Preliminary Results

Thomson Intermedia PLC 25 April 2006 Thomson Intermedia plc Underlying pretax profits up 254% Thomson Intermedia, a leading provider of media intelligence, today announces its preliminary results for the year ended 31 January 2006 Group Financial Highlights â€¢ Turnover increased by 88% to Â£11.1m (2005: Â£5.9m) â€¢ Underlying pretax profit* increased by 254% to Â£2.2m (2005: Â£0.6m) â€¢ Adjusted earnings per share** increased by 178% to 7.15p (2005: 2.57p) â€¢ Gross sales increase by 30% to Â£12.3m (2005: Â£9.5m) â€¢ Deferred income up 68% to Â£4.7m (2005: Â£2.8m) Operational highlights â€¢ Acquisition of billetts, the UK market leader in media and marketing performance consultancy, in August 2005 for an initial consideration of Â£7.5m o Integration progressing well â€¢ 101 new group contracts secured and 32 upgraded â€¢ Exclusive long-term deals signed with top six regional media owners â€¢ Group renewal rate exceeds 90% *pre amortisation and share incentives ** pre amortisation, share incentives and deferred tax Sarah Jane Thomson, Joint Chief Executive Officer of Thomson Intermedia, said: 'The year to January 2006 has been one of the most exciting and dynamic for the Group, as we not only reported very strong organic growth but completed the strategically important acquisition of billetts in August 2005. These results prove the significant benefit of the billetts acquisition across all metrics despite the fact that both businesses largely traded independently during the billetts earn-out phase.' 'The focus now is to complete in May the full integration of the two businesses, products and personnel, in order to benefit from the combined strength of Thomson Intermedia's technology & data with billetts value-added media consultancy.' 'Next year will see the launch of unique products and we look forward to benefiting financially & operationally from our strengthening customer base as well as from a fully integrated Group in the UK.' 25 April 2006 Enquiries: Thomson Intermedia Sarah Jane Thomson, Joint Chief Executive Today 020 7457 2020 David Trendle, Finance Director Thereafter 020 8466 2906 College Hill Adrian Duffield/Ben Way 020 7457 2815/2055 Financial Results Group turnover in the year to 31 January 2006 increased by 88% to Â£11.1m (2005: Â£5.9m), of which billetts contributed Â£3.7m. The original Thomson Intermedia business showed strong organic revenue growth up 26% to Â£7.5m (2005: 5.9m), whilst billetts' revenue increased by 16% for the comparative five months in its 2005 financial year. Thomson Intermedia gross sales contracts grew by 26% to Â£8.1m (2005: Â£6.3m) including fees of Â£400,000 (2005: Â£233,000) from its German investment. New sales contracts continued at a strong pace, up 38%, to Â£3.4m (2004: Â£2.4m). Retrospective vouching continued its growth contributing Â£1.0m (2005: Â£0.4m). billetts billings (gross sales) were Â£4.3m for the five month period to January 2006, with Â£3.5m relating to subscription contracts and Â£0.8m to consultancy projects. The Group deferred income, secured on future contracts, increased by 68% to Â£4.7m (2005: Â£2.8m), Â£0.5m which relates to billetts contracts. Gross profit increased by 73% to Â£7.0m (2005: Â£4.1m), with billetts contributing Â£1.6m. The original Thomson Intermedia's gross margin continues to improve, up from 68.4% to 72.5%. billetts' gross margin improved to 43.5%. Overall Group margin was 63%. Underlying operating margins, before long term incentives and goodwill amortisation, increased sharply to 23.4%, for the original Thomson Intermedia business (2005: 10%) with billetts margin improving from 7% to 13%. The resultant Group operating margin was 20%. This improvement was aided by tight cost control resulting in single digit cost growth for both businesses. Underlying group pretax profit increased by 254% to Â£2.2m (2005: Â£0.6m), including a contribution of Â£0.4m from billetts. Group pretax profit was Â£1.8m (2005: Â£0.4m). Adjusted earnings per share improved by 178% to 7.15p from 2.57p. Basic earnings per share improved from 3.30p to 7.00p. The Group has a tax credit movement of Â£0.4m, with Â£3.8m of tax losses carried forward. A tax charge of Â£0.1m has arisen against billetts profits. The Board is not recommending a dividend in this financial year. In order to create distributable reserves and provide flexibility, if required, the Directors plan to apply to the courts to eliminate its cumulative losses against its share premium account. This will be put forward for shareholder approval at the AGM. The Board will review its dividend policy following this restructure. The Group is operationally cash generative with cash flow improving by 223% to Â£1.2m (2005: Â£0.4m). The Group has moved to a net debt position of Â£0.2m as part of the the acquisition of billetts was funded by cash. The initial consideration paid for billetts was Â£7.5m. The Group raised Â£4.5m in a vendor placing, with the balance being funded by 403,153 shares to the vendor and Â£3m of bank facilities. The Group has a maximum contingent consideration of Â£5.6m, payable in loan notes dependent on billetts' performance between 1 May 2005 and 30 April 2007. The Board estimate that the maximum earn-out of Â£3.9m will be payable based on the billetts' performance relating to year ending 30 April 2006. The performance of the US subsidiary, MPMA, is encouraging with a number of recent new business wins. Strategy Thomson Intermedia's vision to be the leading provider of advertising and media transparency and intelligence has been significantly advanced by the earnings enhancing acquisition of billetts. The enlarged Group will provide an invaluable and comprehensive turnkey solution to advertisers, delivered directly to the desktop supported by expert media consultants, to ensure they receive maximum benefit from every pound of their marketing spend. Thomson Intermedia is now capitalising on its proprietary technology and eight years of data to penetrate the UK market and expand its product reach. The combination of the Group's leading technology and scale of its dataset have created significant barriers to entry for any potential competitors. With the strength of billetts, the UK's leading media performance management consultancy, the enlarged Group is now placed at the hub of the advertising triangle (advertiser - agency - media owner). Thomson Intermedia will provide essential solutions to all three groups. The developed product suite will help advertisers throughout their whole communications cycle, ensuring and monitoring every pound of marketing spend is as effective as possible. The constituents of the cycle offered by the Group now include: â€¢ Agency Management: billetts consultancy services help advertisers to identify the best agency for their requirements, construct the most appropriate contract for their needs, and structure relevant incentivisation packages for the agency. â€¢ Planning & Insight: billetts consultants can help clients gain impartial advice on the best strategy for them, independently reviewing agencies proposals on levels of spend and which media routes to use. â€¢ Market Intelligence: Thomson Intermedia's systems provide the insight into the weight of competitor activity, the mix of communications channels being used, and the likely impact of the clients' messages in real time. â€¢ Verification: Thomson Intermedia's online vouching enables an instant audit of a client's ads having appeared â€¢ Performance & ROI: billetts' econometric capability coupled with Thomson Intermedia technology and data can provide unique and valuable insights into the effect of marketing spend. This is the final stage of the communications cycle, thereby completing the product circle. The Group can also extend its reach to advertisers targeting the top 5,000 with highly functional web-based systems, for the first time enabling media auditing and ROI analysis to be presented to this group via a Thomson Intermedia interface. The addition of the high value added consultancy, which billetts brings, will also enable deeper penetration within the existing customer base as well as cross selling opportunities for the full suite of products. The technological and database skills held by Thomson Intermedia will enable a more efficient and valuable service alongside the potential to be the independent supplier for all the marketing needs of the advertiser. The move into the publisher platform (details below) will allow the Group not only to cut costs and improve it's product; it will provide the backbone for numerous services to the media owners to assist them in reducing costs and improving efficiencies. It will also place the Group at the forefront of regional media in terms of intensity of data, cementing its position as the most accurate and technologically advanced provider of marketing information. Acquisition of billetts The acquisition of a value added media consulting was logical for the business as a complimentary area which enhanced Thomson Intermedia's position and further differentiated its service as the key provider of independent and transparent marketing information and knowledge. The acquisition was structured to include two tranches of contingent consideration based on the earnings performance of the billetts business in the first instance, and the earnings of its US subsidiary, MPMA, in the second instance. This was to accommodate the potential earnings growth of the developing marketing sciences and international revenue streams within the billetts business and the continued improvement in securing new revenue and moving further into profitability for MPMA, which is still in the early stages of the growth cycle in an emerging and transforming market in the US. As the Group approaches the end of the first period to 30 April 2006, the billetts business has continued to strengthen, not only winning more international work, but also gaining market share in the UK, securing work in new media and securing a healthy improvement in its marketing effectiveness brand (marketing sciences). Operational review (i) Thomson Intermedia Core business Thomson Intermedia has continued to develop the core subscription business. New contract activity was strong with 63 new contracts secured alongside a further 32 upgrades to existing contracts. Renewal rates continue to improve; up to 88% (2005: 83%), with the corporate renewal rate over 90%, whilst continuing to increase yields from existing clients. Average rates for new subscription business increased to Â£28,000 from Â£25,000. Publisher platform Thomson Intermedia has already signed exclusive contracts with the top six regional media owners to its publisher platform. This enables the media owners to gain efficiencies through an electronic vouching system directly accessible by the agencies. Using the Thomson Intermedia technology, over 1,000 publications are moving from a manual scanning process to electronic receipt of pdf and metadata. Thomson Intermedia will therefore significantly enhance its database to include the vast majority of the Â£3 billion regional advertising spend. Thomson Intermedia will also be able to expand its offering to media owners by providing the first ever electronic system which enables communication and analysis between media owners and agencies and will be used by most media agencies in the UK. System developments will include electronic approval, invoicing and sales ledger processes Retrospective Vouching Thomson Intermedia has continued to drive the importance of transparency and has won additional clients for whom Thomson Intermedia has identified errors.. The business model continues to be developed and will be integrated into the full proposition over time. Germany Having now completed a year, the German operation is improving its offering with more trend data. Operations are progressing well as they have benefited from the latest versions of Thomson Intermedia's systems, with sales continuing to improve. Recent wins include Sony and Unilever. The German operation expects to break even in early 2007 with increasing returns as revenue exceeds the relatively fixed cost base. The profit share agreement commences in 2007 when the royalties agreement lapses at the end of 2006. This is pleasing progress as it shows that the business is replicable in other countries and proves the requirement for the products in other territories. (ii) billetts billetts media consulting This division accounts for 78% of the billetts group's turnover and provides media performance monitoring for high spending advertisers. billetts media consulting has enhanced its position in the UK with further wins both from competitors and new business. In addition, the billetts brand has been broadening its international presence with numerous multi-national contracts which have grown to nearly 30% of billetts media consulting's revenue. billetts has developed a strong partnership network to assist this growth across Europe and more recently into Asia. A measure of the value and calibre of media consulting is demonstrated in its exceptionally high retention rate with the loss of only three subscription clients during the last nine months. billetts marketing services (ROI) This division accounts for 18% of the billetts group's turnover and provides consultancy focused on optimising marketing return on investment for advertisers through ad hoc consultancy projects. In the nine months to January 2006, 25 contracts were secured with an average value of Â£43,000. Revenue for this period shows a 21% increase on the previous year, which is consistent with the growing need and the enormous potential within the division. The division has grown its client base with a large number of clients providing recurring work and will be benefiting from developments providing ongoing solutions to clients. Media Performance Marketing America (MPMA) billetts 80% owned US subsidiary, MPMA, continues to gain traction in this emerging market, with revenue growth of circa 120% to $1.3m expected comparing the year ending 30 April 2006 to the previous year. With John Billett's main focus being MPMA from May 2006 along with the strengthening of the US based team, the signs for continued expansion are extremely positive. MPMA's clients collectively represent 7% of all US broadcast, cable and syndication advertising spend for 2005. Analysis shows that TV advertisers using MPMA services have on average enjoyed a 26% improvement in their media value in 2005 compared to 2003, providing their advertisers with unparalleled marketing efficiencies. The analysis identifies price ranges to be +/- 30% around the average. MPMA have completed a comprehensive review of its data to understand this differential including a review of upfront versus scatter markets, the quality of buying and the size of budget available. Integration & management During the second half of the year there have been a number of working groups set up to ensure a successful integration of the two businesses, both from a product point of view and importantly from a staff perspective. The main areas of focus have been: â€¢ Personnel and organisational changes into a new structure â€¢ Group strategy and vision â€¢ Development of billetts media audit product for new advertiser segments â€¢ Improvement of data provision to billetts â€¢ Development of Group products The IT developers have been working extremely hard applying technology to the billetts business which provides integrated databases across the Group business. They have developed an extremely powerful and impressive new online audit system planned to be launched in the summer. One of the significant benefits of the acquisition was the high calibre additional management resource which existed in billetts. The restructure maximises the potential of this resource within the Group to drive the integrated business forward. On 1 May 2006 the integration of all the non US businesses will be finally and fully implemented, which will include new key management Group roles for five of the billetts staff. Current trading and outlook The focus over the last six months, has been to integrate the businesses in order to capitalise on their combined influence and strengths. The integration has been progressing well, and following the UK earn out completion date of 30 April 2006, Thomson Intermedia will be moving ahead with an exciting joint development plan. The Group already enjoys a strong client base, with over 70 of the top 100 UK advertisers as ongoing clients. The Board looks forward to deepening these relationships and providing more products and services to these clients as well as driving penetration deeper into the additional 4,650 advertisers for whom it has data and systems, as well as agencies and media owners. The new structure will encourage both enhanced customer relationships and new business growth. With a dedicated resource on international expansion Thomson Intermedia aims to build on the lessons and experience of its German business and the opportunities that exist both in the US, as part of MPMA and billetts partners to identify and drive international expansion of the Group's products. The Board is confident that the enlarged Group is in a significant and strong position to continue its UK penetration, capitalise in the short to medium term on revenue synergies from the integration of the businesses and develop its international strategy to launch its scalable solution in other markets. The first quarter of the year has started well, in line with the Board's expectations, with a strong pipeline of business across the entire product suite. ------- Consolidated Profit and Loss Account for the year ended 31 January 2006 Note 2006 2006 2005 2005 Â£'000 Â£'000 Â£'000 Â£'000 Turnover - continuing operations 7,459 5,924 Turnover - acquisitions 3,677 - Total Turnover 2 11,136 5,924 Cost of sales - continuing operations (2,051) (1,870) Cost of sales - acquisitions (2,078) - Total cost of sales (4,129) (1,870) Gross profit - continuing operations 5,408 4,054 Gross profit - acquisitions 1,599 - Total Gross Profit 7,007 4,054 Overheads - continuing operations (3,676) (3,475) Long term incentives (229) (258) Overheads - acquisitions (1,345) - Administrative Expenses - continuing operations (3,905) (3,733) Administrative Expenses - acquisitions (1,345) - Total Administrative Expenses (5,250) (3,733) Operating profit - continuing operations 1,503 321 Operating profit - acquisitions 254 - Total Operating Profit 2 1,757 321 Interest receivable 49 39 Interest payable and other finance costs (55) - Profit on ordinary activities before taxation 1,751 360 Research and development tax credit - 114 UK Corporation tax on profits at 30% 5 (126) (6) Deferred tax 5 430 480 Taxation 5 304 588 Profit on ordinary activities after taxation 2,055 948 Minority Interest 10 - Retained profit for the year 2,065 948 Earnings per share, pence - basic 3 7.00 3.30 - diluted 3 6.67 3.14 All amounts relate to continuing activities and acquisitions as part of continuing operations All recognised gains and losses are shown other than Â£6k of foreign currency losses, which will be shown in the full statutory accounts within the Statement of Total Recognised Gains and Losses. Consolidated Balance Sheet as at 31 January 2006 Note 2006 2006 2005 2005 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Intangible fixed assets 11,054 31 Tangible fixed assets 706 518 Investments 122 - 11,882 549 Current assets Debtors: Due within one year 5,926 2,290 Debtors: Due after more than one year 1,235 2 Total Debtors 7,161 2,292 Deferred tax 910 480 Cash at bank and in hand 2,774 1,598 3,684 2,078 Total current assets 10,845 4,370 Creditors: amounts falling due within one year (2,479) (848) Net current assets 8,366 3,522 Total assets less current liabilities 20,248 4,071 Creditors: amounts falling due after one year (2,687) - Provisions for liabilities and charges 6 (4,119) - Accruals and deferred income (5,767) (3,535) 2 7,675 536 Capital and reserves Share capital 7,823 7,186 Share premium 8,869 5,064 Merger reserve (4,504) (5,250) Profit and loss account (4,405) (6,464) Shareholders' funds 7,783 536 Minority Interest 108 - 7,675 536 Consolidated Cash Flow Statement for the year ended 31 January 2006 Note 2006 2005 Â£'000 Â£'000 Net cash inflow from operating activities 7a 1,231 381 Returns on investments and servicing of finance 7b (28) 32 Taxation 7b (6) 251 Capital expenditure and financial investment 7b (264) (295) Acquisitions and disposals 7b (7,099) - Cash inflow before financing and management of liquid (6,166) 369 resources Management of liquid resources 7b (515) (91) Financing 7b 7,280 - INCREASE IN CASH IN THE YEAR 599 278 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 Â£'000 Â£'000 Increase in cash in the year 599 278 Cash inflow from increase in debt (2,937) - Cash outflow from change in liquid resources 515 91 Movement in net funds in the year (1,823) 369 Net funds at start of year 1,598 1,229 Net (Debt)/Funds at end of year 7c (225) 1,598 Notes to the Financial Statements for the year ended 31 January 2006 1. Accounting policies The financial statements have been prepared in accordance with applicable Accounting Standards under the historical cost convention. The principal accounting policies are: Acquisition method of accounting As per FRS 7 Fair Values in acquisition accounting, any subsidiary's identifiable net assets acquired will be attributed fair values reflecting conditions at the date of acquisition. Under the acquisition method the results of subsidiaries acquired are included from the effective date of acquisition. When the cost of acquisition exceeds the fair values attributable to the group's share of acquired net assets, the difference is treated as purchased goodwill. This is capitalised and amortised as per the group goodwill policy stated below. Future anticipated payments to vendors in respect of earn-outs are based on the directors best estimates of future obligations, which are dependent on the future performance of the interests acquired and assume the acquired company maintain/improve profits in line with directors estimates. When earn outs are to be settled by cash consideration, the fair value of the consideration is obtained by discounting to present value the amounts expected to be payable in the future. The discount rate used is that at which the group could obtain a similar amount of borrowing. The resulting interest charge is included within other finance costs adjacent to interest. Transactions and balances between subsidiary undertakings are eliminated. The results, assets and liabilities, including related goodwill, of overseas subsidiaries are translated into sterling at rates of exchange ruling at the balance sheet date. Exchange adjustments arising when the opening net assets and the profits for the year retained by an overseas subsidiary are translated into sterling, less exchange differences arising on related foreign currency borrowings, are taken directly to reserves and reported in the statement of total recognised gains and losses. Goodwill Goodwill is the difference between the cost of an acquired entity and the aggregate of the fair value of that entity's identifiable assets and liabilities. Positive goodwill is capitalised, classified as an asset on the balance sheet and amortised on a straight-line basis over its useful economic life. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. Acquisitions that entail significant market positions and which are of long-term strategic significance to the Company's operations are classified as strategic acquisitions, with goodwill amortised over 20 years. For acquisitions of complementary operations in markets where the Company is already established, the amortisation period for goodwill is between 5 and 10 years. 2. Turnover The turnover and operating profit for the year was derived from the Group's principal activities, which were carried out in the following regions: 2006 2005 U.K. Europe Rest of world U.S. Total U.K. Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 9,569 834 452 281 11,136 5,924 5,924 Operating profit 1,363 193 239 (38) 1,757 321 321 Net assets 7,979 - - (304) 7,675 536 536 The segmentation is based on origination, which is not materially different from destination. 3. Earnings per share 2006 2005 Â£'000 Weighted Earnings per Â£'000 Weighted Earnings average number share pence average per share of shares number of pence shares Basic Earnings per share 2,055 29,380,750 7.00 948 28,744,247 3.30 attributable to ordinary shareholders Effect of options - 1,432,829 - - 1,437,212 - Diluted Earnings per share 2,055 30,813,608 6.67 948 30,181,459 3.14 Adjustment for deferred tax (430) - - (480) - - Adjustment for amortisation 246 - - 12 - - Adjustment for share incentives 229 - - 258 - - Adjusted Basic Earnings per 2,100 29,380,750 7.15 738 28,744,247 2.57 share before deferred tax, amortisation and share incentives Effect of options - 1,432,829 - - 1,437,212 - Adjusted Diluted Earnings per 2,100 30,813,608 6.82 738 30,181,459 2.45 share Earnings per share before deferred tax, amortisation and share incentives are presented as the Directors consider that this represents a meaningful measure of performance of the Group. For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume full conversion of all dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the market price of the Company's ordinary shares. 4. Fixed asset investments Company Subsidiary undertaking Â£'000 Cost and net book value At 1 February 2005 5,250 Additions ( see 24d ) 12,320 At 31 January 2006 17,570 At 31 January 2006 the company had interests in the following subsidiary undertakings: Direct Indirect Nature of business Subsidiary undertaking Country of Class of share incorporation capital held Thomson Intermedia England and Wales Ordinary Â£1 100% - Technology and media Associates Limited monitoring business Acquisitions and other investments acquired during the year Thomson Media Control Germany Baden-Baden Fixed capital 50% - Media consultants Gmbh & Co Kg (TMC) BCMG Ltd England and Wales Ordinary Â£1 100% - Holding company billetts media consulting England and Wales Ordinary Â£1 100% - Media consultants Ltd billetts international England and Wales Ordinary Â£1 100% - Media consultants Ltd billetts marketing England and Wales Ordinary Â£1 100% - Marketing sciences Ltd consultants Barsby Rowe Ltd England and Wales Ordinary Â£1 - 100% Non-trading billetts consulting England and Wales Ordinary Â£1 100% - Holding company Limited BCMG Acquisitions Limited England and Wales Ordinary Â£1 - 100% Holding company billetts media management England and Wales Ordinary Â£1 - 100% Dormant Ltd BCMG US Inc US Corporation Ordinary $1 100% - Holding company billetts America LLC US LLC Ordinary $1 - 80% Media consultants During the year Thomson Intermedia PLC (TI) added or acquired the above investments for the group. For fair values of billetts group assets acquired see note 7d. On the 23rd August 2005 the company acquired the entire share capital of BCMG Limited (billetts Group) for a maximum total consideration of Â£13.1m. The initial consideration comprised the allotment and issue of Â£0.85m ordinary shares and Â£6.7m in cash. The final consideration is dependent on the financial performance of the billetts Group for the period to 30th April 2006 and the financial performance of billetts America LLC, BCMG's subsidiary in the United States, to 30th April 2007. The maximum amount of deferred consideration is Â£3.85m and Â£1.75m respectively. The deferred consideration has been discounted in line with the Group's policy and FRS 7. The deferred consideration is secured by Loan notes issued in favour of BCMG's directors. The Loan note amounts reflect the estimated financial performance against targets and a provision has been made for the contingent consideration as shown in note 6. The loan notes as well as the Group's facility with the Bank of Scotland are secured by way of a debenture agreement over the assets of the Group. The acquisition method of accounting has been used in the consolidation of the billetts Group accounts with the Thomson Intermedia PLC Group's accounts. Merger relief has been taken for the consideration shares. 5. Taxation on profit on ordinary activities 2006 2005 Group Â£'000 Â£'000 Corporation Tax at 30% 126 6 Research and development tax credit - (114) Deferred tax (430) (480) 304 (588) 6. Contingent consideration for acquisitions The acquisition of billetts, includes a deferred element that is contingent on the future financial performance of the acquired entity. No material contingent consideration will become payable unless the acquired entity delivers greater profits during the earn-out period than prior to the acquisition. If the earn-out conditions are met, Â£3.85m of the consideration will become payable in 2006, the remaining Â£1.75m will become payable in 2007. The provision for contingent consideration for acquisitions represents the best estimate of the amount expected to be payable in cash or loan notes. The contingent consideration has been discounted in line with the group's policy and FRS 7. Maturity of contingent consideration for acquisitions:- Group Company Cash or loan notes Cash or loan notes 2006 2005 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 In one year or less 3,793 - 3,793 - In more than one year but less than two 326 - 326 - years Total contingent consideration 4,119 - 4,119 - (See note 7d) 7. Notes to consolidated cash flow statement a Reconciliation of operating profit to net cash inflow from 2006 2005 operating activities Â£'000 Â£'000 Operating profit 1,751 321 Depreciation 276 228 Amortisation 246 12 Foreign exchange non-cash movement (8) - Phantom share non-cash movement (106) 230 Issue of share options under UITF 17 335 28 Increase in debtors (2,648) (853) Decrease in creditors (145) 211 Increase in accruals and deferred income 1,530 204 Net cash inflow from operating activities 1,231 381 b Analysis of cash flows for headings netted in the cash 2006 2005 flow statement Â£'000 Â£'000 Returns on investments and servicing of finance Interest received 43 39 Interest paid (71) (7) Net cash (outflow)/inflow from returns on investments and (28) 32 servicing of finance Taxation Corporation tax (paid)/received (6) 251 Capital expenditure and financial investment Purchase of tangible fixed assets (264) (295) Acquisitions and disposals Purchase of investment (87) - Purchase of subsidiary undertakings (6,665) - Net cash acquired with subsidiaries 344 - Expenses paid in connection with purchase of subsidiary (691) - undertakings Net cash outflow from returns on investments and servicing of (7,099) - finance Management of liquid resources Payments to deposit accounts (515) (91) Financing Receipts from issue of shares 4,500 - Receipt of bank loan 3,000 - Repayments of bank loan (63) - New share issue costs (157) - Net cash inflow from financing 7,280 - c Analysis of net Opening Cash flow Acquisition Closing balance funds balance Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 748 (164) 825 1,409 Liquid resources 850 515 - 1,365 1,598 351 825 2,774 Overdrafts - (62) - (62) 1,598 289 825 2,712 Loans - (2,937) - (2,937) Net (Debt)/Funds 1,598 (2,648) 825 (225) d Purchase of subsidiary undertakings Description of item acquired Net Book Fair Value Fair Value Value Â£'000 adjustment Â£'000 Â£'000 Fixed Assets 196 - 196 Debtors 1,162 - 1,162 Other Debtors 851 - 851 Bank and Cash 344 - 344 Trade Creditors (421) - (421) Other Creditors (623) - (623) Taxation Liabilities (541) - (541) Accruals and Deferred Income (13) - (13) NET ASSETS ACQUIRED 955 - 955 Minority Interests 96 - 96 Goodwill Capitalised 11,269 - 11,269 Total 12,320 - 12,320 Comprising: Cash 6,665 Shares 845 Deferred consideration (discounted) 4,119 Professional fees and costs 691 Total cost of acquisition 12,320 8. Financial Information The financial information set out above does not constitute the company's statutory accounts, within the meaning of Section 240 of the Companies Act 1985, for the year ended 31 January 2006 or 2005, but is derived from those accounts. Statutory accounts for the year ended 31 January 2005 have been filed with the registrar of companies and those for 2006 will be delivered following the Group's Annual general meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies act 1985. When published, the Group's annual report and Accounts will be sent to shareholders and will be made available to the public at the Group's registered office, 1 Westmoreland Road, Bromley, Kent BR2 0TB. This information is provided by RNS The company news service from the London Stock Exchange

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