TIDMOPS
RNS Number : 1612U
Optimisa PLC
19 June 2009
Embargoed for release at 7.00 a.m.
19 June 2009
Optimisa plc
("Optimisa" or the "Company")
Final audited results for the year ended 31 December 2008
Highlights
* Revenue increased 55% from GBP11.42m in 2007 to GBP17.70m in 2008 reflecting the
full year impact of eq group acquisition.
* Gross profit up 55% from GBP8.09m in 2007 to GBP12.52m in 2008 reflecting the
full year impact of eq group acquisition.
* Net cash generated from operating activities of GBP1.7m, an increase of GBP0.9m
from GBP0.8m in 2007.
* Net debt decreased from GBP3.72m in 2007 to GBP2.55m in 2008, a decrease of
GBP1.17m (31%).
* Reported loss for the period of GBP4.46m in 2008, a decrease of GBP5.46m from
2007 reported profit for the period of GBP1.00m.
* A 10% increase in adjusted* operating profit from GBP1.41m in 2007 to GBP1.55m
in 2008.
* Adjusted profit before tax decreased from GBP1.36m to GBP1.19m, a decrease of
13%.
* Total Shareholders equity decreased to GBP8.34m in 2008 from GBP12.65m in 2007.
* In 2008 the goodwill in eq group Limited was impaired by GBP4.35m, reducing the
carrying value of goodwill to GBP7.72m in 2008 from GBP12.07m in 2007. The
goodwill balance held in nxt:MOVE Corporation was also impaired in 2008 by
GBP0.76m (following exchange movement) to GBPnil.
* The reported loss before tax is adjusted for the amortisation charge on
customer contracts and customer relationships and impairment losses.
Note: Reconciliation of adjusted operating profit to reported profit for the
period
+------------------------+----------+----------+----------+----------+
| | | 2008 | | 2007 |
+------------------------+----------+----------+----------+----------+
| | | GBP | | GBP |
| | | 000's | | 000's |
+------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------+----------+----------+----------+----------+
| Adjusted | | 1,552 | | 1,405 |
| Operating | | | | |
| Profit* | | | | |
+------------------------+----------+----------+----------+----------+
| Net | | (363) | | (44) |
| Interest | | | | |
| Payable | | | | |
+------------------------+----------+----------+----------+----------+
| Adjusted | | 1,189 | | 1,361 |
| profit | | | | |
| before | | | | |
| tax | | | | |
+------------------------+----------+----------+----------+----------+
| Income | | (310) | | (253) |
| tax | | | | |
| expense | | | | |
+------------------------+----------+----------+----------+----------+
| Adjusted | | 879 | | 1,108 |
| profit | | | | |
| for the | | | | |
| period | | | | |
+------------------------+----------+----------+----------+----------+
| Goodwill | | (5,214) | | - |
| & | | | | |
| intangibles impairment | | | | |
+------------------------+----------+----------+----------+----------+
| Amortisation | | (122) | | (104) |
| of | | | | |
| Intangibles | | | | |
+------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------+----------+----------+----------+----------+
| Reported | | (4,457) | | 1,004 |
| (loss)/profit | | | | |
| for the | | | | |
| period | | | | |
+------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------+----------+----------+----------+----------+
| Earnings | | (50.16) | | 16.65 |
| per | | | | |
| share | | | | |
| (pence) | | | | |
+------------------------+----------+----------+----------+----------+
| Adjusted | | 9.73 | | 18.37 |
| earnings | | | | |
| per | | | | |
| share | | | | |
| (pence) | | | | |
+------------------------+----------+----------+----------+----------+
The total adjustment comprising Goodwill and intangibles impairment and
Amortisation of intangibles is GBP5,336,000 (2007: GBP104,000).
Enquiries:
+------------------------------------+------------------------------------+
| Optimisa plc | +44 20 7960 3300 |
+------------------------------------+------------------------------------+
| Ron Littleboy, Executive Chairman | |
+------------------------------------+------------------------------------+
| | |
+------------------------------------+------------------------------------+
| Noble & Company Limited | +44 20 7763 2200 |
+------------------------------------+------------------------------------+
| Brian Stockbridge | |
+------------------------------------+------------------------------------+
| Alastair Maclachlan | |
+------------------------------------+------------------------------------+
EXECUTIVE CHAIRMAN'S STATEMENT
Despite the difficult economic conditions in the second half of 2008 our results
for the year were in line with the expectations we outlined in September 2008
within the interim report for the six months ended 30 June 2008. Reported loss
before tax which includes the impairments cost of GBP5.21m is GBP4.15m and the
loss per share is 50.16p.Adjusted profit before tax fell 13% from GBP1.36m to
GBP1.19m and adjusted earnings per share declined to 9.73p, largely due to the
disappointing performance of the eq companies acquired in October 2007.
As you may recall, we took the decision to reduce costs fairly early in the
economic downturn, midway through 2008, and headcount was reduced from a peak of
209 to 187 by the year end. The benefits from these actions resulted in higher
margins and operating profits in the second half. However, it was already
becoming clear in November 2008 that the outlook for 2009 was deteriorating
sharply and the marketing budgets for 2009 of our major customers were likely to
be reduced significantly.We therefore continued our focus on cash conservation
and the resultant reduction in net debt. The fall in net debt from GBP4.33m at
the half year to GBP2.55m at the year end was however greater than expected with
the timing of some significant customer payments and the impact of beneficial
exchange rates further improving the position.
Taking into account the 2008 results of eq group and the outlook for 2009, we
took the decision to write down the book value of our investment in eq by
GBP4.35m to GBP7.72m.Similarly the goodwill held in nxt:MOVE Corporation
(nxtMOVE) was written down by GBP0.76m (after the impact of the exchange
movement in the year) to nil. However, these are not cash items and their
impact has been excluded in the calculation of adjusted profit before tax and
earnings per share for the year 2008.
Our first quarter is traditionally our weakest in terms of sales and was
expected to produce a small loss at the operating level in line with the
previous year.However, we experienced an unprecedented drop in revenue of over
20% across the group in the first quarter of 2009, with the operations in Asia
and the USA hit particularly badly.Most of our blue chip clients have
significantly cut their marketing budgets for 2009 in some cases by up to 30%.
Several, especially in the financial services sector, have also gone through
significant internal cost cutting and restructuring that has also delayed or
re-shaped projects. This, combined with general uncertainty about the economy in
the UK and in mainland Europe, created a strong reluctance to start spending the
reduced budgets in the first quarter until the general economic outlook became a
little clearer. We have maintained strong relationships with all of our key
clients and do not believe we have lost market share in our key sectors in 2009
in our core research and consultancy businesses in the UK. The rate of decline
in sales has shown recent signs of decelerating however, the overseas operations
have continued to be hit particularly hard.
Against this bleak economic background, the Board felt it necessary to implement
sweeping changes in the structure of the group and its costs, in order to ensure
it has a sound base from which to benefit from any recovery in demand in
2010.These measures are intended to support a return to profitability in the
second half of 2009 and enable the group to meet its existing bank covenants.
On 26 May 2009, we completed the sale of our embryonic Asian business to its
management for a nominal sum and we are in discussions to sell nxtMOVE, our US
operation. Both companies are currently loss-making and their disposals will
result in exceptional losses but will stop any further cash drain. The sale of
these loss-making businesses is also necessary in order for the group to meet
its bank covenants at 30 June 2009; keeping these businesses within the group
would necessitate the renegotiation of the terms of the group's bank facilities
or the request of a waiver of the existing covenants at 30 June 2009.Taking into
account the disposal of these businesses the group is forecasting compliance
with its banking covenants as set out in note 1.1. The Group has held
discussions with its bankers regarding the impact of renegotiating its covenants
should this be required, and no matters have been drawn to its intention that
suggest terms could not be agreed. The current facilities with the bank and
future repayments are set out in note 20.
We have almost completed the final integration of our three UK based research
companies (Quaestor, Buckingham Research and Andrew Irving Associates) and
reduced headcount by over 20% through eliminating overlap and streamlining back
office and process functions. Client-facing sector specialisations will be
maintained but we will focus more clearly on the sectors where we have a
competitive advantage and long established expertise
Having taken the decision to simplify the structure of the group, we implemented
a review of all head office costs. As a result there have been a number of
redundancies to reduce these costs substantially. Some functions previously
provided centrally have devolved down to the operating units, with only Finance
and I.T now carried out at the head office.We have eliminated the Chief
Operating Officer role, and the Chairman and Chief Executive Officer roles will
be merged during the transition.Against this background, the Board has also
decided to recommend that shareholders approve the delisting of our shares from
A.I.M which will save a further, circa GBP100,000 pa of head office costs and
this will be proposed as a special resolution at the forthcoming AGM. The full
rationale of the de-listing proposal will be explained in a separate letter to
be distributed with the notice of the AGM.
While business remains volatile for all operating units, our strategy of
focussing our attention on our key clients, who themselves are experiencing
significant challenges and both need and appreciate our help, seems to be paying
off. For both KAE and Report International progress has been good in recent
months with significant contract wins that look set to deliver stronger results
into the rest of 2009 and beyond.
We have had to take unpleasant and harsh decisions in response to the recession
and I recognise how difficult it has been for all our team. I would like to take
this opportunity to thank them all for their hard work, commitment and
understanding during this extremely challenging period.
R F Littleboy
Executive Chairman
REPORT OF THE DIRECTORS
The directors present their report together with the audited financial
statements for the year ended 31 December 2008.
Principal activities and business review
The principal activity of the Group is that of marketing consultancy. The
Group's operations were located in the United Kingdom, United States of
America, Singapore and China during the year. Following the disposal on 29 May
2009 of KAE: Asia, and the proposed disposal of nxtMOVE, the Group's operations
are all be within the United Kingdom. The Group and the parent Company
("Company") are incorporated and domiciled in the United Kingdom..
A review of the business and a review of the future developments of the Group
are included in the Executive Chairman's review.
Results and dividends
The Group made a loss after taxation for the year of GBP4,457,000 (2007: profit
GBP1,004,000).
The directors do not propose the payment of a dividend in respect of the
financial year ended 31 December 2008 (2007: 3.00 pence per share).
Directors
During the year the Board comprised three executive directors and three
non-executive directors. On 5 May 2009 Jonathan Waters resigned as an executive
director. On 11 May 2009 Simon Dannatt stepped down as Chief Executive although
he remains an executive director; Ron Littleboy became Executive Chairman and
Chief Executive from this date.
Ron Littleboy
Executive Chairman and Chief Executive
A graduate of the London School of Economics, Ron joined Williams de Broe Hill
Chaplin stockbrokers as a research analyst in 1972. A partner for eight years,
he left in 1987 to join Nomura International where he spent 15 years until 2002.
His career at Nomura progressed from Head of European Research to Executive
Director of equities and lastly Executive Director of the investment bank with
responsibility for a substantial number of the bank's private equity investments
in the TMT and leisure sectors. His expertise in the leisure and media fields
has encompassed research advisory services, fund raising and board positions.
Since leaving Nomura he has provided consultancy services to a number of leisure
and media companies and has focused his time on progressing the strategy for
Optimisa, where he became non-executive chairman in September 2002 and Executive
Chairman and Chief Executive in May 2009.
Simon Dannatt
Director
After graduating from Oxford as a physicist, Simon worked as a consultant with
the Strategy Consultants L.E.K. Consulting. He then moved to what is now Cap
Gemini Ernst & Young and developed his expertise in commercial market analysis
and marketing strategy, working on a wide range of projects at senior management
level across Europe. Simon joined KAE in 1994, became a managing partner in 2000
and is currently the Chairman of KAE. His strategic marketing responsibility
within the organisation means that Simon oversees all new service development,
cross-functional teamwork and strategic planning to deliver effective commercial
solutions to clients. Simon stepped down as Chief Executive in May 2009 but
remains as an executive director.
David Rankin
Finance Director
David was invited to join KAE in 1991 while he was the Finance Director of a
FTSE 250 plc. His previous experience and network from his time at L.E.K.
Consulting were quickly put to use in helping transform KAE into the strategic
marketing consultancy it is today. With a particular focus on financial services
and telecommunications, David, as Managing Director of KAE, has continued to
develop a series of innovative approaches to measure, model and calculate the
potential of existing operations and future opportunities.
Jonathan Waters
Director
Jonathan joined KAE in 2000, bringing extensive HR experience to the management
team. His role has grown significantly since 2004 when he joined the Board
taking responsibility for all operational matters for the business. He developed
his people management skills initially at J. Sainsbury plc reporting to the
Board on remuneration strategy for the group and then at Computer Team Group, an
IT recruitment consultancy, during a period of acquisition leading to the
successful integration of four distinct cultures into a united team of over one
hundred employees which delivered a turnover of over GBP100m. Jonathan has a BA
in Politics, a Diploma in Personal Management, and is MCIPD qualified. Jonathan
resigned as a director and Company Secretary on 5 May 2009.
Robert Porter
Non-executive Director
Appointed to the Optimisa Board in May 2006, Robert began his career with KPMG,
where he qualified as a chartered accountant before moving on to Price
Waterhouse, Houston, Texas. On returning to the UK he spent 17 years in
international investment and private banking, working in senior roles with
responsibility for finance and operations with organisations such as Samuel
Montague Limited, Long-Term Credit Bank of Japan, Republic National Bank of New
York and Dai-Ichi Kangyo Bank and, most recently, Group Finance Director of
Hartest Holdings plc, an AIM listed company that supplies and manufactures
instrumentation and medical equipment.
John Humpish
Non-executive Director
John is currently the Chief Marketing Officer of Zurich Financial and joined the
Optimisa Board as a non-executive director on 26 February 2008. John's previous
positions include international marketing leadership roles in the investment
management businesses of Deutsche Bank, AXA and Robert Fleming. His early career
was spent at Mars Incorporated in a variety of marketing positions. John was
previously a non-executive director of eq group plc up to the date of
acquisition by Optimisa plc.
The directors and their interests in the shares of the company
The directors who served the Group during the year and up to the date of signing
the financial statements together with their beneficial interests in the 25
pence ordinary shares of the Company were as follows:
+-------------------------------+--------------+--------------+------------+
| | At | At | At |
| | 31 May | 31 December | 31 |
| | 2009 | 2008 | December |
| | | | 2007 |
+-------------------------------+--------------+--------------+------------+
| | | | |
+-------------------------------+--------------+--------------+------------+
| R F Littleboy | 909,858 | 710,858 | 511,998 |
+-------------------------------+--------------+--------------+------------+
| S J Dannatt | 1,093,148 | 993,148 | 861,936 |
+-------------------------------+--------------+--------------+------------+
| D B Rankin | 1,192,148 | 993,148 | 861,936 |
+-------------------------------+--------------+--------------+------------+
| J D H Waters (resigned 5 May | 112,410 | 59,394 | 59,394 |
| 2009) | | | |
+-------------------------------+--------------+--------------+------------+
| R C Porter | - | - | - |
+-------------------------------+--------------+--------------+------------+
| J Humpish (appointed 26 | - | - | - |
| February 2008) | | | |
+-------------------------------+--------------+--------------+------------+
Rotation of directors
Directors who have held office for the last two Annual General Meetings will be
required to retire from office and offer themselves for re-appointment at the
next Annual General Meeting (AGM). The number of directors retiring and offering
themselves for re-appointment must be no less than one third of the current
directors on the Board.Robert Porter and Ronald Littleboy having held office for
the last two AGM, are due to retire at the AGM and will offer themselves for
re-election. Ronald Littleboy, having become Executive Chairman and Chief
Executive from May 2009, will offer himself for re-election as an executive
director.
John Humpish was elected to the Board of Optimisa plc on 26 February 2008.
Directors and officers insurance
The Group insures its directors and officers for any loss for claims made
against them during the period they are in office for any wrongful act committed
by them in their capacity as directors or officers of the Group. This excludes
any dishonest or fraudulent act or omission or any wilful violation of law.
Share options
No share options were granted in the year ended 31 December 2008.
The Group has Enterprise Management Incentive (EMI) schemes granted in previous
years (see note 24).
The only director to have an interest in the scheme was J D H Waters. His
interests in the scheme were as follows:
+-----------------------+---------+---------+----------+----------+-------------+
| | At | Granted | At | Exercise | Option |
| | 1 | in the | 31 | Price | Period |
| | January | year | December | Pence | |
| | 2008 | Number | 2008 | | |
| | Number | | Number | | |
+-----------------------+---------+---------+----------+----------+-------------+
| | | | | | |
+-----------------------+---------+---------+----------+----------+-------------+
| EMI | 24,000 | - | 24,000 | 150 | March 2007 |
| | | | | | to March |
| | | | | | 2010 |
| | | | | | |
+-----------------------+---------+---------+----------+----------+-------------+
| EMI | 24,000 | - | 24,000 | 150 | March 2008 |
| | | | | | to March |
| | | | | | 2011 |
+-----------------------+---------+---------+----------+----------+-------------+
Substantial shareholders
According to the register held by the Company, in addition to the directors'
interests disclosed above, the following have interests of 3% or more of the
issued share capital:
+---------------------+------------+------------+------------+-------------+
| | 31 May 2009 | 31 December 2008 |
+---------------------+-------------------------+--------------------------+
| | Number of | Percentage | Number of | Percentage |
| | | of | | of |
+---------------------+------------+------------+------------+-------------+
| | ordinary | share | ordinary | share |
| | shares | capital | shares | capital |
+---------------------+------------+------------+------------+-------------+
| Noble Fund Managers | - | - | 396,294 | 4.447% |
+---------------------+------------+------------+------------+-------------+
| ISIS Equity | 788,934 | 8.854% | 788,934 | 8.854% |
| Partners | | | | |
+---------------------+------------+------------+------------+-------------+
| Gimle Finans AS | 1,524,000 | 17.11% | - | - |
+---------------------+------------+------------+------------+-------------+
| Octopus Asset | - | - | 1,254,000 | 14.08% |
| Management | | | | |
+---------------------+------------+------------+------------+-------------+
| Dennis John Lloyd | 339,996 | 3.816% | 339,996 | 3.816% |
| King | | | | |
+---------------------+------------+------------+------------+-------------+
| Hargreave Hale Ltd | - | - | 271,200 | 3.044% |
+---------------------+------------+------------+------------+-------------+
Share purchase
Optimisa purchased 27,500 of its own shares, representing 0.3% of issued share
capital and with a nominal value of GBP6,875, through its broker in February
2008 for a value of GBP42,000. Of these shares, 23,490 shares formed part of the
settlement for the deferred consideration for Andrew Irving Associates Limited;
the remaining 4,010 shares were placed in Treasury shares. (See notes 23, 25 and
28).
Research and development
The main research and development activity in the Group is undertaken by Report
International Limited. The expense in the year includes work, by internal
software developers with some external input, on the development of online media
analysis tools which will provide flexible and tailored online solutions for
clients, as well as a number of developments in the areas of automation and
on-line delivery of research data to clients.
Post balance sheet events
The group disposed of its 80% shareholding in KAE: Asia Pacific Pte. Ltd (KAE:
Asia) on 26 May 2009 to the management and minority shareholders of KAE: Asia.
The shares were sold at their face value of SGD4,000 (GBP1,796).
Employees
The Group is committed to its employees and seeks to provide a positive,
supportive and rewarding work environment, where continuous personal development
is core to the business ethos. This is supported by:
* weekly business review meetings;
* monthly business unit meetings;
* bi-annual employee reviews; and
* continuous employee training programs.
The Group has a mentoring program whereby all new employees are assigned a
mentor when they join one of the companies within the Group. These mentors help
the new employee to settle in to the companies day to day activities, enable the
employee to grasp their role and responsibilities quicker and ensures the
employee adds value to the company at an early stage.
The Group recognises that employee workloads and responsibilities are changing
and developing all the time. With this in mind, the Group offers continual
training programs to enhance the employee's skill base to assist the business
with meeting its future challenges. Many of these training programs are
performed across the spectrum of the companies within the Group, exposing
individual staff members to ever wider contacts within the Group.
Political and charitable donations
During the year the Group made no political or charitable donations (2007:
GBPnil).
Policy on the payment of creditors
It is the Group's policy to settle the terms of payment with suppliers when
agreeing the terms of the transaction, to ensure that suppliers are aware of
these terms and to abide by them. Such payments are usually within 30 days of
the receipt of an invoice. As the Company is a holding company it has no trade
creditors, accordingly, no disclosure can be made of the year-end creditor days.
Principal risks and uncertainties
There is an ongoing process for identifying, evaluating and managing the
significant risks of the Group, and this process has been in place throughout
the year under review. The Board has overall responsibility for managing the
risks across the Group in a business that is reliant on its people and IT
systems to grow and to deliver its services. Policies and procedures are in
place to manage and eliminate the risks wherever possible.
Finance strategy and liquidity
Whilst net debt was reduced by GBP1.17m during 2008 to a level of GBP2.55m at 31
December 2008, the difficult economic conditions experienced in the second half
of 2008 have continued during the first half of 2009. The Board therefore
closely monitors the Group's level of debt and liquidity to ensure that it meets
its covenant requirements and has sufficient working capital. The annual budget
setting process includes a detailed review of each subsidiary entity and holding
company and consolidated budgets are approved by the Board. Costs and
performance are monitored on a monthly basis against budgets. The Group
generated a positive cash flow from operating activities after capital
expenditure for the year of GBP1,481,000 (2007: GBP679,000).
The Group's bank borrowings are on a variable interest rate and expose the Group
to interest rate fluctuations and therefore associated cash flow risks. The
Group's policy continues to be that borrowings should be arranged at the lowest
possible cost and with covenants within which the Group can comfortably operate.
The Group's senior debt facilities are subject to quarterly compliance
assessment by the bank. The Group is currently in compliance with these
covenants at the year end date. The board monitors future covenant compliance
through a detailed forecasting process. However the increasing severity of the
downturn in 2009 has impacted profitability, adding pressure to the covenant
calculations going forward. Further assessment of the financial risk policies is
included within note 3 to the financial statements.
Market risk
The Group is reliant on the spend levels of its clients on market research and
consultancy and also on the proportion of this spend that is with Group
companies. These areas of spend are at risk of decline in the face of the
current economic climate. The Group mitigates the market risk it faces by
building up long term relationships with its clients, aided by the specialism
created by the client sector lines on which the business operates. Additionally
the Group maintains a wide range of clients across a number of sectors. In 2008
the Group worked with 328 clients with the top 10 clients making up less than
45% of the Group's revenue.
People
People are key to the business and the Group will need to continue to attract
and retain highly skilled and qualified employees from which to grow the
business. Though it cannot be guaranteed that these employees will always be
available, the business seeks to provide a positive work environment to retain
and attract people to the team. The Group monitors closely the satisfaction of
its employees and ensures that remuneration packages reflect both contribution
and the wider employment market. The Group offers bonus schemes which are
related to the individual and Group companies' performances which allow
employees to participate in the success of the Group.
Information technology
The Group's IT systems are the main method that it delivers and stores internal
and client project information. The Board takes responsibility to ensure that
the risks associated with this are reviewed regularly and fully understood. The
Group IT director ensures that security, functionality and accessibility is
consistent across the Group, enabling the continuation and the support of
further cross company activity whilst mitigating the risk of system issues.
The finance systems have been upgraded to the latest versions to ensure that
systems are supported, up to date and that the benefits in product improvements
assist the analysis that is being provided to management teams further enhancing
the decision making process and the ever smoother running of the individual
companies.
All Group systems are protected from external intervention by the latest
technologies and the Group has a disaster recovery plan which would enable the
Group to continue operations in the light of a catastrophic event.
Key performance indicators
The directors monitor the business primarily on net revenue (gross margin) and
operating margin, both at operating unit and Group level as well as on an
individual project basis. The ongoing performance of the business is monitored
by reference to pipeline proposals and future commissioned projects on a net
revenue basis. Overhead costs are monitored continuously through the provision
of monthly management accounts with variances to budget analysed.
Employee performance is also monitored as an indicator of Group performance with
specific attention paid at operating unit level to revenue per employee and
timesheet allocation. Employees are also monitored on their achievement of
targets in relation to their business development activities to ensure they are
driving the business forward.
As people are a key asset to the business, the success of the Group in
attracting and retaining quality employees is also monitored on a continuous
basis.
The environment
As a Group, we are committed to the development of policies that are friendly to
the environment when carrying out our activities. A number of initiatives are
already in place with many of the best ideas coming from the team. We are award
winning recyclers of waste material, print on double sided paper, control (where
possible) office lighting on sensor controls, hold records in electronic format,
and use public transport for business travel where appropriate.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report and the Group and
the parent company financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the Group financial
statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union, and the parent company financial
statements in accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice). The Group and
parent company financial statements are required by law to give a true and fair
view of the state of affairs of the Company and the Group and of the profit or
loss of the Group for that period.
In preparing those financial statements, the directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state that the Group financial statements comply with IFRS as adopted by the
European Union, and with regard to the parent company financial statements that
applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements, and;
* prepare the Group and parent company financial statements on the going concern
basis unless it is inappropriate to presume that the Group will continue in
business, in which case there should be supporting assumptions or qualifications
as necessary.
The directors confirm that they have complied with the above requirements in
preparing the financial statements.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
parent Company and the Group and to enable them to ensure that the Group
financial statements comply with the Companies Act 1985 and Article 4 of the IAS
Regulation and the parent company financial statements comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the parent
Company and the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company's
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Provision of information to auditors
In so far as each of the directors are aware:
1. there is no relevant audit information of which the Group's auditors are
unaware; and
2. each director has taken all steps that he ought to have taken to make himself
aware of any relevant audit information and to establish that the auditors are
aware of that information.
Independent Auditors
A resolution to re-appoint PricewaterhouseCoopers LLP, who have indicated their
willingness to continue as auditors to the Group and parent company will be
proposed at the Annual General Meeting.
Going concern
The directors, having made appropriate enquiries and considering the
uncertainties noted above, and set out in more detail in note 1.1 to the
financial statements, have a reasonable expectation that the Company and the
Group will be able to obtain adequate resources to continue in operational
existence for the foreseeable future. Accordingly the directors continue to
adopt the going concern basis for preparing the financial statements.
ON BEHALF OF THE BOARD
R C Porter
Company secretary
15 June 2009
CORPORATE GOVERNANCE STATEMENT
The directors recognise the value of the Principles of Good Governance and have
taken measures to ensure that the Group has adopted measures appropriate for a
Group of its size. As an Alternative Investment Market (AIM) listed company, the
Group are not required to comply with the Combined Code of the Financial
Services Authority (FSA).
Directors
The Board is responsible for approving Group policy and strategy. It met 17
times during the financial year and has a schedule of matters specifically
reserved to it for decision. Management supply the Board with timely information
and the Board are free to seek any further information they consider necessary.
Relations with shareholders
The Group values the views of its shareholders and recognises their interest in
the Group's strategy and performance. The Annual General Meeting is used to
communicate with shareholders and they are encouraged to participate. The
directors will be available to answer questions at the Annual General Meeting.
Separate resolutions are proposed on each issue in order that they can be given
proper consideration and there is a resolution to approve the Annual Report and
financial statements.
Internal control
The Board is responsible for maintaining a strong system of internal control to
safeguard shareholders' investment and the Group's assets. The system of
internal control is designed to provide reasonable, but not absolute, assurance
against material misstatement or loss.
The directors are responsible for the Group's system of financial control and
for reviewing its effectiveness.
The key features of the systems of financial control are as follows:
* the Group is headed by an effective Board which leads and controls the Group.
The final selection of any director is performed by the full Board and any
appointment is approved by the Board; and
* the Board receives and reviews on a timely basis financial and operating
information appropriate to being able to discharge its duties.
The Group's operating procedures include systems for reporting financial and
non-financial information to the Board including:
* preparation and review of annual plans and budget;
* preparation and review of monthly management information reports; and
* review of the business at each Board meeting.
The Board has considered the need for an internal audit function but has decided
that the size of the Group does not justify it at present.
Audit Committee
The Audit Committee is responsible for monitoring the integrity of the financial
statements, including the annual and interim reports, and all announcements in
connection with its financial performance. The committee also reviews: all
significant financial reporting issues; significant financial returns to the
regulator and any financial information contained in any document or
announcement of a price sensitive nature. The committee meets as and when
required and is comprised of Robert Porter - Chair, Ron Littleboy and John
Humpish.
Remuneration Committee
The Remuneration Committee is responsible for determining and agreeing with the
Board the framework and broad policy for the remuneration of the Chief
Executive, Chairman and executive directors. The Committee meets twice per year
and comprises of Ron Littleboy - Chair, Robert Porter and John Humpish.
Nomination Committee
The Nomination Committee is responsible for making recommendations to the board
on all new board appointments. The nomination committee is responsible for
evaluating the balance of skills, knowledge and experience on the board and, in
light of this evaluation, prepare a description of the role for new
appointments. The Committee meets as and when required and met once in 2008 and
comprises John Humpish - Chair, Ron Littleboy and Robert Porter.
Going concern
Having reviewed the financial position and after making enquiries, the directors
have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future as set out in note 1.1.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OPTIMISA PLC
We have audited the Group financial statements of Optimisa plc for the year
ended 31 December 2008 which comprise the consolidated income statement, the
consolidated statement of recognised income and expense, the consolidated
balance sheet, the consolidated cash flow statement and the related notes. These
Group financial statements have been prepared under the accounting policies set
out therein.
We have reported separately on the parent company financial statements of
Optimisa plc for the year ended 31 December 2008.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the Group
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set
out in the Statement of directors' responsibilities.
Our responsibility is to audit the Group financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland). This report, including the opinion, has been prepared
for and only for the company's members as a body in accordance with Section 235
of the Companies Act 1985 and for no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Group financial statements give a
true and fair view and whether the Group financial statements have been properly
prepared in accordance with the Companies Act 1985. We also report to you
whether in our opinion the information given in the Report of the directors is
consistent with the Group financial statements. The information given in the
Report of the directors includes that specific information presented in the
Executive Chairman's statement that is cross referred from the Principal
activities and business review section of the Report of the directors.
In addition we report to you if, in our opinion, we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding director's remuneration and other transactions is not
disclosed.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited Group financial statements. The other information
comprises only the Highlights, the Executive Chairman's statement, the Report of
the directors, the Corporate Governance statement, Company information, and all
of the other information listed on the contents page. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the Group financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the Group financial statements. It also includes an assessment of
the significant estimates and judgments made by the directors in the preparation
of the Group financial statements, and of whether the accounting policies are
appropriate to the Group's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the Group financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the Group financial statements.
Opinion
In our opinion:
* the Group financial statements give a true and fair view, in accordance with
IFRSs as adopted by the European Union, of the state of the Group's affairs as
at 31 December 2008 and of its loss and cash flows for the year then ended;
* the Group financial statements have been properly prepared in accordance with
the Companies Act 1985; and
* the information given in the Report of the directors is consistent with the
Group financial statements.
Emphasis of matter - going concern
In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of the disclosures given in note 1.1 to the
financial statements concerning the ability of the Group to continue as a going
concern. While the Group is currently forecasting to operate within its existing
banking covenants, this is dependent on the profitability of the business. In
the current economic climate, there is increased risk of over predicting
profitability, and in the event the covenants were no longer met, the Group
would need to renegotiate the terms of its banking facilities or obtain a
waiver. The matters set out in note 1.1 to the financial statements indicate the
existence of material uncertainties which may cast significant doubt over the
ability of the Group to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group were unable to
continue as a going concern.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Leeds
15 June 2009
AUDITED CONSOLIDATED INCOME STATEMENT
+----------------------------------------+------+------------+------------+
| |Note | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+------+------------+------------+
| Revenue | 5 | 17,699 | 11,415 |
+----------------------------------------+------+------------+------------+
| Cost of sales | | (5,177) | (3,325) |
+----------------------------------------+------+------------+------------+
| Gross profit | | 12,522 | 8,090 |
+----------------------------------------+------+------------+------------+
| Administrative expenses excluding | | (10,658) | (6,570) |
| depreciation, amortisation and | | | |
| impairments | | | |
+----------------------------------------+------+------------+------------+
| Depreciation | 16 | (282) | (94) |
+----------------------------------------+------+------------+------------+
| Amortisation | 15 | (169) | (125) |
+----------------------------------------+------+------------+------------+
| Goodwill and intangibles impairment | 15 | (5,214) | - |
+----------------------------------------+------+------------+------------+
| Total administrative expenses | | (16,323) | (6,789) |
+----------------------------------------+------+------------+------------+
| Other operating income | | 17 | - |
+----------------------------------------+------+------------+------------+
| Operating (loss)/profit | 9 | (3,784) | 1,301 |
+----------------------------------------+------+------------+------------+
| Operating profit before impairments | | 1,430 | 1,301 |
+----------------------------------------+------+------------+------------+
| Finance income | 6 | 5 | 51 |
+----------------------------------------+------+------------+------------+
| Finance costs | 7 | (368) | (95) |
+----------------------------------------+------+------------+------------+
| (Loss)/profit before income tax | 9 | (4,147) | 1,257 |
+----------------------------------------+------+------------+------------+
| Income tax expense | 11 | (310) | (253) |
+----------------------------------------+------+------------+------------+
| (Loss)/profit for the period | | (4,457) | 1,004 |
+----------------------------------------+------+------------+------------+
| Attributable to: | | | |
+----------------------------------------+------+------------+------------+
| Minority interests | | 12 | - |
+----------------------------------------+------+------------+------------+
| Equity holders of the parent | | (4,469) | 1,004 |
+----------------------------------------+------+------------+------------+
| (Loss)/profit for the period | | (4,457) | 1,004 |
+----------------------------------------+------+------------+------------+
All activities in both the current and previous year relate to continuing
operations.
+----------------------------------------+------+------------+------------+
| Earnings per share (pence) for the | | | |
| earnings attributable to equity | | | |
| shareholders | | | |
+----------------------------------------+------+------------+------------+
| Basic | 14 | (50.16) | 16.65 |
+----------------------------------------+------+------------+------------+
| Diluted | 14 | (50.10) | 16.56 |
+----------------------------------------+------+------------+------------+
The notes are an integral part of these consolidated financial statements.
AUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
+------------------+--------+---------+---------+
| | Note | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+------------------+--------+---------+---------+
| Currency | 25 | 419 | (16) |
| translation | | | |
| differences | | | |
+------------------+--------+---------+---------+
| Net | | 419 | (16) |
| income/(expense) | | | |
| recognised | | | |
| directly in | | | |
| equity | | | |
+------------------+--------+---------+---------+
| (Loss)/profit | | (4,457) | 1,004 |
| for the year | | | |
+------------------+--------+---------+---------+
| Total | | (4,038) | 988 |
| recognised | | | |
| (expense)/income | | | |
| for the year | | | |
+------------------+--------+---------+---------+
| Attributable | | | |
| to: | | | |
+------------------+--------+---------+---------+
| Minority | | 18 | - |
| interests | | | |
+------------------+--------+---------+---------+
| Equity | | (4,056) | 988 |
| holders | | | |
| of the | | | |
| parent | | | |
| company | | | |
+------------------+--------+---------+---------+
| | | (4,038) | 988 |
+------------------+--------+---------+---------+
The notes are an integral part of these consolidated financial statements.
AUDITED CONSOLIDATED BALANCE SHEET
+----------------------------------------+------+------------+------------+
| |Note | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+----------------------------------------+------+------------+------------+
| Assets | | | |
+----------------------------------------+------+------------+------------+
| Non-current assets | | | |
+----------------------------------------+------+------------+------------+
| Property, plant and equipment | 16 | 467 | 651 |
+----------------------------------------+------+------------+------------+
| Intangible assets - goodwill | 15 | 9,526 | 14,284 |
+----------------------------------------+------+------------+------------+
| Intangible assets - other | 15 | 370 | 599 |
+----------------------------------------+------+------------+------------+
| Deferred income tax assets | 12 | 80 | 126 |
+----------------------------------------+------+------------+------------+
| Total non-current assets | | 10,443 | 15,660 |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Current assets | | | |
+----------------------------------------+------+------------+------------+
| Inventories - work in progress | | 55 | 198 |
+----------------------------------------+------+------------+------------+
| Current income tax recoverable | | 204 | 114 |
+----------------------------------------+------+------------+------------+
| Trade and other receivables | 18 | 3,893 | 4,555 |
+----------------------------------------+------+------------+------------+
| Cash and cash equivalents | | 645 | 1,137 |
+----------------------------------------+------+------------+------------+
| Total current assets | | 4,797 | 6,004 |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Total assets | | 15,240 | 21,664 |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Current liabilities | | | |
+----------------------------------------+------+------------+------------+
| Trade and other payables | 19 | (2,803) | (3,257) |
+----------------------------------------+------+------------+------------+
| Current income tax liabilities | | (457) | (487) |
+----------------------------------------+------+------------+------------+
| Borrowings | 20 | (859) | (1,660) |
+----------------------------------------+------+------------+------------+
| Deferred consideration | 22 | (60) | (101) |
+----------------------------------------+------+------------+------------+
| Total current liabilities | | (4,179) | (5,505) |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Non-current liabilities | | | |
+----------------------------------------+------+------------+------------+
| Borrowings | 20 | (2,336) | (3,197) |
+----------------------------------------+------+------------+------------+
| Deferred consideration | 22 | (291) | (155) |
+----------------------------------------+------+------------+------------+
| Deferred income tax liabilities | 12 | (90) | (154) |
+----------------------------------------+------+------------+------------+
| Total non-current liabilities | | (2,717) | (3,506) |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Total liabilities | | (6,896) | (9,011) |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Net assets | | 8,344 | 12,653 |
+----------------------------------------+------+------------+------------+
| | | | |
+----------------------------------------+------+------------+------------+
| Capital and reserves attributable to | | | |
| equity holders of the Company | | | |
+----------------------------------------+------+------------+------------+
| Ordinary shares | 23 | 2,227 | 2,227 |
+----------------------------------------+------+------------+------------+
| Share premium | 25 | 7,882 | 7,880 |
+----------------------------------------+------+------------+------------+
| Merger reserve | 25 | 914 | 914 |
+----------------------------------------+------+------------+------------+
| Foreign currency translation reserve | 25 | 304 | (115) |
+----------------------------------------+------+------------+------------+
| Retained earnings | 25 | (2,990) | 1,747 |
+----------------------------------------+------+------------+------------+
| Equity attributable to equity | 25 | 8,337 | 12,653 |
| shareholders of the parent | | | |
+----------------------------------------+------+------------+------------+
| Minority interests | | 7 | - |
+----------------------------------------+------+------------+------------+
| Total equity | 25 | 8,344 | 12,653 |
+----------------------------------------+------+------------+------------+
The notes are an integral part of these consolidated financial statements. The
financial statements were approved by the Board of directors on 15 June 2009 and
were signed on its behalf by:
R F Littleboy
Director
AUDITED CONSOLIDATED CASH FLOW STATEMENT
+-----------------------------------------+------+----------+------------+
| |Note | 2008 | 2007 |
| | | GBP'000 | GBP'000 |
+-----------------------------------------+------+----------+------------+
| Cash flows from operating activities: | | | |
+-----------------------------------------+------+----------+------------+
| (Loss)/profit before income tax | | (4,147) | 1,257 |
+-----------------------------------------+------+----------+------------+
| Adjustments for: | | | |
+-----------------------------------------+------+----------+------------+
| Depreciation | 16 | 282 | 94 |
+-----------------------------------------+------+----------+------------+
| Amortisation | 15 | 169 | 125 |
+-----------------------------------------+------+----------+------------+
| (Profit) on disposal of property, plant | | (3) | - |
| & equipment | | | |
+-----------------------------------------+------+----------+------------+
| Amortisation of arrangement fee | | 31 | - |
+-----------------------------------------+------+----------+------------+
| Impairments | 15 | 5,214 | - |
+-----------------------------------------+------+----------+------------+
| Share option cost | | 5 | 10 |
+-----------------------------------------+------+----------+------------+
| Finance income | 6 | (5) | (51) |
+-----------------------------------------+------+----------+------------+
| Finance costs | 7 | 368 | 95 |
+-----------------------------------------+------+----------+------------+
| Foreign exchange gains on operating | | 178 | - |
| activities | | | |
+-----------------------------------------+------+----------+------------+
| Operating cash flow before changes in | | 2,092 | 1,530 |
| working capital and provisions | | | |
+-----------------------------------------+------+----------+------------+
| Decrease in inventories | | 143 | 99 |
+-----------------------------------------+------+----------+------------+
| Decrease/(increase) in trade and other | | 764 | (787) |
| receivables | | | |
+-----------------------------------------+------+----------+------------+
| (Increase)/decrease in trade and other | | (534) | 63 |
| payables | | | |
+-----------------------------------------+------+----------+------------+
| | | 2,465 | 905 |
+-----------------------------------------+------+----------+------------+
| Interest paid | | (362) | (82) |
+-----------------------------------------+------+----------+------------+
| Interest received | | 5 | 51 |
+-----------------------------------------+------+----------+------------+
| Income tax paid | | (450) | (92) |
+-----------------------------------------+------+----------+------------+
| Net cash generated from operating | | 1,658 | 782 |
| activities | | | |
+-----------------------------------------+------+----------+------------+
| | | | |
+-----------------------------------------+------+----------+------------+
| Cash flows from investing activities: | | | |
+-----------------------------------------+------+----------+------------+
| Acquisition of subsidiaries, net of | | (59) | (7,945) |
| cash acquired | | | |
+-----------------------------------------+------+----------+------------+
| Acquisition of property, plant and | 16 | (117) | (103) |
| equipment (PPE) | | | |
+-----------------------------------------+------+----------+------------+
| Proceeds from sale of PPE | | 71 | 11 |
+-----------------------------------------+------+----------+------------+
| Payments to acquire intangible assets | 15 | (36) | (12) |
+-----------------------------------------+------+----------+------------+
| Net cash used by investing activities | | (141) | (8,049) |
+-----------------------------------------+------+----------+------------+
| | | | |
+-----------------------------------------+------+----------+------------+
| Cash flows from financing activities: | | | |
+-----------------------------------------+------+----------+------------+
| Proceeds from the issue of share | | - | 7,805 |
| capital | | | |
+-----------------------------------------+------+----------+------------+
| Cost of share issue | | - | (355) |
+-----------------------------------------+------+----------+------------+
| Purchase of treasury shares | 25 | (42) | - |
+-----------------------------------------+------+----------+------------+
| Proceeds from borrowings | | - | 3,686 |
+-----------------------------------------+------+----------+------------+
| Repayments of borrowings | | (744) | (5,074) |
+-----------------------------------------+------+----------+------------+
| Dividends paid to Company's | | (267) | (221) |
| shareholders | | | |
+-----------------------------------------+------+----------+------------+
| Net cash (used by)/generated from | | (1,053) | 5,841 |
| financing activities | | | |
+-----------------------------------------+------+----------+------------+
| | | | |
+-----------------------------------------+------+----------+------------+
| Net increase/(decrease) in cash and | | 464 | (1,426) |
| cash equivalents | | | |
+-----------------------------------------+------+----------+------------+
| Opening cash and cash equivalents | | 172 | 1,596 |
+-----------------------------------------+------+----------+------------+
| Exchange gain on cash and cash | | 9 | 2 |
| equivalents | | | |
+-----------------------------------------+------+----------+------------+
| Closing cash and cash equivalents* | | 645 | 172 |
+-----------------------------------------+------+----------+------------+
* Cash and cash equivalents at 31 December 2008 comprises cash balances of
GBP645,000 (2007: GBP1,137,000) and bank overdraft balances of GBPnil (2007:
GBP965,000).
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
1.1Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations as adopted by the
European Union (EU) and with those parts of the Companies Act 1985 applicable to
companies reporting under IFRS. These consolidated financial statements have
been prepared under the historical cost convention with the exception of
derivative financial instruments and share based payments which are recognised
at fair value.
The financial statements are prepared on a going concern basis which assumes
that the Group will be able to meet its liabilities as they fall due for the
foreseeable future. The Group's financial position, business activities,
together with the factors likely to affect its future development, performance
and position are set out in the report of the Directors. In addition, notes 3
and 4 set out the Group's objectives, policies and processes for managing its
financial and capital risks.
As explained in the Executive Chairman's statement, the Group is in discussions
to dispose of nxtMOVE and on the assumption that the disposal is completed by 30
June or a reasonable time thereafter, has received confirmation from its bankers
that nxtMOVE's results can as a consequence be excluded from the covenant
compliance calculations. On that basis the Group continues to forecast
compliance with its banking covenants during the current challenging economic
climate; however the covenant at 30 June 2009 is forecast to be the point with
minimum headroom. Covenant compliance is dependent upon the profitability of the
business which is driven by the level of sales to the Group's customers. The
current economic climate has led to increased volatility in the commissioning of
projects and as such an increased risk of over predicting profitability.
In the event that the covenants were no longer met the Group would need to
renegotiate the terms of its banking facilities or obtain a waiver. The Group
has held discussions with its bankers regarding the impact of renegotiating
covenants should this be required, and no matters have been drawn to its
attention that suggest terms could not be agreed. However in the event that a
covenant breach occurs this could result, in extremis, in a reduction or
withdrawal of facilities by the bank.
As highlighted in note 20 to the Group financial statements, the Group meets its
day to day working capital requirements through an overdraft facility. The
Group's bankers have formally offered renewal of the overdraft facility until 31
May 2010 which has been approved by the directors of Optimisa plc. The directors
of the Group's subsidiary companies are also in the process of formally
approving the renewal of the facilities at their upcoming board meetings. The
Group's forecasts and projections, taking account of reasonably possible changes
in trading performance, show that the Group should be able to operate within the
level of its current facility. The Directors have the expectation the senior
debt facility will be available until the end of the term agreement in November
2010.
Whilst the Directors note that the matters set out above indicate the existence
of material uncertainties which may cast significant doubt over the Group's
ability to continue as a going concern, they have reasonable expectation that
the Group can operate within its existing finance arrangements and therefore
consider that it is appropriate to use the going concern basis of preparation
for the financial statements of the Group and the parent company. The financial
statements do not include the adjustments that would result if the Group or
parent company were unable to continue as a going concern.
The following standards, amendments and interpretations to existing standards
have been published and are mandatory for the Group's accounting periods
beginning on or after 1 January 2009 or later periods. The Group has not adopted
any of these standards, amendments or interpretations early. Adoption of these
standards is not anticipated to have any material effect on the current
financial position or performance of the Group:
* Amendment to IFRS 2 Share based payments - The IASB has published an amendment
to IFRS2, 'Share based payments' dealing with vesting conditions and
cancellations. It clarifies that vesting conditions are service conditions and
performance conditions only.
* IFRS 8 Operating segments - The new standard requires a 'management approach',
under which segment information is presented on the same basis as that used for
internal reporting purposes. The Group will apply IFRS 8 from 1 January 2009.
* IAS 23 (revised) Borrowing costs - The new standard requires the capitalisation
of borrowing costs which are directly attributable to the acquisition,
construction or production of a qualifying asset (one that takes substantial
period of time to get ready for use).
* IFRS 3 (revised) Business combinations - The standard continues to apply the
acquisition method to business combinations, with some significant changes
including:
* All payments to purchase a business are to be recorded at fair value at the
acquisition date, with some contingent payments subsequently re-measured at fair
value through income.
* Goodwill may be calculated based on the parent's share of net assets or it may
be goodwill related to minority interest.
* All costs relating to transactions will be expensed.
* IAS 27 (revised) Consolidated and Separate Financial Statements - the standard
impacts the accounts for the cost of an investment in a subsidiary, jointly
controlled entity or associate
1.2Basis of consolidation
The consolidated financial statements incorporate the results of the parent
company and each of its subsidiaries for the financial year ended 31 December
2008. Subsidiaries are entities controlled by the Group. Control is deemed to
exist when the Group has the power, directly or indirectly to govern the
financial and operating policies of an entity so as to obtain benefits from its
activities. The results of subsidiaries are included in the consolidated
financial statements from the date the 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 the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
Consolidation of the subsidiary company accounts within the Group is done on a
line by line basis. The accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by Group.
Intra-group balances and transactions are eliminated on consolidation.
Reserves attributable to the minority interest are presented separately.
1.3Foreign currency translation
a) Functional and presentation currency
Items included in the financial statement of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in UK Pounds, which is the Company's functional and
Group's presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of such transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
c) Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
d) Group companies
The results and financial position of Group entities that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
i) assets and liabilities are translated at the closing rate at the date of the
balance sheet;
ii) income and expenses are translated at the average exchange rate over the
period; and
iii) all resulting exchange differences are recognised as a separate component
of equity (foreign currency translation reserve (FCTR)).
1.4Property, plant and equipment
Property, plant and equipment (PPE) is stated at cost less accumulated
depreciation. Cost comprises the purchase price of property, plant and equipment
together with any incidental costs of acquisition.
Subsequent costs are included in the asset's carrying value or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All repairs and maintenance expenditure is
charged to the income statement as incurred.
Depreciation on PPE is calculated to write their cost down to their residual
values over their remaining useful economic lives by annual equal instalments,
as follows:
+--------------------------------------+---------------------------------+
| Short leasehold property | 5 years |
+--------------------------------------+---------------------------------+
| Fixtures, fittings and equipment | 3 - 5 years |
+--------------------------------------+---------------------------------+
| Motor vehicles | 4 years |
+--------------------------------------+---------------------------------+
The assets' residual values and useful lives are reviewed and adjusted if
appropriate, at each balance sheet date. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognised within administrative expenses in the income
statement.
1.5Intangible assets
a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill is tested annually for impairment by reference to
the relevant cash-generating units (CGU's) and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
b) Computer software
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their useful economic lives estimated at 3 years.
c) Customer contracts and relationships
In accordance with IFRS 3, "Business Combinations", an intangible asset acquired
in a business combination is deemed to have a cost to the Group of its fair
value at the acquisition date. The fair value of the intangible asset reflects a
valuation at the acquisition date of the future economic benefits embodied in
the asset that are expected to flow to the Group.
Intangible assets identified at acquisition date for the nxt:MOVE Corporation,
Andrew Irving Associates Limited, Report International Limited and eq group
Limited acquisitions related to customer contracts and relationships. Customer
contracts and relationships acquired through a business combination are deemed
to have a finite life, being either the contracted period (1 to 18 months), or
an estimate of the tenure of the relationship at acquisition date (up to 8 years
depending on nature).
The fair value attributed at acquisition date is amortised on a straight line
basis over the finite life to which the value is attributed.
The Group has elected not to restate business combinations that occurred prior
to 1 January 2006, the date of transition to IFRS, and accordingly, no customer
contracts and relationships have been recognised in relation to business
combinations prior to transition.
d) Development expenditure
Development expenditure on an individual project is recognised as an intangible
asset only when the Group can demonstrate the technical feasibility of
completing the project so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset
will generate future economic benefits, the availability of resources to
complete the project and the ability to measure reliably the expenditure during
development. Following initial recognition of development expenditure as an
asset, the asset is carried at cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of the asset begins when development
is complete and the asset is available for use. It is amortised on a
straight-line basis over the period of expected future benefit. During the
period of development, the asset is tested annually for impairment.
1.6Impairment of non-financial assets
Assets that have an indefinite useful life, for example, goodwill, are not
subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and value in use.
1.7Financial assets
The Group only has one category of financial assets, loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included
in current assets, except for maturities greater than 12 months after the
balance sheet date. These are classified as non-current assets. The Group's
loans and receivables comprise "trade and other receivables" and "cash and cash
equivalents" in the balance sheet.
Loans and receivables are carried at amortised cost using the effective interest
rate method.
The Group assesses, at each balance sheet date, whether there is objective
evidence that a financial asset or a group of financial assets is impaired.
1.8Derivative financial instruments
The Group uses derivative financial instruments such as forward currency
contracts and interest rate swaps to hedge its risks associated with foreign
currency and interest rate fluctuations. Derivatives are initially measured at
fair value on the date the derivative contract is entered into and are
subsequently re-measured at their fair value. As the derivative financial
instruments used by the Group do not qualify for hedge accounting, changes in
the fair value of any derivative instruments are recognised immediately in the
income statement within other gains/(losses) and are shown net.
1.9Inventories
The only category of inventories held by the Group is work in progress. Work in
progress is stated at the lower of cost and net realisable value and represents
external costs directly attributable to projects. The cost of work in progress
comprises external direct cost of sales. Net realisable value is the estimated
selling price in the ordinary course of business, less costs to complete.
1.10Trade receivables
Trade receivables are recognised at fair value, less provision for impairment. A
provision for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments are considered
indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. The carrying amount of the asset is reduced
through the use of a doubtful debt provision, and the amount of the loss is
recognised in the income statement within administrative expenses. When a trade
receivable is uncollectible, it is written off against the doubtful debt
provision. Subsequent recoveries of amounts previously written off are credited
against administrative expenses in the income statement.
1.10Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits on call with banks,
other short term highly liquid investments with maturities of three months or
less, and bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
1.11Trade payables
Trade payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
1.12Borrowings
Borrowings are recognised initially at fair value, net of transaction costs.
Subsequent measurement is based on amortised cost and any difference between the
proceeds (net of transaction of costs) and the redemption value is recognised in
the income statement over the period of the borrowings using the effective
interest rate method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
1.13Current and deferred income tax
The charge or credit for current tax is based on the results for the year
adjusted for items that are either not subject to taxation or for expenditure
which cannot be deducted in computing the tax charge or credit. The tax charge
or credit is calculated using taxation rates that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, deferred
income tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit.
Deferred income tax is determined using tax rates and laws that have been
enacted or substantively enacted at the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled. Deferred income tax is not discounted as the
effects are not material.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
1.14Provisions
A provision is recognised in the balance sheet when the Group has a legal or
constructive obligation as a result of a past event, it is probable than 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. If the effect is
material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
Provisions for deferred consideration on acquisitions are made based upon
management's expectation as to the outcome of the determining factors. As
deferred consideration is part of the consideration for the acquisition the
amount provided for in the accounts has led to a resultant increase in the
goodwill associated with that acquisition. Any revisions to the amount of
deferred consideration provided for are similarly reflected by a revision to
goodwill.
1.15Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable incremental
costs (net of income taxes) is deducted from equity attributable to the
Company's equity holders until the shares are cancelled or reissued. Where such
shares are subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related income tax
effects, is included in equity attributable to the Company's equity holders.
1.16Net debt
Net debt comprises cash and cash equivalents, bank and other loans, finance
lease liabilities and derivative financial instruments.
1.17Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved by the Company's shareholders.
1.18Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for
the sale of services in the ordinary course of the Group's activities. Revenue
is shown net of value added tax and discounts and after eliminating sales within
the Group.
Revenue is recognised as follows:
a) Sales of services are recognised in the accounting period in which the
services are rendered, by reference to completion of the specific transaction,
assessed on the basis of the actual service provided as a proportion of the
total services to be provided.
b) Interest is recognised on an accruals basis.
1.19Segment Reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that is
subject to risks and returns that are different from those of segments operating
in other economic environments.
1.20Exceptional items
Exceptional items are those significant items which are separately disclosed by
virtue of their size or incidence to enable a full understanding of the Group's
financial performance. Transactions which may give rise to exceptional items are
principally gains or losses on disposal of investments and subsidiaries or
impairments of assets, as well as the reversal of such impairments.
1.21Employee benefits
a) Pension obligations
Group companies contribute to various defined contribution pension schemes. A
defined contribution plan is a pension plan under which the Group pays fixed
contributions into a third party entity. The Group has no further payment
obligations once the contributions have been paid. Contributions payable to
these schemes are charged to the period in which the obligation arises.
b) Share option scheme
The Group operates equity settled executive and employee share option
arrangements and all share based remuneration is ultimately recognised as an
expense in the income statement with a corresponding credit to shareholders
funds. Upon exercise of the share options fulfilled by the issue of new shares,
the proceeds received net of any directly attributable transaction costs up to
the nominal value of the shares are allocated to share capital with any excess
being recorded as share premium.
All share based payment arrangements granted after 7 November 2002 are
recognised in the financial statements, with the exception of those vesting
before 1 January 2006.
The fair value of the options is measured using a Black Scholes valuation model
of options with non-market performance conditions. Changes in vesting period and
non market vesting conditions are assessed on an annual basis.
1.22Leases
a) Operating leases
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
b) Finance leases
Leases are classified as finance leases where the terms of the lease transfer
substantially all the risks and rewards of ownership to the Group.
Each lease payment is allocated between the liability and finance charges so as
to achieve a constant rate on the finance balance outstanding. The corresponding
rental obligations, net of finance charges are included in borrowings. The
interest element of the finance cost is charged to the income statement over the
lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The assets acquired under
finance leases are included in property, plant and equipment and are depreciated
over the shorter of the useful economic life of the asset and the lease term.
2Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise judgment in the process of applying the Group's accounting policies.
The nature of estimation means that actual outcomes could differ from those
estimates. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities with the
next financial year are discussed below.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all
non-financial assets at each reporting date. Goodwill is tested annually for
impairment and at other times when such indicators exist. Other non financial
assets are tested for impairment when there are indicators that the carrying
amounts may not be recoverable.
When value in use calculations are undertaken, management must estimate the
expected future cash flows from the asset or cash generating unit and choose a
suitable discount rate in order to calculate the present value of those cash
flows.
Deferred tax assets
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.
3Financial risk management
The Group's activities expose it to some financial risks, the main ones being
foreign exchange risk and interest rate risk. The Group is also exposed to
credit risk and liquidity risk but these are considered to be of lesser
significance. Risk management is carried out by the Board of directors and
senior management. The Group does not enter into derivative contracts for
speculative purposes.
a)Foreign exchange risk
The Group operates internationally and also invoices customers in a number of
foreign currencies. It is therefore exposed to foreign exchange risk arising
from exchange rate movements, primarily between the US dollar, the Euro and the
UK pound. Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign operations.
Management reviews the foreign currency exposure on a regular basis and, when
appropriate, enters into forward contracts to manage the foreign exchange
currency risk. At 31 December 2008 no forward contracts were outstanding. In
February 2009 management entered into 3 forward contracts to mitigate the risk
on the future US dollar receipts.
b) Interest rate risk
The Group's interest risk arises from bank borrowings which are at variable
rates and expose the Group to cash flow risk. Management review the interest
rate risk on a periodic basis. Short-term interest rate swaps to fix the
interest rate for a period of time are undertaken when considered appropriate to
manage the cash flow risk arising from the interest rate exposure. The bank
borrowings interest payable is based on the London Inter Bank Offer Rate
(LIBOR). An increase in the LIBOR rate of 0.25% would result in an increase in
interest payable of approximately GBP10,000 per annum.
c) Credit risk
The Group's credit risk arises from outstanding receivables with customers and
cash deposits with banks. Credit risk is managed by each individual operating
unit, monitored regularly on a Group basis. Due to the nature of the Group's
business, credit risk is assessed on a customer by customer basis prior to
entering into contractual arrangements. Credit risk is mitigated by the
invoicing in advance of 50% of the agreed project fee.
d) Liquidity risk
The Group is subject to the risk that it will not have sufficient borrowing
facilities, in the form of a bank overdraft facility and bank loans, to meet the
Group's cash requirements. The Group manages this risk with weekly cash flow
forecasts which extend to 31 December 2010. Funding adequacy throughout this
period is demonstrated by the calculation of the headroom that the Group is
forecasting to have against the overdraft facility limit at the end of each
week. The Group's bank facilities, comprising its bank overdraft and bank
loans, are subject to quarterly covenant tests. The Group forecasts its position
against these covenant tests throughout the period to the end of the facility
agreement in November 2010 to mitigate the risk of non-compliance.
4Capital risk management
The Group is subject to the risk that its capital structure will not be
sufficient to support the future operations of the business. The Group's
objectives when managing capital (capital being defined as the Ordinary share
capital, the share premium account, the merger reserve, the foreign currency
translation reserve and the retained earnings) are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue
new shares, purchase its own shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. The ratio is
calculated as net debt divided by total equity. The level of gearing at 31
December 2008 is 31% (2007: 29%) which the Board considers appropriate at this
time.
5Segmental information
a) Primary reporting format - business segments
The directors regard the Group as operating in one primary segment, that being
marketing consultancy.
b) Secondary reporting format - geographical segments
The Group's businesses are based in the UK, with the exception of nxtMOVE which
is based in the US and KAE Asia which is based in Singapore. All of the Group's
businesses have customers based around the world, but the main areas where
revenue is generated are the UK, the rest of Europe and the US.
+---------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+------------+
| Revenue | | |
+---------------------------------------------+------------+------------+
| United Kingdom | 10,118 | 6,025 |
+---------------------------------------------+------------+------------+
| Rest of Europe | 2,439 | 1,163 |
+---------------------------------------------+------------+------------+
| US | 4,704 | 4,185 |
+---------------------------------------------+------------+------------+
| Other countries | 438 | 42 |
+---------------------------------------------+------------+------------+
| | 17,699 | 11,415 |
+---------------------------------------------+------------+------------+
Revenue is allocated based on the country in which the customer is located.
+---------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+------------+
| Total assets | | |
+---------------------------------------------+------------+------------+
| United Kingdom | 14,554 | 20,577 |
+---------------------------------------------+------------+------------+
| Rest of Europe | - | - |
+---------------------------------------------+------------+------------+
| US | 435 | 1,087 |
+---------------------------------------------+------------+------------+
| Other countries | 251 | - |
+---------------------------------------------+------------+------------+
| | 15,240 | 21,664 |
+---------------------------------------------+------------+------------+
Total assets are allocated based on where the assets are located.
+---------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+------------+
| Capital expenditure | | |
+---------------------------------------------+------------+------------+
| United Kingdom | 144 | 133 |
+---------------------------------------------+------------+------------+
| Rest of Europe | - | - |
+---------------------------------------------+------------+------------+
| US | 14 | 1 |
+---------------------------------------------+------------+------------+
| Other countries | 11 | - |
+---------------------------------------------+------------+------------+
| | 169 | 134 |
+---------------------------------------------+------------+------------+
Capital expenditure is allocated based on where the assets are located.
6Finance income
+------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------+---------+---------+
| Interest | 5 | 51 |
| receivable | | |
| on bank | | |
| deposits | | |
+------------+---------+---------+
7Finance costs
+----------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------------+---------+---------+
| Interest | 325 | 82 |
| payable | | |
| on bank | | |
| borrowings | | |
+----------------+---------+---------+
| Interest | 12 | 5 |
| payable | | |
| on | | |
| finance | | |
| leases | | |
+----------------+---------+---------+
| Interest | 4 | - |
| payable: | | |
| other | | |
+----------------+---------+---------+
| Deferred | 27 | 8 |
| consideration: | | |
| unwinding of | | |
| discount (note | | |
| 22) | | |
+----------------+---------+---------+
| Total | 368 | 95 |
| finance | | |
| costs | | |
+----------------+---------+---------+
8Directors and employees
The average monthly number of persons including executive directors employed by
the Group during the year was made up as follows:
+---------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | Number | Number |
+---------------------------------------------+------------+------------+
| Marketing consultants | 195 | 95 |
+---------------------------------------------+------------+------------+
| Central support staff | 9 | 7 |
+---------------------------------------------+------------+------------+
| | 204 | 102 |
+---------------------------------------------+------------+------------+
Staff costs during the year including executive directors were as follows:
+--------------------------------------------+------------+-------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------------------------------------+------------+-------------+
| Wages, salaries and benefits in kind | 7,262 | 4,413 |
+--------------------------------------------+------------+-------------+
| Social security costs | 694 | 407 |
+--------------------------------------------+------------+-------------+
| Other pension costs | 431 | 216 |
+--------------------------------------------+------------+-------------+
| Share option expense | 5 | 10 |
+--------------------------------------------+------------+-------------+
| | 8,392 | 5,046 |
+--------------------------------------------+------------+-------------+
The pension cost charged to the profit and loss account in the year of
GBP431,000 (2007: GBP216,000) includes an amount of GBP26,000 (2007: GBP30,000)
included in liabilities at the 31 December and paid in the following year.
Remuneration in respect of executive and non-executive directors was as follows:
+---------------------------------------------+------------+-------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+-------------+
| Emoluments | 260 | 365 |
+---------------------------------------------+------------+-------------+
| Pension contributions | 138 | 99 |
+---------------------------------------------+------------+-------------+
| | 398 | 464 |
+---------------------------------------------+------------+-------------+
Directors' emoluments include base salary, bonus and benefits in kind. Pension
contributions include one (2007: one) director whose contributions are paid
into a defined contribution scheme and two directors (2007: two) whose fixed
contributions are paid into Self Invested Personal Pensions (S.I.P.P.).
The key management of the Group are the same as the directors of the Group,
therefore no additional disclosure of key management compensation has been
provided.
Amounts set out above include remuneration in respect of the highest paid
director as follows:
+---------------------------------------------+------------+--------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+--------------+
| Emoluments | 104 | 139 |
+---------------------------------------------+------------+--------------+
| Pension contribution | 64 | 28 |
+---------------------------------------------+------------+--------------+
| | 168 | 167 |
+---------------------------------------------+------------+--------------+
9Loss before income taxation
+---+------------------------------------------+------------+--------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------------------------------------------+------------+--------------+
| The following items have been included in | | |
| arriving at loss before income tax: | | |
+----------------------------------------------+------------+--------------+
| Research and development costs | 27 | 52 |
+----------------------------------------------+------------+--------------+
| Amortisation of deferred development costs | 16 | 7 |
| (note 15) | | |
+----------------------------------------------+------------+--------------+
| Employee benefits expense (note 8) | 8,392 | 5,046 |
+----------------------------------------------+------------+--------------+
| Depreciation of property, plant and | | |
| equipment (note 16): | | |
+----------------------------------------------+------------+--------------+
| - | Owned assets | 198 | 76 |
+---+------------------------------------------+------------+--------------+
| - | Under finance leases | 84 | 18 |
| | | | |
+---+------------------------------------------+------------+--------------+
| Amortisation of intangible assets (note 15) | 169 | 125 |
+----------------------------------------------+------------+--------------+
| Cost of inventories recognised as an expense | 1,933 | 607 |
+----------------------------------------------+------------+--------------+
| Foreign currency exchange gains | (238) | - |
+----------------------------------------------+------------+--------------+
| Operating lease payments | 568 | 364 |
+----------------------------------------------+------------+--------------+
| Disposal of property plant and equipment | (3) | - |
+---+------------------------------------------+------------+--------------+
10Services provided by the Group's auditor
During the year the Group, including the overseas subsidiary, obtained the
following services from the Group's auditor, as detailed below:
+--------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------+---------+---------+
| Fees | 9 | 12 |
| payable | | |
| to | | |
| Company | | |
| auditor | | |
| for the | | |
| audit | | |
| of the | | |
| parent | | |
| company | | |
| and | | |
| consolidated | | |
| financial | | |
| accounts | | |
+--------------+---------+---------+
| Fees | | |
| payable | | |
| to | | |
| Company | | |
| auditor | | |
| for | | |
| other | | |
| services: | | |
+--------------+---------+---------+
| - | 54 | 42 |
| audit | | |
| of | | |
| Company's | | |
| subsidiaries | | |
| pursuant to | | |
| legislation | | |
+--------------+---------+---------+
| - tax | 13 | 11 |
| compliance | | |
| services | | |
+--------------+---------+---------+
| | 76 | 65 |
+--------------+---------+---------+
In the prior year GBP7,000 was paid to the Group's former auditors.
11Income tax expense
+-------------+---------+---------+
| Analysis | 2008 | 2007 |
| of | GBP'000 | GBP'000 |
| charge | | |
| in year | | |
+-------------+---------+---------+
| Current | | |
| tax: | | |
+-------------+---------+---------+
| - | 351 | 293 |
| current | | |
| year | | |
| - | | |
| adjustment | | |
| in respect | | |
| of | | |
| previous | | |
| years | | |
+ +---------+---------+
| | (23) | 1 |
+-------------+---------+---------+
| Total | 328 | 294 |
| current | | |
| tax | | |
+-------------+---------+---------+
| | | |
+-------------+---------+---------+
| Deferred | | |
| tax | | |
| (note | | |
| 12): | | |
+-------------+---------+---------+
| - | (98) | (46) |
| Origination | | |
| and | | |
| reversal of | | |
| temporary | | |
| differences | | |
+-------------+---------+---------+
| - | 81 | 8 |
| Utilisation | | |
| of | | |
| previously | | |
| recognised | | |
| tax losses | | |
+-------------+---------+---------+
| - | (20) | 1 |
| Impact | | |
| of | | |
| change | | |
| in UK | | |
| tax | | |
| rate | | |
+-------------+---------+---------+
| - | 19 | (4) |
| Adjustment | | |
| in respect | | |
| of | | |
| previous | | |
| years | | |
+-------------+---------+---------+
| Total | (18) | (41) |
| deferred | | |
| tax | | |
+-------------+---------+---------+
| Total | 310 | 253 |
| income | | |
| tax | | |
| charge | | |
+-------------+---------+---------+
Tax reconciliation
The standard rate of corporation tax in the UK changed from 30% to 28% on 1
April 2008 giving an effective rate for the year of 28.5%. The tax for the year
is higher (2007: lower) than the effective rate, the differences are explained
below:
+---------------------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------+---------+---------+
| (Loss)/profit | (4,147) | 1,257 |
| before tax | | |
+---------------------------+---------+---------+
| Loss | (1,182) | 377 |
| on | | |
| ordinary | | |
| activities | | |
| multiplied | | |
| by rate of | | |
| corporation | | |
| tax in the | | |
| UK of 28.5% | | |
| (2007: 30%) | | |
+---------------------------+---------+---------+
| Effects | | |
| of: | | |
+---------------------------+---------+---------+
| Higher | - | 8 |
| rate | | |
| of tax | | |
| payable | | |
| in | | |
| foreign | | |
| countries | | |
+---------------------------+---------+---------+
| Expenses | 1,435 | 7 |
| not | | |
| deductible | | |
| for tax | | |
| purposes | | |
+---------------------------+---------+---------+
| Impact | (20) | - |
| of | | |
| change | | |
| in UK | | |
| tax | | |
| rate | | |
+---------------------------+---------+---------+
| Utilisation/(recognition) | 81 | (136) |
| of previously | | |
| unrecognised tax losses | | |
+---------------------------+---------+---------+
| Adjustments | (4) | (3) |
| in respect | | |
| of previous | | |
| years | | |
+---------------------------+---------+---------+
| Total | 310 | 253 |
| income | | |
| tax | | |
| charge | | |
+---------------------------+---------+---------+
12Deferred tax
The deferred tax included in the balance sheet is as follows:
+--------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------+---------+---------+
| Deferred | | |
| tax | | |
| asset | | |
+--------------+---------+---------+
| Tax | 27 | 103 |
| losses | | |
| carried | | |
| forward | | |
+--------------+---------+---------+
| Depreciation | 53 | 23 |
| in excess of | | |
| capital | | |
| allowances | | |
+--------------+---------+---------+
| | 80 | 126 |
+--------------+---------+---------+
| Deferred | | |
| tax | | |
| liability | | |
+--------------+---------+---------+
| Accelerated | 4 | 5 |
| capital | | |
| allowances | | |
+--------------+---------+---------+
| Acquisition | 86 | 149 |
| fair value | | |
| adjustments | | |
+--------------+---------+---------+
| | 90 | 154 |
+--------------+---------+---------+
Trading losses:
The balance for deferred tax losses carried forward at 31 December 2008 relates
to trading losses carried forward in Optimisa plc and Report International
Limited, the deferred tax asset in each company being GBP3,000 and GBP24,000
respectively (2007: GBP80,000 and GBP23,000 respectively). Recoverability of
this asset is dependent upon there being sufficient future trading profits in
these two companies against which the brought forward tax losses can be offset.
Capital losses:
Unrelieved tax losses relating to capital disposals in previous years of
approximately GBP13,210,000 remain available to offset against future taxable
gains in Optimisa plc. The potential deferred tax asset at 28% of GBP3,699,000
associated with these losses has not been recognised as the directors do not
expect them to be utilised in the future.
The movement in the deferred tax asset and the deferred tax liability in the
year is as follows:
+--------------------+---------+---------+
| Deferred | 2008 | 2007 |
| tax | GBP'000 | GBP'000 |
| asset | | |
+--------------------+---------+---------+
| At 1 | 126 | 86 |
| January | | |
+--------------------+---------+---------+
| (Charged)/credited | (46) | 14 |
| to the income | | |
| statement | | |
+--------------------+---------+---------+
| On | - | 26 |
| acquisition | | |
| of | | |
| subsidiary | | |
+--------------------+---------+---------+
| At 31 | 80 | 126 |
| December | | |
+--------------------+---------+---------+
+-------------+---------+---------+
| Deferred | 2008 | 2007 |
| tax | GBP'000 | GBP'000 |
| liability | | |
+-------------+---------+---------+
| At 1 | 154 | 15 |
| January | | |
+-------------+---------+---------+
| Credited | (64) | (27) |
| to the | | |
| income | | |
| statement | | |
+-------------+---------+---------+
| On | - | 166 |
| acquisition | | |
| of | | |
| subsidiary | | |
+-------------+---------+---------+
| At 31 | 90 | 154 |
| December | | |
+-------------+---------+---------+
13Ordinary dividends
+----------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------+---------+---------+
| Equity | | |
| - | | |
| ordinary | | |
+----------+---------+---------+
| Final | 267 | 132 |
| 3.0p | | |
| per | | |
| share | | |
| (final | | |
| 2006: | | |
| 2.5p | | |
| per | | |
| share) | | |
+----------+---------+---------+
| Interim | - | 89 |
| paid | | |
| 0.0p | | |
| per | | |
| share | | |
| (interim | | |
| 2007: | | |
| 1.67p | | |
| per | | |
| share) | | |
+----------+---------+---------+
| | 267 | 221 |
+----------+---------+---------+
The directors do not propose the payment of a dividend in respect of the
financial year ending 31 December 2008.
14(Loss)/earnings per share
+---------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | pence | pence |
+---------------------------------------------+------------+------------+
| Basic (loss)/earnings per ordinary share | (50.16) | 16.65 |
+---------------------------------------------+------------+------------+
| Diluted earnings per ordinary share | (50.10) | 16.56 |
+---------------------------------------------+------------+------------+
| Adjusted earnings per share | 9.73 | 18.37 |
+---------------------------------------------+------------+------------+
Basic EPS is calculated by dividing the earnings attributable to ordinary
shareholders by the weighted average number of ordinary shares in issue during
the year.
For diluted EPS, the weighted average number of ordinary shares in issue is
adjusted to reflect the assumption of conversion of all dilutive ordinary
shares. The dilutive ordinary shares represent the share options granted to
employees where the exercise price is less than the average market price of the
Company's ordinary shares during the year.
For adjusted EPS, the reported profit after tax is adjusted for the amortisation
charge on customer contracts and customer relationships and impairment losses.
Reconciliations of basic EPS to diluted EPS and adjusted EPS are set out below:
+-------------------------------+----------+-----------+----------+-----------+
| | 2008 | 2007 |
+-------------------------------+----------------------+----------------------+
| | Earnings | Weighted | Earnings | Weighted |
| | GBP'000 | average | GBP'000 | average |
| | | number | | number |
| | | of | | of |
| | | shares | | shares |
+-------------------------------+----------+-----------+----------+-----------+
| Basic EPS | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| (Loss) /Profit and weighted | (4,469) | 8,910,090 | 1,004 | 6,031,243 |
| average number of ordinary | | | | |
| shares for basic earnings per | | | | |
| share | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| Diluted EPS | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| Adjustment for share options | - | 10,646 | - | 32,168 |
+-------------------------------+----------+-----------+----------+-----------+
| (Loss) /Profit and weighted | (4,469) | 8,920,736 | 1,004 | 6,063,411 |
| average number of shares for | | | | |
| diluted earnings per share | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| Adjusted EPS | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| Adjustment for customer | 5,336 | - | 104 | - |
| contracts and relationships | | | | |
| amortisation and impairments | | | | |
+-------------------------------+----------+-----------+----------+-----------+
| (Loss) /Profit and weighted | 867 | 8,910,090 | 1,108 | 6,031,243 |
| average number of shares for | | | | |
| adjusted earnings per share | | | | |
+-------------------------------+----------+-----------+----------+-----------+
15Intangible assets
+--------------+----------+----------+---------------+-------------+---------+
| | Goodwill | Computer | Customer | Development | Total |
| | GBP'000 | software | contracts | GBP'000 | GBP'000 |
| | | GBP'000 | and | | |
| | | | relationships | | |
| | | | GBP'000 | | |
+--------------+----------+----------+---------------+-------------+---------+
| Cost | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 1 | 14,284 | 63 | 659 | 40 | 15,046 |
| January | | | | | |
| 2008 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Acquisition | 26 | 1 | - | - | 27 |
| of | | | | | |
| subsidiaries | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Additions | 110 | 36 | - | - | 146 |
+--------------+----------+----------+---------------+-------------+---------+
| Currency | 222 | 1 | - | - | 223 |
| movement | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 31 | 14,642 | 101 | 659 | 40 | 15,442 |
| December | | | | | |
| 2008 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Accumulated | | | | | |
| amortisation | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 1 | - | 26 | 130 | 7 | 163 |
| January | | | | | |
| 2008 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Charge | - | 31 | 122 | 16 | 169 |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Impairment | 5,116 | - | 98 | - | 5,214 |
+--------------+----------+----------+---------------+-------------+---------+
| At 31 | 5,116 | 57 | 350 | 23 | 5,546 |
| December | | | | | |
| 2008 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Net | 9,526 | 44 | 309 | 17 | 9,896 |
| book | | | | | |
| amount | | | | | |
| at 31 | | | | | |
| December | | | | | |
| 2008 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Cost | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 1 | 2,008 | 38 | 76 | - | 2,122 |
| January | | | | | |
| 2007 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Acquisition | 12,284 | 16 | 583 | 40 | 12,923 |
| of | | | | | |
| subsidiaries | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Additions | 3 | 9 | - | - | 12 |
| | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Currency | (11) | - | - | - | (11) |
| movement | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 31 | 14,284 | 63 | 659 | 40 | 15,046 |
| December | | | | | |
| 2007 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Accumulated | - | | | | |
| amortisation | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 1 | - | 12 | 26 | - | 38 |
| January | | | | | |
| 2007 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Charge | - | 14 | 104 | 7 | 125 |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| At 31 | - | 26 | 130 | 7 | 163 |
| December | | | | | |
| 2007 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
| Net | 14,284 | 37 | 529 | 33 | 14,883 |
| book | | | | | |
| amount | | | | | |
| at 31 | | | | | |
| December | | | | | |
| 2007 | | | | | |
+--------------+----------+----------+---------------+-------------+---------+
The currency movements in the year are as a result of movements in the US dollar
and Singapore dollar exchange rates with pound sterling, US dollar being the
functional currencies of nxtMOVE, Singapore dollar being the functional currency
of KAE Asia and pound sterling being the presentational currency of these Group
accounts.
Customer contracts and relationships
In the year there has been an indication of impairment of some of the customer
relationships following a decline in the sales made to these customers.
Impairment tests were then carried out on all customer relationship assets and a
number were identified as no longer having sufficient current and expected
future sales to support their carrying value in the accounts. The carrying
value of these customer relationships has been reduced to their recoverable
amount and as a result customer relationships have been impaired by GBP98,000 in
the year.
Goodwill
Goodwill is allocated to the Group's cash generating units (CGU's). Currently
each entity or group of entities acquired separately is a CGU. A summary of the
allocation of goodwill is presented below:
+--------------------------------------------+--------------+-------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------------------------------------+--------------+-------------+
| kae: marketing intelligence Limited | 1,304 | 1,304 |
+--------------------------------------------+--------------+-------------+
| nxt:MOVE Corporation | - | 542 |
+--------------------------------------------+--------------+-------------+
| Andrew Irving Associates Limited | 154 | 154 |
+--------------------------------------------+--------------+-------------+
| Report International Limited | 322 | 212 |
+--------------------------------------------+--------------+-------------+
| eq group Limited | 7,720 | 12,072 |
+--------------------------------------------+--------------+-------------+
| KAE Asia Pacific Pte Limited | 26 | - |
+--------------------------------------------+--------------+-------------+
| | 9,526 | 14,284 |
+--------------------------------------------+--------------+-------------+
The recoverable amount of a CGU is determined based on value-in-use
calculations. Following the annual impairment reviews of all goodwill balances,
an impairment charge of GBP4,352,000 has been made to the goodwill balance
attributable to eq group Limited and an impairment charge, following exchange
movement, of GBP763,000 has been made to the goodwill balance held in nxt:MOVE
Corporation. Expected future revenues from eq group and nxt:MOVE have reduced
following a decline in spend by a number of clients.
The value-in-use calculation uses pre-tax cash flow projections for years 1 to 5
with year 5 then being taken to perpetuity. The key assumptions are the
projected level of sales, gross margin, employee costs and the annual growth
rate of 3%. The discount rate of 8% used is pre-tax and is the estimated
weighted average cost of capital for the Group based on the cost of debt for the
Group and assumptions regarding the risks relating to the Group and its
subsidiaries.
If key assumptions are changed in this value in use model the recoverable amount
of the goodwill attributable to eq group Limited would also change as follows:
* If the discount rate used is increased by 1% to 9% the recoverable amount
decreases by GBP1,427,000.
* If forecasted EBITDA is decreased by 1%, the recoverable amount decreases by
GBP85,000.
* If the annual growth rate is decreased by 1% to 2% the recoverable amount
decreases by GBP1,209,000.
* If the gross revenue and direct costs of sale are reduced by 1% the recoverable
amount decreases by GBP731,000.
16Property, plant and equipment
+--------------+-----------+-----------+----------+---------+
| | Short | Fixtures, | Motor | Total |
| | Leasehold | fittings | vehicles | GBP'000 |
| | Property | and | GBP'000 | |
| | GBP'000 | equipment | | |
| | | GBP'000 | | |
+--------------+-----------+-----------+----------+---------+
| Cost | | | | |
+--------------+-----------+-----------+----------+---------+
| At 1 | 148 | 435 | 218 | 801 |
| January | | | | |
| 2008 | | | | |
+--------------+-----------+-----------+----------+---------+
| Acquisition | 3 | 12 | - | 15 |
| of | | | | |
| subsidiaries | | | | |
+--------------+-----------+-----------+----------+---------+
| Additions | 5 | 112 | 16 | 133 |
+--------------+-----------+-----------+----------+---------+
| Disposals | (3) | - | (96) | (99) |
| | | | | |
+--------------+-----------+-----------+----------+---------+
| Currency | 15 | 19 | - | 34 |
| movement | | | | |
+--------------+-----------+-----------+----------+---------+
| At 31 | 168 | 578 | 138 | 884 |
| December | | | | |
| 2008 | | | | |
+--------------+-----------+-----------+----------+---------+
| Accumulated | | | | |
| depreciation | | | | |
+--------------+-----------+-----------+----------+---------+
| At 1 | 23 | 114 | 13 | 150 |
| January | | | | |
| 2008 | | | | |
+--------------+-----------+-----------+----------+---------+
| Charge | 40 | 181 | 61 | 282 |
| for | | | | |
| the | | | | |
| year | | | | |
+--------------+-----------+-----------+----------+---------+
| Disposals | (2) | - | (29) | (31) |
+--------------+-----------+-----------+----------+---------+
| Currency | 8 | 8 | - | 16 |
| movement | | | | |
+--------------+-----------+-----------+----------+---------+
| At 31 | 69 | 303 | 45 | 417 |
| December | | | | |
| 2008 | | | | |
+--------------+-----------+-----------+----------+---------+
| Net | 99 | 275 | 93 | 467 |
| book | | | | |
| amount | | | | |
| at | | | | |
| 31 | | | | |
| December | | | | |
| 2008 | | | | |
+--------------+-----------+-----------+----------+---------+
+--------------+--------+--------+--------+--------+
| Cost | | | | |
+--------------+--------+--------+--------+--------+
| At 1 | 37 | 124 | - | 161 |
| January | | | | |
| 2007 | | | | |
+--------------+--------+--------+--------+--------+
| Acquisition | 112 | 209 | 210 | 531 |
| of | | | | |
| subsidiaries | | | | |
+--------------+--------+--------+--------+--------+
| Additions | - | 104 | 18 | 122 |
+--------------+--------+--------+--------+--------+
| Disposals | - | (2) | (10) | (12) |
+--------------+--------+--------+--------+--------+
| Currency | (1) | - | - | (1) |
| movement | | | | |
+--------------+--------+--------+--------+--------+
| At 31 | 148 | 435 | 218 | 801 |
| December | | | | |
| 2007 | | | | |
+--------------+--------+--------+--------+--------+
| Accumulated | | | | |
| depreciation | | | | |
+--------------+--------+--------+--------+--------+
| At 1 | 6 | 50 | - | 56 |
| January | | | | |
| 2007 | | | | |
+--------------+--------+--------+--------+--------+
| Charge | 17 | 64 | 13 | 94 |
| for | | | | |
| the | | | | |
| year | | | | |
+--------------+--------+--------+--------+--------+
| At 31 | 23 | 114 | 13 | 150 |
| December | | | | |
| 2007 | | | | |
+--------------+--------+--------+--------+--------+
| Net | 125 | 321 | 205 | 651 |
| book | | | | |
| amount | | | | |
| at | | | | |
| 31 | | | | |
| December | | | | |
| 2007 | | | | |
+--------------+--------+--------+--------+--------+
Assets held under finance lease
The net book amount of property, plant and equipment held under finance leases
at 31 December 2008 was GBP115,000 (2007: GBP271,000). The cost of these assets
was GBP199,000 (2007: GBP289,000) and the accumulated depreciation was GBP84,000
(2007: GBP18,000).
Acquisition of subsidiaries
GBP15,000 was the fair value on the date of acquisition (1 May 2008) of the
property, plant and equipment held by KAE Asia Pacific Pte Ltd.
17Financial instruments
+-------------+---------+---------+
| | Loans and |
| | receivables |
+-------------+-------------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| At 31 | | |
| December | | |
| - Assets | | |
| as per | | |
| balance | | |
| sheet | | |
+-------------+---------+---------+
| Trade | 2,930 | 3,699 |
| and | | |
| other | | |
| receivables | | |
+-------------+---------+---------+
| Cash | 645 | 1,137 |
| and | | |
| cash | | |
| equivalents | | |
+-------------+---------+---------+
| | 3,575 | 4,836 |
+-------------+---------+---------+
+---------------+---------+---------+
| | Other financial |
| | liabilities |
+---------------+-------------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------+---------+---------+
| At 31 | | |
| December | | |
| - | | |
| Liabilities | | |
| as per | | |
| balance | | |
| sheet | | |
+---------------+---------+---------+
| Trade | 1,429 | 1,649 |
| and | | |
| other | | |
| payables | | |
+---------------+---------+---------+
| Deferred | 351 | 256 |
| consideration | | |
+---------------+---------+---------+
| Borrowings | 3,195 | 4,857 |
+---------------+---------+---------+
| | 4,975 | 6,762 |
+---------------+---------+---------+
Credit quality of financial assets
The directors consider that, based on historical information about default rates
and the current strength of customer relationships, the majority of which are
long term recurring customers, the credit quality of financial assets that are
neither past due nor impaired is good. This is supported by the very low level
of bad debts over the last two years of less than GBP10,000. Further detail on
how the directors manage credit risk is provided in note 3.
18Trade and other receivables - current
+-------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| Trade | 2,876 | 3,591 |
| receivables | | |
+-------------+---------+---------+
| Less: | (26) | (20) |
| provision | | |
| for | | |
| impairment | | |
| of trade | | |
| receivables | | |
+-------------+---------+---------+
| Trade | 2,850 | 3,571 |
| receivables | | |
| net of | | |
| provision | | |
| for | | |
| impairment | | |
+-------------+---------+---------+
| Other | 80 | 128 |
| receivables | | |
+-------------+---------+---------+
| Prepayments | 963 | 856 |
| and accrued | | |
| income | | |
+-------------+---------+---------+
| | 3,893 | 4,555 |
+-------------+---------+---------+
Trade receivables are non-interest bearing and are generally on 30-90 days
terms. Trade receivables that are past due are reviewed individually for
impairment. At 31 December 2008, trade receivables of GBP1,664,000 (31 December
2007: GBP1,828,000) were fully performing, trade receivables of GBP1,186,000 (31
December 2007: GBP1,743,000) were past due but not considered to be impaired,
and trade receivables of GBP26,000 (31 December 2007: GBP20,000) were impaired
and provided for The receivables that are not considered to be impaired relate
to a number of independent customers for whom there is no history of default.
The ageing analysis of trade receivables is as follows:
+---------------+-----------+------------+------------+----------+----------+----------+
| | | | Past due but not | Past due |
| | | | impaired | and |
| | | | | provided |
| | | | | for |
+---------------+-----------+------------+-----------------------+----------+
| | Total | Fully | Up to 3 | 3 - 6 | 3 - 6 months |
| | GBP'000 | performing | months | months | GBP'000 |
| | | GBP'000 | GBP'000 | GBP'000 | |
+---------------+-----------+------------+------------+----------+---------------------+
| 31 December | 2,876 | 1,664 | 973 | 213 | 26 |
| 2008 | | | | | |
+---------------+-----------+------------+------------+----------+---------------------+
| 31 December | 3,591 | 1,828 | 1,371 | 372 | 20 |
| 2007 | | | | | |
+---------------+-----------+------------+------------+----------+----------+----------+
The carrying amounts of the Group's trade and other receivables are denominated
in the following currencies:
+-----------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-----------+---------+---------+
| Pounds | 2,602 | 3,830 |
+-----------+---------+---------+
| Euros | 221 | 213 |
+-----------+---------+---------+
| US | 1,028 | 512 |
| dollar | | |
+-----------+---------+---------+
| Singapore | 42 | - |
| dollar | | |
+-----------+---------+---------+
| | 3,893 | 4,555 |
+-----------+---------+---------+
19Trade and other payables - current
+----------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------+---------+---------+
| Trade | 881 | 875 |
| payables | | |
+----------+---------+---------+
| Social | 548 | 774 |
| security | | |
| and | | |
| other | | |
| taxes | | |
+----------+---------+---------+
| Accruals | 1,374 | 1,608 |
| and | | |
| deferred | | |
| income | | |
+----------+---------+---------+
| | 2,803 | 3,257 |
+----------+---------+---------+
20Borrowings
+-------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| Current | | |
+-------------+---------+---------+
| Bank | - | 965 |
| overdrafts | | |
| - | | |
| unsecured | | |
| (b) | | |
+-------------+---------+---------+
| Bank | 786 | 590 |
| borrowings | | |
| - secured | | |
| (a) | | |
+-------------+---------+---------+
| Finance | 73 | 105 |
| lease | | |
| obligations | | |
| (note 21) | | |
+-------------+---------+---------+
| | 859 | 1,660 |
+-------------+---------+---------+
+-------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| Non-current | | |
+-------------+---------+---------+
| Bank | 2,310 | 3,096 |
| borrowings | | |
| - secured | | |
| (a) | | |
+-------------+---------+---------+
| Finance | 26 | 101 |
| lease | | |
| obligations | | |
| (note 21) | | |
+-------------+---------+---------+
| | 2,336 | 3,197 |
+-------------+---------+---------+
a) The secured bank loans are secured by a floating charge over the Group's UK
based assets. The bank loans are stated net of unamortised issue costs of
GBP35,000 (2007: GBP64,000) and additional capitalised bank charges of GBP19,000
(2007: GBPnil). The bank loan is due to be fully repaid by November 2010.
b) The unsecured borrowings comprise the bank overdraft which is subject to
annual renewal. The overdraft facility is GBP1,000,000 (2007: GBP1,000,000).
All bank borrowings are denominated in UK pounds.
The bank overdraft is subject to a floating rate of interest of UK Base rate
plus a margin of 5% (2007: UK Base rate plus a margin of 1.25%).
The bank loans are subject to a floating rate of interest of LIBOR plus a margin
plus a cost of funds. The margin in 2008 was 1.8% to 9th October 2008 and on the
revision of the loan facilities was amended to a margin of 2.5%.
The finance leases are subject to fixed rates of interest. The effective
interest rates at the balance sheet dates of borrowings were as follows:
+------------+---------+---------+
| | 2008 | 2007 |
+------------+---------+---------+
| Bank | 3.25% | 6.5% |
| overdraft | | |
+------------+---------+---------+
| Bank | 4.9847% | 8.0125% |
| borrowings | | |
+------------+---------+---------+
| Finance | 7.94% | 7.79% |
| leases | | |
+------------+---------+---------+
The maturity profile of the contractual payments, including finance charges, of
the Group's financial liabilities as at 31 December 2008 is as follows:
+-----------------+------------+----------+----------+----------+---------+
| | Less than | 1 - 2 | 2 - 3 | 3 - 5 | Total |
| | 1 year | years | years | years | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+-----------------+------------+----------+----------+----------+---------+
| Bank overdraft | - | - | - | - | - |
+-----------------+------------+----------+----------+----------+---------+
| Trade and other | 2,803 | - | - | - | 2,803 |
| payables | | | | | |
+-----------------+------------+----------+----------+----------+---------+
| Bank loans | 942 | 2,453 | - | - | 3,395 |
+-----------------+------------+----------+----------+----------+---------+
| Finance lease | 77 | 21 | 4 | 2 | 104 |
| obligations | | | | | |
+-----------------+------------+----------+----------+----------+---------+
| Total | 3,822 | 2,474 | 4 | 2 | 6,302 |
+-----------------+------------+----------+----------+----------+---------+
The maturity profile of the contractual payments, including finance charges, of
the Group's financial liabilities as at 31 December 2007 was as follows:
+-----------------+------------+----------+----------+----------+---------+
| | Less than | 1 - 2 | 2 - 3 | 3 - 5 | Total |
| | 1 year | years | years | years | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+-----------------+------------+----------+----------+----------+---------+
| Bank overdraft | 965 | - | - | - | 965 |
+-----------------+------------+----------+----------+----------+---------+
| Trade and other | 3,257 | - | - | - | 3,257 |
| payables | | | | | |
+-----------------+------------+----------+----------+----------+---------+
| Bank loans | 881 | 1,026 | 2,514 | - | 4,421 |
+-----------------+------------+----------+----------+----------+---------+
| Finance lease | 117 | 87 | 16 | 3 | 223 |
| obligations | | | | | |
+-----------------+------------+----------+----------+----------+---------+
| Total | 5,220 | 1,113 | 2,530 | 3 | 8,866 |
+-----------------+------------+----------+----------+----------+---------+
21Obligations under finance leases
Future minimum lease payments under finance leases fall due as follows:
+-----------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
| | | |
+-----------+---------+---------+
| Not | 77 | 117 |
| later | | |
| than | | |
| one | | |
| year | | |
+-----------+---------+---------+
| After | 27 | 106 |
| one | | |
| year | | |
| but | | |
| not | | |
| more | | |
| than | | |
| five | | |
| years | | |
+-----------+---------+---------+
| | 104 | 223 |
+-----------+---------+---------+
| Less | (5) | (17) |
| finance | | |
| charges | | |
| allocated | | |
| to future | | |
| periods | | |
+-----------+---------+---------+
| Present | 99 | 206 |
| value | | |
| of | | |
| minimum | | |
| finance | | |
| lease | | |
| payments | | |
+-----------+---------+---------+
The present value of minimum finance lease payments is analysed as follows:
+--------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
| | | |
+--------+---------+---------+
| Not | 73 | 105 |
| later | | |
| than | | |
| one | | |
| year | | |
+--------+---------+---------+
| After | 26 | 101 |
| one | | |
| year | | |
| but | | |
| not | | |
| more | | |
| than | | |
| five | | |
| years | | |
+--------+---------+---------+
| | 99 | 206 |
+--------+---------+---------+
22Deferred consideration
+-------------+--------+---------+
| | | GBP'000 |
+-------------+--------+---------+
| At 1 | | 101 |
| January | | |
| 2007 | | |
+-------------+--------+---------+
| Included | | 147 |
| in cost | | |
| of | | |
| acquisition | | |
+-------------+--------+---------+
| Charged | | 8 |
| to | | |
| income | | |
| statement | | |
| - | | |
| unwinding | | |
| of | | |
| discount | | |
+-------------+--------+---------+
| At 31 | | 256 |
| December | | |
| 2007 and | | |
| 1 | | |
| January | | |
| 2008 | | |
+-------------+--------+---------+
| Revision | | 109 |
| of | | |
| earn-out | | |
| liability | | |
+-------------+--------+---------+
| Charged | | 27 |
| to | | |
| income | | |
| statement | | |
| - | | |
| unwinding | | |
| of | | |
| discount | | |
| (note 7) | | |
+-------------+--------+---------+
| Settled | | (41) |
| during | | |
| the | | |
| year | | |
+-------------+--------+---------+
| At 31 | | 351 |
| December | | |
| 2008 | | |
+-------------+--------+---------+
Provisions are analysed between current and non-current as follows:
+-------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
| | | |
+-------------+---------+---------+
| Current | 60 | 101 |
+-------------+---------+---------+
| Non-current | 291 | 155 |
+-------------+---------+---------+
| | 351 | 256 |
+-------------+---------+---------+
Provisions comprise deferred consideration in relation to the acquisitions of
Andrew Irving Associates Limited (AIA) and Report International Limited (RIL).
The deferred consideration in relation to the acquisition of AIA on 2 October
2006 is payable following completion of the financial statements for the year
ending 31 December 2008, based upon the gross profit earned by AIA in the 2008
financial year. A provision for the maximum amount payable of GBP60,000 has been
made at 31 December 2008 (31 December 2007: GBP101,000). This has not been
discounted as the effect is not material.
During the year GBP41,000 of deferred consideration was settled in relation to
the acquisition of Andrew Irving Associates Limited; GBP3,000 was settled in
cash and GBP38,000 was settled in ordinary equity shares in Optimisa plc (see
note 23).
The deferred consideration in relation to the acquisition of RIL on 2 May 2007
is payable following completion of the financial statements for the year ending
31 December 2009, based upon the average profit before tax in the 2008 and 2009
financial years. A provision for GBP291,000 has been made at 31 December 2008
(2007: GBP155,000) which represents the discounted value of the estimated amount
payable. A discount rate of 8% has been applied which is an estimate of the
Group's weighted average cost of capital based on the cost of debt for the Group
and assumptions regarding the risks relating to the Group and its subsidiaries.
The earn-out liability has been revised at 31 December 2008 following the 2008
actual result being above that previously forecasted combined with an increase
in the forecasted result for 2009. This revision resulted in an increase in the
provision of GBP109,000.
23Ordinary shares
+------------+---------+---------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------+---------+---------+
| Authorised | | |
+------------+---------+---------+
| 12,600,000 | 3,150 | 3,150 |
| ordinary | | |
| shares of | | |
| 25p each | | |
+------------+---------+---------+
| Allotted, | | |
| called up | | |
| and fully | | |
| paid | | |
+------------+---------+---------+
| 8,910,090 | 2,227 | 2,227 |
| ordinary | | |
| shares of | | |
| 25p each | | |
+------------+---------+---------+
During the year the Group acquired 27,500 of its own shares with a nominal value
GBP6,875 for a total cost of GBP42,000. 23,490 of these shares with a nominal
value of GBP5,873 formed part of the settlement to a related party of the
deferred consideration for Andrew Irving Associates Limited (see notes 22 & 28).
The remaining 4,010 shares with a nominal value of GBP1,003 are held in treasury
shares within reserves at 31 December 2008.
24Share options
The Group had the following outstanding options over its ordinary shares of 25
pence each;
+----+--------------+---------------------+----------+----------+---------+
| Share Option | Exercise period | Exercise | 2008 | 2007 |
| Scheme | | price | Number | number |
| | | per | | |
| | | share | | |
+-------------------+---------------------+----------+----------+---------+
| Share Option Scheme | | | |
+-----------------------------------------+----------+----------+---------+
| | | February 2000 to | 25p | 14,166 | 14,166 |
| | | February 2010 | | | |
+----+--------------+---------------------+----------+----------+---------+
| | | | | | |
+----+--------------+---------------------+----------+----------+---------+
| Enterprise Management | | | |
| Incentive Scheme | | | |
+-----------------------------------------+----------+----------+---------+
| | | March 2007 to March | 150p | 39,000 | 39,000 |
| | | 2010 | | | |
+----+--------------+---------------------+----------+----------+---------+
| | | | | | |
+----+--------------+---------------------+----------+----------+---------+
| | | March 2008 to March | 150p | 39,000 | 39,000 |
| | | 2011 | | | |
+----+--------------+---------------------+----------+----------+---------+
| | | | | | |
+----+--------------+---------------------+----------+----------+---------+
| | | | | 92,166 | 92,166 |
+----+--------------+---------------------+----------+----------+---------+
The charge to the income statement in the year in relation to outstanding
options over the Group's ordinary shares is GBP5,000 (2007: GBP10,000).
The additional disclosures required by IFRS 2, 'Share-based payment
transactions' have not been given as the directors do not consider them to be
material.
25Statement of changes in shareholders' equity
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | | | | Foreign | | | |
| | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | | | | Currency | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | Ordinary | Share | Merger | Translation | Retained | Minority | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | Number | Shares | Premium | Reserve | Reserve | Earnings | Interests | Total |
| | of | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | shares | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Balance at 1 | 8,910,090 | 2,227 | 7,880 | 914 | (115) | 1,747 | - | 12,653 |
| January 2008 | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Minority | - | - | - | - | - | - | (5) | (5) |
| interests in | | | | | | | | |
| acquisitions | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Share options | - | - | - | - | - | 5 | - | 5 |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Dividends paid | - | - | - | - | - | (267) | - | (267) |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Own shares | - | - | - | - | - | (42) | - | (42) |
| purchased | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Own shares | - | - | 2 | - | - | 36 | - | 38 |
| transferred | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| (Loss)/profit | - | - | - | - | - | (4,469) | 12 | (4,457) |
| for the year | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Foreign exchange | - | - | - | - | 419 | - | - | 419 |
| translation | | | | | | | | |
| differences | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Balance at 31 | 8,910,090 | 2,227 | 7,882 | 914 | 304 | (2,990) | 7 | 8,344 |
| December 2008 | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | | | | Foreign | | | |
| | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | | | | Currency | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | | Ordinary | Share | Merger | Translation | Retained | Minority | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | Number | Shares | Premium | Reserve | Reserve | Earnings | Interests | Total |
| | of | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| | shares | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Balance at 1 | 882,151 | 1,323 | 1,334 | 914 | (99) | 954 | - | 4,426 |
| January 2007 | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Shares issued | 2,864 | 4 | - | - | - | - | - | 4 |
| for warrants | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Share issue | 600,000 | 900 | 6,546 | - | - | - | - | 7,446 |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Share options | - | - | - | - | - | 10 | - | 10 |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Dividends paid | - | - | - | - | - | (221) | - | (221) |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| 6 for 1 share | 7,425,075 | - | - | - | - | - | - | - |
| sub-division | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Profit for the | - | - | - | - | - | 1,004 | - | 1,004 |
| year | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Foreign exchange | - | - | - | - | (16) | - | - | (16) |
| translation | | | | | | | | |
| differences | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
| Balance at 31 | 8,910,090 | 2,227 | 7,880 | 914 | (115) | 1,747 | - | 12,653 |
| December 2007 | | | | | | | | |
+------------------+-----------+----------+---------+---------+-------------+----------+-----------+---------+
During the year the Group acquired 27,500 of its own shares with a nominal value
GBP6,875 for a total cost of GBP42,000. 23,490 of these shares with a nominal
value of GBP5,873 formed part of the settlement to a related party of the
deferred consideration for Andrew Irving Associates Limited (see notes 22 & 28).
The remaining 4,010 shares with a nominal value of GBP1,003 are held in treasury
shares within reserves at 31 December 2008. There has been a reduction in
distributable reserves of GBP6,000 being the net consideration paid for the
remaining treasury shares.
The merger reserve, which is non-distributable, arose on the acquisition of kae:
marketing intelligence Limited on 28 April 2005. The premium on the shares
issued on acquisition was taken to the merger reserve in accordance with section
131 of the Companies Act.
26Reconciliation of movement in net debt
+---------------------+---------+---------+
| | 2008 | 2007 |
+---------------------+---------+---------+
| | GBP'000 | GBP'000 |
+---------------------+---------+---------+
| Decrease/(increase) | (446) | 464 |
| in cash and cash | | |
| equivalents | | |
| excluding cash | | |
| acquired with | | |
| acquisitions | | |
+---------------------+---------+---------+
| Cash | (728) | (1,370) |
| flows | | |
| from | | |
| decrease | | |
| in debt | | |
+---------------------+---------+---------+
| Decrease | (1,174) | (906) |
| in net | | |
| debt | | |
| resulting | | |
| from cash | | |
| flow | | |
+---------------------+---------+---------+
| (Decrease)/increase | (27) | 6,221 |
| in net debt on | | |
| acquisition of | | |
| subsidiaries | | |
+---------------------+---------+---------+
| Non-cash | 31 | - |
| movement | | |
+---------------------+---------+---------+
| Effect | - | 1 |
| of | | |
| exchange | | |
| rate | | |
| fluctuations | | |
| on net debt | | |
+---------------------+---------+---------+
| (Decrease)/increase | (1,170) | 5,316 |
| in net debt in the | | |
| year | | |
+---------------------+---------+---------+
| Net | 3,720 | (1,596) |
| debt/(funds) | | |
| at beginning | | |
| of year | | |
+---------------------+---------+---------+
| Net | 2,550 | 3,720 |
| debt at | | |
| end of | | |
| year | | |
+---------------------+---------+---------+
27Operating lease commitments
The total future minimum lease payments under non-cancellable operating leases
are as follows:
+--------------------------------------+------------+-----------+-----------+
| | | 2008 | 2007 |
| | | Land and | Land and |
| | | buildings | buildings |
| | | GBP'000 | GBP'000 |
+--------------------------------------+------------+-----------+-----------+
| Due within one year | | 614 | - |
+--------------------------------------+------------+-----------+-----------+
| Due between one year and five years | | 816 | 979 |
+--------------------------------------+------------+-----------+-----------+
| Due beyond five years | | - | 642 |
+--------------------------------------+------------+-----------+-----------+
| | | 1,430 | 1,621 |
+--------------------------------------+------------+-----------+-----------+
28Related party transactions
The Group does not have a controlling party. The shares are held by a number of
individuals, none of whom hold a majority interest. Significant shareholders are
disclosed in the Report of the directors.
Directors' emoluments and key management compensation are disclosed in note 8.
Transactions between the Company and its subsidiaries are eliminated on
preparation of the consolidated financial statements of the Group. During the
year the Group transferred to a related party, Charles Andrew Irving, a director
of Andrew Irving Associates Limited, 23,490 ordinary equity shares in the Group
out of treasury shares in settlement of the deferred consideration owing in
relation to the acquisition of Andrew Irving Associates Limited. The Group also
paid Dorothy Irving, Nicola Spicer and Ian Sparham, all directors of Andrew
Irving Associates Limited, GBP1,898, GBP758 and GBP758 respectively in cash in
settlement of the deferred consideration owing in relation to the acquisition of
Andrew Irving Associates Limited.
There are no other material related party transactions in the year ended 31
December 2008 (2007: GBPNil).
29Business combinations
The following acquisitions were made during the year:
KAE: Asia Pacific Pte. Ltd
On 1 May 2008, the Group exercised its option, as contained in an agreement
entered into on 18 January 2008, to acquire 80% of the issued share capital of
KAE: Asia Pacific Pte. Ltd (KAE Asia), formerly Frontstate Pte. Ltd, a company
based and incorporated in Singapore. The consideration payable was the face
value of the shares of SGD4,000 which translates to GBP1,492 at the exchange
rate prevailing on 1 May 2008 of SGD2.681:GBP1.00. This amount has been
included in the inter-company account between Optimisa and KAE Asia.
KAE Asia provides marketing intelligence to a number of blue chip clients in
Asia and has grown rapidly since its incorporation on 29 November 2007. KAE Asia
has one 100% owned subsidiary, KAE Greater China Ltd, which to date has not
operated.
KAE Asia contributed revenues of GBP590,000 and a profit before tax of GBP79,000
for the period from 1 May 2008 to 31 December 2008. The impact on the Group's
revenue and profit would have been GBP784,000 and GBP95,000 if the acquisition
had occurred on 1 January 2008. KAE Asia's first set of accounts will be
prepared for the 13 month period from the date of incorporation to 31 December
2008.
The total cost of the acquisition and the cash outflow as at 31 December 2008
was as follows:
+---------------+---------+
| | GBP'000 |
+---------------+---------+
| Consideration | 1 |
+---------------+---------+
| Acquisition | 7 |
| costs | |
+---------------+---------+
| Total | 8 |
| cost | |
| of | |
| acquisition | |
+---------------+---------+
+--------------+---------+
| | GBP'000 |
+--------------+---------+
| Professional | (7) |
| fees paid | |
+--------------+---------+
| Cash | 27 |
| in | |
| subsidiary | |
| acquired | |
+--------------+---------+
| Cash | 20 |
| inflow | |
| on | |
| acquisition | |
+--------------+---------+
The amounts recognised for each class of the acquiree's assets and liabilities
at the acquisition date and the resulting goodwill are as follows:
+--------------------------+---------------+---------------+--------------+
| | Acquiree's | Fair value | Fair value |
| | carrying | adjustments | GBP'000 |
| | amount | GBP'000 | |
| | GBP'000 | | |
+--------------------------+---------------+---------------+--------------+
| Non-current assets | | | |
+--------------------------+---------------+---------------+--------------+
| Property, plant and | 10 | 5 | 15 |
| equipment | | | |
+--------------------------+---------------+---------------+--------------+
| Total non-current assets | 10 | 5 | 15 |
+--------------------------+---------------+---------------+--------------+
| Current assets | | | |
+--------------------------+---------------+---------------+--------------+
| Trade and other | 43 | 59 | 102 |
| receivables | | | |
+--------------------------+---------------+---------------+--------------+
| Cash at bank | 26 | 1 | 27 |
+--------------------------+---------------+---------------+--------------+
| Total current assets | 69 | 60 | 129 |
+--------------------------+---------------+---------------+--------------+
| Total assets | 79 | 65 | 144 |
+--------------------------+---------------+---------------+--------------+
| | | | |
+--------------------------+---------------+---------------+--------------+
| Current liabilities | | | |
+--------------------------+---------------+---------------+--------------+
| Trade and other payables | (133) | (34) | (167) |
+--------------------------+---------------+---------------+--------------+
| Total current | (133) | (34) | (167) |
| liabilities | | | |
+--------------------------+---------------+---------------+--------------+
| | | | |
+--------------------------+---------------+---------------+--------------+
| Net (liabilities) / | (54) | 31 | (23) |
| assets | | | |
+--------------------------+---------------+---------------+--------------+
| Minority Interests (20%) | | | (5) |
+--------------------------+---------------+---------------+--------------+
| Net liabilities acquired | | | (18) |
+--------------------------+---------------+---------------+--------------+
| Fair value of | | | 8 |
| consideration | | | |
+--------------------------+---------------+---------------+--------------+
| Goodwill | | | 26 |
+--------------------------+---------------+---------------+--------------+
The goodwill that has arisen on the combination can be partly attributed to the
workforce of KAE Asia, which at acquisition comprised 9 people, which cannot be
recognised as an intangible asset under IAS 38, "Intangible Assets".
Additionally there is expected to be an increase in activity resulting from
membership in Optimisa Group for KAE Asia as its geographical location will
enable it to win new and additional work from existing customers of the Optimisa
Group.
eq group Limited (formerly eq group plc)
An additional amount of GBP4,000 has been recognised in relation to the
acquisition of eq group Limited during the year ended 31 December 2008 as a
result of an additional acquisition cost being incurred. This has been
partially offset by an adjustment of GBP3,000 increasing the fair value of the
net assets acquired.
Report International Limited
An additional amount of GBP109,000 has been recognised in relation to the
acquisition of Report International Limited during the year ended 31 December
2008 as a result of a revision in the estimate of deferred consideration
payable.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KVLFFKQBFBBZ
Optimisa (LSE:OPS)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Optimisa (LSE:OPS)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024
