FOR IMMEDIATE RELEASE
31 MARCH 2008
GARNER PLC ("Garner" or the "Company")
FINAL RESULTS TO 31 DECEMBER 2007
CHAIRMAN'S STATEMENT
At last year's AGM we set out our strategy of continuing to secure the team,
broaden our client base and maintain profitability. All of this we achieved.
Whilst the first half of 2007 proved strong and saw us winning a lot of
assignments including from new clients, the second half had to be focused on
delivery. The credit crunch affected all markets. Although we did not encounter
poor trading, certainly client decision making took longer.
Whilst turnover for the year shows an increase of 19 per cent to �3,122,000
(2006: �2,612,000), the turnover for the second half was down on the same
period last year. Profits decreased slightly (4.6 per cent) as a consequence of
higher staff costs resulting in pre-tax profits of �494,000 (2006: �518,000).
However, a lower tax charge means that post tax profits were up 10 per cent at
�402,000 (2006: �365,000). Earnings per share are: 1.06p (2006: 0.97p).
Net debt at the year end has reduced to �1,183,000 (2006:�1,287,000) with the
Group generating net cash flow of �104,000. This cash flow represented a
reduction in borrowing of �25,000 and an increase in cash balances of �79,000.
Net liabilities at the year end were �1,301,000 (2006:�1,703,000 as restated),
an improvement of �402,000. We have now put in place a more advantageous
banking arrangement designed to give us more operating headroom for growth.
The increase in our cost base was almost entirely a result of improving our
reward strategy for our consultants in achieving key targets of both improved
billing levels and broadening our client base. We were delighted to win another
FTSE 10 client with whom there is the potential for a significant relationship.
Of equal importance was the work of one of our colleagues who was very
successful in winning volume business from clients' digital business
assignments.
Adding to our client base is essential in protecting our commercial
performance, and this remains a priority not only for 2008 but in the long
term. It is worth noting that we increased our client list by five companies in
different sectors in the first two months of 2008. Our expertise now stretches
across technology, media, packaging, professional services, public sector and,
of course, banking and real estate.
With reference to growing the team, we are being very selective. We will be
announcing some additions during 2008 as we plan to launch a new specialist HR
practice in April and a Digital Media practice in May.
Predictions for the future are not easy, not least because our clients are
finding forecasting difficult too. Strategically, however, there are some good
signs for Garner Plc. Our consultants have well established client
relationships and more of our assignments are for work to be done overseas,
e.g. Ireland, Germany and the Middle East.
Finally, we have been working on a new trading relationship with a leading US
search firm about which I hope to make an announcement soon. This will enable
us to leverage globally many of our UK client relationships. Overall, we think
that we are in as strong a position as we could be with a good and committed
team and costs under tight control. I look forward to sharing with you our
progress at the half year.
J BARTLE
Chairman
For further information please contact:
Andrew Garner Chief Executive Officer, Garner Plc 020 7629 8822
Ross Andrews City Financial Associates Limited 020 7492 4777
Ruari McGirr St Helen's Capital Plc 020 7628 5582
CONSOLIDATED INCOME STATEMENT
Note 31 December 2007 31 December 2006
�000 as restated
�000
REVENUE 3,122 2,612
COST OF OPERATIONS (2,513) (1,978)
GROUP OPERATING PROFIT 609 634
Net finance costs (115) (116)
PROFIT ON ORDINARY ACTIVITIES 494 518
BEFORE TAXATION
Tax expense (92) (153)
PROFIT FOR THE FINANCIAL YEAR 402 365
Earnings per share - Basic 2 1.06p 0.97p
Earnings per share - Diluted 2 1.01p 0.97p
All activity arose from continuing operations.
There are no recognised gains and losses other than as stated above.
Accordingly, no Statement of Total Recognised Gains and Losses is given.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year ended Year ended
31 December 31 December
2007 2006
as restated
�000 �000
Profit for the 402 365
period
Prior Year Adjustment due to IFRS conversion 67 -
Total recognised income and expense for the
period since
last Annual Report 469 365
All other changes to equity are shown in note 3 - Reconciliation of movements
in total equity.
DETAILED RECONCILIATION OF RESTATED 2006 INCOME STATEMENT
Note Previous Effect of Restated
UK GAAP transition results as
to IFRS Per IFRS
�000 �000 �000
Revenue 2,612 2,612
Cost of Operations (i) (2,045) 67 (1,978)
Group Operating Profit 567 67 634
Net finance costs (116) - (116)
Profit on ordinary activities 451 67 518
before taxation
Tax expenses (153) - (153)
Profit for the financial year 298 67 365
(i) Goodwill has been adjusted by �67,000, being the amortisation charge for
the year. In line with IFRS, goodwill has not been amortised from the
transition date, but has instead been subject to an impairment review. The
review has indicated that goodwill is not impaired.
CONSOLIDATED BALANCE SHEET
As at 31 December 2007 2007 2006
�000 �000 �000 as
restated
�000
Goodwill 959 959
Property, plant and equipment 14 16
TOTAL NON-CURRENT ASSETS 973 975
Trade and other receivables 812 671
Cash and cash equivalents 56 -
TOTAL CURRENT ASSETS 868 671
TOTAL ASSETS 1,841 1,646
Current Liabilities
Redeemable Preference Shares 1,213 1,213
Trade and other payables 561 700
Bank overdraft and interest bearing 850 688
loans
Current tax liability 195 244
TOTAL CURRENT LIABILITIES 2,819 2,845
Non-Current Liabilities
Interest bearing loans 323 504
TOTAL LIABILITIES 3,142 3,349
TOTAL ASSETS LESS TOTAL LIABILITIES (1,301) (1,703)
Issued share capital 4,942 4,942
Share premium account 3,845 3,845
Retained earnings (10,088) (10,490)
TOTAL EQUITY (1,301) (1,703)
RECONCILIATION OF GROUP EQUITY AT 1 JANUARY 2007
Note Previous Effect of Restated
transition results
UK GAAP to IFRS per IFRS
�000 �000 �000
Goodwill 16 - 16
Property, plant and (i) 892 67 959
equipment
TOTAL NON-CURRENT ASSETS 908 67 975
Trade and other receivables 671 - 671
TOTAL CURRENT ASSETS 671 - 671
TOTAL ASSETS 1,579 67 1,646
Current Liabilities
Redeemable Preference 1,213 - 1,213
Shares
Trade and other payables 700 - 700
Bank overdraft and interest 688 - 688
bearing loans
Current tax liability 244 - 244
TOTAL CURRENT LIABILITIES 2,845 - 2,845
Non-Current Liabilities
Interest bearing loans 504 - 504
TOTAL LIABILITIES 3,349 - 3,349
TOTAL ASSETS LESS TOTAL LIABILITIES (1,770) 67 (1,703)
Issued share capital 4,942 - 4,942
Share premium account 3,845 - 3,845
Retained earnings (10,557) 67 (10,490)
TOTAL EQUITY (1,770) 67 (1,703)
CONSOLIDATED CASH FLOW STATEMENT AND NOTES
2007 2006
Note As
restated
�000 �000
Net cash from operating activities (i) 223 90
Cash flows from investing activities and servicing
of finance
Interest paid (115) (116)
Payments to acquire tangible assets (2) (20)
Net cash used in investing activities (117) (136)
Cash flows from financing activities
Net cash inflow from equity placings - 445
Repayment of secured loans (181) (174)
Repayment of advances from Directors (31) (300)
Increase in invoice discounting 187 96
Net cash from financing activities (25) 67
Net increase in cash and cash equivalents 81 21
Net cash and cash equivalents at beginning of (25) (46)
period
Net cash and cash equivalents at end of period 54 (25)
Analysis of net funds
Cash and cash equivalents 56 -
Bank overdraft (2) (25)
54 (25)
Borrowings due within one year (848) (663)
Borrowings due after one year (323) (504)
Directors loan account (66) (97)
Net funds (1,183) (1,289)
Note (i)
Reconciliation of operating profit to net cash
from operating activities
2007 2006
as restated
�000 �000
Operating profit 609 634
Depreciation of property, plant and equipment 4 4
Amortisation of loan arrangement fees 3 2
(Increase) in trade and other receivables (144) (368)
(Decrease) in trade and other payables (108) (182)
Taxation paid (141) -
Net cash from operating activities (ii) 223 90
Note (ii)
Material adjustments to operating cash flows under
IFRS for the year ended 31 December 2006
Previous Effect of Restated
UK GAAP transition results
to IFRSs per IFRS
�000 �000 �000
Operating profit 567 67 634
Depreciation 4 - 4
Amortisation 69 (67) 2
(Increase) in trade and other (368) - (368)
receivables
(Decrease) in trade and other payables (182) - (182)
Net cash from operating activities 90 - 90
NOTES
1. ACCOUNTING POLICIES
The financial statements have been prepared for the first time in accordance
with International Financial Reporting Standards ("IFRS") as adopted by the
European Union. The adoption of International Financial Reporting Standards has
resulted in the restatement of 2006 results to provide a like for like
comparison. The financial impact of this change in reporting is detailed after
each of the above financial reports.
A summary of the more important accounting policies, which have been applied
consistently, is set out below.
Basis of accounting
The financial statements are prepared under the historical cost convention.
Although the accounts disclose a net liabilities position as at 31 December
2007 the accounts have been prepared on a going concern basis due to current
trading levels and cash generation being in excess of required payments to
creditors. The Group remains dependant on the continuing support of its bankers
who have confirmed their intention to extend the existing facilities through to
30 July 2008.
Basis of consolidation
The consolidated income statement and balance sheet include the financial
statements of the Company and its subsidiary undertaking made up to 31 December
2007. The results of subsidiaries sold and acquired are included in the
consolidated income statement up to, or from, the date control passes.
Intra-Group sales and profits are eliminated fully on consolidation.
On acquisition of a subsidiary, all of the subsidiary assets and liabilities
that exist at the date of acquisition are recorded at their provisional fair
values reflecting their condition at that date.
Basis of preparation of the financial statements
Goodwill
Goodwill arising on acquisition of subsidiaries is included in the balance
sheet of the consolidated accounts as an asset at cost less impairment. In
previous years goodwill has been amortised over the economic life of the asset,
subject to an impairment review in line with UK GAAP. However for 2007 in line
with International Financial Reporting Standards, goodwill has not been
amortised from the transition date, but has instead been subject to an
impairment review.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently where there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is
not reversed in a subsequent period.
The recoverable amount is calculated as a multiple of Earnings Before Interest
and Taxation based on immediate past results using a multiple at the lower end
of the range that would normally be applied to businesses within the same
sector.
In further accordance with International Financial Reporting Standards, the
2006 comparative income statement and balance sheet results have had that
year's goodwill amortisation added back to provide a like for like comparison.
A reconciliation between the 2006 published results and the 2006 comparative
results in these accounts appears on page 13.
Tangible fixed assets
The cost of tangible fixed assets is their purchase cost, together with any
incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of tangible fixed
assets, less their estimated residual values, over the expected useful economic
lives of the assets concerned:
Fixtures and Fittings - 25% - 33% per annum on cost
Land & Buildings - over 5, years straight line
Foreign exchange
Transactions denominated in foreign currency are translated into the functional
currency at the rates ruling at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are
retranslated at the rates ruling at that date. These translation differences
are dealt with in the income statement account.
Leases
Costs in respect of operating leases are charged on a straight-line basis over
the lease term.
Deferred taxation
UK corporation tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantially enacted by
the balance sheet date.
Deferred tax is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based
on current rates and laws. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different to
those in which they are included in the financial statements. Deferred tax is
not provided on timing differences arising from the revaluation of fixed assets
where there is no binding contract to dispose of those assets. Deferred tax
assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered. Deferred tax assets and liabilities are not
discounted.
Investments
Fixed asset investments are stated at cost less provision for any impairment in
value.
Revenue Recognition
Revenue comprises the fair value of the sale of services, net of value-added
tax, rebates and discounts. Revenue is recognised on the percentage completion
basis, using pre-specified milestones to trigger invoices.
Pensions
The Group operates a number of defined contribution funded pension schemes for
the benefit of certain employees. The costs of the pension schemes are charged
to the income statement account as incurred.
Enterprise Management Incentive Share Option Scheme
During the year Garner plc granted options on 1,758,437 new Ordinary Shares of
1.0p each to certain employees of Garner International Ltd. These options may
be exercised over one third of the Shares under Option on each of the first,
second and third anniversaries of the date of the grant in equal instalments.
The options will expire on the tenth anniversary of the date of grant. These
options are included in the calculation of the Group's fully diluted earnings
per share.
For equity-settled share-based payment transactions the group, in accordance
with IFRS2 (effective from 1 January 2006) measures their value, and the
corresponding increase in equity, indirectly, by reference to the fair value of
the equity instruments granted. The fair value of those equity instruments is
measured at grant date, using the trinomial method. The expense is apportioned
over the vesting period of the financial instrument and is based on the numbers
which are expected to vest and the fair value of those financial instruments at
the date of grant. If the equity instruments granted vest immediately, the
expense is recognised in full.
2. BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
In accordance with IAS 33, earnings per ordinary share of 1.06p (2006: 0.97p)
have been calculated by dividing the profit on ordinary activities after
taxation and non-equity dividends of �402,000 (2006: �365,000) by 37,968,937
(2006: 30,594,733), being the weighted average number of ordinary shares in
issue and ranking for dividend during the period. There were no preference
shares at 31 December 2007 (2006: nil) available for conversion. The share
options granted through the EMI scheme have been used to calculate the diluted
earnings per ordinary share of 1.01p (2006: 0.97p).
3. RECONCILIATION OF MOVEMENTS IN TOTAL EQUITY
2007 2006
As
restated
�000 �000
Profit for the financial period 402 365
402 365
Issue of share capital - 147
Premium on issue of new shares - 358
Costs of share issues - (56)
Net addition to shareholders' funds 402 814
Opening shareholders' deficit (1,703) (2,517)
Closing shareholders' deficit (1,301) (1,703)
The impact of IFRS at the transition date has had no effect on the Group's
equity.
4. STATUTORY ACCOUNTS
The financial information in this statement does not constitute the Company's
statutory accounts for the year ended 31 December 2007 or 2006 (but is derived
from those accounts).
5. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at The Institute of
Directors, 116 Pall Mall, London, SW1Y 5ED at 2.30pm on 21st May.
6. REPORT AND ACCOUNTS
Copies of the Report and Accounts for the year ended 31 December 2007 are being
sent to shareholders in due course. Further copies will be available from the
Company's registered office at 6 Derby Street, London, W1J 7AD and on the
Company's web site www.garnerinternational.com.
END
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