TIDMFDT
RNS Number : 9836I
1st Dental Laboratories PLC
23 March 2010
1st Dental Laboratories plc
("1st Dental" or the "Company" or "the Group")
Preliminary Results for the year ended 30 November 2009
1st Dental Laboratories plc (AIM: FDT) the UK's largest and leading provider of
dental laboratory products to the dental profession, announces its preliminary
results for the year ended 30 November 2009
Chairman's Statement
Results Announcement
I am pleased to provide my first Chairman's Statement to you since my
appointment in September last year. Revenues showed a satisfactory increase
compared with the previous year. The operational performance was patchy, with a
higher gross profit offset by higher operating costs, especially exceptionals of
GBP534k, which largely reflects the costs of restructuring and redundancy costs,
resulting in an EBITDA loss of GBP359k compared with a GBP203k profit in 2008.
Background
I would like to welcome new shareholders who have decided to invest over the
last year. 1st Dental Laboratories plc is a healthcare company focused on the
dental sector, and is the largest operator of dental laboratories in the UK. The
Board is currently focused on a turnaround strategy.
The Group supplies from fourteen laboratories around the UK, with a total
headcount of 237 at the year end. The Group estimates that it has approximately
a 5% market share of the dental laboratory market.
By way of background, I joined the Company in 2002 as Non-Executive Director
when the Group first listed on the AIM Market. At that time the Group owned
three laboratories and the GBP2m funds raised at the time of the flotation were
invested on acquiring several new laboratories. The "Buy and Build" strategy
was successful in the early years but the acquisition of Benchmark in the 2005
financial year, which doubled the size of the Group, turned out to be very
challenging. The combination of Benchmark, government imposed changes on the
dental sector and the loss of key management in certain laboratories resulted in
two years of declining sales and lack of profitability.
Results for 2009 Summary
With this background, the results for 2009 appear to show no improvement. It
has indeed been a year of change for the Group. In April we appointed a new
Finance Director, Jonathan Foxcroft, taking the place of Roger Smallwood. In
September, Andrew Garner, who had been Executive Chairman and Founder, resigned
from the Board. At the same time Mark Ganderton, who had been with the Group
since the acquisition of Benchmark, also resigned from the Board.
I was asked to take on the role of Non-Executive Chairman. At the same time the
Board appointed Nigel Spring, who joined the Group in March 2008, as CEO.
The exceptional costs of GBP534k reflect these management changes and other
re-structuring costs specific to the year. In addition the Company has provided
GBP3.25m in impairment costs which reflect the impairment of goodwill relating
to certain laboratories mainly originating from the acquisition of Benchmark.
The level of the impairment provision can be considered to be based on a prudent
approach by the Board to the trading prospects for these laboratories.
During the year the Group created a new sales team which resulted in an increase
in costs but also helped to arrest the recent decline in sales. Indeed revenue
growth for the year was 5% compared with the previous year, the first revenue
increase since the financial year ended November 2006, and satisfactory given
the difficult economic climate.
During the year the Group generated GBP446k cash from operating activities
compared to GBP311k last year.
The Group expanded eTeeth, its online offer to dentists, during the year with a
revenue increase of 69%.
The issue of the GBP420k VAT liability reported last year remains unresolved and
is being disputed with HMRC. This amount was booked in the Profit and Loss
Account in the years ended 30th November 2007 and 2006.
The Company had bank debts at year end of GBP1,247k which involves annual
repayments of GBP510k and the Bank remains supportive of the Group.
Results for 2009 Highlights
· Revenues GBP10,572k (2008: GBP10,065k), an increase of 5.0%
· Gross Profit GBP3,817k (2008: GBP3,656k), an increase of 4.4%
· Gross Profit % on Revenues 36.1% (2008: 36.3%)
· Operating Loss before amortisation, goodwill impairment and non-recurring
administrative expenses GBP140k (2008: Profit GBP95k)
· Impairment provision primarily on Benchmark laboratories GBP3,250k
(2008: GBPNil)
· Exceptional costs GBP534k (2008: GBP172k)
· Total operating loss GBP3,935k (2008: GBP87k)
· Pre tax loss of GBP4,054k (2008: GBP265k)
· Loss per Ordinary Share 9.65p (2008: 0.59p)
· Net cash generated from operating activities of GBP446k (2008: GBP311k)
· Bank debt reduction of GBP514k reducing from GBP1,761k to GBP1,247k
Results in First Quarter to 28th February 2010
Since the year end the first three months of trading up to 28th February have
been satisfactory. Revenues have increased 2% versus the same period last year.
This is despite revenues being severely hit in January because of the bad
weather, which resulted in cancelled patient appointments with dentists and
consequently a reduction in the level of work at the Group's laboratories.
On 18th January 2010 Bradley Moore resigned as Technical Director. Bradley had
been a Director since flotation. We have decided to re-structure his function
with the appointment of two technical managers through internal promotion and
with responsibilities on a regional basis. This should result in an improved
level of technical support to the laboratories and over time should result in a
higher level of concentration on quality and best practice through employee
development. Further, this should result in an overall reduction in cost.
Operational Review
I would like to thank Roger Smallwood, Andrew Garner, Mark Ganderton and Bradley
Moore for their contributions to the development of the Group.
After a tough few years and despite the significant losses reported for the year
to 30th November 2009, we did in fact increase revenues for the year and this
trend has continued in the new financial year. The first three months of the new
financial year showed a modest increase in revenue, a reduction in operating
expenses and consequently an improvement in the Group's profitability. The new,
much smaller Board of three people, together with the management team, have
reviewed the Group's strategy, prepared a challenging business plan for the new
financial year and are very focused on:
- protecting the Group from any further revenue decline
- improving the level of gross profit at laboratory level in the Group
- looking for continued cost reduction
- achieving an improvement in overall Group profitability
The Board believes that it should continue to invest in two critical areas.
These are:
- the new sales team, which is helping to build sales, provide improved
customer service and improve communication to both existing dentist customers
and to potential new customers of the range of services that the Group can
provide, which is the best in the dental laboratory industry.
- its team of dental technicians throughout the country. The Board has
taken steps to leverage the position of the Group as the biggest player in the
sector, and develop a higher level of integration between the head office and
the laboratories, and between the laboratories. This includes a stronger focus
on quality and training and also improving communication of 1st Dental's focus
on quality through its Damas quality registration. This should result in
ensuring that head office is seen as more of a support operation to the field
operations and help to ensure that best practice is applied.
Further, through improved integration, the negative impact that the Group has
suffered from in the past when key managers in laboratories leave the Group,
should be minimised.
We have in the first quarter re-branded the field operations, so that all
laboratories are now operating under the 1st Dental brand. The human resources
function has been strengthened. This role is taking the lead in improving
employee communication, with regular newsletters, all aimed at building morale
and developing a stronger brand image both within the organisation and in the
market place.
We have significantly upgraded our website www.1stdental.co.uk to support the
stronger brand. This should strengthen customer loyalty, support the recruitment
of new technicians, sales personnel and other staff when required, improve
communication with suppliers and also help to improve communications with our
investors.
The Board is continuing to look at all of its activities including its pricing
strategy, its organisation structure and its operating costs.
The Board will continue to look at building revenues through selected marketing
campaigns and public relations, introduction of new products for dentists or
through building revenues via acquisitions, but only where the financial risk is
minimal and consistent with the strategy of the Group.
Outlook
The economic outlook remains uncertain and the short term political situation is
also unknown. While healthcare spending is generally on the increase, the
dental laboratory market remains challenging with many laboratories operating as
tiny operations able to sell on price alone in what can best be described as
largely a cottage industry. As a Group, we are taking steps to leverage our
position as market leader, but this will take time. However, the Board is of the
view that the promising trends from the operating performance in 2009 have a
chance of continuing into the rest of the current trading year, but the level of
improvement remains fragile. The Board will maintain an iron focus on the costs
of operations throughout the Group, and this will be achieved through quality
analysis, comprehensive and timely reporting, resulting in pro-active management
when required.
You as shareholders will decide if the Group offers an attractive investment
opportunity. But the Board and the senior management team are working very hard
to rebuild shareholder value. Personally I am committed to providing regular
updates to shareholders on the Group's performance and to provide a more
frequent level of news announcements. Further, all the senior executives are on
an incentive plan based on the annual budget with clear targets to achieve
revenue and profits. We are making some progress and continue to see external
opportunities to build revenues but also to increase efficiencies, but many
challenges remain. Our priority is to manage a turnaround which can be
sustainable and is not just a quick fix.
As Chairman, I would like to thank Nigel Spring for his contribution to the
improving performance of the Group, especially since his appointment as CEO in
September, to Jonathan Foxcroft as FD and to all the managers and staff around
the Group. We are driving a turnaround strategy. We are managing cultural change
throughout the Group's trading operations. I believe that the vast majority of
our employees are supporting this. The Group's key objective is to re-build
shareholder trust.
I look forward to further updating you later in the year on the results for the
first six months to 31st May.
GT Sewell
Non-Executive Chairman
23 March 2010
For Further Information:
Grahame Sewell, Chairman 07767 350
372
William Vandyk, Astaire Securities Plc 020 7448 4400
Copies of the Report and Accounts will be sent to shareholders in due course and
a further announcement will be made at that time.
Consolidated Income Statement for the year ended 30 November 2009
+-----------------------------------+----+---------------+---------------+
| | | 2009 | 2008 |
+-----------------------------------+----+---------------+---------------+
| | | GBP000 | GBP000 |
+-----------------------------------+----+---------------+---------------+
| | | | |
+-----------------------------------+----+---------------+---------------+
| Revenue | | 10,572 | 10,065 |
+-----------------------------------+----+---------------+---------------+
| Cost of sales | | (6,755) | (6,409) |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Gross profit | | 3,817 | 3,656 |
+-----------------------------------+----+---------------+---------------+
| Administrative expenses | | (7,752) | (3,743) |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Operating (loss)/profit before | | (140) | 95 |
| amortisation, goodwill impairment | | | |
| and non-recurring administrative | | | |
| expenses | | | |
+-----------------------------------+----+---------------+---------------+
| Amortisation | | (11) | (10) |
+-----------------------------------+----+---------------+---------------+
| Goodwill impairment | | (3,250) | - |
+-----------------------------------+----+---------------+---------------+
| Non-recurring administrative | | (534) | (172) |
| expenses | | | |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Total operating loss | | (3,935) | (87) |
+-----------------------------------+----+---------------+---------------+
| | | | |
+-----------------------------------+----+---------------+---------------+
| Finance income | | 2 | 37 |
+-----------------------------------+----+---------------+---------------+
| Finance expenses | | (121) | (215) |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Loss before taxation | | (4,054) | (265) |
+-----------------------------------+----+---------------+---------------+
| Taxation | | - | 16 |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Loss for the year | | (4,054) | (249) |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
| Loss per ordinary share : | | | |
+-----------------------------------+----+---------------+---------------+
| - Basic | | (9.65p) | (0.59p) |
+-----------------------------------+----+---------------+---------------+
| - Diluted | | (9.65p) | (0.59p) |
+-----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+-----------------------------------+----+---------------+---------------+
All of the results of the Group are derived from continuing operations.
Consolidated Statement of Changes in Equity as at 30 November 2009
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | Share | Share | Retained | Total |
| | | | premium | earnings | |
| | | capital | | | |
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | | | | |
+---------------------------+------+---------------+---------------+---------------+---------------+
| At 1 December 2007 (as | | 4,202 | 6,358 | (2,330) | 8,230 |
| restated) | | | | | |
+---------------------------+------+---------------+---------------+---------------+---------------+
| Result for the year | | - | - | (249) | (249) |
+---------------------------+------+---------------+---------------+---------------+---------------+
| Share based payment | | - | - | 16 | 16 |
| charges | | | | | |
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | ------------- | ------------- | ------------- | ------------- |
+---------------------------+------+---------------+---------------+---------------+---------------+
| At 30 November 2008 | | 4,202 | 6,358 | (2,563) | 7,997 |
+---------------------------+------+---------------+---------------+---------------+---------------+
| Result for the year | | - | - | (4,054) | (4,054) |
+---------------------------+------+---------------+---------------+---------------+---------------+
| Share based payment | | - | - | 23 | 23 |
| charges | | | | | |
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | ------------- | ------------- | ------------- | ------------- |
+---------------------------+------+---------------+---------------+---------------+---------------+
| At 30 November 2009 | | 4,202 | 6,358 | (6,594) | 3,966 |
+---------------------------+------+---------------+---------------+---------------+---------------+
| | | ------------- | ------------- | ------------- | ------------- |
+---------------------------+------+---------------+---------------+---------------+---------------+
There is no material tax impact of share based payment charges recognised
directly in equity.
Consolidated Balance Sheet as at 30 November 2009
+----------------------------------+----+---------------+---------------+
| | | | |
| | | | Restated |
| | | 2009 | |
| | | | 2008 |
+----------------------------------+----+---------------+---------------+
| | | GBP000 | GBP000 |
+----------------------------------+----+---------------+---------------+
| | | | |
+----------------------------------+----+---------------+---------------+
| Non-current assets | | | |
+----------------------------------+----+---------------+---------------+
| Property, plant & equipment | | 1,950 | 2,069 |
+----------------------------------+----+---------------+---------------+
| Intangible assets | | 3,806 | 7,067 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| | | 5,756 | 9,136 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Current assets | | | |
+----------------------------------+----+---------------+---------------+
| Inventories | | 321 | 295 |
+----------------------------------+----+---------------+---------------+
| Trade and other receivables | | 1,582 | 1,596 |
+----------------------------------+----+---------------+---------------+
| Cash and cash equivalents | | 413 | 563 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| | | 2,316 | 2,454 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Total assets | | 8,072 | 11,590 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Current liabilities | | | |
+----------------------------------+----+---------------+---------------+
| Interest bearing loans and | | 701 | 553 |
| borrowings | | | |
+----------------------------------+----+---------------+---------------+
| Trade and other payables | | 1,725 | 1,137 |
+----------------------------------+----+---------------+---------------+
| Current taxes | | - | - |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| | | 2,426 | 1,690 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Non-current liabilities | | | |
+----------------------------------+----+---------------+---------------+
| Interest bearing loans and | | 897 | 1,438 |
| borrowings | | | |
+----------------------------------+----+---------------+---------------+
| Trade and other payables | | 294 | - |
+----------------------------------+----+---------------+---------------+
| Provisions | | 489 | 465 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| | | 1,680 | 1,903 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Total liabilities | | 4,106 | 3,593 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Net assets | | 3,966 | 7,997 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Equity attributable to equity | | | |
| holders of the Group | | | |
+----------------------------------+----+---------------+---------------+
| Called up share capital | | 4,202 | 4,202 |
+----------------------------------+----+---------------+---------------+
| Share premium account | | 6,358 | 6,358 |
+----------------------------------+----+---------------+---------------+
| Retained earnings | | (6,594) | (2,563) |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
| | | | |
+----------------------------------+----+---------------+---------------+
| Total equity | | 3,966 | 7,997 |
+----------------------------------+----+---------------+---------------+
| | | ------------- | ------------- |
+----------------------------------+----+---------------+---------------+
Consolidated Cash Flow Statement for the year ended 30 November 2009
+---------------------------------------+----------+---------------+---------------+
| | | | |
| | | | Restated |
| | | 30 | 30 |
| | | November | November |
| | | 2009 | 2008 |
+---------------------------------------+----------+---------------+---------------+
| | | GBP000 | GBP000 |
+---------------------------------------+----------+---------------+---------------+
| | | | |
+---------------------------------------+----------+---------------+---------------+
| Operating activities | | | |
+---------------------------------------+----------+---------------+---------------+
| Loss for the year | | (4,054) | (249) |
+---------------------------------------+----------+---------------+---------------+
| Amortisation | | 11 | 10 |
+---------------------------------------+----------+---------------+---------------+
| Impairment of goodwill | | 3,250 | - |
+---------------------------------------+----------+---------------+---------------+
| Depreciation | | 315 | 280 |
+---------------------------------------+----------+---------------+---------------+
| Loss on sale of plant and equipment | | 7 | 32 |
+---------------------------------------+----------+---------------+---------------+
| Share based payment charges | | 23 | 16 |
+---------------------------------------+----------+---------------+---------------+
| Net finance expense | | 119 | 178 |
+---------------------------------------+----------+---------------+---------------+
| Income tax credit | | - | (16) |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Operating cash (outflow)/inflow | | (329) | 251 |
| before changes in working capital | | | |
+---------------------------------------+----------+---------------+---------------+
| Movement in inventories | | (26) | 1 |
+---------------------------------------+----------+---------------+---------------+
| Movement in trade and other | | 14 | (43) |
| receivables | | | |
+---------------------------------------+----------+---------------+---------------+
| Movement in trade and other payables | | 858 | 212 |
+---------------------------------------+----------+---------------+---------------+
| Movement in provisions | | 24 | 30 |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Operating cash inflow from operations | | 541 | 451 |
+---------------------------------------+----------+---------------+---------------+
| Interest received | | 2 | 37 |
+---------------------------------------+----------+---------------+---------------+
| Interest paid on borrowings | | (73) | (168) |
+---------------------------------------+----------+---------------+---------------+
| Interest element of hire purchase | | (24) | (9) |
| payments | | | |
+---------------------------------------+----------+---------------+---------------+
| Income tax received | | - | - |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Net cash inflow from operating | | 446 | 311 |
| activities | | | |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Investing activities | | | |
+---------------------------------------+----------+---------------+---------------+
| Purchase of plant and equipment | | (77) | (302) |
+---------------------------------------+----------+---------------+---------------+
| Sale of plant and equipment | | 16 | 12 |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Net cash flow from investing | | (61) | (290) |
| activities | | | |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Financing activities | | | |
+---------------------------------------+----------+---------------+---------------+
| Capital element of interest bearing | | (664) | (525) |
| loans and borrowings paid | | | |
+---------------------------------------+----------+---------------+---------------+
| New loans | | 129 | - |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Net cash flow from financing | | (535) | (525) |
| activities | | | |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Net decrease in cash and cash | | (150) | (504) |
| equivalents | | | |
+---------------------------------------+----------+---------------+---------------+
| Cash and cash equivalents at the | | 563 | 1,067 |
| beginning of the year | | | |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
| Cash and cash equivalents at the end | | 413 | 563 |
| of the year | | | |
+---------------------------------------+----------+---------------+---------------+
| | | ------------- | ------------- |
+---------------------------------------+----------+---------------+---------------+
Significant non cash financing transactions include additions to fixed assets of
GBP142,000 (2008: GBP259,000) relating to assets purchased on hire purchase
arrangements.
1.Accounting policies
Basis of preparation
The financial information has been prepared and approved by the Directors in
accordance with IFRS as adopted by the European Union and IFRIC interpretations
issued and effective at the time of preparing these statements.
The Group has taken the business combination exemption, which allows that IFRS3
not be applied to business combinations that took place prior to 1 December
2006, the date of transition to IFRS. Estimates under IFRS at the date of
transition are consistent with the estimates made at the same time under UK
GAAP. The Group has also taken the share based payments exemption and,
accordingly, IFRS2 has only been applied to awards granted after 7 November
2002.
The following Standards and Interpretations have been issued, but are not yet
effective and have not been adopted early by the Group :
+-------+------------------------------------+---------------+-------------+
| | | Effective | Date of |
| | | date - | EU |
| | Title | reporting | endorsement |
| | | periods | |
| | | starting on | |
| | | or later than | |
+-------+------------------------------------+---------------+-------------+
| IFRS | Business Combinations (Revised | 1 July 2009 | - |
| 3 | 2008) | | |
+-------+------------------------------------+---------------+-------------+
| IAS | Consolidated and Separate | 1 July 2009 | - |
| 27 | Financial Statements | | |
+-------+------------------------------------+---------------+-------------+
| IFRS | Amendment to IFRS 2 Share Based | 1 January | - |
| 2 | Payment : Vesting Conditions and | 2009 | |
| | Cancellations | | |
+-------+------------------------------------+---------------+-------------+
| IAS 1 | Presentation of Financial | 1 January | - |
| | Statements | 2009 | |
+-------+------------------------------------+---------------+-------------+
| IAS | Revision to IAS 23 Borrowing costs | 1 January | - |
| 23 | | 2009 | |
+-------+------------------------------------+---------------+-------------+
| IAS | Amendment to IAS 32 Financial | 1 January | - |
| 32 | Instruments : Presentation and IAS | 2009 | |
| | 1 Presentation of Financial | | |
| | Statements - Puttable Financial | | |
| | Instruments and Obligations | | |
| | arising on Liquidation | | |
+-------+------------------------------------+---------------+-------------+
| IFRS | Operating Segments | 1 January | 21 |
| 8 | | 2009 | November |
| | | | 2007 |
+-------+------------------------------------+---------------+-------------+
| IFRIC | Agreements for the Construction of | 1 January | - |
| 15 | Real Estate | 2009 | |
+-------+------------------------------------+---------------+-------------+
| IFRIC | Distributions of Non-cash Assets | 1 | - |
| 17 | to Owners | July 2009 | |
+-------+------------------------------------+---------------+-------------+
The Directors anticipate that the adoption of these standards and
interpretations in future periods will have no material impact on the financial
statements of the Group when the relevant standards come into effect for periods
commencing on or after 1 December 2009.
Basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
All intra-group balances and transactions, including unrealised profits arising
from intra-group transactions, are eliminated fully on consolidation.
Significant accounting judgements, estimates and assumptions
The key assumptions concerning the future, and other sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below:
Impairment of goodwill - The Group determines whether goodwill is impaired at
least on an annual basis. This requires an estimation of the "value in use" of
the cash generating units to which the goodwill is allocated. Estimating a value
in use amount requires management to make an estimate of the expected future
cash flows from the cash generating unit and also to choose a suitable discount
rate in order to calculate the present value of those cash flows.
Deferred tax assets - Deferred tax assets are recognised for all unused tax
losses to the extent that it is more likely than not that taxable profit will be
available against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and level of future taxable profits.
Share based payments - The estimation of the fair value of share options and
other equity instruments at their date of grant requires management to make
estimates concerning the expected volatility of the underlying shares, the
dividends payable on the shares and the time at which employees are likely to
exercise vested options.
Debtors - Debtors are recognised to the extent that they are judged recoverable.
Management reviews are performed to estimate the level of reserves required for
irrecoverable debt. Provisions are made specifically against invoices where
recoverability is uncertain.
Segmental reporting
The Directors consider that the Group operates only one class of business, being
the manufacture of dental appliances. All turnover and operating losses
originate in the UK, therefore geographical analysis has not been presented.
Property, plant and equipment
Property, plant and equipment are held at cost less accumulated depreciation and
impairment charges. The cost of property, plant and equipment is the purchase
price, together with any directly attributable costs of acquisition.
Depreciation is provided at the following annual rates in order to write off the
cost less estimated residual value, which is based on up to date prices, of
property, plant and equipment over their estimated useful lives as follows:
+-----------------------------------------+---------------------------+
| Freehold land | - Nil |
+-----------------------------------------+---------------------------+
| Freehold buildings | - 50 years |
+-----------------------------------------+---------------------------+
| Leasehold properties and improvements | - shorter of remaining |
| | life or 50 years |
+-----------------------------------------+---------------------------+
| Plant and equipment | - 4 to 10 years |
+-----------------------------------------+---------------------------+
| Computer equipment | - 4 years |
+-----------------------------------------+---------------------------+
| Motor vehicles | - 4 years |
+-----------------------------------------+---------------------------+
Intangible assets - Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the net identifiable assets of the acquired subsidiary at the date of
acquisition. The cost of acquisition represents the fair value of all
consideration given in return for the assets acquired. Goodwill on acquisition
of subsidiaries is included in intangible assets. Goodwill is tested annually
for impairment and carried at cost less accumulated impairment losses.
Intangible assets - Licences
Software licences are capitalised and amortised over their useful economic life
of five years. The cost of the licence is the purchase price plus any
incidental costs of acquisition.
Impairment
The carrying amounts of the Group's non-financial assets are reviewed at each
balance sheet date to determine whether there is any indication of impairment.
If any such indication exists, the asset's recoverable amount is estimated.
For goodwill, assets that have an indefinite useful life and intangible assets
that are not yet available for use, the recoverable amount is estimated at each
balance sheet date
An impairment loss is recognised whenever the carrying amount of an asset or its
cash generating unit exceeds its recoverable amount. Impairment losses are
recognised in the consolidated income statement.
An impairment loss is recognised for the amount by which the carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of the
asset's fair value less costs to sell and the value in use. For the purposes of
assessing impairments, assets are grouped at the lowest levels for which there
are identifiable cash flows.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash-generating
units (group of units) and then, to reduce the carrying amount of the other
assets of the unit (group of units) on a pro-rata basis.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less
allowance for any uncollectible amounts. Where receivables are considered to be
irrecoverable an impairment charge is included in the income statement.
Classification of financial instruments issued by the Group
Following the adoption of IAS32 'Financial instruments: presentation', financial
instruments issued by the Group are treated as equity only to the extent that
they meet the following two conditions:
- they include no contractual obligations upon the group to deliver cash
or other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially
unfavourable to the group; and
- where the instrument will or may be settled in the Company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company's own equity instruments or is a
derivative that will be settled by the Company's exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified takes
the legal form of the Company's own shares, the amounts presented in these
financial statements for called up share capital and share premium account
exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are dealt with as part of
finance expenses. Finance payments associated with financial instruments that
are classified in equity are treated as distributions and are recorded directly
in equity.
Financial assets
The Group classifies its financial assets depending on the purpose for which the
asset was acquired. The Group has the following financial assets:
Loans and receivables: These assets are non-derivative financial assets with
fixed and determinable payments that are not quoted in an active market. They
arise principally through the provision of services to customers (trade
receivables). They are carried at fair value on initial recognition less
provision for impairment. Cash and cash equivalents comprise cash in hand,
deposits held at call with banks and bank overdrafts.
Financial liabilities
Financial liabilities are comprised of termed loan facilities and trade
payables, which are recognised at amortised cost.
Interest bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in profit or loss over the
period of the borrowings on an effective interest basis.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding
discounts and rebates.
Revenue relates to the sale of goods. This is recognised when the significant
risks and rewards of ownership of the goods have passed to the buyer, usually on
despatch of the goods.
Leases
Leases where the lessor retains substantially all of the risks and rewards of
ownership are classified as operating leases. Rentals payable under operating
lease rentals are charged to the income statement on a straight line basis over
the term of the lease.
Leases where the Group acts as lessee and obtains substantially all of the risks
and rewards of ownership are classified as finance leases or hire purchase
agreements. Assets held under finance leases or hire purchase agreements are
capitalised and depreciated over their useful economic lives. The capital
element of the future obligations under finance leases and hire purchase
contracts are included as liabilities in the balance sheet. The interest
elements of the rental obligations are charged to the income statement over the
periods of the finance leases and hire purchase agreements and represent a
constant proportion of the balance of capital outstanding.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all costs incurred in bringing each product to its present location and
condition. Raw materials are stated at purchase cost. Work in progress includes
the cost of materials and labour plus attributable overheads based on a normal
activity level. Net realisable value is based upon estimated selling price less
any further costs expected to be incurred to completion and disposal.
Non-recurring items
Non-recurring items are material items in the Income Statement which derive from
events or transactions which fall within the ordinary activities of the Group
and which individually or, if of a similar type, in aggregate the Group has
highlighted as needing to be disclosed by virtue of their size or incidence if
the financial statements are to give a true and fair view. Such items are
non-recurring, as by their nature they do not occur on a frequent basis.
Post retirement benefits
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Group in an independently
administered fund. The amount charged to the income statement represents the
contributions payable to the scheme in respect of the accounting period. In
addition, the Group contributes to the private pension plans of certain
employees. These arrangements are of the money purchase type.
Share based payments and employee benefits
The Group operates a number of equity settled share based payment schemes. The
fair value of awards to employees that take the form of shares or rights to
shares is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period
during which the employees become unconditionally entitled to the options. The
fair value of the options granted is measured using an option valuation model,
taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest except where forfeiture is due only to share
prices not achieving the threshold for vesting.
Short term employee benefits are recognised when an employee has rendered
service to the Group during an accounting period. The amount recognised is the
undiscounted amount of short term employee benefits expected to be paid in
exchange for that service.
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains and losses on translation are
recognised in the income statement.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the tax currently payable based on taxable profit for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in previous years.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in subsidiaries is
not provided if reversal of these temporary differences can be controlled by the
group and it is probable that reversal will not occur in the foreseeable future.
In addition, tax losses available to be carried forward as well as other income
tax credits to the group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax is
also charged or credited directly to equity.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the group expects
some or all of a provision to be reimbursed, the reimbursement is recognised as
a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the income statement net of
any expected reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of time is recognised as
a finance cost.
2. Non-recurring administrative expenses
+---------------------------------------+---------------+---------------+
| | 2009 | 2008 |
+---------------------------------------+---------------+---------------+
| | GBP000 | GBP000 |
+---------------------------------------+---------------+---------------+
| Aborted takeover costs | - | 80 |
+---------------------------------------+---------------+---------------+
| Professional advisers fees in | - | 20 |
| relation to the potential VAT | | |
| liability | | |
+---------------------------------------+---------------+---------------+
| Professional advisers fees in | 28 | 30 |
| relation to staff issues | | |
+---------------------------------------+---------------+---------------+
| Re-organisation and redundancy costs | 50 | 42 |
+---------------------------------------+---------------+---------------+
| Termination costs of directors | 424 | - |
+---------------------------------------+---------------+---------------+
| Additional professional advisers fees | 32 | - |
+---------------------------------------+---------------+---------------+
| | ------------- | ------------- |
+---------------------------------------+---------------+---------------+
| Non-recurring administrative expenses | 534 | 172 |
+---------------------------------------+---------------+---------------+
| | ------------- | ------------- |
| | | |
| | | |
+---------------------------------------+---------------+---------------+
3. Loss per ordinary share
+--------------------------------------------+---------------+---------------+
| | 2009 | 2008 |
+--------------------------------------------+---------------+---------------+
| | | |
+--------------------------------------------+---------------+---------------+
| Retained loss for the year (GBP000) | (4,054) | (249) |
+--------------------------------------------+---------------+---------------+
| Weighted average number of shares (basic) | 42,017,444 | 42,017,444 |
+--------------------------------------------+---------------+---------------+
| Weighted average number of shares | 48,341,162 | 44,746,255 |
| (diluted) | | |
+--------------------------------------------+---------------+---------------+
| Basic loss per ordinary share (pence per | (9.65p) | (0.59p) |
| share) | | |
+--------------------------------------------+---------------+---------------+
| Diluted loss per ordinary share (pence per | (9.65p) | (0.59p) |
| share) | | |
+--------------------------------------------+---------------+---------------+
| | ------------- | ------------- |
+--------------------------------------------+---------------+---------------+
Diluted earnings per share for each of the two years ended 30 November 2009 has
been calculated using the weighted average number of shares in issue during the
year as adjusted for the dilutive effect of shares held under unexercised share
options. The calculation of diluted earnings per share assumes that all
performance criteria are achieved in full and all options exercised.
The potential increase in ordinary shares from the exercise of any of the share
options at 30 November 2009 would be anti-dilutive as the Company reported a net
loss for the year ended on that date. These potential ordinary shares were
therefore excluded from the calculation at that date and the diluted loss per
share figure reported is the same as the basic earnings per share.
4. Board of Directors
Grahame Sewell, Non- Executive Chairman
Aged 59
Joined the Company upon flotation in 2002 and chairs both the Audit and
Remuneration Committees. Grahame is regarded as an independent Director and was
appointed Chairman in September 2009.
Executive Directors
Nigel Spring, Chief Executive Officer
Aged 47
Nigel was promoted to Chief Executive Officer in September 2009. He joined 1st
Dental in March 2008 with over fifteen years' senior management experience.
Jonathan Foxcroft, Finance Director
Aged 46
Jonathan joined 1st Dental in April 2009 with over 19 years senior finance
experience in precision and volume manufacturing environments gained after he
qualified as a Chartered Accountant.
The terms of reference of the Audit and Remuneration committees are available
upon request from the Company Secretary.
Details of Senior Managers
Elisabeth Wagster, Group Sales & Marketing Manager
Aged 47
Elisabeth joined the Company in March 2009 following a number of successful
years within similar development roles elsewhere in the dental industry.
Stefan Roguszka, Joint Group Technical Manager
Aged 53
Stefan has over 36 years technical experience, becoming Ripley laboratory
manager in 2007.
Gary Jenkinson, Joint Group Technical Manager
Aged 40
Gary rejoined 1st Dental in 2006 as Sheffield laboratory manager with over 23
years technical experience initially starting at our Scarborough laboratory.
Sel Baxter, Field Operations Manager
Aged 59
After a number of successful years managing his own laboratory, Sel joined the
group when it acquired his laboratory and was promoted to Field Operations
Manager in 2007.
Fliss Stewart, Group HR Manager
Aged 26
Fliss joined 1st Dental in March 2007 and established the HR function in March
2008. She is currently studying for the PDS post graduate qualification in Human
Resource Management with the CIPD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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