Final Results

Games Workshop Group PLC 25 July 2006 PRELIMINARY RESULTS Games Workshop Group PLC ('Games Workshop' or the 'Group') announces its preliminary results for the year ended 28 May 2006. Highlights * Revenue at Â£115.2m (2005: Â£136.6m) * Operating profit at Â£4.2m (2005: Â£14.3m) * Pre-tax profit at Â£3.7m (2005: Â£13.9m) * Earnings per share of 6.5p (2005: 29.4p) * Maintained final dividend per share of 14.025p (2005: 14.025p) Tom Kirby, Chairman and Chief Executive of Games Workshop, said: 'Despite the short-term difficulties of this year, we remain confident that the Hobby is in good health. In addition we have come to the end of our investment programme, which leaves the business seriously well invested. 'The directors believe the prospects for the business remain very good.' For further information, please contact: Games Workshop Group PLC Today only: 01756 770 376 Tom Kirby, Chairman and Chief Executive Thereafter: 0115 900 4001 Michael Sherwin, Finance Director 0115 900 4001 Julia Woodall, PR Manager 0115 900 4006 The analyst presentation may be viewed at the investor relations web site http://investor.games-workshop.com General website www.games-workshop.com Rawlings Financial PR Limited Tel: 01756 770 376 Catriona Valentine The 2006 annual report may be viewed at the investor relations web site at the address above. FINANCIAL HIGHLIGHTS 2006 2005 Revenue Â£115.2m Â£136.6m Operating profit Â£4.2m Â£14.3m Pre-tax profit Â£3.7m Â£13.9m Year end net (borrowings)/funds Â£(2.2m) Â£3.4m Earnings per share 6.5p 29.4p Dividend per share 18.975p 18.975p BUSINESS REVIEW BY THE CHAIRMAN AND CHIEF EXECUTIVE Summary of results- for the year to 28 May 2006 This year our sales and profits have fallen for two main reasons: firstly, the continuing decline in sales following an exceptional trading period*, and secondly, the continued reduction in our sales to independent toy and hobby retailers, notably in the US, where many smaller independent operators are ceasing to trade. Following the decline in sales, management faced three issues. Firstly, the need for all staff to be focused on the temporary nature of the decline. Secondly, during the rapid sales upturn between 2002 and 2004, some of the good habits on which we have built the business became eroded. Thirdly, over the same period, our traditional product stream became disrupted. The first was the easiest to deal with - we all knew the franchise was sound and undamaged - all we had to do was to remind everyone to be patient. The second required us to work hard at re-training and re-invigorating our staff in the basics of providing our normal, exceptional, customer service. As regards the third we are now engaged in the process of re-establishing our normal product life cycles. We have also taken the opportunity to examine closely the costs that have come into the business over the last few years. We believe we have made significant inroads into the extra costs that had crept in. The results of this work leave the Company in a more healthy state at the end of this year than at its beginning. In the first half of the year we reported a sales decline of 20%. In the second half this decline slowed to 12%. By the end of the year our Games Workshop Hobby stores in seven of our nine sales businesses, including both the US and the UK - our two largest businesses - were recording growth. Despite the lower production volumes resulting from the decline in sales, we have been able to maintain and improve our gross profit margin to 70%. This is due to price rises, improved operational efficiency from the capital investments which have now been completed in our manufacturing facilities at both Nottingham and Memphis, and the sourcing of bought-in components and print more cost effectively from both Europe and Asia. Additionally we have reduced overheads by Â£2.8 million during the year, whilst increasing our expenditure on customer facing activities including a net increase of ten new Hobby stores since May 2005. Sales by channel The Games Workshop Hobby is supported and promoted by our own Games Workshop Hobby stores, through which 48% of our 2005/6 sales were made. As we continue to develop the Hobby we have opened sixteen and closed six stores during the year, taking our total to 337. Sales are also made through independent retailers and direct, through the internet and mail order. An analysis of sales for 2005/6 for each of the channels is given below: 2006 2005 Independent retailers Â£48.1m 42% Â£61.0m 45% Hobby stores Â£54.9m 48% Â£62.9m 46% Direct Â£12.2m 10% Â£12.7m 9% Sales by territory An analysis of sales for 2005/6 for each of the geographical sectors is given below: 2006 2005 Decline Continental Europe Â£48.1m Â£59.5m -Â£11.4m UK Â£33.5m Â£40.1m -Â£6.6m The Americas Â£26.2m Â£28.7m -Â£2.5m Asia Pacific Â£7.4m Â£8.3m -Â£0.9m Continental Europe There are five stand alone sales businesses in Continental Europe responsible for development of the Hobby in France, Germany, Northern Europe, Spain and Italy. We now have 106 Games Workshop Hobby stores, up from 101 last year. Our sales have fallen in all of these territories during the year, however, the rate of decline had slowed significantly by the end of the year, with three of the five Hobby store chains recording growth in May 2006. Our progress in restoring growth in our sales to independent retailers has been slower, however, we believe that the progress of our own stores is the lead indicator. UK We now have 119 Games Workshop Hobby stores in the UK (2005: 118). The decline in sales has impacted our own stores and sales to independent retailers by similar proportions. Our focus during the year has been on staff training, recruitment and retention, particularly for the key post of store manager. All of our full time staff have attended refresher training courses to refocus their efforts on the basics of Games Workshop customer service. We have also kept the cost base under close review, reducing both our back office costs and our store opening hours. At our annual Games Day, held in September at a new larger venue (the National Exhibition Centre in Birmingham), we welcomed 10,000 people - a record attendance. The Americas During the year we have opened two new Games Workshop Hobby stores in the Americas, which for us comprises the USA and Canada, bringing our total to 83. As our independent retailer base has continued to struggle, our focus has been on establishing and growing our own Games Workshop Hobby stores. We have established that our best model both for the development of the Hobby and for management command and control is to focus upon selected metropolitan areas where we can cluster our stores to grow and nurture the Hobby community. Our development plan moving forwards is to recruit staff, bring on middle management and deliver great Games Workshop Hobby activity centred around this metropolitan area strategy. We also believe that this strategy will support and develop the independent retailer base in these major metropolitan areas. The shake out has, however, continued this year: in the USA we began the year with 875 active accounts and we have ended it with 729. As indicated above, however, our own Games Workshop Hobby stores were enjoying healthy growth by the end of the year. During the year we held five Games Day events in the Americas, and the attendances continue to grow year on year. The appetite for the Games Workshop Hobby is as great in the Americas as elsewhere: our challenge remains in establishing sound and profitable routes to market. We are confident that our strategy will be successful in doing this. Asia Pacific This territory comprises Australia, New Zealand and Japan, where we opened our first Games Workshop Hobby store in Tokyo during the year. We now have 29 stores in the region (2005: 27). As in the UK, revenue has suffered with sales through the Games Workshop Hobby stores declining at a similar rate to those through our independent customers. However, also similar to the UK, at the end of the year our own stores were enjoying growth. We see our first Japanese store as the beginning of a long-term investment which has cost us Â£0.5m this year. The initial indications are promising, and we expect to open our second store shortly. Manufacturing and Supply division This year we completed the final stages of our major investment programme in our vertically integrated design, manufacturing and distribution supply chain with the commissioning of the new European warehousing and distribution centre in Nottingham and the move of our plastic injection moulding facility from Wisbech to Nottingham. Both of these moves were completed on time and on budget, without any disruption to the delivery of product to our customers. This now leaves the Group with a well invested supply chain supporting the UK and Europe from our Nottingham facility and the Americas and Asia Pacific from Memphis. Other activities Computer games licensing We now have three third party licences in place with publishers of computer games: THQ Inc. for Warhammer 40,000, Namco Hometek Inc. for Warhammer and Mythic Entertainment Inc. who are developing a massively multiplayer online role-play game set in the Warhammer world. Most of the Â£1.2m of royalty income which we earned this year came from THQ Inc. We expect this income to fluctuate from year to year, depending on the commercial success of the products created by our licensees. BL Publishing Our publishing business, which made sales of Â£2.1m this year, has continued to enjoy growth and success primarily with novels based upon our Warhammer and Warhammer 40,000 intellectual properties. This business continues to develop a small but profitable niche publishing portfolio, focusing on fantasy and science fiction titles, which continues to enhance and develop the existing Games Workshop intellectual property. Sabertooth Games This US based collectible card game business, which has been struggling to break even since we acquired it in 2002, has recently launched an exciting new product, the Universal Fighting System collectible card game (CCG), which has received a promising reception from the CCG market in the Americas. We are watching the progress of this game system with interest. Cash generation The Group generated Â£15.8m (2005: Â£21.2m) of cash from operations during the year, and after capital expenditure of Â£9.2m we had net borrowings at the year end of Â£2.2m (2005: net funds of Â£3.4m) Now that the investment in the Nottingham building and supply chain developments is complete, we do not expect to make any further major investments of this nature for several years. For the foreseeable future we therefore expect that capital expenditure will be broadly similar to the level of annual depreciation/ amortisation of capital assets. Management structure The Group is managed through four clearly defined divisions as follows: Hobby division - responsible for the development of the Hobby throughout the world. This encompasses the sales businesses in each territory around the world as well as the design studio based in Nottingham. Manufacturing and Supply division - responsible for the realisation of the designs into manufactured products, and the supply and distribution of those products to our sales businesses and their customers around the world. Other Activities division - responsible for the sales of all non-tabletop wargaming products, including publishing, collectible card games and computer games. Group - responsible for the financing and corporate governance of the activities carried out in the divisions. This also includes intellectual property management, legal, treasury, reporting and investor relations. This structure has been in place throughout this year, and in addition to providing clear business focus we believe that the structure enables us to address the key areas of management recruitment, development and succession planning in a systematic way. A development this year has been the removal of areas of duplication of processes between the divisions, resulting in the centralisation of some back office activities. Our vertically integrated manufacturing and supply division is dedicated to the supply of products to the Hobby and Other Activities divisions. We consider that the risks and rewards of each division are similar, and that the Group has a single business segment, the Games Workshop Hobby. Workforce This has been a hard year for everybody at Games Workshop as we have seen our sales and profits decline, and while most of our staff love what they do, they also love to succeed. It is part of our job as management here at Games Workshop to provide reassurance to our staff that success isn't just about beating last year's numbers (although that helps), it is about doing your best, every day, to develop and further the business. So long as our staff are doing that, then they continue to get my wholehearted vote of confidence. So once again, I would like to use this annual report to say thank you to all our staff and I trust that our shareholders will join me. Risks facing the business Managing the risks which our business faces is what we do every day. The divisional management structure referred to above is how we make this process transparent and accountable. The Hobby division is responsible for keeping the Games Workshop Hobby fresh and exciting and for managing market facing risks; the Manufacturing and Supply division is responsible for managing product delivery risks; the Other Activities division is responsible for using our intellectual property appropriately while not distracting our tabletop wargaming activities, and Group is responsible for managing corporate risks. We have a formal risk reporting process as part of our annual budgeting and planning cycle, which is linked into the internal and external audit process, but the management of these risks is an integral part of the daily management process. Foremost amongst the market facing risks is our ability to forecast sales and factory demand. Throughout this last year I have been encouraged by a clear improvement in the capability of our central team to keep close to the drivers and trends which underlie our sales in each business unit, and to ensure that the communication between the sales division and the manufacturing division is immediate and effective. Amongst the product delivery risks are those relating to input prices. We have seen significant increases in energy costs during the year, and the outlook remains uncertain. Our annual energy bill amounts to some Â£0.9m. The cost of raw materials, such as metal and plastic, represents no more than 2% of our annual sales and has been relatively stable during the year. We do not believe that the price volatility of these inputs represents a significant threat to our long-term profitability. In the short term our buying team continues to work hard to minimise these risks and the Manufacturing and Supply division continues to seek process efficiencies to offset any cost impact. Many of our risks are mitigated by the portfolio effect which we enjoy with different geographies, different routes to market and different currencies. This leads me to conclude, as it does every year, that the main source of risk to this business remains management error. This is why management recruitment, development and succession planning are so important. Prospects In the short term our trading prospects remain challenging: throughout Spring 2006 our year on year performance has been improving and, as I have indicated above, by the end of the year our Games Workshop Hobby stores in seven of our nine sales territories, including both the US and the UK - our two largest businesses - were recording growth. We believe that the business is now returning to growth. With 42% of our sales made to independent retailers, however, 'calling the turn' is difficult. Nevertheless we remain confident that we are right to refer to these as short-term trading issues. This confidence is based upon the following three fundamentals: 1. The long-term growth credentials of the business We continue to see Games Workshop as a growth business. Between 2002 and 2005 our sales were above the normal growth line, since when they have been deflating. We believe that it is only a matter of time before we re-establish our historic linear growth rate. 2. The market opportunity for our existing sales businesses The table below shows our sales per capita in our key sales markets, based upon our 2006 sales and the population statistics for each country. In the long term we see no reason why we shouldn't achieve similar levels of sales penetration in each of these markets to those that we currently have in the UK. Achieving this would at least treble the current level of our sales. Sales per capita by geographical area UK 51p Asia Pacific 35p Continental Europe 18p The Americas 10p Japan 0p This is not a sales forecast but a rough indication of the potential sales of Games Workshop. 3. The health of the Games Workshop Hobby Despite the short-term difficulties of this year, we remain confident that the Hobby is in good health. In addition we have come to the end of our investment programme, which leaves the business seriously well invested. These are the reasons why the directors believe the prospects for the business remain very good. Tom Kirby Chairman and Chief Executive *see 2005 annual report, page 4; 2004 annual report, page 5; 2003 annual report, page 6. CONSOLIDATED INCOME STATEMENT Year to Year to 28 May 2006 29 May 2005 Notes Â£000 Â£000 Revenue 3 115,150 136,647 Cost of sales (34,265) (42,126) --------- --------- Gross profit 80,885 94,521 Operating expenses (77,838) (80,594) Other operating income - royalties receivable 1,170 374 --------- --------- Operating profit 3 4,217 14,301 Finance income 238 348 Finance costs (797) (740) --------- --------- Profit before taxation 3,658 13,909 Income tax expense 5 (1,660) (4,889) --------- --------- Profit attributable to equity shareholders 1,998 9,020 --------- --------- Basic earnings per ordinary share 6.5p 29.4p Diluted earnings per ordinary share 6.4p 29.0p All items dealt with in arriving at the profit before taxation relate to continuing activities. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year to Year to 28 May 2006 29 May 2005 Â£000 Â£000 Profit attributable to equity shareholders 1,998 9,020 Exchange differences on translation of foreign operations (131) 486 Cash flow hedges: - fair value gains 86 331 - transferred to the income statement (331) (615) Net investment hedge (2) - Tax on items recognised directly in equity 73 85 --------- --------- Total recognised income for the year 1,693 9,307 --------- --------- CONSOLIDATED BALANCE SHEET As at As at 28 May 2006 29 May 2005 Notes Â£000 Â£000 Non-current assets Goodwill 2,449 2,468 Other intangible assets 4,320 4,008 Property, plant and equipment 29,475 28,959 Other receivables 712 674 Deferred income tax assets 2,121 2,178 --------- --------- 39,077 38,287 --------- --------- Current assets Inventories 12,407 12,838 Trade and other receivables 9,081 10,075 Current tax assets 382 308 Financial assets - derivative financial instruments 181 476 Cash and cash equivalents 6,444 8,622 --------- --------- 28,495 32,319 --------- --------- Total assets 67,572 70,606 --------- --------- Current liabilities Financial liabilities - borrowings (1,705) (143) Financial liabilities - derivative financial instruments (14) (109) Trade and other payables (15,714) (17,726) Current income tax liabilities (415) (2,005) Provisions (584) (322) --------- --------- (18,432) (20,305) --------- --------- Net current assets 10,063 12,014 --------- --------- Non-current liabilities Financial liabilities - borrowings (6,960) (5,038) Other non-current liabilities (1,317) (640) Provisions (927) (881) --------- --------- (9,204) (6,559) --------- --------- Net assets 39,936 43,742 --------- --------- Capital and reserves Called up share capital 7 1,556 1,553 Share premium 7 7,822 7,592 Other reserves 7 (536) (231) Retained earnings 7 31,094 34,828 --------- --------- Total shareholders' equity 7 39,936 43,742 --------- --------- CONSOLIDATED CASH FLOW STATEMENT Year to Year to 28 May 2006 29 May 2005 Notes Â£000 Â£000 Cash flows from operating activities Cash generated from operations 9 15,789 21,152 UK corporation tax paid (1,665) (4,141) Overseas tax paid (1,838) (2,186) ------- -------- Net cash from operating activities 12,286 14,825 ------- -------- Cash flows from investing activities Purchases of property, plant and equipment (8,321) (10,726) Proceeds on disposal of property, plant and equipment 32 49 Purchases of other intangible assets (830) (1,186) Expenditure on product development (2,505) (2,102) Interest received 234 346 ------- -------- Net cash from investing activities (11,390) (13,619) ------- -------- Cash flows from financing activities Proceeds from issue of ordinary share capital 207 727 Proceeds from borrowings 1,955 5,000 Repayment of principal under finance leases (143) (165) Equity dividends paid (5,874) (5,818) Interest paid (886) (716) ------- -------- Net cash from financing activities (4,741) (972) ------- -------- Effects of foreign exchange rates (5) 223 ------- -------- Net (decrease)/increase in cash and cash equivalents (3,850) 457 ------- -------- Opening cash and cash equivalents 8,622 8,165 ------- -------- Closing cash and cash equivalents 8 4,772 8,622 ------- -------- NOTES TO THE PRELIMINARY RESULTS 1. The consolidated financial statements of Games Workshop Group PLC are now prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee interpretations, that are endorsed by the European Union and with those parts of the Companies Act 1985 applicable to those companies reporting under IFRS. The Group had previously reported under UK GAAP. The date of transition to IFRS was 31 May 2004, which is the beginning of the comparative period for the year to 29 May 2005. The Group has applied IFRS 1 'First-time Adoption of International Financial Reporting Standards' and has elected to use the following exemptions: - IFRS 3 'Business Combinations' has not been applied retrospectively to business combinations that occurred before 31 May 2004. - The Group has elected to set the foreign currency translation differences reserve to nil at 31 May 2004. - Share-based payment exemption. It has applied IFRS 2 'Share-based Payment' from 31 May 2004 to those options that were issued after 7 November 2002 and had not vested by 30 May 2005. 2. These results for the year to 28 May 2006 together with the corresponding amounts for the year to 29 May 2005 are extracts from the 2006 annual report and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 (as amended). The annual report for the year to 28 May 2006, on which the auditors have issued a report that does not contain a statement under section 237(2) or (3) of the Companies Act 1985, will be posted to shareholders on 26 July 2006 and will be delivered to the Registrar of Companies in due course. Copies will also be available from Michael Sherwin, Games Workshop Group PLC, Willow Road, Lenton, Nottingham NG7 2WS. This information is also available on the company web site at investor.games-workshop.com. The annual general meeting will be held at Willow Road, Lenton, Nottingham NG7 2WS at 10.00am on 13 September 2006. 3. Segmental analysis The Group has one business segment, the Games Workshop Hobby. Geographical segments represent the dominant source and nature of the Group's risk and returns and is therefore provided below as the primary reporting format. Year ended 28 May 2006 Rest Continental United The Asia of the Central/ Design and Royalty Europe Kingdom Americas Pacific world unallocated development income Group Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Total gross segment sales by operation 48,112 33,507 26,121 7,410 - - - - 115,150 Inter-segment sales 1,348 (3,489) 1,645 444 52 - - - - -------- ------- ------- ------ ------ -------- -------- ------- ------- Total gross segment sales by location of customers 49,460 30,018 27,766 7,854 52 - - - 115,150 -------- ------- ------- ------ ------ -------- -------- ------- ------- Operating profit/segment result by location of customers 8,154 3,799 (487) 470 22 (4,872) (4,039) 1,170 4,217 -------- ------- ------- ------ ------ -------- -------- ------- ------- Year ended 29 May 2005 Rest Continental United The Asia of the Central/ Design and Royalty Europe Kingdom Americas Pacific world unallocated development income Group Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Total gross segment sales by operation 59,539 40,166 28,670 8,272 - - - - 136,647 Inter-segment sales 2,193 (3,500) 954 258 95 - - - - -------- ------- ------- ------ ------ -------- -------- ------ ------- Total gross segment sales by location of customers 61,732 36,666 29,624 8,530 95 - - - 136,647 -------- ------- ------- ------ ------ -------- -------- ------ ------- Operating rofit/segment result by location of customers 15,336 6,887 314 1,012 38 (5,677) (3,983) 374 14,301 -------- ------- ------- ------ ------ -------- -------- ------ ------- 4. The calculation of basic earnings per ordinary share has been based on profit attributable to equity shareholders of Â£2.0 million (2005: Â£9.0 million) and the weighted average number of shares in issue throughout the year. The calculation of diluted earnings per ordinary share has been based on profit for the year and the weighted average number of shares in issue throughout the year, adjusted for the dilution effect of share options outstanding at the year end. 2006 2005 Weighted average number of shares (thousands): For basic earnings per ordinary share 30,959 30,691 Dilution effect of share options outstanding 47 385 -------- -------- For diluted earnings per ordinary share 31,006 31,076 -------- -------- 5. Income tax expense 2006 2005 Â£000 Â£000 Current taxation UK corporation tax 530 3,633 Overseas tax 1,072 1,823 -------- -------- Total current taxation 1,602 5,456 Deferred taxation 58 (567) -------- -------- Income tax expense 1,660 4,889 -------- -------- 2006 2005 Â£000 Â£000 Profit before taxation 3,658 13,909 -------- -------- Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% 1,097 4,173 Effects of: Expenses not deductible for tax purposes 274 143 Movement in deferred tax not recognised 677 518 Losses attributable to minority interests - 22 Higher rates on overseas earnings 26 28 Adjustments to tax charge in respect of previous years (414) 5 -------- -------- Total tax charge for the year 1,660 4,889 -------- -------- 6. The proposed final dividend per share of 14.025p will be paid on 27 October 2006 to shareholders on the register at the close of business on 6 October 2006. 7. Consolidated statement of changes in shareholders' equity Other reserves Retained earnings ------------------------------------------ ------------------ Called up Capital share Share redemption Translation Other Hedging Treasury Profit Total capital premium reserve reserve reserve reserve shares and loss equity Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 As at 29 May 2005 1,553 7,592 101 486 (1,050) 232 (1,132) 35,960 43,742 Exchange adjustments - - - (131) - - - - (131) Profit attributable to equity shareholders - - - - - - - 1,998 1,998 Shares vested - - - - - - 1,083 (1,083) - Dividends paid - - - - - - - (5,874) (5,874) Share-based payments - - - - - - - 168 168 Current tax - - - - - 73 - - 73 Cash flow hedges: - fair value gains in the year - - - - - 86 - - 86 - transfers to net profit - - - - - (331) - - (331) Net investment hedge - - - (2) - - - - (2) Issue of ordinary share capital 3 230 - - - - (26) 207 ------- ------ ------- ------- ------ ------- ------- ------ ------- As at 28 May 2006 1,556 7,822 101 353 (1,050) 60 (49) 31,143 39,936 ------- ------ ------- ------- ------ ------- ------- ------ ------- Other reserves Retained earnings ------------------------------------------ ------------------ Called up Capital share Share redemption Translation Other Hedging Treasury Profit Total capital premium reserve reserve reserve reserve shares and loss equity Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 As at 30 May 2004 1,542 6,301 101 - (1,050) 431 (1,011) 33,067 39,381 Exchange adjustments - - - 486 - - - - 486 Profit attributable to equity shareholders - - - - - - - 9,020 9,020 Shares vested - - - - - - 29 121 150 Purchase of treasury shares - - - - - - (150) - (150) Dividends paid - - - - - - - (5,818) (5,818) Share-based payments - - - - - - - 145 145 Deferred tax - - - - - 85 - - 85 Cash flow hedges: - fair value gains in the year - - - - - 331 - - 331 - transfers to net profit - - - - - (615) - - (615) Issue of ordinary share capital 11 1,291 - - - - (575) 727 ------- ------ ------- ------- ------ ------- ------- ------ ------- As at 29 May 2005 1,553 7,592 101 486 (1,050) 232 (1,132) 35,960 43,742 ------- ------ ------- ------- ------ ------- ------- ------ ------- 8. Analysis of net funds/(debt) As at As at 29 May Cash Exchange 28 May 2005 flow movement 2006 Â£000 Â£000 Â£000 Â£000 Cash at bank and in hand 8,622 (2,178) - 6,444 Current borrowings - bank overdraft - (1,667) (5) (1,672) ------- ------- -------- -------- Cash and cash equivalents 8,622 (3,845) (5) 4,772 Non-current borrowings (5,000) (1,955) - (6,955) Finance leases (181) 143 - (38) ------- ------- -------- -------- Net funds/(debt) 3,441 (5,657) (5) (2,221) ------- ------- -------- -------- 9. Reconciliation of profit to net cash from operations 2006 2005 Â£000 Â£000 Profit attributable to equity shareholders 1,998 9,020 Income tax expense 1,660 4,889 Depreciation of property, plant and equipment 7,145 6,239 Loss on disposal of property, plant and equipment 113 57 Amortisation of capitalised development costs 2,289 1,809 Amortisation of other intangibles 736 667 Interest income (238) (348) Interest expense 908 734 Net fair value (gains)/losses on derivative financial instruments (43) 294 Share-based payments 168 145 Exchange (gains)/losses on borrowings (111) 6 Changes in working capital: Decrease/(increase) in inventories 465 (644) Decrease in trade and other receivables 948 1,498 Decrease in trade and other payables (562) (3,033) Increase/(decrease) in provisions 313 (181) -------- -------- Net cash from operating activities 15,789 21,152 -------- -------- This information is provided by RNS The company news service from the London Stock Exchange

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