Interim Results

RNS Number : 9177D

Velosi Limited

22 September 2008

 



Velosi Limited ('Velosi', 'the Company' or 'the Group')

Interim Results

For the six month period ended 30 June 2008

Velosi, the AIM listed provider of asset integrity and HSE services to major national and multinational oil and gas companies, is pleased to announce its interim results for the six months ended 30 June 2008.

Highlights 

• Turnover increased 60% to US$77.3 million (2007: US$48.4 million)

• Operating profit increased by 36% to US$7.02 million (2007: US$5.16million)

• Profit before tax up 31% to US$7.2 million (2007: US$5.5 million)

• Basic earnings per share of 10.4 cents (2007: 9.3 cents)

• Successful Placing in March 2008 raising gross proceeds of £4.42 million (US$8.7 million)

• Focus on  expansion within new regions of operation and consolidation of acquisitions

• Major contract wins since the interim period end

John Hogan, Chairman, commented:

'I am pleased to announce another good set of results for the Group, with strong growth performance in turnover and profit.  We continue to win new contracts, in both geographically and strategically important areas, from existing and new clients, demonstrating the quality of Velosi's services offering. Trading since the period end has continued well and is in line with market expectations. Looking ahead, I am confident Velosi will continue to provide value and growth for shareholders.'

For further information, please contact:

Velosi	Dr Nabil Abdul Jalil Dan Ooi	020 7930 0777
Strand Partners	James Harris	020 7409 3494
Charles Stanley Securities	Mark Taylor Freddy Crossley	020 7149 6000
Cardew Group	Tim Robertson Shan Shan Willenbrock Catherine Maitland	020 7930 0777

CHAIRMAN'S STATEMENT

I am very pleased to announce another strong set of interim results for the Group for the six months ended 30 June 2008.  The results show substantial increases in both revenues and profits reflecting the Group's success in developing its geographic presence so that it can deliver a 'Global Reach, Local Service' to the major national and multinational oil and gas corporations. New contract wins and the renewal of existing contracts have driven revenue growth, with the Group benefiting from being able to offer an expanded range of services to meet the diverse requirements of its clients.

Market conditions remain favourable, with continued high levels of investment in the oil and gas sector underpinning the growth in demand for Velosi's services. The issue of safety remains paramount across the oil and gas sector and as a result the Group has benefited in particular from strong demand for its asset integrity management and health, safety, and environment (HSE) services, which covers quality assurance and quality control services.

Also during the period, the Group was focused on the consolidation and integration of recent acquisitions and the new offices opened over the last 12 months. In part, this involved ensuring that the expertise and client relationships held regionally are shared across the Group's operations, the importance of which has been reflected in the efficient and effective establishment of recently opened offices. 

Financial Performance

The successful execution of the Group's strategy led to turnover increasing by 60% to US$77.3 million (2007: US$48.4m). Profit from ordinary activities before tax for the period was up 31% to US$7.2 million (2007: US$5.5m), and profit after tax also increased, from US$4.6 million in 2007 to US$6.0 million. The growth in turnover and profit was driven by the Group's expansion into new regions, such as Angola, Ghana, Vietnam and Indonesia, alongside the continued new contract wins from both new and existing clients. 

The effective tax rate for the Group for the half year was 16% (2007: 16%) and the tax charge was US$1.2 million (2007: US$0.9m). The effective tax rate for the Group reflects the contributions from the different regions and their varying tax rates. 

Profits attributable to minority interests for the period were US$1.6 million (2007: US$1.0m).  Basic earnings per share after minority interests were 10.4 cents and fully diluted earnings per share after minority interests were 9.4 cents.  

Velosi's cash position is strong.  At 30 June 2008, cash and cash equivalents for the Group were US$10.7 million (2007: US$8.2m) and we had long-term bank borrowings of US$1.5 million (2007: US$0.8m).  There was a small operating cash outflow of US$0.5 million (2007: US$1.1 million) reflecting the strong growth profile as well as the timing of certain receipts around the period end.  Significant payments were also received in relation to operations in the Middle East in the subsequent months of July and August.

As announced on 21 April 2008, Velosi successfully raised £4.42 million (US$8.7 million) through the issue of 3,842,000 new ordinary shares at a placing price of 115 pence (215 cents) per share to institutional investors, to augment existing working capital facilities and for the development of the Group's business.

Dividend

As previously stated the Board does not propose to pay an interim dividend. The Board does however intend, subject to the availability of distributable reserves and a satisfactory performance in the second half of the year, to recommend a final dividend to shareholders in respect of the financial year ending 31 December 2008.

Operational Review

2008 has seen a continuation in demand for Velosi's services from the major oil and gas and petrochemical companies driven by the ongoing high levels of investment in infrastructure projects combined with a heightened focus on safety issues across the industry. The Group also benefited from its expansion into new regions such as Angola, Ghana, Vietnam, The Netherlands, Russia and Indonesia together with the expansion of its diverse range of services to include Asset Integrity Management Services. 

A key focus during the period was developing and expanding Velosi's position within the new regions of operation, as well as consolidating the acquisitions of K2 Specialist Services Pte Ltd ('K2') and Intec UK Limited ('Intec') announced in 2007. The growing synergies and cross referrals across the Group's strategic business units ('SBUs'), is enhancing the performance of the Group's 47 companies, 3 branches and 7 representative offices. SBUs are the Group's subsidiaries, providing specialised services within our core activities.

Asia & Australasia

Turnover: US$13.9 million (2007: US$4.5 million), Contribution to Group Sales: 18% (2007: 9%)

Asia and Australasia again saw a substantial increase in revenues driven by strong contributions from its new offices in Vietnam and Indonesia together with further progress from the recent acquisition of K2 in Singapore and QAM, the quality assurance and inspection company based in Australia.  

Vietnam continued to benefit from its manpower contract with Truong Son JOC awarded in June last year worth US$1.3million per annum, together with a new inspection services contract in March awarded this year with Technip worth at least US$1.5 million which was extended to the end of October 2008). Indonesia benefited from winning an important new vendor and expediting contract with Conoco Indonesia worth US$7.8 million over three years beginning from May 2008.

K2, acquired by the Group in October 2007, continued to make excellent progress providing inspection, testing and engineering support services in remote and extreme environments to the oil and gas industry. Recently K2 announced it had been awarded two new contracts - the first with PPL Shipyard, Singapore, worth $2.75 million for the assembly and installation of five new build jackup derricks which is expected to be completed in June 2009. The second contract was with COSCO shipyard, Nantong, China, for the supply of specialist equipment, manpower and technical know-how to carry out the assembly and installation of the drilling package on the semi-submersible Sevan 650 drilling rig. The contract is worth $1.22 million and is expected to be completed in the current financial year.

Europe 

Turnover: US$19.6 million (2007: US$3.6 million), Contribution to Group Sales: 25% (2007: 7%)

Europe delivered the Group's largest rise in revenues for the period. This substantial increase came primarily from the successful integration of Intec, acquired in October 2007, through which the Group is running a number of European contracts, the continuation of the Shell EP Europe contract awarded in January 2007 which runs to December 2009, and the recent landmark contract with BP Norway.

Intec is becoming increasingly involved in new contracts brought in from different European countries providing additional expertise and acting as a key European centre.

The Group made a significant step forward in establishing a strong presence in Scandinavia with its first contract with BP Norge AS which commenced in March 2008. Under this contract Velosi will provide Quality Assurance and Control for BP, including verification, certification and enhancement services at fabrication sites in Norway and the rest of Europe. 

Middle East 

Turnover: US$26.8 million (2007: US$14.3 million), Contribution to Group Sales: 35% (2007: 29%)

Building on a good result in 2007, the Middle Eastern region demonstrated another strong performance during the period, with revenues almost doubling against the comparative period last year. Demand was strong across the region, with the Qatari and Kuwaiti operations performing particularly well, benefiting from an increase in maintenance contracts with clients such as RasGas and Qatar Gas.

Demonstrating the demand for Velosi's newly established asset integrity services, Al Khafji Joint Operations ('KJO'), a joint venture between Aramco Gulf Operations and Kuwait Gulf Oil Company, awarded a $2.2 million, two year contract to Velosi effective from April 2008. 

Most recently, and after the period end, the newly established Saudi Arabian unit won a major five year General Inspection Services Contract with Saudi Aramco effective from July 2008 until the second quarter of 2013. This is an important breakthrough win for a new region and one which also represents a significant increase in the scope of work with Aramco, one of the world's leading producers of oil and gas. There is also an option for the contract to be extended for a further three years.

Africa

Turnover: US$8.7 million (2007: US$18.1 million), Contribution to Group Sales: 11% (2007: 37%)

Turnover in the first half has been impacted by the ongoing negotiations with Richard Ogunmakin's estate regarding the future ownership and operation of Velosi Nigeria. While there is no certainty that the outcome of these negotiations will be favourable to the Group, the trading performance from other regions in the division, particularly from Angola and Ghana, is expected to produce a significant increase in revenues for the second half of the financial year. Looking further ahead, the Group expects Africa will again be one of the largest contributors to Group revenues.

Velosi won one of its largest contracts to date with Chevron Angola to provide Construction Management and Inspection Services personnel to Chevron's oil and gas operations in Cabinda, Angola. 

Ghana has had a successful beginning to 2008, winning a contract with BOST which began in February 2008 and is worth approximately US$2.5 million over the next two years.

Americas and Former Soviet Union (FSU)

Turnover: US$8.1 million (2007: US$7.9 million), Contribution to Group Sales: 10% (2007 16%)

Americas and FSU generated a satisfactory performance for the first half of 2008 and is expected to benefit in the second half from the 5 year contract with Exxon Neftegas worth up to US$6 million which commenced in May 2008. Won by the new office in Sakhalin, it is a significant step in establishing Velosi's presence in this region which continues to trade in line with expectations.

Employees

On behalf of the Board, I would like to take this opportunity to thank all of our employees worldwide for their dedication and continued hard work. Due to the scarcity of high quality candidates recruitment remains an industry wide issue. As a result, the Group has implemented a 'localisation policy' whereby each office is encouraged to recruit local employees. This policy has been successful, substantially increasing the number of employees recruited locally which in turn has reduced the costs of recruitment, increased the effectiveness of internal training programmes and developed an expanding pool of future local and regional managers. 

Outlook

Since the IPO in 2006, the Group has expanded rapidly through a selective mix of acquisitions and the opening of new offices. These actions mean that Velosi is now able to service its clients from a much broader geographic base and provide a wider range of complementary services. This has enabled the Group to meet the strong demand for its services stemming from the continued investment in infrastructure projects and consequent increase in demand for maintenance services to ensure the continuity of the operations over the long-term. 

Although some way off the all time highs of earlier in the year oil and gas prices still remain relatively high - a key factor in the recent growth of the oil and gas sector. The Group is also working to diversify its activities into other areas which require similar services and technical expertise such as nuclear power and mining industries.

Velosi has delivered an excellent performance for the first 6 months which has created a strong platform on which to deliver a positive outcome for the full year. The Board confirms that trading is in line with expectations and looks forward to the business continuing to expand both organically and through acquisition.

John Hogan

Chairman

22 September 2008

   VELOSI LIMITED

Consolidated Income Statement

For the six months ended 30 June 2008 

	Note	Six months ended 30 June 2008 US$'000 (unaudited)	Six months ended 30 June 2007 US$'000 (unaudited)	Year ended 31 December 2007 US$'000 (audited)
Revenue	7	77,306	48,427	116,997
Cost of sales		(58,232)	(36,295)	(89,152)
		________	________	________
Gross profit		19,074	12,132	27,845
Other operating income		28	257	1,435
Administrative expenses		(12,083)	(7,234)	(18,121)
		________	________	________
Operating profit		7,019	5,155	11,159
Finance costs		(269)	(26)	(253)
Share of profit of associated companies		418	333	520
		________	________	________
Profit on ordinary activities before tax		7,168	5,462	11,426
Income tax expense	3	(1,160)	(888)	(1,670)
		________	________	________
Profit on ordinary activities after tax		6,008	4,574	9,756
Minority interests		(1,598)	(1,014)	(2,301)
		________	________	________
Profit from continuing operations and attributable to equity holders		4,410	3,560	7,455
		________	________	________
Earnings per ordinary share
Basic earnings per share	5	10.4 cents	9.3 cents	19.4 cents
Diluted earnings per share	5	9.4 cents	8.7 cents	18.2 cents

  VELOSI LIMITED

Consolidated Balance Sheet

As at 30 June 2008

	Note	30 June 2008 US$'000 (unaudited)	30 June 2007 US$'000 (unaudited)	31 December 2007 US$'000 (audited)
Assets
Non-Current Assets
Goodwill on acquisition		7,341	3,729	7,341
Intangible assets	8	1,549	-	1,662
Property, plant and equipment	11	7,325	5,284	6,920
Investment in associated companies	12	1,247	1,033	869
Other investments		9	-	9
Deferred tax assets		42	76	88
		________	________	________
		17,513	10,122	16,889
		________	________	________
Current Assets
Cash and cash equivalents		15,881	8,200	7,967
Inventories		4,610	2,755	1,056
Trade and other receivables		54,626	33,523	48,737
Tax recoverable		450	50	90
		________	________	________
		75,567	44,528	57,850
		________	________	_______
Non-current asset held for sale		900	-	900
		________	________	_______
Total Assets		93,980	54,650	75,639
		________	________	________
Equity and Liabilities
Capital and Reserves
Share capital	4	869	767	787
Share premium	4	30,226	18,499	21,310
Share based payment reserves		590	260	425
Revaluation reserve		287	287	287
Translation reserve		(63)	11	(63)
Retained profit		18,414	10,108	14,004
		________	________	________
Total equity attributable to equity holders		50,323	29,932	36,750
Minority Interests		7,241	3,723	5,729
		________	________	________
Total Equity		57,564	33,655	42,479
		________	________	________

  VELOSI LIMITED

Consolidated Balance Sheet

As at 30 June 2008

	Note	30 June 2008 US$'000 (unaudited)	30 June 2007 US$'000 (unaudited)	31 December 2007 US$'000 (audited)
Current Liabilities
Trade and other payables		22,359	18,172	21,091
Bank and other borrowings	14	5,577	148	4,075
Current tax liabilities		2,592	1,673	1,761
Deferred consideration	9	3,984	-	4,477
		________	________	________
		34,512	19,993	31,404
		________	________	_______
Non-Current Liabilities
Deferred tax liabilities		20	11	24
Bank and other borrowings	14	1,549	804	1,499
Other non-current liabilities		335	187	233
		________	________	________
		1,904	1,002	1,756
		________	________	_______
		________	________	________
Total Liabilities		36,416	20,995	33,160
		________	________	_______
Total Equity and Liabilities		93,980	54,650	75,639
		________	________	________

VELOSI LIMITED

Consolidated Cash Flow Statement

For the six months ended 30 June 2008

	Six months ended 30 June 2008 US$'000 (unaudited)	Six months ended 30 June 2007 US$'000 (unaudited)	Year ended 31 December 2007 US$'000 (audited)
Net cash used in operating activities	(513)	(1,058)	(740)
Cash flows from investing activities
Acquisition of property, plant and equipment	(1,310)	(1,835)	(3,376)
Receipts from sale of property, plant and equipment	128	13	172
Acquisition of new subsidiary companies, net of cash	-	(943)	(6,415)
Incorporation of new subsidiary companies	-	(1)	-
Purchase of unquoted shares	-	-	(9)
Repayment from / (advance to) associated company	228	(93)	(598)
Dividend income from associated company	-	-	324
Interest received	140	116	210
	________	________	________
Net cash used in investing activities	(814)	(2,743)	(9,692)
	________	________	________
Cash flows from financing activities
Proceeds from issue of shares	8,660	499	3,275
Share issue costs	(391)	-	(69)
Net borrowings	216	297	(381)
Repayment to related parties	(402)	(643)	(245)
(Repayment to) / advance from directors	(54)	313	722
Dividend paid to shareholders	-	(383)	(383)
Dividend paid to minority shareholders of subsidiary companies	(86)	-	(60)
	________	________	________
Net cash from financing activities	7,943	83	2,859
	________	________	________
Net increase / (decrease) in cash and cash equivalents	6,616	(3,718)	(7,573)
Foreign exchange translation differences	-	-	(234)
Cash and cash equivalents at the beginning of the period	4,111	11,918	11,918
	________	________	________
Cash and cash equivalents at the end of the period	10,727	8,200	4,111
	________	________	________

  VELOSI LIMITED

Consolidated Cash Flow Statement

For the six months ended 30 June 2008

	Six months ended 30 June 2008 US$'000 (unaudited)	Six months ended 30 June 2007 US$'000 (unaudited)	Year ended 31 December 2007 US$'000 (audited)
Cash and cash equivalents comprise:
Current assets - Cash and cash equivalents	15,881	8,200	7,967
Current liabilities - Bank overdraft	(5,154)	-	(3,856)
	________	________	________
	10,727	8,200	4,111
	________	________	________

VELOSI LIMITED

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2008

	Share capital US$'000	Share premium US$'000	Other reserves US$'000	Retained earnings US$'000	Total US$'000	Minority interest US$'000	Total equity US$'000
Balance as at 1 January 2007	763	18,128	434	6,932	26,257	2,507	28,764
Net proceeds from shares issued	4	371	-	-	375	-	375
Profit for the period	-	-	-	3,560	3,560	1,014	4,574
Acquisition of subsidiaries	-	-	-	-	-	202	202
Issue of share options	-	-	123	-	123	-	123
Dividend paid	-	-	-	(383)	(383)	-	(383)
	________	_______	_______	_______	_______	_______	________
Balance as at 30 June 2007	767	18,499	557	10,109	29,932	3,723	33,655
	________	_______	_______	_______	_______	_______	________
	________	_______	_______	_______	_______	_______	________

VELOSI LIMITED

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2008

	Share capital US$'000	Share premium US$'000	Other reserves US$'000	Retained earnings US$'000	Total US$'000	Minority interest US$'000	Total equity US$'000
Balance at 1 July 2007	767	18,499	557	10,109	29,932	3,723	33,655
Net proceeds from shares issued	20	2,811	-	-	2,831	-	2,831
Exchange reserve on translation of financial statements of overseas subsidiaries	-	-	(74)	-	(74)	183	109
Profit for the period	-	-	-	3,895	3,895	1,287	5,182
Acquisition of subsidiaries	-	-	-	-	-	578	578
Disposal of shares in subsidiary	-	-	-	-	-	18	18
Issue of share options	-	-	166	-	166	-	166
Dividend paid	-	-	-	-	-	(60)	(60)
	________	_______	_______	_______	_______	_______	________
Balance as at 31 December 2007	787	21,310	649	14,004	36,750	5,729	42,479
	________	_______	_______	_______	_______	_______	________
Balance as at 1 January 2008	787	21,310	649	14,004	36,750	5,729	42,479
Net proceeds from shares issued	82	8,916	-	-	8,998	-	8,998
Profit for the period	-	-	-	4,410	4,410	1,598	6,008
Issue of share options	-	-	165	-	165	-	165
Dividend paid	-	-	-	-	-	(86)	(86)
	________	_______	_______	_______	_______	_______	________
Balance as at 30 June 2008	869	30,226	814	18,414	50,323	7,241	57,564
	________	_______	_______	_______	_______	_______	________

VELOSI LIMITED

INTERIM ANNOUNCEMENT - NOTES

1.      Business of Velosi Limited

 

         Velosi Limited was incorporated in Jersey on 28 March 2006. The principal activity of the Company is investment holding. The principal activities of the Group are provision of asset integrity management and health, safety, and environment (HSE) services, which cover quality assurance and quality control services. This includes certification, project verification, quality enhancement and engineering support services.

 

2.      Basis of preparation and significant accounting policies

 

         The Group's interim financial statements comprise of the consolidated balance sheet as of 30 June 2008 and related income statement, consolidated cash flow statement and related notes for the six months then ended of Velosi Limited. These have been prepared in accordance with IAS 34 ‘Interim Financial Statements’. The accounting policies are consistent with those adopted in the Company's annual financial statements for the year ended 31 December 2007.

        

         The interim statements are unaudited and do not constitute statutory financial statements. The results for the year ended 31 December 2007 do not constitute statutory accounts and have been extracted from the group's published accounts for that year, which contain an unqualified Audit Report.

        

         The consolidated financial statements are presented in US Dollars (“US$”) and all values are rounded to the nearest US$ '000 except where otherwise indicated.

 

         The Interim Report for the six months ended 30 June 2008 was approved by the Directors on 16 September 2008.

 

 

3.      Income tax expense

 

	Six months ended 30 June 2008 US$'000	Six months ended 30 June 2007 US$'000	Year ended 31 December 2007 US$'000
Foreign tax
Overseas tax payable	1,163	938	1,740
Total current tax	1,163	938	1,740
Deferred tax
Movement in deferred tax position	(42)	(82)	(133)
Taxation on profit from ordinary activities	1,121	856	1,607
Add: Share of taxation of associated companies	39	32	63
	1,160	888	1,670

         Interim period income tax is accrued based on the estimated average annual effective income tax rate 
         of 16% (Interim period 2007: 16%).

4.         Increase in paid up capital

 

On 11 February 2008, 83,438 new ordinary shares were issued in lieu of payment for the acquisition of 14 per cent of Kurtec Inspection Services Sdn Bhd.

 

On 6 March 2008, 214,836 new ordinary shares were issued to shareholders of K2 Specialist Services Pte Ltd (“K2”), pursuant to an agreement dated 19 October 2007 between K2 and Velosi Industries Sdn Bhd, and based on achievement of performance targets by K2 for the financial year ending December 31, 2007.

 

On 27 March 2008, Charles Stanley Securities on behalf of the Company, completed an institutional placing (“the Placing”) of 3,842,000 new Ordinary Shares which represent 8.8% of the enlarged issued share capital of the Company.

  

 

5.      Earnings per share

 

         The basic and diluted earnings per share is calculated by reference to the earnings attributable to ordinary shareholders divided by the number of shares in issue as at 30 June 2008, as follows:

 

	Six months ended 30 June 2008 US$'000	Six months ended 30 June 2007 US$'000	Year ended 31 December 2007 US$'000
Profit after taxation and minority interest	4,410	3,560	7,455
	Number	Number	Number
Weighted average number of shares for the purpose of calculating basic earnings per share	42,419,424	38,235,053	38,389,734
Effect of dilutive potential ordinary shares:
Share Options	2,067,708	2,067,708	1,858,702
Warrants	476,749	476,749	476,749
Deferred consideration	1,853,193	-	332,773
Weighted average number of shares for the purpose of calculating diluted earnings per share	46,817,074	40,779,510	41,057,958
Earnings per ordinary share
Basic earnings per share	10.4 cents	9.3 cents	19.4 cents
Diluted earnings per share	9.4 cents	8.7 cents	18.2 cents

6.    Dividends

A final dividend of US$383,000 (representing 1 cent per share) in respect of the financial year ended 31 December 2007 was paid on 25 July 2008.

The Directors do not propose to pay an interim dividend. The Directors do intend, subject to the availability of distributable reserves, to recommend a final dividend to shareholders in respect of the financial year ending 31 December 2008.

7.      Segmental Reporting

A geographical analysis of the turnover and profit before tax in the period is given below:

	Six months ended 30 June 2008 US$'000	Six months ended 30 June 2007 US$'000	Year ended 31 December 2007 US$'000
Turnover
Europe	19,619	3,596	15,174
Middle East	26,788	14,283	34,172
Americas	8,061	7,874	17,464
Africa	8,710	18,130	36,608
Asia	12,224	3,904	12,115
Others	1,904	640	1,464
	77,306	48,427	116,997
Gross Profit
Europe	3,327	1,041	2,921
Middle East	6,607	3,799	8,315
Americas	1,918	1,942	4,707
Africa	1,908	3,107	5,804
Asia	4,375	1,994	5,511
Others	939	244	587
	19,074	12,127	27,845
Carrying amount of assets
Europe	16,474	9,591	16,106
Middle East	27,178	16,697	19,472
Americas	7,425	5,431	6,897
Africa	16,052	14,048	14,830
Asia	20,088	8,034	17,198
Others	6,763	849	1,136
	93,980	54,650	75,639
Liabilities
Europe	12,805	3,134	10,862
Middle East	5,776	4,769	5,403
Americas	2,693	2,213	2,708
Africa	8,024	8,392	8,073
Asia	5,828	2,159	5,762
Others	1,290	328	352
	36,416	20,995	33,160
Additions to plant, property and equipment
Europe	46	868	908
Middle East	217	547	1,349
Americas	21	5	5
Africa	429	519	1,352
Asia	561	261	751
Others	75	5	11
	1,349	2,205	4,376
Depreciation
Europe	80	15	86
Middle East	220	123	292
Americas	-	-	4
Africa	243	113	327
Asia	265	113	330
Others	8	6	17
	816	370	1,056

8.    Intangible assets

	30 June 2008 US$'000	30 June 2007 US$'000	31 December 2007 US$'000
At 1 January	1,662	-	-
Acquisition of subsidiary companies	-	-	1,737
Amortisation	(113)	-	(75)
	1,549	-	1,662

Acquired intangible assets which consist of customer lists acquired are valued at cost less accumulated amortisation. Amortisation is calculated using the straight line method over the expected useful life of 5 and 10 years.

9.       Deferred consideration

	30 June 2008 US$'000	30 June 2007 US$'000	31 December 2007 US$'000
At 1 January	4,477	-	-
Acquisition of subsidiary companies	-	-	6,603
Cash consideration paid	-	-	(2,126)
Issuance of new Velosi shares	(493)	-	-
	3,984	-	4,477

These interim results will be available on the Company's website www.velosi.com. Further copies can be obtained from the registered office at Walker House, PO Box 72, 28-34 Hill Street, St Helier, Jersey JE4 8PN Channel Islands.

10.       Seasonality

The Group's business operations are not seasonal.

11.       Property, plant and equipment

During the period, the Group acquired new plant and machinery at a cost of US$1,350,000. The Group also disposed of plant and machinery with net book value of US$128,000.

12.       Investment in associated companies

Investment in associated companies has increased as a result of the share of net profit of associated companies.

13.        Related party transactions

The following table provides the total amount of transactions, which have been entered into with related parties for the relevant financial year:

Related parties		Sales to related parties	Purchases from related parties	Rental received and receivable from related parties
		US$'000	US$'000	US$'000
Velosi (M) SdnBhd	2008	1,477	101	31
	2007	984	270	-
Associated companies
Velosi LLC	2008	407	17	-
	2007	123	15	-

During the financial year, there were no transactions entered into with key management other than Directors' remuneration as disclosed in note 5.

Term and conditions of transactions with related parties

The above transactions were entered into in the normal course of business and were carried out on an arms-length basis.

Amount due from/ to related parties

The amount due from / to related parties included under current assets / liabilities represents unsecured interest free advances repayable on demand. The related party is Velosi (M) Sdn Bhd. Included in trade and other receivables is an amount of US$0.391 million (2007: US$1.089 million) pledged as security for bank guarantee facilities.

14.       Bank and other borrowings

	30 June 2008 USD'000	30 June 2007 USD'000	31 December 2007 USD'000
Current
Bank overdrafts	5,154	-	3,856
Bank loan	128	-	-
Hire purchase	295	148	219
	5,577	148	4,075
Non-current
Bank loan	1,069	479	548
Hire purchase	480	325	951
	1,549	804	1,499
	7,126	952	5,574

Independent review report to Velosi Limited

We have been engaged by Velosi Limited to review the condensed financial information for the six months ended 30 June 2008 which comprises the unaudited consolidated income statement, the unaudited consolidated balance sheet, the unaudited consolidated cash flow statement, the unaudited consolidated statement of changes in shareholders' equity and related notes 1 to 14. We have read the other information contained in the interim half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the condensed information.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.  

Respective responsibilities of directors and auditors

The interim report, including the condensed financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules issued by the London Stock Exchange, which requires that the interim report must be prepared and presented in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial information in the interim report based on our review.  

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial information in the interim half-yearly report for the six month period ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by European Union and the AIM Rules issued by the London Stock Exchange.

Mazars LLP

Chartered Accountants
London

22 September 2008

 

END

 

 

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