Final Results

Next Fifteen Communications Plc Next Fifteen Communications Group plc Preliminary Results for the year ended 31 July 2008 (Unaudited) Next Fifteen Communications Group plc ("Next Fifteen" or "the Group"), the international public relations consultancy group, today announces record preliminary results for the year to 31 July 2008. Financial highlights: -- Adjusted profit before tax up 18% to Â£6.58 million (2007: Â£5.58 million) (see note 3) -- Revenues up 6.5% to Â£63.1 million (2007: Â£59.3 million) -- Adjusted pre-tax profit margins improved to 10.4% from 9.4% in the comparative period -- Adjusted earnings per share up 21.6% to 8.62p (2007: 7.09p) (see note 7) -- Final dividend of 1.25p (2007: 1.1p), making a total dividend for the year of 1.7p (2007: 1.5p), up 13.3% -- Net cash of Â£3.4m, following strong cash generation of Â£3.5m in the year Corporate progress: -- Strong overall performance by the Group's technology and non-technology orientated consulting businesses; growth of existing client revenue and significant new client wins including AMD, Sony, Sybase and Facebook -- Organic revenue growth (at constant currencies) in US up 8.8%, in EMEA up 8.5%, in India up 18.5% -- Ownership of Lexis Public Relations was increased to 87.15% in April 2008, further strengthening the Group's presence beyond the technology sector. Remaining equity to be purchased in the current financial year -- Bite Sweden strengthened by acquisition of the business of Stockholm-based AIM PR in September 2008 Commenting on the results, Chairman of Next Fifteen, Will Whitehorn, said: "The Group has managed its fundamentals well in the last year, showing solid growth and improved profits margins. Unlike most others in the marketing services sector it was also cash positive having ended the year with Â£3.4m on its balance sheet. Given the current climate, the Group will continue to take a conservative approach to running the business and focus heavily on the three Cs of customers, cost base and cash. As things stand the Group is still experiencing good trading conditions but it seems prudent to manage the business in a way that reflects the general uncertainty that surrounds the current economy." For further information contact: -0- *T Next Fifteen Communications Group Tim Dyson, Chief Executive 001 415 350 2801 David Dewhurst, Finance Director 07974 161183 Inferno Liam Jacklin +44(0)20 8735 9727 Liam.jacklin@infernopr.com Elijah Lawal +44(0)20 8735 9718 Elijah.lawal@infernopr.com *T -0- *T Attached: Chairman and Chief Executive Statement Consolidated Income Statement Consolidated Statement of Recognised Income and Expense Consolidated Balance Sheet Consolidated Statement of Cash Flow Notes to the Preliminary Statement *T Next Fifteen Communications Group plc Preliminary Results for the year ended 31 July 2008 (Unaudited) Chairman and Chief Executive's statement Next Fifteen Communications Group plc ('Next Fifteen' or 'the Group'), the global public relations consultancy group, is pleased to announce its preliminary results for the year to 31 July 2008. The Group has continued to perform well and has again produced record results, with revenue increasing 6.5% to Â£63.1m (2007: Â£59.3m). Reporting for the first full-year under IFRS, profit before tax was up 7.7% at Â£5.52m (2007: Â£5.12m) but the adjusted profit before tax increased 18% to Â£6.58m (2007: Â£5.58m) (see note 3). Adjusted earnings per share have increased 21.6% to 8.62p (2007: 7.09p) (see note 7), while basic earnings per share have increased 11.8% to 7.08p (2007: 6.33p). The Group has significantly improved its cash position, with net cash of Â£3.4m at year-end up from a small net debt of Â£0.1m at last year-end. The Group's results were affected by currency movements during the year, particularly the strengthening of the Euro, somewhat offset by further weakness of the US dollar. Using exchange rates prevailing for the year ended 31 July 2007, the Group would have shown revenue of Â£62.6m, an increase of 5.6%. On the back of these strong results the Board has proposed a final dividend of 1.25p per share, bringing the total dividend for the year to 1.7p, which represents an increase of 13.3% (2007: 1.5p). Margin improvement The Group saw its adjusted profit margin improve from 9.4% to 10.4% during the year despite continued investments made in new operations. Before head office costs (see note 2), the businesses improved their overall adjusted profit margin from 13.2% to 15.9%. The biggest improvement came from our US businesses who collectively achieved a margin of over 20%. Strengthened client base During the last twelve months the Group added significant brands to its client roster including: Sybase, MTV, Sony and Facebook. In addition, the Group has expanded its relationships with Yahoo!, Nokia and AMD. Given the retainer nature of many of the contracts the Group holds with its clients, the Group has good visibility on revenues from its current client base. The Group has experienced a growing trend of clients prioritizing their PR spend towards new media. It is expected that clients will continue to do this and that our businesses are well positioned to serve their needs. Growth strategy The Group has continued to explore organic growth opportunities and selective acquisitions of specialist agencies that will either extend the international reach of our existing businesses or provide new markets or market-share for the Group. With strong cash generation and net cash on the company's balance sheet, the Group is well placed to make targeted acquisitions of a size that would not lead to a significantly geared balance sheet; an approach that the Board feels is prudent given the current economic climate. Prospects The Group has managed its fundamentals well in the last year, showing solid growth and improved profits margins. Unlike most others in the marketing services sector it was also cash positive having ended the year with Â£3.4m on its balance sheet. Given the current climate, the Group will continue to take a conservative approach to running the business and focus heavily on the three Cs of customers, cost base and cash. As things stand the Group is still experiencing good trading conditions but it seems prudent to manage the business in a way that reflects the general uncertainty that surrounds the current economy. In the first two months of the current financial year, the Group has maintained its momentum and the Board remains optimistic about the prospects for the year. IFRS impact These results for the full-year are the first reported under adopted International Financial Reporting Standards (IFRS). Under IAS 39 Financial Instruments: Recognition and Measurement we are required to report the value of the financial instruments we use to protect the Group from rising interest rates and weaker currencies, at fair market value. This effectively means that we are obliged to record in the Income Statement all the movement in the market value of these longer-term protection measures which have occurred during the year. In 2007, we took out five-year interest rate protection on the dollar denominated loan used to finance the acquisition of OutCast. We also have an ongoing programme of currency protection to mitigate the impact on reported sterling results of any weakening of the US Dollar and the Euro. The impact of reporting the value of financial instruments at their fair value was minimal in the comparative period. However, in the year-ended 31 July 2008 we experienced a dramatic reduction in US borrowing costs in response to the credit crisis, as well as a similarly dramatic strengthening of the Euro over the same period, which resulted in a Â£754k reduction in the fair value of the financial protection instruments we hold. There is no immediate cash impact of this movement in fair value but the negative fair value will unwind as the underlying contracts are realised and settled in cash. A consequence of moving to IAS 39 is that the Company's reported pre-tax profits will reflect the movements in the fair value of the Group's financial protection measures between balance sheet dates and will be more difficult to predict. For this reason we have decided to adjust for this item in the underlying measure of profits and earnings that we present, to give a better understanding of the performance of the Group (see note 3). The other key impacts of the adoption of IFRS are explained in note 10 to this Preliminary Announcement. NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 JULY 2008 -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Note Â£'000 Â£'000 Â£'000 Â£'000 Billings 73,916 69,422 =========================================================================================== Revenue 2 63,107 59,268 Staff costs 42,455 39,963 Depreciation 1,203 1,421 Amortisation 113 44 Reorganisation costs - 295 Other operating charges 12,630 11,852 ---------- ---------- Total operating charges (56,401) (53,575) ------------- -------------- Operating profit 6,706 5,693 ------------- -------------- Finance expense (1,481) (769) Finance income 174 142 ------------- -------------- Net finance expense 6 (1,307) (627) ------------- -------------- Share of profit of equity accounted associates 117 56 ------------- -------------- Profit before income tax 2,3 5,516 5,122 Income tax expense 4 (1,655) (1,781) ------------- -------------- Profit for the period 3,861 3,341 ============= ============== Attributable to: Equity holders of the parent 3,663 3,100 Minority interest 198 241 ------------- -------------- 3,861 3,341 ============= ============== Earnings per share 7 Basic (pence) 7.08 6.33 Diluted (pence) 6.99 6.23 *T NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 JULY 2008 -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Â£'000 Â£'000 Foreign currency translation differences for foreign operations 15 (206) Translation differences on long-term foreign currency inter-company loans 28 (124) -------------- ----------- Income and expense recognised directly in equity 43 (330) Profit for the period 3,861 3,341 -------------- ----------- Total recognised income and expense for the period 3,904 3,011 -------------- ----------- Attributable to: Equity holders of the Company 3,706 2,770 Minority interest 198 241 -------------- ----------- Total recognised income and expense for the period 3,904 3,011 -------------- ----------- *T NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 31 JULY 2008 -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Note Â£'000 Â£'000 Â£'000 Â£'000 Assets Property, plant and equipment 2,435 2,162 Intangible assets 15,462 13,507 Investments in equity accounted associates 190 124 Deferred tax asset 1,468 2,252 Other receivables 651 397 -------- -------- Total non-current assets 20,206 18,442 Trade and other receivables 15,720 14,991 Cash and cash equivalents 9,525 5,834 Corporation tax asset 701 - Derivative financial assets - 69 -------- -------- Total current assets 25,946 20,894 -------- --------- Total assets 2 46,152 39,336 -------- --------- Liabilities Loans and borrowings 5,315 5,170 Deferred tax liabilities 32 95 Other payables 385 20 Deferred consideration 139 1,662 Share purchase obligation 10(e) - 1,737 -------- -------- Total non-current liabilities (5,871) (8,684) Loans and borrowings - 320 Trade and other payables 14,914 13,229 Corporation tax liability 677 29 Deferred consideration 2,630 766 Derivative financial liabilities 685 - Share purchase obligation 10(e) 1,737 1,326 -------- -------- Total current liabilities (20,643) (15,670) -------- --------- Total liabilities (26,514) (24,354) -------- --------- TOTAL NET ASSETS 19,638 14,982 ======== ========= Equity Share capital 1,354 1,334 Share premium reserve 5,157 5,157 Merger reserve 2,659 2,160 Share purchase reserve 10(e) (1,380) (2,890) Foreign currency translation reserve (191) (206) Investment in own shares (663) (681) Treasury shares (504) - Retained earnings 12,960 9,910 -------- --------- Total equity attributable to equity holders of the Company 9 19,392 14,784 Minority interests 246 198 -------- --------- TOTAL EQUITY 19,638 14,982 ======== ========= *T NEXT FIFTEEN COMMUNICATIONS GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 JULY 2008 -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Â£'000 Â£'000 Â£'000 Â£'000 Cash flows from operating activities Profit for the period 3,861 3,341 Adjustments for: Depreciation 1,203 1,421 Amortisation 113 44 Finance income (174) (142) Finance expense 1,481 769 Share of profit from equity accounted associates (117) (56) Loss on sale of property, plant and equipment 2 151 Income tax expense 1,655 1,781 Share based payments 237 262 --------- ----------- Net cash inflow from operating activities before changes in working capital 8,261 7,571 Change in trade and other receivables (1,417) (2,294) Change in trade and other payables 2,755 1,926 --------- ----------- 1,338 (368) ------------- ----------- Net cash generated from operations 9,599 7,203 Income taxes paid (1,090) (1,992) ------------- ----------- Net cash from operating activities 8,509 5,211 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (829) (1,959) Acquisition of property, plant and equipment (1,591) (643) Acquisition of intangible assets (329) (525) Payments for long-term cash deposits (233) (78) Interest received 174 113 --------- ----------- Net cash outflow from investing activities (2,808) (3,092) ------------- ----------- Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Â£'000 Â£'000 Â£'000 Â£'000 Cash flows from financing activities Proceeds from sale of own shares 64 953 Acquisition of own shares (504) - Proceeds from bank borrowings - 539 Repayment of bank borrowings (337) - Capital element of finance lease rental repayment (217) (299) Interest paid (414) (424) Dividends paid to holders of the parent (807) (691) --------- ----------- Net cash (outflow)/inflow from financing activities (2,215) 78 ------------- ----------- Net increase in cash and cash equivalents 3,486 2,197 Cash and cash equivalents at beginning of the period 5,834 3,791 Exchange gains/(losses) on cash held 205 (154) ------------- ----------- Cash and cash equivalents at end of period 9,525 5,834 ------------- ----------- *T NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 1) ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. A. Basis of Preparation The financial information in this announcement does not constitute the Group's statutory accounts for the years ended 31 July 2008 or 31 July 2007. The financial information for the year ended 31 July 2007 is derived from the statutory accounts for that year, which were prepared under UK GAAP, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, Section 237(2) or (3). The statutory accounts for the year ended 31 July 2008, prepared in accordance with IFRSs as adopted by the EU, will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's annual general meeting. The AIM rules require that the annual consolidated financial statements of the Group for the year ending 31 July 2008 be prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('adopted IFRS'). The Group's consolidated financial statements were prepared in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP) until 31 July 2007. UK GAAP differs in some areas from adopted IFRS. In preparing the 2008 consolidated financial statements, management has amended certain accounting methods applied under UK GAAP financial statements to comply with adopted IFRS. B. Transitional provisions of IFRS accounting policies An explanation of how the transition to adopted IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in note 10. The Group's date of transition to adopted IFRS is 1 August 2006. IFRS 1 First-time Adoption of International Financial Reporting Standards sets out the procedures that the Group has followed as the basis for preparing its 2008 consolidated financial statements under IFRS. The Group was required to establish its IFRS accounting policies as at 31 July 2008 and, in general, apply these retrospectively to determine the IFRS balance sheet at the date of transition. The standard provides a number of optional exemptions to this general principal. The most significant of these are set out below, together with the description in each case of the exemptions adopted by the Group. i) Business combinations that occurred before the transition date (IFRS 3 Business Combinations) The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before the date of transition. As a result, in the transition balance sheet, goodwill arising on past business combinations remains as stated under UK GAAP as at 31 July 2006. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, goodwill arising on the acquisition of foreign subsidiaries is treated as a monetary asset and restated using exchange rates prevailing at each balance sheet date. This treatment is the same as that applied under UK GAAP with the exception that under adopted IFRS, all translation differences be transferred to a separate foreign currency translation reserve within equity. In the 2008 Interim Report, the Group had taken advantage of the exemption allowed by IAS 1 Presentation of Financial Statements (Exemption iii), and treated the goodwill on foreign subsidiaries acquired prior to 1 August 2006 as a sterling item, using exchange rates applied at that date. The Group has elected to no longer apply this exemption, and this change in accounting treatment has required a restatement of the comparative goodwill and foreign currency translation reserve reported at 31 January 2008 within the Interim Accounts. ii) Fair value or revaluation at deemed cost (IAS 16 Property and Equipment) The option to restate items of property, plant and equipment to their fair value at the transition date has not been taken by the Group. For all items, the Group has elected to take their carrying value as shown previously under UK GAAP as their deemed cost. iii) Foreign currency translation reserve (IAS 21 The Effects of Changes in Foreign Exchange) For accounting periods beginning on or after the transition date, IFRS requires amounts taken to reserves on the translation of foreign subsidiaries, associates and branches to be recorded in a separate foreign currency translation reserve and to be included in the future calculation of profit or loss on disposal of the subsidiary, associate or branch. The foreign currency translation reserve was set at zero at the transition date. C. Basis of consolidation The Group's financial information consolidates the financial information of Next Fifteen Communications Group plc and all of its subsidiary undertakings using the acquisition method of accounting. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. Business combinations that took place prior to the transition date have not been restated. Inter-company transactions, balances and unrealised gains on transactions between Group companies (Next Fifteen Communications Group plc and its subsidiaries) are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies for subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. D. Merger reserve Where the conditions set out in Section 131 of the Companies Act 1985 are met, shares issued as part of the consideration in a business combination are recorded at their fair value in the consolidated balance sheet, and the difference between the nominal value and fair value of the shares issued is recognised in the merger reserve. E. Associates Where the Group has the power to exercise significant influence over (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated balance sheet at cost. The Group's share of post-acquisition profits and losses is recognised in the consolidated income statement, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses. Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's unrealised profits and losses resulting from these transactions is eliminated against the carrying value of the associate. Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate and subject to impairment in the same way as goodwill arising on acquisitions described below. F. Revenue Billings represents amounts receivable from clients, exclusive of sales taxes, in respect of charges for fees, commission and rechargeable expenses incurred on behalf of clients. Revenue is billings less amounts payable on behalf of clients to external suppliers where they are retained to perform part of a specific client project or service, and represents fees, commissions and mark-ups on rechargeable expenses. Revenue is recognised on the following basis: -- Retainer and other non-retainer fees are recognised as the services are performed. -- Project fees are recognised on a percentage completion basis. -- Expenses are recharged to clients at cost plus an agreed mark-up when the services are performed. G. Intangible assets Goodwill Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated income statement. Computer Software Licenses for software that are not integral to the functioning of a computer are capitalised as intangible assets. Costs that are directly associated with the production of identifiable and unique software products controlled by the Company, and that are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development employee costs. Included within software are assets in the course of construction which comprise payments on account in respect of software licenses and consultancy fees relating to the construction of a new IT system which is not yet operational in the business. Only the incremental costs which are directly attributable to the asset in the course of construction are capitalised. Amortisation is provided on software at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life. No amortisation is charged on assets in the course of construction until they are available for operational use in the business. Capitalised computer software that is not an asset in the course of construction is amortised over its useful economic life of 5 years. Costs associated with maintaining computer software programmes are recognised as an expense as incurred. H. Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation. Depreciation is provided on all property, plant and equipment at annual rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life as follows: -0- *T Leasehold premises - Over the term of the lease, or until the first break clause . Office equipment - 20%-50% per annum straight line. Office furniture - 20% per annum straight line. Motor vehicles - 25% per annum straight line. *T I. Impairment Impairment tests on goodwill are undertaken annually at the financial year end. Other non-financial assets (including investments in associates but excluding deferred tax) are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is measured as the higher of value in use and fair value less costs to sell, the asset is impaired accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit defined as the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows. Goodwill is allocated on initial recognition to each of the group's cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in the other operating charges line item in the consolidated income statement, except to the extent they reverse gains previously recognised in the consolidated statement of recognised income and expense. An impairment loss recognised for goodwill is not reversed. J. Foreign currency Transactions entered into by group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the exchange rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the exchange rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the consolidated income statement. On consolidation, the results of overseas operations are translated into sterling at the average exchange rates for the accounting period. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the exchange rates ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rates and the results of overseas operations at actual rates are recognised directly in the foreign currency translation reserve within equity. On disposal of a foreign operation, the cumulative translation differences recognised in the foreign currency translation reserve relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal. In accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards, cumulative translation differences at the date of transition to IFRS are deemed to be zero (see note B iii) within this accounting policies section) and the gain or loss on a subsequent disposal of those foreign operations would exclude the differences that arose before the date of transition. K. Segment reporting A business segment is a distinguishable component of the group that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. -0- *T Primary segment: The Group has one business segment being the provision of public relations services. A second business segment, being research, is not large enough to require segmental disclose. Secondary segments: The Group operates in four geographical segments being the UK, Europe, the Middle East and Africa, North America and Asia Pacific. *T L. Financial instruments Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the asset or liability. The Group's accounting policies for different types of financial asset and liability are described below. Trade receivables Trade receivables are initially recognised at fair value and will subsequently be measured at amortised cost less allowances for impairment. An allowance for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows and is recognised as an expense in the consolidated income statement. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and short-term call deposits held with banks. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated balance sheet. Derivative financial instruments Derivative instruments utilised by the Group are cap and collar interest rate and foreign exchange contracts. Derivative financial instruments are initially recognised at fair value at the contract date and continue to be stated at fair value at the balance sheet date with gains and losses on revaluation being recognised immediately in the consolidated income statement. Bank borrowings Interest-bearing bank loans and overdrafts are recognised at their fair value net of direct issue costs and, thereafter, at amortised cost. Finance costs are charged to the consolidated income statement over the term of the debt so that the amount charged is at a constant rate on the carrying amount. Finance costs include issue costs which are initially recognised as a reduction in the proceeds of the associated capital instrument and unwound over the term of the debt. Share purchase obligation Liabilities in respect of put option agreements that allow the Group's equity partners to require the Group to purchase the minority interest are treated as derivatives over equity instruments and are recorded in the balance sheet at fair value. The fair value of such put options is re-measured at each period end. The movement in fair value is recognised in the income statement. The Group recognises its best estimate of the amount it is likely to pay, should these options be exercised by the minority interests, as a liability in the balance sheet. When the initial fair value of the liability in respect of the put option is created the corresponding debit is included in the share purchase reserve. Trade payables Trade payables are initially recognised at fair value and, thereafter, at amortised cost. M. Retirement benefits Pension costs, which relate to payments made by the Company to employees' own defined contribution pension plans are charged to the profit and loss account as incurred. N. Share-based payments The Group issues equity-settled share-based payments to certain employees. The share-based payments are measured at fair value at the date of the grant and expensed on a straight line basis over the vesting period. The cumulative expense is adjusted for failure to achieve non-market vesting conditions. 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 at 1 August 2006. There are equity instruments granted prior to 7 November 2002 which remain outstanding at 31 July 2008 for which no expense has been recognised. Fair value is measured by use of a Black Scholes model on the grounds that there are no market related vesting conditions. 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. O. Leased assets Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased asset and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated income statement over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership are not transferred to the group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated income statement on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction to the rental expense over the lease term on a straight-line basis. The land and buildings elements of property leases are considered separately for the purposes of lease classification. P. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on: â€¢ the initial recognition of goodwill; â€¢ the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and â€¢ investments in subsidiaries and jointly controlled entities where the group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the asset can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: â€¢ the same taxable group company; or â€¢ different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Q. Dividends Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting. R. Employee Share Ownership Plan (ESOP) As the Group is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purposes of the Group accounts. The ESOP's assets (other than investments in the company's shares), liabilities, income and expenses are included on a line-by-line basis in the Group financial statements. The ESOP's investment in the Company's shares is deducted from equity in the consolidated balance sheet as if they were treasury shares and presented in the investment in own shares reserve. S. Treasury shares When the Group re-acquires its own equity instruments, those instruments (treasury shares) are deducted from equity. No gain or loss is recognised in the consolidated income statement on the purchase, sale, issue or cancellation of the Group's treasury shares. Such treasury shares may be acquired and held by other members of the Group. Consideration paid or received is recognised directly in equity. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 2) SEGMENT INFORMATION Primary reporting format - business segments The Group operates in one business segment, being the provision of public relations services. A second business segment, being research, is not large enough to require segmental disclosure. Secondary reporting format - geographical segments The Group's operations are based in four main geographical areas. The UK is the home country of the Parent Company. -0- *T Profit Adjusted before profit Total Capital Revenue income before assets expenditure tax income tax(Â²) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Year ended 31 July 2008 (Unaudited) UK 18,787 2,336 2,520 13,096 775 EMEA(Â¹) 10,074 1,164 1,164 4,085 52 North America 27,522 5,576 5,704 16,186 559 Asia Pacific 6,724 667 667 4,262 366 Head Office - (4,227) (3,473) 8,523 349 -------------------------------------------------------- 63,107 5,516 6,582 46,152 2,101 ======================================================== Year ended 31 July 2007 (Unaudited) UK 18,443 2,349 2,493 9,048 280 EMEA(Â¹) 8,567 609 609 3,128 69 North America 25,922 3,966 4,136 15,722 236 Asia Pacific 6,336 611 611 3,409 487 Head Office - (2,413) (2,269) 8,029 538 -------------------------------------------------------- 59,268 5,122 5,580 39,336 1,610 ======================================================== *T (Â¹) EMEA means Europe (excluding the UK), Middle East and Africa. (Â²) Adjusted profit before income tax has been reached by adjusting profit before income tax for movements in fair value of financial instruments and the unwinding of the discount on deferred consideration and share purchase obligation. See note 3 Reconciliation of pro-forma financial measures. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 3) RECONCILIATION OF PRO-FORMA FINANCIAL MEASURES -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Â£'000 Â£'000 Profit before income tax 5,516 5,122 Movement in fair value of financial instruments(Â¹) 754 (29) Reorganisation costs - 295 Unwinding of discount on deferred consideration(Â²) 128 170 Unwinding of discount on share purchase obligation(Â³) 184 173 Profit on sale of division - (151) ------------------- ------------------- Adjusted profit before income tax 6,582 5,580 =================== =================== *T Adjusted profit before income tax has been presented to provide additional information which may be useful to the reader. (Â¹) See note 6 (2) As required by IAS39 Financial Instruments, an interest charge of Â£128,000 has been recognised during the period in relation to the deferred consideration payable for OutCast Communications. (Â³) As required by IAS39 Financial Instruments: Recognition and Measurement, an interest charge of Â£184,000 has been recognised during the period in relation to the unwinding of the discount on the share purchase obligation for Lexis Public Relations Limited. 4) INCOME TAX EXPENSE The tax charge is based on the effective tax rate of 30% for the year. 5) DIVIDEND A final dividend of 1.25p per share (2007: 1.1p) has been proposed. This has not been accrued in accordance with IAS10 Events after the Balance Sheet Date. The interim dividend was 0.45p per share (2007: 0.40p), making a total for the year of 1.70p per share (2007: 1.50p). The final dividend, if approved at the AGM on 27 January 2009, will be paid on 6 February 2009 to all shareholders on the Register of Members on 9 January 2009. The ex-dividend date for the shares is 7 January 2009. 6) FINANCE EXPENSE The net finance expense of Â£1,307,000 (2007: Â£627,000), includes a charge of Â£754,000 (2007: gain of Â£29,000) on financial instruments reflecting the movement in the fair value since 31 July 2007. These financial instruments comprise of financial products used for hedging interest rate risk on long term debt and currency exposure on USD and EUR. Also included within finance expense is a charge of Â£312,000 for the period (2007: Â£343,000) relating to the unwinding of the discount on the deferred consideration of OutCast Communications and share purchase obligation of Lexis Public Relations Limited. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 7) EARNINGS PER SHARE -0- *T Year ended Year ended 31 July 2008 31 July 2007 (Unaudited) (Unaudited) Â£'000 Â£'000 Earnings attributable to ordinary shareholders 3,663 3,100 Reorganisation costs after taxation - 207 Unwinding of discount on deferred consideration after tax 80 112 Unwinding of discount on share purchase obligation 184 173 Profit on sale of division after taxation - (106) Movement in fair value of financial instruments after tax 532 (14) --------------------- --------------------- Adjusted earnings attributable to ordinary shareholders 4,459 3,472 ===================== ===================== Number Number Weighted average number of ordinary shares 51,737,491 48,954,264 Dilutive shares 652,320 819,624 --------------------- --------------------- Diluted weighted average number of ordinary shares 52,389,811 49,773,888 --------------------- --------------------- Basic earnings per share 7.08p 6.33p Diluted earnings per share 6.99p 6.23p Adjusted earnings per share 8.62p 7.09p Diluted adjusted earnings per share 8.51p 6.98p *T The adjusted earnings per share is the performance measure used for the vesting of employee share options and performance shares. 8) ACQUISITIONS 1. On 31 October 2007, the Company paid Â£977,000 ($2,030,000) relating to the deferred consideration for the purchase of OutCast Communications Limited ("OutCast"). Â£791,000 ($1,644,000) of the Â£977,000 was settled in cash and the remainder in shares. OutCast is a wholly owned subsidiary acquired in June 2005. 2. On 31 October 2007, the Company acquired a further 0.6% stake in the UK public relations company Lexis Public Relations Limited ("Lexis") by the purchase of a 0.6% stake in Panther Communications Group Limited ("Panther"), the parent company of Lexis. The stake was acquired for a total consideration of Â£51,000 of which Â£38,000 was satisfied in cash and the remainder in shares, taking the Company's total stake to 76.6%. 3. On 31 March 2008, the Company acquired a further 10.55% stake in Lexis by the purchase of a 10.55% stake in Panther, the parent company of Lexis. An initial payment in shares of Â£314,000 was made on the transaction date with the remainder to be satisfied in cash during the year ended 31 July 2009. This takes the Company's total stake to 87.15%. The Company is contracted to acquire the whole of Panther and Panther's existing management has agreed to sell further stakes in the company over the next 12 months. NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 9) RECONCILIATION OF MOVEMENT IN RESERVES -0- *T Called Share Merger Share Foreign ESOP Treasury Retained Equity up premium reserve purchase currency reserve shares earnings attributable share account reserve translation to capital reserve shareholders of the Company Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 August 2007 1,334 5,157 2,160 (2,890) (206) (681) - 9,910 14,784 ------------- Profit attributable to shareholders - - - - - - - 3,663 3,663 ------------- Dividends - - - - - - - (807) (807) ------------- Shares issued on acquisitions 20 - 499 - - - - - 519 ------------- Movement in share purchase obligation - - - 1,510 - - - - 1,510 ------------- Credit in relation to share- based payments - - - - - - - 237 237 ------------- Deferred tax on share -based payments - - - - - - - (117) (117) ------------- Translation differences on foreign currency net investments - - - - 15 - - - 15 ------------- Movement due to ESOP share option exercises - - - - - 18 - 46 64 ------------- Purchase of own shares - - - - - - (504) - (504) ------------- Translation differences on long-term inter- company loans - - - - - - - 28 28 --------------------------------------------------------------------------------------------- At 31 July 2008 1,354 5,157 2,659 (1,380) (191) (663) (504) 12,960 19,392 ============================================================================================= *T NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY 2008 10) TRANSITION TO ADOPTED IFRS As stated in note 1, the financial information has been prepared on the basis of the recognition and measurement requirements of adopted IFRS. The accounting policies set out in note 1 have been applied (subject to IFRS 1 exemptions taken) in preparing the financial statements for the year ended 31 July 2008, the comparative information presented for the year ended 31 July 2007 and the preparation of the opening IFRS balance sheet at 1 August 2006 (the Group's transition date). The changes in accounting policies as a consequence of the transition to adopted IFRS and the reconciliations of the effects of the transition to adopted IFRS on the Group's financial statements are presented below. Only the presentation of the cashflow statement has changed as a result of the adoption of IFRS. The transition to adopted IFRS resulted in the following changes in accounting policies: a) Goodwill The change to adopted IFRS means that goodwill is no longer amortised but is tested for impairment annually or when external factors indicate that it may be impaired. The carrying value of goodwill was tested for impairment at the date of transition and as at 31 July 2007 and 31 July 2008. No impairment was required, therefore the amortisation charge for the year ended 31 July 2007 of Â£826,000 has been fully reversed under IFRS and the carrying value of goodwill as at the transition date remains the same as under UK GAAP in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards. b) Short-term Compensated Absences In accordance with IAS 19 Employee Benefits, the Group must recognise the expected cost of short-term employee benefits in the form of compensated absences, including contractual vacation and sick leave allowances. Accumulated unused allowances accrued at the transition date and at 31 July 2007 were Â£1,148,000 and Â£1,181,000 respectively, resulting in an additional expense for the year ended 31 July 2007 of Â£33,000. c) Financial Instruments As at 31 July 2007 the Group held a reset cap and collar interest rate contract and forward exchange contracts with a fair value of Â£69,000 (Â£40,000 as at 1 August 2006). These contracts meet the IAS 39 Financial Instruments: Recognition and Measurement definition of a derivative, falling into the category of a "financial asset at fair value through profit or loss". Therefore, in compliance with IAS 39, the fair value of these contracts is recognised on the balance sheet at each post transition reporting date, with corresponding finance income in the consolidated income statement for the year ended 31 July 2007 of Â£29,000. The fair value liability and finance expense carried in the balance sheet and consolidated income statement for the year ended 31 July 2008 is Â£685,000 and Â£754,000 respectively. Of the total finance expense, Â£202,000 relates to a USD interest rate hedge on borrowings used to finance the acquisition of OutCast Communications, Â£42,000 to USD foreign exchange hedging and Â£441,000 to EUR foreign exchange hedging. The negative fair value on these financial instruments has resulted from USD interest rate reductions and both EUR and USD foreign exchange strengthening during the year ended 31 July 2008. d) Income Tax IAS 12 looks at 'temporary differences' between tax and book values for deferred tax whereas UK GAAP assesses 'permanent' and 'timing differences' reversing in future periods. The impact on the consolidated income statement and consolidated balance sheet arises in relation to share-based payments. As a result, a deferred tax asset of Â£210,000 was recognised as at 31 July 2007 (Â£78,000 at the transition date) with the corresponding credit recognised partially in the income statement and partially in equity. e) Contingent Consideration and Share Purchase Obligations Under IAS 32 Financial Instruments: Presentation, own shares issued in return for another financial asset should be classified as a liability rather than within shareholders' equity. As at 31 July 2007 the Group had a balance of Â£190,000 of shares to be issued as contingent consideration for the acquisition of OutCast Communications. This balance has been presented as a liability resulting in a reduction in equity of Â£190,000. Under IAS 32 Financial Instruments Presentation and IAS 39 Financial Instruments: Recognition and Measurement, share purchase obligations must be recognised as a liability at fair value. The obligation to acquire the remaining shares in Lexis Public Relations Limited ("Lexis") is recorded, on transition, at the discounted expected settlement amount of Â£4,961,000 and a corresponding share purchase reserve is recognised within equity. At each balance sheet date, the remaining liability is re-valued to its discounted expected settlement amount. Any changes in the carrying value of the liability will be recognised in the consolidated income statement and an interest charge is recognised within finance expense in each period in relation to the unwinding of the discount rate on the share purchase obligation. During the year ended 31 July 2007 the Company acquired a further 25% stake in Lexis by the acquisition of a 25% stake in the Panther Communications Group Limited ("Panther"), the parent company of Lexis. The share purchase obligation was reduced by the consideration of Â£2,071,000 with a corresponding decrease in the share purchase reserve. The interest charge for the period ending 31 July 2007 was Â£173,000 thus the share purchase liability as at 31 July 2007 was Â£3,063,000. During the year ended 31 July 2008 the liability was reduced by the consideration of Â£1,510,000 for the purchase of a further 11.15% stake in Lexis, with a corresponding decrease in the share purchase reserve. The interest charge for the period was Â£184,000. As at 31 July 2008 the share purchase obligation is Â£1,737,000. f) Software Under IAS 38 Intangible Assets, certain computer software must be classified as an intangible asset. Consequently, Â£829,000 as at 31 July 2007 (Â£298,000 as at the transition date) has been reclassified from property, plant and equipment to intangible assets. Â£44,000 of amortisation on software is reclassified from depreciation to amortisation within the consolidated income statement for the year ending 31 July 2008. g) Share-based payments Previously the company maintained a separate reserve within equity for share based payments under UK GAAP. For the sake of simplicity under adopted IFRS the Group has included within retained earnings Â£491,000 as at 31 July 2007 (Â£229,000 as at the transition date) which was previously presented as the share-based payments reserve. h) Foreign currency translation In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, goodwill arising on the acquisition of foreign subsidiaries is treated as a monetary asset and restated using exchange rates prevailing at each balance sheet date. This treatment is the same as that applied under UK GAAP with the exception that under adopted IFRS, all translation differences be transferred to a separate foreign currency translation reserve within equity. In the 2008 Interim Report, the Group had taken advantage of the exemption allowed by IAS 1 Presentation of Financial Statements (Exemptions iii), and treated the goodwill on foreign subsidiaries acquired prior to 1 August 2006 as a sterling item, using exchange rates applied at that date. The Group has elected to no longer apply this exemption, and this change in accounting treatment has required a restatement of the comparative goodwill and foreign currency translation reserve reported at 31 January 2008. In accordance with IAS 21, exchange differences resulting from the translation of foreign subsidiaries in the consolidated balance sheet must be presented as a separate reserve within shareholders' equity. As a result the Group has reclassified Â£206,000 as at 31 July 2007 (Â£nil as at the transition date) from retained earnings to the foreign currency translation reserve. i) Finance lease obligation Under UK GAAP finance lease obligations were classified as loans and borrowing. Under adopted IFRS the Group include within other payables. As a result the Group has reclassified Â£20,000 as at 31 July to non-current other payables and Â£392,000 to current trade and other payables. An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position and financial performance is set out in the tables below and the notes that accompany the tables. There are no material adjustments to the cash flow statement in any of the periods presented. Reconciliation of profit for the year ended 31 July 2007 (end of last period presented under UK GAAP) -0- *T UK GAAP IFRS 3 IAS 38 IAS 19 IAS 39 IAS 12 IAS IFRS 32/39 Period Period ended 31 ended 31 July 07 July 07 10(a) 10(f) 10(b) 10(c) 10(d) 10(e) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Billings 69,422 - - - - - - 69,422 ======================================================================================================== Revenue 59,268 - - - - - - 59,268 Staff costs 39,930 - - 33 - - - 39,963 Depreciation 1,465 - (44) - - - - 1,421 Amortisation and amounts written off intangible assets 826 (826) 44 - - - - 44 Reorganisation costs 295 - - - - - - 295 Other operating charges 11,852 - - - - - - 11,852 -------------------------------------------------------------------------- Total operating charges (54,368) 826 - (33) - - - (53,575) -------------------------------------------------------------------------- Operating profit 4,900 826 - (33) - - - 5,693 -------------------------------------------------------------------------- Finance expense (596) - - - - - (173) (769) Finance income 113 - - - 29 - - 142 -------------------------------------------------------------------------- Net finance expense (483) - - - 29 - (173) (627) -------------------------------------------------------------------------- Share of profit of equity accounted associates 56 - - - - - - 56 -------------------------------------------------------------------------- Profit before income tax 4,473 826 - (33) 29 - (173) 5,122 Income tax expense (1,746) (74) - 99 (9) (51) - (1,781) -------------------------------------------------------------------------- Profit for the period 2,727 752 - 66 20 (51) (173) 3,341 ========================================================================== Attributable to: Equity holders of the parent 2,486 752 - 66 20 (51) (173) 3,100 Minority interest 241 - - - - - - 241 -------------------------------------------------------------------------- 2,727 752 - 66 20 (51) (173) 3,341 ========================================================================== Earnings per share Basic (pence) 5.08 6.33 Diluted (pence) 4.99 6.23 *T Reconciliation of equity for the year ended 31 July 2007 (end of last period presented under UK GAAP) -0- *T UK GAAP Reclass IFRS 3 IAS 19 IAS 39 IAS 12 IAS IFRS 32/39 Period Period ended 31 ended 31 July 07 July 07 10(f-,i) 10(a) 10(b) 10(c) 10 (d) 10(e) Assets Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Property, plant and equipment 2,991 (829) - - - - - 2,162 Intangible assets 11,871 829 807 - - - - 13,507 Investments in equity accounted associates 124 - - - - - - 124 Deferred tax asset 1,725 - - 317 - 210 - 2,252 Other receivables 397 - - - - - - 397 ---------------------------------------------------------------------------- Total non-current assets 17,108 - 807 317 - 210 - 18,442 ---------------------------------------------------------------------------- Trade and other receivables 14,991 - - - - - - 14,991 Cash and cash equivalents 5,834 - - - - - - 5,834 Current tax assets - - - - - - - - Derivative financial assets - - - - 69 - - 69 ---------------------------------------------------------------------------- Total current assets 20,825 - - - 69 - - 20,894 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Total assets 37,933 - 807 317 69 210 - 39,336 ============================================================================ Liabilities Loans and borrowings 5,190 (20) - - - - - 5,170 Deferred tax liability - - 74 - 21 - - 95 Other payables - 20 - - - - - 20 Deferred consideration 1,662 - - - - - - 1,662 Share purchase obligation - - - - - - 1,737 1,737 ---------------------------------------------------------------------------- Total non-current liabilities (6,852) - (74) - (21) - (1,737) (8,684) ---------------------------------------------------------------------------- Bank overdraft - - - - - - - - Loans and borrowings 712 (392) - - - - - 320 Trade and other payables 11,656 392 - 1,181 - - - 13,229 Corporation tax liability 29 - - - - - - 29 Deferred consideration 576 - - - - - 190 766 Share purchase obligation - - - - - - 1,326 1,326 ---------------------------------------------------------------------------- Total current liabilities (12,973) - - (1,181) - - (1,516) (15,670) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Total liabilities (19,825) - (74) (1,181) (21) - (3,253) (24,354) ---------------------------------------------------------------------------- TOTAL NET ASSETS 18,108 - 733 (864) 48 210 (3,253) 14,982 ============================================================================ Equity Share capital 1,334 - - - - - - 1,334 Share premium reserve 5,157 - - - - - - 5,157 Merger reserve 2,160 - - - - - - 2,160 Share purchase reserve - - - - - - (2,890) (2,890) Foreign currency translation reserve - (187) (19) - - - - (206) Share-based payment reserve 491 (491) - - - - - - Shares to be issued 190 - - - - - (190) - Investment in owns shares (681) - - - - - - (681) Retained earnings 9,259 678 752 (864) 48 210 (173) 9,910 ---------------------------------------------------------------------------- Total equity attributable to equity holders of the Company 17,910 - 733 (864) 48 210 (3,253) 14,784 Minority interests 198 - - - - - - 198 ---------------------------------------------------------------------------- TOTAL EQUITY 18,108 - 733 (864) 48 210 (3,253) 14,982 ============================================================================ *T -0- *T As at 1 August 2006 (date of transition) Effect of Under UK GAAP transition to Under IFRS IFRS Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Assets Property, plant and equipment 3,063 (298) 2,765 Intangible assets 11,188 298 11,486 Investments in equity accounted associates 92 - 92 Deferred tax asset 854 297 1,151 Other receivables 335 - 335 -------- -------- -------- Total non-current assets 15,532 297 15,829 Trade and other receivables 14,411 - 14,411 Cash and cash equivalents 4,018 - 4,018 Current tax assets 169 - 169 Derivative financial assets - 40 40 Total current assets 18,598 40 18,638 --------- --------- ---------- Total assets 34,130 337 34,467 ========= ========= ========== Liabilities Loans and borrowings 4,642 - 4,642 Deferred tax liabilities - 12 12 Deferred consideration 2,192 318 2,510 Share purchase obligation - 3,098 3,098 -------- -------- -------- Total non-current liabilities (6,834) (3,428) (10,262) Bank overdraft 227 - 227 Loans and borrowings 588 - 588 Trade and other payables 11,304 1,148 12,452 Corporation tax liability - - - Deferred consideration 435 240 675 Share purchase obligation - 1,863 1,863 -------- -------- -------- Total current liabilities (12,554) (3,251) (15,805) --------- --------- ---------- Total liabilities (19,388) (6,679) (26,067) --------- --------- ---------- TOTAL NET ASSETS 14,742 (6,342) 8,400 ========= ========= ========== Equity Share capital 1,303 - 1,303 Shares to be issued 558 (558) - Share premium reserve 5,157 - 5,157 Merger reserve 1,353 - 1,353 Share purchase reserve - (4,961) (4,961) Share-based payment reserve 229 (229) - Investment in own shares (1,487) - (1,487) Retained earnings 7,629 (594) 7,035 --------- --------- ---------- Total equity attributable to equity holders of the Company 14,742 (6,342) 8,400 Minority interests - - - --------- --------- ---------- TOTAL EQUITY 14,742 (6,342) 8,400 ========= ========= ========== *T

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