Final Results

Pennant International Group PLC 03 April 2006 3 April 2006 Pennant International Group plc Preliminary results for year ending 31 December 2005 Pre-Tax Profits up 315%; Increased Final Dividend Pennant International Group plc, ('Pennant' or the 'Company') quoted on AIM, announces preliminary results for the year ended 31 December 2005. Pennant is a leading supplier of technology solutions to the defence and industrial sectors, including specialist software, technical data services and data management systems, simulation and training systems. Commenting on the results, Chairman Christopher Powell said: 'The strategy of concentrating on core skills and building relationships with existing and new customers through good service and quality products has improved profitability in 2005 and is expected to continue to do so in the future.' Highlights: Group profit before tax of £450,561 (2004: £103,283) an increase of 315%. Increased final dividend of 0.31p per share (2004: 0.27p) - making total cash dividend for the year of 0.44p per share (2004: 0.40p). Strong cash position with net debt down to £261,795; Gearing further reduced to 6.5% (2004: 9.6%) New customers won during the year include Man ERF UK Limited and Australian Aerospace; Joint Venture with Sonovision, of France now operational and in profit. New or renewed contracts awarded since year end include MOD service provision contract worth an initial £3.8million. On prospects, Mr Powell added: 'The UK MOD is currently in the middle of a transformation involving a series of new 'platforms which bring with them requirements for training, technical documentation and through life support products. We believe that the Group has the skills and experience and is well placed, through its major customers, to benefit from these opportunities. There is also considerable overseas interest in the Group's products in the defence sector. 'The strong balance sheet and positioning for future opportunities gives your Board continued confidence.' For further information contact: Pennant International Group plc Tel: 01452 714881 Chris Snook, Chief Executive John Waller, Finance Director W.H. Ireland Tel: 0121 616 2101 Tim Cofman Winningtons Financial Tel: 0117 920 0092 Paul Vann CHAIRMAN'S STATEMENT I am pleased to report a significant increase in profits and dividend and a strengthened balance sheet. During the year the Group has concentrated on increasing profitability by building on core strengths, improving efficiency and enhancing its reputation for quality, delivery and focus on customer requirements. Efforts continue to be made to build new relationships and to establish the Group in new sectors appropriate to its core skills. This strategy is proving successful. Profitability has improved significantly, a number of new contracts have been won and service and framework agreements, giving ongoing revenue streams, have been renewed and/or extended. Tendering activity continues both for short and longer term prospects where, in a number of cases, the Group is supporting major prime contractors. The Group announced on 23 February 2006, that it had exchanged conditional contracts for the sale of a property in Southampton. The property is no longer suitable for the Group's needs. The sale is conditional upon the purchaser being able to obtain satisfactory planning permission within 9 months of the date of exchange. The agreed sale price is not less than £721,000 in cash. If, as expected, this transaction is completed it will realise a profit of approximately £300,000 and a cash inflow of approximately £700,000. RESULTS AND DIVIDEND Group profit on ordinary activities before tax was £450,561 (2004: £103,283). Earnings per share were 1.33p (2004: 0.32p) an increase of 315%. The Group's cash position remains strong, with net debt of £261,795 (2004: £358,281). Gearing is 6.5% (2004: 9.6%). Your Board is recommending a final cash dividend of 0.31p per share (2004: 0.27p) which, together with the interim dividend of 0.13p, gives a total dividend for the year of 0.44p per share (2004: 0.4p), an increase of 10%. This total dividend is 3 times covered by earnings. The final dividend will be paid on 26 May 2006 to shareholders on the Register at the close of business on 26 April 2006. The shares are expected to go ex dividend on 24 April 2006. The dividend reflects your Board's continued confidence in the future having regard to improved trading and current prospects. On 8 December 2005 the Company made a market purchase of 434,000 of its own shares at 11.5p per share. The shares will be held in treasury where they will be available for sale or to satisfy possible future requirements arising from the Group's share option scheme. This is the only holding of treasury shares the Company has. CURRENT TRADING Training Systems which supplies training solutions to the defence, aviation and industrial markets, has traded profitably and continues to work closely with the Ministry of Defence ('MOD'), BAE Systems, Agusta Westland and others, both on current contracts and future prospects. Its products include simulation training systems, computer based training and emulation. Examples of major contracts won or renewed, and which help to underpin trading for 2006 and beyond, include: A service provision contract for the MOD for 5 years to 2011 with an option to extend for a further 2 years. The contract is worth an initial £3.8 million and has provision for additional services throughout the life of the contract which could significantly enhance its overall value. Under the contract Pennant Training Systems Limited supports training equipment at six military establishments. A contract to supply courseware to the MOD. The contract will generate revenues until 2009 and the MOD has options to extend for a further two one year periods. A multi million pound contract to supply a Computer Aided Learning System to a major customer that will run into 2008. Selection, teamed with Carley Corporation, by Northrupp Grumman Corporation to provide CBT development support to the F-35 Joint Strike Fighter programme. Technical Data Services has continued to undertake tasking under a number of ongoing enabling contracts with the MOD, BT, General Dynamics and others. It has also been busy with a number of specific contracts including: The previously announced contract with Kawasaki Heavy Industries for documentation and training in respect of the operation and maintenance of the rolling stock for the Taipei Light Railway. A number of e-learning programmes for the Department of Work and Pensions. The first tranches of work, through BAE Systems, carrying out maintenance task analysis and the development of maintenance procedures for the Type 45 Destroyer. The Joint Venture Company (Pennant Sonovision - ITEP Limited) is now established with an office in Bristol. It made a small profit in its first period of trading. It is engaged in the provision of technical documentation and engineering services to Airbus UK Limited and is expected to grow in 2006. The Software subsidiary's product (OmegaPS suite) assists the operators of complex assets, such as ships, aeroplanes and tanks etc, to manage and support them through life. The product is widely used by defence authorities and contractors around the world. Product sales generate ongoing revenues in the form of maintenance contracts for the support of the software and from related consultancy services. In Australia and Canada the product is effectively mandated by the defence authorities. In both countries Pennant has continued to provide the authorities with support and consultancy services under ongoing contractual relationships. New customers won during the year include Zhe Jiang Zhong Yuan Electric Co Ltd in China, PSC - Naval Dockyard in Malaysia, Oerlikan Contraves AG in Switzerland, Rheinmetal Defence Electronics in Germany, Man Erf UK Limited and Australian Aerospace. PROSPECTS As set out in the Defence Industrial Strategy White Paper issued in December 2005, the UK MOD is currently in the middle of a transformation involving a series of new 'platforms' including the future aircraft carriers, Type 45 destroyers, new medium weight fighting vehicles, Super Lynx helicopters, A400M transport aircraft and Joint Strike Fighter. These 'platforms' bring with them requirements for training, technical documentation and through life support products. We believe that the Group has the skills and experience and is well placed, through its major customers, to benefit from these opportunities. There is also considerable overseas interest in the Group's products in the defence sector. In other sectors there are good overseas opportunities particularly in rail and, in the expanding UK market, for e-learning products. REDUCTION OF SHARE CAPITAL As set out and explained in the Notice of AGM, the Directors are proposing a resolution to reduce the share capital of the Company by the cancellation of all the deferred shares of 15p each thereby improving the Company's balance sheet by creating additional distributable reserves. The Directors consider that the capital reduction is in the best interests of the shareholders and of the Company. They unanimously recommend that the shareholders vote in favour of the resolution as they intend to do in respect of their own shareholdings totalling 35.05% of the Company's existing issued share capital. CONCLUSION The strategy of concentrating on core skills and building relationships with existing and new customers through good service and quality products has improved profitability in 2005 and is expected to continue to do so in the future. The strong balance sheet and positioning for future opportunities gives your Board confidence for the future. I thank my colleagues and all employees for their considerable efforts during a successful year. C C Powell Chairman Group Profit and Loss Account For the year ended 31 December 2005 Notes 2005 2004 £ (as restated) £ Turnover: Group and share of joint venture 10,784,644 11,550,645 Less: share of joint venture turnover (222,896) - --------- ---------- Group turnover 1 10,561,748 11,550,645 Cost of sales (6,164,512) (7,332,524) --------- ---------- Gross profit 4,397,236 4,218,121 Administration expenses (3,864,325) (4,035,503) --------- ---------- Group operating profit 2 532,911 182,618 Share of operating profit in joint venture 4,836 - --------- ---------- Profit on ordinary activities before 537,747 182,618 interest Interest receivable and similar income 1,137 6,332 Interest payable - Group 4 (86,799) (85,667) - Joint venture (1,524) - --------- ---------- Profit on ordinary activities before 450,561 103,283 taxation Tax on profit on ordinary activities 5 (24,937) (2,457) - Group - Joint venture (1,166) - --------- ---------- Profit on ordinary activities after taxation for Group and its share of joint venture attributable to members of the parent 424,458 100,826 undertaking ========= ========== Earnings per share 7 Basic 1.33p 0.32p Diluted 1.22p 0.29p Group Statement of Total Recognised Gains and Losses For the year ended 31 December 2005 Notes 2005 2004 £ £ Profit for the financial year 424,458 100,826 Prior year adjustment 19 86,400 - Currency translation differences on foreign currency net 34,609 (56,289) investments --------- ---------- Total gains and losses recognised since last annual report 545,467 44,537 ========= ========== Group Balance Sheet As at 31 December 2005 Notes 2005 2004 £ (as restated) £ Fixed assets Intangible assets 8 857,604 1,060,569 Tangible assets 9 2,561,663 2,670,671 Investments 10 6,135 6,135 Investment in joint venture - share of gross 155,346 - assets Investment in joint venture - share of gross (148,200) - liabilities --------- --------- 7,146 - --------- --------- 3,432,548 3,737,375 Current assets Stocks 11 750,884 510,860 Debtors 12 2,344,685 1,719,936 Cash at bank and in hand 939,798 1,242,152 --------- --------- 4,035,367 3,472,948 Creditors: amounts falling due within one year 13 (2,521,168) (2,430,560) --------- --------- Net current assets 1,514,199 1,042,388 --------- --------- Total assets less current liabilities 4,946,747 4,779,763 Creditors: amounts falling due after more than one year 14 (919,918) (1,050,091) Provisions for liabilities and charges 15 (16,000) - --------- --------- 4,010,829 3,729,672 ========= ========= Capital and reserves Called up share capital 16 3,045,400 3,045,400 Share premium 17 3,563,504 3,563,504 Profit and loss account 17 (2,598,075) (2,879,232) --------- --------- Shareholders' funds 18 4,010,829 3,729,672 ========= ========= Group Cashflow Statement For the year ended 31 December 2005 Notes 2005 2004 £ £ Net cash (outflow)/inflow from operating activities 26 484,238 (7,917) Returns on investments and servicing of finance 27 (85,662) (79,335) Taxation (32,257) (19,202) Capital expenditure 27 (71,407) (222,588) Acquisitions and disposals 27 (5,000) - Equity dividends (128,000) (169,600) --------- ---------- Cash inflow/(outflow) before financing 161,912 (498,642) Financing 27 (179,320) (651,923) --------- ---------- (Decrease) in cash 29 (17,408) (1,150,565) ========= ========== The financial statements were approved by the Board on 30 March 2006 C Snook J M Waller Director Director Notes to the Financial Statements For the year ended 31 December 2005 1. Turnover The Group's turnover is attributable to its one principal activity. The geographical analysis of turnover by destination is as follows: 2005 2004 £ £ United Kingdom 7,133,380 8,436,955 Europe 255,245 573,808 USA and Canada 2,154,638 1,598,783 Australasia 741,899 919,974 Africa 34,599 5,400 Far East 25,125 11,045 Middle East 216,862 4,680 -------------- ------------ 10,561,748 11,550,645 ============== ============ The geographical analysis of turnover by origin is as follows: 2005 2004 £ £ United Kingdom 8,047,007 9,308,939 USA and Canada 2,089,517 1,569,420 Australasia 425,224 672,286 -------------- ------------ 10,561,748 11,550,645 ============== ============ 2. Operating profit/(loss) The operating profit is stated after charging/ 2005 2004 (crediting): £ £ Depreciation of tangible fixed assets 202,236 191,028 Profit on sale of tangible fixed assets (3,433) (11,324) Amortisation of intangible fixed assets 203,439 206,940 Loss on foreign exchange transactions 48,734 14,777 Operating leases - property 128,502 134,707 - plant and machinery 71,732 80,674 Rents receivable - - Restructuring costs 128,861 130,689 ============== ============ 3. Auditors' remuneration, including non-cash benefits 2005 2004 £ £ Audit services 36,500 36,500 Taxation services 1,835 3,290 Other services 800 7,430 -------------- ------------ 39,135 47,220 ============== ============ Audit services include fees in respect of the Group audit and fees for other services required by statute or regulation. Taxation services consist of tax compliance services and tax advice. Other services consist of advice within group restructuring and the tax implications. 4. Interest payable 2005 2004 £ £ On bank loans and overdrafts 11,646 4,918 On loans repayable after five years 73,634 80,749 On overdue tax 283 - On hire purchase 1,236 - -------------- ------------ 86,799 85,667 ============== ============ 5. Taxation 2005 2004 £ £ UK corporation tax Current 733 544 Prior year adjustment - (1,791) -------------- ------------ 733 (1,247) Foreign tax Current 22,128 (6,596) Prior year adjustment (8,137) - -------------- ------------ 13,991 (6,596) -------------- ------------ Current tax charge/(credit) 14,724 (7,843) Deferred tax Deferred tax charge 11,379 10,300 -------------- ------------ Tax on profit on ordinary activities 26,103 2,457 ============== ============ Tax charge relates to the following Pennant International Group plc 24,937 2,457 Joint venture 1,166 - -------------- ------------ 26,103 2,457 ============== ============ Factors affecting the tax charge for the year Profit on ordinary activities before taxation 450,561 103,283 ============== ============ Profit on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 30% (2003 - 30%) 135,168 30,985 -------------- ------------ Effects of: Non deductible expenses 5,305 6,930 Depreciation 62,810 109,503 Capital allowances (46,203) (56,663) Tax losses (142,066) (41,066) Other tax adjustments (290) (55,741) Adjustment to tax charge in respect of previous - (1,791) periods -------------- ------------ (120,444) (38,828) -------------- ------------ Current tax charge/(credit) 14,724 (7,843) ============== ============ The Group has estimated UK losses of £2,022,000 (2004 - £2,560,000) available for carry forward against future trading profits. 6. Dividends 2005 2004 Ordinary shares of 5p each: Dividends paid 128,000 169,600 ============== ============ Equity shares 128,000 169,600 ============== ============ 7. Earnings per share Earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year as follows: 2005 2004 £ £ Profit after tax attributable to shareholders 424,458 100,826 ============== ============ Number Number Weighted average number of ordinary shares in issue during the year 31,971,463 32,000,000 Diluting effect of share options 2,777,500 2,564,500 -------------- ------------ Diluted average number of ordinary shares 34,748,963 34,564,500 ============== ============ Earnings per share p p Basic 1.33 0.32 -------------- ------------ Diluted 1.22 0.29 ============== ============ 8. Intangible fixed assets Positive Negative Development Total goodwill goodwill expenditure £ £ £ £ Cost At 1 January 2005 and at 31 December 2005 1,243,731 (69,234) 922,045 2,096,542 --------- --------- ---------- --------- Amortisation At 1 January 2005 279,238 (17,310) 774,045 1,035,973 Exchange difference on opening balance (474) - - (474) Charge/(credit ) for the year 58,901 (3,462) 148,000 203,439 --------- --------- ---------- --------- At 31 December 2005 337,665 (20,772) 922,045 1,238,938 --------- --------- ---------- --------- Net book value At 31 December 2005 906,066 (48,462) - 857,604 ========= ========= ========== ========= At 31 December 2004 964,493 (51,924) 148,000 1,060,569 ========= ========= ========== ========= 9. Tangible fixed assets Long Short Freehold Plant Motor leasehold leasehold land and Equipment vehicles Total land and land and buidings fixtures & buildings buildings fittings £ £ £ £ £ £ Cost or valuation At 1 January 576,892 70,737 1,587,858 3,093,412 62,591 5,391,490 2005 Exchange difference on opening - - - 22,492 470 22,962 balance Additions 46,690 - - 48,351 10,266 105,307 Disposals - - - (34,498) (21,363) (55,861) -------- -------- -------- -------- -------- -------- At 31 December 623,582 70,737 1,587,858 3,129,757 51,964 5,463,898 2005 ======== ======== ======== ======== ======== ======== Depreciation At 1 January 2005 31,068 4,433 200,126 2,437,408 47,784 2,720,819 Exchange difference on opening balance - - - 19,813 277 20,090 Charge for the year 5,458 663 13,877 180,349 1,889 202,236 Disposals - - - (34,499) (6,411) (40,910) -------- -------- -------- -------- -------- -------- At 31 December 2005 36,526 5,096 214,003 2,603,071 43,539 2,902,235 ======== ======== ======== ======== ======== ======== Net book value At 31 December 2005 587,056 65,641 1,373,855 526,686 8,425 2,561,663 -------- -------- -------- -------- -------- -------- At 31 December 2004 545,824 66,304 1,387,732 656,004 14,807 2,670,671 ======== ======== ======== ======== ======== ======== The freehold land and buildings include a revalued asset owned by a subsidiary which was valued on an open market basis in 1988 by a firm of independent Chartered Surveyors. Comparable historical cost for the land and buildings included at valuation: Cost £ At 1 January 2005 and at 31 December 510,894 2005 -------- Depreciation based on cost At 1 January 2005 86,598 Charge for the year 4,091 -------- At 31 December 2005 90,689 -------- Net book value At 31 December 2005 420,205 -------- -------- At 31 December 2004 424,296 ======== Included in freehold land and buildings is a non-depreciable asset of £101,789 (2004-£101,789) Included above are assets held under finance leases or hire purchase contracts as follows: Motor vehicles £ Net book values At 31 December 2005 11,739 ========== At 31 December 2004 - ========== Depreciation charge for the year 31 December 2005 1,944 ========== 31 December 2004 - ========== 10. Investments 2005 2004 £ £ Quoted (note 10a) 6,135 6,135 Joint venture - Group share of net assets (note 10b) 7,146 - ---------- ---------- 13,281 6,135 ========== ========== 10a. Market values Quoted 5,625 7,625 ========== ========== 10b. Joint venture Pennant International Group plc has a 50% interest, consisting of 5,000 Ordinary Shares, in Pennant Sonovision ITEP Ltd, a joint venture with Sonovision ITEP SAS of France. The joint venture was established in 2005 to provide technical documentation for European aerospace industry customers. The company is based in Filton, Bristol, England and is headed by a board of directors with equal representation from both shareholders. 11. Stocks 2005 2004 £ £ Raw materials and consumables 34,868 31,096 Work in progress 716,016 479,764 ---------- ---------- 750,884 510,860 ========== ========== 12. Debtors Trade debtors 1,208,332 1,102,533 Amounts recoverable on long-term contracts 838,165 387,079 Other debtors 1,857 24,417 Taxation recoverable - 8,000 Prepayments 155,433 175,403 Deferred tax asset (note 15) 28,198 22,504 Amounts due from joint venture 83,500 - VAT recoverable 29,200 - ---------- ---------- 2,344,685 1,719,936 ========== ========== Amounts due from the joint venture are due after more than one year. They are repayable in five annual instalments, with the first instalment becoming due for repayment on 14 February 2008. Interest is being charged at 2% above the bank base rate. 13. Creditors: amounts falling due within one year 2005 2004 £ (as restated) £ Bank loans and overdrafts 278,817 550,342 Trade creditors 555,636 520,430 Corporation tax 31,184 56,812 Social security and other taxes 505,883 479,685 Net obligations under hire purchase contracts 2,858 - Payments received on account 114,000 33,000 Other creditors 300,993 218,177 Accruals and deferred income 651,445 571,949 Dividends payable 165 165 Amounts due to joint venture 80,187 - ---------- ---------- 2,521,168 2,430,560 ========== ========== 14. Creditors: amounts falling due after more than one year 2005 2004 £ £ Bank loans 909,657 1,050,091 Net obligations under hire purchase contracts 10,261 - ---------- ---------- 919,918 1,050,091 ========== ========== Analysis of loans Not wholly repayable within five years by instalments 1,046,352 1,173,365 Included in current liabilities (136,695) (123,274) ---------- ---------- 909,657 1,050,091 ---------- ---------- Instalments not due within five years 268,059 467,977 ========== ========== Loan maturity analysis In more than one year but not more than two years 145,580 131,595 In more than two years but not more than five years 496,018 450,519 In more than five years 268,059 467,977 ========== ========== Bank loans of £1,046,352 (2004 - £1,173,365 ) are secured by fixed and floating charges over the assets of Pennant International Group plc, Pennant Training Systems Limited, Pennant Software Services Limited and Pennant Information Services Limited, and are repayable by monthly instalments and interest is charged at 2% above the bank's base rate. Net obligations under hire purchase contracts 2005 2004 £ £ Repayable within one year 2,858 - Repayable between one and five years 10,261 - ---------- ---------- 13,119 - Included in liabilities falling due within one year (2,858) - ---------- ---------- 10,261 - ========== ========== 15. Provisions for liabilities and charges Deferred taxation provided in the financial statements and the amounts not provided are as follows: At 1 January 2005 (22,504) (32,804) Profit and loss account 11,379 10,300 ---------- ---------- At 31 December 2005 (11,125) (22,504) ========== ========== Deferred tax relates to the following: Pennant International Group plc - Deferred tax asset (note 12) (28,198) (22,504) - Deferred tax liability 16,000 - ---------- ---------- (12,198) (22,504) Joint venture 1,073 - ---------- ---------- (11,125) (22,504) ========== ========== Not provided Provided 2005 2004 2005 2004 £ £ £ £ Accelerated capital allowances - - 104,522 89,794 Other timing differences - - (5,233) (5,275) Tax losses available - - (110,414) (107,023) --------- --------- --------- --------- - - (11,125) (22,504) Surplus on revaluation of land and 32,000 30,000 - buildings --------- --------- --------- --------- 32,000 30,000 (11,125) (22,504) ========= ========= ========= ========= The deferred taxation liability on the surplus arising on the revaluation of the freehold property has not been provided because there is little possibility of the property being sold in the foreseeable future. 16. Share Capital 2005 2004 Authorised £ £ 51,092,000 Ordinary shares of 5p each 2,554,600 2,554,600 9,636,000 Deferred shares of 15p each 1,445,400 1,445,400 ----------- ----------- 4,000,000 4,000,000 =========== =========== Allotted, called up and fully paid 32,000,000 Ordinary shares of 5p each 1,600,000 1,600,000 9,636,000 Deferred shares of 15p each 1,445,400 1,445,400 ----------- ----------- 3,045,400 3,045,400 =========== =========== On 8 December 2005 the company purchased 434,000 of its own Ordinary Shares of 5p and holds these as Treasury Shares at the year end. The deferred shares: do not confer any right to attend or vote at general meetings; do not confer any right to participate in any dividends; in the case of a winding up of the Company are entitled as a class to £1 paid after the holders of the ordinary shares; may be cancelled by the Company without making any payment. The number and exercise price of options under the Company's share option scheme at 31 December 2005 are: Option price Number of Exercise Per share Shares Dates 1998 Share Option Scheme 122.50p 17,500 2003 to 2007 11.50p 460,000 2005 to 2012 10.00p 1,800,000 2006 to 2013 13.00p 500,000 2008 to 2015 ----------- 2,777,500 =========== 17. Statement of movements on reserves Share Profit Premium and loss £ account £ Balance at 1 January 2005 as previously reported 3,563,504 (2,965,632) Prior year adjustment (note 19) - 86,400 ---------- --------- Balance at 1 January 2005 as restated 3,563,504 (2,879,232) Profit for the year - 424,458 Dividends - (128,000) Currency translation differences on foreign currency net investments - 34,609 Purchase of treasury shares - (49,910) ---------- --------- Balance at 31 December 2005 3,563,504 (2,598,075) ========== ========= 18. Reconciliation of movements in shareholders' funds 2005 2004 £ £ Profit for the financial year 424,458 100,826 Dividends (128,000) (169,600) Purchase of treasury shares (49,910) - Other recognised gains and losses relating to the year 34,609 (56,289) ---------- --------- Net addition/(reduction) to shareholders' funds 281,157 (125,063) Opening shareholders' funds (originally £3,643,272 before adding prior year adjustment of £86,400) 3,729,672 3,854,735 ---------- --------- Closing shareholders' funds 4,010,829 3,729,672 ========== ========= 19. Prior year adjustments Until 31 December 2004 it was the Group's policy to recognise proposed dividends as a liability at the balance sheer date. In accordance with FRS 21 (effective from 1 January 2005) proposed dividends are no longer considered to represent a present obligation at the balance sheet date. Accordingly the proposed final dividend for 2005 has not been provided as a liability. The comparative figures have been restated accordingly. 20. Capital commitments There were no capital commitments at 31 December 2005 and 31 December 2004 21. Financial commitments At 31 December 2005 the Group had annual commitments under non-cancellable operating leases as follows: Land and Buildings Other 2005 2004 2005 2004 Expiry date: £ £ Within one year - - 24,840 30,552 Between two and five years 48,015 60,015 52,680 60,324 In over five years 72,356 72,356 - - -------- -------- -------- -------- 120,371 132,371 77,520 90,876 ======== ======== ======== ======== On 14 February 2005 the Group entered into a commitment with Pennant Sonovision ITEP Ltd to make available £120,000 of funds for a period of three years. At 31 December 2005, £75,000 had been drawn down and £45,000 remains available. 22. Directors' emoluments 2005 2004 £ £ Emoluments for qualifying services 226,283 265,065 Pension contributions to money purchase schemes 12,350 13,845 Amounts paid for directors' services 111,600 111,600 ---------- --------- 350,233 390,510 ========== ========= The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 2 (2004: 3) Emoluments disclosed above include the following amounts paid to the highest paid director: Emoluments for qualifying services 112,607 123,042 ========== ========= 23. Employees Number of employees 2005 2004 Number Number The average monthly number of employees (including directors) during the year was: Office and management 25 18 Production 125 156 Selling and distribution 11 11 ---------- --------- 161 185 ========== ========= Employment costs £ £ Wages and salaries 5,182,851 5,490,215 Social security costs 437,539 529,994 Other pension costs 215,514 210,715 ---------- --------- 5,835,904 6,230,924 ========== ========= 24. Pension costs Defined contribution The Group operates a defined contribution pension scheme for its employees in the United Kingdom. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund. Contributions payable by the Group for the year 153,214 167,472 Contributions payable to the fund at the year end and included in creditors 26,342 25,671 ========== ========= 25. Substantial shareholdings Ordinary shares of 5p each Name Rathbone Nominees Limited 4,256,351 Dartington Portfolio Nominees Limited 3,381,671 Capita Trust Co. Limited 1,741,850 Pennine Downing AIM VCT 3 PLC 1,111,111 Pennine Downing AIM VCT 5 PLC 1,111,111 ========= 26. Reconciliation of Group operating profit to net cash inflow/(outflow) from operating activities 2005 2004 £ £ Operating profit 532,911 182,618 Depreciation 202,236 191,028 Profit on sale of tangible fixed assets (3,433) (11,324) Amortisation of intangible fixed assets 203,439 206,940 (Increase)/decrease in stocks (240,024) 3,305 (Increase)/decrease in debtors (627,055) 478,896 Increase/(decrease) in creditors 384,903 (1,010,568) Other movements 31,261 (48,812) ---------- --------- Net cash inflow/(outflow) from operating activities 484,238 (7,917) ========== ========= 27. Analysis of cash flows for headings netted in the cash flow statement 2005 2004 £ £ Returns on investment and servicing of finance Interest received 1,137 6,332 Interest paid (86,799) (85,667) ---------- --------- Net cash outflow for returns on investments and servicing of finance (85,662) (79,335) ========== ========= Capital expenditure Payments to acquire tangible fixed assets (89,791) (234,080) Receipts from sales of tangible fixed assets 18,384 11,492 ---------- --------- Net cash outflow from capital expenditure (71,407) (222,588) ========== ========= Acquisitions and disposals Purchase of joint venture 5,000 - ========== ========= Financing Repayment of hire purchase and finance leases (2,397) (6,389) Repayment of loans (127,013) (645,534) Purchase of treasury shares (49,910) - ---------- --------- Net cash outflow for financing (179,320) (651,923) ========== ========= 28. Analysis of net (debt)/funds 1 January 2005 Cash Other 31 December Flow non-cash 2005 changes £ £ £ £ Cash in hand and at bank 1,242,152 (302,354) - 939,798 Bank overdraft (427,068) 284,946 - (142,122) --------- -------- -------- --------- 815,084 (17,408) - 797,676 Hire purchase due within one - 2,397 (5,255) (2,858) year Hire purchase due after one - - (10,261) (10,261) year Loans due within one year (123,274) 127,013 (140,434) (136,695) Loans due after one year (1,050,091) - 140,434 (909,657) --------- -------- -------- --------- (358,281) 112,002 (15,516) (261,795) ========= ======== ======== ========= 29. Reconciliation of net cash flow to movement in net (debt)/funds 2005 2004 £ £ Decrease in cash in the year (17,408) (1,150,565) Cash to repurchase debt 129,410 651,923 New hire purchase (15,516) - -------- --------- Movement in net debt in the year 96,486 (498,642) Opening net (debt)/funds (358,281) 140,361 -------- --------- Closing net debt (261,795) (358,281) ======== ========= This information is provided by RNS The company news service from the London Stock Exchange

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