Interim Results

Triad Group Plc 22 December 2005 TRIAD GROUP PLC Interim Results for six months ended 30 September 2005 Chairman's statement Results Turnover is Â£22.7m for the six months ended 30 September 2005 (H1 2004/05: Â£22.8m). Pre tax losses are Â£489,000 (H1 2004/05 profit: Â£180,000). The pre tax losses are after charging exceptional administrative expenses of Â£309,000; see note 4 to the Consolidated Income Statement below. Dividends No interim dividend has been declared (2004/05 interim - 0.00p). Review of activities Market conditions in the resourcing area of the company's business have slowed to some extent during the period but we have been successful in responding to challenging conditions by concentrating on niche vertical markets and on higher margin work rather than pursuing low margins and high turnover. As I reported in my Chairman's Statement in the annual report and accounts 2005, the level of systems and consultancy business from one major government customer has declined steadily. We have succeeded in achieving a significant reduction in the rate of decline. In October, we announced that we had been awarded a contract with TRANSEC and I am delighted to report that this is going well. The current level of bid activity is very high and we are pursuing substantial opportunities which we have a realistic prospect of winning. The increase in cash during the period is the result of significantly improved cash collection and management. Staff turnover in the systems and consulting business is very low and we are actively recruiting more high quality staff. Relationships at board level are now harmonious and effective, and the refocused senior management team are performing well. We intend to appoint another non-executive director as soon as possible. Mira Makar ceased to be an employee and a director of Triad Group Plc with effect from 8 December 2005. Employees On behalf of the board, I have pleasure in thanking our staff and directors for their substantial and continuing efforts. John Rigg Chairman 22 December 2005 Consolidated income statement Note Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Revenue 22,722 22,799 46,200 -------------- -------------- -------------- Operating (loss)/profit 4 (410) 153 126 Finance income 7 10 38 50 Finance costs 7 (89) (11) (38) -------------- -------------- -------------- (Loss)/profit before taxation (489) 180 138 Taxation (33) - (25) -------------- -------------- -------------- (Loss)/profit for the period (522) 180 113 -------------- -------------- -------------- ---------------- ---------------- --------------- Basic earnings per 5 (3.45)p 1.19p 0.75p share --------- --------- --------- Diluted earnings per share 5 (3.45)p 1.14p 0.72p --------- --------- --------- There is no recognised income or expense except for the (loss)/profit for the periods stated above therefore no separate Statement of recognised income and expense has been prepared. Consolidated balance sheet Note Unaudited Unaudited Unaudited 30 September 30 September 31 March 2005 Â£'000 2004 2005 Â£'000 Â£'000 Non-current assets Intangible assets 74 80 88 Property, plant and equipment 740 685 820 Deferred tax 180 238 213 -------------- -------------- -------------- 994 1,003 1,121 -------------- -------------- -------------- Current assets Trade and other receivables 10,602 9,933 12,002 Cash and cash equivalents 1,244 1,738 104 -------------- -------------- -------------- 11,846 11,671 12,106 -------------- -------------- -------------- Total assets 12,840 12,674 13,227 Current liabilities Trade and other (7,028) (6,079) (6,863) payables -------------- -------------- -------------- (7,028) (6,079) (6,863) -------------- -------------- -------------- Non-current liabilities Long term provisions (1,976) (2,170) (2,006) -------------- -------------- -------------- (1,976) (2,170) (2,006) -------------- -------------- -------------- Total liabilities (9,004) (8,249) (8,869) -------------- -------------- -------------- Net assets 3,836 4,425 4,358 -------------- -------------- -------------- ---------------- ---------------- --------------- Shareholders' equity Share capital 151 151 151 Share premium account 562 562 562 Capital redemption reserve 104 104 104 Retained earnings 3,019 3,608 3,541 -------------- -------------- -------------- Total shareholders' equity 9 3,836 4,425 4,358 -------------- -------------- -------------- ---------------- ---------------- --------------- Consolidated cash flow statement Note Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 8 1,262 (1,311) (2,578) Interest paid (17) - (16) Interest received 10 38 50 Tax paid - - (13) -------------- -------------- -------------- Net cash flows from operating activities 1,255 (1,273) (2,557) -------------- -------------- -------------- Cash flows from investing activities Purchase of intangible assets (12) (21) (54) Purchase of property, plant and equipment (173) (262) (613) Proceeds from sale of property plant and equipment 70 50 84 -------------- -------------- -------------- Net cash flows from investing activities (115) (233) (583) -------------- -------------- -------------- Net increase/(decrease) in cash and cash equivalents 1,140 (1,506) (3,140) Cash and cash equivalents at beginning 104 3,244 3,244 of the period -------------- -------------- -------------- Cash and cash equivalents at end of the period 1,244 1,738 104 -------------- -------------- -------------- ---------------- ---------------- --------------- Notes to the interim report 1. General information The interim financial information does not constitute statutory accounts and is unaudited. The figures for the six months ended 30 September 2004 and the year ended 31 March 2005 have been extracted from the unaudited restatement of the Group's results announced on 30 September 2005 under International Financial Reporting Standards (IFRS). The UK GAAP figures for the year ended 31 March 2005 received an unqualified audit opinion and have been filed with the Registrar of Companies. The interim report is being sent to shareholders. Further copies can be obtained from the company's registered office at Weyside Park, Catteshall Lane, Godalming, Surrey, GU7 1XE. 2. Summary of significant accounting policies (a) Basis of preparation The consolidated interim financial information is for the six months ended 30 September 2005 and has been prepared in accordance with the accounting policies the Group expects to adopt in its 2006 Annual Report. These accounting policies are based on the EU-adopted International Financial Reporting Standards (IFRS) and IFRIC interpretations that the Group expects to be applicable at that time. The IFRS and IFRIC interpretations that will be applicable at 31 March 2006, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. The policies set out below have been consistently applied to all the years presented. The Group's consolidated financial statements were prepared in accordance with UK GAAP until 31 March 2005. The Group has applied the accounting policies and methods of computation in these interim financial statements as detailed below. The effect of any changes in accounting policies arising as a result of the adoption of IFRS as compared to the policies stated in the Group's published 2005 Annual Report are explained in note 10. Reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group's equity and its net income and cash flows are provided in note 10. These consolidated interim financial statements have been prepared under the historical cost convention. (b) Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and any impairment in value. Depreciation is calculated so as to write off the cost of assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: % Computer hardware 25-33 Motor vehicles 25-33 Fixtures and fittings 10-33 The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement. (c) Intangible assets Acquired computer software licences and internally developed software are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to four years). (d) Trade and other receivables Trade and other receivables are recognised at fair value, being transaction value less subsequent impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Any change in the amount of the provision is recognised in the income statement. (e) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. (f) Foreign currencies Assets and liabilities expressed in foreign currencies are translated into sterling at the exchange rate ruling on the balance sheet date. Transactions in foreign currencies are recorded at the exchange rate ruling as at the date of the transaction. All differences on exchange are taken to the income statement in the year in which they arise. (g) Research and development expenditure Expenditure on research and development is written off to the income statement in the year in which it is incurred. (h) Revenue Revenue, which excludes value added tax, represents the invoiced value of goods and services supplied: where a service has been provided, but not yet invoiced, the amount is included in the financial statements as accrued income. Income from consultancy contracts, which are on a time hire basis, is recognised as the services are delivered. Income from maintenance contracts is recognised pro rata over the life of the contract and is deferred to the extent that it has not been earned. (i) Income tax and deferred income tax The charge for current tax is based on the results for the period as adjusted for disallowable items. Deferred income tax is accounted for using the liability method in respect of temporary differences between the tax bases of assets and liabilities and their carrying amount in the financial statements. Deferred income tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. A deferred income tax asset is only recognised to the extent that it is probable that taxable profits will be available against which temporary differences can be utilised. Deferred income tax balances are not discounted. (j) Employee benefits Pension costs The Group contributes to the personal pension plans of certain employees. The Group's contributions are accounted for as incurred. (k) Surplus property Provision has been made to meet the estimated liabilities of any property surplus to the requirements of the business. All ongoing costs net of estimated future rental income are charged to the provision. The provision is discounted, unless the effect of the time value of money is not material. (l) Consolidation Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. (m) Dividends Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the interim dividend is approved by the Board and, in respect of the final dividend, in the period in which the final dividend is approved by the Company's shareholders. (n) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. 3. Dividend No interim dividend has been declared (2004/05: 0.0p) 4. Operating loss The operating loss is after charging exceptional administrative expenses of Â£309,000. These are legal and professional fees which the company has been obliged to incur as a result of the situation regarding Mira Makar. Mira Makar ceased to be an employee and a director of the company on 8 December 2005. 5. Earnings per share Earnings per share have been calculated on the (loss)/profit on ordinary activities after tax divided by the weighted average number of shares in issue during the period based on the following: Unaudited Unaudited Unaudited 30 September 30 September 31 March 2005 2004 2005 (Loss)/profit on ordinary activities after taxation Â£(522,000) Â£180,000 Â£113,000 -------------- -------------- -------------- Average number of shares in issue 15,149,579 15,149,579 15,149,579 --- --- --- Effect of dilutive options - 615,444 504,600 _________ _________ _________ Average number of shares in issue plus dilutive options 15,149,579 15,765,023 15,654,179 -------------- -------------- -------------- Basic earnings per share (3.45)p 1.19p 0.75p --------- --------- --------- Diluted earnings per share (3.45)p 1.14p 0.72p --------- --------- --------- The share options have no dilutive effect in the current period. 6. Segmental reporting Based on risks and returns the directors consider that the primary reporting format is by business segment. The directors consider that there is only one business segment being business consultancy, software and systems delivery. Therefore the disclosures for the primary segment have already been given in these financial statements. Furthermore as the Group has no significant overseas activities there is no requirement to report by geographical segment. 7. Finance income and finance costs Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 --- --- --- Interest receivable 10 38 50 _________ _________ _________ Finance income 10 38 50 -------------- -------------- -------------- --- --- --- Interest payable (17) - (16) Unwinding of discount on provisions (72) (11) (22) _________ _________ _________ Finance costs (89) (11) (38) -------------- -------------- -------------- 8. Reconciliation of net (loss)/profit to cash flow from operations Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Net (loss)/profit (522) 180 113 Adjustments for: Tax 33 - 25 Depreciation of property, plant and equipment 195 174 370 Profit on disposal of property, plant and equipment (12) (3) (17) Amortisation of intangible assets 26 27 52 Interest income (10) (38) (50) Interest expense 89 11 38 Changes in working capital Decrease/(increase) in trade and other receivables 1,400 (2,533) (4,602) Increase in trade and other payables 165 975 1,772 Decrease in provisions (102) (104) (279) -------------- -------------- -------------- Cash flows from operations 1,262 (1,311) (2,578) -------------- -------------- -------------- ---------------- ---------------- ---------------- 9. Consolidated statement of changes in shareholders' equity Unaudited Unaudited Unaudited Six months Six months Year Ended ended ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Opening shareholders' equity 4,358 4,245 4,245 (Loss)/profit for the period (522) 180 113 -------------- -------------- -------------- Closing shareholders' equity 3,836 4,425 4,358 -------------- -------------- -------------- ---------------- ---------------- --------------- 10. First time adoption of IFRS The Group reported under UK GAAP in its previously published financial statements for the year ended 31 March 2005. The tables below reconcile profit and net assets as reported previously under UK GAAP to those reported under IFRS for the six month period ended 30 September 2005, together with comparatives for the six month period ended 30 September 2004, and year ended 31 March 2005. Reconciliation of (loss)/profit after tax for the period between UK GAAP and IFRS Unaudited Unaudited Unaudited Six months Six months Year ended ended Ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 (Loss)/profit after tax-UK GAAP (512) 170 120 IAS 19-Employee benefits 17 10 6 IAS 39-Financial instruments (42) - (18) IAS 12-Income Taxes 15 - 5 -------------- -------------- -------------- (Loss)/profit after tax- IFRS (522) 180 113 -------------- -------------- -------------- ---------------- ---------------- ---------------- Reconciliation of equity between UK GAAP and IFRS Unaudited Unaudited Unaudited Six months Six months Year Ended ended Ended 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Equity-UK GAAP 3,857 4,419 4,369 IAS 19-Employee benefits (69) (82) (86) IAS 27-Consolidation 5 5 5 IAS 39-Financial instruments 58 118 100 IAS 12-Income Taxes (15) (35) (30) -------------- -------------- -------------- Equity- IFRS 3,836 4,425 4,358 -------------- -------------- -------------- ---------------- ---------------- ---------------- Explanation of reconciling items between UK GAAP and IFRS a) IAS 19 Employee benefits In accordance with IAS 19 a holiday pay accrual has been recognised as follows: 1 April 2004 Â£92,000 30 September 2004 Â£82,000 31 March 2005 Â£86,000 30 September 2005 Â£69,000 The impact of this on operating profit in the income statement is: â€¢ For the six months ended 30 September 2004: an increase of Â£10,000 in the income statement. â€¢ For the year ended 31 March 2005: an increase of Â£6,000 in the income statement. â€¢ For the six months ended 30 September 2005: an increase of Â£17,000 in the income statement. b) Under UK GAAP software was previously disclosed in tangible assets. IAS 16 Property, plant and equipment and IAS 38 Intangible assets require that such software costs be classified as intangible assets. The net book value of software at 30 September 2005 is Â£74,000. c) Under UK GAAP consolidated financial statements were not prepared on the basis that the inclusion of subsidiaries was not material for the purposes of giving a true and fair view. However, under IFRS, consolidated financial statements are now required to be presented. d) Under UK GAAP a general non-specific bad debt reserve was held. Under IAS 39 trade debtors are recognised at fair value, being transaction value less subsequent impairment. The impact of this is: To increase trade debtors by: 1 April 2004 Â£118,000 30 September 2004 Â£118,000 31 March 2005 Â£100,000 30 September 2005 Â£58,000 The impact of this on operating profit in the income statement is: â€¢ For the six months ended 30 September 2004: no change in the income statement. â€¢ For the year ended 31 March 2005: a decrease of Â£18,000 in the income statement. â€¢ For the six months ended 30 September 2005: an decrease of Â£42,000 in the income statement e) The effect on the deferred tax asset, resulting from the IAS 39 adjustment is to reduce the deferred tax asset as follows: 1 April 2004 Â£35,000 30 September 2004 Â£35,000 31 March 2005 Â£30,000 30 September 2005 Â£15,000 The impact of this on the tax charge in the income statement is: â€¢ For the six months ended 30 September 2004: no change in the tax charge. â€¢ For the year ended 31 March 2005: a decrease of Â£5,000 in the tax charge. â€¢ For the six months ended 30 September 2005: a decrease of Â£15,000 in the tax charge. There are no material reconciling items between the cash flow statements as presented under UK GAAP and IFRS. 11. Election of optional exemptions on first-time adoption of IFRS The general principle that should be applied on first-time adoption of IFRS is that standards are applied with full retrospective effect. IFRS 1 First-time Adoption of International Financial Reporting Standards sets out certain mandatory exceptions to retrospective application and certain optional exemptions. The optional exemptions adopted by the Group are; â€¢ to apply IFRS 2 Share-based Payments only to awards granted after 7 November 2002 and not vested by 1 January 2005. â€¢ not to apply IFRS 3 Business Combinations to business combinations that occurred prior to 1 April 2004 the date of transition to IFRS. The only balance sheet item related to it at the date of transition was an investment of Â£440. This information is provided by RNS The company news service from the London Stock Exchange

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