Interim Results
Deal Group Media PLC
26 September 2007
Press Release 26 September 2007
Deal Group Media plc
('DGM' or the 'Group')
Interim Results
Deal Group Media plc, a leading online media-marketing Group, today announces
its Interim Results for the six months ended 30 June 2007.
Financial
• Revenue for the six months ended 30 June 2007 was £9.8 million (H1 2006:
£12.8 million)
• Operating Loss of £1.4 million (H1 2006: Loss £0.69 million)
• EBITDA* for the period was a Loss of £952,000 as against a Loss of
£289,000 for the previous year
• Net investment in Asia Pacific region in half year of £160,000
• Successful placing of £850,000 in August 2007 to provide working capital
and enable the continued expansion strategy in Asia Pacific
* Calculated as profit before interest, tax, amortisation, depreciation or share
based payments
Operational
• Successful launch of regional offices in Singapore and India with initial
sales building
• Executive Board now complete and supported by highly skilled senior
management team
Commenting on the results, Adrian Moss, Chief Executive, said: 'We have made
considerable progress in the first six months in the Asia Pacific region and we
are now well positioned to take advantage of the significant opportunities in
these territories. In the first quarter the UK operations have performed below
potential due to increased competition. We are confident that the Group will
return to profitability in 2008.'
For further information, please contact:
Deal Group Media plc
Adrian Moss, Chief Executive Tel: + 44 (0) 20 7943 4200
www.dealgroupmediaplc.com
Evolution Securities Limited
Tom Price, Corporate Finance Tel: +44 (0) 20 7071 4300
Jeremy Ellis, Corporate Finance
www.uk.evosecurities.com
Media enquiries:
Abchurch Communications
Ariane Comstive / Franziska Boehnke Tel: +44 (0) 20 7398 7700
franziska.boehnke@abchurch-group.com www.abchurch-group.com
Chief Executive's statement
As stated in a trading update dated 28 August 2007, the investment in the Asia
Pacific region has commenced as planned. Overseas trading in the current year
has been encouraging, and the Group is already seeing exciting opportunities for
the provision of complete digital solutions to clients in Asia Pacific from its
recently launched regional base in Singapore.
Trading in the UK has been below DGM's potential. The Group is expecting to
report a full year loss for the year ending 31 December 2007, however it is
expected that this will be reduced from the loss reported in 2006.
Turnover for the six months ended 30 June 2007 was £9.8 million (H1 2006: £12.8
million) while the operating loss was £1.4 million (H1 2006: Loss £690,000).
EBITDA before share based payments was a loss of £952,000 as against loss of
£289,000 for the previous year.
The Group has converted to reporting under IFRS for the first time. The Board
still intends to change the Group name however this has been delayed for the
time being.
UK Operations
Turnover in the period was £6.2 million (H1 2006: £9.7 million) with the
affiliate business remaining the core part of the UK operations. This division
has been affected by intense competition since the beginning of the financial
year however the second quarter saw an improvement in trading. The search
business remains a small but profitable part of the Group's operations. We
remain confident in our ability to improve performance in the UK market
throughout the remainder of the current financial year.
Overseas Operations
As previously announced, the Group expected to make a net investment of £1
million in the Asia Pacific region in the current financial year. To date there
has been a net incremental investment of £160,000 as a result of prudent cost
control. Turnover was up by 15% to £3.6 million (H1 2006: £3.1 million) and
significant effort has been made into the recruitment and training of staff.
We expect the contribution to the Group from existing overseas operations to be
the same as last year. Meanwhile, the small operation in South Africa commenced
generating positive monthly cash flow in the second quarter.
Also, the regional base in Singapore was successfully launched in mid August
2007 and has already signed its first orders. We are confident that our wealth
of knowledge of the industry put the Group in a strong position to take
advantage of this fast expanding market and to service the South East Asian
region.
In the second quarter we launched the Indian operation with offices in Mumbai
and Delhi. It has already established itself as a key player in this embryonic
market place and although it is still early days, we are pleased with the
progress and revenues are starting to build.
Board changes
Martin Chalmers was appointed to the Board as Finance Director in April 2007.
As a result we now have a complete executive Board which is complemented by a
strong senior management team.
Financing
The Group has recently completed a successful placing which raised £850,000 in
August 2007 to provide working capital and enable the Group to execute the
continued expansion strategy in the Group's Asia Pacific operations. Further
funds will be required in the current financial year for working capital
purposes and the Group is currently exploring possible sources of financing.
Outlook
We are extremely excited by the opportunities in the Asia Pacific region and
much has been achieved in the last six months in establishing regional offices
and putting in place the infrastructure and staff. The Group's skills and
knowledge in terms of technology and experience poses a significant advantage in
gaining market share. We remain confident that the Group will return to
profitability in 2008.
Adrian Moss
Chief Executive
25 September 2007
Independent Review Report To Deal Group Media plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007, which comprises the consolidated interim
income statement, the consolidated interim balance sheet, the consolidated
interim statement of changes in equity, the consolidated interim cash flow
statement and notes 1 to 9. We have read the other information contained in the
interim report, which comprises only the directors and advisers and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information. Our responsibilities do not extend to any other
information.
This report is made solely to the Company, in accordance with guidance contained
in APB Bulletin 1999/4 'Review of Interim Financial Information'. Our review
work has been undertaken so that we might state to the company those matters we
are required to state to it in a review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company, for our review work, for this report, or for the
conclusion we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report.
As disclosed in note 2 the next annual financial statements of Deal Group Media
plc will be prepared in accordance with International Financial Reporting
Standards as adopted by the European Union. This interim report has been
prepared in accordance with International Accounting Standard 34 'Interim
Financial Reporting' and the requirements of IFRS 1 'First-time Adoption of
International Financial Reporting Standards' relevant to the interim reports.
The accounting policies are consistent with those the directors intend to use in
the next annual financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS
LONDON THAMES VALLEY OFFICE
SLOUGH
25 September 2007
The maintenance and integrity of the Deal Group Media plc website is the
responsibility of the directors: the interim review does not involve
consideration of these matters and, accordingly, the Company's reporting
accountants accept no responsibility for any changes that may have occurred to
the interim report since it was initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of
the interim report differ from legislation in other jurisdictions.
Consolidated interim income statement for the six months ended
30 June 2007
6 months 6 months Year
to 30 Jun to 30 Jun to 31 Dec
2007 2006 2006
£'000 £'000 £'000
CONTINUING OPERATIONS
Revenue 9,781 12,824 22,965
Cost of sales (7,597) (9,322) (15,828)
GROSS PROFIT 2,184 3,502 7,137
ADMINISTRATIVE EXPENSES
- Amortisation (136) (87) (202)
- Depreciation (166) (161) (328)
- Share based payment (150) (153) (298)
- Other administrative expenses (3,136) (3,791) (7,214)
(3,588) (4,192) (8,042)
LOSS FROM OPERATIONS (1,404) (690) (905)
FINANCE COST (2) - (11)
FINANCE INCOME 14 10 27
LOSS BEFORE TAX (1,392) (680) (889)
Taxation 5 - (695) (1,806)
TOTAL LOSS AFTER TAXATION
FOR PERIOD FROM CONTINUING OPERATIONS (1,392) (1,375) (2,695)
BASIC LOSS PER SHARE 7 (0.34p) (0.36p) (0.71p)
DILUTED LOSS PER SHARE 7 (0.34p) (0.36p) (0.71p)
The accompanying accounting policies and notes form part of these financial
statements.
Consolidated interim balance sheet as at 30 June 2007
As at As at As at
30 Jun 07 30 Jun 06 31 Dec 06
£'000 £'000 £'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 352 459 503
Intangible assets 6,717 6,472 6,630
Available for sale financial assets 256 - 152
Deferred tax - 1,029 -
7,325 7,960 7,285
CURRENT ASSETS
Trade and other receivables 4,905 3,962 4,962
Cash and cash equivalents (77) 2,551 584
4,828 6,513 5,546
TOTAL ASSETS 12,153 14,473 12,831
EQUITY AND LIABILITIES
EQUITY
Called up share capital 4,107 3,800 3,816
Capital redemption reserve 13,188 13,188 13,188
Share based payment reserve 677 382 527
Share premium account 22,014 21,471 21,505
Translation reserve (20) (43) (18)
Retained earnings (32,618) (29,906) (31,226)
TOTAL EQUITY 7,348 8,892 7,792
CURRENT LIABILITIES
Trade and other payables 4,805 5,574 5,039
NON-CURRENT LIABILITIES
Trade and other payables - 7 -
TOTAL LIABILITIES 4,805 5,581 5,039
TOTAL EQUITY AND LIABILITIES 12,153 14,473 12,831
The consolidated interim financial statements were approved by the board of
directors and signed on their behalf on 25 September 2007
Director Martin Chalmers
Consolidated interim statement of changes in equity for the six months ended 30
June 2007
Share Share Capital Share based Translation Retained Total
capital premium redemption payment reserve earnings equity
reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 3,798 21,458 13,188 229 - (28,531) 10,142
2006
Changes in equity
Exchange difference - - - - (43) - (43)
on translation of
foreign operations
Share option grants - - - 153 - - 153
Net income - - - 153 (43) - 110
recognised directly
in equity
Retained loss for - - - - - (1,375) (1,375)
the period
Total recognised - - - 153 (43) (1,375) (1,265)
income and expense
for the period
Shares issued in the 2 13 - - - - 15
period
As at 30 June 2006 3,800 21,471 13,188 382 (43) (29,906) 8,892
Changes in equity
Exchange difference - - - - 25 - 25
on translation of
foreign operations
Share option grants - - - 145 - - 145
Net income - - - 145 25 165
recognised directly
in equity
Retained profit for - - - - - (1,320) (1,295)
period
Total recognised - - - 145 25 (1,320) (1,130)
income and expense
for the period
Shares issued in the 16 34 - - - - 50
period
As at 31 December 3,816 21,505 13,188 527 (18) (31,226) 7,792
2006
As at 31 December 3,816 21,505 13,188 527 (18) (31,226) 7,792
2006
Changes in equity
Exchange difference - - - - (2) - (2)
on translation of
foreign operations
Share option grants - - - 150 - - 150
Net income - - - 150 (2) - 148
recognised directly
in equity
Retained profit for - - - - - (1,392) (1,392)
period
Shares issued in the 291 509 - - - - 800
period
As at 30 June 2007 4,107 22,014 13,188 677 (20) (32,618) 7,348
Consolidated interim cash flow statement for the six months ended
30 June 2007
6 months 6 months Year to
to 30 Jun 07 to 30 Jun 06 31 Dec 06
£'000 £'000 £'000
Operating activities
Loss before tax (1,392) (680) (889)
Depreciation 166 161 328
Amortisation 136 87 202
(12) (10) (16)
Share based payment 150 153 298
Loss on sale of property plant and equipment - - 44
Decrease/(increase) in receivables 57 462 (538)
(Decrease)/increase in payables (212) 1,270 470
Tax credit - (3) (3)
Net cash flow from operations (1,107) 1,440 (104)
Investing activities
Purchase of property, plant and equipment (66) (147) (396)
Purchase of associate (76) - (119)
Sale of associate - 32 32
Purchase of intangible assets (201) (416) (642)
Interest received 14 10 27
Interest paid (3) - (11)
Net cash used in investing activities (332) (521) (1,109)
(1,439) 919 (1,213)
Financing activities
Issue of ordinary share capital 800 16 203
Capital element of finance lease payments - (43) (43)
Repayment of loan notes (22) (23) (45)
Net cash generated from financing activities 778 (50) 115
Net (decrease)/increase in cash and cash equivalents (661) 869 (1,098)
Cash and cash equivalents at start of period 584 1,682 1,682
Cash and cash equivalents at end of period (77) 2,551 584
Notes to the condensed consolidated interim financial statements for the six
months to 30 June 2007
1 GENERAL INFORMATION
Deal Group Media plc and its subsidiaries ('the Group') are principally engaged
in the provision of online marketing services including performance based
marketing, search engine positioning and optimisation and the sale of
advertising space.
Deal Group Media plc is the Group's ultimate parent company. It is incorporated
in England and Wales and its shares are listed on the AIM market of the London
Stock Exchange.
These consolidated interim financial statements have been approved for issue by
the Board of Directors on 25 September 2007.
The financial information set out in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
Group's statutory financial statements for the year ended 31 December 2006,
prepared under UK GAAP, have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and did not
contain a statement under Section 237 (2) of the Companies Act 1985.
2. BASIS OF PREPARATION
The consolidated interim financial statements are for the six months ended 30
June 2007.
They have been prepared in accordance with IAS34 'Interim Financial reporting'
and the requirements of IFRS 1 'First time adoption of International Financial
Reporting Standards' applicable to interim reports. They do not include all of
the information required for full financial statements and should be read in
conjunction with the consolidated financial statements of the Group for the year
ended 31 December 2006.
These consolidated interim financial statements have been prepared in accordance
with the accounting policies set out below which are based on the recognition
and measurement principles of IFRS in issue and are effective at 30 June 2007 or
expected to be adopted and effective at 31 December 2007 our first annual
reporting date at which it is required to use IFRS accounting standards.
Deal Group Media plc's consolidated financial statements were prepared in
accordance with UK GAAP until 31 December 2006. The transition date to IFRS was
1 January 2006. The comparative figures in respect of 2006 have been restated to
reflect changes in accounting policies as a result of adoption of IFRS. The
disclosures required by IFRS concerning the transition from UK GAAP to IFRS are
given in the reconciliation schedules, presented and explained in note 9.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these statements.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
Subsidiaries
Subsidiaries are entities that are directly or indirectly controlled by the Deal
Group Media plc. Control exists where Deal Group Media plc has the power to
govern the financial and operating policies of the entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition.
Revenue recognition
Revenue is measured by reference to fair value of the total amount receivable by
the Group for goods supplied and services provided, excluding VAT.
Income for services which are provided over a period of time are invoiced in
advance and deferred and recognised in the period in which the services are
provided.
Income from other services and products is recognised at the point of sale and
when any obligation has been fulfilled.
Intangible assets
Goodwill
Goodwill represents the excess of the fair value attributed to the cost of
investments in businesses or subsidiary undertakings over the fair value of the
identifiable net assets at the date of their acquisition. Goodwill is assessed
annually for impairment and carried at cost less accumulated impairment losses.
For the purpose of assessing impairment assets are grouped at the lowest levels
for which there are separately identifiable cash flows.
Software development
Costs that are directly associated with the development of identifiable and
unique software products controlled by the group, and that will probably
generate economic benefits exceeding costs beyond one year are recognised as
intangible assets and amortised over 4 years. Costs include software development
employee costs. Other development costs and all research costs are expensed as
incurred.
Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated depreciation.
Depreciation is calculated to write down the cost of all property, plant and
equipment over their expected economic useful lives.
The periods generally applicable are:
Leasehold improvements Over the term of the lease
Computer equipment 33% - 50% per annum
Fixtures and fittings 25% per annum
Motor vehicles 25% - 33% per annum
Leases
Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet and depreciated over their estimated useful economic lives. A
lease is classified as a finance lease where the lessee bears substantially all
the risks and rewards related to the ownership of the leased asset. The
interest element of leasing payments represents a constant proportion of the
capital balance outstanding and is charged to the profit and loss account over
the period of the lease. All other leases are regarded as operating leases and
the payments made under them are charged to the profit and loss account on a
straight-line basis over the lease term.
Financial instruments
Financial assets and financial liabilities are recognised on the group's balance
sheet when the group becomes a party to the contractual terms of the financial
instrument.
Trade receivables do not carry any interest and are stated at their fair value
as reduced to equal the estimated present value of future cash flows.
Trade payables are not interest bearing and are stated at their fair values.
Bank borrowings on interest bearing loans and overdrafts are recorded at fair
value on initial recognition. Finance charges are accounted for on an accruals
basis using the effective interest rate method.
Equity instruments issued by the group are recorded as the proceeds less direct
issue costs. Share capital represents the nominal value of equity shares.
Share premium represents the excess of the fair value of the consideration over
the nominal value of equity shares issued. Translation reserve represents the
differences arising from translation of investments in overseas subsidiaries.
Share based payment reserve represents equity-settled share-based employee
remuneration until such share options are exercised. Capital redemption reserve
represents the nominal value of shares redeemed by the group.
Financial assets designated available for sale are initially recognised at fair
value. Subsequent to initial recognition they are measured at fair value with
any changes to the carrying amount of the investment are recognised in equity
through the statement of changes in equity.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, other short term highly liquid
investments and bank overdrafts.
Foreign currencies
Foreign currency transactions are recorded in local currency at current exchange
rates. Monetary assets and liabilities denominated in foreign currencies at the
period end are translated at the period end exchange rate. Non-monetary items
are measured at historical cost at the rate of exchange at the date of the
transaction. Foreign currency gains and losses are credited or charged to the
profit and loss account as they arise. The profit and loss accounts of overseas
subsidiary undertakings are translated into pounds sterling at average exchange
rates and the period end net assets of these companies are translated at period
end exchange rates.
The exchange differences arising from the translation of the opening net
investment in subsidiary undertakings are taken directly to translation reserve.
On disposal cumulative translation differences are transferred to the income
statement as part of the gain or loss on disposal.
Non current assets classified as held for sale
Assets held for sale include assets that the group intends and expects to sell
within one year from the date of classification as held for sale. Assets
classified as held for sale are measured at the lower of their carrying amounts
immediately prior to their classification as held for sale and their fair value
less costs to sell. Assets classified as held for sale are not subject to
depreciation or amortisation.
Employee benefits
The Company pays contributions to a defined contribution plan. The pension costs
charged against profits represents the amount of the contributions payable to
the scheme in respect of the accounting period.
Share-based payment
Share based payment that is within the scope of IFRS2 have been recognised in
the financial statements in accordance with that standard.
All goods and services received in exchange for the grant of any share-based
payment are measured at their fair values. Where employees are rewarded using
share-based payment, the fair values of employees' services are determined
indirectly by reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions (for example, profitability and sales growth
targets).
All equity-settled share-based payment is ultimately recognised as an expense in
the income statement with a corresponding credit to equity.
If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Estimates are subsequently revised if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised are different
to that estimated on vesting. Upon exercise of share options the proceeds
received net of attributable transaction costs are credited to share capital,
and where appropriate share premium.
During the six months to June 2007, £150,000 was charged to the income statement
in respect of equity settled transactions (2006: £153,000). This expense was
based on the fair value of share based payment transactions when contracted. All
of the expense arose under employee share awards made within the Group's reward
structures.
Fair values of share options/awards, measured at the date of the grant of the
option/award, are calculated using a binomial model methodology.
Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries and joint ventures
is not provided if reversal of these temporary differences can be controlled by
the group and it is probable that reversal will not occur in the foreseeable
future. In addition, tax losses available to be carried forward as well as
other income tax credits to the group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity (such as the revaluation of land) in
which case the related deferred tax is also charged or credited directly to
equity.
4 SEGMENTAL INFORMATION
Turnover is attributable to the principal activity, which is mainly carried out
in the United Kingdom, Europe and Australia.
An analysis of turnover and operating loss by geographical market is given
below:
Turnover Operating (loss)/profit
2007 2006 2007 2006
£'000 £'000 £'000 £'000
United Kingdom 6,169 9,680 75 296
Overseas 3,612 3,144 (102) 292
Central costs - - (1,377) (1,278)
9,781 12,824 (1,404) (690)
No segmental analysis of net assets has been provided, as the assets and
liabilities attributable to overseas sales are not separately identified.
5. TAXATION
There is no current tax charge for the year. An explanation of the tax position
compared to the Group's reported results is set out below:
6 months 6 months Year to
to 30 Jun 07 to 30 Jun 06 31 Dec 06
£'000 £'000 £'000
Foreign tax - - (82)
Deferred tax - (695) (1,724)
Current tax charge for the period - (695) (1,806)
6 SEASONAL FLUCTUATIONS
The business of Deal Group Media plc is subject to seasonal fluctuations, with
stronger demand for services in the second half of the year.
7 LOSS PER SHARE
The calculation for the basic loss per share is based upon the loss attributable
to ordinary shareholders divided by the weighted average number of shares in
issue during the period.
Reconciliation of the loss and weighted average number of shares used in the
calculations are set out below:
6 months 6 months Year to
to 30 Jun 07 to 30 Jun 06 to 31 Dec 06
Loss on ordinary activities after tax (£'000) (1,392) (1,375) (2,695)
Weighted average number of shares 405,695,354 380,029,031 380,831,210
Amount of loss per share in pence (0.34) (0.36) (0.71)
In view of the loss for the period, options have no dilutive effect
8 SHARE ISSUE
During the period the company issued 29,090,909 1p ordinary shares for 2.75p
each.
9 EXPLANATION OF TRANSITION TO IFRS
As stated in Note 2, these are the Group's first consolidated interim financial
statements for part of the period covered by the first IFRS annual consolidated
financial statements.
This transition has affected the Group's reported financial position, financial
performance and cash flows as set out below:
Reconciliation of equity at 1 January 2006, 30 June 2006 and 31 December 2006
The effect of the changes to the Group's accounting policies on the equity of
the Group as at the date of transition, 1 January 2006, 30 June and 31 December
2006, were as follows:
1 January 2006
Reported Intangible Set up costs Restated
under assets under
Note UK GAAP IAS 38 IFRS
£'000 £'000 £'000 £'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 647 (123) - 524
Intangible assets 1,2,3 5,857 332 (21) 6,168
6,504 209 (21) 6,692
CURRENT ASSETS
Trade and other receivables 4,426 - - 4,426
Deferred tax 1,724 - - 1,724
Cash and cash equivalents 1,682 - - 1,682
7,832 - - 7,832
TOTAL ASSETS 14,336 209 (21) 14,524
EQUITY AND LIABILITIES
EQUITY
Called up share capital 3,798 - - 3,798
Capital redemption reserve 13,188 - - 13,188
Share based payment reserve 229 - - 229
Share premium account 21,458 - - 21,458
Retained earnings 1,2,3 (28,719) 209 (21) (28,531)
TOTAL EQUITY 9,954 209 (21) 10,142
CURRENT LIABILITIES
Trade and other payables 4,317 - - 4,317
NON-CURRENT LIABILITIES
Trade and other payables 65 - - 65
TOTAL LIABILITIES 4,382 - - 4,382
TOTAL EQUITY AND LIABILITIES 14,336 209 (21) 14,524
30 June 2006
Reported Intangible Set up costs Restated
under assets under
Note UK GAAP IAS 38 IFRS
£'000 £'000 £'000 £'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 531 (72) - 459
Intangible assets 1,2,3 5,443 1,048 (19) 6,472
5,974 976 (19) 6,931
CURRENT ASSETS
Trade and other receivables 3,962 - - 3,962
Deferred tax 1,029 - - 1,029
Cash and cash equivalents 2,551 - - 2,551
7,542 - - 7,542
TOTAL ASSETS 13,516 976 (19) 14,473
EQUITY AND LIABILITIES
EQUITY
Called up share capital 3,800 - - 3,800
Capital redemption reserve 13,188 - - 13,188
Share based payment reserve 382 - - 382
Share premium account 21,471 - - 21,471
Retained earnings 1,2,3 (30,906) 976 24 (29,906)
Translation reserve - - (43) (43)
TOTAL EQUITY 7,935 976 (19) 8,892
CURRENT LIABILITIES
Trade and other payables 5,574 - - 5,574
NON-CURRENT LIABILITIES
Trade and other payables 7 - - 7
TOTAL LIABILITIES 5,581 - - 5,581
TOTAL EQUITY AND LIABILITIES 13,516 976 (19) 14,473
31 December 2006
Reported Intangible Set up costs Restated
under assets under
Note UK GAAP IAS 38 IFRS
£'000 £'000 £'000 £'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 582 (79) - 503
Intangible assets 1,2,3 5,014 1,633 (17) 6,630
Available for sale financial assets 171 (19) - 152
5,767 1,539 (17) 7,285
CURRENT ASSETS
Trade and other receivables 4,962 - - 4,962
Cash and cash equivalents 584 - - 584
5,546 - - 5,546
TOTAL ASSETS 11,313 1,539 (17) 12,831
EQUITY AND LIABILITIES
EQUITY
Called up share capital 3,816 - - 3,816
Capital redemption reserve 13,188 - - 13,188
Share based payment reserve 527 - - 527
Share premium account 21,505 - - 21,505
Retained earnings 1,2,3 (32,762) 1,535 1 (31,226)
Translation reserve - - (18) (18)
TOTAL EQUITY 6,274 1,535 (17) 7,792
CURRENT LIABILITIES
Trade and other payables 5,039 - - 5,039
NON-CURRENT LIABILITIES
Trade and other payables - - - -
TOTAL LIABILITIES 5,039 - - 5,039
TOTAL EQUITY AND LIABILITIES 11,313 1,535 (21) 12,831
Reconciliation of income statement at 30 June and 31 December 2006
The effect of the changes to the Group's accounting policies on the income
statement of the Group as at 30 June and 31 December 2006, were as follows:
30 June 2006
Reported IAS 38 Reported
under UK under IFRS
GAAP
£'000 £'000 £'000
Revenue 12,824 - 12,824
Cost of sales (9,322) - (9,322)
GROSS PROFIT 3,502 - 3,502
ADMINISTRATIVE EXPENSES
- Amortisation (575) 488 (87)
- Depreciation (187) 26 (161)
- Share based payments (153) (153)
- Other administrative expenses (4,088) 297 (3,791)
(5,003) 811 (4,192)
LOSS FROM OPERATIONS (1,501) 811 (690)
NET INTEREST INCOME 10 - 10
(LOSS)/PROFIT BEFORE TAX (1,491) 811 (680)
Taxation (695) - (695)
TOTAL LOSS AFTER TAXATION
FOR PERIOD FROM CONTINUING OPERATIONS (2,186) 811 (1,375)
31 December 2006
Reported IAS 38 Reported
under UK under IFRS
GAAP
£'000 £'000 £'000
Revenue 22,965 - 22,965
Cost of sales (15,828) - (15,828)
GROSS PROFIT 7,137 - 7,137
ADMINISTRATIVE EXPENSES
- Amortisation (1,010) 808 (202)
- Depreciation (385) 57 (328)
- Share based payment (298) - (298)
- Other administrative expenses (7,697) 483 (7,214)
(9,390) 1,348 (8,042)
LOSS FROM OPERATIONS (2,253) 1,348 (905)
NET INTEREST INCOME 16 - 16
LOSS BEFORE TAX (2,237) 1,348 (889)
Taxation (1,806) - (1,806)
TOTAL LOSS AFTER TAXATION
FOR PERIOD FROM CONTINUING OPERATIONS (4,043) 1,348 (2,695)
1. The adoption of IFRS requires that goodwill be frozen at the date of
transition, as at 1st January 2006 the value was frozen at £5,857,000. The
effect of the above is to add back the amortisation charge by £573,000 at 30
June 2006 and £1,006,000 at 31 December 2006. An impairment review was
undertaken at the date of transition and at 31 December and there was no
indication of impairment, the directors consider that no adjustment was
necessary with respect to goodwill.
2. Under UK GAAP the Group applied a policy of expensing all development costs.
Under IFRS where costs incurred in the development phase of a project meet
the criteria in IAS 38 they must be capitalised. Management have reviewed
the various development projects undertaken by the Group and ascertained
that the costs of the dgmPro and Integra projects meet the capitalisation
criteria. The impact on the opening transition balance sheet was to increase
intangible assets by £209,000. At 30 June 2006 the effect was to increase
intangible assets by a further £254,000 and charge amortisation of £60,000.
At 31 December 2006 the effect was to increase intangible assets by £484,000
and charge amortisation of £145,000.
3. Start up costs capitalised under UK GAAP are to be charged to the profit and
loss account under IFRS. At 1 January 2006 £21,000 of set up costs were
removed from goodwill. Amortisation charges of £2,000 for the period to 30
June 2006 and £4,000 in the period to 31 December 2006 have been reversed.
4. Under UK GAAP the results of foreign operations were translated at the
closing rate, under IFRS the results are translated at average rate. The
exchange difference on translation is £43,000 at 30 June 2006 and £18,000 at
31 December 2006. The group has taken advantage of the exemption in IFRS1
and has deemed cumulative translation differences for all foreign operations
to be nil at the date of transition to IFRS.
5. IFRS 1 permits companies adopting IFRS for the first time to apply certain
exemptions from the full requirements of IFRS in the transition period.
These interim financial statements have been prepared on the basis of taking
the following exemption:
• Business combinations prior to 1 January 2006, the Group's date of
transition to IFRS have not been restated to comply with IFRS 3 Business
Combinations. Goodwill of £5,813,000 on business combinations prior to this date
has been frozen at their UK GAAP carrying value as at 1 January 2006.
The cumulative effect of the above on retained earnings are as follows
1 January 30 June 31December 2006
2006 2006
£'000 £'000 £'000
Goodwill - 573 1,006
Development costs capitalised 209 463 693
Development costs amortisation - (60) (145)
Set up costs (21) (21) (21)
Set up amortisation - 2 4
Translation reserve - 43 18
Loss of associate - - (19)
188 1,000 1,536
-Ends-
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