Interim Results

Volvere PLC 27 September 2007 VOLVERE PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007 Volvere plc ('Volvere' or 'the Company'), the turnaround investment company, announces its interim results for the 6 months ended 30 June 2007. Results The financial information for Volvere plc published in this document reflects the application for the first time of the new International Financial Reporting Standards ('IFRS'). There have been a number of significant changes affecting the presentation of the information, principally relating to the reversal of positive goodwill amortisation and negative goodwill recognition together with accounting for the cost of share-based payments. Reconciliations of the previous UK GAAP formats to the new IFRS format are included in this interim report. The Group's principal accounting policies are set out in the Statement of Accounting Policies in this interim report. HIGHLIGHTS â€¢ Group net assets: Â£7.57m (30 June 2006: Â£4.17m, 31 December 2006: Â£7.66m) of which cash represented Â£6.44m (30 June 2006: Â£1.6m, 31 December 2006: Â£6.54m) â€¢ Group turnover in the period: Â£7.19m (6 months to 30 June 2006: Â£6.58m, 12 months to 31 December 2006: Â£13.78m) â€¢ Group profit before tax: Â£4,000 (30 June 2006: loss Â£3,000, 31 December 2006: loss Â£125,000) â€¢ Core areas at Vectra continued to perform strongly â€¢ Sira Test and Certification and Sira Environmental performed well â€¢ Sira Defence & Security showing signs of improvement in second half â€¢ Group's financial position remains strong â€¢ Basic earnings per share 0.036p (30 June 2006: loss 0.079p, 31 December 2006: loss 3.031p); diluted earnings per share 0.035p (30 June 2006: loss 0.079p, 31 December 2006: loss 3.031p) CHAIRMAN'S STATEMENT I am pleased to report on the results for the six months ended 30 June 2007. We have continued to build and strengthen our businesses during the period and turnover has continued to grow. At the period end our net assets per share were Â£1.33. I would like to thank our management and staff for their hard work and commitment during the period. OUTLOOK Following a good first half in 2007, our principal businesses have continued to perform in line with our expectations during the second half. Lord Kalms Chairman 27 September 2007 For further information, please contact: Jonathan Lander, Chief Executive Officer Volvere plc + 44 (0) 20 7979 7596 Terry Garrett Weber Shandwick + 44 (0) 20 7067 0700 Tom Hulme Landsbanki Securities (UK) Limited + 44 (0) 20 7426 9000 CHIEF EXECUTIVE'S STATEMENT INTRODUCTION The performance of our principal businesses during the period was pleasing and underpins their value to the Group, which I believe to be well in excess of their book costs. OPERATING REVIEW For reporting purposes we have classified our group businesses into segments and the results of those segments are explained in the Financial Review and the notes to the interim report. In the interests of clarity and comparability with prior years, we have identified below the companies included within each segment. Safety & risk consulting This segment comprises the results of Vectra, which we believe is the largest independent safety and risk consultancy in the UK. Vectra's track record extends back for almost 25 years and we believe it is highly regarded by its clients. The business continues to focus on the Oil and Gas, Transportation and Nuclear markets where regulation, good practice and infrastructure spend continue to drive the need for Vectra's services. During the period Vectra exceeded its operating profit budget on turnover up 7% compared with the same period in 2006. All sectors are seeing buoyant market conditions and we continue to seek new staff to accelerate this growth. Certification services This segment comprises the results of Sira Test and Certification ('STC'), acquired in September 2005, and Sira Environmental ('SEL'), acquired in March 2006. During the period STC's order intake grew by 28% compared to the same period in 2006. Revenue growth was lower at 11% and we have been increasing fee-earning capacity to handle the increase in work. Consequently, although operating profits have been in line with last year, we believe we have not yet seen the maximum potential of this business. SEL continued to perform well and made an operating profit in the period compared to an operating loss in the 3 months following its acquisition in 2006. Security solutions This segment comprises the results of Sira Defence & Security. We continue to believe there is long term potential in the security sector in particular and the existing order backlog is expected to result in an improved performance in the second half of 2007. ACQUISITIONS AND FUTURE STRATEGY During the period, the Group did not make any acquisitions, other than increase its holding in NMT. The challenge facing the Group remains to make investments of the quality that we have made to date without over-paying for them. We remain optimistic that this can be achieved and our strong balance sheet is enabling us to respond quickly to opportunities as they arise. Jonathan Lander Chief Executive 27 September 2007 FINANCIAL REVIEW This Financial Review covers the Group's performance during the 6 months ended 30 June 2007. It should be read in conjunction with the Chairman's and Chief Executive's statements. Revenue and operating performance Detailed information about the Group's segments is set out in the notes to the interim report. Investing activities are the activities of NMT Group PLC ('NMT') and Management services represents the costs of the Group's management and central services functions. Revenue and operating results are summarised below: REVENUE (Note 1) OPERATING PROFIT/(LOSS) (Note 2) SEGMENT 6 months to 30 6 months to 30 12 months to 31 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Safety & risk consulting 5,419 5,064 10,358 382 282 436 Certification services 1,746 1,360 3,019 238 151 467 Security solutions 21 - 182 (127) - (1) Investing activities - - - (30) - (58) Management services - 160 218 (575) (375) (1,034) ------- ------- ------- ------- -------- -------- Total 7,186 6,584 13,777 (112) 58 (190) ======= ======= ======= ======= ======== ======== Note 1: Revenue is external revenue exclusive of intra-group sales. Note 2: Operating profit/(loss) is stated before amortisation of intangibles, intra-group charges and realisation of negative goodwill. Overall trading revenue grew by almost 12% during the period, excluding the fall in management services revenue. Management services revenue in 2006 represented fees payable to Volvere by NMT when the latter was an associate company but which is now consolidated fully. Safety & risk consulting, which represents the results of Vectra, grew by 7%. The growth in Certification services was due to growth in Sira Test and Certification ('STC') of 11% and due to the inclusion of six months revenue from Sira Environmental ('SEL'), which was acquired at the end of March 2006. SEL's turnover grew on a like-for-like basis by 37% in the period. Operating profits in Safety & risk consulting (being those of Vectra) reflected the turnover growth in that area. Operating profits in STC were in line with the prior period, with the growth in gross margin being eroded by increased staff costs as the business increased its fee-earning capacity in response to increased order intake, up 28% on the same period in 2006. SEL made a small operating profit in the period, compared with an operating loss in the period from March to June 2006. A lack of orders in the Security solutions segment has resulted in losses. However, work in hand currently is expected to result in a significant improvement in the second half of 2007. The increase in the Management services operating loss compared to the period to 30 June 2006 reflects the treatment of management fee revenue to NMT, as noted above. In the period to 30 June 2006 NMT was an associate and therefore the fees charged to it (Â£160,000) were reported as Group revenues and included in the operating result. EARNINGS PER SHARE The basic and diluted earnings per ordinary share were 0.036p and 0.035p respectively (30 June 2006: basic and diluted loss 0.079p, 31 December 2006: basic and diluted loss 3.031p). During the year the Group continued the operation of a share option scheme in which all staff are entitled to participate, subject to certain conditions. NEGATIVE GOODWILL Negative goodwill of Â£93,000 (30 June 2006: Â£nil) arising on the consolidation of NMT as a subsidiary, has been credited to profit and loss during the period. In the period to 30 June 2006 an amount of Â£53,000 was credited to profit and loss in respect of the acquisition of the business and assets of Sira Environmental. AMORTISATION OF INTANGIBLES An amount of Â£120,000 was charged to profit and loss (30 June 2006: Â£120,000, 31 December 2006: Â£240,000) in respect of the amortisation of the Group's intangible assets. CASH MANAGEMENT Cash balances at the period end totalled Â£6,443,000 (30 June 2006: Â£1,600,000, 31 December 2006: Â£6,540,000). The increase compared to June 2006 reflects the acquisition of NMT and the movement since December 2006 reflects the underlying trading in the Group's businesses. HEDGING It is not the Group's policy to enter into derivative instruments to hedge interest rate risk. DIVIDENDS In accordance with the policy set out in our prospectus on our 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. Nick Lander 27 September 2007 CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2007 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 Revenue 7,186 6,584 13,777 Cost of Sales (3,494) (3,270) (7,017) ---------- --------- ---------- Gross Profit 3,692 3,314 6,760 Administrative expenses - before goodwill and amortisation of intangible assets (3,804) (3,256) (6,950) - amortisation of intangible assets (120) (120) (240) - realisation of negative goodwill 93 53 252 ---------- --------- ---------- (3,831) (3,323) (6,938) ---------- --------- ---------- ---------- --------- ---------- Operating profit/(loss) (139) (9) (178) Share of results of associates - (65) (96) Negative goodwill arising in respect of associates - 37 44 Investment revenues - Group 165 16 99 - Share of associates - 38 63 Finance costs (22) (20) (57) ---------- --------- ---------- Profit/(loss) before tax 4 (3) (125) Tax - - - ---------- --------- ---------- Profit/(loss) after tax 4 (3) (125) Minority interests (2) - 4 ---------- --------- ---------- Profit/(loss) for the period 2 (3) (121) ========== ========= ========== Earnings/(loss) per ordinary share -basic 0.036p (0.079p) (3.031p) -diluted 0.035p (0.079p) (3.031p) ========== ========= ========== All results are derived from continuing operations. There are no recognised gains or losses other than the result for the current and preceding periods. Accordingly no statement of recognised income and expenses is given. Notes: 1. International Accounting Standards ('IFRS') will apply for the first time to the Group's Annual report for the year ending 31 December 2007. Consequently the Group's interim results for the six months to 30 June 2007 are presented under IFRS together with restated information for the six months ended 30 June 2006 and the year ended 31 December 2006. Further information on the Group's adoption of IFRS is given under 'Explanation of transition to IFRS' on pages 25 to 36. 2. The financial information for the six months ended 30 June 2007 and the comparative figures for the six months ended 30 June 2006 have not been reviewed or audited by the Group's auditors and have been prepared on the basis of the accounting policies adopted by the Group under IFRS. These accounting policies are set out under 'Statement of Accounting Policies' on pages 12 to 15. 3. The unaudited comparative figures for the 12 months to 31 December 2006 have been prepared under IFRS. They do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The unqualified audited accounts for the 12 months ended 31 December 2006, under previous UKGAAP, have been filed with the Registrar of Companies and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 4. The group has estimated an annualised effective tax rate of nil due to deferred tax not recognised. 5. Copies of this statement will be available to members of the public at the company's registered office: 9-11 Grosvenor Gardens, London, SW1W 0BD and on its website www.volvere.co.uk. CONSOLIDATED BALANCE SHEET At 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 Non-current assets Goodwill - - - Other intangible assets 837 1,077 957 Property, plant & equipment 330 248 293 Investments - 1,735 - -------- -------- -------- 1,167 3,060 1,250 -------- -------- -------- Current assets Inventories - 44 - Trade and other receivables 5,058 4,452 4,743 Cash and cash equivalents 6,443 1,600 6,540 -------- -------- -------- 11,501 6,096 11,283 -------- -------- -------- -------- -------- -------- Total assets 12,668 9,156 12,533 ======== ======== ======== Current liabilities Trade and other payables (4,584) (4,385) (4,302) Current tax liabilities - - - Bank overdrafts and loans (150) (120) (150) -------- -------- -------- (4,734) (4,505) (4,452) -------- -------- -------- -------- -------- -------- Net current assets 6,767 1,591 6,831 Non-current liabilities Bank loans (360) (480) (420) -------- -------- -------- Total liabilities (5,094) (4,985) (4,872) ======== ======== ======== Net assets 7,574 4,171 7,661 ======== ======== ======== EQUITY Share capital 50 50 50 Share premium account 3,584 361 3,313 Equity reserve 83 58 75 Retained earnings 3,577 3,702 3,575 -------- -------- -------- Equity attributable to equity holders of the parent 7,294 4,171 7,013 Minority interest 280 - 648 -------- -------- -------- Total equity 7,574 4,171 7,661 ======== ======== ======== CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2007 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 Net cash from operating activities (71) 221 68 Investing activities Interest received 165 16 99 Proceeds of disposal of property, plant and equipment - - 5 Refund of consideration relating to acquisition - 87 88 Purchases of property, plant and equipment (104) (70) (180) Acquisition of investment in an associate - (190) (190) Acquisition of subsidiary including associated costs (5) (31) (242) Net cash acquired of acquisition of subsidiary undertaking net of associated costs - - 5,822 -------- -------- -------- Net cash from/(used in) investing activities 56 (188) 5,402 -------- -------- -------- Financing activities Interest paid (22) (20) (57) Repayment of borrowings (60) (157) (608) New bank loans raised - 600 600 Redemption of share capital - - (9) -------- -------- -------- Net cash (used in)/from financing activities (82) 423 (74) -------- -------- -------- Net (decrease)/increase in cash and cash equivalents (97) 456 5,396 Cash and cash equivalents at beginning of period 6,540 1,144 1,144 -------- -------- -------- Cash and cash equivalents at end of period 6,443 1,600 6,540 ======== ======== ======== NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2007 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 Operating loss (139) (9) (178) Adjustments for: Depreciation of property, plant and equipment 66 49 107 Negative goodwill released to income (93) (53) (252) Amortisation of intangible assets 120 120 240 Share-based payment expense 8 17 34 Loss on disposal of property, plant and equipment - - 2 -------- -------- -------- Operating cashflows before movements in working capital (38) 124 (47) -------- -------- -------- Increase in inventories - (44) - Increase in receivables (337) (616) (896) Increase in payables 304 757 1,011 -------- -------- -------- Cash generated by operations (71) 221 68 ======== ======== ======== STATEMENT OF ACCOUNTING POLICIES - UPDATED FOR IFRS Basis of accounting The interim financial report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below. They have been applied consistently throughout the period and in the preceding periods. 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 cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition. The interest of minority shareholders is stated at the minority's proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent. 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. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Investments in associates An associate is an entity over which the group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of the associates in excess of the group's interest in those associates are not recognised. Any excess of the cost of acquisition over the group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. Any deficiency of the cost of acquisition below the group's share of the fair values of the identifiable net assets of the associate at the date of acquisition (i.e. discount on acquisition) is credited in profit and loss in the period of acquisition. Where a group company transacts with an associate of the group, profits and losses are eliminated to the extent of the group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment. Goodwill Goodwill arising on consolidation represents the excess of the costs of acquisition over the group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. Negative goodwill arising on acquisitions is recognised immediately in profit or loss in the period in which it arises. 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, 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 of the relevant contract. Leasing 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 balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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 defined contribution retirement benefit schemes are charged as an expense as they fall due. 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 balance sheet date. Deferred tax is the tax expected to be payable or recoverable on 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 balance sheet 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 calculated at 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 Fixtures 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, 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 cost, including transaction costs. Investment income Income from investments is included in the income statement on an accruals basis, before deduction of any related tax credit. Impairment of tangible and intangible assets excluding goodwill At each balance sheet 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. Intangible assets - customer relationships Customer relationship intangible assets, acquired in a business combination, are initially measured at cost, based on discounted cash flows and amortised over their estimated useful lives of 5 years on a straight line basis. Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Financial liability and equity 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. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis to the profit and loss account using effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade payables Trade payables are not interest-bearing and are stated at their nominal value. Share-based payments The group has applied the requirements of IFRS 2, Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005. 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 shares that will eventually 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. NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Critical judgements in applying the Group's accounting policies In the process of applying the Group's accounting policies, which are set out on pages 12 to 15, management has made the following judgements that have the most significant effect on the amounts recognised in the interim financial statements (apart from those involving estimations, which are dealt with below). Revenue recognition Significant amounts of the Group's revenue arise from client projects where there is a fixed contract value and fixed scope of work. The Group recognises revenue as work progresses and assesses the stage of completion in relation to these projects. On large projects, and those spanning long periods of time, there can be a greater amount of uncertainty in relation to these projects' financial outcomes and the timing of project completion. The Group reviews projects' progress on a periodic basis to ensure that projects' revenues are recognised appropriately. Key sources of estimation uncertainty Amortisation of intangible assets The Group has, in determining the value of intangible assets, estimated the cash flows expected to arise from the underlying intangible assets acquired as part of their acquisition and estimated a suitable discount rate in order to calculate the present value thereof. The value of the Group's intangible assets is being amortised over 5 years using the straight line method. 2. BUSINESS SEGMENTS For management purposes the group is currently organised into investing activities and management services and a number of operating divisions. The operating divisions are Safety & Risk Consulting, Certification Services and Security Solutions. Segment information about the group's businesses is presented below. 6 MONTHS TO 30 JUNE 2007 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 REVENUE External sales 5,419 1,746 21 - - - 7,186 Inter-segment sales - - - - 409 (409) - ------- -------- ------- ------- ------ ------ ------ Total revenue 5,419 1,746 21 - 409 (409) 7,186 ======= ======== ======= ======= ====== ====== ====== RESULT Segment result 382 238 (127) (30) (575) - (112) (Note 1) ======= ======== ======= ======= ====== ====== ====== Operating loss before goodwill and amortisation of intangible assets (112) Amortisation of intangible assets (120) Negative goodwill released to income (excluding associates) 93 Share of results of associates - Negative goodwill released to income in respect of associate - Investment revenues - group 165 - share of associate - Finance costs (22) ------ Profit before tax 4 Tax - ------ Profit after 4 ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total OTHER INFORMATION Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Capital additions 58 40 5 - - - 103 ======= ======= ======= ======= ====== ====== ====== Depreciation (39) (23) (3) - (1) - (66) ======= ======= ======= ======= ====== ====== ====== Amortisation of intangible assets - (120) - - - - (120) ======= ======= ======= ======= ====== ====== ====== Realisation of negative goodwill - - - - 93 - 93 ======= ======= ======= ======= ====== ====== ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total BALANCE Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 SHEET Segment assets 4,090 2,314 10 5,862 392 - 12,668 (Note 2) ======= ======= ======= ======= ====== ====== ====== Segment liabilities (Note 2) (2,432) (2,193) (27) (65) (377) - (5,094) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation of intangible assets and group management charges. Note 2: Segment assets and liabilities have been stated excluding inter-segment balances. 6 MONTHS TO 30 JUNE 2006 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 REVENUE External sales 5,064 1,360 - - 160 6,584 Inter-segment sales - - - - 390 (390) - ------- -------- ------- ------- ------ ------ ------ Total revenue 5,064 1,360 - - 550 (390) 6,584 ======= ======== ======= ======= ====== ====== ====== RESULT Segment result 282 151 - - (375) - 58 (Note 1) ======= ======== ======= ======= ====== ====== ====== Operating profit before goodwill and amortisation of intangible assets 58 Amortisation of intangible assets (120) Negative goodwill released to income (excluding associates) 53 Share of results of associates (65) Negative goodwill released to income in respect of associate 37 Investment revenues - group 16 - share of associate 38 Finance costs (20) ------ Profit before tax (3) Tax - ------ Profit after tax (3) ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total OTHER INFORMATION Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Capital additions 19 51 - - - - 70 ======= ======= ======= ======= ====== ====== ====== Depreciation (42) (7) - - - - (49) ======= ======= ======= ======= ====== ====== ====== Amortisation of intangible assets - (120) - - - - (120) ======= ======= ======= ======= ====== ====== ====== Realisation of negative goodwill - 53 - - - - 53 ======= ======= ======= ======= ====== ====== ====== NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED) 2. BUSINESS SEGMENTS (CONTINUED) 6 MONTHS TO 30 JUNE 2006 (continued) Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total BALANCE Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 SHEET Segment assets 3,328 3,050 - - 2,778 - 9,156 (Note 2) ======= ======= ======= ======= ====== ====== ====== Segment liabilities (Note 2) (2,345) (1,883) - - (757) - (4,985) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation of intangible assets and group management charges. In response to the acquisitions made in late 2005 and early 2006 the Group established a central service company (Volvere Central Services Limited) with effect from 1 July 2006, to provide financial, IT and personnel services to Group companies. Until that date these activities were accounted for through the results of Vectra Group Limited and therefore formed part of the Safety and Risk Consulting segmental analysis. In order to present more clearly the segmentation of the Group's businesses the June 2006 segmental analysis has been adjusted to reflect the existence of the central service company as though it had existed throughout the period. Note 2: Segment assets and liabilities have been stated excluding inter-segment balances. 12 MONTHS TO 31 DECEMBER 2006 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 REVENUE External sales 10,358 3,019 182 - 218 - 13,777 Inter-segment sales - 12 - - 721 (733) - ------- -------- ------- ------- ------ ------ ------ Total frevenue 10,358 3,031 182 - 939 (733) 13,777 ======= ======== ======= ======= ====== ====== ====== RESULT Segment result 436 467 (1) (58) (1,034) - (190) (Note 1) ======= ======== ======= ======= ====== ====== ====== Operating profit before goodwill and amortisation of intangible assets (190) Amortisation of intangible assets (240) Negative goodwill released to income (excluding associates) 252 Share of results of associates (96) Negative goodwill released to income in respect of associate 44 Investment revenues - group 99 - share of associate 63 Finance costs (57) ------ Profit before tax (125) Tax - ------ Profit after tax (125) ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total OTHER INFORMATION Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Capital additions 56 112 5 - 7 - 180 ======= ======= ======= ======= ====== ====== ====== Depreciation (83) (22) (1) - (1) - (107) ======= ======= ======= ======= ====== ====== ====== Amortisation of intangible assets - (240) - - - (240) ======= ======= ======= ======= ====== ====== ====== Realisation of negative goodwill - - - - 252 - 252 ======= ======= ======= ======= ====== ====== ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total BALANCE Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 SHEET Segment assets 3,613 2,518 24 5,866 512 - 12,533 (Note 2) ======= ======= ======= ======= ====== ====== ====== Segment liabilities (Note 2) (2,577) (1,811) (33) (86) (365) - (4,872) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation of intangible assets and group management charges. In response to the acquisitions made in late 2005 and early 2006 the Group established a central service company (Volvere Central Services Limited) with effect from 1 July 2006, to provide financial, IT and personnel services to Group companies. Until that date these activities were accounted for through the results of Vectra Group Limited and therefore formed part of the Safety and Risk Consulting segmental analysis. In order to present more clearly the segmentation of the Group's businesses the December 2006 segmental analysis has been adjusted to reflect the existence of the central service company as though it had existed throughout the year. Subsequent to the reporting of the results for the year ended 31 December 2006 a cost of Â£101,000 (relating to insurance costs) has been reallocated from the Management services segment result to the Safety and risk consulting segment result to better reflect those underlying segments' results and ensure comparability with other periods in this interim report. Note 2: Segment assets and liabilities have been stated excluding inter-segment balances. SALES BY GEOGRAPHICAL MARKET 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 United Kingdom 5,490 5,324 11,192 Rest of Europe 897 708 1,504 United States of America 399 108 119 Other 400 444 962 ------- ------- --------- 7,186 6,584 13,777 ======= ======= ========= CARRYING AMOUNT OF SEGMENT ASSETS 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited Â£000 Â£000 Â£000 United Kingdom 11,620 8,477 11,508 Rest of Europe 410 266 414 United States of America - - - Other 638 413 611 ------- ------- --------- 12,668 9,156 12,533 ======= ======= ========= ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Â£000 Â£000 Â£000 United Kingdom 99 67 170 Rest of Europe 4 3 5 United States of America 0 0 0 Other 0 0 5 ------- ------- --------- 103 70 180 ======= ======= ========= 3. STATEMENT OF CHANGES IN EQUITY 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited Â£000 Â£000 Â£000 Opening equity attributable to the equity holders of the parent 7,013 4,157 4,157 Issue of share capital 271 - 2,952 Shares redeemed and cancelled - - (9) Equity reserve movement 8 17 34 Profit/(loss) for the period 2 (3) (121) ------- ------- --------- 7,294 4,171 7,013 ======= ======= ========= 4. EARNINGS PER SHARE The weighted average number of shares and the profit used to calculate earnings per share are given below: 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited Weighted average number of ordinary shares used for the purposes of basic earnings per share 5,583,626 3,786,588 3,992,054 Number of shares deemed to be issued at nil consideration pursuant to exercise of in-the-money share options - 25,031 11,092 Number of shares deemed to be issued at nil consideration under incentive share scheme 119,485 267,271 83,831 ------- ------- --------- Weighted average number of ordinary shares used for the purposes of diluted earnings per share 5,703,111 4,078,890 4,086,977 ======= ======= ========= Â£000 Â£000 Â£000 Net profit/(loss) attributable to equity holders of the parent 2 (3) (121) ======= ======= ========= At the end of the period 5,675,232 ordinary shares (30 June 2006: 3,786,588; 31 December 2006: 5,488,679) were in issue. In addition, 99,470 convertible shares (30 June 2006: 99,470; 31 December 2006: 99,470) and options for 214,401 shares (30 June 2006: 268,553; 31 December 2006: 268,553) were outstanding. For the period ended 30 June 2007 net profit per share is decreased by the deemed exercise of share options and the deemed issue of shares under the incentive share scheme since inclusion of those would result in a reduced net profit per share. For the periods ended 30 June 2006 and 31 December 2006 the net loss per share would decrease if shares were issued upon exercise of the share options or under the incentive share scheme and therefore diluted net loss per share is the same as basic net loss per share. 5. DIVIDEND The Board is not recommending payment of an interim dividend for the period ended 30 June 2007. 6. DEBTORS Debtors includes amounts recoverable under contracts of Â£1,241,000 (30 June 2006: Â£1,090,000; 31 December 2006: Â£1,362,000). EXPLANATION OF TRANSITION TO IFRS IFRS 1 First time adoption of International Financial Reporting Standards sets out the procedures that the Group must follow as it adopts IFRS for the first time as the basis for preparing its consolidated financial statements. The Group is required to establish its accounting policies as at 31 December 2007 and, in general, apply these retrospectively to determine the IFRS opening balance sheet as its date of transition, 1 January 2006. The standard allows a number of exceptions to this general principle. Those that affect the Group are set out below: â€¢ Use of the exemption in IFRS 3 to only restate Business Combinations arising after 31 March 2004. â€¢ IFRS 2, Share Based Payments, has been applied to all share options issued after 7 November 2002 and not vested as at 1 January 2005. Reconciliations of the adjustments to profit and loss for the reported periods are shown below: Reconciliation of profit/(loss) for period 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Notes Â£000 Â£000 Â£000 Profit/(loss) for the period under previous UKGAAP 154 63 74 Adjustments: Reversal of positive goodwill amortisation 1 30 30 61 Amortisation of intangible assets 2 (120) (120) (240) Negative goodwill released to income in period of acquisition 3 (54) 41 18 Cost of share-based payments 4 (8) (17) (34) -------- -------- -------- Profit/(loss) for the period under IFRS 2 (3) (121) ======== ======== ======== Notes 1. Reversal of positive goodwill amortisation This relates to the amortisation charged in the periods since 1 January 2006 in respect of goodwill arising on the acquisition of Sira Test & Certification Limited's business and assets. In accordance with IFRS 3, Business Combinations, the amount charged to income has been credited to profit and loss reserves and included in Intangible assets in the balance sheet. 2. Amortisation of intangible assets Amortisation of the value of intangible assets, being the net acquisition cost of Â£1,197,000 in respect of the acquisition of Sira Test and Certification Limited, amortised over 5 years. 3.Negative goodwill released to income in period of acquisition This relates to the negative goodwill arising on the acquisitions of Sira Environmental Limited's business, NMT Group PLC and Vectra Group Limited. The amounts arising have been recognised in the periods in which they arose, in accordance with IFRS 3, Business Combinations. 4. Cost of share-based payments (IFRS 2) The Group has quantified the cost to the group of the options granted over its ordinary shares of Â£0.0000001 each which have been granted since 7 November 2002 and which were unvested as at 1 January 2005. More detailed analysis of the adjustments made to the Group's accounts as a result of the transition from UKGAAP to IFRS follow. Included is a reconciliation of the balance sheet as at 1 January 2006, the date of transition to IFRS. Reconciliation of profit for the six months ended 30 June 2007 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Revenue 7,186 - 7,186 Cost of sales (3,494) - (3,494) -------- -------- ------- Gross profit 3,692 - 3,692 Administrative Expenses - before goodwill (1) (3,796) (8) (3,804) - realisation of negative goodwill (2) 147 (54) 93 - amortisation of positive goodwill (3) (30) 30 - - amortisation of intangible assets (4) - (120) (120) -------- -------- ------- Operating profit/(loss) 13 (152) (139) Share of operating - - - results of associates Negative goodwill arising - - - in respect of associates Investment revenues - Group 165 - 165 - Share of associates - - - Finance costs - Group (22) - (22) - Share of associates - - - -------- -------- ------- Profit before tax 156 (152) 4 Tax - - - -------- -------- ------- Profit after tax 156 (152) 4 Minority interests (2) - (2) -------- -------- ------- Profit/(loss) for the period 154 (152) 2 ======== ======== ======= Notes: (1) The cost of Â£8,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period. (2) The cost of Â£54,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) (12) Negative goodwill relating to acquisition in year ended 31 December 2006 now restated at the value determined following acquisition to the period in which it arose (42) -------- (54) ======== (3) The credit of Â£30,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of Â£1,197,000 is being amortised on a straight-line basis over 5 years. Reconciliation of profit for the six months ended 30 June 2006 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Revenue 6,584 - 6,584 Cost of sales (3,270) - (3,270) -------- -------- ------- Gross profit 3,314 - 3,314 Administrative Expenses - before goodwill (1) (3,239) (17) (3,256) - realisation of negative goodwill (2) 12 41 53 - amortisation of positive goodwill (3) (30) 30 - - amortisation of intangible assets (4) - (120) (120) -------- -------- ------- Operating profit/(loss) 57 (66) (9) Share of operating results of associates (65) - (65) Negative goodwill arising in respect of associates 37 - 37 Investment revenues - Group 16 - 16 - Share of associates 38 - 38 Finance costs - Group (20) - (20) - Share of associates - - - -------- -------- ------- Profit before tax 63 (66) (3) Tax - - - -------- -------- ------- Profit after tax 63 (66) (3) Minority interests - - - -------- -------- ------- Profit/(loss) for the period 63 (66) (3) ======== ======== ======= Notes: (1) The cost of Â£17,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period. (2) The credit of Â£41,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) (12) Negative goodwill relating to acquisition in period ended 30 June 2006 now restated to that period and included at the value as estimated in that period 53 -------- 41 ======== (3) The credit of Â£30,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of Â£1,197,000 is being amortised on a straight-line basis over 5 years. EXPLANATION OF TRANSITION TO IFRS (CONTINUED) Reconciliation of profit for the year ended 31 December 2006 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Revenue 13,777 - 13,777 Cost of sales (7,017) - (7,017) -------- -------- ------- Gross profit 6,760 - 6,760 Administrative Expenses - before goodwill (1) (6,916) (34) (6,950) - realisation of negative goodwill (2) 234 18 252 - amortisation of positive goodwill (3) (61) 61 - - amortisation of intangible assets (4) - (240) (240) -------- -------- ------- Operating profit/(loss) 17 (195) (178) Share of operating results of associates (96) - (96) Negative goodwill arising in respect of associates 44 - 44 Investment revenues - Group 99 - 99 - Share of associates 63 - 63 Finance costs - Group (57) - (57) - Share of associates - - - -------- -------- ------- Profit before tax 70 (195) (125) Tax - - - -------- -------- ------- Profit after tax 70 (195) (125) Minority interests 4 - 4 -------- -------- ------- Profit/(loss) for the period 74 (195) (121) ======== ======== ======= Notes: (1) The cost of Â£34,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period. (2) The credit of Â£18,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) (24) Negative goodwill relating to acquisition in year ended 31 December 2006 now restated at the value determined following acquisition to the 42 period in which it arose ------- 18 ======== (3) The credit of Â£61,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of Â£1,197,000 is being amortised on a straight-line basis over 5 years. Reconciliation of balance sheet as at 31 December 2006 (date of latest UK GAAP financial statements) Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Non-current assets Goodwill (1) 1,136 (1,136) - Other intangible assets (1) - 957 957 Negative goodwill (2) (84) 84 - Property, plant & equipment 293 - 293 Investments - - - -------- -------- ------- 1,345 (95) 1,250 Current assets Trade and other receivables 4,743 - 4,743 Cash and cash equivalents 6,540 - 6,540 -------- -------- ------- 11,283 - 11,283 -------- -------- ------- Total assets 12,628 (95) 12,533 -------- -------- ------- Current liabilities Trade and other payables (4,302) - (4,302) Current tax liabilities - - - Bank overdrafts and loans (150) - (150) -------- -------- ------- (4,452) - (4,452) Net current assets 6,831 - 6,831 Non-current liabilities Bank loans (420) - (420) -------- -------- ------- Total liabilities (4,872) - (4,872) -------- -------- ------- Net assets 7,756 (95) 7,661 ======== ======== ======= EQUITY Share capital 50 - 50 Share premium account 3,313 - 3,313 Equity reserve (3) - 75 75 Retained earnings (4) 3,745 (170) 3,575 -------- -------- ------- Equity attributable to equity holders of the parent 7,108 (95) 7,013 Minority interest 648 - 648 -------- -------- ------- Total equity 7,756 (95) 7,661 ======== ======== ======= Notes: 1. The goodwill recognised under UK GAAP (which was in respect of the acquisition of the business and assets of Sira Test and Certification Limited) has been reviewed in accordance with the provisions of IFRS3. Goodwill amortisation of Â£61,000, which would have been reported under UK GAAP and deducted from the goodwill balance, has been credited to profit and loss and added back to goodwill. The balance of goodwill has been determined as relating to the cost of intangible assets and been reclassified as such. Intangible assets are being amortised over 5 years. The movements in Goodwill and Intangible assets are summarised as follows: Goodwill Intangible assets Â£000 Â£000 Opening balance brought forward under UK GAAP 1,136 - Amount of goodwill amortisation under UKGAAP in period 61 - Amount transferred to Intangible assets under IFRS 3 (1,197) 1,197 Amortisation of intangible assets under IFRS 3 - (240) ------- -------- Closing balance carried forward under IFRS 3 - 957 ======= ======== 2. The adjustment of Â£84,000 in accordance with IFRS 3, Business Combinations, arises as follows: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (24) Negative goodwill relating to acquisition in year ended 31 December 2006 now restated at the value determined following acquisition to the period in which it arose 42 -------- 84 ======== 3. This amount relates to the costs of share-based payments (IFRS 2) and comprises the following: Â£000 Costs of share-based payments credited to equity reserve 1 January 2006 41 Costs of share-based payments charged to income in period 34 -------- 75 ======== 4. This amount comprises the following: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (24) Goodwill amortisation written back to reserves (Note 1 above) 61 Amortisation of intangible assets (Note 1 above) (240) Negative goodwill relating to acquisition in year ended 31 December 2006 now restated at the value determined following acquisition to the period in which it arose 42 Costs of share-based payments debited to retained earnings 1 January 2006 (41) Costs of share-based payments charged to income in period (34) -------- (170) ======== Reconciliation of balance sheet as at 30 June 2006 Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Non-current assets Goodwill (1) 1,167 (1,167) - Other intangible assets (1) - 1,077 1,077 Negative goodwill (2) (107) 107 - Property, plant & equipment 248 - 248 Investments 1,735 - 1,735 -------- -------- ------- 3,043 17 3,060 Current assets Inventories 44 - 44 Trade and other receivables 4,452 - 4,452 Cash and cash equivalents 1,600 - 1,600 -------- -------- ------- 6,096 - 6,096 -------- -------- ------- Total assets 9,139 17 9,156 -------- -------- ------- Current liabilities Trade and other payables (4,385) - (4,385) Current tax liabilities - - - Bank overdrafts and loans (120) - (120) -------- -------- ------- (4,505) - (4,505) Net current assets 1,591 - 1,591 Non-current liabilities Bank loans (480) - (480) -------- -------- ------- Total liabilities (4,985) - (4,985) -------- -------- ------- Net assets 4,154 17 4,171 ======== ======== ======= EQUITY Share capital 50 - 50 Share premium account 361 - 361 Equity reserve (3) - 58 58 Retained earnings (4) 3,743 (41) 3,702 -------- -------- ------- Equity attributable to equity holders of the parent 4,154 17 4,171 Minority interest - - - -------- -------- ------- Total equity 4,154 17 4,171 ======== ======== ======= Notes: 1. The goodwill recognised under UK GAAP (which was in respect of the acquisition of the business and assets of Sira Test and Certification Limited) has been reviewed in accordance with the provisions of IFRS3. Goodwill amortisation of Â£30,000, which would have been reported under UK GAAP and deducted from the goodwill balance, has been credited to profit and loss and added back to goodwill. The balance of goodwill has been determined as relating to the cost of intangible assets and been reclassified as such. Intangible assets are being amortised over 5 years. The movements in Goodwill and Intangible assets are summarised as follows: Goodwill Intangible assets Â£000 Â£000 Opening balance brought forward under UK GAAP 1,167 - Amount of goodwill amortisation under UKGAAP in period 30 - Amount transferred to Intangible assets under IFRS 3 (1,197) 1,197 Amortisation of intangible assets under IFRS 3 - (120) ------- -------- Closing balance carried forward under IFRS 3 - 1,077 ======= ======== 2. The adjustment of Â£107,000 in accordance with IFRS 3, Business Combinations, arises as follows: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (12) Negative goodwill relating to acquisition in period ended 30 June 2006 now restated at the value as estimated in that period 53 -------- 107 ======== 3. This amount relates to the costs of share-based payments (IFRS 2) and comprises the following: Â£000 Costs of share-based payments credited to equity reserve 1 January 2006 41 Costs of share-based payments charged to income in period 17 -------- 58 ======== 4. This amount comprises the following: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (12) Goodwill amortisation write back to reserves (Note 1 above) 30 Amortisation of intangible assets (Note 1 above) (120) Negative goodwill relating to acquisition in year ended 31 December 2006 now restated at the value estimated in that period 53 Costs of share-based payments debited to retained earnings 1 January 2006 (41) Costs of share-based payments charged to income in period (17) -------- (41) ======== Reconciliation of equity at 1 January 2006 (date of transition to IFRS) Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited Â£000 Â£000 Â£000 Non-current assets Goodwill 1,285 (1,285) - Other intangible assets (1) - 1,285 1,285 Negative goodwill (2) (66) 66 - Property, plant & equipment 218 - 218 Investments 1,535 - 1,535 -------- -------- ------- 2,972 66 3,038 Current assets Inventories - - - Trade and other receivables 3,663 - 3,663 Cash and cash equivalents 1,144 - 1,144 -------- -------- ------- 4,807 - 4,807 -------- -------- ------- Total assets 7,779 66 7,845 -------- -------- ------- Current liabilities Trade and other payables (3,688) - (3,688) Current tax liabilities - - - Bank overdrafts and loans - - - -------- -------- ------- (3,688) - (3,688) Net current assets 1,119 - 1,119 Non-current liabilities Bank loans - - - -------- -------- ------- Total liabilities (3,688) - (3,688) -------- -------- ------- Net assets 4,091 66 4,157 ======== ======== ======= EQUITY Share capital 50 - 50 Share premium account 361 - 361 Equity reserve (3) - 41 41 Retained earnings (4) 3,680 25 3,705 -------- -------- ------- Equity attributable to equity holders of the parent 4,091 66 4,157 Minority interest - - - -------- -------- ------- Total equity 4,091 66 4,157 ======== ======== ======= Notes: 1. The goodwill recognised under UK GAAP (which was in respect of the acquisition of the business and assets of Sira Test and Certification Limited) has been reviewed in accordance with the provisions of IFRS3. The balance of goodwill has been determined as relating to the cost of intangible assets and been reclassified as such. Intangible assets are being amortised over 5 years. 2. The adjustment of Â£66,000 in accordance with IFRS 3, Business Combinations, arises as follows: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 now restated in opening reserves for this year 66 ======== 3. This amount relates to the costs of share-based payments (IFRS 2) and comprises the following: Â£000 Costs of share-based payments credited to equity reserve 1 January 2006 41 ======== 4. This amount comprises the following: Â£000 Negative goodwill relating to acquisition made prior to 1 January 2006 (restated in opening reserves) 66 Costs of share-based payments debited to retained earnings 1 January (41) 2006 -------- 25 ======== This information is provided by RNS The company news service from the London Stock Exchange

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