Interim Results
Parity Group PLC
12 September 2007
Parity Group PLC
Interim results for the six months ended 30 June 2007
Parity Group plc, the UK IT Services Company, is pleased to announce interim
results for the six months ended 30th June 2007.
Financial Highlights:
• Revenue from continuing operations up 15% to £84M (H1 2006: £73M)
• Adjusted operating profit from continuing operations* £2.0M (H1 2006:
£234k), with both Resources and Solutions strong contributors
• Profit before tax from continuing operations of £1.1M (H1 2006: loss
of £1.3M)
• Profit before tax of £1.25M (H1 2006: £469k) and earnings per share of
1.44p (H1 2006: 3.13p)
• Net debt of £9.3M (31 December 2006: £5.7M) with movement mainly due
to working capital timing.
* Adjusted operating profit excludes share-based compensation charge of
£0.3M (H1 2006 £10k credit) and exceptional items in H1 2006 of £0.6M.
Operational Highlights:
• 60% growth in revenue in Solutions, and very good margin recovery,
with margins at 9%
• 9% revenue growth in Resources, with investment in new business areas
• Continued margin improvement in Training, due to cost savings and mix
changes
• Modest investment made in infrastructure, recruitment and service
offers
• Continuing operational improvement and refocusing the business on
higher margin and growth market opportunities.
Commenting on the results Alwyn Welch, Chief Executive, said:
'We are very pleased with the continued improvement in our business. We have
been aggressively moving our sales focus and investing in higher margin revenue
opportunities, especially in Resources and Training. Much of the expected margin
benefit has yet to come, but we have managed to deliver a strong overall profit
improvement whilst making these necessary changes.
'Solutions delivered a very good result, demonstrating our ability to win and
deliver fixed price projects, combined with continued attention to overhead
costs across the business. Overall an encouraging set of results, justifying the
confidence placed in our recovery by shareholders, clients, and staff alike.'
Enquiries:
Parity Group PLC
Alwyn Welch, Chief Executive Officer 020 8543 5353
Ian Ketchin, Finance Director
The Hogarth Partnership
John Olsen/Sarah Richardson 020 7357 9477
Notes to editors:
Parity Group PLC is a UK-focused IT services company, operating via three core
business units - Parity Resources, Parity Solutions and Parity Training.
Parity Resources is a leading IT recruitment specialist, with over 30 years
experience in providing permanent and contract technology staff, temporary staff
and managed recruitment services across all markets.
Parity Solutions specialises in providing IT, Projects and Consulting, using
leading edge technologies and drawing upon the depth of experience of its
consultants in Programme and Project Management.
Parity Training is one of the UK's leading Management and IT training providers.
In addition to a comprehensive schedule of public courses, Parity delivers
tailored learning solutions and customised programmes for major clients.
Parity is listed on the London Stock Exchange, with a ticker of PTY.LN.
Chief Executive's Review
Introduction
For the third consecutive period, the results in the first half of 2007 have
shown good overall improvement and the Group has continued to make solid
progress. Trading was in line with market expectations, and represented strong
improvement over the same period in 2006.
Solutions in particular grew at a very good rate, although sequential growth
from the second half of last year is a more meaningful measure, and is now
performing within our target operating margin range, of 8-10%. Project delivery
continues well, both with established large clients such as Northern Ireland
Electricity, but also in newer clients, for example, the new Commission for
Equality & Human Rights ('CEHR'), utilising Microsoft Sharepoint 2007. We have
also made good progress in extending and growing established clients, such as
BAT and the Cabinet Office.
Training also made good profit progress, which has been achieved mainly through
changing the revenue mix, and focusing on project and service management. We
have turned around the performance of Training, to produce a third profitable
period after several years of large losses. Revenue in our core focus areas of
project, programme and service management grew by 30%, and we invested in new
products in areas such as ITIL3. We added new large clients such as Barclays
Bank to the more established, and renewed relationships such as HBOS.
Whilst Resources grew over H1 2006, we invested in newer higher margin markets,
and this held back absolute profitability. As in Training, we are focussing on
higher margin contracts and we started to see the revenue and margin impact of
this during this period. New business was written with over 50 new clients,
mainly smaller and higher margin contracts. In particular, we recruited an SAP
focussed team that has now achieved some significant early wins.
Overall the Group achieved 15% revenue growth, and delivered a solid profit from
continuing operations. Sequential revenue progression over H2 2006 was flat, due
to our focus on higher margin business in Resources, and the exiting of two
large low margin contracts, in line with this strategy.
Group adjusted operating profit from continuing operations (stated before share
based compensation charge of £0.3M) was £2.0M compared to £234k in H1 2006
(stated before share based compensation credit of £10k and exceptional charge of
£0.6M), and Group profit before tax from continuing operations was £1.1M
compared to a loss in H1 2006 of £1.3M. A profit before tax of £164k was made
from discontinued operations, leading to a Group profit before tax of £1.25M (H1
2006: £0.5M).
Business Focus and Strategy
Since mid 2005, Parity has been focused on returning its operations to
profitable growth. We have streamlined our geographic focus to the UK and
Ireland, and after disposal of operations outside of this region, our business
has focused on organic growth.
The mid-term operational objective remains to achieve above market growth rates,
and to deliver above median operating margins. Margin improvement is being
achieved through overhead cost control as well as focusing on higher margin
revenue streams.
We have started to invest modestly in the infrastructure of our operations and
the people in our business, both to improve efficiency of operation and to be
able to attract and retain the key staff who are critical for our continued
growth.
Management Team and Board of Directors
We made two significant changes to the Board during this period. Firstly we
recruited Ian Ketchin as Group Finance Director. Ian has a background with Ernst
& Young and most recently as Finance Director of MSB, and has rapidly
demonstrated the benefits of his experience across the Group.
At the end of June we also welcomed Lord Roger Freeman as Non-Executive Chairman
of the Group. He brings the benefit of a long and successful track record in
business and politics. John Hughes, Executive Chairman since May 2005, has
stepped down to become Deputy Chairman as planned.
People
The people who work for Parity, whether employees, associates or contractors,
form the key element of the service we deliver to our clients. I would like to
thank all our staff for their continued hard work, and the critical part that
they play in the operation of the Parity Group.
We have continued the process of improving the way we manage our people and
this, combined with our improved business performance, has helped us improve
staff retention in the first half of 2007. For the first time in several years
we grew our staff numbers, recruiting 80 people in the period, to deliver the
new business we have been winning.
Cash Flow and Net Debt
The movement in net borrowings during the period was £3.6M, of which £1.1M was
capital expenditure (mainly facilities property fit out and IT), £0.4M was for
exceptional items recorded in prior periods, £0.5M was pension fund related and
£0.6M is held as a performance bond on a large contract. Working capital
increased by £3.3M, mainly in Resources, due to receivables from two large
clients and other payment timing issues, but also due to cash required to fund
revenue growth.
Net Debt as a result increased to £9.3M (December 2006: £5.7M). Subsequent to
the half year end collections have continued to be a focus and good progress has
been made. Continuing reduction of our level of indebtedness remains a priority.
Tax
The tax charge for continuing operations for the period was £663k (H1 2006 £81k
credit), but with no cash outflow, on a Group profit on continuing operations of
£1.1M. The tax charge represents an effective tax rate of 61% compared to the UK
statutory rate of 30%. The main reason for this variance is that the new UK
Corporation Tax rate from April 2008 will be 28% and the resulting reduction in
the Group's deferred tax asset has been charged in the period.
Discontinued Operations and Exceptional Items
We continue to work actively to complete closure of the residual elements of
discontinued operations in the USA and continental Europe, with an objective of
closing all legal entities as soon as practicable. We received a payment of
£130k from a fully provided bad debt in Switzerland during the period.
No exceptional charges were made during the period, but work continues to
dispose of surplus properties in the UK.
Dividend
No interim dividend is proposed in respect of the year ending 31st December 2007
(2006: final dividend £nil; interim dividend £nil).
Market Conditions and Outlook
The overall markets in which Parity operates continue to show modest growth, and
the skills areas in which we now focus remain in good demand. Recent volatility
in financial markets, and a focus on spending efficiency in Government have not
materially impacted our business outlook.
In both Training and Resources our plans are to continue to invest in changing
our mix of services to improve both absolute profit and profit margins.
In Solutions we will continue to focus on growing our fee and service based
revenues, and lower-margin subcontracted revenue will become of less importance.
Our objective is to build a stronger, larger scale Solutions business based
around fees work delivered by our own staff and associates.
The Group continues to have as its near-term operational objectives profit
improvement through a focus on higher margin services and tight cost control. We
will continue to invest prudently to achieve these goals. We have now delivered
several periods of operational improvement. Although work remains to achieve our
target profit goals, we are well positioned to continue along the path of
sustained performance improvement.
Alwyn Welch
Chief Executive
Financial summary
Six months Six months Year ended
to 30.6.07 to 30.6.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Revenue from continuing operations 83,930 73,018 156,845
Operating profit from continuing
operations before exceptional items 1,741 244 1,377
Operating profit (loss) from
continuing operations 1,741 (356) 777
Profit (loss) before taxation from
continuing operations 1,086 (1,317) (774)
Profit for the period 546 557 833
Net debt (see note 10) (9,306) (4,812) (5,659)
Equity shareholders' funds 12,013 11,099 11,029
------------------------------------------------------------------------------
Pence Pence Pence
------------------------------------------------------------------------------
Earnings per share
Basic 1.44 3.13 2.99
Diluted 1.37 3.13 2.99
Earnings (loss) per share from continuing
operations
Basic 1.12 (6.95) (3.49)
Diluted 1.06 (6.95) (3.49)
------------------------------------------------------------------------------
Divisional performance - continuing operations
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
Profit Profit (loss) Profit (loss)
before before before
Revenue taxation Revenue taxation Revenue taxation
£'000 £'000 £'000 £'000 £'000 £'000
-----------------------------------------------------------------------------------
Solutions 16,164 1,462 10,058 73 23,922 778
Training 9,228 350 9,223 94 18,406 308
Resources 58,538 1,191 53,737 1,401 114,517 2,710
-----------------------------------------------------------------------------------
Operating
profit before
central costs
and
exceptional
items 3,003 1,568 3,796
Central costs (1,262) (1,324) (2,419)
-----------------------------------------------------------------------------------
Operating
profit before
exceptional
items 1,741 244 1,377
Net finance
costs (655) (961) (1,551)
-----------------------------------------------------------------------------------
Profit (loss)
before tax and
exceptional
items 1,086 (717) (174)
Exceptional
costs - (600) (600)
-----------------------------------------------------------------------------------
83,930 1,086 73,018 (1,317) 156,845 (774)
-----------------------------------------------------------------------------------
Geographical performance - continuing operations
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
Operating Operating Operating
profit profit profit
before before before
central costs central costs central costs
and and and
exceptional exceptional exceptional
Revenue items Revenue items Revenue items
£'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------------------------
United Kingdom 83,623 3,003 72,743 1,568 156,171 3,796
Ireland 307 - 275 - 674 -
----------------------------------------------------------------------------------------
83,930 3,003 73,018 1,568 156,845 3,796
----------------------------------------------------------------------------------------
Consolidated income statement
For the six months ended 30 June 2007
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
------------------------------------------------------------------------------
Continuing operations 2 83,930 73,018 156,845
Revenue
------------------------------------------------------------------------------
Employee benefit costs (10,391) (10,975) (20,672)
Depreciation (170) (303) (569)
All other operating expenses (71,628) (62,096) (134,827)
------------------------------------------------------------------------------
Total operating expenses (82,189) (73,374) (156,068)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Operating profit before
exceptional items 2 1,741 244 1,377
Exceptional items 3 - (600) (600)
------------------------------------------------------------------------------
Operating profit (loss) 2 1,741 (356) 777
Finance income 4 15 - 7
Finance costs 5 (670) (961) (1,558)
------------------------------------------------------------------------------
Profit (loss) before tax 1,086 (1,317) (774)
Tax 6 (663) 81 (197)
------------------------------------------------------------------------------
Profit (loss) for the period
from continuing operations 423 (1,236) (971)
------------------------------------------------------------------------------
Discontinued operations
Profit for the period from
discontinued operations 7 123 1,793 1,804
------------------------------------------------------------------------------
Profit for the period
attributable to equity 11 546 557 833
shareholders
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Earnings per share
Basic 8 1.44p 3.13p 2.99p
Diluted 8 1.37p 3.13p 2.99p
Earnings (loss) per share
from continuing operations
Basic 8 1.12p (6.95p) (3.49p)
Diluted 8 1.06p (6.95p) (3.49p)
------------------------------------------------------------------------------
Consolidated balance sheet
As at 30 June 2007
Notes As at As at As at
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Non-current assets
Goodwill 7,116 7,116 7,116
Property, plant and equipment 1,544 697 615
Available for sale financial - 30 -
assets
Deferred tax assets 4,269 5,160 5,102
------------------------------------------------------------------------------
12,929 13,003 12,833
------------------------------------------------------------------------------
Current assets
Work in progress 776 1,146 998
Trade and other receivables 42,301 34,572 39,494
Cash and cash equivalents 1,014 1,785 736
------------------------------------------------------------------------------
44,091 37,503 41,228
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total assets 57,020 50,506 54,061
------------------------------------------------------------------------------
Current liabilities
Financial liabilities (10,320) (2,086) (6,394)
Trade and other payables (27,664) (24,092) (28,687)
Current tax liabilities (72) (252) (201)
Provisions (986) (1,743) (677)
------------------------------------------------------------------------------
(39,042) (28,173) (35,959)
------------------------------------------------------------------------------
Non-current liabilities
Financial liabilities - (4,511) (1)
Provisions (1,647) (2,103) (2,369)
Retirement benefit liability (4,318) (4,620) (4,703)
------------------------------------------------------------------------------
(5,965) (11,234) (7,073)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total liabilities (45,007) (39,407) (43,032)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net assets 12,013 11,099 11,029
------------------------------------------------------------------------------
Shareholders' equity
Called up share capital 11 15,078 15,075 15,075
Share premium account 11 20,086 20,055 20,020
Other reserves 11 44,160 44,160 44,160
Retained earnings 11 (67,311) (68,191) (68,226)
------------------------------------------------------------------------------
Total shareholders' equity 11 12,013 11,099 11,029
------------------------------------------------------------------------------
Consolidated statement of recognised income and expense
For the six months ended 30 June 2007
Notes Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Exchange differences on
translation of foreign
operations 78 8 152
Actuarial losses on defined
benefit pension schemes - - (762)
Deferred taxation on items
taken directly to equity - - 229
------------------------------------------------------------------------------
Net income (expense)
recognised directly in
equity 11 78 8 (381)
Profit for the period 11 546 557 833
------------------------------------------------------------------------------
Total recognised income for
the period 624 565 452
------------------------------------------------------------------------------
Consolidated cash flow statement
For the six months ended 30 June 2007
------------------------------------------------------------------------------
Notes Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Cash flows from operating
activities
Cash used in operations 9 (2,374) (4,256) (4,508)
Interest received 15 - 11
Interest paid (270) (615) (872)
------------------------------------------------------------------------------
Net cash used in operations (2,629) (4,871) (5,369)
------------------------------------------------------------------------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (1,099) (74) (272)
Proceeds from sale of
subsidiary undertakings - 4,649 4,649
Proceeds from disposal of
available for sale assets - - 71
------------------------------------------------------------------------------
Net cash (used in) from
investing activities (1,099) 4,575 4,448
------------------------------------------------------------------------------
Cash flows from financing
activities
Net cash from issue of
ordinary shares 69 14,634 14,599
Cash outflow in respect of
repayment of bank borrowing - (16,824) (20,176)
Net movement on invoice
discounting 10 4,916 574 4,804
Payment of capital element
of finance leases 10 (10) (9) (19)
------------------------------------------------------------------------------
Net cash from (used in)
financing activities 4,975 (1,625) (792)
------------------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents 10 1,247 (1,921) (1,713)
Cash and cash equivalents at
beginning of the period (260) 1,738 1,738
Net foreign exchange
difference 10 12 (98) (285)
------------------------------------------------------------------------------
Cash and cash equivalents at
end of the period 999 (281) (260)
------------------------------------------------------------------------------
Cash and cash equivalents
consist of:
- Cash 1,014 1,785 736
- Overdrafts (15) (2,066) (996)
------------------------------------------------------------------------------
999 (281) (260)
------------------------------------------------------------------------------
For the purposes of the cash flow statement, cash and cash equivalents are net
of overdrafts. These overdrafts are excluded from the definition of cash and
cash equivalents in the balance sheet.
Notes to the interim results
--------------------------------------------------------------------------------
1 Basis of preparation
The financial information comprises the unaudited results for the six months to
30 June 2007 and 30 June 2006 and the audited results for the twelve months
ended 31 December 2006. The results for the twelve months ended 31 December 2006
included in this report do not constitute statutory accounts for the purpose of
section 240 of the Companies Act 1985. A copy of the statutory accounts for the
twelve months ended 31 December 2006 has been delivered to the Registrar of
Companies. An unqualified report on the statutory accounts for the twelve months
ended 31 December 2006 has been made by the auditors and they did not contain a
statement under section 237 (2)-(3) of the Companies Act 1985, or include a
reference to any matters to which the auditors wished to draw attention by way
of emphasis without qualifying their report.
Accounting policies
This interim report has been prepared on the basis of the accounting policies
set out in the group financial statements for the twelve months ended 31
December 2006 and on the basis of the International Financial Reporting
Standards (IFRS) as adopted for use in the EU that the group expects to be
applicable as at 31 December 2007. IFRS are subject to amendment and
interpretation by the International Accounting Standards Board (IASB) and there
is an ongoing process of review and endorsement by the European Commission.
2 Segmental analysis
The Group is organised into three primary business segments: Solutions, Training
and Resources.
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Revenue - continuing operations
Solutions 16,164 10,058 23,922
Training 9,228 9,223 18,406
Resources 58,538 53,737 114,517
------------------------------------------------------------------------------
83,930 73,018 156,845
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Revenue - discontinued operations
Resources - 3,369 3,380
------------------------------------------------------------------------------
Operating result before Exceptional items Operating result after
exceptional items exceptional items
Six Six Six Six Six Six
months months Year months months Year months months Year
to to to to to to to to to
30.06.07 30.06.06 31.12.06 30.06.07 30.06.06 31.12.06 30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------------------------------------------------------
Continuing
operations 1,462 73 778 - - - 1,462 73 778
Solutions
Training 350 94 308 - - - 350 94 308
Resources 1,191 1,401 2,710 - - - 1,191 1,401 2,710
----------------------------------------------------------------------------------------------------------------------
3,003 1,568 3,796 - - - 3,003 1,568 3,796
Central (1,262) (1,324) (2,419) - (600) (600) (1,262) (1,924) (3,019)
costs
----------------------------------------------------------------------------------------------------------------------
1,741 244 1,377 - (600) (600) 1,741 (356) 777
----------------------------------------------------------------------------------------------------------------------
Notes continued
--------------------------------------------------------------------------------
3 Exceptional items
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Continuing operations
Property restructuring - (600) (600)
------------------------------------------------------------------------------
Total exceptional items from
continuing operations - (600) (600)
------------------------------------------------------------------------------
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Discontinued operations
Disposal of subsidiary undertakings - 2,046 2,170
------------------------------------------------------------------------------
Total exceptional items from
discontinued operations - 2,046 2,170
------------------------------------------------------------------------------
4 Finance income
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Bank interest receivable 15 - 7
------------------------------------------------------------------------------
Total finance income 15 - 7
------------------------------------------------------------------------------
5 Finance costs
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Bank interest payable 270 595 872
Post retirement benefits 400 346 686
Other interest payable - 20 -
------------------------------------------------------------------------------
Total finance costs 670 961 1,558
------------------------------------------------------------------------------
Notes continued
--------------------------------------------------------------------------------
6 Tax
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Current tax (129) (88) (109)
Deferred tax 833 - 214
------------------------------------------------------------------------------
Total tax charge (credit) 704 (88) 105
------------------------------------------------------------------------------
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Continuing operations 663 (81) 197
Discontinued operations 41 (7) (92)
------------------------------------------------------------------------------
Total tax charge (credit) 704 (88) 105
------------------------------------------------------------------------------
The tax charge (credit) above includes a £nil tax credit for the six months
ended 30 June 2007 in respect of exceptional items (£180,000 tax credit for the
six months ended 30 June 2006 and for the year ended 31 December 2006).
The UK corporation tax rate will change from 30% to 28% from April 2008. This
has reduced the group's deferred tax assets by £307,000 as at 30 June 2007.
7 Discontinued operations
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Pre-tax profit (loss) from
discontinued operations 164 (391) (458)
------------------------------------------------------------------------------
Gain on disposal of US subsidiary net
assets - 131 131
Gain on disposal of European
subsidiary net assets - 2,046 2,039
Taxation (41) 7 92
------------------------------------------------------------------------------
Total 123 1,793 1,804
------------------------------------------------------------------------------
8 Earnings per share
The calculation of the earnings per share is based on a profit after taxation of
£546,000 (30 June 2006: £557,000, 31 December 2006: £833,000). The calculation
of the earnings (loss) per share from continuing operations (see Financial
Summary) is based on a profit after taxation of £423,000 (30 June 2006:
£1,236,000 loss, 31 December 2006: £971,000 loss).
Earnings per share on discontinued Six months to Six months to Year to
operations 30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
------------------------------------------------------------------------------
Basic 0.32p 10.08p 6.48p
Diluted 0.31p 10.08p 6.48p
------------------------------------------------------------------------------
Notes continued
--------------------------------------------------------------------------------
8 Earnings per share continued
The weighted average number of shares used in the calculation of the basic and
diluted earnings per share are as follows:
Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Basic
Weighted average number of fully
paid ordinary shares in issue during
the period 37,914,549 16,925,330 27,454,632
Weighted average number held by ESOP
trust (43,143) (50,822) (46,950)
Adjustment for the effect of the
issue of new shares under the exercise
of rights - 906,200 449,376
------------------------------------------------------------------------------
Adjusted weighted average number of
fully paid ordinary shares in issue
during the period 37,871,406 17,780,708 27,857,058
------------------------------------------------------------------------------
Dilutive
Weighted average number of fully
paid
ordinary shares in issue during the
period 37,914,549 16,925,330 27,454,632
Dilutive effect of potential
ordinary shares 2,085,822 - -
Weighted average number held by ESOP
trust (43,143) (50,822) (46,950)
Adjustment for the effect of the
issue of new shares under the exercise
of rights - 906,200 449,376
------------------------------------------------------------------------------
Adjusted diluted weighted average
number of fully paid ordinary shares
in issue during the period 39,957,228 17,780,708 27,857,058
------------------------------------------------------------------------------
Number of issued ordinary shares
at the end of the period 37,926,546 37,812,260 37,812,260
------------------------------------------------------------------------------
Basic earnings per share is calculated by dividing the basic earnings for the
period by the weighted average number of fully paid ordinary shares in issue
during the period, less those shares held by the ESOP Trust.
Diluted earnings per share is calculated on the same basis as the basic earnings
per share with a further adjustment to the weighted average number of fully paid
ordinary shares to reflect the effect of all potentially dilutive ordinary
shares. The Group has one class of potentially dilutive ordinary shares being
those share options granted to employees where the exercise price is less than
the average market price of the Company's ordinary shares during the period.
There were no dilutive potential ordinary shares in issue for the six months
ended 30 June 2006 or the year ended 31 December 2006 because the group made
losses on continuing activities.
Notes continued
--------------------------------------------------------------------------------
9 Reconciliation of profit (loss) after tax to net cash flow
Continuing operations Six months to Six months to Year to
30.06.07 30.06.06 31.12.06
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------
Net profit (loss) for the period 423 (1,236) (971)
Adjustments for:
Tax 663 (81) 197
Depreciation 170 303 569
Equity settled share based payments 291 (10) 68
Loss on disposal of tangible fixed
assets - 62 76
Profit on disposal of available for
sale assets - - (41)
Interest income (15) - (7)
Interest expense 670 961 1,558
Changes in working capital
Decrease in work in progress 222 177 325
(Increase) decrease in trade and
other (2,279) 806 (3,836)
receivables
Decrease in trade and other payables (602) (2,070) (437)
Decrease in provisions (379) (1) (580)
Change in retirement benefit (785) (112) (1,402)
liability
Transfer of funds to client guarantee
account (see below) (600) - -
------------------------------------------------------------------------------
Cash used in continuing operations (2,221) (1,201) (4,481)
------------------------------------------------------------------------------
Discontinued operations
------------------------------------------------------------------------------
Net profit for the period 123 1,793 1,804
Adjustments for:
Tax 41 (7) (92)
Loss on disposal of tangible fixed
assets - 26 -
Profit on disposal of discontinued
operations - (2,046) (2,170)
Interest income - - (4)
Interest expense - - -
Changes in working capital
(Increase) decrease in trade and
other receivables 93 764 2,111
Increase (decrease) in trade and
other payables (376) (3,585) (1,455)
Decrease in provisions (34) - (221)
------------------------------------------------------------------------------
Cash from (used in) discontinued
operations (153) (3,055) (27)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total net cash flow from operating
activities (2,374) (4,256) (4,508)
------------------------------------------------------------------------------
Cash generated from operations includes cash outflows relating to exceptional
items recorded in prior years of £368,000 (30 June 2006: outflow of £1,371,000;
31 December 2007: outflow of £3,535,000).
During the six months ended 30 June 2007, the group transferred £600,000 to a
separate 'guarantee' bank account as part of the terms of a business contract.
For the duration of the contract these funds are ring-fenced and unavailable for
the Group's use and may not be classified as cash or cash equivalents under IAS
7, but are included in other debtors. On successful performance and completion
of the services under the contract, these funds will revert to the Group and
again be available for use. It is expected that these funds will be returned
before 31 December 2007.
Notes continued
--------------------------------------------------------------------------------
10 Consolidated reconciliation of net cash flow to movement in net borrowings
Six months to Six months to
30.06.07 30.06.06
(unaudited) (unaudited)
£'000 £'000
------------------------------------------------------------------------------
Increase in cash in the period from cashflows 266 145
Decrease in overdrafts in the period from
cashflows 981 (2,066)
Exchange movements 12 (98)
Increase/(decrease) in drawings on invoice
financing facilities and bank borrowings (4,916) 16,250
Repayment of obligations under finance leases 10 9
------------------------------------------------------------------------------
Movement in net borrowings in the period (3,647) 14,240
Net borrowings at 1 January 2007 (5,659) (19,052)
------------------------------------------------------------------------------
Net borrowings at 30 June 2007 (9,306) (4,812)
------------------------------------------------------------------------------
11 Movement on capital and reserves
-------------------------------------------------------------------------------
Share
Share Deferred premium Other Retained
capital Shares reserve reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------
At 1 January 2007 756 14,319 20,020 44,160 (68,226) 11,029
Net profit for the
period - - - - 546 546
Issue of new shares 3 - 66 - - 69
Share options -
value of employee
services - - - - 291 291
Net income
recognised directly
in equity - - - - 78 78
-------------------------------------------------------------------------------
At 30 June 2007 759 14,319 20,086 44,160 (67,311) 12,013
-------------------------------------------------------------------------------
12 Post retirement benefits
The Group provides employee benefits under various arrangements, including
through a defined benefit and defined contribution pension plans, the details of
which are disclosed in the 2006 Annual Report and Accounts. At the interim
balance sheet date, the assets and liabilities of the defined benefit plan have
been updated from the latest actuarial valuation and no material differences
were identified.
This information is provided by RNS
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