Final Results

RNS Number : 0791E

Volvere PLC

01 April 2011

 



Press Release

1 April 2011

Volvere plc

("Volvere" or the "Group")

Final Results for the year ended 31 December 2010

Volvere plc (AIM:VLE) the turnaround investment company, announces its final results for the year ended 31 December 2010.

Highlights

·	Cash and marketable securities: £20.9 million (2009: £20.4 million)
·	Group net assets: £20.1 million (2009: £18.2 million), stated after deducting a £1.4 million non-cash liability (2009: £1.1 million) in respect of share capital classified as debt
·	Group revenue from continuing businesses: £9.0 million (2009: £10.9 million)
·	Group profit before tax £0.9 million (2009: £0.5 million)
·	Investment revenues and other gains on investments £1.2 million (2009: £0.9 million)
·	Total basic and diluted earnings per share 19.44p and 19.39p respectively (2009: basic and diluted 113.57p)
·	Operating businesses performed well in the context of a difficult environment
·	Record deal flow is presenting increasing opportunities for investment

Chairman's statement

The last year has been particularly challenging.   Using our financial resources we have invested cautiously and made a satisfactory return.   It is uncertain that this performance can be repeated this year, with the economic scenario continuing to be unsettled.

Acquisitions have been difficult, and we have declined to invest against that background.  Where the opportunity exists we will be well-positioned to select promising companies.

Lord Kalms

Chairman
31 March 2011

For further information:

Volvere plc
Jonathan Lander, CEO	Tel: [phone]
mailto:	www.volvere.co.uk
Arbuthnot Securities Limited
Nick Tulloch, Corporate Finance	Tel: [phone]
[e-mail]	www.arbuthnot.co.uk

Chief Executive's statement

Introduction

I am pleased to report on another successful year for the Group.  Despite lacklustre growth in the UK economy, we increased our net assets per share (excluding non-controlling interests) by 10% to £3.43 (2009: £3.11) as a result principally of gains in our bonds and equities portfolio coupled with a good trading performance.  

Operating review

During the year the Group operated in two segments: online marketing & data services and security solutions.  The financial performance of each segment is summarised in the financial review and detailed in note 5 to the preliminary announcement .

Online marketing & data services

Our online marketing and data services business, IPT, produced revenue and profit before interest, tax and amortisation of £8.5 million and £1.1 million respectively (2009: £10.4 million and £1.7 million).  This was in excess of our expectations at the beginning of the year. The company made significant efforts to improve the quality and quantity of its prospect data through close monitoring of suppliers, increasing the range and depth of its data. In 2011 the company is investing significant resource in new products which we expect will continue this trend.

IPT's sector is challenging and the result for 2010, whilst excellent, was still below that of 2009.  I am  cautious about the outlook for 2011 more because of the general economic environment rather than for any IPT-specific reason. IPT has a talented workforce and a strong management team who respond to market conditions appropriately and we remain committed to them.

The total cash received by way of loan repayments and dividends from IPT since acquisition in 2008 has, following a dividend received in 2011, reached £2.65 million compared with an original investment cost of £1.4 million. During the year, our stake in IPT was reduced to approximately 45% following the exercise of share options by the management team.  IPT has already been a successful investment for us and it continues to be so.

Security solutions

Sira Defence & Security continued to expand the SiraView user base and to undertake security-related and other consulting work, resulting in its first ever profitable year.  Government spending reductions are affecting many of our clients but a number of successes with projects during 2010 gives us some confidence that follow-on work will materialise.  Revenue for the year was £0.5 million (2009: £0.4 million) with profit before interest and tax of £0.04 million (2009: loss £0.04 million).

Cash and investments

At the year end the Group had cash of £3.1 million and a total of £16.4 million (at cost) invested in available for sale investments, with a valuation of £17.8 million.

Acquisitions and future strategy

We reported in our interim report that deal flow had been increasing and this has continued into 2011.  We avoided entering the recession with significant exposure and have enjoyed the rebound in the valuation of financial securities and more recently of corporate bonds and large cap equities. At this time we continue to seek quality acquisition opportunities commensurate with our skills and resources.

Jonathan Lander

Chief Executive

31 March 2011

Financial review

This financial review covers the Group's performance for the year ended 31 December 2010.  It should be read in conjunction with the Chairman's and Chief Executive's statements.

Accounting policies and basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.  The Group's accounting policies are set out in note 1 to the preliminary announcement .

Revenue and operating performance

Detailed information about the Group's segments is set out in note 5 to this preliminary announcement  and should be read in conjunction with this financial review.

Total revenue from continuing operations was £9.0 million for the year, a fall of 17% compared with the prior year (2009: £10.9 million).  Revenue by segment is shown in note 5 to the preliminary announcement .  Profit before tax from continuing businesses was £0.9 million (2009: £0.5 million) but the improvement was due largely to a lower finance expense in respect of share capital treated as debt (2010: £0.3 million; 2009: £1.0 million) and increased investment income, offset partly by weaker trading in IPT.

Online marketing and data services

The Group's principal trading subsidiary throughout 2010 was IPT, which forms the online marketing & data services segment.  IPT's revenue for 2010 as a whole fell by 19% from £10.4 million in 2009 to £8.5 million.  There was a corresponding fall in profit before tax from £1.7 million to £1.1 million.  Although revenue for the second half of 2010 was only 2% lower than the first half, profits before tax were lower at £0.45 million (first half £0.63 million) as a result of a less profitable revenue mix.

Security solutions

Revenue from security solutions increased by 26% to £0.5 million (2009: £0.4 million) following delivery of a number of successful projects and encouraging SiraView sales.  The effect of the increased revenue was a move for the first time into profit for the year as a whole with a profit before tax of £0.04 million (2009: loss £0.04m).  Activity in the second half of the year was lower than the first half due to uncertainty surrounding public sector spending cuts but we are hopeful that in 2011 both further project work will be forthcoming along with efficiency-driven SiraView sales.

Investment revenues, other gains and losses and finance income and expense

Whilst continuing to review and assess further investments in trading activities, the Group has had significant cash on hand and has continued with active treasury management in response to prevailing low interest rates.  This resulted in investment revenues, other gains and losses and finance income totalling £1.2 million (2009: £1.0 million).  

Statement of financial position

Deferred tax

The group has recognised a deferred tax asset in the year of £0.9 million.

Cash and cash equivalents

Cash at the year end totalled £3.1 million (2009: £8.8 million).  The reduction was a result of the investment by the Group in available for sale investments as part of treasury management.  The Group's cash includes (by virtue of its full consolidation) £1.2 million (2009: £1.1 million) held in its 45% owned subsidiary, Interactive Prospect Targeting Limited.

Available for sale investments

At the year end the Group's available for sale investments had a market value of £17.8 million; the base cost of these investments was £16.4 million.  The investments are in a mixture of non-investment grade bank fixed income securities, a FTSE tracker fund and another investment grade asset-backed securities fund of mainly US issuers.

Hedging

It is not the Group's policy to enter into derivative instruments to hedge interest rate risk.  Certain of the investments are denominated in US dollars (base cost $4 million, valuation $4.3 million) and the Group has entered into a foreign exchange contract for the sale of $4.25 million in November 2011 at a rate of $1.5871/£1.  The difference between the foreign exchange contract rate and the spot rate has resulted in a charge to the income statement of £0.07 million in 2010.

Dividends

In accordance with the policy set out in the prospectus on admission to AIM, the Board does not currently intend to recommend payment of a dividend and prefers to retain profits as they arise for investment in future opportunities.  During the year, however, Interactive Prospect Targeting Limited paid dividends totalling £0.77 million (2009: £1.7million), of which £0.42 million (2009: £0.85 million) was paid to third party (i.e. non-Group) shareholders.

Purchase of own shares

The Group purchased for treasury a total of 298,000 shares at a total consideration of £0.88 million (representing an average price of £2.95 per share).

Earnings per share

The basic and diluted earnings per ordinary share were 19.44p and 19.39p respectively (2009: basic and diluted 113.57p).  During the year the Company continued the operation of a share option scheme in which certain staff are entitled to participate, subject to the scheme's terms and conditions.

Key performance indicators

The Group uses key performance indicators suitable for the nature and size of the Group's businesses.  These are primarily monthly reports of profitability, levels of working capital and workload.  In the online marketing and data services segment, the Group monitors traffic statistics both in terms of yield and cost as well as overall profitability.  Order intake is monitored weekly and reported monthly in respect of the security solutions segment.  The segmental analysis in note 5 to this preliminary announcement summarises the performance of each segment. 

Risk factors

The Company and Group face a number of specific business risks that could affect the Company's or Group's success.  The Company and Group invests in distressed businesses and securities, which by their nature, often carry a higher degree of risk than those that are not distressed.  The Group's businesses are principally engaged in the provision of services that are dependent on the continued employment of the Group's employees and availability of suitable, profitable workload.  In addition, the online marketing and data services segment is particularly dependent on IT systems and infrastructure, the unavailability of which could impact the Group materially.

More information on the Group's financial risks is disclosed in note 16 to the preliminary announcement .

Nick Lander

Chief Financial & Operating Officer

31 March 2011

Consolidated income statement for the year ended 31 December 2010

	Note		2010	2009
			£'000	£'000
Continuing operations
Revenue	5		8,979	10,890
Cost of sales			(2,739)	(3,761)
Gross profit			6,240	7,129
Administrative expenses:
- Before goodwill and share based payments charge			(6,224)	(6,526)
- Realisation of negative goodwill			-	67
- Costs of share-based payments			-	(90)
Administrative expenses			(6,224)	(6,549)
Operating profit	2		16	580
Investment revenues	7		582	299
Other gains and losses	7		588	591
Finance expense	7		(295)	(1,030)
Finance income	7		46	85
Profit before tax			937	525
Income tax	8		1,116	(128)
Profit for the year from continuing operations			2,053	397
Discontinued operations
Profit for the year from discontinued operations	6		176	6,862
Profit for the year			2,229	7,259
Attributable to:
- Equity holders of the parent	20		1,093	6,459
- Non-controlling interests	26		1,136	800
			2,229	7,259
Earnings/(loss) per share	9
Continuing operations
- Basic			16.31p	(7.08)p
- Diluted			16.27p	(7.08)p
Discontinued operations
- Basic			3.13p	120.65p
- Diluted			3.12p	120.65p
Total
- Basic			19.44p	113.57p
- Diluted			19.39p	113.57p

Consolidated statement of comprehensive income for the year ended 31 December 2010

			2010	2009
			£'000	£'000
Profit for the year			2,229	7,259
Other comprehensive income
Fair value gains and losses on available for sale financial assets
- current period gains			1,521	351
- deferred tax on current period gains			(164)	-
- reclassified to profit			(450)	(97)
Other comprehensive income			907	254
Total comprehensive income for the year			3,136	7,513
Attributable to:
- Equity holders of the parent			2,000	6,713
- Non-controlling interests			1,136	800
			3,136	7,513

Consolidated statement of changes in equity for the year ended 31 December 2010

2009	Share capital £'000	Share premium £'000	Revaluation reserve £'000	Share option reserve £'000	Retained earnings £'000	Total £'000	Non-controlling interests £'000	Total £'000
Income recognised directly in equity	-	-	254	-	-	254	-	254
Profit for the year	-	-	-	-	6,459	6,459	800	7,259
Total comprehensive income for the year	-	-	254	-	6,459	6,713	800	7,513
Balance at 1 January	50	3,586	97	16	7,218	10,967	670	11,637
Equity shares issued	-	49	-	-	-	49	-	49
Shares reclassified as financial liabilities	(50)	-	-	-	-	(50)	-	(50)
Equity share options cancelled	-	-	-	(16)	16	-	-	-
Share based payments charge	-	-	-	90	-	90	-	90
Reduction in minority share	-	-	-	-	-	-	(157)	(157)
Dividends paid by subsidiaries to non-controlling interests	-	-	-	-	-	-	(850)	(850)
Balance at 31 December	-	3,635	351	90	13,693	17,769	463	18,232
2010
Income recognised directly in equity	-	-	907	-	-	907	-	907
Profit for the year	-	-	-	-	1,093	1,093	1,136	2,229
Total comprehensive income for the year	-	-	907	-	1,093	2,000	1,136	3,136
Balance at 1 January	-	3,635	351	90	13,693	17,769	463	18,232
Equity shares issued	9	1	-	-	-	10	-	10
Purchase of own shares	-	-	-	-	(880)	(880)	-	(880)
Exercise of options in subsidiary	-	-	-	(90)	41	(49)	49	-
Dividends paid by subsidiaries to non- controlling interests	-	-	-	-	-	-	(420)	(420)
Balance at 31 December	9	3,636	1,258	-	13,947	18,850	1,228	20,078

Consolidated statement of financial position as at 31 December 2010

				2010	2009
		Note		£'000	£'000
	Assets
	Non-current assets
	Goodwill	11		305	305
	Property, plant and equipment	12		266	331
	Deferred tax asset	18		966	52
	Total non-current assets			1,537	688
	Current assets
	Trade and other receivables	14		1,483	1,566
	Cash and cash equivalents			3,109	8,837
	Available for sale investments	13		17,812	11,601
	Total current assets			22,404	22,004
	Total assets			23,941	22,692
	Liabilities
	Current liabilities
	Trade and other payables	15		(2,463)	(3,204)
	Taxation			(41)	(183)
	Shares classed as financial liabilities	19		(1,359)	(1,073)
	Total current liabilities			(3,863)	(4,460)
	Total liabilities			(3,863)	(4,460)
	TOTAL NET ASSETS			20,078	18,232
	Equity
	Share capital	19		9	-
	Share premium account	20		3,636	3,635
	Revaluation reserve	20		1,258	351
	Share option reserve	20		-	90
	Retained earnings	20		13,947	13,693
Capital and reserves attributable to equity holders of the Company				18,826	17,769
Non-controlling interests		26		1,228	463
TOTAL EQUITY		21		20,078	18,232

Consolidated statement of cash flows for the year ended 31 December 2010

		2010	2010	2009	2009
	Note	£'000	£'000	£'000	£'000
Profit for the year			2,229		7,259
Adjustments for:
Investment revenues	7	(582)		(299)
Other gains and losses	7	(588)		(591)
Finance expense	7	295		1,030
Finance income	7	(46)		(85)
Gain arising on disposal of discontinued operations	6	(176)		(6,379)
Income tax (credit)/expense	8	(1,116)		128
Tax paid		(105)		-
Depreciation (continuing operations)	12	232		250
Realisation of negative goodwill (continuing operations)		-		(67)
Depreciation (discontinued operations)		-		41
Amortisation (discontinued operations)		-		120
Foreign exchange revaluation loss/(gain)		90		(23)
Share based payment expense	23	-		90
			(1,996)		(5,785)
Operating cash flows before movements in working capital			233		1,474
(Increase)/decrease in trade and other receivables			(140)		745
(Decrease)/increase in trade and other payables			(306)		260
Cash (used)/generated by operations			(213)		2,479
Interest paid			-		(11)
Net cash from operating activities			(213)		2,468
Investing activities
Purchase of additional shares in subsidiary		(3)		(82)
Amounts received in respect of prior acquisition		-		85
Disposal of subsidiary, net of costs of disposal and cash disposed	6	(71)		6,252
Purchase of available for sale investments		(12,141)		(18,902)
Income from available for sale investments		706		106
Disposal of available for sale investments		7,403		17,831
Proceeds on disposal of property, plant and equipment		-		5
Purchases of property, plant and equipment	12	(167)		(306)
Interest received	7	46		86
Net cash (used in)/ generated from  investing activities			(4,227)		5,075
Financing activities
Issue of share capital	19	40		48
Purchase of own shares (treasury shares)	19	(880)		-
Repayment of borrowings		(28)		(903)
Dividend paid		(420)		(850)
Net cash used in from financing activities			(1,288)		(1,705)
Net (decrease)/increase  in cash and cash equivalents			(5,728)		5,838
Cash and cash equivalents at beginning of year			8,837		2,999
Cash and cash equivalents at end of year			3,109		8,837

Notes forming part of the preliminary announcement for the year ended 31 December 2010

The financial information set out above, which was approved by the Board on 31 March 2011, is derived from the full Group accounts for the year ended 31 December 2010 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2009, will be delivered to the Registrar of Companies in due course.

Copies of the financial statements will be sent to shareholders shortly and will be available from the Company's registered office, York House, 74-82 Queen Victoria Street, London, EC4N 4SJ and website at www.volvere.co.uk.

1      Accounting policies

Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) as adopted by the European Union ("adopted IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under adopted IFRS.

The following principal accounting policies have been applied consistently, in all material respects, in the preparation of these financial statements:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year.  Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.  Any excess of the consideration transferred over the fair values of the identifiable net assets acquired is recognised as goodwill.  Any deficiency of the consideration transferred below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.  The interest of non-controlling shareholders is stated at the non-controlling interest's proportion of the fair values of the assets and liabilities recognised.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.  All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is recognised in profit or loss immediately.

For business combinations occurring since 1 January 2010, the requirements of IFRS 3 "Business Combinations (Revised 2008)" have been applied.  Prior to 1 January 2010, business combinations were accounted under the previous version of IFRS 3 (see below for a summary of the significant changes).

Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See above for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Sales of goods are recognised when goods are delivered and title has passed.

Revenue earned on time and materials contracts is recognised as costs are incurred.  Income from fixed price contracts is recognised in proportion to the stage of completion, determined on the basis of work done, of the relevant contract.

Discontinued operations

Discontinued operations represent cash generating units or groups of cash generating units that have either been disposed of or classified as held for sale, and represent a separate major line of business or are part of a single co-ordinated plan to dispose of a separate major line of business.  Cash generating units forming part of a single co-ordinated plan to dispose of a separate major line of business are classified within continuing operations until they meet the criteria to be held for sale.  The post-tax profit or loss of the discontinued operation is classified as a single line on the face of the consolidated income statement, together with any post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on the disposal of the assets or disposal group constituting the discontinued operation.  On changes to the composition of groups of units comprising discontinued operations, the presentation of discontinued operations within prior periods is restated to reflect consistent classification of discontinued operations across all periods presented.

Operating Segments

IFRS 8 "Operating Segments" requires the disclosure of segmental information for the Group on the basis of information reported internally to the chief operating decision-maker for decision-making purposes.  The Group considers that the role of chief operating decision-maker is performed collectively by the board of Directors. 

Volvere plc is a holding company that identifies and invests principally in undervalued and distressed businesses and securities as well as businesses that are complementary to existing Group companies.  Its customers are based in the UK, Europe and the USA. 

Financial information (including revenue and operating profits) is reported to the board on a segmental basis.  Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income.  Segment profit reported to the board represents the profit earned by each segment before the allocation of goodwill, amortisation, investment revenues, other gains and losses, finance expense and income and tax.  For the purposes of assessing segment performance and for determining the allocation of resources between segments, the board reviews the non-current assets attributable to each segment as well as the financial resources available.  All assets are allocated to reportable segments.  Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned.  All liabilities are allocated to individual segments.  Information is reported to the board of directors on a segmental basis as management believes that each segment exposes the Group to differing levels of risk and rewards due to their varying business life cycles.  The segment profit or loss, segment assets and segment liabilities are measured on the same basis as amounts recognised in the financial statements.  Each segment is managed separately.

Leasing

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease.  The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.  Lease payments are apportioned between finance charges and the reduction of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.  Finance charges are charged directly against income. 

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Foreign currencies

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions.  At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date.  Gains and losses arising on retranslation are included in net profit or loss for the period.

Retirement benefit costs

The Group's subsidiary undertakings operate defined contribution retirement benefit schemes.  Payments to these schemes are charged as an expense in the period to which they relate.  The assets of the schemes are held separately from those of the relevant company and Group in independently administered funds.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.  The tax currently payable is based on taxable profit for the year.  Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is measured on an undiscounted basis using the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.  Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Property, plant and equipment

Items of plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.  Depreciation is charged so as to write off the cost or valuation of assets, less their residual values, over their estimated useful lives, using the straight line method, on the following bases:

Improvements to short-term leasehold property:                Over the life of the lease

Plant and machinery:                                                     20%-33%

Investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, including transaction costs.  Available for sale current asset investments are carried at fair value with adjustments recognised in other comprehensive income.

Investment income

Income from investments is included in the income statement at the point the Group becomes legally entitled to it.

Impairment of tangible and intangible assets excluding goodwill

At each reporting date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.  If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). 

Recoverable amount is the higher of fair value less costs to sell and value in use.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.  An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.  A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Share-based payments

The Group issues equity-settled share-based payments to certain employees.  Equity-settled share-based payments are measured at fair value at the date of grant.  The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of options that will ultimately vest.

Fair value is measured by use of a Black-Scholes pricing model.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, overnight deposits and treasury deposits.  The Group considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents.

Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired.  The Group's accounting policy for each category is as follows:

Fair value through profit or loss:  This category comprises only in-the-money derivatives.  They are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement.  The Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Loans and receivables:  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method less any provision for impairment.

Available-for-sale:  Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise the Group's investments in entities not qualifying as subsidiaries, associates or jointly controlled entities.  They are carried at fair value with changes in fair value recognised directly in other comprehensive income.  Fair value is determined by reference to independent valuation statements provided by the investment manager or broker (as the case may be) through whom such investments are made.  Where the underlying investments are exchange-traded, the mid price of the investment is used.

Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the income statement.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.  The Group's accounting policy for each category is as follows:

Fair value through profit or loss:  This category comprises only out-of-the-money derivatives.  They are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement.

Other financial liabilities:  Other financial liabilities include the following items:

·      Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

·      Bank and other borrowings are initially recognised at the fair value of the amount advanced net of any transaction costs directly attributable to the issue of the instrument.  Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest method.  "Interest expense" in this context includes initial transaction costs and premia payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.  An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

The Group has in issue A and B shares which are convertible into Ordinary shares at the option of the shareholder based upon a formula contained in the Company's Articles of Association.  The A and B shares do not have a cash alternative.  However, because the shares convert into a variable number of ordinary shares, dependent inter alia on the share price of the ordinary shares in issue, the terms of IAS 32 "Financial Instruments Presentation" require them to be classified as debt.  The instrument is classified as an amortised cost liability and carried at its settlement amount, which approximates fair value.  Movements in settlement amount re-estimation are recorded in profit or loss.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The nature of the Group's business is such that there can be unpredictable variation and uncertainty regarding its business.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.  The critical judgements and key sources of estimation uncertainty that have a significant impact on the carrying value of assets and liabilities are discussed below:

Deferred tax asset

The Group recognises a deferred tax asset in respect of temporary differences relating to capital allowances, revenue losses and other short term temporary differences when it considers there is sufficient evidence that the asset will be recovered against future taxable profits.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and VAT.  Sales of goods are recognised when goods are delivered and title has passed.  Revenue is recognised when the significant risks and rewards associated with ownership of the goods have been transferred.  Sales of services are recognised with reference to the stage of completion.

Due to the nature of some services provided by certain of the Group's businesses the recoverability of receivables can be subject to some uncertainty.  Whilst the Group has a thorough process for reviewing the requirement for receivables and credit note provisions, this area is inherently subjective. 

New standards and interpretations

During the year, a number of new standards/interpretations have come into force and hence have been adopted by the Group.  The adoption of these standards/interpretation has had no material effect on the Group's financial statements.

The accounting policies are consistent with the prior year with the exception of revisions and amendments to IFRS issued by the IASB, which are relevant to and effective for the annual period beginning 1 January 2010. These are as follows:

• IFRS 3 Business Combinations (Revised 2008)

• IAS 27 Consolidated and Separate Financial Statements (Revised 2008)

• Improvements to IFRSs 2009

Significant effects on current, prior or future periods arising from the first-time application of these new requirements in respect of presentation, recognition and measurement are described below.

Adoption of IFRS 3 Business Combinations (Revised 2008)

The revised standard on business combinations (IFRS 3R) introduced major changes to the accounting requirements for business combinations. It retains the major features of the purchase method of accounting, now referred to as the acquisition method. The most significant changes in IFRS 3R are as follows:

• acquisition-related costs of the combination are recorded as an expense in the income statement. Previously, these costs would have been accounted for as part of the cost of the acquisition

• any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration arrangement gives rise to a financial liability, any subsequent changes are generally recognised in profit or loss. Previously, contingent consideration was recognised only once its payment was probable and changes were recognised as an adjustment to goodwill

• the measurement of assets acquired and liabilities assumed at their acquisition-date fair values is retained. However, IFRS 3R includes certain exceptions and provides specific measurement rules.

Business combinations for which the acquisition date is before 1 January 2010 have not been restated.

Adoption of IAS 27 Consolidated and Separate Financial Statements (Revised 2008)

The adoption of IFRS 3R required that the revised IAS 27 (IAS 27R) is adopted at the same time. IAS 27R introduced changes to the accounting requirements for transactions with non-controlling (formerly called 'minority') interests and the loss of control of a subsidiary. These changes are applied prospectively. During the current period the Group was not affected by the adoption of IAS 27R.

Standards in issue not yet effective

The IASB and IFRIC have issued the following Standards and Interpretations which are in issue but not yet effective

·     IFRS 9 Financial Instruments (effective 1 January 2013)

·     IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)

·     IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)

·     Improvements to IFRS issued May 2010 (some changes effective 1 July 2010, others effective 1 January 2011)

·     Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2012)

The Group does not anticipate that the adoption of these Standards and Interpretations will have a material effect on its financial statements on initial adoption.

2      Operating profit

Operating profit is stated after charging/(crediting):

		2010 £'000	2009 £'000
	Staff costs	3,921	5,190
	Depreciation of property, plant and equipment:
	- owned assets	220	238
	- leased assets	12	12
	Realisation of negative goodwill	-	(67)
	Exchange losses/(gains)	91	(8)
	Operating lease expense	177	31
	Audit fees	33	36
	Fees paid to the Company's auditor for non-audit services	-	2
	The analysis of auditor's remuneration is as follows:
	Fees payable to the Company's auditor
	- for the audit of the Company's annual accounts	12	14
	- for the audit of the Company's subsidiaries' accounts	21	22
	- for financial reporting advice	-	2
		33	38

3      Staff costs

Staff costs in respect of continuing operations (including Directors) comprise:
			2010 £'000	2009 £'000
	Wages and salaries		3,509	4,550
	Employer's national insurance contributions and similar taxes		394	524
	Defined contribution pension cost		18	26
	Share-based payment expense		-	90
			3,921	5,190

The average number of employees (including Directors) in the Group was as follows:

		2010 Number	2009 Number
	Engineering and production	20	18
	Sales and marketing	22	24
	Administration and management	26	35
		68	77

4      Directors' remuneration

The remuneration of the directors was as follows:

	Salaries & fees 2010 £'000	Bonus 2010 £'000	Compensation  for loss of office 2010 £'000	Other benefits 2010 £'000	Total 2010 £'000
Lord Kalms	62	10	-	-	72
Neil Ashley	30	9	-	-	39
David Buchler	30	9	-	-	39
Richard Kalms	10	28	-	-	38
Jonathan Lander	12	44	-	-	56
Nick Lander	12	44	-	1	57
	156	144	-	1	301

	Salaries & fees 2009 £'000	Bonus 2009 £'000	Compensation  for loss of office 2009 £'000	Other benefits 2009 £'000	Total 2009 £'000
Lord Kalms	37	71	-	-	108
Neil Ashley	20	64	-	-	84
David Buchler	20	60	-	-	80
Richard Kalms	40	61	-	-	101
Jonathan Lander	12	303	-	-	315
Nick Lander	12	307	-	1	320
	141	866	-	1	1,008

The services of Jonathan Lander and Nick Lander are provided under the terms of a Service Agreement with Dawnay, Day Lander Limited.  The amount due under this agreement, which is in addition to the amounts disclosed above, for the year amounted to £502,000 (2009: £480,000).  In addition, the amount paid to David Buchler in the year was to a third party on an invoice basis.  None of the directors were members of the Group's defined contribution pension plan in the year (2009: none).

5      Segment information

All revenue arose through services rendered in the principal activities of online marketing & data services, security solutions and investing and management services. 

Analysis by business segment:

	Online marketing & data services 2010 £'000	Security solutions 2010 £'000	Investing and management services 2010 £'000	Eliminations 2010 £'000		Total 2010 £'000	Discontinued activities 2010 £'000
Revenue
External	8,452	472	55	-		8,979	-
Inter-segment	-	-	203	(203)		-	-
Total	8,452	472	258	(203)		8,979	-
Segment profit/(loss) (note (a))	1,139	39	(1,162)	-		16	-
Profit from operations before goodwill and amortisation of intangible assets						16
Investment revenues						582	-
Other gains and losses						588	-
Net finance expense (note 7)						(249)	-
Profit on ordinary activities before tax						937	-
Gain on disposal of discontinued operation (note 6)						-	176
Profit for the year before tax						937	176
Income tax						1,116	-
Profit for the year						2,053	176

	Online marketing & data services 2009 £'000	Security solutions 2009 £'000	Investing and management services 2009 £'000	Eliminations 2009 £'000		Total 2009 £'000	Discontinued activities 2009 £'000
Revenue
External	10,404	374	112	-		10,890	2,635
Inter-segment	-	-	338	(338)		-	-
Total	10,404	374	450	(338)		10,890	2,635
Segment profit/(loss) (note (a))	1,685	(42)	(1,130)	-		513	606
Profit from operations before goodwill and amortisation of intangible assets						513	606
Amortisation of intangible assets						-	(120)
Investment revenues						299	-
Other gains and losses						591	-
Negative goodwill released to income						67	-
Net finance expense (note 7)						(945)	(3)
Profit on ordinary activities before tax						525	483
Gain on disposal of discontinued operation (note 6)						-	6,379
Profit for the year before tax						525	6,862
Income tax expense						(128)	-
Profit for the year						397	6,862

		Online marketing & data services 2010 £'000	Security solutions 2010 £'000	Investing and management services 2010 £'000	Eliminations 2010 £'000	Total 2010 £'000
Statement of financial position (note (b))
Assets		3,800	260	19,881	-	23,941
Liabilities		(1,766)	(270)	(1,827)	-	(3,863)
Net assets/(liabilities)		2,034	(10)	18,054	-	20,078
Other
Capital expenditure		161	3	3	-	167
Depreciation		212	6	14	-	232
Realisation of negative goodwill		-	-	-	-	-

		Online marketing & data services 2009 £'000	Security solutions 2009 £'000	Investing and management services 2009 £'000	Eliminations 2009 £'000	Total 2009 £'000
Statement of financial position (note (b))
Assets		3,122	117	19,453	-	22,692
Liabilities		(2,443)	(83)	(1,934)	-	(4,460)
Net assets		679	34	17,519	-	18,232
Other
Capital expenditure		265	2	26	-	293
Depreciation		226	7	17		250
Amortisation		-	-	-	-	-
Realisation of negative goodwill		-	-	67	-	67

Note (a):  The segment result has been stated before tax, interest, amortisation of intangible assets and Group management and similar charges.  Note (b): Segment assets and liabilities have been stated excluding inter-segment balances.

Geographical analysis:

	External revenue by location of customers		Non-current assets (excluding deferred tax) by location of assets
	2010	2009	2010	2009
	£'000	£'000	£'000	£'000
UK	8,257	9,918	571	636
Rest of Europe	599	716	-	-
USA	2	120	-	-
Other	121	136	-	-
	8,979	10,890	571	636

In the Group's online marketing & data services segment, the revenue from the top five customers exceeded 30% of the total revenue, with the top 20 customers representing approximately 58% of the total.  The discontinued operations relates to the Company's then subsidiaries, Sira Test and Certification Limited, Sira Environmental Limited and Sira Certification Service, which were sold in July 2009.  Further information is given in note 6.

6      Discontinued operations

On 3 July 2009 the Group sold Sira Test and Certification Limited, Sira Environmental Limited and Sira Certification Service, which together represented the Group's certification services segment.  The disposal proceeds included a variable element, the absolute amount of which was not known at the time the 2009 financial statements were approved.  During 2010 additional amounts became payable which result in additional profit on the sale, being recognised in 2010.  Further amounts may become payable during 2011, such amounts have not been recognised as they cannot be reliably estimated at this time.

The profit from discontinued operations was as follows:

		2010 £'000	2009 £'000
Profit for period after tax (before group management and other charges)		-	483
Gain on sale of discontinued operations after tax (see below)		176	6,379
		176	6,862

The gain on disposal of discontinued operations recognised is analysed as follows:

	2010 £'000	2010 £'000	2009 £'000	2009 £'000
Consideration:
Cash receivable	209		8,118
Less: disposal costs	(33)		(1,657)
		176		6,461
Less: net assets disposed of
Property, plant and equipment	-		203
Intangible assets	-		356
Trade and other receivables	-		1,328
Other financial assets	-		88
Cash	-		640
Trade and other payables	-		(2,533)
		-		82
Gain on disposal of discontinued operation		176		6,379
The net cash (outflow)/inflow comprises:
Cash received		176		8,118
Cash disposed of		-		(640)
Disposal costs		(247)		(1,226)
		(71)		6,252

The statement of cash flows includes the following additional amounts relating to discontinued operations:

		2010 £'000	2009 £'000
Operating activities		-	748
Investing activities		-	(2)
Financing activities		-	(300)
		-	446

7      Investment revenues, other gains and losses and finance income and expense

	2010	2009
	£'000	£'000
Investment revenues	582	299
Other gains and losses	588	591
Finance income
Bank interest receivable	46	85
Finance expense
Changes in settlement value of share capital classed as financial liabilities	(295)	(1,023)
Shareholder loan interest in subsidiary	-	(4)
Finance lease interest	-	(3)
	(295)	(1,030)

Investment revenues and other gains and losses represent respectively interest (paid and accrued) on, and the gains arising upon disposal of, investments made pursuant to the Group's investing and treasury management policies.

The Company's convertible A and B share capital, which are classified as financial liabilities rather than equity, are carried at their settlement amount and changes in the settlement value reflects the required treatment under IAS 32 "Financial Instruments: Presentation".  There is no cash alternative upon conversion of these shares and therefore no cash liability arises. 

8      Income tax

			2010	2009
			£'000	£'000
Current tax (credit)/expense			(38)	180
Deferred tax credit recognised in income statement			(1,078)	(52)
Total tax (credit)/expense recognised in income statement			(1,116)	128
Tax charge recognised directly in equity			164	-
Total tax (credit)/charge			(952)	128

The reasons for the difference between the actual tax expense for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows:

	2010 £'000	2009 £'000
Profit before tax	937	525
Expected tax charge based on the standard rate of corporation tax in the UK of 28% (2009: 28%)	262	147
Effects of: Expenses not deductible for tax purposes	5	382
Gains on disposal of discontinued activities	59	1,946
Income not subject to tax	(156)	(84)
Depreciation for period in excess of capital allowances	65	2
Losses not utilised	158	60
Utilisation of previously unrecognised losses	(418)	(379)
Gains not chargeable	(59)	(1,946)
Recognition of previously unrecognised deferred tax asset	(905)	-
Other differences	37	-
Total tax (credit)/charge	(952)	128

9      Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings for the purposes of earnings per share:	2010 £'000	2009 £'000
From continuing operations From discontinued operations	917 176	(403) 6,862
Total	1,093	6,459
EEa Weighted average number of shares for the purposes of earnings per share:	2010 No.	2009 No.
Weighted average number of ordinary shares in issue	5,623,258	5,687,457
Dilutive effect of potential ordinary shares	12,754	-
Weighted average number of ordinary shares for diluted EPS	5,636,012	5,687,457

In the prior year, there was no dilutive effect from the options in issue in view of the loss from continuing operations.

10    Subsidiaries

The principal subsidiaries of Volvere plc, all of which have been included in these consolidated financial statements, are as follows:

Name	Country of incorporation	Proportion of ownership interest
Volvere Central Services Limited	England and Wales	100%
NMT Group Limited	Scotland	97.8%
Interactive Prospect Targeting Limited	England and Wales	45.4%
Postal Preference Service Limited	England and Wales	45.4%
Sira Defence & Security Limited	England and Wales	100%

Postal Preference Service Limited is 100% owned by Interactive Prospect Targeting Limited.  The Company has the power to control Interactive Prospect Targeting Limited (and hence Postal Preference Service Limited) by virtue of the terms of a shareholder agreement.

 11   Goodwill

Cost and carrying amount	Total £'000
At 1 January 2009	532
Revision to fair value (see note below)	(227)
At 31 December 2009 and at 31 December 2010	305

Goodwill represents that arising from the acquisition of Interactive Prospect Targeting Limited's                          business and assets on 29 September 2008, being the difference between the fair value of the consideration paid and the fair value of the net assets acquired. 

Goodwill initially recognised on acquisition (during 2008) amounted to £532,000.  This was revised to £305,000 during 2009 as additional information came to light which resulted in adjustments to the fair values of assets and liabilities acquired.  Details of the adjustments are set out below:

			2010	2009
			£'000	£'000
Goodwill at 1 January			305	532
Revisions in respect of:
Trade receivables and other debtors			-	(127)
Trade payables			-	(88)
Accruals and deferred income			-	(12)
Goodwill at 31 December			305	305

The goodwill has been reviewed for impairment at 31 December 2010 and the directors are satisfied that no impairment has taken place.  The impairment review was performed by reference to the net present value of expected future cash flows, treating the acquired business as a single cash generating unit.  In performing the review, the directors took a conservative view in assuming zero growth in cash generation and using a discount rate of 20% per annum.

12    Property, plant and equipment                                   

	Short Leasehold Property £'000	Plant & Machinery £'000	Total £'000
Cost
At 1 January 2009	43	1,236	1,279
Additions	9	284	293
Disposals	-	(9)	(9)
Disposal of subsidiaries	(43)	(836)	(879)
At 31 December 2009 and 1 January 2010	9	675	684
Additions	-	167	167
At 31 December 2010	9	842	851
Accumulated depreciation
At 1 January 2009	14	770	784
Charge for the year	1	249	250
Disposals	-	(5)	(5)
Disposal of subsidiaries	(14)	(662)	(676)
At 31 December 2009 and 1 January 2010	1	352	353
Charge for the year	1	231	232
At 31 December 2010	2	583	585
Net book value
At 31 December 2010	7	259	266
At 31 December 2009	8	323	331

The net book value of property, plant and equipment held on finance leases was £nil (2009: £12,000).

13    Financial assets (current)                                                                                           

	2010 £'000	2009 £'000
Available-for-sale investments	17,812	11,601

During the year the Group invested in a mixture of equity funds, sub-investment grade securities of UK banks and investment grade corporate bond and asset-backed securities funds of mainly UK and US issuers.

At the year end the cost of these investments was £16,389,000 (2009: £11,062,000); the revalued amount stated above reflects the increased values of these investments along with accrued income.

14    Trade and other receivables

	2010 £'000	2009 £'000
Trade receivables	1,413	1,805
Less: provision for impairment of trade receivables	(317)	(634)
Net trade receivables	1,096	1,171
Other receivables	183	169
Prepayments and accrued income	204	226
	1,483	1,566

The fair value of trade receivables approximates to book value at 31 December 2010 and 2009.

The Group is exposed to credit risk with respect to trade receivables due from its customers, primarily in the online marketing & data services segment.  Whilst this segment is characterised by a large number of small customers who place small orders, there is a significant dependency on a small number of large customers who can and do place significant contracts with the business.  Provisions for bad and doubtful debts are made based on management's assessment of the risk taking into account the ageing profile, experience and circumstances.  There were no significant amounts due from individual customers where the credit risk was considered by the Directors to be significantly higher than the total population.

There is no currency risk associated with trade receivables as all are denominated in Sterling

The ageing analysis of trade receivables is disclosed below:

	2010 £'000	2009 £'000
Up to 3 months	1,033	1,105
3 to 6 months	33	41
6 to 12 months	-	-
Over 12 months	30	25
	1,096	1,171

15    Trade and other payables - current

	2010 £'000	2009 £'000
Trade payables	581	927
Other tax and social security	412	514
Obligations due under finance leases	-	28
Other payables	216	460
Accruals	1,044	953
Deferred income	210	322
	2,463	3,204

The fair value of trade and other payables approximates to book value at 31 December 2010 and 2009.

16    Financial instruments - risk management

The Group is exposed through its operations to one or more of the following financial risks:

·      Cash flow interest rate risk

·      Foreign currency risk

·      Liquidity risk

·      Credit risk

·      Other market price risk

Policy for managing these risks is set by the Board following recommendations from the Chief Financial & Operating Officer.  Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre.  The policy for each of the above risks is described in more detail below.

The Group's principal financial instruments are:

·      Trade receivables

·      Cash at bank

·      Investments in equity funds, government bonds, sub-investment grade securities of UK banks and investment grade corporate bond and asset-backed securities funds of mainly UK and US issuers

·      Trade and other payables

Due to the relatively low level of borrowings that has existed from time to time within the Group (with none at the year end), the Directors do not have an explicit policy for managing cash flow interest rate risk.  All recent borrowing had been on variable terms.  Although the Board accepts that this policy neither protects the Group entirely from paying rates in excess of current market rates nor eliminates fully cash flow risk associated with interest payments, the Directors feel that given circumstances where interest rates were to increase significantly the Group has cash reserves of such an extent that any borrowings could be repaid immediately thus mitigating the impact of such risk.  In addition all cash is managed centrally and subsidiary operations are not permitted to arrange borrowing independently.

The Group's investments may attract interest at fixed or variable rates, or none at all.  The market price of such investments may be impacted positively or negatively by changes in underlying interest rates.  It is not considered practicable to provide a sensitivity analysis on the effect of changing interest rates.  At the year end, the Group's investments had the following interest profiles:

	2010 £'000	2009 £'000
No interest	15,198	-
Fixed interest	2,614	4,693
Unspecified interest	-	6,908
	17,812	11,601

Foreign currency risk                                                                                                            

Foreign exchange risk arises when individual Group operations enter into transactions denominated in a currency other than their functional currency (sterling).  The Directors monitor and review their foreign currency exposure on a regular basis; they are of the opinion that as the Group's trading exposure is limited to transactions with a small number of customers and suppliers it is not appropriate to actively hedge that element of its foreign currency exposure.  However, during 2009 the Group invested $4 million in an investment grade debt fund and has entered into a foreign exchange contract in respect of the sale of $4.25 million at a rate of $1.5871/£1 with a sale date of 21 November 2011.

Liquidity risk

The Group maintains significant cash reserves and therefore does not require facilities with financial institutions to provide working capital.  Surplus cash is managed centrally to maximise the returns on deposits. 

Credit risk

The Group is mainly exposed to credit risk from credit sales.  The Group's policy for managing and exposure to credit risk is disclosed in note 14. 

Other market price risk

The Group has generated a significant amount of cash and this has been held partly as cash deposits and partly invested pursuant to the Group's investing strategy.  Investments have been in a mixture of equity funds, term deposits, government bonds, sub-investment grade securities of UK banks and investment grade corporate bond and asset-backed securities funds of mainly UK and US issuers, all of which have been made having regard to the Group's need to access capital.  Market price movements of these investments could materially affect the value of the Group's assets.  The directors believe that the exposure to market price risk from this activity is acceptable in the Group's circumstances.

The Group's convertible A and B shares (which have been classified as financial liabilities) are convertible into ordinary shares based upon a predetermined conversion formula.  The conversion formula includes as one variable the Group's share price.

Capital management

The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade profitably in the foreseeable future.  The Group also aims to maximise its capital structure of debt and equity so as to minimise its cost of capital.

The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates by monitoring its gearing ratio on a regular basis and adjusting the level of dividends paid to ordinary shareholders. 

The Group considers its capital to include share capital, share premium, revaluation reserve, retained earnings and net debt as noted. 

Net debt includes short and long-term borrowings (including lease obligations) and shares classed as financial liabilities, net of cash and cash equivalents. 

The Group has not made any changes to its capital management during the year.  The Group is not subject to any externally imposed capital requirements.

An analysis of the Group's gearing is shown in the table below. 

	2010 £'000	2009 £'000
Total debt	1,359	1,101
Less cash and cash equivalents	(3,109)	(11,601)
Net debt	(1,750)	(10,500)
Total equity	18,850	17,769
Less: reserves not included in definition of capital	-	(90)
Adjusted capital	18,850	17,679
Debt to adjusted capital ratio	(9.3)%	(59.4)%

17    Financial assets and liabilities - numerical disclosures

Maturity of financial assets

The maturities and denominations of financial assets at the year end, other than loans and receivables (note 14 above) are as follows:

	2010 £'000	2009 £'000
Sterling
No fixed maturity	15,031	9,022
US dollar
No fixed maturity	2,781	2,579
	17,812	11,601

Maturity of financial liabilities 

The carrying amounts of all financial liabilities, excluding loans and borrowings, being carried at amortised cost is as follows:

	2010 £'000	2009 £'000
In less than six months	3,653	4,138

The Group had no loans, or unused borrowing facilities at 31 December 2010 or 31 December 2009. All financial liabilities are denominated in Sterling.

18    Deferred tax

Deferred tax assets recognised on the balance sheet are analysed as follows:

	2010 £'000	2009 £'000
Tax losses carried forward	914	-
Excess of depreciation over capital allowances	52	52
	966	52

In addition, there are unrecognised deferred tax assets as follows:

	2010 £'000	2009 £'000
Tax losses carried forward	416	1,456
Excess of depreciation over capital allowances	61	8
Short term temporary differences	76	16
Goodwill	(32)	(7)
	521	1,473

	Accelerated tax depreciation	Losses	Revaluation gains	Total
	£'000	£'000	£'000	£'000
At 1 January 2009	-	-	-	-
Recognised in income statement for the year	52	-	-	52
At 31 December 2009 and 1 January 2010	52	-	-	52
Recognised in equity for the year	-	-	(164)	(164)
Recognised in income statement for the year	-	1,078	-	1,078
At 31 December 2010	-	1,078	(164)	914

Deferred tax assets and liabilities have been calculated using the rate of corporation tax expected to apply when the relevant temporary differences reverse.  Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

The unrecognised element of the deferred tax assets have not been recognised because there is insufficient evidence that they will be recovered.

19    Share capital

	Authorised
	2010 Number	2010 £'000	2009 Number	2009 £'000
Ordinary shares of £0.0000001 each	100,100,000	-	100,100,000	-
A shares of £0.49999995 each	50,000	25	50,000	25
B shares of £0.49999995 each	50,000	25	50,000	25
Deferred shares of £0.00000001 each	4,999,999,500,000	50	4,999,999,500,000	50
		100		100

	Issued and fully paid
	2010 Number	2010 £'000	2009 Number	2009 £'000
Ordinary shares of £0.0000001 each	5,793,634	-	5,708,720	-
A shares of £0.49999995 each	41,167	20.5	49,735	25
B shares of £0.49999995 each	41,167	20.5	49,735	25
Deferred shares of £0.00000001 each	883,299,050,726	9	26,499,985,533	-
		50		50
A and B shares classed as financial liabilities		(41)		(50)
		9		-

Movements in share capital

During the year 8,568 A shares and 8,568 B shares were converted into 84,914 Ordinary Shares and 856,799,065,193 Deferred shares on exercise of conversion rights attached to the A and B shares. 

The only change in share capital during the previous year was the issue of 33,488 Ordinary shares on exercise of share options.

Treasury shares

During the year the Company made market purchases of 298,000 of the Company's own shares for total consideration of £880,000.  Of these, 666 were transferred on exercise of share options and the remaining 297,334 are held as treasury shares at 31 December 2010.  There were no such purchases in the previous year.

Rights attaching to different classes of share

The A and B shares rank pari passu with the Ordinary shares on a return of capital but do not have voting rights.  The A and B shares became capable of being converted into Ordinary shares at the option of the holder on or after 24 December 2003 and 24 December 2004 respectively, on a predetermined conversion formula based upon share price performance and the weighted average issue price of Ordinary share capital, whereby approximately 15% of the growth in market capitalisation of the Group over the weighted average issue price of Ordinary shares issued is attributable to the holders of A and B shares.

Based on the closing share price of 325p at 31 December 2010 (2009: 252.5p), the A and B shares would have been capable of converting into 418,257 Ordinary shares (2009: 424,739).  The fair value of the A and B shares of £1,359,000 (2009: £1,073,000) is classified as a financial liability; there is no cash alternative upon conversion of these shares.

The Deferred shares carry no rights to participate in the profits or assets of the Company and carry no voting rights.

20    Reserves

	Share capital £'000	Share premium account £'000	Revaluation reserve £'000	Share option reserve £'000	Retained earnings £'000
At 1 January 2009	50	3,586	97	16	7,218
Revaluation of available for sale investments	-	-	254	-	-
Share capital re-classified as liabilities	(50)	-	-	-	-
Premium on shares issued	-	49	-	-	-
Share based payments charge	-	-	-	90	-
Equity share options cancelled	-	-	-	(16)	16
Profit for the year attributable to the equity holders of the parent	-	-	-	-	6,459
At 31 December 2009	-	3,635	351	90	13,693

At 1 January 2010	-	3,635	351	90	13,693
Revaluation of available for sale investments (net of related deferred tax)	-	-	907	-	-
Issue of equity shares	9	1	-	-	-
Equity share options exercised in subsidiary	-	-	-	(90)	41
Purchase of own shares	-	-	-	-	(880)
Profit for the year attributable to the equity holders of the parent	-	-	-	-	1,093
At 31 December 2010	9	3,636	1,258	-	13,947

The following describes the nature and purpose of each reserve within owners' equity:

Reserve	Nature and purpose
Share premium	Amount subscribed for share capital in excess of nominal value
Revaluation reserve	Cumulative net unrealised gains and losses arising on the revaluation of the Group's available for sale investments
Share option reserve	Aggregate charge in respect of employee share option charges net of lapsed option cost releases
Retained earnings	Cumulative net gains and losses recognised in the consolidated income statement

21    Changes in shareholders' equity

	2010 £'000	2009 £'000
Profit for the year	1,093	6,459
Issue of shares	10	49
Exercise of options in subsidiary	(49)	-
A and B shares reclassified as financial liabilities	-	(50)
Share-based payment expenses	-	90
Revaluation of available for sale investments (net of related deferred tax)	907	254
Purchase of own shares	(880)	-
	1,081	6,802
Capital and reserves attributable to equity holders of the parent at the beginning of the period	17,769	10,967
Capital and reserves attributable to equity holders of the parent at the end of the period	18,850	17,769
Non-controlling interests	1,200	463
Total equity	20,078	18,232

22    Leases

Operating leases - lessee

The Group leases all of its properties.  The terms of property leases vary, although they all tend to be tenant repairing with rent reviews every 2 to 5 years; some have break clauses.  The total future values of minimum lease payments are due as follows:

	Land and Buildings 2010 £'000	Other 2010 £'000	Land and buildings 2009 £'000	Other 2009 £'000
Not later than one year	-	-	-	-
Later than one year and not later than five years	169	6	169	-
Later than five years	-	2	-	2
	169	8	169	2

23    Share-based payment

The Company operates two share-based payment schemes, an approved EMI equity-settled share-based remuneration scheme for certain employees and an unapproved equity-settled share scheme for certain management.  Under the EMI scheme, the options vest on achievement of employee-specific targets subject to a compulsory 2.5 or 3 year vesting period and can be exercised for a further 7.5 or 7 years after vesting.

Options in issue are summarised below:                                                                                                             

	Weighted average exercise price 2010	Number 2010	Weighted average exercise price 2009	Number 2009
Outstanding at beginning of the year	170.8p	35,166	156.3p	99,920
Granted during the year	-	-	-	-
Exercised during the year	190.6p	(666)	144.5p	(33,488)
Lapsed during the year	137.5p	(500)	138.9p	(31,266)
Outstanding at the end of the year	177.0p	34,000	170.8p	35,166

During the year 666 options were exercised (2009: 33,488) for a total consideration of £1,000 (2009: £49,000).

The exercise price of options outstanding at the end of the year ranged between 137.5p and 187.5p (2009: 137.5p and 197.5p) and their weighted average remaining contractual life was 3.6 years (2009: 4 years).  Of those options outstanding, 31,000 were exercisable at a weighted average exercise price of 187.5p.

The Company's share price during the year ranged from a low of 245p to a high of 341p, with an average of 289.4p.  At the year end it was 325p.

	2010 £'000	2009 £'000
The share-based remuneration expense (note 3) comprises:
Equity-settled schemes	-	90

The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period.

24    Related party transactions

Details of amounts payable to Directors are disclosed in note 4.  Other than their remuneration and participation in the Group's share option schemes (note 23), there are no transactions with key members of management.

There were no material transactions with other related parties.

25    Contingent liabilities

The Group had no material contingent liabilities as at the date of these financial statements (2009: none), except that it has been agreed with the Group's subsidiary, Interactive Prospect Targeting Limited, that upon a sale of that company, an initial amount of the consideration payable shall be paid to certain management shareholders on a pre-determined basis, following which it will be payable to all shareholders pro-rata to their holdings.  This initial amount, as at 31 December 2010, was £454,000 (2009: £252,000).

26    Non-controlling interests                                                                                            

The non-controlling interests of £1,200,000 (2009: £463,000) relates to the net assets attributable to the shares not held by the Group at 31 December 2010 in the following subsidiary undertakings:

Name of subsidiary undertaking	2010 £'000	2009 £'000
NMT Group Limited	122	127
Interactive Prospect Targeting Limited	1,106	336
	1,228	463

- Ends -

 

END

 

 

FR LLFIDVRILVIL