TIDMRLX
RNS Number : 4938T
Relax Group PLC
08 June 2009
Relax Group plc
Results for the five-month period ended 31 December 2008
Highlights
* Revenue increases by 20.9% pro rata up to GBP6.5m
* Trade receivables down by16.1% to GBP11.2m due to improved collection of debts
* Five-month period following change of accounting date
* Revenue and profit continue to rise strongly
* Successful ongoing integration of Relax finance limited acquisition
* Key Financial indicators continue to improve
* Development of new product areas
* Economic background and outlook continue to favour the company's activities
Chairman's Statement
I am pleased to present the report to shareholders for the five-month period to
31 December 2008. Shareholders will be aware that the Company recently announced
a change in its accounting period, from a July year end to a December year end.
The reason for the change was the seasonality of our business. Levels of
activity have always been at their lowest in August, December and early January,
primarily because of holidays. This meant that in previous years our first half
contained all of these months.
As a result the first half was considerably weaker than the second half and
consequently it was felt that by making this change of year end the first half
should be much more in balance with the second half and thus enable the market
to have a more accurate and realistic guide to the full-year outcome.
This period was once again extremely satisfying and rewarding for the Company.
As we indicated in the previous annual report, the acquisition of Relax Finance
has progressed very well and the work of integration continued throughout the
period under review.
The economic climate for the average consumer is still extremely difficult and
the number of people seeking advice about borrowings and personal financial
problems continues to rise. Our corporate strategy of offering the widest
possible range of solutions has continued to demonstrate its efficacy and our
client base is still growing strongly.
Whilst the areas of Relax Finance engaged in new lending have been held back by
the decline in both demand for mortgages and availability of funds, we have
successfully introduced other new product lines such as life insurance.
Meanwhile we have made great progress in consolidating our operations into our
Chesterfield head office. The efforts put into the development of our
infrastructure have been extremely successful and cash collection has been, and
continues to be, speeded up with benefits to our cash flow and balance sheet.
Overview
We look forward to an excellent 2009, and continued growth in the business. I
should like to thank the Board of Directors and all our staff for their hard
work and continued efforts to achieve our objectives.
Bernard Asher
Chairman
4 June 2009
Chief Executive Officer's Statement
The prevailing economic conditions are providing a number of opportunities. The
strategies that we have implemented at a Group level have had a favourable
impact upon our current trading performance and we look forward to the year
ahead.
To enable us to demonstrate our ongoing success to the market, and be able to
reflect this in future half and full year reporting, we chose to change the
accounting reference date to 31 December. Traditionally the demand for DMP and
IVA programmes is low in August, December and January, resulting in a weaker
first half year compared to the second half. It was therefore felt that the
change in accounting reference date will give two relatively balanced half years
whilst the business continues to grow.
Trading overview
Our reported revenue for the period was GBP6.5m, showing a 20.9% pro rata
increase from GBP12.9m in the year ended 31 July 2008, on the back of the
continued integration of Relax Finance Limited. EBITDA was GBP0.8m compared to
GBP2.3m in the year ended 31 July 2008. The fall in EBITDA was largely due to
the change in fee structures resulting in less profitability on IVAs.
However, our volumes have increased significantly since the year end following
the acquisition of Relax Finance Limited. In addition, the efficiency gains from
IT infrastructure improvements, renewed operational rigor, reorganising the
Group into two main trading centres and refocusing our customer acquisition
strategies will further improve profitability levels going forward.
Current customer enquires remain strong, with approximately 10,000 enquiries
generated per month via our customer service centre and enquiries "Hot-keyed"
via third party relationships. These result in approximately 881 new sales each
month; 490 DMPs, 191 IVA s and PTDs, and 200 Secured Loans, Unsecured Loans and
Mortgages. Demand for DMP s, IVA s and PTD s has been increasing as the "credit
crunch" bites and, despite the resulting negative impact on secured loans and
mortgages due to a lack of credit in the market, we are of the opinion that as
the fall out of the credit crunch gathers pace, the need and requirement for our
services in 2009 will significantly increase. Mortgage sales are now increasing,
with the volume of applications, lender acceptance and pipeline revenues
increasing.
Great progress is being made in training sales staff to sell general insurance.
Accreditation has been achieved with five major life insurance companies as well
as buildings and contents insurance providers. Revenue streams already look to
be in line with previous secured figures. With nearly 200 sales per month in
test mode, the insurance model is scalable and we are confident that this will
grow over the next year to become a significant part of our strategy. The Group
has been offered managed bank accounts with the leading provider and will look
to implement this for customers in the second half of 2009. These, together with
the existing core service lines, will complete our strategy of creating a
diversified financial group providing services to over-indebted individuals, and
we believe this strategy will provide significant enhancement to shareholder
value in the future.
Effects of restructuring
Benefits of rationalising and restructuring the Group continue to filter
through, especially from improvements in operational efficiency and
effectiveness. We continue to look for further means of making cost savings from
our operations, whilst ensuring that these changes are performed without any
material impact upon our capacity to handle new and existing work. One
significant improvement was the closure of the Doncaster office and the
integration of the sales staff into Chesterfield. Not only did this save around
20 heads, the increased skills that were transported have allowed the
development of all sales staff in Chesterfield. We therefore expect conversions
of DMPs and IVAs to improve significantly in 2009.
The rationalisation has resulted in ongoing cost savings and we continue to
drive forward a number of key strategies, the impact of which is felt in the
current trading period, namely:
* leveraging introducers to provide DMP, IVA and PTD leads. This has the
added advantage of removing uncertainty in the acquisition of customers by
agreeing back-ended commission arrangements, providing certainty of profits and
improving cash flow;
* generating better returns from online marketing strategies through the
Group's enlarged base of websites, affiliate links and search engine
optimisation;
* significant improvements in cross-selling opportunities, conversion rates and
call handling efficiencies, due to the merger of the front-end customer service
centre into our Chesterfield operations;
* further development and integration of the Group's database, enabling technology
and significant cross-selling opportunities based on historical enquiries;
* utilising our bespoke RAPS IT system to manage and control lead generation
through engaged customer to commission/fee earned and third party commission
arrangements. The Group is working to develop a number of relationships which
will give controlled growth over a period of time; and
* despite the lack of available credit to lend to individuals, the Group has
managed to retrain its secured lending team to sell remortgages. Accreditation
has been achieved and volumes already show the Group to be in the top
three introducers for the northern region within the Santander Group.
Throughout 2009 Chesterfield has been undertaking and administering an
increasing number of Trust Deeds. This gives greater control over the Scottish
business.
Marketing
Our multifaceted customer acquisition model has continued to reduce the cost of
client acquisition since the integration of Relax Finance Limited; the volume
of applications has increased dramatically over the period and further exciting
opportunities lie ahead. We are particularly pleased that Confused.com, one of
our premier partners, has signed up to extend our exclusive relationship on a
long-term basis with an additional commitment to significantly step up their
marketing efforts for debt solutions.Other key partnership deals are coming
to fruition which we are confident will only enhance our Group's position.
We are shortly due to launch a new technology platform which will enable
authorised third parties to engage in the sale of Debt Management plans (DMPs)
remotely using our technology, subsequently passing the completed cases to us
for on going management within our client portfolio. In particular this
technology will enable IFA s and mortgage networks to sell DMPs to their client
banks and refer to us for ongoing management. This will enable us to operate
in a similar way to "mortgage packagers" and take on more new business without
the requirement of increasing headcount at our customer contact centres.
Overview
Market conditions for the industry and trading levels for the Group are very
encouraging. We look forward to the challenges over the next few years and are
confident that the Group is well placed to take advantage of the
prevailing circumstances, ensuring that we continue to maintain levels of growth
and profitability, whilst also managing cash flow.
Paul Carter
Chief Executive Officer
4 June 2009
Consolidated Income Statement
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| | | | | | | Period | Year |
| | | | | | | ended | ended |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| | | | | | | 31 | 31 July |
| | | | | | | December | |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| | | | | | | 2008 | 2008 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| | | | | | | GBP'000 | GBP'000 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Revenue | | | | | | 6,510 | 12,923 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Direct costs | | | | | | (1,926) | (3,168) |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Gross profit | | | | | | 4,584 | 9,755 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Operating costs | | | | | | (3,788) | (7,389) |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Operating profit prior to exceptional | | | | | | 796 | 2,366 |
| costs | | | | | | | |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Exceptional costs | | | | | | - | (2,131) |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Net finance cost | | | | | | (128) | (221) |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Profit before taxation | | | | | | 668 | 14 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Income tax expense | | | | | | - | 8 |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Profit for the period/(year) | | | | | | 668 | 22 |
| attributable to equity holders of the | | | | | | | |
| parent company | | | | | | | |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| | | | | | | | |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Earnings per share | | | | | | | |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Basic earnings per ordinary share | | | | | | 2.19p | 0.09p |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
| Diluted earnings per ordinary share | | | | | | 2.19p | 0.09p |
+------------------------------------------+----+--+---+----+-----------+-----------+-----------+
There were no other gains and losses other than those recognised in the Income
Statement. All activities relate to continuing operations.
Consolidated Balance Sheet
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | As at | As at |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 31 | 31 July |
| | | | | | | December | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 2008 | 2008 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | GBP'000 | GBP'000 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Assets | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Non-current assets | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Intangibles | | | | | | 7,696 | 4,608 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Goodwill | | | | | | 4,205 | 4,517 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Property, plant and equipment | | | | | | 644 | 620 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 12,545 | 9,745 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Current assets | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Trade and other receivables | | | | | | 11,204 | 13,351 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Cash and short-term deposits | | | | | | - | 186 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 11,204 | 13,537 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Total assets | | | | | | 23,749 | 23,282 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Equity and liabilities | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Equity attributable to equity holders of the parent | | | | | | | |
| company | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Share capital | | | | | | 3,049 | 3,049 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Share premium | | | | | | 8,708 | 8,708 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Merger reserve | | | | | | (1,513) | (1,513) |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Retained earnings | | | | | | 4,006 | 3,338 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 14,250 | 13,582 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Current liabilities | | | | | | | |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Trade and other payables | | | | | | 8,979 | 8,112 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Corporate income tax payable | | | | | | 484 | 1,299 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| | | | | | | 9,463 | 9,411 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Liabilities due after one year | | | | | | 36 | 289 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Total liabilities | | | | | | 9,499 | 9,700 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
| Total equity and liabilities | | | | | | 23,749 | 23,282 |
+-------------------------------------------------------+-+-+--+--+-----+-----------+-----------+
The financial statements were approved by the Board of Directors and authorised
for issue on 4 June 2009 and are signed on its behalf by
Paul Carter TRevor Moore
chief executive officer Finance director
Statement of Changes in Equity
+------------------------------------------+---------+----------+----------+----------+----------+
| | Share | Share | Merger | Retained | |
+------------------------------------------+---------+----------+----------+----------+----------+
| | capital | premium | reserve | earnings | Total |
+------------------------------------------+---------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Group | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Changes in equity for the year | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| to 31 July 2008 | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Brought forward at 1 August 2007 | 2,109 | 5,527 | (1,513) | 3,316 | 9,439 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Total recognised income and expense for | - | - | - | 22 | 22 |
| the year | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Issue of share capital | 940 | 3,290 | - | - | 4,230 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Issue costs | - | (109) | - | - | (109) |
+------------------------------------------+---------+----------+----------+----------+----------+
| Balance as at 31 July 2008 | 3,049 | 8,708 | (1,513) | 3,338 | 13,582 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Group | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Changes in equity for the period | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| to 31 December 2008 | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Total recognised income and expense for | - | - | - | 668 | 668 |
| the period | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Balance as at 31 December 2008 | 3,049 | 8,708 | (1,513) | 4,006 | 14,250 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Company | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Changes in equity for the year | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| to 31 July 2008 | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Brought forward at 1 August 2007 | 2,109 | 5,527 | - | 91 | 7,727 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Total recognised income and expense for | - | - | - | - | - |
| the year | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Issue of share capital | 940 | 3,290 | - | - | 4,230 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Issue costs | - | (109) | - | - | (109) |
+------------------------------------------+---------+----------+----------+----------+----------+
| Balance as at 31 July 2008 | 3,049 | 8,708 | - | 91 | 11,848 |
+------------------------------------------+---------+----------+----------+----------+----------+
| Company | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Changes in equity for the period | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| to 31 December 2008 | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Total recognised income and expense for | - | - | - | - | - |
| the period | | | | | |
+------------------------------------------+---------+----------+----------+----------+----------+
| Balance as at 31 December 2008 | 3,049 | 8,708 | - | 91 | 11,848 |
+------------------------------------------+---------+----------+----------+----------+----------+
Consolidated Cash Flow Statement
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| | | | | | | Period | Year |
| | | | | | | ended | ended |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| | | | | | | 31 | 31 July |
| | | | | | | December | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| | | | | | | 2008 | 2008 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| | | | | | | GBP'000 | GBP'000 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash flows from operating activities | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Profit from operations | | | | | | 796 | 235 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Depreciation of property, plant and equipment | | | | | | 74 | 147 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Impairment of goodwill | | | | | | 312 | - |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Profit on disposal of property, plant and equipment | | | | | | - | (8) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Other non-cash movement | | | | | | (1) | 20 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Decrease/(increase) in receivables | | | | | | 2,147 | (757) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Decrease/(Increase) in payables | | | | | | 143 | (649) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Income taxes paid | | | | | | (815) | (648) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net cash INFLOW/(OUTFLOW) FROM operating activities | | | | | | 2,658 | (1,660) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash flows from investing activities | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net interest paid | | | | | | (128) | (221) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Acquisition of Relax Finance Limited (including costs of | | | | | | - | (1,099) |
| GBP123,000) | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Acquisition of PB Recovery Limited (including costs of | | | | | | - | (1,314) |
| GBP104,000) | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Acquisition of property, plant and equipment | | | | | | (98) | (83) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Disposal of property, plant and equipment | | | | | | - | 63 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Acquisition of intangible fixed assets | | | | | | (3,088) | (2,390) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net cash used in investment activities | | | | | | (3,314) | (5,044) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash flows from financing activities | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net increase/(decrease) in borrowings | | | | | | 250 | 2,663 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Proceeds on issue of shares | | | | | | - | 2,730 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash outflow from decrease in debt and HP and finance | | | | | | (268) | - |
| leasing | | | | | | | |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cost of share issue | | | | | | - | (109) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net cash from financing activities | | | | | | (18) | 5,284 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Net INCREASE/(decrease) in cash and cash equivalents | | | | | | (674) | (1,420) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash and cash equivalents at start of year | | | | | | (201) | 1,219 |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
| Cash and cash equivalents at end of year | | | | | | (875) | (201) |
+----------------------------------------------------------+--+--+-+--+--+----------+----------+
Notes to the Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
A) SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company for the period ended 31
December 2008 comprise the Company and its subsidiaries (together referred to as
the "Group").
B) STATEMENT OF COMPLIANCE
The consolidated financial statements of Relax Group PLC (formerly Debts.co.uk
plc) have been prepared in accordance with IFRS incorporating International
Accounting Standards as issued by the International Accounting Standards Board
(IASB) and with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
C) BASIS OF PREPARATION
The financial reports have been prepared under the historical cost convention.
Non current assets are stated at the lower of carrying amount and fair value
less costs to sell.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting year. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
Judgements made by management in the application of IFRS that have a significant
effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are discussed where appropriate. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision effects only that period, or in the
period of revision and future periods if the revision affects both current and
future periods. The critical judgements applied within the financial
statements are in respect of the accounting for databases, as noted at F (ii)
below, and the net realisable value of work in progress shown as accrued income.
D) BASIS OF CONSOLIDATION
i. SUBSIDIARIES
Subsidiaries are entities controlled by the Company. Control exists when a
company has the power, directly or indirectly, to govern the financial and
operational policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that presently are exercisable
or convertible are taken into account. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
ii. TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intragroup balances, and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the
consolidated financial statements. Unrealised losses are eliminated in the same
way as unrealised gains but only to the extent that there is no evidence
of impairment.
E) PROPERTY, PLANT AND EQUIPMENT
i. OWNED ASSETS
Items of property, plant and equipment are stated at cost less accumulated
depreciation (see below) and impairment losses (see accounting policy J).
ii. LEASED ASSETS
Leases in terms of which the Group assumes substantially all the risks and
rewards of ownership are classified as finance leases.
iii. DEPRECIATION
Depreciation is charged to the income statement over the estimated useful life
of each part of an item of property, plant and equipment. The estimated useful
lives are as follows:
+----------------------------------------+-------------------------------------------------------------+
| Buildings | 50 years |
+----------------------------------------+-------------------------------------------------------------+
| Leaseholds | Over the term of the lease or life of the asset, if shorter |
+----------------------------------------+-------------------------------------------------------------+
| Fixtures and fittings | 25% on a reducing balance basis |
+----------------------------------------+-------------------------------------------------------------+
| Motor vehicles | 25% on a reducing balance basis |
+----------------------------------------+-------------------------------------------------------------+
| Computer equipment | 33% on a straight line basis |
+----------------------------------------+-------------------------------------------------------------+
The residual value, if significant, is reassessed annually.
F) INTANGIBLE ASSETS
i. GOODWILL
All business combinations are accounted for by applying the purchase method.
Goodwill represents the amount arising on acquisition of subsidiaries.
In respect of business acquisitions, goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable assets
acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash generating units and is no longer amortised but is
tested annually for impairment (see accounting policy J).
Negative goodwill arising on acquisition is recognised directly in the income
statement.
ii. DATABASES
Following the acquisition of Relax Finance Limited the Directors reconsidered
the Group's accounting for databases. The cost of databases has now been
capitalised as an intangible fixed asset and comprises the fair value of
databases acquired as part of a business combination or the data purchase and
data capture costs of internally developed databases. The Directors consider
that this new policy better reflects the value to the business of these assets
and the treatment required by IAS 38.
Databases are held at cost and have an indefinite useful life. They are tested
annually for impairment.
G) INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Group classifies its investments depending on the purpose for which the
investments were acquired. The Directors determine the classification of its
investment at initial recognition and re-evaluates this designation at every
reporting date.
The fair value of unquoted investments is based on valuation techniques. 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.
H) TRADE AND OTHER RECEIVABLES
Trade and other receivables are stated at their cost less impairment losses (see
accounting policy J).
I) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprises cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
J) IMPAIRMENT
The carrying amounts of the Group's assets, other than deferred tax assets (see
accounting policy R), are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any such indication exists,
the asset's recoverable amount is estimated.
For goodwill, assets that have an indefinite useful life and intangible assets
that are not yet available for use, the recoverable amount is estimated at each
balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Impairment losses recognised in respect of cash generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash generating
units (group of units) and then to reduce the carrying amount of other assets in
the unit (group of units) on a pro rata basis.
The recoverable amount of the Group's receivables carried at amortised cost is
calculated as the present value of the estimated future cash flows, discounted
at the original effective interest rate. Receivables with a short duration are
not discounted.
The recoverable amount of other assets is the greater of their net selling price
and the value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money
and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the
cash generating unit to which the asset belongs.
An impairment loss in respect of a receivable carried at amortised cost is
reversed if the subsequent increase in recoverable amount can be
related objectively to an event occurring after the impairment loss was
recognised.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is only reversed to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
K) SHARE CAPITAL
Dividends on ordinary share capital are recognised as a liability in the year in
which they are paid.
L) INTEREST BEARING BORROWINGS
Interest bearing borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between proceeds (net of transaction costs) and the
redemption value is recognised in the income statement over the year 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 twelve
months after the balance sheet date.
M) EMPLOYEE BENEFITS
i. DEFINED CONTRIBUTION PLANS
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement as incurred.
ii. SHARE-BASED PAYMENT TRANSACTIONS
The fair value of employee share option schemes is measured by a Black Scholes
pricing model. Further details are set out in note 18. In accordance with IFRS 2
"Share based Payments" the resulting cost is charged to the income statement
over the vesting year of the options. The value of the charge is adjusted to
reflect expected and actual levels of options vesting period.
N) PROVISIONS
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event and it is
probable that an outflow of economic benefits will be required to settle 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.
O) TRADE AND OTHER PAYABLES
Trade payables are non-interest bearing and are repayable within one year.
P) REVENUE RECOGNITION
Revenue from services rendered is recognised in the income statement in
proportion to the stage of completion of the transaction at the balance sheet
date.
The stage of completion is assessed by reference to a review of work performed.
No revenue is recognised if there are significant uncertainties concerning
the recovery of the consideration due or associated costs.
Q) EXPENSES
i. OPERATING LEASE PAYMENTS
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives
received are recognised in the income statement as an integral part of the total
lease expense.
ii. FINANCE LEASE PAYMENTS
Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge is allocated
to each year during the lease term, so as to produce a constant rate of interest
on the remaining balance of the liability.
iii. NET FINANCING COSTS
Net financing costs comprise interest payable on borrowings calculated using the
effective interest rate method and interest received on funds invested.
Interest income is recognised in the income statement as it accrues, using the
effective interest method. The interest expense component of finance lease
payments is recognised in the income statement using the effective interest rate
method.
R) INCOME TAX
The charge for current tax is based on the results for the year as adjusted for
items which are non assessable or disallowed. It is calculated using rates that
have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the liability method in respect of temporary
differences arising from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax basis used in
the computation of taxable profit. In principle, deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from goodwill (or negative goodwill) or from the initial recognition (other than
in a business combination) of other assets and liabilities in a
transaction which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates and interest in joint
ventures,
except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply when the
asset or liability is settled. Deferred tax is charged or credited in the income
statement, except when it relates to items credited or charged directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
S) FINANCIAL RISK MANAGEMENT
The Group uses a limited number of financial instruments, comprising cash,
short-term deposits, bank loans and overdrafts and various items such as trade
receivables and payables, which arise directly from operations. The Group does
not trade in financial instruments.
FINANCIAL RISK FACTORS
The Group's activities expose it to a variety of financial risks: credit risk,
liquidity risk and cash flow interest rate risk. The Group's overall risk
management programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's financial
performance.
i. Credit Risk
The Group has no significant concentrations of credit risk and has policies in
place to ensure that sales are made to customers with an appropriate credit
history.
ii . Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and
available funding through an adequate amount of committed credit facilities.
The Group ensures it has adequate cover through the availability of bank
overdraft and loan facilities.
iii . Cash Flow and Interest Rate Risk
The Group finances its operations through a mix of cash flow from current
operations together with cash on deposit and bank and other borrowings.
Borrowings are generally at floating rates of interest and no use of interest
rate swaps has been made.
2. Earnings per Share
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| | | | Group |
+-----------------------------------+----------+----------+---------------------------------------------------------+
| | | | Period ended 31 | Year ended 31 July | |
| | | | December 2008 | 2008 | |
+-----------------------------------+----------+----------+---------------------------+---------------------------+-+
| | | | Pre | Post | Pre | Post | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Earnings | | | exceptional | exceptional | exceptional | exceptional | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Basic EPS | | | | | | | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Reported earnings (GBP'000) | | | 668 | 668 | 2,153 | 22 | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Reported EPS (p) | | | 2.19p | 2.19p | 8.99p | 0.09p | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Diluted EPS | | | | | | | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Diluted reported earnings | | | 668 | 668 | 2,153 | 22 | |
| (GBP'000) | | | | | | | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
| Reported diluted EPS (p) | | | 2.19p | 2.19p | 8.80p | 0.09p | |
+-----------------------------------+----------+----------+-------------+-------------+-------------+-------------+-+
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| | | | | | | Period | Year |
| | | | | | | ended | ended |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| | | | | | | 31 | 31 July |
| | | | | | | December | |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| | | | | | | 2008 | 2008 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| | | | | | | Number | Number |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Weighted average number of ordinary shares: | | | | | | | |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Issued ordinary shares at 1 August 2008 | | | | | | 30,493,255 | 21,093,254 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Effect of 18 March 2008 share issue | | | | | | - | 2,243,836 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Effect of 23 May 2008 share issue | | | | | | - | 630,137 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Weighted average number of ordinary shares | | | | | | 30,493,255 | 23,967,227 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Average shares used in calculating the Basic EPS | | | | | | 30,493,255 | 23,967,227 |
| calculation | | | | | | | |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Dilutive share options outstanding | | | | | | 36,309 | - |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
| Weighted average number of ordinary shares | | | | | | 30,529,564 | 23,967,227 |
+---------------------------------------------------------+-+-+---+-+-+-------------+------------+
3. Subsequent Events
There are no post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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