RNS Number : 7124I
Proventec PLC
24 November 2008
Press Release 24 November 2008
Proventec Plc
("Proventec" or "the Group")
Interim Results
Proventec Plc (AIM:PROV, Alternext:ALTPC), a provider of specialist steam cleaning and coatings technologies, today announces its
interim results for the six months ended 30 September 2008.
Highlights
* Group turnover up 41% to �8.18 million* (2007: �5.82 million)
* Pre-tax loss of �649,000 due in part to weakness in sterling (2007: �391,000
profit**)
* Successful dual listing on the NYSE Euronext's Alternext market in Paris
* Acquired controlling stakes in Frank GmbH, a German engineering company and
CryoJet Industrial Services BV based in Rotterdam
* Proventec Healthcare formed to provide specialist hygienic cleaning
solutions for infection control and effective cleaning functions in the
healthcare sector
* Guido Schoenmakers appointed to the main board as Chief Operations Director
* Turnover figure includes a full six months of Contico compared to four months in the previous interim period
** The corresponding results for the period to 30 September 2007 included a profit of �615,000 on the sale of one of the non-core
investments, Ultra Motor Company Limited.
David Chestnutt, Chief Executive of Proventec Plc, commented: "Despite the problems of the economic slowdown and hopefully the short
term volatility of the currency markets, the Board remains confident and excited for the future of the Group. Proventec's main businesses
are focused on markets where cost is not necessarily the most important consideration and the Group remains confident that it can continue
to provide innovative and effective solutions where solutions are required."
For further information, please contact:
Proventec Plc
David Chestnutt, Chief Executive Tel: + 44 (0) 151 706 0626
dchestnutt@proventecplc.com www.proventecplc.com
Seymour Pierce Limited
Paul Davies, Corporate Finance Tel: + 44 (0) 20 7107 8031
pauldavies@seymourpierce.com www.seymourpierce.com
Media enquiries:
Abchurch
Henry Harrison-Topham / Stephanie Cuthbert Tel: +44 (0) 20 7398 7718
stephanie.cuthbert@abchurch-group.com www.abchurch-group.com
CHAIRMAN'S STATEMENT
The results for the six month period ended 30 September 2008 show an encouraging increase in turnover but a reduction in net profit
compared to the same period last year, which included a profit of �615,000 on the sale of one of Proventec's non-core investments.
During the period the Group dual-listed its shares on the NYSE Euronext's Alternext market in Paris and earlier this month the unsecured
Loan Notes 2012 were also admitted to trading on this market. Since Proventec dual listed on Alternext, it has already witnessed increased
investor interest from outside the UK. The Group believes this listing will continue to give it access to mainland European capital markets
which, in turn, gives it greater flexibility.
There has been a significant increase in Proventec's overhead base as the Board seeks to put in place a structure to manage the
expansion and development of the Group. In addition there has been a reduction in margin due to exchange rate losses suffered over recent
months. The weakness of sterling has had a significant effect on the profitability of the trading companies within the Group who
predominantly purchase in US dollars and from the Euro zone.
The Group strategy of positioning Proventec as a specialist provider of hygienic and innovative cleaning products and services to the
healthcare market and the food industry has continued.
In September Guido Schoenmakers was appointed to the main board as Chief Operations Director. In addition, two senior managers have
also recently been appointed to the Group who will assist in the 'roll out' of Proventec Healthcare which is a new concept. Proventec
Healthcare will provide a focal point for the provision of specialist hygienic cleaning solutions and products aimed specifically at the
healthcare market and its particular demands both in the UK and elsewhere.
In the industrial sector, the Group has also completed two small but significant acquisitions during the first half of the year. In
August 2008, Proventec acquired a 60 per cent. stake in Frank GmbH, a German engineering company, specialising in the manufacture and
assembly of high quality, reliable, industrial high pressure cleaners. The Board believes that there will be many benefits in working with
Frank not only in producing a new range of Industrial water based cleaning solutions for Proventec as well as also growing its existing
business.
In September 2008, the Group acquired a 60 per cent. shareholding in CryoJet Industrial Services BV based in Rotterdam. CryoJet uses in
addition to steam, a proprietary dry ice technology as a cleaning agent and the company provides a specialist cleaning service to industrial
clients in Holland. This technology will be rolled out to other geographical markets and, together with the Osprey dry steam industrial
machine range, will offer a highly cost effective and efficient cleaning and ongoing maintenance service to industrial customers.
The Board believes that the steps it has taken and continues to take, will help to position the Group at the forefront of innovative and
technology based cleaning solutions for both the healthcare and industrial sectors.
The Board has previously stated that it is aware that the Group's Balance Sheet would benefit from some restructuring and in the near
future the Board will make contact with shareholders to advise them of the Board's proposals and to seek shareholder approval at a General
Meeting.
Peter Teerlink
Chairman
24 November 2008
CHIEF EXECUTIVE'S REPORT
Turnover in the six months to 30 September 2008 has increased in line with the Group's expectations and overall sales have remained
strong. Margins within the Group have been eroded and this has been largely due to currency losses because the majority of the products
purchased for resale by the Group are purchased in US Dollars from the Far East, mainly China and in Europe, from Italy. In addition, the
listing of Proventec's shares and loan notes on Alternext in France and the costs involved in the acquisitions of Frank and CryoJet are
other one-off costs incurred by the Group.
Proventec's interim results to 30 September 2007 included the profit on the balance of the monies due arising from the sale of its stake
in Ultra Motor Company Limited, one of the Group's non-core investments that was sold in October 2006.
The level of the Group's overheads has increased as it has continued to strengthen its senior management and technical staff in Osprey
in the UK and in The Netherlands. Proventec's advertising spend and marketing budget, including attendance at an increased number of trade
exhibitions, has been maintained to ensure the Group is well positioned to take advantage of the commercial opportunities it has created in
the market.
Hygienic Solutions
Under the leadership of Thomas Stuecken, now supported by Guido Schoenmakers, the Group has continued to expand the niche market that
Osprey has successfully developed with its dry steam equipment and specialist tooling directed at the healthcare sector.
Contico Manufacturing Limited has sought new products to enhance its janitorial range and in conjunction with Osprey has sourced a
disposable micro-fibre range.
These developments lead to the formation of a new entity, Proventec Healthcare, which will act as a provider of innovative and evidence
based solutions for infection control and effective cleaning functions in the healthcare sector.
Proventec Healthcare has appointed two new and experienced senior managers, Richard Horsfall and Michael Rollins who specialise in
procurement and research. Proventec Healthcare will seek to source a range of effective and environmentally friendly products that combined
with dry steam and micro-fibre will provide a comprehensive package for hospitals, nursing homes and other establishments in the healthcare
sector.
Although dry steam cleaning has been initially focused on the healthcare market, the Group also recognises that there is a larger market
in the industrial sector. Food manufacturing companies have similar demands on the level of cleanliness and the need for a bacterially
clean environment.
To that end Proventec has strengthened its expertise in this industrial market by the Group's strategic acquisitions of controlling
stakes in Frank GmbH and CryoJet Industrial Services BV.
The acquisition of Frank has broadened the Group's technical and engineering skills. Frank, which has a reputation in Germany for
manufacturing reliable industrial high pressure hot water washers, will work with the Osprey technical staff to develop a range of
industrial dry steam equipment aimed at use in the food manufacturing sector where the demands of power and the ability to use 24/7 requires
reliably engineered equipment.
As an additional service, the acquisition of CryoJet provides the Group with access to an innovative and highly efficient heavy duty
industrial cleaning service. The process utilises dry-ice pellets of carbon dioxide, blasted on to the surface to be cleaned, at a
temperature of minus 75 degrees centigrade. The company has developed its own proprietary equipment and provides this highly specialist
cleaning service through its own team of skilled operators. CryoJet can clean where the industrial process has baked on excessive dirt that
even dry steam cannot remove.
Once the CryoJet process has renovated the industrial plant, dry steam cleaning will ensure the plant does not fall into such a state of
disrepair again.
Dry-ice and dry steam working together is cost effective and can delay or prevent the need for plant refurbishment. Effective cleaning
solutions can also extend the life of major plant assets that would otherwise be replaced with the attendant costs of new plant and
downtime.
Preventative Coatings
Marketing and business development work is continuing on the Magma range of fire retardant coatings for the timber, thatch and
construction market. Magma has recently completed a trial of one of its timber impregnation products which should lead to a commercial
agreement before the end of 2008.
Innoshield BV, a coating that prevents fading and restores the colour of plastics from ultra-violet light, is in discussions with a
company for a significant contract in the Middle East where fading from ultra-violet light is a major concern.
Outlook
After listing Proventec's shares on the NYSE Euronext's Alternext market in Paris, the Group has recently completed the listing of the
Loan Notes on the same market. The Board will continue during the second half of the year with the re-structuring of our balance sheet.
Despite the problems of the economic slowdown and hopefully the short term volatility of the currency markets, the Board remains
confident and excited for the future of the Group. Proventec's main businesses are focused on markets where cost is not necessarily the
most important consideration and the Group remains confident that it can continue to provide innovative and effective solutions where
solutions are required.
David Chestnutt
Chief Executive
24 November 2008
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2008
Unaudited Unaudited
Notes 30 September 30 Audited
2008 September 2007 31 March
�'000 �'000 2008
�'000
Assets
Non-current assets
Property, plant and equipment 1 1,049 582 689
Goodwill 2 38,303 33,186 37,144
Other intangible assets 3 4,697 3,410 3,855
Available for sale financial 4 2,816 2,816 2,816
assets
Share of associate net assets (33) (66) (19)
46,832 39,928 44,485
Current assets
Inventories 2,678 2,230 2,232
Trade and other receivables 5 11,937 9,472 11,448
Cash and cash equivalents 6 1,786 1,057 4,042
Investments held for sale 7 100 100 100
16,501 12,859 17,822
Total assets 63,333 52,787 62,307
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Share capital 12,170 12,140 12,170
Other reserves 27,991 23,497 27,458
Retained earnings (1,463) (1,891) (855)
38,698 33,746 38,773
Minority interest 22 40 32
Total equity 38,720 33,786 38,805
Non-current liabilities
Long term borrowings 8 16,744 10,350 16,774
Deferred tax 587 870 517
Total non-current liabilities 17,331 11,220 17,291
Current liabilities
Trade and other payables 9 7,058 3,535 5,937
Current portion of long term 8 59 3,996 59
borrowings
Current tax payable 165 250 215
Total current liabilities 7,282 7,781 6,211
Total liabilities 24,613 19,001 23,502
Total equity and liabilities 63,333 52,787 62,307
The financial statements were approved and authorised for issue by the Board on 21 November 2008 and were signed on its behalf by D
Chestnutt.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Unaudited Unaudited Audited
Notes 6 months 6 months 12 months
to 30 September to 30 September 2007 to
2008 31 March 2008
�'000 �'000 �'000
Revenue 8,182 5,819 14,027
Cost of sales (4,716) (3,226) (7,658)
Gross profit 3,466 2,593 6,369
Other income - 615 1,125
Distribution and (3,326) (2,291) (5,117)
administrative expenses
Finance costs (747) (460) (1,020)
Share of associates operating (42) (66) (19)
loss
(Loss)/profit before taxation (649) 391 1,338
Income tax expense - (90) (7)
(Loss)/profit for the period (649) 301 1,331
Minority interest 41 (19) 13
(Loss)/profit for the period
relating to equity (608) 282 1,318
shareholders
Earnings per share
basic 10 (5.0) 0.12 10.9
diluted 10 (5.0) 0.12 10.9
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Foreign
Share Share Shares to be issued Share Retained currency Share
capital premium �'000 options earnings reserve warrants
�'000 �'000 �'000 �'000 �'000 �'000 Total
�'000
For the period ended 30
September 2008
At 1 April 12,170 21,107 - 58 (855) 4,822 1,471 38,773
Loss for the period
attributable to equity
shareholders
- - - - (608) - - (608)
Unrealised exchange movement
- - - - - 212 - 212
Issue of Shares - - 321 - - - - 321
Movement in period - - 321 - (608) 212 - (75)
At 30 September 2008 12,170 21,107 321 58 (1,463) 5,034 1,471 38,698
For the period ended 30
September 2007
At 1 April 11,565 20,641 - 58 (2,173) 159 1,471 31,721
Profit for the period
attributable to equity
shareholders
- - - - 282 - - 282
Unrealised exchange movement
- - - - - 708 - 708
Issue of shares 575 460 - - - - - 1,035
Movement in period 575 460 - - 282 708 - 2,025
At 30 September 2007 12,140 21,101 - 58 (1,891) 867 1,471 33,746
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
(continued)
Foreign
Share Share Share Retained currency Share
capital premium options earnings reserve warrants
�'000 �'000 �'000 �'000 �'000 �'000 Total
�'000
For the year ended 31 March
2008
At 1 April 11,565 20,641 58 (2,173) 159 1,471 31,721
Profit for the year
attributable to equity
shareholders
- - - 1,318 - - 1,318
Unrealised exchange movement
- - - - 4,663 - 4,663
Issue of shares 605 466 - - - - 1,071
Movement in year 605 466 - 1,318 4,663 - 7,052
At 31 March 2008 12,170 21,107 58 (855) 4,822 1,471 38,773
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 2007 31 March 2008
2008 �'000 �'000
�'000
(Loss)/profit for the period (649) 282 1,331
Net exchange differences on
translating foreign operations 212 708 4,663
Total recognised income and
expense for the period (437) 990 5,994
Attributable to the minority (41) - 13
interest
Attributable to equity holders
of the parent (396) 990 5,981
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Unaudited 6 months Unaudited 6 months Audited
Notes to 30 September to 30 September 2007 12 months to
2008 �'000 31 March 2008
�'000 �'000
Cash flows from operating
activities
Cash generated from operations 11 (768) (1,221) (1,411)
Interest received 80 130 352
Interest paid (711) (443) (1,140)
Tax (paid) / received - - (116)
Net cash flow from operating (1,399) (1,534) (2,315)
activities
Cash flows from investing
activities
Acquisition of subsidiaries
(net of cash acquired) (754) (5,149) (5,474)
Proceeds from sale of tangible - - 3
assets
Purchase of property, plant (73) (115) (285)
and equipment
Purchase of intangible assets - - (97)
Share capital acquired by - 20 20
minority interest
Net cash flow from investing (827) (5,244) (5,833)
activities
Cash flows from financing
activities
Proceeds from new loans - 1,362 1,826
Proceeds from issue of share - 1,035 5,096
capital
Payment of finance lease (30) (4) (18)
liabilities
Costs in issuing share capital - - (156)
Net cash flow from financing (30) 2,393 6,748
activities
Net decrease in cash and cash (2,256) (4,385) (1,400)
equivalents
Cash and cash equivalents at
beginning of the period 4,042 5,442 5,442
Cash and cash equivalents at 6
end of the period 1,786 1,057 4,042
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
As is permitted by the AIM Rules, the directors have not adopted the requirements of IAS 34 "Interim Financial Reporting" in preparing
the interim financial statements. Accordingly the interim financial statements are not in full compliance with IFRS.
The financial information for the six months ended 30 September 2008 and 30 September 2007 is unaudited and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The comparative figures for the year ended 31 March 2008 were derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not contain statements under sections
237(2) or (3) of the Companies Act 1985.
Group accounting
Subsidiaries are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to
govern the financial and operating policies. The existence and effect of potential voting rights that are presently exercisable or presently
convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date
that control ceases.
Where necessary, the accounting policies of subsidiaries have been changed in order to ensure consistency with the policies adopted by
the Group.
Inter company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Business combinations
The purchase method of accounting is used to account for the acquisition of subsidiaries. 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. The excess of the cost of the 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.
Foreign currency translation
Functional currency
Items included in the financial statements of each entity in the Group 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 sterling, which
is the functional and presentation currency of the parent.
Transactions and balances
Foreign currency translations are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies are recognised in the income statement.
Group companies
Income statements and cash flow of foreign entities are translated into the Group's functional currency at average exchange rates for
the year and their balance sheets are translated at the exchange rates ruling at the period end.
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.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Cost includes the original purchase price of the
asset and the costs attributable to bringing the assets to its working condition for its intended use. Finance costs are not included.
Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated
useful lives as follows.
Fixtures, fittings and equipment 25% per annum
Plant and machinery 25% per annum
Computer equipment 25% per annum
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.
Repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of the net assets of the acquired
subsidiary at the date of acquisition.
Prior to 1 April 2004, the date of transition to IFRS, goodwill was amortised over its estimated useful life; such amortisation ceasing
on 31 March 2004. Goodwill is subject to impairment review, both annually and when there are indicators that the carrying value may not be
recoverable. A write down is made if the carrying amount exceeds the recoverable amount.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and impairment losses. Intangible assets with indefinite useful lives
are not amortised but are tested for impairment annually.
Impairment of non-financial assets
Property, plant and equipment and other non-current assets, including goodwill and other intangible assets are reviewed on an annual
basis to determine whether events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If any
such indication exists, the recoverable amount of the asset is estimated as either the higher of the asset's net selling price or value in
use; the resultant impairment (the amount by which the carrying amount of the asset exceeds its recoverable amount) is recognised as a
charge in the consolidated income statement.
The value in use is calculated as the present value of estimated future cash flows expected to result from the use of assets and their
eventual disposal proceeds. In order to calculate the present value of estimated future cash flows the Group uses a discount rate based on
the Group's estimated weighted average cost of capital, together with any risk premium determined appropriate. Estimated future cash flows
used in the impairment calculation represents management's best view of the likely future market conditions and current decisions on the use
of each asset or asset group.
For the purpose of assessing impairment, assets are grouped at the lowest levels at which there are separately identifiable cash flows.
Finance leases where the Group is the lessee
Leases of property, plant and equipment where the Group is subject to substantially all the risks and rewards of ownership, are
classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased
property or the present value of the minimum lease payments. 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
other payables. 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 property, plant and equipment acquired
under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.
Where reference is made in the report and financial statements to finance leases, this includes hire purchase agreements.
Operating leases where the Group is the lessee
Leases where 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. Incentives received are recorded as deferred income and spread over the term of the lease on a straight
line basis.
Operating leases where the Group is the lessor
Lease income is recognised over the term of the lease using the net investment method, which reflects a constant period rate of return.
Inventories
Inventories are stated at the lower of cost, or net realisable value. Cost of inventory represents material and a proportion of
procurement overheads. Net realisable value represents the estimated selling price less all estimated costs of completion and cost to be
incurred in marketing, selling and distribution.
Provisions are made for slow moving and obsolete amounts due according to the original terms of receivables. The amount of the provision
is the difference between the carrying amount and the directors' best estimate of the amount recoverable.
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash flow statement, cash and cash
equivalents comprise cash on hand and deposits held at call with banks.
Employee benefits
Defined contribution schemes
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will
have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees
benefits relating to employee service in the current and prior periods. Contributions are charged to the profit and loss account in the year
in which they arise.
Share-based payments
The fair values of employees share option and share performance plans are calculated using the Black-Scholes model. In accordance with
IFRS 2, 'Share-based Payments' the resulting cost is charged to the income statement over the vesting period of the options. The value of
the charge is adjusted to reflect expected and actual levels of options vesting for changes in non market vesting criteria.
Deferred tax
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, the deferred 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 or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred
income tax liability is settled.
Deferred 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.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the
foreseeable future.
Revenue Recognition
Revenue comprises the invoiced value for the sale of goods and services net of value-added tax, rebates and discounts, and after
eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the
goods are transferred to the buyer, which is usually on dispatch.
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 performed.
Interest
Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the
period of maturity, when it is determined that such income will accrue to the Group.
Financial assets
The Group classifies its financial assets in the following categories: investments held for sale, trade and other receivables, and
available for sale investments. The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of the Group's financial assets at initial recognition and re-evaluates this designation at every reporting
date.
(a) Investments held for sale
A financial asset is classified in this category if designated by management as expected to be realised within 12 months of the balance
sheet date.
Investments are classified as held for sale in accordance with IFRS 5 if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use. Such assets are measured at the lower of their carrying amount and fair value less
costs to sell.
Gains or losses arising from changes in the fair value of these investments, including interest and dividend income, are presented in
the income statement within "other (losses)/gains - net" in the period in which they arise.
(b) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, 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 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 the estimated future cash flows, discounted at the effective interest rate.
(c) Available for sale financial assets
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. They are included in non current assets unless management intends to dispose of the investment within 12 months of the
balance sheet date.
When investments classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are
included in the income statement as "gains and losses from investment". Interest on available for sale investments calculated using the
effective interest method is recognised in the income statement. Dividends on available for sale investments are recognised in the income
statement when the Group's right to receive payments is established.
Regular purchases and sales of investments are recognised on the date on which the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit
or loss. Financial assets carried at fair value through profit and loss are initially recognised at fair value and transaction costs are
expensed in the income statement. Investments are derecognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available for sale investments and
investments held for sale are subsequently carried at fair value.
If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation
techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same,
discounted cash flow analysis, and the option pricing models, making maximum use of market inputs and relying as little as possible on
entity specific inputs. If the fair value of an unquoted equity instrument cannot be measured reliably, it is measured at cost.
Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is
impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is considered an indicator that the securities are impaired. If any such evidence exists for available for sale
financial assets, the cumulative loss is measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised.
Share 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.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the
period of the borrowings using the effective interest 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.
Trade payables are recognised at fair value.
Financial risk management
Financial risk factors
The Group's activities expose it to currency, interest rate and credit risk.
The Group incurs currency risk as a result of transactions that are denominated in a currency other than British Pounds. The Group does
not enter into any forward exchange contracts in order to hedge its exposure to such risk.
The Group is exposed to credit risk in its accounts receivable and bank balances. The Group has a credit risk policy in place and the
exposure to credit risk is monitored on an ongoing basis. The Group is exposed to credit risk in relation to licence income and sale
proceeds from investments included in other debtors The directors constantly monitor this risk and have procedures to only enter into
transactions of this nature with reputable companies. Bank balances are all maintained at reputable financial institutions.
Accounts receivable and accounts payable, arising from normal trade transactions, are expected to be settled within normal credit
terms.
Fair value estimation
Financial instruments recognised on the balance sheet include bank balances and cash, investments, accounts receivable, accounts payable
and borrowings. The carrying values of financial instruments are considered to approximate their fair value.
Credit accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
(a) Estimated impairment of goodwill and intangible assets
The Group tests annually whether goodwill and intangible assets have suffered any impairment, in accordance with the accounting
policy stated. The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations
require the use of estimates, as disclosed in note 3 and 4 to the financial statements.
(b) Premium on redemption of loan notes
The Group has assumed the loan notes will be converted in full and so no provision has been made for the premium due on redemption.
(c) Licence income receivable
The Group has estimated the amount recoverable on licence income due based on the net present value of the cashflows using an
appropriate discount rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
1. PROPERTY, PLANT AND EQUIPMENT
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Cost
At 1 April 823 189 189
Additions 73 115 285
Acquisitions via business 530 933 357
combination
Disposals - - (8)
At 30 September 1,426 1,237 823
Depreciation
At 1 April 134 32 32
Charge for the year 68 47 107
Acquisitions via business 175 576 -
combination
Disposals - - (5)
At 30 September 377 655 134
Net book value
At 30 September 1,049 582 689
2. GOODWILL
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Cost
At 1 April 37,144 29,873 29,873
Additions 999 2,729 3,430
Exchange rate movement 160 584 3,841
Net carrying amount at 30 38,303 33,186 37,144
September
Goodwill is carried at cost less any impairment. Impairment testing has been carried out by comparing goodwill plus associated operating
assets with the value in use, calculated as the net present value of discounted future cash flows.
Key assumptions used in goodwill impairment reviews are based on previous experience and are:
* Cash flow forecasts for a 3 year period have been used for the cash generating unit which comprises the acquired businesses.
* Growth in net revenue assumptions amount to 30% to 2009, 30% to 2010, 30% to 2011, 10% thereafter.
* The cash flows have been discounted using the estimated WACC of 7.5%.
3. OTHER INTANGIBLE ASSETS
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Cost
At 1 April 3,864 3,306 3,306
Additions 851 34 164
Disposals - - (68)
Exchange rate movement 16 84 462
At 30 September 4,731 3,424 3,864
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Amortisation
At 1 April 9 14 14
Charge for period 25 - 47
Disposals - - (52)
At 30 September 34 14 9
Net carrying amount at 30 4,697 3,410 3,855
September
The reasons and factors that played a role in determining that development and patents have an indefinite life are that they are in the
early stages and so the Group cannot determine reliably how long they will generate cash flows for.
Key assumptions used in intangible asset impairment reviews are based on:-
* Cash flow forecasts for a 3 year period have been used for the cash generating unit which comprises the acquired businesses.
* Growth in net revenue assumptions amount to 30% to 2009, 30% to 2010, 30% to 2011, 10% thereafter.
* The cash flows have been discounted using the estimated WACC of 7.5%.
4. AVAILABLE FOR SALE FINANCIAL ASSETS
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
At cost
At 1 April 2,816 2,816 2,816
Additions - - -
Net carrying value at 30 2,816 2,816 2,816
September
Details of the investments held are as follows:-
No. of Type of % Share Cost Nature of business
Shares Shares Capital Held �'000
Biocote Limited 696,693 Ordinary 31.5% 704 Powder Coating
Firestop Chemicals Limited 6,946,256 Ordinary 44.1% 1,072 Fire retardant
- Loan Notes - 1,035 chemicals and
processes
The investments in Biocote Limited and Firestop Chemicals Limited are classified as held for sale because the group does not have
significant influence over these entities as other board members are significant shareholders, who if they vote together, have control of
the company.
The loan notes held in Firestop Chemicals Limited are repayable on 30 September 2012. The interest is receivable at a rate 2% above base
with a minimum rate of 6%.
These investments are held at cost because their fair value cannot be determined reliably because there is no active market and are not
profitable at this stage of development.
5. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Trade debtors 6,251 4,511 5,914
Other debtors 656 626 1,457
Prepayments and accrued income 5,030 4,335 4,077
11,937 9,472 11,448
6. CASH AND CASH EQUIVALENTS
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Cash at bank and in hand 1,786 1,057 4,042
7. INVESTMENTS HELD FOR SALE
Unaudited 30 September Unaudited Audited
2008 30 September 2007 31 March
�'000 �'000 2008
�'000
At 1 April 275 275 275
Disposals - - -
At 30 September 275 275 275
Impairment and amortisation
At 1 April 175 175 175
At 30 September 175 175 175
Net carrying amount at 30 100 100 100
September
No. of Type of % Share Cost Nature of business
Shares Shares Capital Held �'000
Oxis Energy Limited 12,061,124 Ordinary 4% 100 Early stage
developer of lithium
sulphide batteries
The directors have resolved to dispose of their investments in Oxis Energy Limited within the next 12 months.
8. FINANCIAL LIABILITIES - BORROWINGS
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Current
Loan due within one year - 3,987 -
Finance lease commitments due
within one year 59 9 59
59 3,996 59
Non-current
Loans due between two and five 2,625 - 2,625
years
Loan notes between two and 14,058 - 14,058
five years
Loan notes over five years - 10,345 -
16,683 10,345 16,683
Finance lease commitments
Between one and two years 61 5 91
16,744 10,350 16,774
16,803 14,346 16,833
The loan due within one year attracts interest at 0.5% above the lender's borrowings rate. The loan and accumulated interest can be
converted into ordinary shares after 31 December 2006. The loan has a repayment date of 31 March 2010.
The loan notes comprise 10,500,000 8.5% fixed rate convertible guaranteed unsecured loan notes. The interest on the loan notes
recognised in the profit and loss account for the period is �647,000. The effective interest rate on the loan notes is 8.86%. The loan notes
are repayable in one final payment on 31 December 2012 which attracts a premium of 22.5% of the principal amount outstanding. The loan notes
are convertible into ordinary shares at the option of the holder at 280p per share.
9. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30 September 30 September 2007 31 March
2008 �'000 2008
�'000 �'000
Invoice discounting 1,635 - 1,676
Trade creditors 2,425 1,679 2,139
Other taxes and social 351 348 318
security
Other creditors 660 17 649
Accruals 1,987 1,491 1,155
7,058 3,535 5,937
10. EARNINGS PER SHARE
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of
ordinary shares in issue during the year.
Unaudited 30 Unaudited
September 30 September 2007 Audited
2008 �'000 31 March
�'000 2008
�'000
(Loss)/profit attributable to (608) 282 1,318
equity holders of the company
Weighted average number of
ordinary shares in issue 12,170 234,235 12,009
(thousands)
Basic earnings per share (5.0) 0.12 10.9
(pence)
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of
all dilutive potential Ordinary Shares. The Group has two dilutive potential Ordinary Shares namely its share options and convertible loan
notes. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Group's shares) based on the monetary value of the subscription rights attached
to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued
assuming the exercise of the share options. The conversion of the outstanding warrants and convertible loan notes do not result in a
decreased earnings per share or increased loss per share and are therefore not treated as dilutive potential Ordinary Shares.
Diluted
Unaudited 30 Unaudited
September 30 September 2007 Audited
2008 �'000 31 March
�'000 2008
�'000
(Loss)/profit attributable to (608) 282 1,318
equity holders of the company
Weighted average number of
ordinary shares in issue 12,170 234,305 12,009
(thousands)
Adjustments for share options - - -
(thousands)
Weighted average number of
ordinary shares for diluted 12,170 234,305 12,009
earnings per share (thousands)
Diluted earnings per share (5.0) 0.12 10.9
(pence)
11. CASH FLOW FROM OPERATING ACTIVITIES
Unaudited 30 Unaudited
September 30 September 2007 Audited
2008 �'000 31 March
�'000 2008
�'000
(Loss)/profit before taxation (649) 391 1,338
Depreciation of tangible and 93 47 154
intangible assets
Finance costs 747 460 1,020
Share of loss in joint venture 42 66 19
Profit on disposal of - (615) (1,125)
investment
Changes in working capital
(excluding effect of 233 349 1,406
acquisitions and disposals)
(Increase)/decrease in (97) (174) (176)
inventory
(Increase)/decrease in trade (680) (1,554) (3,402)
and other receivables
(Decrease)/increase in trade (224) 158 761
and other payables
Cash outflow from operations (768) (1,221) (1,411)
- Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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