
momentum of the business and believe that the group's existing resources and
facilities described below provide it with adequate funding to support its
activities through to the point at which they anticipate that operations will
become cash generative on a sustained basis. This is however dependent on the
group continuing to deliver an adequate level of sales. Furthermore, the
time-to-close and the order value of individual sales can vary considerably,
factors which constrain the ability to accurately predict revenue performance.
At 30 June 2008, the group reported net assets of £3.4m and gross cash
resources of £2.0m. The group has a loan note from BlueCrest Capital Finance
("BlueCrest") with a current balance of £1.4m, which is repayable in equal
monthly instalments of £45,000 through July 2011. The group also has access to
a bank line of credit with BlueCrest which is secured against the trade
receivables of Sopheon's North American business and was fully drawn down at 30
June 2008 for a value of £377,000.
If sales fall short of expectations, the group may need to raise additional
finance. Sopheon continues to have access to the equity markets, as
demonstrated by the placing in June 2007 in London of 12 million shares to
raise £2 million after expenses in connection with the Alignent acquisition. In
addition, the group has access to an equity line of credit facility from GEM
Global Yield Fund Limited ("GEM") for an aggregate of €10 million for a term,
the expiry date of which was recently extended until December 2009. GEM's
obligation to subscribe for shares is subject to certain conditions linked to
the prevailing trading volumes and prices of Sopheon shares on the Euronext
stock exchange. To date Sopheon has made one call on the equity line of credit
facility, raising just under €1 million in March 2004, leaving a maximum €9
million potentially available.
The directors believe that taken as a whole, the factors described above enable
the group to continue as a going concern for the foreseeable future. The
financial information does not include the adjustments that would be required
if the company or group were unable to continue as a going concern.
NOTES
3. Principal Accounting Policies
Basis of consolidation
The consolidated financial information incorporate the financial information of
the Company and entities controlled by the Company ("subsidiaries"). Control is
achieved where the Company has the power to govern the financial and operating
policies of an entity and to obtain benefits from its activities. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts and sales related taxes. Sales
of software products are recognised on delivery, and when no significant vendor
obligations remain. Revenues relating to maintenance and post contract support
agreements are deferred and recognised over the period of the agreements.
Revenues from implementation and consultancy services are recognised as the
services are performed, or in the case of milestone based or long term
contracts, recognised on a percentage basis as the work is completed and any
relevant milestones are met, using latest estimates to determine the expected
duration and cost of the project.
Leases
Assets held under finance leases are recognised as assets of the group at their
fair value at the inception of the lease or, if lower, at the net present value
of the minimum lease payments. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to profit or loss. Rentals payable under
operating leases are charged to profit or loss on a straight-line basis over
the term of the relevant lease.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged as an
expense as they fall due. The group does not operate any defined benefit
retirement benefit plans.
Treatment of foreign currencies for consolidation
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the group's foreign operations (including comparatives) are
expressed in sterling using exchange rates prevailing on the balance sheet
date. Income and expense items (including comparatives) are translated at the
average exchange rates for the period. Exchange differences arising (including
exchange differences on intra-group loans) are classified as equity and
transferred to the group's translation reserve. Such translation differences
are recognised in profit or loss in the period in which the foreign operation
is disposed of.
Deferred taxation
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, but deferred tax assets are
recognised only to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax is calculated at tax rates that have been enacted or substantively
enacted at the balance sheet date, and that are expected to apply in the period
when the liability is settled or the asset realised. Deferred tax is charged or
credited to profit or loss, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in
equity.
NOTES
3. Principal Accounting Policies(continued)
Property, plant and equipment
Computer equipment and fixtures and fittings are stated at cost less
accumulated depreciation and any accumulated impairment losses. Depreciation is
charged so as to write off the costs of assets over their estimated useful
lives, using the straight-line method. Assets held under finance leases are
depreciated over their expected useful lives on the same basis as owned assets,
or, when shorter, over the term of the relevant lease. The gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sale proceeds and the carrying amount
of the asset and is recognised in profit or loss.
Intangible assets - research and development expenditure
Development expenditure on internally developed software products is
capitalised if it can be demonstrated that:
* it is technically feasible to develop the product
* adequate resources are available to complete the development
* there is an intention to complete and sell the product
* the Group is able to sell the product
* sales of the product will generate future economic benefits; and
* expenditure on the product can be measured reliably
Capitalised development costs are amortised over the period over which the
group expects to benefit from selling the product developed. Development costs
not satisfying the above criteria and expenditure on the research phase of
internal projects are recognised in profit or loss as incurred.
Share based payments
The group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non-market-based vesting conditions) at the date of grant. The fair
value determined at the date of grant is expensed on a straight-line basis over
the vesting period, based on the group's estimate of the shares that will
eventually vest and adjusted for the effect of non-market-based vesting
conditions. Fair value is measured by the binomial option-pricing model. The
expected life used in the model had been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioral considerations.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the group in exchange for control of the entity being
acquired, together with any costs directly attributable to the business
combination. The results of the acquired entities are included in the
consolidated income statement from the date on which effective control is
obtained. The identifiable assets, liabilities and contingent liabilities of
the entity being acquired that meet the conditions for recognition under IFRS 3
Business Combinations are recognised at their fair values on the date of
acquisition.
Identifiable intangible assets are capitalised at fair value as at the date of
acquisition. The useful lives of these intangible assets are assessed and
amortisation is charged on a straight-line basis, with the expense taken to the
income statement. Intangible assets are tested for impairment when a trigger
event occurs. Useful lives are also examined on an annual basis and
adjustments, where applicable are made on a prospective basis.
NOTES
4. Turnover
All of the group's revenues in respect of the six month periods ended 30 June
2008 and 2007 are derived from continuing operations and from the group's
single business segment, the design, development and marketing of software
products with associated implementation and consultancy services.
5. Earnings per share
The calculation of basic earnings per ordinary share is based on a profit of £
54,000 (2007 - loss of £73,000) and on 145,579,027 ordinary shares (2007 -
134,904,994) being the weighted average number of ordinary shares in issue
during the year. The diluted earnings per ordinary share for both 2008 and 2007
are the same as the basic earnings / loss per ordinary share in each year. For
2008 this is because the dilutive effect of the exercise of potential ordinary
shares does not cause a material change in the resultant earnings per share
fraction. For 2007, it is because the exercise of share options would have the
effect of reducing the loss per ordinary share and was therefore not dilutive.
6. Intangible Assets
In accordance with IAS 38 Intangible Assets, certain development expenditure
must be capitalised and amortised based on detailed technical criteria, rather
than automatically charging such costs in the income statement as they arise.
This has led to the capitalisation of £319,000 (2007: £321,000), and
amortisation of £186,000 (2007: £138,000) during the period. In addition the
acquisition of Alignent has given rise to the recognition of a further £
2,505,000 of intangible assets and goodwill, with accumulated amortisation of £
338,000 at 30 June 2008 of which £170,000 has been charged during the period.
7. Cautionary Statement
Sopheon has made forward-looking statements in this press release, including
statements about the market for and benefits of its products and services;
financial results; product development plans; the potential benefits of
business relationships with third parties and business strategies. These
statements about future events are subject to risks and uncertainties that
could cause Sopheon's actual results to differ materially from those that might
be inferred from the forward-looking statements. Sopheon can give no assurance
that any forward-looking statements will prove correct.
Independent review report to Sopheon plc
Introduction
We have been engaged by the company to review the financial information in the
interim report for the six months ended 30 June 2008 which comprises the
consolidated balance sheet; consolidated income statement; consolidated
statement of recognised income and expense; consolidated cash flow; and
associated notes. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with rules of
the London Stock Exchange for companies trading securities on the Alternative
Investment Market and for the rules governing securities listed on Euronext,
which require that the interim report be presented and prepared in a form
consistent with that applied in preparing the preceding annual accounts except
where any changes, and the reasons for them, are disclosed. As disclosed in
Note 1, the annual financial statements of the company are prepared in
accordance with International Financial Reporting Standards as adopted for use
in the EU. This interim report has been prepared in accordance with the basis
set out in Note 1. The accounting policies are consistent with those that the
directors intend to use in the next annual financial statements.
Our responsibility
Our responsibility is to express to the company a conclusion on the financial
information in the half-yearly financial report based on our review. Our report
has been prepared in accordance with the terms of our engagement to assist the
company in meeting the requirements of the rules of the London Stock Exchange
for companies trading securities on the Alternative Investment Market and for
the rules governing securities listed on Euronext, and for no other purpose. No
person is entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to any
other person or for any other purpose and we hereby expressly disclaim any and
all such liability
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 financial information in the interim financial report for the
six months ended 30 June 2008 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for companies trading
securities on the Alternative Investment Market and for the rules governing
listed securities on Euronext.
Going concern
In arriving at our review conclusion, we have considered the adequacy of the
disclosures made in Note 2 regarding the Group's ability to continue as a going
concern. As in prior periods, these disclosures identify certain factors that
indicate the existence of material uncertainties which may cast a significant
doubt over the group's ability to continue as a going concern. As discussed in
Note 2, the appropriateness of the going concern basis remains reliant on the
group achieving an adequate level of sales in order to maintain sufficient
working capital to support its activities, or if this objective is not met,
being able to raise sufficient additional finance
BDO Stoy Hayward LLP 28 August 2008
Chartered Accountants, London
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