Preliminary Results

RNS Number : 8601F

Plexus Holdings Plc

15 October 2008

 



Plexus Holdings plc ('Plexus' or 'the Group')

Preliminary Results for the year to 30 June 2008 

Plexus Holdings plc, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP method of wellhead engineering announces its preliminary results for year ending 30 June 2008.

Results

*	145% increase in profit before tax to £1.9m (2007: £0.8m before £0.8m gain on investment disposal)
*	29% increase in turnover to £13.3m (2007: £10.3m)
*	104% increase in EBITDA (before IFRS 2 share based payment charges of £0.18m) to £3.8m (2007: £1.9m before IFRS 2 share based payment charges of £0.12m and £0.8m gain on investment disposal)
*	Basic earnings per share of 1.61p (2007: 1.39p)

Highlights

*	Continued strong growth of oil and gas engineering service business supplying proprietary POS-­ GRIP wellhead equipment
*	New customer rental contract wins for StatoilHydro ASA, CNR International (U.K.) Limited ('CNR'), Lundin Petroleum AB ('Lundin') and SPD Ltd
*	First Middle Eastern contract win with Dubai Petroleum Establishment in June 2008
*	Strong progress made in the growing high pressure/high temperature (HP/HT) market including a second contract win with Shell for Shell Egypt in August 2008
*	£1.7m contract win with ConocoPhillips for the supply of 15,000 psi HP/HT and 20,000 psi extreme high pressure high temperature (X-HP/HT) rental wellhead exploration equipment for wells being drilled in the Norwegian North Sea was announced in September 2008
*	Successful installation of the first 20,000 psi X-HP/HT rental wellhead system for BG International Ltd
*	POS-GRIP technology moves into the subsea market with contract wins from AGR Petroleum on behalf of Silverstone Energy Ltd and Sterling Resources (U.K.) Ltd for its unique M2S (mudline to subsea) cross-over system
*	Exercise of option to acquire Plexus Deepwater Technologies Ltd ('PDT') from Grant Prideco, Inc which unites the POS-GRIP subsea IP rights
*	Plexus Malaysia actively marketing the POS-GRIP equipment and services in the region
*	Capital expenditure of £3.8m made during the year, of which £2.4m was in property, plant and equipment primarily reflecting growth in rental inventory
*	25% increase in personnel to 74 as at the year end (2007: 59)

Chief Executive Ben van Bilderbeek said:

'I am pleased that our second full year as an AIM company has delivered excellent results where we have achieved strong sales and profit growth. At the same time it is particularly important to note that we have continued to advance our strategic goals of raising the profile of our proprietary POS-GRIP wellhead equipment which has resulted in increasing interest and support from the global oil and gas industry, particularly in the higher pressure/higher temperature rental wellhead exploration arena. This success has enabled us to win business from a number of new customers including our first contract with a Middle Eastern operator and our second X-HP/HT contract, and has given us the platform to establish our first base of operation outside of the UK in Malaysia which allows us to target the Asian marketplace, and extend our geographic reach.

Our focus remains in rental wellhead equipment and as such we are looking to accelerate investment in our rental wellhead inventory to increase our capacity for servicing customer demand from around the world, and improve our equipment utilisation rates. At the same time as building our core business we will continue to invest in developing our proprietary POS-GRIP technology for applications outside of wellheads which has already enabled us to move into the subsea market. I am confident that these initiatives and the unique nature of our technology will encourage potential licencees and alliance partners in the long term to work with us not only in the exploration rental equipment arena but more significantly in the key production wellhead sales market to fully exploit our resources, and deliver significant value to shareholders.'

For further information please visit www.posgrip.com or contact: 

Ben van Bilderbeek	Plexus Holdings PLC	Tel: [phone]
Graham Stevens	Plexus Holdings PLC	Tel: [phone]
Alexander Dewar	Brewin Dolphin Investment Banking	Tel:[phone]
Sandy Fraser	Brewin Dolphin Investment Banking	Tel:[phone]
Felicity Edwards	St Brides Media & Finance Ltd	Tel: [phone]
Isabel Crossley	St Brides Media & Finance Ltd	Tel: [phone]

Summary of Results for the year ended 30 June 2008

	2008 £'000	2007 Restated £'000
Turnover	13,275	10,274
EBITDA - before the effect of IFRS 2	3,810	1,869
EBITDA - after the effect of IFRS 2	3,629	1,753
Profit before taxation	1,905	1,566
Basic earnings per share (pence)	1.61	1.39

Chairman's Statement

Business progress

I am pleased to report that the Group has had another strong year of growth and made significant progress in a number of key strategic areas including strengthening the blue chip client base, advancing technological developments, and continued broadening of geographical areas of operation. This has resulted in a 29% increase in turnover to £13.3m for the year to 30th June 2008, and a 104% increase in EBITDA to £3.8m, (before IFRS 2 share based payment charges of £0.18m), resulting in earnings per share of 1.61p.

Strategy

Plexus is a company built around the development and commercialisation of its proprietary POS-GRIP technology. Our core strategy remains to grow our share of the wellhead rental exploration market, and in the longer term the volume production wellhead market, whilst continuing to extend our range of POS-­ GRIP applications into new product areas. For this reason we are particularly pleased to have successfully tested and delivered during the year the world's first 20,000 psi X-HP/HT, through the BOP, adjustable surface wellhead system, which is currently being used by BG International Ltd in the North Sea. In addition to our rental activities we have built and tested our first subsea application for Silverstone Energy Ltd in the form of a cross-over wellhead system. This milestone incorporated our metal-to-metal POS-GRIP activated HG® seals which are integral to the performance, safety, and time saving advantages that we offer the industry when comparing our proprietary equipment to conventional systems. This further demonstrates the significant commercial opportunities that exist in the oil and gas industry for innovative and, we believe, superior technology led solutions.

Together with expanding our range of products and services, part of our strategy is to broaden our areas of operation to enable us to pursue sales opportunities further afield from our traditional North Sea base whilst at the same time continuing to raise our profile with major operators. This will leave us well placed to benefit from such developments as the availability of the large number of new Jack-up rigs scheduled for delivery over the next 4 years. As these new rig units are designed to be able to drill deeper and higher pressure wells, they are generally equipped with well control equipment for which POS-­ GRIP wellhead equipment is ideally suited.

Such strategic sales initiatives have resulted over the year in a number of new contract wins including those with StatoilHydro ASA, Lundin Petroleum AB, and Dubai Petroleum Establishment, and since the year end a second HP/HT contract with Shell for Shell Egypt, and our first 20,000 psi X-HP-HT contract win with ConocoPhillips for exploration wells to be drilled in the Norwegian North Sea. Contract wins of this nature where Plexus is becoming the supplier of choice are extremely important for raising our profile within the oil and gas industry.

A key part of this diversification strategy away from our traditional North Sea heartland includes the establishment of an entity in Malaysia called Plexus Ocean Systems (Malaysia) Sdn Bhd as our first base of operation outside of Aberdeen. This entity where Plexus owns 49% which would be licensed to supply POS-GRIP equipment is already targeting new customers in the region and we are confident that we will be able to generate new sales opportunities over the coming months.

To be able to fulfil these strategic initiatives it is essential that we have the necessary number of skilled personnel, inventory, and facility space, therefore ongoing investment will continue to be made in these key areas. This is extremely important as we need to continue to drive our organic growth as a means of ensuring our role in the industry and the part we play in meeting the increasing challenges in both exploring for and producing oil and gas in unconventional conditions is recognised by both operators and our peers. As we continue to pursue such a strategy, we believe we will be successful in time in persuading potential licensees and alliance partners to invest in helping us to accelerate the roll out of POS-­ GRIP technology across the wider industry, and particularly in the volume production wellhead market.

In recognition of the continuing growth and development of Plexus, and the increasing importance of all matters relating to 'Quality, Health, Safety and Environment' it is also important to report on new initiatives during the year to ensure our ability to meet ever more stringent standards, which can be essential to the winning of contracts from contractors and operators. For these reasons the Plexus Excellence Programme was created and implemented to manage and monitor all aspects of our health and safety policies which will underpin our growth plans and ongoing acceptance by major international customers.

Staff

The Board is grateful to all our employees, many of whom are new to the Company, and would like to thank everyone for their dedication and hard work during a year that has achieved a number of milestones in terms of winning new customers and the successful development and testing of new POS-­ GRIP products.

Outlook

Our central belief that our patented proprietary POS-GRIP technology has an increasingly important role to play in the oil and gas wellhead industry, as well as being able to extend to a much broader range of products including connectors and valves, is being vindicated as Plexus continues to grow and gain recognition from major international operators around the world. This increasing recognition combined with the industry's increasing need to have access to innovative and groundbreaking technological solutions places Plexus in a strong position to become a significant participant in the oil services sector. This is particularly the case where major international operators have chosen to specify and deploy our equipment in preference to traditional alternatives which we believe have performance limitations, especially at high pressure levels where POS-GRIP excels. We therefore look forward to the future with confidence whilst being cognisant that we are operating in a sector where contracts have long lead times and can lead to some volatility in anticipated revenues.

Robert Adair

Non-Executive Chairman

14 October 2008

Chief Executive's Review

Plexus has continued to make excellent progress during its second full year of operation as an AIM company. These results reflect both the increasing awareness within the oil and gas industry of our proprietary POS-GRIP wellhead equipment and the returns deriving from our ongoing investment programme in people, technological development, and rental inventory.

We have also benefited from a growing exploration rental wellhead market and we anticipate that this demand will continue despite signs of an economic slowdown as the world continues to be dependant on oil and gas. The industry's need to pursue unconventional fields, particularly those which are HP/HT, and the unique safety and technical benefits that our technology provides for such activities places us in a strong position to be able to capitalise on these opportunities.

The progress made during the year has been driven and underpinned by a number of key contract wins and commercial developments of which some of the more notable were as follows:

*	Successful installation of the first 20,000 psi X-HP/HT rental wellhead system for BG International Ltd.
*	POS-GRIP technology moved into the subsea market for the first time with contract wins from AGR Petroleum on behalf of Silverstone Energy Ltd and Sterling Resources (U.K.) Ltd for its unique M2S (mudline to subsea) cross-over wellhead system. This new equipment enables the conversion of pre-­ drilled wells to subsea production, and incorporates our metal-to-metal POS-GRIP activated HG seals. These seals are integral to the performance, safety, and time saving advantages that we believe we can demonstrate to the industry when comparing our proprietary equipment to conventional systems.
*	Exercise of option to acquire US based Plexus Deepwater Technologies Ltd (PDT) from Grant Prideco, Inc. This acquisition delivers to Plexus the 50% commercial interest over the POS-­ GRIP subsea technology intellectual property rights that Grant Prideco controlled at the time of admission to AIM in December 2005, and leaves Plexus with 100% ownership and full control.
*	Winning first contract with StatoilHydro ASA for the supply of HP/HT exploration rental wellhead equipment, mudline suspension equipment and service support for the Norwegian North Sea.
*	First Middle Eastern contract win with Dubai Petroleum Establishment in the Arabian Gulf which is a key milestone in the region and which it is hoped will generate additional opportunities in the future.
*	Extension of trading relationship with Shell leading to the contract win in August 2008 for the supply of HP/HT equipment to Shell Egypt in the Egyptian Eastern Mediterranean Sea, which is our second contract win in the Northern African region.
*	Post year end £1.7m contract win with ConocoPhillips for the supply of 15,000 psi HP/HT and 20,000 psi X-HP/HT rental wellhead exploration equipment contract for wells being drilled in the Norwegian North Sea. This is our second 20,000 psi X-HP/HT contract and further demonstrates our growing reputation in the expanding unconventional and more extreme drilling arena.

Our focus during the year has been the pursuit of organic growth through a combination of developing and building on existing contracts and relationships, whilst vigorously promoting and championing POS-GRIP technology around the world to new customers and potential alliance partners. Such activity has successfully generated a number of new key contracts with world class operating companies in a variety of geographical locations, and this places us in an excellent position to capitalise on new business opportunities as they arise. At the same time the market for oil and gas services continues to grow and we are particularly encouraged by the fact that independent research predicts that the global Jack-up fleet will over the next four years increase by 52 rigs equipped with Blow Out Preventers ('BOP') that are designed in a way that is particularly suited to our HP/HT through the BOP adjustable method of engineering. We believe that this additional modern generation rig capacity will help us to continue to drive the growth of our HP/HT and X-HP/HT rental sales activities.

The success of our strategy to date and the increasing awareness and support for our proprietary technology from the operators, is evidenced by the make up of our year-on-year sales increase to £13.3m from £10.3m. Our HP/HT and X-HP/HT rental sales contributed £7.0m in the year equating to growth of 150% against £2.8m the prior year. This is extremely encouraging and could not have been achieved without further significant capital investment which totalled £2.4m for the rental fleet and tangible assets, as well as investment in people throughout the year which resulted in our headcount increasing by 25% to 74 as at the year end as compared to 59 at the same time last year.

In summary I am very pleased with this strong set of results and the progress we have continued to make during the year. It is important to emphasise that the underlying performance of our rental activities is to a degree masked by our continued investment in facilities, personnel, development and testing in support of new product development and additional applications for POS-GRIP. However over the longer term I  believe that such investment and our ability to demonstrate that our proprietary technology is safer to use, easier to install, lower in cost to manufacture, and superior in performance, is key to making a breakthrough with potential licensees and alliance partners who in time will engage with us to fully exploit our capabilities on a global scale including in the key production wellhead sales market, and thereby deliver significant value to our shareholders.

Ben van Bilderbeek

Chief Executive

14 October 2008

Financial Review

Turnover

Turnover for the year was £13.3m, up 29% from £10.3m in the previous year reflecting strong growth during the year.

The rental business and related equipment and services accounted for over 85% of turnover as compared to over 56% last year. HP/HT and X-HP/HT again generated the largest year on year sales increase of nearly 150%. Turnover includes £1.5m of engineering and testing which reflects the increase in activity relating to the ongoing development of POS-GRIP technology for new applications including subsea equipment.

Margin

Gross margins have increased to 54.8% from 45.1% in the previous year as rental sales continued to increase as a percentage of total revenues and related economies of scale benefits flow through.

Overhead expenses

In line with sales and profit growth overhead expenses have increased so as to be able to provide the necessary infrastructure and skill base to support the growing number of customers around the world. This resulted in total overheads increasing to £5.2m from £3.9m in the previous year of which overhead staff costs increased to £2.8m from £2.0m reflecting the continuing need to increase our permanent headcount to support increased activity levels and more complex projects. Other items which increased significantly year on year were overseas base costs, travel, freight, warehouse consumables, and equipment hire costs as a result of the growing international profile of our customers and business activities.

EBITDA

The EBITDA for the year (before IFRS 2 share based payment charges of £0.18m) was £1.9m, up from £1.1m the previous year (before IFRS 2 share based payment charges of £0.12m and £0.8m gain on investment disposal). EBITDA margin for the year increased to 29.1% as compared to 18.3% last year. The Group's ongoing significant investment in people, infrastructure, and inventory has enabled Plexus to in particular grow rental sales and this has helped to deliver the strong year on year EBITDA growth due to the higher gross margins that are generated.

Profit before tax

Profit before tax of £1.9m compares to a profit last year of £0.8m (before the £0.8m gain on investment disposal). Depreciation and amortisation increased to £1.58m against £0.98m last year reflecting the increase in assets during the period. The profit before tax is stated after the charge for share based payments under reporting standard IFRS 2; the charge for the full year is £0.18m compared to £0.12m last year.

Tax

The Group UK Corporation Tax charge was significantly higher than the prior year as a result of the rise in trading profitability. This resulted in a tax charge of £0.62m for the year as compared to £0.45m last year.

EPS

The Group reports basic earnings per share of 1.61p compared to 1.39p last year (after adjusting for the effect of conversion to IFRS reporting).

Cash and Balance Sheet

The balance sheet reflects the growth in operations during the year with the net book value of tangible assets including items in the course of construction increasing to £7.3m from £6.6m last year. Receivables have increased to £6.9m as compared to £5.0m as a result of the increase in sales revenues. Net bank borrowings closed at £3.1m compared to a £1.8m last year reflecting the Group's ongoing investment in the expansion of the rental fleet and tangible assets totalling £2.4m, acquisition of PDT for £1.0m, increase in working capital requirements associated with longer payment cycles that can apply to international as opposed to local contracts, and ongoing investment in research and development and patent extensions. Net cash outflow for the year was £1.4m as compared to £4.7m last year. In recognition of the ongoing capital expenditure programme either completed or under construction together with the increase in working capital requirements the Group increased its bank facilities during the year to £4.0m from the previous level of £2.5m.

Intellectual property

The Group carries in its balance sheet goodwill and intellectual property rights of £7.4m including an additional £1.0m resulting from the acquisition of PDT during the year. The directors have considered whether there have been any indications of impairment and have concluded that there have been no such indications. The directors therefore consider the current carrying values to be appropriate. Indications of impairment are considered annually.

IFRS 2 (Share Based Payments)

IFRS 2 charges have been included in the accounts, in line with reporting standards. The 'fair value' of share based payments has been computed independently by specialist consultants and is amortised evenly over the expected vesting period from the date of grant. The charge for the year was £0.18m which compares to £0.12m for last year.

International Financial Reporting Standards ('IFRS')

This is the first full year that Plexus has reported under International Financial Reporting Standards ('IFRS') and this years accounts are now as required IFRS compliant. The Annual Report is therefore longer as it contains a number of reconciliations between UK GAAP and IFRS. The accounts for the prior period have been restated under IFRS and these accounts were audited under UK GAAP. The adjustments between UK GAAP and IFRS are detailed in note 26 and are not considered material.

Graham Stevens

Finance Director

14 October 2008

Consolidated Income Statement

for the year ended 30 June 2008

	2008 £'000	2007 Restated £'000
Revenue	13,275	10,274
Cost of sales	(6,003)	(5,640)
Gross profit	7,272	4,634
Administrative expenses	(5,167)	(3,862)
Operating profit	2,105	772
Other income	-	789
Finance income	14	52
Finance costs	(156)	(47)
Share of loss of associate	(58)	-
Profit before taxation	1,905	1,566
Income tax expense	(616)	(450)
Profit after taxation being profit for the
financial year	1,289	1,116
Earnings per share
Profit for the year attributable to Plexus Holdings shareholders
Basic	1.61p	1.39p
Diluted	1.60p	1.39p

Consolidated Balance Sheet

at 30 June 2008

	2008 £'000	2007 Restated £'000
Assets
Goodwill	722	722
Intangible assets	6,661	5,611
Property, plant and equipment	7,329	6,549
	14,712	12,882
Non-current assets
Inventories	3,478	3,123
Trade and other receivables	6,907	4,976
Cash at bank and in hand	456	128
Current assets	10,841	8,227
Total Assets	25,553	21,109
Equity and Liabilities
Called up share capital	802	802
Share premium account	15,596	15,596
Share based payments reserve	360	179
Retained earnings	787	(502)
Total equity	17,545	16,075
Liabilities
Deferred tax liabilities	377	322
Non-current liabilities	377	322
Trade and other payables	3,521	2,707
Current income tax liabilities	510	104
Borrowings	3,600	1,901
Current liabilities	7,631	4,712
Total liabilities	8,008	5,034
Total Equity and Liabilities	25,553	21,109

These financial statements were approved and authorised for issue by the board of directors on 14 October 2008 and were signed on its behalf by:

B van Bilderbeek	G Stevens
Director	Director

Consolidated Statement of Changes in Equity

for the year ended 30 June 2008

Group
	Called Up Share Capital £'000	Share Premium Account £'000	Share Based Payments Reserve £'000	Retained Earnings £'000	Total £'000
Balance as at 1 July 2006 as reported
under UK GAAP	802	15,596	63	(1,585)	14,876
Changes in accounting policy arising from
IFRS	-	-	-	(33)	(33)
Balance as at 1 July 2006 under IFRS	802	15,596	63	(1,618)	14,843
Profit for the year	-	-	-	1,116	1,116
Share based payments reserve charge	-	-	116	-	116
Balance as at 30 June 2007	802	15,596	179	(502)	16,075
Profit for the year	-	-	-	1,289	1,289
Share based payments reserve charge	-	-	181	-	181
Balance as at 30 June 2008	802	15,596	360	787	17,545

Consolidated Cash Flow Statement

for the year ended 30 June 2008

	2008 £'000	2007 Restated £'000
Cash flows from operating activities
Profit before taxation	1,905	1,566
Adjustments for:
Depreciation and amortisation	1,581	981
Loss/(profit) on disposal of plant, property and equipment	84	(2)
Profit on disposal of investment	-	(789)
Charge for share based payments	181	116
Investment income	(14)	(52)
Interest expense	156	47
Changes in working capital:
Increase in inventories	(355)	(1,885)
Increase in trade and other receivables	(1,920)	(2,326)
Increase in trade and other payables	27	1,761
Cash generated from operations	1,645	(583)
Income taxes paid	(155)	(24)
Net cash generated from operations	1,490	(607)
Cash flows from investing activities
Acquisition of subsidiary entity	(254)	-
Purchase of intangible assets	(356)	(237)
Purchase of plant, property and equipment	(2,360)	(4,856)
Proceeds of sale of plant, property and equipment	258	28
Proceeds of sale of investments	-	989
Net cash used in investing activities	(2,712)	(4,076)
Cash flows from financing activities
Interest paid	(152)	(41)
Interest received	3	41
Net cash used in financing activities	(149)	-
Net decrease in cash and cash equivalents	(1,371)	(4,683)
Cash and cash equivalents at 1 July 2007	(1,773)	2,910
Cash and cash equivalents at 30 June 2008	(3,144)	(1,773)

Notes to the Consolidated Financial Statements

1.	Revenue
		2008 £'000	2007 £'000
	By geography
	UK	6,391	4,173
	Europe	3,235	1,459
	Rest of World	3,649	4,642
		13,275	10,274
	By type
	Sale of goods	1,960	4,173
	Services	11,315	1,459
	Construction contract	-	4,642
		13,275	10,274

2.	Segment reporting
	The Group derives turnover from the sale of its POS-GRIP technology and associated products, the rental of wellheads utilising the POS-GRIP technology and service income principally derived in assisting with the commissioning and ongoing service requirements of our equipment. These income streams are all derived from the utilisation of the technology which the Group believes is its only segment.

3.	Earnings per share
		2008 £'000	2007 Restated £'000
	Profit attributable to shareholders	1,289	1,116
		Number	Number
	Weighted average number of shares in issue	80,182,569	80,182,569
	Dilution effects of share schemes	409,284	258,510
	Diluted weighted average number of shares in issue	80,591,853	80,441,079
	Basic earnings per share	1.61p	1.39p
	Diluted earnings per share	1.60p	1.39p

	Basic earnings per share is calculated on the results attributable to ordinary shares divided by the weighted average number of shares in issue during the year.
	Diluted earnings per share calculations include additional shares to reflect the dilutive effect of employee share schemes and share option schemes.

4.	Intangible fixed assets
		Intellectual  Property £'000	Patent and Other  Development £'000	Computer Software £'000	Total £'000
	Cost
	As at 1 July 2006	5,403	478	55	5,936
	Additions	-	230	7	237
	As at 1 July 2007	5,403	708	62	6,173
	Additions	1,037	344	12	1,393
	As at 30 June 2008	6,440	1,052	74	7,566
	Amortisation
	As at 1 July 2006	173	55	9	237
	Charge for the year	270	30	25	325
	As at 1 July 2007	443	85	34	562
	Charge for the year	270	46	27	343
	As at 30 June 2008	713	131	61	905
	Net Book Value
	As at 30 June 2008	5,727	921	13	6,661
	As at 30 June 2007	4,960	623	28	5,611
	As at 30 June 2006	5,230	423	46	5,699
	Patent and other development costs are internally generated.

5.	Plant, property and equipment
		Equipment £'000	Assets under Construction £'000	Motor Vehicles £'000	Total £'000
	Cost
	As at 1 July 2006	2,660	510	28	3,198
	Additions	315	4,541	-	4,856
	Transfers	3,481	(3,481)	-	-
	Disposals	(56)	-	(1)	(57)
	As at 1 July 2007	6,400	1,570	27	7,997
	Additions	78	2,281	1	2,360
	Transfers	3,629	(3,629)	-	-
	Disposals	(413)	-	(6)	(419)
	As at 30 June 2008	9,694	222	22	9,938

	Depreciation
	As at 1 July 2006	810	-	13	823
	Charge for the year	652	-	4	656
	On disposals	(30)	-	(1)	(31)
	As at 1 July 2007	1,432	-	16	1,448
	Charge for the year	1,234	-	4	1,238
	On disposals	(71)	-	(6)	(77)
	As at 30 June 2008	2,595	-	14	2,609
	Net book value
	As at 30 June 2008	7,099	222	8	7,329
	As at 30 June 2007	4,968	1,570	11	6,549
	As at 30 June 2006	1,850	510	15	2,375

6.	Share Capital
		2008 £'000	2007 £'000
	Authorised:
	Equity: 110,000,000 Ordinary shares of 1p each	1,100	1,100
	Allotted, called up and fully paid:
	Equity: 80,182,569 Ordinary shares of 1p each	802	802

7.	Reconciliation of net cash flow to movement in net debt
		2008 £'000	2007 £'000
	(Decrease)/increase in cash in the year	(1,371)	(4,683)
	Cash outflow from decrease in net debt	-	-
	Change in net debt resulting from cash flows	(1,371)	(4,683)
	Loan set against debtor balance	-	-
	Movement in net debt in year	(1,371)	(4,683)
	Net cash/(debt) at start of year	(1,773)	2,910
	Net cash outflow from operating activities	(3,144)	(1,773)

8.	Analysis of net debt
		At beginning of year £'000	Cash flow £'000	At end of year £'000
	Cash in hand and at bank	128	328	456
	Overdrafts	(1,901)	(1,699)	(3,600)
	Total	(1,773)	(1,371)	(3,144)

9.		Transition to IFRS
1		Introduction
		The Financial Statements for the 12 months ended 30 June 2008 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) for the first time. The comparative information in the financial statements has been restated to IFRS and a reconciliation of the differences disclosed. The disclosures required by IFRS 1 concerning the transition from UK Generally Accepted Accounting Practice (UK GAAP) to IFRS are set out below. Reconciliations from UK GAAP to IFRS of the Group's net assets at 30 June 2007 and net profit for the year ended 30 June 2007 are also included. The IFRS standards that principally affect adjustments between UK GAAP and IFRS are: IFRS 1 - First-Time Adoption of International Financial Reporting Standards IFRS 3 - Business Combinations IAS 19 - Employee Benefits IAS 38 - Intangible Assets IFRS 1, First-Time Adoption of IFRS, outlines how to apply IFRS for the first time. The Group's transition date is 1 July 2006, and the standard permits certain exemptions from the full requirements of IFRS at that date.
2		Exemptions
		The Group has taken the following exemptions or options available as at transition
		(a) Business Combinations
		The Group has taken the option not to restate business combinations that occurred prior to 1 July 2006 on an IFRS 3, Business Combinations basis.
3	Reconciliations to International Financial Reporting Standards
	Group reconciliation of equity as at 1 July 2006
			UK GAAP in IFRS format £000's	Effect of transition to IFRS  £000's	IFRS  £000's
	Assets
	Goodwill		722	-	722
	Intangible assets		5,653	46	5,699
	Property, plant and equipment		2,421	(46)	2,375
	Investments		200	-	200
	Non-current assets		8,996	-	8,996
	Inventories		1,238	-	1,238
	Trade and other receivables		2,640	-	2,640
	Cash and cash equivalents		2,910	-	2,910
	Current assets		6,788	-	6,788
	Total Assets		15,784	-	15,784
	Equity and Liabilities
	Capital and reserves attributable to equity holders of
	the company
	Called-up share capital		802	-	802
	Share premium account		15,596	-	15,596
	Share based payments reserve		63	-	63
	Retained earnings		(1,585)	(33)	(1,618)
	Total equity		14,876	(33)	14,843
	Non-current liabilities		-	-	-
	Trade and other payables		908	33	941
	Current income tax liabilities		-	-	-
	Borrowings		-	-	-
	Current liabilities		908	33	941
	Total liabilities		908	33	941
	Total Equity and Liabilities		15,784	-	15,784

	Group reconciliation of equity as at 1 July 2007
		UK GAAP in IFRS format £000's	Effect of transition to IFRS  £000's	IFRS  £000's
	Assets
	Goodwill	681	41	722
	Intangible assets	5,583	28	5,611
	Property, plant and equipment	6,577	(28)	6,549
	Non-current assets	12,841	41	12,882
	Inventories	3,123	-	3,123
	Trade and other receivables	4,976	-	4,976
	Cash and cash equivalents	128	-	128
	Current assets	8,227	-	8,227
	Total Assets	21,068	41	21,109
	Equity and Liabilities
	Capital and reserves attributable to equity holders of
	the company
	Called-up share capital	802	-	802
	Share premium account	15,596	-	15,596
	Share based payments reserve	179	-	179
	Retained earnings	(501)	(1)	(502)
	Total equity	16,076	(1)	16,075
	Deferred tax liabilities	322	-	322
	Non-current liabilities	322	-	322
	Trade and other payables	2,665	42	2,707
	Current income tax liabilities	104	-	104
	Borrowings	1,901	-	1,901
	Current liabilities	4,670	42	4,712
	Total liabilities	4,992	42	5,034
	Total Equity and Liabilities	21,068	41	21,109

Group reconciliation of income statement for the year ended 30 June 2007

		UK GAAP in IFRS format £000's	Effect of transition to IFRS  £000's	IFRS  £000's
	Revenue	10,274	-	10,274
	Cost of sales	(5,640)	-	(5,640)
	Gross profit	4,634	-	4,634
	Administrative expenses	(3,894)	32	(3,862)
	Operating profit	740	32	772
	Other income	789	-	789
	Finance income	52	-	52
	Finance costs	(47)	-	(47)
	Profit before taxation	1,534	32	1,566
	Income tax expense	(450)	-	(450)
	Profit after taxation	1,084	32	1,116

	The following changes to accounting policies and presentation resulted from the transition to IFRS:
a		Intangible assets
		IAS 38 - Intangible Assets requires that software costs which are not integral to the operation of the piece of machinery be classified as intangible assets. The costs and depreciation relating to expenditure on such software has been reclassified from Property, plant and equipment to intangible assets. A reclassification of £45,666 was made on transition to IFRS on 1 July 2006 and further reclassifications were made during the year to 30 June 2007 (£27,973).
b		Goodwill
		Under UK GAAP the Group amortised goodwill over its useful economic life. IFRS 3 - Business Combinations requires that goodwill is not amortised but is subject to an annual impairment review instead. IFRS requires that an impairment test is carried out at transition date based on the conditions at that date. No impairment was identified at the date of transition and no adjustments to the carrying value of goodwill were made. Subsequent impairment tests performed in accordance with IAS 38 have similarly resulted in no impairment having been identified. The remeasurement adjustment made to the Group balance sheet reverses the amortisation of goodwill charged in the year from 1 July 2006 to 30 June 2007 £41,083.
c		Holiday pay accrual
		IAS 19 - Employee Benefits requires that where an entity compensates employees for holiday, an accrual be recognised to the extent that accumulated untaken entitlement can be carried forward and taken or paid in a future period. Holiday pay accruals were not recognised by the Group under UK GAAP. The following accruals were made in accordance with IAS 19:
		At 1 July 2006	£32,791
		At 30 June 2007	£41,711

The financial information above does not constitute the company's statutory accounts for the year ended 30 June 2008.  The statutory financial statements for the year ended  30 June 2008 were approved by the Board on 14 October 2008.  On the same date the company's auditors, Horwath Clark Whitehill LLP. issued an unqualified report on those financial statements.  The auditors have not drawn attention to any matters without qualifying their report and have not made any statement under section 237(2) or (3) of the Companies Act 1985.  A copy of the statutory accounts will be delivered to the Registrar of Companies in due course.

The Annual Report will be circulated to all shareholders and thereafter, copies will be available from the registered office of the Company, Plexus House, 1 Cromwell Place, London, SW7 2JE.

 

END

 

 

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