Final Results - Replacement

Volvere PLC 25 May 2007 The following amendments have been made to the Final Results announcement released today at 07.01 under RNS No 2179X. Three headings were omitted from the previous announcement. These have now been added. All other details remain unchanged. The full amended text is shown below. 25 May 2007 VOLVERE PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Volvere plc ('Volvere' or 'the Company'), the turnaround investment company, announces its final results for the year ended 31 December 2006. HIGHLIGHTS • Group net assets: £7.76m (2005: £4.09m) of which cash represented £6.54m (2005: £1.14m) • Group turnover in the year: £13,777,000 (2005: £10,626,000) • Group profit before tax: £70,000 (2005: loss £63,000) • Core areas at Vectra continued to perform strongly • Sira Test and Certification, acquired in 2005, generated £462,000 profit before tax, goodwill and group management and service charges (29 September - 31 December 2005: £107,000) • Acquired Sira Environmental and Sira Defence & Security • Group well positioned to seize opportunities in future • Basic earnings per share 1.85p (2005: loss 1.64p); diluted earnings per share 1.81p (2005: loss 1.64p) CHAIRMAN'S STATEMENT I am pleased to report on the results for the year ended 31 December 2006. 2006 was a defining year for the Group. We entered the year with two operating subsidiaries and ended it with four as well as a controlling interest in NMT Group PLC. Group turnover is at an all-time high, up 30% on last year, and we have moved from a loss to a small profit. Net assets per ordinary share are up 31% over the period to £1.41 and our balance sheet is strong. OUTLOOK The current period has started strongly. I believe that the value of the investments that we have made will become increasingly apparent. Lord Kalms of Edgware Chairman For further information, please contact: Jonathan Lander, Chief Executive Officer Volvere plc + 44 (0) 20 7979 7596 Terry Garrett Weber Shandwick Square Mile + 44 (0) 20 7067 0700 Tom Hulme Teather & Greenwood + 44 (0) 20 7426 9000 CHIEF EXECUTIVE'S STATEMENT Introduction The three largest operating subsidiaries contributed strongly to group overhead, which is very pleasing given that they were acquired in less than auspicious times, when they or their former owners were in distress. That is of course the essence of turnaround investing. Even our smallest unit - the defence and security business - essentially broke even over the period. I believe it has the potential for much success, albeit with a high degree of risk due to the early stage of its development. The offer for NMT Group PLC, which was made on 14 September 2006 and which was declared unconditional on 2 November 2006, has resulted in over £5m of extra cash becoming available to the Group for investing in businesses that fit with any existing portfolio company, as well as for further turnarounds and activist investment opportunities. OPERATING REVIEW Vectra Vectra is our largest subsidiary, representing in 2006 about 75% of Group turnover and employing 75% of our staff. It contributed £0.537m towards Group central overhead during the period. We believe Vectra is the largest independent safety consultancy in the UK. It operates in the Oil and Gas, Transportation and Nuclear markets. Demand for the services that Vectra offers is linked closely to the level of infrastructure spend in these areas, which we expect to be significant for the foreseeable future. Vectra has an excellent track record in its service delivery - spanning more than 20 years - which is a testament to the high calibre of the individuals we employ and the long-term relationships we build with our clients. In spite of the very buoyant labour markets in which Vectra operates 4.6%, growth in sales was achieved compared to 2005. Vectra's future growth will be a function partly of the number of suitably qualified people that we can recruit and we have redoubled efforts to increase our fee earning capacity during 2007. This is showing early signs of success in the current period. During 2006 Vectra completed some high profile and challenging assignments. The Transportation practice continued the safety case for the new Dutch high-speed rail link between Amsterdam and the Belgian border (completed in early 2007). This was the largest Public Private Partnership contract ever awarded by the Dutch government and one of the largest high speed railway projects in Europe to date. Fees generated on the project over 3 years exceeded £1m. The expected investment in European high speed rail networks provides an opportunity for Vectra to leverage its experience and profile to achieve further growth in this area. In addition, the growing threat from terrorism has provided an opportunity to win strategically important consulting projects in this area and we are confident that this will continue to expand. Our work for the UK rail industry continued to grow, particularly for projects on the London Underground. Our control room design and passenger information solutions, which combine safe design with operational effectiveness, are recognised as industry standards and we see further growth in this business in the years ahead. The Nuclear practice continued to provide consulting and related services to the UK civil and defence nuclear market. Following the relative instability of this market in 2005 we saw a more stable market in 2006. In addition, we have diversified our client base to provide greater opportunity for growth and in 2007 further extended our consulting capabilities. We are confident that the Nuclear sector will continue to provide a steady flow of work for Vectra reflecting our position as a respected, long term industry player. The Process practice (which largely serves the oil and gas sectors) made strong progress during the year. We were delighted to have our framework agreement with the Shell Group extended in early 2007 for a further 2 years beyond its initial 3-year term, reflecting the close relationship we have established with Shell in supporting its European safety activities. The strength of the oil and gas sectors, coupled with Vectra's reputation and profile, mean we are confident that the Process practice will continue to perform strongly. We are actively seeking to acquire other businesses complementary to Vectra in order to increase the scale and the depth of our offering. During 2006 we came close to but regrettably could not complete on any transaction. This is principally because of the high prices being paid for such businesses due to the scarcity of companies of a size similar to Vectra and the level of demand for services. We continue to look for such acquisitions. Sira Test and Certification ('STC') 2006 was STC's first full year of ownership by the Group and it made a contribution to Group central overhead of £0.462m, which is an excellent performance. STC is a UK leader in the conformity assessment and testing field, specialising in the safety of equipment used in potentially explosive atmospheres. STC serves a range of markets, including the fuel dispenser, mining equipment and process plant markets as well as offering training relevant to those markets. Its clients are located throughout the world and we believe that there are opportunities to further extend its client base and geographic presence. In 2006 STC opened a second office, increasing its fee earning capacity and embarked on an enhanced marketing programme. The first quarter order intake for 2007 has shown impressive growth over the prior year. We remain confident about this business's prospects in the years ahead. Sira Environmental Sira Environmental was acquired in March 2006 and provides test, calibration and certification services for people and products that are associated with gas emissions and effluent flow. The company operates the Monitoring Certification Scheme ('MCERTS') on behalf of the Environment Agency. MCERTS is a high profile scheme that provides regulatory assurance in respect of stack emissions and effluent flow. Sira Environmental's performance improved as 2006 progressed and it became profitable in the second half of the year, following its move to a new office and laboratory. The improved performance has continued into 2007 and we are confident this business will prosper further as we introduce new activities and build on existing ones. Sira Defence & Security ('SDS') SDS was acquired in March 2006. It develops niche surveillance products and software for use in security applications. Typically SDS is paid by customers for the development time associated with a potential product, followed by sales of the end product should the development be successful. For the period since acquisition SDS's turnover was £0.18m, which comprised principally of the sale of surveillance products. We have seen further encouraging enquiry levels for similar products in early 2007. In addition, we are positive about relatively significant enquiries received for further related work. During 2006 SDS continued development of the Meerkat CCTV image-management software. This was launched into the police and homeland security sector in early 2007 and we have been pleased with the level of interest shown. EMPLOYEES The Group's strength lies in the commitment and dedication of all its staff and I am grateful to them for all their continued efforts. ACQUISITIONS AND FUTURE STRATEGY Following the acquisition of the NMT Group PLC, we now have access to sufficient cash resources to make further investments in complementary businesses as well as activist and turnaround opportunities. We remain committed to ensuring that the underlying value of the Group's activities is recognised by shareholders through active management of our portfolio of businesses. Jonathan Lander Chief Executive FINANCIAL REVIEW This Financial Review covers the Group's performance during the year ended 31 December 2006. It should be read in conjunction with the Chairman's and Chief Executive's statements. Accounting Policies and Basis of Preparation The financial statements have been prepared in accordance with UK Generally Accepted Accounting Standards and the Group's principal accounting policies, which are set out in note 1 of the Notes to the Financial Statements below. The Group carries out regular reviews of its accounting policies in accordance with the requirement of Financial Reporting Standard ('FRS') 18 'Accounting Policies'. Turnover and Operating performance Turnover in the year grew by 30% to £13,777,000 (2005: £10,626,000) of which £717,000 arose from the acquisitions of Sira Environmental and Sira Defence and Security in March 2006. Segmental turnover and operating results from the Group's operations (before intra-group management charges) are set out in Note 2 of the Notes to the Financial Statements and are further analysed into individual businesses in Table A below. In view of the growth of the Group during the year and to give increased clarity to individual company results, support service functions (principally Finance, IT and Human Resources) were combined into one central service company, Volvere Central Services ('VCS'), during the year. The costs relating to these functions had previously been accounted for in Vectra's results. Following the all-share offer for the group's former associate undertaking, NMT Group PLC ('NMT') became a subsidiary undertaking with effect from November 2006 and has been consolidated from that date. Table A 2006 2006 2006 2006 2006 2006 2006 2005 Operating Profit £000 £000 £000 £000 £000 £000 £000 £000 Head Vectra Sira Sira Sira NMT Total Total Office/ Test and Environmental Defence & Group Group VCS Certification Security Turnover 218 10,358 2,484 535 182 - 13,777 10,626 Operating (loss)/ profit before goodwill amortisation and intra-group charges (1,101) 537 462 5 (1) (58) (156) (167) Notes Note 1 Note 2 Note 2 Note 3 1 & 3 Amortisation of positive goodwill (61) (16) Realisation of negative goodwill 234 24 Operating profit/(loss) 17 (159) Note 1: The costs of the Group's Finance, IT and HR functions were included in Vectra until 30 June 2006. From 1 July 2006 they were transferred to VCS. The operating results of Head Office/VCS and Vectra have been adjusted above on a pro-forma basis to show the financial performance of each as though VCS had existed throughout the year. Note 2: Acquired 29 March 2006. Note 3: NMT has been consolidated as a subsidiary since November 2006. For the first 10 months NMT was an associate undertaking. Included in the turnover of Head Office/Central Services is £218,000 relating to the period for which NMT was an associate. The Group's operating profit of £17,000 was much improved over 2005 (loss £159,000). Performance at Vectra (after adjusting on a pro-forma basis for the costs that now form part of Volvere Central Services) was improved over 2005 and Sira Test & Certification (acquired on 29 September 2005) performed strongly throughout the year, generating an operating profit before goodwill of £462,000 amortisation (2005: £107,000). NMT's operating loss of £58,000 relates to the overheads for the period since it became a subsidiary. These costs have reduced significantly in 2007 following that company's cancellation of its stock market listing and associated costs. Of the negative goodwill of £278,000 realised in the year, £254,000 was realised from acquisitions in 2006 (and most of which related to NMT becoming a subsidiary). This arose because the fair value of the Group's share of the underlying net assets acquired in NMT was less than the cost of acquiring the company. The gross margin for the Group as a whole was improved at 49% for the year (2005: 46%), reflecting the contribution of the Sira Environmental and Sira Defence & Security businesses, along with a full year's contribution from Sira Test and Certification. For the first 10 months of 2006, the gross margin includes the turnover and profit earned of £218,000 from management fees charged to NMT whilst an associate (and which are included as part of the share of associate's operating loss). Vectra's gross margin was in line with 2005. EARNINGS PER SHARE The basic and diluted earnings per ordinary share were 1.85p and 1.81p respectively (2005 Loss: Basic 1.64p; Diluted 1.64p). During the year the Group continued the operation of a share option scheme in which all staff are entitled to participate, subject to certain conditions. NEGATIVE GOODWILL Negative goodwill arising on the acquisition of Vectra has been capitalised and has been credited to the profit and loss account during the period in so far as the assets acquired have been consumed or realised as cash. In the year an amount of £24,000 (2005: £24,000) was credited to the profit and loss account. Negative goodwill arising on the consolidation of the Group's then associate undertaking, NMT Group PLC, has been credited to the profit and loss account (£44,000; 2005: £135,000). Negative goodwill of £210,000 (2005: £nil) arising on the consolidation of NMT as a subsidiary, has been credited to the profit and loss account during the year. POSITIVE GOODWILL Positive goodwill relating to the acquisition of Sira Test and Certification in 2005 is being amortised over 20 years, with a charge in 2006 of £61,000 (2005: £16,000). CASH MANAGEMENT During the year the Group closed the Contract for Difference ('CFD') through which part of its holding in NMT had been held. This has been accounted for as repayment of debt. Cash balances at the year end totalled £6,540,000 (2005: £1,144,000) reflecting the acquisition of NMT and the underlying trading in our businesses. HEDGING It is not the Group's policy to enter into derivative instruments to hedge interest rate risk. DIVIDENDS In accordance with the policy set out in our prospectus on our admission to AIM, the Board does not currently intend to recommend payment of a dividend and prefers to retain profits as they arise for investment in future opportunities CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 December 2006 Note Total Year ended Year ended 31 December 31 December Existing Acquisitions 2006 2005 £000 £000 £000 £000 TURNOVER 2 13,060 717 13,777 10,626 Cost of sales (6,724) (293) (7,017) (5,791) GROSS PROFIT 6,336 424 6,760 4,835 Administrative expenses - before goodwill (6,438) (478) (6,916) (5,002) - realisation of negative 9 24 210 234 24 goodwill - amortisation of positive 9 (61) - (61) (16) goodwill (6,475) (268) (6,743) (4,994) OPERATING (LOSS)/PROFIT (139) 156 17 (159) Share of operating loss in (96) (89) associate Negative goodwill arising in respect of associate 9 44 135 Finance income - interest receivable and similar income - Group 42 59 - share of associate 63 21 Cost of fundamental reorganisation - share of associate 5 - (30) PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAX 2 70 (63) Tax on profit/(loss) on ordinary 6 - 3 activities PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAX 70 (60) Minority interests 4 - PROFIT/(LOSS) FOR THE YEAR TRANSFERRED TO/(FROM) RESERVES 17 74 (60) EARNINGS/(LOSS) PER ORDINARY SHARE: - Basic 8 1.85p (1.64p) - Diluted 8 1.81p (1.64p) All results are derived from continuing operations. There are no recognised gains or losses other than the result for the current and preceding financial years. Accordingly, no statement of total recognised gains and losses is given. BALANCE SHEETS 31 December 2006 2006 2005 Note Group Company Group Company £000 £000 £000 £000 FIXED ASSETS Intangible fixed assets - positive goodwill 9 1,136 - 1,285 - - negative goodwill 9 (84) - (66) - Tangible fixed assets 10 293 - 218 - Investments 11,12,13 - 6,970 1,535 3,619 1,345 6,970 2,972 3,619 CURRENT ASSETS Debtors 14 4,743 1,026 3,663 1,997 Cash at bank and in hand 6,540 479 1,144 389 11,283 1,505 4,807 2,386 CREDITORS: amounts falling due 15 (4,452) (280) (3,688) (848) within one year NET CURRENT ASSETS 6,831 1,225 1,119 1,538 CREDITORS: amounts falling due after more than one year 15 (420) - - - NET ASSETS 7,756 8,195 4,091 5,157 CAPITAL AND RESERVES Called up share capital 16 50 50 50 50 Share premium account 17 3,313 3,313 361 361 Profit and loss account 17 3,745 4,832 3,680 4,746 SHAREHOLDERS' FUNDS 18 7,108 8,195 4,091 5,157 Minority interests 26 648 - - - TOTAL CAPITAL EMPLOYED 7,756 8,195 4,091 5,157 CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2006 Note 2006 2005 £000 £000 Net cash inflow/(outflow) from operating activities 19 68 (21) Returns on investments and servicing of finance 20 42 59 Capital expenditure and financial investment 20 (175) (18) Acquisitions and disposals 20 5,478 (2,457) Cash inflow/(outflow) before management of liquid resources and financing 5,413 (2,437) Financing 20 (17) 578 Increase/(decrease) in cash in the year 21 5,396 (1,859) NOTES TO THE PRELIMINARY ANNOUNCEMENT Year ended 31 December 2006 The financial information set out in the announcement does not constitute the company's statutory accounts for the year ended 31 December 2006 or the year ended 31 December 2005. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2006 on the basis of the financial information presented by the directors in this preliminary announcement will be delivered to the Registrar of Companies following the company's annual general meeting. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which have been applied during the current and preceding year with the exception of FRS 20 and FRS 25 adopted in 2006, are set out below. Basis of accounting The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The group financial statements consolidate the financial statements of Volvere plc and its subsidiary undertaking drawn up to 31 December 2006. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method. Goodwill Goodwill, representing the excess of the fair value of consideration given over the fair value of separable net assets acquired, is capitalised as an intangible asset and is amortised over a period of 20 years, being the directors assessment of its likely future life. Provision is made for any impairment. Negative goodwill, representing the excess of the fair value of the separable net assets acquired over the fair value of the consideration given, is capitalised as an intangible asset and credited to the profit and loss account over the periods in which relevant non monetary assets acquired are consumed or realised as cash, or the periods expected to benefit. Tangible fixed assets The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Depreciation is calculated so as to write off the cost of tangible fixed 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: Improvements to short leasehold property Over the life of the lease Plant and machinery 20% - 33% Investments Investments are carried in the balance sheet at cost less provision for diminution in value. Amounts recoverable on contracts Amounts recoverable on short-term contracts include the cost of direct materials and labour plus attributable overheads. Full provision is made on uncompleted contracts for anticipated losses to completion. Turnover Turnover represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, VAT and other sales related taxes and are recognised on a basis appropriate to the nature of the income source. Turnover earned on time and materials contracts is recognised as costs are incurred. Income from fixed price contracts is recognised in proportion to the stage of completion of the relevant contract. Foreign currencies All transactions denominated in foreign currencies are translated into sterling at the actual rate of exchange ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date at the end of the financial year. All exchange differences arising are taken to the profit and loss account in the year in which they arise. Taxation Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred at the balance sheet date. Timing differences are differences between the group's taxable profits and its results as stated in the financial statements. These arise from including gains and losses in different periods from those recognised in the financial statements. Deferred tax is measured on a non discounted basis. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing difference can be deducted. Associates In the group financial statements investments in associates are accounted for using the equity method. The consolidated profit and loss account includes the group's share of associates' profits less losses while the group's share of the net assets of the associates is shown in the consolidated balance sheet. Goodwill arising on the acquisition of associates is accounted for in accordance with the policy set out above. Any unamortised balance of goodwill is included in the carrying value of the investment in associates. Investment income Income from investments is included in the profit and loss account on an accruals basis, before deduction of any related tax credit. Pension costs The group's subsidiary undertakings, Vectra Group Limited and Sira Test and Certification Limited, operate defined contribution schemes. The contributions to those schemes are charged against profits in the years in which they fall due. The assets of the schemes are held separately from those of the relevant company and group in independently administered funds. The group provides no other post retirement benefits to its employees. Operating leases Costs in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term. Share-based payment The group applies the requirements of FRS 20 Share-based Payment. In accordance with the transitional provisions, FRS 20 applies to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005. The group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The group has concluded that the impact for 2006 and 2005 comparatives would not be material. TURNOVER AND PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAX The turnover is attributable to the continuing operations and principal activities of safety and risk consulting, certification services and management services. 2006 By Destination £000 £000 £000 £000 £000 Safety and risk Certification Management Security Total consulting services services Solutions United Kingdom 8,094 2,698 218 182 11,192 Rest of Europe 1,350 154 - - 1,504 United States of America - 119 - - 119 Other 914 48 - - 962 10,358 3,019 218 182 13,777 2005 By Destination £000 £000 £000 £000 £000 Safety and Certification Management Security Total risk consulting services services Solutions United Kingdom 7,867 508 70 - 8,445 Rest of Europe 1,297 50 - - 1,347 United States of America - 95 - - 95 Other 734 5 - - 739 9,898 658 70 - 10,626 2006 Segmental Analysis £000 £000 £000 £000 £000 £000 Management Safety and Certification Security Investing Total services risk services solutions activities consulting Turnover Total sales 939 10,358 3,031 182 - 14,510 Inter-segment sales (721) - (12) - - (733) Sales to third parties 218 10,358 3,019 182 - 13,777 Segment operating (loss)/profit (1,101) 537 467 (1) (58) (156) before goodwill (see note (a) below) Amortisation of positive (61) goodwill Realisation of negative 234 goodwill Share of associate's operating loss (96) Realisation of goodwill 44 arising in associate Finance income 42 Share of associate's finance income 63 Profit on ordinary activities 70 before taxation Segment net assets 113 1,036 844 (10) 5,797 7,780 Unallocated net assets (24) Net assets 7,756 2005 Segmental Analysis £000 £000 £000 £000 £000 £000 Management Safety and Certification Security Investing Group services risk services solutions activities consulting Turnover Total sales 934 9,898 658 - - 11,490 Inter-segment sales (864) - - - - (864) Sales to third parties 70 9,898 658 - - 10,626 Segment operating (loss)/ (202) (48) 67 - - (183) profit before goodwill (see note (a) below) Realisation of negative goodwill 24 Share of associate's operating (89) loss Share of associate's exceptional (30) items reported after operating loss Realisation of goodwill arising 135 in associate Finance income 59 Share of associate's finance 21 income Profit on ordinary activities (63) before taxation Segment net assets (488) 1,408 1,636 - - 2,556 Share of associate's net assets 1,535 Net assets 4,091 Note (a): In response to the acquisitions made in late 2005 and early 2006 the Group established a central service company (Volvere Central Services Limited) with effect from 1 July 2006, to provide financial, IT and personnel services to Group companies. Until that date these activities were accounted for through the results of Vectra Group Limited and therefore formed part of the Safety and Risk Consulting segmental analysis. In order to present more clearly the segmentation of the Group's businesses the 2006 segmental analyses have been adjusted to reflect the existence of the central service company as though it had existed throughout that year. No similar exercise was performed for 2005 as for most of the year the people within Vectra Group Limited worked solely on operations within that business. For both the year ended 31 December 2006 and 31 December 2005 the net assets were all based in the United Kingdom. Profit/(loss) on ordinary activities before taxation is stated after charging/ (crediting): 2006 2005 £000 £000 Depreciation on owned assets 107 66 Realisation of negative goodwill (see note 9) (278) (159) Amortisation of positive goodwill 61 16 Auditors' remuneration: - audit services 38 35 - non-audit services 21 8 Operating lease costs - plant and machinery 153 162 - other 471 411 Loss on disposal of fixed assets 2 - Exchange loss/(gain) 17 (2) Auditors' remuneration in respect of the company was £10,000 (2005: £10,000). DIRECTORS' EMOLUMENTS The remuneration of the directors was as follows: 2006 2005 £000 £000 Emoluments 417 152 2006 2005 £000 £000 Lord Kalms 39 7 Neil Ashley 20 8 David Buchler 20 20 Richard Kalms 25 - Jonathan Lander 59 - Nick Lander 44 - 207 35 The services of Jonathan Lander, Nick Lander and Richard Kalms are provided under the terms of a Service Agreement dated 19 December 2002 with Dawnay, Day Lander Limited. The amount charged under this agreement (which is not included in the amount stated above) for the year amounted to £210,000 (2005: £117,000). None of the directors were members of the group's defined contribution pension plan in the year (2005: none). STAFF COSTS (INCLUDING DIRECTORS) Group 2006 2005 £000 £000 Wages and salaries 6,858 5,623 Social security costs 723 599 Pension costs 302 260 7,883 6,482 The average monthly number of persons employed by the group (including directors) during the period was 162 (2005: 119) of which management and administration numbered 40 (2005: 20) and consultants and other fee earning staff totalled 122 (2005: 99). Those of the group's subsidiary undertakings, which are set out in Note 24, that have employees operate defined contribution pension plans to which they and their employees contribute. Company Employees of the company are directors and their costs are as disclosed within Note 3. 5. EXCEPTIONAL ITEMS 2006 2005 £000 £000 Costs of a fundamental reorganisation (group share) - 30 The exceptional costs in 2005 related to the costs incurred by the Group's then associated undertaking, NMT Group PLC, in reorganising its business. Further information on NMT Group PLC is given in Note 12. 6. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES 2006 2005 Current tax £000 £000 UK corporation tax - - Share of associate's tax - 3 Total tax on profit/(loss) on ordinary activities - 3 The standard rate of tax for the year, based on the UK standard rate of corporation tax is 30%. The actual tax charge for the period exceeds the standard rate for the reasons set out in the following reconciliation. 2006 2005 £000 £000 Profit/(loss) on ordinary activities before tax 70 (63) Add: share of associate's losses 33 (37) 103 (100) Tax (charge)/credit on profit/(loss) on ordinary activities at standard rate of 30% (2005: 30%) (32) 30 Factors affecting credit for the year: Expenses disallowable for tax purposes (24) (9) Capital allowances in (less)/excess of depreciation (16) 17 Goodwill not taxable 83 Tax losses carried forward (70) (45) Utilisation of brought forward losses 62 Movement in short term timing differences (3) 7 Total actual amount of current tax - - At 31 December 2006 a deferred tax asset has not been recognised in respect of timing differences relating to capital allowances, revenue losses and other short term timing differences as there is insufficient evidence that the asset will be recovered against future taxable profits. The amount of the asset not recognised is £18,644,971 (2005: £534,615). Of this asset £16,789,174 relate to NMT and therefore may not be available for offset against future profits of group activities. 7. PROFIT ATTRIBUTABLE TO THE COMPANY The profit for the financial year dealt with in the financial statements of the parent company was £95,000 (2005: £713,000). As permitted by Section 230 of the Companies Act 1985, no separate profit and loss account is presented in respect of the parent company. 8. PROFIT/(LOSS) PER SHARE The weighted average number of shares and profit/(loss) used to calculate earnings per share are given below: 2006 2005 Number Number Number of shares used for basic profit/(loss) per share 3,992,054 3,667,664 Number of shares deemed to be issued at nil consideration pursuant to exercise of in-the-money share options 11,092 3,383 Number of shares deemed to be issued at nil consideration under incentive share scheme 83,831 267,271 Number of diluted shares 4,086,977 3,938,318 2006 2005 £000 £000 Profit/(loss) attributable to shareholders 74 (60) At the end of the period 5,488,679 ordinary shares (2005: 3,786,588) were in issue. In addition, 99,470 convertible shares (2005: 99,470) were in issue and options for 268,553 shares (2005: 277,483) were outstanding. FRS14 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. In 2005 the loss per share would have decreased if shares had been issued upon exercise of the share options or under the incentive share scheme and therefore diluted loss per share was the same as basic loss per share in that year. 9. INTANGIBLE FIXED ASSETS - GOODWILL Positive Negative Goodwill Goodwill £000 £000 Cost At 1 January 2006 1,301 (1,537) Additions (see notes 11, 12 and 13) - (296) Refund of consideration (88) - At 31 December 2006 1,213 (1,833) Amortisation At 1 January 2006 (16) 1,471 (Charged)/realised in the period (61) 278 At 31 December 2006 (77) 1,749 Net book value At 31 December 2006 1,136 (84) At 31 December 2005 1,285 (66) The balance of negative goodwill is being realised over the periods in which relevant assets to which it relates are consumed by the Group or the periods which are expected to benefit. For Vectra this period is expected to extend out three years from the anniversary of the underlying acquisition. 10. TANGIBLE FIXED ASSETS Group Short leasehold Plant and property machinery Total £000 £000 £000 Cost At 1 January 2006 449 1,084 1,533 Acquisition of business (see note 13) - 10 10 Additions 29 151 180 Disposals - (15) (15) At 31 December 2006 478 1,230 1,708 Depreciation At 1 January 2006 351 964 1,315 Charge for the period 26 81 107 Disposals - (7) (7) At 31 December 2006 377 1,038 1,415 Net book value At 31 December 2006 101 192 293 At 31 December 2005 98 120 218 11. FIXED ASSET INVESTMENTS 2006 2005 Group Company Group Company £000 £000 £000 £000 Subsidiary undertakings - 6,970 - 2,124 Investment in associated undertaking - - 1,535 1,495 - 6,970 1,535 3,619 The Company's investments represent 100% of the ordinary share capital of Vectra Group Limited and 88.7% of the ordinary share capital of NMT Group PLC. The Company acquired, for cash, further shares in NMT Group PLC during February 2006, bringing its holding to 29.9%. On 14 September 2006 the Company announced a recommended all-share offer for the shares in NMT Group PLC that it did not already own. As a result of shares issued to NMT Group PLC shareholders under the terms of the offer, the Company's holding in NMT Group PLC increased to 88.7% at the year end. This holding has been reclassified from an associated undertaking to that of a subsidiary undertaking. The investments in subsidiary and associated undertakings are stated at cost. On 1 December 2006 the admission of NMT Group PLC's ordinary shares to trading on AIM was cancelled. The Company acquired its original stake in NMT Group PLC for cash but, on 23 September 2005, entered into a Contract for Difference ('CFD') in respect of 1,306,600 shares (out of a then total holding of 2,269,024 shares). This resulted in the legal ownership in these shares transferring to the CFD provider, with the Company retaining the economic interest. On this basis the economic benefit of these shares was reflected in the associate interest accounted for by the group in 2005. The funds received from the CFD provider upon the transfer of the holding to it, net of the funds provided by the Company as security under the terms of the CFD, were treated as an increase in debt. During 2006 the Company repurchased the shares which were subject to the CFD. The associated cash outflow was treated as a repayment of debt, in line with the treatment in the prior year. Subsidiary undertakings - (see Note 24) Group Company £000 £000 Cost and Net Book Value 1 January 2006 - 2,124 Reclassification as subsidiary undertaking (see Associated undertaking below) - 1,685 Additions (Note 12 below) - 3,161 31 December 2006 - 6,970 Associated undertaking Group Company £000 £000 Cost and Net Book Value 1 January 2006 1,535 1,495 Additions 190 190 Share of loss of associated undertaking (33) - Realisation of negative goodwill 44 - Reclassification as subsidiary undertaking (1,736) (1,685) 31 December 2006 - - 12. ACQUISITION OF SUBSIDIARY UNDERTAKING As noted in Note 11 above, during the year the Company increased its investment in NMT Group PLC and subsequently reclassified it from being an investment in an associated undertaking to a subsidiary undertaking. The following table sets out the book values of the identifiable assets and liabilities acquired at the point that NMT Group PLC became a subsidiary undertaking and their fair value to the Group: Book Provisional Fair value at value at fair value acquisition acquisition adjustments £000 £000 £000 Current assets Other debtors 74 - 74 Cash 5,822 - 5,822 Total assets 5,896 - 5,896 Creditors Trade and other creditors (114) - (114) Total liabilities (114) - (114) Net assets acquired 5,782 - 5,782 Minority interest (675) Costs treated previously as associated (1,736) undertaking Negative goodwill recognised (210) Purchase consideration 3,161 Satisfied by Cash 209 Shares 2,952 3,161 The financial information below, in relation to 2006, has been extracted from the unaudited management accounts for the period from 1 January to 31 October 2006, the nearest date to that upon which NMT Group PLC became a subsidiary undertaking and the audited financial statements for the year ended 31 December 2005: Unaudited Audited 1 January - 12 months to 31 31 October 2006 December 2005 £000 £000 Turnover - - Cost of sales - - Gross profit - - Distribution costs - (237) Administration expenses (327) (1,123) Operating loss (327) (1,360) Exceptional item - (336) Loss before interest and tax (327) (1,696) Interest income 215 293 Loss on ordinary activities before tax (112) (1,403) Taxation on loss on ordinary activities - 39 Loss for the period (112) (1,364) 13. ACQUISITION OF BUSINESSES AND ASSETS On 29 March 2006 the Group acquired certain businesses and assets from the Sira group of companies for a consideration of £31,000 payable in cash at completion. For the purpose of undertaking this transaction, the company established a new wholly-owned subsidiary, Sira Environmental Limited, which since the acquisition has commenced trading. On 1 August 2006, Sira Environmental Limited transferred certain of the acquired activities to another new wholly-owned subsidiary, Sira Defence & Security Limited. As part of the acquisition, the group companies became the sole members of Sira Certification Service, a company limited by guarantee. Sira Certification Service holds certain accreditations relating to the businesses of Sira Test and Certification Limited (acquired in 2005), Sira Environmental Limited and certain third party activities undertaken outside of the group. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair values to the group: Book Provisional fair Fair value to group at value at value acquisition acquisition adjustments £000 £000 £000 Fixed assets Tangible 10 - 10 Current assets Debtors (incl. amounts recoverable under contracts) 110 - 110 Total assets 120 - 120 Creditors Trade creditors (36) (11) (47) Total liabilities (36) (11) (47) Net assets acquired 84 (11) 73 Negative goodwill capitalised (42) Purchase consideration, including certain costs, after debtors transfer to seller 31 Satisfied by Cash 31 Details of the fair value adjustments are as follows: Tangible fixed assets The directors performed a review for impairment of tangible fixed assets. This review did not result in a change to the book value of the assets acquired. Debtors The directors performed a review of the recoverability of debtors (including amounts recoverable under contracts) and this did not result in a change to the book value of the assets acquired. Trade creditors and accruals The directors performed a review of the valuation of creditors and accruals which has resulted in certain creditors and accruals being restated. The businesses and assets acquired were previously part of the trading operations undertaken by the seller's group and accordingly statutory accounts were not prepared for the business acquired. No financial information was available in respect of the businesses and assets acquired. 14. DEBTORS 2006 2005 Group Company Group Company £000 £000 £000 £000 Trade debtors 2,987 - 2,112 28 Amounts recoverable on contracts 1,362 - 1,253 - Amounts due from subsidiary undertakings - 1,005 - 1,960 Other debtors 148 16 67 - Prepayments and accrued income 246 5 231 9 4,743 1,026 3,663 1,997 15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2006 2005 Group Company Group Company £000 £000 £000 £000 Bank loans and overdrafts 150 - - - Other loans - - 578 578 Trade creditors 1,672 199 919 94 Other taxes and social security 221 3 193 - VAT payable 370 - 363 73 Other creditors 372 7 285 - Accruals and deferred income 1,667 71 1,350 103 4,452 280 3,688 848 The Company's subsidiary, Sira Test and Certification Limited, drew down a term loan of £600,000 during the year. At the year end the balance outstanding totalled £570,000 and the amount of £150,000 relates to the current portion of that loan. The balance of £420,000 is shown as creditors falling due after more than one year. The other loans balance in 2005 is the net amount due under a contract for difference (see note 11), which was repaid during 2006. The company's subsidiaries Vectra Group Limited and Sira Test and Certification Limited have issued debentures creating fixed and floating charges over substantially all Vectra Group Limited's and Sira Test and Certification Limited's assets to secure amounts owing to their bankers for both working capital and term debt facilities. As at 31 December 2006 the total amount drawn down and outstanding pursuant these facilities (including bank guarantees and term debt but excluding overdrafts for which there is a right of set off with credit balances) totalled £630,000. 16. CALLED UP SHARE CAPITAL Company 2006 2005 £000 £000 Authorised 100,100,000 Ordinary shares of £0.0000001 each - - 50,000 A shares of £0.49999995 each 25 25 50,000 B shares of £0.49999995 each 25 25 4,999,999,500,000 Deferred shares of £0.00000001 each 50 50 100 100 Issued, called-up and fully paid 5,488,679 ordinary shares (2005: 3,786,588) of £0.0000001 each - - 49,735 A shares of £0.49999995 each 25 25 49,735 B shares of £0.49999995 each 25 25 26,499,985,533 Deferred shares of £0.00000001 each - - 50 50 Between 16 November and 29 December 2006 a total of 1,707,091 £0.0000001 ordinary shares were issued at prices of between £1.2625 and £1.7625 each, giving rise to share premium on issue of £2,952,000. On 20 July 2006 the Company purchased 5,000 £0.0000001 ordinary shares at a price of £1.85 per share and cancelled them. The A and B class shares rank pari passu with the ordinary shares on a return of capital and have equal voting rights. The A and B shares became capable of being converted into ordinary shares at the option of the holder on or after 24 December 2003 and 24 December 2004 respectively, on a predetermined conversion formula based upon share price performance, whereby 15% of the growth in market capitalisation of Group is attributable to the holders of the A and B shares. Based on the closing share price of £1.40 at 31 December 2006, the A and B class shares would be capable of converting into 83,831 ordinary shares (2005: 267,271). The deferred shares carry no rights to participate in the profits or assets of the Company and carry no voting rights. Option scheme Date of grant Exercise price Number (pence) Volvere plc EMI Plan 30 June 2006 197.5 71,263 30 June 2005 190.0 69,240 30 June 2004 187.5 60,953 Unapproved 13 April 2004 187.5 31,000 24 December 2002 100.0 36,097 268,553 Options granted under the Volvere plc EMI Plan vest subject to certain performance and time-based criteria and are exercisable between 3 and 10 years following grant. Options over 16,864 shares at 1.875p and 63,329 shares at £1.90 were cancelled during 2005. The Unapproved options granted on 13 April 2004 vested as to 10,334 on each of 8 December 2004 and 8 December 2005 and 10,332 on 8 December 2006. Those granted on 24 December 2002 can be exercised at any time until 24 December 2007. 17. SHARE PREMIUM AND RESERVES Group Profit and Share premium loss account Total £000 £000 £000 At beginning of year 361 3,680 4,041 Profit transferred for the year - 74 74 Premium on shares issued 2,952 - 2,952 Shares redeemed and cancelled - (9) (9) At end of year 3,313 3,745 7,058 Company Profit and Share premium loss account Total £000 £000 £000 At beginning of year 361 4,746 5,107 Profit transferred for the year - 95 95 Premium on shares issued 2,952 - 2,952 Shares redeemed and cancelled - (9) (9) At end of year 3,313 4,832 8,145 18. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2006 2005 Group Company Group Company £000 £000 £000 £000 Opening shareholders' funds 4,091 5,157 3,840 4,133 Issue of share capital 2,952 2,952 300 300 Refund of expenses associated with issue of share capital - - 11 11 Shares redeemed and cancelled (9) (9) - - Profit/(loss) for the year 74 95 (60) 713 Closing shareholders' funds 7,108 8,195 4,091 5,157 The refund of expenses associated with the issue of share capital in 2005 was as a result of VAT being refunded that had been written off previously to the share premium account. 19. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS Group 2006 2005 £000 £000 Operating profit/(loss) 17 (159) Depreciation and goodwill amortisation 168 82 Realisation of negative goodwill (234) (24) Loss on sale of fixed assets 2 - Profit on sale of investments - (11) Increase in debtors (896) (366) Increase in creditors 1,011 457 Net cash inflow/(outflow) from operating activities 68 (21) 20. ANALYSIS OF CASH FLOWS Group 2006 2005 £000 £000 Returns on investments and servicing of finance Interest received 42 59 Net cash inflow from returns on investments and servicing of finance 42 59 Capital expenditure and financial investment Purchase of tangible fixed assets (180) (97) Sale of tangible fixed assets 5 3 Sale of equity investment - 76 Net cash outflow from capital expenditure and financial investment (175) (18) Acquisitions and disposals Acquisition of business (31) (1,090) Net cash acquired on acquisition of subsidiary undertaking net of associated costs 5,822 1 Refund of consideration in relation to previous acquisition 88 - Costs associated with acquisition of subsidiary undertaking (211) - Investment in associated undertaking (190) (1,368) Net cash inflow/(outflow) from acquisitions and disposals 5,478 (2,457) Financing Redemption of share capital (9) - Increase in short term borrowings - 874 Repayment of short term borrowings (578) (296) Increase in bank borrowings 570 - Net cash (outflow)/ inflow from financing (17) 578 21. ANALYSIS AND RECONCILIATION OF NET FUNDS Group 1 January 2006 Cash 31 December 2006 £000 flow £000 £000 Cash in hand at bank, being net funds 1,144 5,396 6,540 Bank loan - due within one year - (150) (150) Bank loan - due after one year - (420) (420) Other loans - within one year (578) 578 - 566 5,404 5,970 Reconciliation of net funds 2006 2005 £000 £000 Increase/(decrease) in cash in the year 5,396 (1,859) Cashflow from movement in debt and lease financing 8 (578) 5,404 (2,437) Net funds at start of the year 566 3,003 Net funds at end of year 5,970 566 22. COMMITMENTS AND CONTINGENCIES Operating leases The group has the following annual commitments under non-cancellable operating leases: 2006 2005 Land and Land and buildings Other buildings Other £000 £000 £000 £000 Expiry date - within one year 35 45 344 40 - between two and five years 284 72 49 80 1,138 117 393 120 23. RELATED PARTIES The company has taken advantage of the exemption available to it under FRS8 paragraph 3(b) relating to transactions and balances with subsidiaries. As stated in note 3 above, the company's Executive Directors are provided under the terms of a Service Agreement dated 19 December 2002 with Dawnay, Day Lander Limited. The amount payable under this agreement in the period amounted to £210,000 (2005: £117,000). In addition, pursuant to a Facilities Agreement dated 19 December 2002 with Dawnay, Day Lander Limited, the company is provided with certain administrative and support services. The amount payable under this agreement during the period amounted to £35,000. The amount earned from NMT Group PLC for management services for the period for which it was an associated undertaking was £218,000 (2005: £83,000). 24. SUBSIDIARY UNDERTAKINGS The subsidiary undertakings at 31 December 2006 are shown below. All subsidiary undertakings are registered in the United Kingdom and prepare accounts to 31 December each year. Principal Activity Holding Vectra Group Limited Provision of safety, risk and other consulting 100% and field services Vectra Partners Limited Dormant 100% Vectra (Middle East) Limited Provision of safety, risk and other consulting 100% and field services Sira Test and Certification Limited Certification services 100% Sira Certification Service* Certification services 67% Sira Environmental Limited Certification services 100% Sira Defence & Security Limited Security solutions 100% NMT Group PLC Investing company 88.7% New Medical Technology Limited Dormant 100% Zero-Stik Limited Dormant 100% The investments in Vectra Partners Limited and Vectra (Middle East) Limited are held by Vectra Group Limited. The investments in New Medical Technology Limited and Zero-Stik Limited are held by NMT Group PLC. The proportion of voting rights held is equivalent to the equity shareholdings. * Sira Certification Service is a company limited by guarantee. The Group controls all of the member shares. 25. POST BALANCE SHEET EVENT Subsequent to the year end the Company has issued a further 186,593 shares pursuant to the offer for NMT Group PLC. This has increased the Company's holding in that company to approximately 95%. 26. MINORITY INTEREST The minority interest of £648,000 relates to the share of NMT assets attributable to those shares not held by the group at 31 December 2006. This information is provided by RNS The company news service from the London Stock Exchange

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