TIDMBTP
RNS Number : 4215M
BNS Telecom Group plc
29 January 2009
29 January 2009
BNS Telecom Group plc
Final Results
BNS Telecom Group plc ("BNS" or the "Group"), a leading telecoms service
provider and IP carrier, publishes its final results for the year to 31 July
2008. The Group has adopted IFRS accounting with 2007 comparisons restated
accordingly.
Financial highlights:
* Revenue from continuing operations increased by 23.9% to GBP32.48 million (2007:
GBP26.2 million) following the acquisition of 3g in 2007
* Total deferred income increased to GBP3.33 million (2007: GBP1.36 million) as at
31 July 2008
* Underlying EBITDA* GBP130,000 (2007: GBP2.26 million) includes new customer
acquisition costs but excludes deferred income of GBP1.97 million
* Reported net loss GBP2.3 million (2007: loss GBP3.55 million) including loss of
GBP1.43 million from discontinued businesses (2007: loss of GBP5.97 million)
* Strong cash generation from continuing operations of GBP2.41 million (2007:
GBP2.16 million)
* Continuing strong net cash generation post year end, with net borrowings falling
from GBP4.34 million at 31 July 2008 to GBP3.35 million on 30 November 2008
* Banking facilities agreed for a further 12 months
Operational highlights:
* Customer numbers increased by 15% to 10,201 as at 31 July 2008
* 50% of customer contracts have terms of between five to seven years at inception
* Total expected term revenue on the Group's contracts of fully installed IP-based
products and services GBP13.2 million as at 22 January 2009, excludes as yet
uninstalled order book of GBP4 million
* In excess of 1.5 million calls carried across the Group's IP switch every month
* Excluding discontinued business, exceptional items, share based payments,
amortisation of intangible fixed assets and profit on sale of property
Garry Moat, Chief Executive, said:
"Our strategic shift to IP telephony has continued to translate into strong cash
generation and a growing long term customer base with the associated jump in
deferred income. Our debt has fallen by almost GBP1 million in the first four
months of the current financial year.
"Our range of business critical telecommunication services within a single
bundled package at very competitive prices is proving very attractive to
customers, at a time when they are looking very closely at their costs. The high
levels of recurring revenues from a broad and diverse customer base and the
business critical nature of our products and services, give us considerable
confidence in the Group's development, despite the current economic
environment."
Enquiries:
+----------------------------------------------+--------------------------+
| BNS Telecom Group plc | Tel: 01661 839 554 |
| Garry Moat, Chief Executive | |
| Andrew Goldwater, Finance Director | |
+----------------------------------------------+--------------------------+
| | |
+----------------------------------------------+--------------------------+
| KBC Peel Hunt Ltd (Nominated Adviser & | Tel: 020 7418 8900 |
| Broker) | |
| David Anderson | |
+----------------------------------------------+--------------------------+
| | |
+----------------------------------------------+--------------------------+
| College Hill | Tel: 020 7457 2815 |
| Adrian Duffield/Carl Franklin | |
+----------------------------------------------+--------------------------+
Chief Executive's Report
The Board are pleased to announce that BNS has continued to deliver and build on
the strong cash performance of the first half of the year and that the Group is
well positioned to face the challenges of current economic conditions.
In 2007/08, BNS transformed from being mainly a SME telecoms reseller to being
also a leading supplier of Internet Protocol (IP) products and services and
mobile telephony. The strategic shift to IP telephony has also continued to
translate into strong cash generation. Cash generated from continuing operations
in the year to 31 July 2008 was GBP2.41 million (2007: GBP2.16 million).
As a complete telecoms carrier and service provider to the SME market, BNS is
able to provide its customers with savings on their telecom spend as well as
enhanced capability, flexibility and control over their communications. The
economic downturn is likely to present good opportunities for further organic
growth as businesses inevitably focus more on cost. Also, as Fixed Mobile
Convergence (FMC) gathers pace ISDN will give way to IP telephony in the SME
market. BNS is well positioned to take advantage of the opportunities this
technology shift will present, as many of its competitors continue to focus on
the UK fixed line reseller market.
In 2007/08, having developed a portfolio of leading IP products, BNS increased
its investment in growing its customer base. Customer numbers have increased by
15% to 10,201 as at 31 July 2008 (31 July 2007: 8,898). With continued focus of
the management on customer churn, the average monthly churn in the year to 31
July 2008 remained in line with 2007 levels at approximately 1.5% (2007:
approximately 1.5%).
Group revenue increased by 24.4% to GBP32.60 million excluding an increase in
deferred income of GBP1.97 million (2007: GBP26.20 million excluding
discontinued operations). The Group adopts a prudent policy of expensing all
customer acquisition costs immediately. As a result, the EBITDA for 2007/08
reflects the costs associated with the increased customer base but does not
benefit from future contracted revenue streams. In addition, the release of
deferred income on IP sales provides further forward visibility over earnings;
* A significant proportion of revenue associated with the cash received up front
from sales of IP products is recognised over the term of the contract.
Consequently, the stronger operating cash position is not necessarily yet
reflected in the income statement. As at 31 July 2008, the level of deferred
income in respect of IP sales was GBP1.93 million. The level of deferred income
is expected to increase with further IP sales. As this then gets released to the
income statement, an improvement in reported revenue and profits in 2009 is
anticipated which will strengthen the Group's balance sheet.
* With 49.6% of customer contracts having terms at inception of between five and
seven years, the Group has increased visibility over high levels of contracted
recurring revenue.
* Total deferred income at 31 July 2008 was GBP3.33 million (2007: GBP1.36
million).
Underlying EBITDA was GBP130,000 (2007: GBP2.27 million). This is after charging
the full costs of customer acquisition. Additionally GBP1.97 million of revenue
has been deferred representing this increase in deferred income of GBP1.97
million, as explained above.
The Group's mobile services operation 3g, which was acquired in March 2007, has
now been fully integrated and has delivered a full year's revenue contribution
of GBP10.53 million compared with a four month contribution of GBP3.34 million
in 2007. Progress in cross-selling mobile services across the Group's customer
base has been slower than anticipated and therefore the Board consider this to
represent a considerable area of focus and opportunity during 2009.
The Network Services Division was closed in October 2007 and its associated
costs and cash outflows are now eliminated from the Group. The acquisitions that
resulted in the Network Services Division did enhance the Group's knowledge of
the emerging IP technologies. However, with hindsight the acquisitions proved to
be very disappointing both operationally and financially, absorbing significant
management effort and considerable levels of funding over the last two years. Of
the total loss for the financial year of GBP2.34 million, GBP1.43 million arose
in the now fully discontinued operations.
With all Network Services related debt now cleared, together with the levels of
cash forecast, the Board expects the Group's net borrowing position to
significantly reduce over the next 12 months. This is evidenced in the four
month period to 30 November 2008, which shows a reduction of GBP1.0 million to
GBP3.35 million. The Board are pleased to confirm that the Group has recently
agreed its banking facilities for a further 12 months.
Current trading and outlook
The Directors fully recognise the challenges within the marketplace, yet
consider the Group to be well positioned with a number of important strengths
which make it resilient during a period of economic downturn.
In the current economic climate, most enterprises are looking to reduce and more
tightly manage, their operational costs whilst also exploiting new digital
technologies. BNS' ability to provide a broad range of related business critical
telecommunication services within a single bundled package at very competitive
prices is proving very attractive to the market. With further cutting edge
products expected to be launched early in 2009 as well as opportunities for
greater efficiencies, the Board believe that the Group's prospects look
increasingly favourable.
As well as high levels of recurring revenues from a broad and diverse business
customer base, the business critical nature of the Group's products and services
means that it is less vulnerable to cuts in business' discretionary expenditure.
The Group has reached a number of exciting milestones; in September 2008 the
monthly volume of calls carried across its IP switch exceeded one million and by
November 2008 this figure was in excess of one and a half million. Its
contracted order pipeline for IP-based products and services is at record levels
for the Group. This provides clear visibility over the Group's near term
performance and cash generation whilst an increasing long-term contract base
with its IP products and services considerably enhances its prospects.
The expected total term revenue from the Group's contracts of fully installed
IP-based products and services was GBP13.2 million as at 22 January 2009, which
excludes an as yet uninstalled order book of GBP4.0 million. By the end of
January 2009 it is expected that the Group will have connected its one
thousandth IP-based customer site.
I would like to sincerely thank our former Chairman, Graham Wilson, who stepped
down in September 2008, for his substantial contribution over the last few
years. I would also like to pay tribute to all of the management and staff
within the Group who have contributed to the transformation of the business over
the past 18 months during an extremely challenging time of change. I know I can
rely on their support as we face the challenges and take the opportunities
presented by the market.
Garry Moat
Chief Executive
Business and Financial Review
Overview
In last year's Annual Report, the Board stated its belief that the development
of BNS' IP Telephony service would result in a transformation of BNS from
"reseller" to "IP telecoms carrier" thereby enabling BNS to exploit the growing
demand from SMEs for VoIP products and services.
In 2007/08, this strategic shift has been completed and now as an IP telecoms
carrier, BNS is a complete service provider to the SME market. The Group is now
able to offer a unique combination of cutting-edge IP-based products in addition
to traditional lines and calls. This provides customers with significantly
cheaper calls and enhanced features and benefits including payment for receiving
inbound calls (an industry first). BNS' VoIP network and technology can be
installed or integrated with existing telephone systems if required.
As a result, the Group has built on the performance reported at the half year.
BNS convert many new customer orders into cash by introducing a third party
finance company who lease the equipment to the end user. Accordingly, the
success of the new technology IP-based products introduced during 2007 is
driving strong cash generation from continuing operations.
In the context of the downturn in the economy the resilience of the business is
especially important:
Strong Customer Proposition
* BNS offers its customers a strong proposition of saving them money and enhancing
their capability, flexibility and control over their communications. As a
result, the economic downturn presents considerable opportunities for further
growth as companies focus more on cost.
* The business critical nature of the Group's products and services means that it
is less vulnerable to cuts in business' discretionary expenditure.
* BNS provides a broad range of telecoms services from traditional lines and calls
to broadband, mobile and IP telephony. As Fixed Mobile Convergence (FMC) gathers
pace, ISDN will inevitably give way to IP telephony in the SME market. BNS is
well positioned to take advantage of this and continues to develop new IP
related products and services to meet its customers' future requirements.
* The Group has strong partner relationships with its suppliers who are top
European businesses, providing confidence in the continuity of service to
customers.
Robust Business Model
* BNS has a direct salesforce and now five months into the financial year 2008/09,
BNS has the highest contracted order pipeline in its history. This order book
provides clear visibility over short term growth performance and cash
generation.
* The business is highly cash generative with GBP2.41 million generated from
continuing operating activities in 2008 (2007: GBP2.16 million).
* Approximately 50% of the Group's customers are on contracts with terms of
between five and seven years. This provides enhanced earning visibility of
contracted recurring revenue streams. In addition, BNS has strong credit vetting
processes and 65% of the Group's customers (excluding schools and charities) pay
monthly by direct debit further reducing the Group's credit risk.
* Credit risk is further reduced as BNS' customers are spread across all industry
and service sectors and the top 10 customers account for just over 10% of
revenues.
* Deferred income in respect of IP-based sales of GBP1.93 million as at 31 July
2008, will be released to the Income Statement over the period of the contracts.
All customer acquisition charges have already been expensed; therefore, as the
deferred income is released it directly impacts EBITDA. The level of deferred
income has continued to increase post year end with increased IP-based sales.
* In 2007/08, BNS invested in supporting an increase in sales volumes. The focus
in 2009 is on improving operational efficiencies whilst continuing to grow the
business.
* The Group has recently agreed the renewal of its banking facilities for a
further 12 months. With the elimination of the costs associated with
discontinued activities and the level of cash generation forecast, the Board
expects the Group's net borrowing position to reduce significantly over the next
12 months from GBP4.34 million as at 31 July 2008. This is demonstrated by the
net borrowing as at 30 November 2008 being GBP3.35 million.
Results and operating review
IFRS
This is the first year for which the Group is reporting under IFRS.
Implementation of IFRS has had a minimal impact on the Group; the main effect
being the alteration to the treatment of goodwill and other intangible assets.
Prior period accounts have been restated under IFRS and reconciliations between
UK GAAP and IFRS are shown in note 10.
Revenue and profit
Group revenue from continuing operations increased by 24.4% to GBP32.60 million
(2007: GBP26.20 million). This improvement was due to the full 12 month
contribution of 3g, which was acquired in March 2007.
The expected total term revenue from the Group's contracts of fully installed
IP-based products and services was GBP6.9 million as at 31 July 2008. Of this
amount, GBP3.28 million of cash had been received of which GBP1.35 million was
recognised as income and GBP1.93 million carried forward in the balance sheet as
deferred income. The remainder of the total expected value of GBP3.62 million,
should be invoiced and received over the remaining term of the contract. Total
deferred income, whilst not recognised in the income statement until future
periods, increased strongly during the year, from GBP1.36 million at 31 July
2007 to GBP3.33 million at 31 July 2008, reflecting the growth in deferred
revenues from IP-based hardware sales of GBP1.93 million which will be released
over the life of contracts, many of which are up to seven years.
The level of deferred income is expected to increase as the Group grows its
long-term contract base with its IP products and services. Other deferred income
relates to fixed line and maintenance revenues for which the movement over the
year was neutral.
Overall, Group gross margin slightly declined from 35.7% for the year ended 31
July 2007 to 33.5% for the year ended 31 July 2008 primarily due to the change
in sales mix with more comparatively lower margin mobile sales. Strong cash
inflows on IP-based product sales do not fully translate to reported gross
margin due the impact of deferring some revenue but expensing the full cost of
customer acquisition and sale. Overall, the traditional revenue streams of fixed
line, calls traffic, hardware supply and maintenance have performed broadly in
line with the Group's expectations despite the pressures arising from a highly
competitive market.
Underlying EBITDA from continuing operations was GBP0.13 million (2007: GBP2.27
million). The decrease in reported operating profit to a loss of GBP0.9 million
(2007: profit GBP2.52 million) reflects the change in sales mix towards IP-based
products and the profit on sale of land and buildings in 2007 of GBP1.02
million. These sales of IP based products include a significant amount of
deferred income, as well as additional payroll and customer acquisition costs
totalling GBP1.3 million as the Group grew its cost base to develop and market
its wider product portfolio. Occupancy costs also increased by GBP0.4 million
following the sale and leaseback of the property during 2007.
Net finance costs were GBP345,000 (2007: GBP307,000). The increase reflects the
higher average net debt levels resulting mainly from the financing of the 3g
acquisition and the funding of the cash outflows from the discontinued Network
Services Division. The Group had a net tax credit of GBP356,000 (2007:
GBP208,000) resulting from the recognition of a deferred tax asset in relation
to current year losses.
As stated in the interim results on 30 April 2008, the Group closed its Network
Services Division in late October 2007. The operating result of this
discontinued operation has been disclosed separately as a single amount in the
income statement and includes the outstanding closure charges, provisions and
losses incurred by this unit during the first three months of the financial
year.
The Group reported a net loss for the year of GBP2.30 million (2007: loss of
GBP3.55 million).
Cash flow
BNS generated strong operating cash flow of GBP2.41 million (2007: GBP2.16
million) from its continuing operations. However, GBP2.32 million (2007: GBP3.03
million) was absorbed in the discontinued Network Services Division relating to
losses during the first three months of the financial year and the unwinding of
liabilities from the opening balance sheet. Separately the Group made a loan of
GBP797,000 to its Chief Executive, Mr Garry Moat. Further details are provided
below. As at 31 July 2008, Group net borrowings were GBP4.31 million (July 2007:
GBP2.75 million).
Bank facilities
In January 2009 agreement was reached to amend the Group's bank facilities with
the revised terms comprising a term loan of GBP3.15 million and an overdraft
facility of GBP1.0 million. These revised bank facilities provide the Group with
adequate funding to meet the Group's current forecast requirements.
Loans to Director
During the year a loan was advanced to Mr Garry Moat, the Group's Chief
Executive. A loan agreement was subsequently formalised and ratified by
shareholders that requires repayment of the loan by 24 July 2009. At 31 July
2008 the balance outstanding on this loan was GBP797,000, which includes
interest of GBP21,000 charged at 0.3% greater than the Group's cost of
borrowing.
The Board of Directors have considered the recoverability of the loan and in
doing so have considered the financial assets, liabilities and cash flows of the
debtor concerned. The Directors have concluded that the full balance of the loan
will be recoverable, although in light of the illiquidity of current property
and debt markets, it is recognised that there are uncertainties over the timing
and method of repayment. The Directors are satisfied that there are a number of
viable options available to Mr Garry Moat to source the funding necessary to
repay the debt but that this may well not now occur before the end of July 2009.
Accordingly, the Directors have reclassified the debtor as non-current, although
the terms of the debt and due date of repayment remain unaltered.
Operating review
The IP-based suite of products was launched during 2007. In total nine new
products have already been launched including, the Group's Hosted IP Centrex
system, the BNS IP Smartbox and Call recording.
The Group's level of new sales orders has consistently grown. The average
monthly contracted sales orders have been running at record levels for the Group
throughout the financial year. This resulted in strong cash generation as well
as developing a substantial pipeline of future business.
The BNS customer base has grown to 10,201 at 31 July 2008 compared with 8,898 at
31 July 2007. A broader product range and improvements in customer service have
helped the Group keep customer churn levels comfortably below sector averages.
Average monthly churn is in line with 2007 levels at approximately 1.5% (July
2007: 1.5%). The percentage of the customer base taking more than one service
from the Group has also remained constant at over 86% (2007: 86%).
Performance within the traditional revenue streams of fixed line access and
calls and hardware supply and maintenance have remained broadly in line with the
Group's expectations. The number of fixed lines connected by the Group was
significantly boosted during the latter part of the year by the connection of
over 4,000 lines across eight larger customers. The first of these lines were
connected in July 2008 and together with separate agreements to supply mobile
services to these customers the contracts are estimated to be worth in excess of
GBP5 million in revenue over three years.
As the numbers of customers taking IP-based products continues to grow, there
will inevitably be a proportion of existing fixed line customers who are
re-signed on longer term IP-based product and services contracts. Despite this
emerging trend, at 31 July 2008 the number of lines connected by the Group was
still marginally ahead of the 2007 volume at 45,193 (2007: 44,467).
The acquisition of 3g in March 2007 provided BNS with an immediate increase in
scale in the mobile market and progress has continued to be made across a range
of key indicators. The business subscriber mobile base across the Group at 31
July 2008 was 15,560 (2007: 16,341) and had risen to 17,559 by 31 December 2008.
The Group continues to have a strong relationship with Vodafone and its other
key suppliers.
Despite the detrimental effect of industry wide pressure on tariffs from factors
such as EU roaming price reductions, margins have remained strong. This strength
has resulted from focussing on selling to high margin users. Further growth is
expected to result from new products, competitive tariff offerings and also
greater internal efficiencies. The Board also believes that the opportunity to
cross-sell mobile products to the existing BNS customer base is still at a
comparatively early stage of the process and represents considerable upside in
2009.
Owning its own IP-based network, BNS controls the routing of calls, thereby
ensuring the quality of calls being made. Its Network Operations Centre
continues to play an important role in supporting and developing the IP-based
product offerings. The Group expects to continue to develop enhanced products
and features based on the IP platform.
Revenue by product is also included below to provide further useful information
when interpreting the financials.
+------------------------------------------+--------------+--------------+
| REVENUE BY PRODUCT | 2008 | 2007 |
+ +--------------+--------------+
| | (GBPm) | (GBPm) |
+------------------------------------------+------------------------------------------+--------------+
| IP-based products and services (amount | 4.1 | - |
| invoiced) | | |
+------------------------------------------+--------------+--------------+
| Less: deferred income | (1.9) | - |
+------------------------------------------+--------------+--------------+
| IP-based products and services revenue | 2.2 | - |
+------------------------------------------+--------------+--------------+
| Mobile services | 11.3 | 4.9 |
+------------------------------------------+--------------+--------------+
| Fixed line access and calls | 16.7 | 18.0 |
+------------------------------------------+--------------+--------------+
| Traditional PBX systems and maintenance | 2.4 | 3.3 |
+------------------------------------------+--------------+--------------+
| Total revenue | 32.6 | 26.2 |
+------------------------------------------+--------------+--------------+
Accounting Policy Review and IFRS
BNS Telecom Group plc's consolidated financial statements were prepared in
accordance with UK Generally Accepted Accounting Policies (GAAP) until 31 July
2007. UK GAAP differs in some areas from IFRS. In preparing these consolidated
financial statements, management has amended certain accounting, valuation and
consolidation methods applied to the UK GAAP financial statements to comply with
IFRSs as adopted by the European Union. Implementation of IFRS has had a minimal
impact on the Group; the main effect being the alteration to the treatment of
goodwill and other intangible assets. Prior period accounts have been restated
under IFRS and reconciliations between UK GAAP and IFRS are shown in note 10.
Consolidated Income Statement
for the year ended 31 July 2008
+----------------------------------------------------+-------+----------+----+----------+--+
| | | 2008 | | 2007 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | Note | GBP'000 | | GBP'000 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Revenue | | 32,597 | | 26,201 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Cost of sales | | (21,719) | | (16,838) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Gross profit | | 10,878 | | 9,363 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Distribution costs | | (3,248) | | (2,346) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Administrative expenses | | (8,551) | | (5,514) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Trading profit | | (921) | | 1,503 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Profit on disposal of property | | - | | 1,018 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Group operating (loss)/profit | | (921) | | 2,521 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Underlying EBITDA | | 130 | | 2,267 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Depreciation | | (732) | | (557) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Amortisation | | (209) | | (80) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Share-based payments | | 35 | | (52) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Exceptional costs | | (145) | | (75) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Profit on disposal of property | | - | | 1,018 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Group operating (loss)/profit | | (921) | | 2,521 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Finance income | | 90 | | 21 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Finance costs | | (435) | | (328) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| (Loss)/profit before income tax and discontinued | | (1,266) | | 2,214 | |
| operations | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Income tax credit | 2 | 356 | | 208 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| (Loss)/profit after tax before discontinued | | (910) | | 2,422 | |
| operations | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Loss from discontinued operations after tax | 4 | (1,434) | | (5,970) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Loss for the financial year | | (2,344) | | (3,548) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Attributed to: | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Equity holders of the parent | | (2,344) | | (3,525) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Minority interest | | - | | (23) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | (2,344) | | (3,548) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Earnings per share - continuing | 3 | Pence | | Pence | |
+----------------------------------------------------+-------+----------+----+----------+--+
| - basic earnings per share | | (1.7) | | 4.8 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| - diluted earnings per share | | (1.7) | | 4.6 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| - underlying basic EBITDA per share | 3 | 0.3 | | 4.5 | |
+----------------------------------------------------+-------+----------+----+----------+--+
| | | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| Earnings per share - total | 3 | | | | |
+----------------------------------------------------+-------+----------+----+----------+--+
| - basic earnings per share | | (4.6) | | (7.0) | |
+----------------------------------------------------+-------+----------+----+----------+--+
| - diluted earnings per share | | (4.6) | | (7.0) | |
+----------------------------------------------------+-------+----------+----+----------+--+
Consolidated Statement of Recognised Income and Expense
for the year ended 31 July 2008
+-----------------------------------------------+-----------+--------+----------+
| | 2008 | | 2007 |
+-----------------------------------------------+-----------+--------+----------+
| | GBP'000 | | GBP'000 |
+-----------------------------------------------+-----------+--------+----------+
| Deferred tax on share options | - | | 10 |
+-----------------------------------------------+-----------+--------+----------+
| Income recognised directly in equity | - | | 10 |
+-----------------------------------------------+-----------+--------+----------+
| Loss for the year | (2,344) | | (3,548) |
+-----------------------------------------------+-----------+--------+----------+
| Total recognised income and expense for the | (2,344) | | (3,538) |
| year | | | |
+-----------------------------------------------+-----------+--------+----------+
| Attributed to: | | | |
+-----------------------------------------------+-----------+--------+----------+
| Equity holders of the parent | (2,344) | | (3,515) |
+-----------------------------------------------+-----------+--------+----------+
| Minority interest | - | | (23) |
+-----------------------------------------------+-----------+--------+----------+
| | (2,344) | | (3,538) |
+-----------------------------------------------+-----------+--------+----------+
Consolidated Balance Sheet
at 31 July 2008
+--------------------------------------------+--------+----------+----+----------+
| | | 2008 | | 2007 |
+--------------------------------------------+--------+----------+----+----------+
| | Note | GBP'000 | | GBP'000 |
+--------------------------------------------+--------+----------+----+----------+
| Assets | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Non-current assets | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Property, plant and equipment - at | | 479 | | 479 |
| revaluation | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Property, plant and equipment - at cost | | 1,672 | | 1,697 |
+--------------------------------------------+--------+----------+----+----------+
| Goodwill | | 3,843 | | 3,843 |
+--------------------------------------------+--------+----------+----+----------+
| Other intangible assets | | 1,259 | | 1,450 |
+--------------------------------------------+--------+----------+----+----------+
| Trade and other receivables | | 797 | | - |
+--------------------------------------------+--------+----------+----+----------+
| Deferred tax assets | | 375 | | 71 |
+--------------------------------------------+--------+----------+----+----------+
| | | 8,425 | | 7,540 |
+--------------------------------------------+--------+----------+----+----------+
| Current assets | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Inventories | | 456 | | 316 |
+--------------------------------------------+--------+----------+----+----------+
| Trade and other receivables | 5 | 3,952 | | 4,095 |
+--------------------------------------------+--------+----------+----+----------+
| Current income tax receivable | | - | | 132 |
+--------------------------------------------+--------+----------+----+----------+
| Cash and cash equivalents | | 2 | | 2,148 |
+--------------------------------------------+--------+----------+----+----------+
| | | 4,410 | | 6,691 |
+--------------------------------------------+--------+----------+----+----------+
| Total assets | | 12,835 | | 14,231 |
+--------------------------------------------+--------+----------+----+----------+
| Liabilities | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Current liabilities | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Borrowings | | (3,924) | | (1,556) |
+--------------------------------------------+--------+----------+----+----------+
| Trade and other payables | 6 | (7,091) | | (7,458) |
+--------------------------------------------+--------+----------+----+----------+
| Deferred income | | (1,900) | | (1,362) |
+--------------------------------------------+--------+----------+----+----------+
| Current income tax payable | | (86) | | - |
+--------------------------------------------+--------+----------+----+----------+
| Derivative financial instruments | | (14) | | (4) |
+--------------------------------------------+--------+----------+----+----------+
| | | (13,015) | | (10,380) |
+--------------------------------------------+--------+----------+----+----------+
| Net current liabilities | | (8,605) | | (3,689) |
+--------------------------------------------+--------+----------+----+----------+
| Non-current liabilities | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Borrowings | | (391) | | (3,340) |
+--------------------------------------------+--------+----------+----+----------+
| Deferred income | | (1,439) | | - |
+--------------------------------------------+--------+----------+----+----------+
| Deferred tax liabilities | | (312) | | (364) |
+--------------------------------------------+--------+----------+----+----------+
| Provisions | | (40) | | (130) |
+--------------------------------------------+--------+----------+----+----------+
| | | (2,182) | | (3,834) |
+--------------------------------------------+--------+----------+----+----------+
| Total liabilities | | (15,197) | | (14,214) |
+--------------------------------------------+--------+----------+----+----------+
| Net (liabilities)/assets | | (2,362) | | 17 |
+--------------------------------------------+--------+----------+----+----------+
| | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Capital and reserves | | | | |
+--------------------------------------------+--------+----------+----+----------+
| Share capital | 7 | 5,012 | | 5,012 |
+--------------------------------------------+--------+----------+----+----------+
| Share premium | 7 | 2,245 | | 2,245 |
+--------------------------------------------+--------+----------+----+----------+
| Other reserves | 7 | (3,939) | | (3,939) |
+--------------------------------------------+--------+----------+----+----------+
| Retained earnings | 7 | (5,680) | | (3,301) |
+--------------------------------------------+--------+----------+----+----------+
| Total shareholders' (deficit)/equity | | (2,362) | | 17 |
+--------------------------------------------+--------+----------+----+----------+
Consolidated Cash Flow Statement
for the year ended 31 July 2008
+------------------------------------------------------+------+---------+-----+---------+
| | | 2008 | | 2007 |
+------------------------------------------------------+------+---------+-----+---------+
| |Note | GBP'000 | | GBP'000 |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flows from operating activities | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash generated from continuing operations | 8 | 2,414 | | 2,156 |
+------------------------------------------------------+------+---------+-----+---------+
| Interest received | | 63 | | 21 |
+------------------------------------------------------+------+---------+-----+---------+
| Interest paid on bank loans and overdrafts | | (21) | | (268) |
+------------------------------------------------------+------+---------+-----+---------+
| Interest element of finance lease payments | | (44) | | (52) |
+------------------------------------------------------+------+---------+-----+---------+
| Tax received/(paid) | | 218 | | (226) |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from operating activities in continuing | | 2,630 | | 1,631 |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from operating activities in discontinued | | (2,318) | | (3,033) |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Total cash flow from operating activities | | 312 | | (1,402) |
+------------------------------------------------------+------+---------+-----+---------+
| | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flows from investing activities | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Purchase of property, plant and equipment | | (190) | | (1,443) |
+------------------------------------------------------+------+---------+-----+---------+
| Proceeds from sale of property | | - | | 4,804 |
+------------------------------------------------------+------+---------+-----+---------+
| Proceeds from sale of plant and equipment | | 99 | | - |
+------------------------------------------------------+------+---------+-----+---------+
| Acquisitions (net of cash acquired) | | - | | (3,307) |
+------------------------------------------------------+------+---------+-----+---------+
| Amount loaned to Director | | (1,263) | | (44) |
+------------------------------------------------------+------+---------+-----+---------+
| Amounts repaid by Director | | 498 | | 37 |
+------------------------------------------------------+------+---------+-----+---------+
| Purchase of intangible assets | | (18) | | (159) |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from investing activities in continuing | | (874) | | (112) |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from investing activities in discontinued | | - | | - |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Total cash flow from investing activities | | (874) | | (112) |
+------------------------------------------------------+------+---------+-----+---------+
| | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flows from financing activities | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Increase in bank loans | | - | | 5,777 |
+------------------------------------------------------+------+---------+-----+---------+
| Repayment of bank loans | 9 | (1,175) | | (3,808) |
+------------------------------------------------------+------+---------+-----+---------+
| Capital element of finance lease payments | 9 | (466) | | (476) |
+------------------------------------------------------+------+---------+-----+---------+
| Dividends paid | | - | | (251) |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from financing activities in continuing | | (1,641) | | 1,242 |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash flow from financing activities in discontinued | | - | | - |
| operations | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Total cash flow from financing activities | | (1,641) | | 1,242 |
+------------------------------------------------------+------+---------+-----+---------+
| Net increase / (decrease) in cash and cash | | (2,203) | | (272) |
| equivalents | | | | |
+------------------------------------------------------+------+---------+-----+---------+
| Cash and cash equivalents at start of period | | 2,096 | | 2,368 |
+------------------------------------------------------+------+---------+-----+---------+
| Cash and cash equivalents at end of period | | (107) | | 2,096 |
+------------------------------------------------------+------+---------+-----+---------+
Notes to the Financial Statements
1. Basis of Preparation
BNS Telecom Group plc's consolidated Financial Statements were prepared in
accordance with UK Generally Accepted Principles (GAAP) until 31 July 2007.
These Financial Statements have been prepared in accordance with EU Endorsed
International Financial Reporting Standards (IFRS) and IFRIC interpretations and
the Companies Act 1985 applicable to companies reporting under IFRS. The
Financial Statements have been prepared under the historical cost convention.
The financial information is abridged and does not contain the Group's full
Financial Statements for the year ended 31 July 2007 and 2008.
Full Financial Statements for the year ended 31 July 2007 (which received an
unqualified audit report) have been filed with the Registrar of Companies. A
copy of the Group's Annual Report and Financial Statements for the year ended 31
July 2008 is being sent to shareholders and will be presented at the forthcoming
Annual General Meeting; a copy is also available on the Group's
website www.bnsplc.com. They will also be available at the registered office of
the Company, Telecom House, Princess Way, Low Prudhoe, Northumberland, NE42 6NJ
during normal business hours. The Audit Report on these Financial Statements is
unqualified.
2. Taxation
(a) Analysis of charge for the year:
+-----------------------------------------+---+---------+----+---------+
| | | Year | | Year |
| | | ended | | ended |
+-----------------------------------------+---+---------+----+---------+
| | | 31 | | 31 |
| | | July | | July |
+-----------------------------------------+---+---------+----+---------+
| | | 2008 | | 2007 |
+-----------------------------------------+---+---------+----+---------+
| | | GBP'000 | | GBP'000 |
+-----------------------------------------+---+---------+----+---------+
| Current tax | | | | |
+-----------------------------------------+---+---------+----+---------+
| UK Corporation tax | - | | - |
+---------------------------------------------+---------+----+---------+
| Adjustments in respect of prior years | | - | | (160) |
+-----------------------------------------+---+---------+----+---------+
| | | - | | (160) |
+-----------------------------------------+---+---------+----+---------+
| Deferred tax | | | |
+---------------------------------------------+---------+----+---------+
| Credit for the year | | (300) | | (46) |
+-----------------------------------------+---+---------+----+---------+
| Deferred tax release re Intangible | | (52) | | - |
| fixed assets | | | | |
+-----------------------------------------+---+---------+----+---------+
| Adjustments in respect of prior years | (4) | | (2) |
+---------------------------------------------+---------+----+---------+
| | | (356) | | (48) |
+-----------------------------------------+---+---------+----+---------+
| | | | | |
+-----------------------------------------+---+---------+----+---------+
| Total tax credit | | (356) | | (208) |
+-----------------------------------------+---+---------+----+---------+
| Less tax charge included within | | - | | - |
| discontinued operations | | | | |
+-----------------------------------------+---+---------+----+---------+
| Total tax credit in the income | | (356) | | (208) |
| statement | | | | |
+-----------------------------------------+---+---------+----+---------+
(b) Deferred tax included in the statement of recognised income and expense
+------------------------------------------+--+---------+----+---------+
| | | 31 | | 31 |
| | | July | | July |
+------------------------------------------+--+---------+----+---------+
| | | 2008 | | 2007 |
+------------------------------------------+--+---------+----+---------+
| | | GBP'000 | | GBP'000 |
+------------------------------------------+--+---------+----+---------+
| | | | | |
+------------------------------------------+--+---------+----+---------+
| Deferred tax charge on share options | | - | | 10 |
+------------------------------------------+--+---------+----+---------+
(c) Reconciliation of total tax charge for the year
+---------------------------------------------+---+----------+----+----------+
| | | 31 | | 31 |
| | | July | | July |
+---------------------------------------------+---+----------+----+----------+
| | | 2008 | | 2007 |
+---------------------------------------------+---+----------+----+----------+
| | | GBP'000 | | GBP'000 |
+---------------------------------------------+---+----------+----+----------+
| Loss before tax (including discontinued | | (2,700) | | (3,756) |
| operations) | | | | |
+---------------------------------------------+---+----------+----+----------+
| | | | | |
+---------------------------------------------+---+----------+----+----------+
| Loss before tax multiplied by the rate of | | (756) | | (1,126) |
| corporation tax in the UK of 28% (2007: | | | | |
| 30%) | | | | |
+---------------------------------------------+---+----------+----+----------+
| Effect of: | | | | |
+---------------------------------------------+---+----------+----+----------+
| Disallowables | | 55 | | 404 |
+---------------------------------------------+---+----------+----+----------+
| Losses carried forward not recognised | | - | | 494 |
+---------------------------------------------+---+----------+----+----------+
| Losses relating to discontinued business | | 401 | | - |
+---------------------------------------------+---+----------+----+----------+
| Losses brought forward | | - | | (7) |
+---------------------------------------------+---+----------+----+----------+
| Deferred tax losses not recognised | | - | | 213 |
+---------------------------------------------+---+----------+----+----------+
| Prior year deferred tax overprovision | | (4) | | (2) |
+---------------------------------------------+---+----------+----+----------+
| Prior year corporation tax overprovision | | - | | (160) |
+---------------------------------------------+---+----------+----+----------+
| IFRS deferred tax movement | | (52) | | 16 |
+---------------------------------------------+---+----------+----+----------+
| Other | | - | | (40) |
+---------------------------------------------+---+----------+----+----------+
| Total tax credit reported in the income | | (356) | | (208) |
| statement | | | | |
+---------------------------------------------+---+----------+----+----------+
(d) Factors that may affect future tax charges
To the extent that tax losses carried forward can be utilised against profits
from the same trade, future tax costs will be reduced.
3. Earnings per share
(a) Continuing
The calculation of continuing basic earnings per share is based on the loss for
the period after taxation but before discontinued operations and a weighted
average number of ordinary shares outstanding during the period as follows:
+-----------------------+--------------+---------+------+---------+
| | | Year | | Year |
| | | ended | | ended |
+-----------------------+--------------+---------+------+---------+
| | | 31 | | 31 |
| | | July | | July |
+-----------------------+--------------+---------+------+---------+
| | | 2008 | | 2007 |
+-----------------------+--------------+---------+------+---------+
| | | GBP'000 | | GBP'000 |
+-----------------------+--------------+---------+------+---------+
| (Loss)/profit for the period | (910) | | 2,422 |
+--------------------------------------+---------+------+---------+
| | | | | |
+-----------------------+--------------+---------+------+---------+
| | | Shares | | Shares |
+-----------------------+--------------+---------+------+---------+
| | | '000 | | '000 |
+-----------------------+--------------+---------+------+---------+
| Weighted average number of shares - | 50,123 | | 50,123 |
| basic | | | |
+-----------------------+--------------+---------+------+---------+
(b) Total
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
ordinary shares outstanding during the period as follows.
+-----------------------+--------------+---------+------+---------+
| | | 2008 | | 2007 |
+-----------------------+--------------+---------+------+---------+
| | | GBP'000 | | GBP'000 |
+-----------------------+--------------+---------+------+---------+
| Loss for the period | (2,344) | | (3,548) |
+--------------------------------------+---------+------+---------+
| | | | | |
+-----------------------+--------------+---------+------+---------+
| | | Shares | | Shares |
+-----------------------+--------------+---------+------+---------+
| | | '000 | | '000 |
+-----------------------+--------------+---------+------+---------+
| Weighted average number of shares - | 50,123 | | 50,123 |
| basic | | | |
+-----------------------+--------------+---------+------+---------+
(c) Diluted
The calculation of diluted earnings per share in respect of continuing
operations for the year ended 31 July 2008 and the total Group for the years
ended 31 July 2007 and 31 July 2008 is the same as the basic earnings per share
as calculated above. There is no difference as the exercise of options would
have the effect of reducing the loss per ordinary share and is therefore not
dilutive under the terms of IAS 33.
The diluted earnings per share in respect of continuing operations for the year
ended 31 July 2007 has been calculated using the same numerators as set out in
(a) and (b) above and by reference to the following number of shares:
+----------------------------------------------+--+----------+
| | | 2007 |
+----------------------------------------------+--+----------+
| | | Shares |
+----------------------------------------------+--+----------+
| | | '000 |
+----------------------------------------------+--+----------+
| Number of shares per basic earnings per | | 50,123 |
| share calculations | | |
+----------------------------------------------+--+----------+
| Effect of shares under option | | 2,597 |
+----------------------------------------------+--+----------+
| Weighted average number of shares - diluted | 52,720 |
+----------------------------------------------+--+----------+
(d) Underlying basic EBITDA per share
A reconciliation of the results for the periods used to calculate basic earnings
per share to underlying EBITDA used to calculate the underlying basic EBITDA per
share is set out below:
+----------------------------------------+-------------+--+-----------+--+------------+
| | | Year | | Year ended |
| | | ended | | |
+----------------------------------------+----------------+-----------+--+------------+
| | | 31 July | | 31 July |
+----------------------------------------+----------------+-----------+--+------------+
| | | 2008 | | 2007 |
+----------------------------------------+----------------+-----------+--+------------+
| | | GBP'000 | | GBP'000 |
+----------------------------------------+----------------+-----------+--+------------+
| Loss for the period | | (2,344) | | (3,548) |
+----------------------------------------+----------------+-----------+--+------------+
| Net finance costs | | 345 | | 307 |
+----------------------------------------+----------------+-----------+--+------------+
| Depreciation and amortisation | | 941 | | 637 |
+----------------------------------------+----------------+-----------+--+------------+
| Share-based payments | | (35) | | 52 |
+----------------------------------------+----------------+-----------+--+------------+
| Exceptional costs | 145 | | 75 |
+---------------------------------------------------------+-----------+--+------------+
| Profit on disposal of property | | - | | (1,018) |
+------------------------------------------------------+--+-----------+--+------------+
| Tax | | (356) | | (208) |
+------------------------------------------------------+--+-----------+--+------------+
| Loss after tax in respect of discontinued operations | | 1,434 | | 5,970 |
+------------------------------------------------------+--+-----------+--+------------+
| Underlying EBITDA | 130 | | 2,267 |
+----------------------------------------+-------------+--+-----------+--+------------+
4. Discontinued operations
The discontinued operations comprise the trading activities of the Network
Services business which was closed on 29 October 2007. The results of the year
ended 31 July 2007 has therefore been restated to show this operation as
discontinued.
The loss from discontinued operations after tax is analysed as follows:
+----------------------------------+---------+--------+---------+
| | 2008 | | 2007 |
+----------------------------------+---------+--------+---------+
| | GBP'000 | | GBP'000 |
+----------------------------------+---------+--------+---------+
| Revenue | 2,150 | | 8,710 |
+----------------------------------+---------+--------+---------+
| Cost of sales | (2,421) | | (8,623) |
+----------------------------------+---------+--------+---------+
| Gross profit | (271) | | 87 |
+----------------------------------+---------+--------+---------+
| Operating costs | (1,163) | | (5,754) |
+----------------------------------+---------+--------+---------+
| Operating loss | (1,434) | | (5,667) |
+----------------------------------+---------+--------+---------+
| Closure and associated costs | - | | (303) |
+----------------------------------+---------+--------+---------+
| Loss before income tax | (1,434) | | (5,970) |
+----------------------------------+---------+--------+---------+
| Income tax expense | - | | - |
+----------------------------------+---------+--------+---------+
| Loss after tax | (1,434) | | (5,970) |
+----------------------------------+---------+--------+---------+
Basic and diluted earnings per share in respect of discontinued operations were
a loss of 2.9 pence and 11.9 pence for the years ended 31 July 2008 and 31 July
2007 respectively.
5. Trade and other receivables
+-------------------------------+--+---------+--------+---------+
| | | 31 | | 31 |
| | | July | | July |
+-------------------------------+--+---------+--------+---------+
| | | 2008 | | 2007 |
+-------------------------------+--+---------+--------+---------+
| | | GBP'000 | | GBP'000 |
+-------------------------------+--+---------+--------+---------+
| Current | | | | |
+-------------------------------+--+---------+--------+---------+
| Trade receivables | | 2,272 | | 2,176 |
+-------------------------------+--+---------+--------+---------+
| Net investment in finance | | 119 | | - |
| leases | | | | |
+-------------------------------+--+---------+--------+---------+
| Prepayments and accrued | | 1,399 | | 1,715 |
| income | | | | |
+-------------------------------+--+---------+--------+---------+
| Other receivables | | 162 | | 204 |
+-------------------------------+--+---------+--------+---------+
| | | 3,952 | | 4,095 |
+-------------------------------+--+---------+--------+---------+
| Non-current | | | | |
+-------------------------------+--+---------+--------+---------+
| Trade and other receivables - | | 797 | | - |
| loan to a Director | | | | |
+-------------------------------+--+---------+--------+---------+
6. Trade and other payables
+-------------------------+--------+---------+--------+---------+
| | | 2008 | | 2007 |
+-------------------------+--------+---------+--------+---------+
| | | GBP'000 | | GBP'000 |
+-------------------------+--------+---------+--------+---------+
| Current | | | | |
+-------------------------+--------+---------+--------+---------+
| Trade payables | | 3,583 | | 3,905 |
+-------------------------+--------+---------+--------+---------+
| Social security and | | 954 | | 1,102 |
| other taxes | | | | |
+-------------------------+--------+---------+--------+---------+
| Accruals | | 2,554 | | 2,451 |
+-------------------------+--------+---------+--------+---------+
| | | 7,091 | | 7,458 |
+-------------------------+--------+---------+--------+---------+
7. Capital and reserves
Reconciliation of movements in equity
+------------------------------+---------+----------+----------+-----------+------------+
| | Share | Share | Other | Retained | Total |
| | capital | premium | reserves | earnings | equity |
+------------------------------+---------+----------+----------+-----------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------+---------+----------+----------+-----------+------------+
| At 1 August 2006 | 5,012 | 2,245 | (3,821) | 244 | 3,680 |
+------------------------------+---------+----------+----------+-----------+------------+
| Total recognised income and | - | - | - | (3,515) | (3,515) |
| expense | | | | | |
+------------------------------+---------+----------+----------+-----------+------------+
| Equity-settled share-based | - | - | - | 52 | 52 |
| payments | | | | | |
+------------------------------+---------+----------+----------+-----------+------------+
| Realised revaluation surplus | - | - | (118) | 169 | 51 |
+------------------------------+---------+----------+----------+-----------+------------+
| Dividends paid | - | - | - | (251) | (251) |
+------------------------------+---------+----------+----------+-----------+------------+
| At 31 July 2007 | 5,012 | 2,245 | (3,939) | (3,301) | 17 |
+------------------------------+---------+----------+----------+-----------+------------+
| Total recognised income and | - | - | - | (2,344) | (2,344) |
| expense | | | | | |
+------------------------------+---------+----------+----------+-----------+------------+
| Equity-settled share-based | - | - | - | (35) | (35) |
| payments | | | | | |
+------------------------------+---------+----------+----------+-----------+------------+
| At 31 July 2008 | 5,012 | 2,245 | (3,939) | (5,680) | (2,362) |
+------------------------------+---------+----------+----------+-----------+------------+
Share capital
+---------------------------------------------+--+---------+--------+---------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+---------+--------+---------+
| | | GBP'000 | | GBP'000 |
+---------------------------------------------+--+---------+--------+---------+
| Authorised | | | | |
+---------------------------------------------+--+---------+--------+---------+
| 65,000,000 (2007: 65,000,000) ordinary | | 6,500 | | 6,500 |
| shares of 10p | | | | |
+---------------------------------------------+--+---------+--------+---------+
| | | | | |
+---------------------------------------------+--+---------+--------+---------+
| Allotted, issued and fully paid | | | | |
+---------------------------------------------+--+---------+--------+---------+
| 50,122,930 (2007: 50,122,930) ordinary | | 5,012 | | 5,012 |
| shares of 10p | | | | |
+---------------------------------------------+--+---------+--------+---------+
| | | | | |
+---------------------------------------------+--+---------+--------+---------+
Share options over ordinary shares
At 31 July 2008 options to subscribe for 1,423,985 ordinary shares at prices
between 27.0 pence and 54.0 pence were outstanding under the Company's two
equity-settled share option schemes. Options outstanding under these schemes are
exercisable at various times up to December 2017. No further options have been
granted since the year end.
Other reserves
Other reserves comprise a merger reserve which arose on the restructuring of the
Group at the time of the admission to the Alternative Investment Market in
November 2005 and a revaluation reserve created on the revaluation of freehold
land and buildings. At 31 July 2008 the balance in respect of the revaluation
reserve was GBPnil (2007: GBPnil).
8. Cash generated from continuing operations
+------------------------------------------+-------+----------+---+-----------+
| | | 2008 | | 2007 |
+------------------------------------------+-------+----------+---+-----------+
| | | GBP'000 | | GBP'000 |
+------------------------------------------+-------+----------+---+-----------+
| Loss for the year | | (2,344) | | (3,548) |
+------------------------------------------+-------+----------+---+-----------+
| Loss after tax on discontinued | | 1,434 | | 5,970 |
| operations | | | | |
+------------------------------------------+-------+----------+---+-----------+
| Depreciation and other non-cash items: | | | | |
+------------------------------------------+-------+----------+---+-----------+
| Depreciation | | 732 | | 557 |
+------------------------------------------+-------+----------+---+-----------+
| Amortisation of intangible assets | | 209 | | 80 |
+------------------------------------------+-------+----------+---+-----------+
| Loss on disposal of plant and equipment | 48 | | - |
+--------------------------------------------------+----------+---+-----------+
| Profit on disposal of property | - | | (1,018) |
+--------------------------------------------------+----------+---+-----------+
| Share based payments | (35) | | 52 |
+--------------------------------------------------+----------+---+-----------+
| Changes in working capital: | | | | |
+------------------------------------------+-------+----------+---+-----------+
| (Increase)/decrease in inventories | | (143) | | 87 |
+------------------------------------------+-------+----------+---+-----------+
| (Increase)/decrease in trade and other | | (410) | | 752 |
| receivables | | | | |
+------------------------------------------+-------+----------+---+-----------+
| Increase/(decrease) in payables | | 957 | | (764) |
+------------------------------------------+-------+----------+---+-----------+
| Increase/(decrease) in deferred income | | 1,977 | | (111) |
+------------------------------------------+-------+----------+---+-----------+
| Finance revenue | | (90) | | (21) |
+------------------------------------------+-------+----------+---+-----------+
| Finance costs | | 435 | | 328 |
+------------------------------------------+-------+----------+---+-----------+
| Tax | | (356) | | (208) |
+------------------------------------------+-------+----------+---+-----------+
| Cash generated from continuing | | 2,414 | | 2,156 |
| operations | | | | |
+------------------------------------------+-------+----------+---+-----------+
9. Analysis of movements in net borrowing
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| | As at | | | | | | As at |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| | 1 August | | | | Non-cash | | 31 July |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| | 2007 | | Cash | | items | | 2008 |
| | | | flows | | | | |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Cash | 2,148 | | (2,146) | | - | | 2 |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Bank overdraft | (52) | | (57) | | - | | (109) |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Cash and cash equivalents | 2,096 | | (2,203) | | - | | (107) |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Bank loans | (4,349) | | 1,175 | | (339) | | (3,513) |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Finance leases and hire purchase | (495) | | 466 | | (664) | | (693) |
| contracts | | | | | | | |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
| Net borrowings | (2,748) | | (562) | | (1,003) | | (4,313) |
+-----------------------------------+----------+--+----------+--+----------+--+----------+
10. Adoption of IFRS
As stated in note 1, these are the Group's first consolidated financial
statements prepared in accordance with IFRS.
The accounting policies have been applied in preparing the financial statements
for the year ended 31 July 2008, the comparative information presented in these
financial statements for the year ended 31 July 2007 and in the preparation of
an opening IFRS balance sheet at 1 August 2006, the Group's date of transition.
In preparing its opening IFRS balance sheet, the Group has adjusted amounts
reported previously in financial statements prepared in accordance with its
prior basis of accounting, UK GAAP. An explanation of how the transition from UK
GAAP to IFRS has affected the Group's financial performance and financial
position and is set out in the following tables and notes that accompany the
tables. The transition to IFRS has not impacted the Group cash flow and hence
the Group cash flow statement has not required restatement.
Reconciliation of loss for the year ended 31 July 2007
+-----------------------------------+------+--------+----------+------------+----------+
| |Note | | UK | Effect | IFRS |
| | | | GAAP - | of | |
| | | | as | transition | |
| | | | reported | to IFRS | |
+-----------------------------------+------+--------+----------+------------+----------+
| | | | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------+--------+----------+------------+----------+
| Revenue | (h) | | 34,911 | (8,710) | 26,201 |
+-----------------------------------+------+--------+----------+------------+----------+
| Cost of sales | (h) | | (25,461) | 8,623 | (16,838) |
+-----------------------------------+------+--------+----------+------------+----------+
| Gross profit | | | 9,450 | (87) | 9,363 |
+-----------------------------------+------+--------+----------+------------+----------+
| Operating costs | (i) | | (13,896) | 6,036 | (7,860) |
+-----------------------------------+------+--------+----------+------------+----------+
| Trading profit | | | (4,446) | 5,949 | 1,503 |
+-----------------------------------+------+--------+----------+------------+----------+
| Profit on disposal of property | | | 1,018 | - | 1,018 |
+-----------------------------------+------+--------+----------+------------+----------+
| Group operating profit | | | (3,428) | 5,949 | 2,521 |
+-----------------------------------+------+--------+----------+------------+----------+
| | | | | | |
+-----------------------------------+------+--------+----------+------------+----------+
| Underlying EBITDA | | | (903) | 3,170 | 2,267 |
+-----------------------------------+------+--------+----------+------------+----------+
| Depreciation | (j) | | (872) | 315 | (557) |
+-----------------------------------+------+--------+----------+------------+----------+
| Amortisation | (j) | | - | (80) | (80) |
+-----------------------------------+------+--------+----------+------------+----------+
| Share-based payments | | | (52) | - | (52) |
+-----------------------------------+------+--------+----------+------------+----------+
| Exceptional costs | (k) | | (2,619) | 2,544 | (75) |
+-----------------------------------+------+--------+----------+------------+----------+
| Profit on disposal of property | | | 1,018 | - | 1,018 |
+-----------------------------------+------+--------+----------+------------+----------+
| | | | - | - | - |
+-----------------------------------+------+--------+----------+------------+----------+
| Group operating profit | | | (3,428) | 5,949 | 2,521 |
+-----------------------------------+------+--------+----------+------------+----------+
| | | | | | |
+-----------------------------------+------+--------+----------+------------+----------+
| Finance income | | | 21 | - | 21 |
+-----------------------------------+------+--------+----------+------------+----------+
| Finance costs | (l) | | (324) | (4) | (328) |
+-----------------------------------+------+--------+----------+------------+----------+
| (Loss)/profit before income tax and discontinued | (3,731) | 5,945 | 2,214 |
| operations | | | |
+---------------------------------------------------+----------+------------+----------+
| Income tax credit/(expense) | (m) | | 196 | 12 | 208 |
+-----------------------------------+------+--------+----------+------------+----------+
| (Loss)/profit after tax before | | | (3,535) | 5,957 | 2,422 |
| discontinued operations | | | | | |
+-----------------------------------+------+--------+----------+------------+----------+
| Loss from discontinued operations | (h) | | - | (5,970) | (5,970) |
| after tax | | | | | |
+-----------------------------------+------+--------+----------+------------+----------+
| Loss for the financial year | | | (3,535) | (13) | (3,548) |
+-----------------------------------+------+--------+----------+------------+----------+
| Attributed to: | | | | | |
+-----------------------------------+------+--------+----------+------------+----------+
| Equity holders of the parent | | | (3,512) | (13) | (3,525) |
+-----------------------------------+------+--------+----------+------------+----------+
| Minority interest | | | (23) | - | (23) |
+-----------------------------------+------+--------+----------+------------+----------+
| | | | (3,535) | (13) | (3,548) |
+-----------------------------------+------+--------+----------+------------+----------+
Reconciliation of equity
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | Opening balance | | | | Closing balance |
| | | | | | sheet | | | | sheet |
+------------------+------+--+----------+--+--------------------------+---+----------+--+--------------------------+
| | | | | | as at 1 August | | | | as at 31 July |
| | | | | | 2006 | | | | 2007 |
+------------------+------+--+----------+--+--------------------------+---+----------+--+--------------------------+
| |Note | | UK | | Effect | | IFRS | | UK | | Effect | | IFRS |
| | | | GAAP - | | of | | | | GAAP - | | of | | |
| | | | as | | transition | | | | as | | transition | | |
| | | | reported | | to IFRS | | | | reported | | to IFRS | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Assets | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Non-current | | | | | | | | | | | | | |
| assets | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Property, plant | (a) | | 4,402 | | (39) | | 4,363 | | 1,722 | | (25) | | 1,697 |
| and equipment - | | | | | | | | | | | | | |
| at cost | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Property, plant | | | 1,422 | | - | | 1,422 | | 479 | | - | | 479 |
| and equipment - | | | | | | | | | | | | | |
| at revaluation | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Goodwill | (b) | | 2,044 | | - | | 2,044 | | 4,754 | | (911) | | 3,843 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Other intangible | (b) | | - | | 39 | | 39 | | 152 | | 1,298 | | 1,450 |
| assets | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | 7,868 | | - | | 7,868 | | 7,107 | | 362 | | 7,469 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Current assets | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Inventories | | | 270 | | - | | 270 | | 316 | | - | | 316 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Trade and other | | | 3,877 | | - | | 3,877 | | 4,095 | | - | | 4,095 |
| receivables | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Current income | | | - | | - | | - | | 132 | | - | | 132 |
| tax receivable | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Cash and cash | | | 2,614 | | - | | 2,614 | | 2,148 | | - | | 2,148 |
| equivalents | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | 6,761 | | - | | 6,761 | | 6,691 | | - | | 6,691 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Non-current | (f) | | - | | - | | - | | - | | - | | - |
| assets held for | | | | | | | | | | | | | |
| sale | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | 6,761 | | - | | 6,761 | | 6,691 | | - | | 6,691 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Total assets | | | 14,629 | | - | | 14,629 | | 13,798 | | 362 | | 14,160 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Liabilities | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Current | | | | | | | | | | | | | |
| liabilities | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Borrowings | | | (3,044) | | - | | (3,044) | | (1,556) | | - | | (1,556) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Trade and other | (c) | | (7,217) | | (73) | | (7,290) | | (8,728) | | (92) | | (8,820) |
| payables | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Current income | | | (254) | | - | | (254) | | - | | - | | - |
| tax payable | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Derivative | (d) | | - | | - | | - | | - | | (4) | | (4) |
| financial | | | | | | | | | | | | | |
| instruments | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | (10,515) | | (73) | | (10,588) | | (10,284) | | (96) | | (10,380) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Net current | | | (3,754) | | (73) | | (3,827) | | (3,593) | | (96) | | (3,689) |
| assets | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Non-current | | | | | | | | | | | | | |
| liabilities | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Borrowings | | | (300) | | - | | (300) | | (3,340) | | - | | (3,340) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Deferred tax | (e) | | (36) | | (2) | | (38) | | - | | (293) | | (293) |
| liabilities | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Provisions | | | - | | - | | - | | (130) | | - | | (130) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | (336) | | (2) | | (338) | | (3,470) | | (293) | | (3,763) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Total | | | (10,851) | | (75) | | (10,926) | | (13,754) | | (389) | | (14,143) |
| liabilities | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Net assets | | | 3,778 | | (75) | | 3,703 | | 44 | | (27) | | 17 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Capital and | | | | | | | | | | | | | |
| reserves | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Share capital | | | 5,012 | | - | | 5,012 | | 5,012 | | - | | 5,012 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Share premium | | | 2,245 | | - | | 2,245 | | 2,245 | | - | | 2,245 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Capital | | | - | | - | | - | | - | | - | | - |
| redemption | | | | | | | | | | | | | |
| reserve | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Other reserves | (f) | | (3,770) | | (51) | | (3,821) | | (3,939) | | - | | (3,939) |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Retained | (g) | | 268 | | (24) | | 244 | | (3,274) | | (27) | | (3,301) |
| earnings | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Total | | | 3,755 | | (75) | | 3,680 | | 44 | | (27) | | 17 |
| shareholders' | | | | | | | | | | | | | |
| equity | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Minority | | | 23 | | - | | 23 | | - | | - | | - |
| interest | | | | | | | | | | | | | |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
| Total equity | | | 3,778 | | (75) | | 3,703 | | 44 | | (27) | | 17 |
+------------------+------+--+----------+--+------------+--+----------+---+----------+--+------------+--+----------+
Notes to the reconciliation of equity and reconciliation of loss for the year
ended 31 July 2007
The notes below identify the adjustments made from UK GAAP to IFRS for each line
item in the restated consolidated balance sheets and income statement:
(a) Property, plant and equipment - at cost
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Software reclassified as intangible assets | | (39) | | (25) |
+--------------------------------------------------+--+-----------+----+---------+
Under IAS 16 certain items of software do not meet the criteria for recognition
as property, plant and equipment and have been reclassified as intangible
assets.
(b) Goodwill and other intangible assets
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Goodwill | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| Goodwill arising since 1 August 2006 | | - | | (1,337) |
| reclassified as purchased intangible assets | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| Reversal of amortisation charged since 1 August | | | | |
| 2006 | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| - continuing operations | | - | | 62 |
+--------------------------------------------------+--+-----------+----+---------+
| - discontinued operations | | - | | 109 |
+--------------------------------------------------+--+-----------+----+---------+
| Adjustment resulting from recognition of | | - | | 364 |
| deferred tax liability | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| Impairment of goodwill | | - | | (109) |
+--------------------------------------------------+--+-----------+----+---------+
| | | - | | (911) |
+--------------------------------------------------+--+-----------+----+---------+
| | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| Other intangible assets | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| Reclassified from property, plant and equipment | | 39 | | 25 |
+--------------------------------------------------+--+-----------+----+---------+
| Reclassified from goodwill | | - | | 1,337 |
+--------------------------------------------------+--+-----------+----+---------+
| Amortisation charged | | - | | (64) |
+--------------------------------------------------+--+-----------+----+---------+
| | | 39 | | 1,298 |
+--------------------------------------------------+--+-----------+----+---------+
The Group has applied IFRS 3 to all business combinations that have occurred
since 1 August 2006 (the date of transition to IFRS). As a result part of the
goodwill which arose after that date under UK GAAP, relating to customer
contracts and relationships, has been reclassified as purchased intangible
assets.
Under UK GAAP goodwill was amortised on a straight-line basis over the
anticipated useful economic life of the business acquired. Under IFRS goodwill
is not amortised but measured at cost less impairment losses with an annual test
for impairment. Accordingly, the carrying value of goodwill is frozen at 1
August 2006 (the date of transition to IFRS) and amortisation charged under UK
GAAP since this date has been reversed.
A deferred tax liability arising on the recognition of the customer contracts
intangible has been reflected with a corresponding adjustment to goodwill.
Under IAS 36 goodwill must be tested annually for impairment. In the UK GAAP
financial statements for the year ended 31 July 2007 an exceptional goodwill
impairment of GBP929,000 was recognised in respect of the discontinued Network
Services business. As a result of the reversal of goodwill amortisation set out
above in respect of this discontinued business, there is a corresponding
increase in the impairment charge.
The intangible asset in respect of customer contracts and relationships will be
written off over 7 years on a straight-line basis, being the estimated useful
economic life from the date of acquisition.
(c) Trade and other payables
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Holiday pay accrual | | (73) | | (92) |
+--------------------------------------------------+--+-----------+----+---------+
Previously no provision was made for holiday pay. IAS 19 requires that holiday
accrued by employees, but not taken at the balance sheet date must be provided
for.
(d) Derivative financial instruments
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Fair value of derivative financial instrument | | - | | (4) |
+--------------------------------------------------+--+-----------+----+---------+
IAS 39 requires all derivative financial instruments to be included in the
balance sheet at fair value. The Group has one such instrument, a structured
collar agreement taken out during 2007 to manage interest rate risk. This
instrument does not qualify for hedge accounting and all movements in fair value
have therefore been reflected within finance costs in the income statement.
(e) Deferred tax liabilities
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Changes in deferred taxation arising as a result | | | | |
| of: | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| - revalued assets | | (51) | | - |
+--------------------------------------------------+--+-----------+----+---------+
| - reclassification of other intangible from | | - | | (364) |
| goodwill | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| - holiday pay accrual | | 20 | | 26 |
+--------------------------------------------------+--+-----------+----+---------+
| - share-based payments | | 29 | | 45 |
+--------------------------------------------------+--+-----------+----+---------+
| | | (2) | | (293) |
+--------------------------------------------------+--+-----------+----+---------+
Under UK GAAP deferred tax is generally recognised on all timing differences
that have originated but not reversed by the balance sheet date. The exception
is the recognition of deferred tax assets, where recognition is limited to the
extent which the Group anticipates making sufficient taxable profits in the
future to absorb the reversal of underlying timing differences.
Under IFRS, deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences. These differences arise between the
carrying amount of assets and liabilities in the balance sheet and their
corresponding tax base. Deferred tax is not recognised on temporary differences
arising from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transition where there is no
effect on either the tax or accounting profit.
Deferred tax liabilities have been recognised in respect of customer contracts
and relationships and accrued holiday pay (see (b) and (c) above).
Under UK GAAP no deferred tax liability was recognised when the Group's freehold
property was revalued in February 2004. IFRS requires that deferred tax is
recognised on revaluation and accordingly a deferred tax asset has been
reflected on the date of transition to IFRS.
In addition, IFRS requires deferred tax to be reflected on share-based payment
expenses/(credits).
(f) Other reserves
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Deferred tax on revalued asset | | (51) | | - |
+--------------------------------------------------+--+-----------+----+---------+
The deferred tax adjustment in respect of the revalued assets is recognised as a
debit to the revaluation reserve within other reserves.
(g) Retained earnings
+--------------------------------------------------+--+-----------+----+---------+
| | | 1 August | | 31 |
| | | | | July |
+--------------------------------------------------+--+-----------+----+---------+
| | | 2006 | | 2007 |
+--------------------------------------------------+--+-----------+----+---------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+--+-----------+----+---------+
| Impact of adjustments: | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| - IFRS 3 - Business combinations | | - | | 107 |
+--------------------------------------------------+--+-----------+----+---------+
| - IAS 36 - Impairment of goodwill | | - | | (109) |
+--------------------------------------------------+--+-----------+----+---------+
| - IAS 19 - Holiday pay accrual | | (73) | | (92) |
+--------------------------------------------------+--+-----------+----+---------+
| - IAS 12 - Recognition of deferred tax | | 49 | | 71 |
+--------------------------------------------------+--+-----------+----+---------+
| - IAS 32/39 - Fair value of derivative | | - | | (4) |
| financial instruments | | | | |
+--------------------------------------------------+--+-----------+----+---------+
| | | (24) | | (27) |
+--------------------------------------------------+--+-----------+----+---------+
The above table shows the cumulative effect on retained earnings of the
adjustments described elsewhere.
(h) Discontinued operations
Under IFRS 5, businesses which are discontinued through closure rather than sale
are not disclosed as discontinued until closure is complete. The closure of the
Network Services business was completed on 29 October 2007. The results the
Network Services business for the period from 1 August 2007 to 29 October 2007
and associated costs in respect of the closure of this business are therefore
disclosed as discontinued operations in the year ended 31 July 2008, with the
income statement for the year ended 31 July 2007 restated to show the results of
this business and associated costs as discontinued.
The results of the Network Services business for the year ended 31 July 2007
reclassified as discontinued are as follows:
+-------------------------------------------+-------+--------+--------+---------+
| | | | | 31 |
| | | | | July |
+-------------------------------------------+-------+--------+--------+---------+
| | | | | 2007 |
+-------------------------------------------+-------+--------+--------+---------+
| | | | | GBP'000 |
+-------------------------------------------+-------+--------+--------+---------+
| Revenue | | | | 8,710 |
+-------------------------------------------+-------+--------+--------+---------+
| Cost of sales | | | | (8,623) |
+-------------------------------------------+-------+--------+--------+---------+
| Gross profit | | | | 87 |
+-------------------------------------------+-------+--------+--------+---------+
| Operating costs | | | | (6,057) |
+-------------------------------------------+-------+--------+--------+---------+
| Operating loss | | | | (5,970) |
+-------------------------------------------+-------+--------+--------+---------+
| | | | | |
+-------------------------------------------+-------+--------+--------+---------+
| Underlying EBITDA | | | | (3,189) |
+-------------------------------------------+-------+--------+--------+---------+
| Depreciation | | | | (299) |
+-------------------------------------------+-------+--------+--------+---------+
| Exceptional costs | | | | (2,482) |
+-------------------------------------------+-------+--------+--------+---------+
| Operating loss | | | | (5,970) |
+-------------------------------------------+-------+--------+--------+---------+
(i) Operating costs
+-------------------------------------------+-------+--------+--------+---------+
| | | | | 2007 |
+-------------------------------------------+-------+--------+--------+---------+
| | | | | GBP'000 |
+-------------------------------------------+-------+--------+--------+---------+
| Discontinued business - see note (h) | | | | 6,057 |
+-------------------------------------------+-------+--------+--------+---------+
| Holiday pay expense - see note (c ) | | | | (19) |
+-------------------------------------------+-------+--------+--------+---------+
| Goodwill amortisation - see note (b) | | | | 62 |
+-------------------------------------------+-------+--------+--------+---------+
| Amortisation of other intangible assets - | | | | (64) |
| see note (b) | | | | |
+-------------------------------------------+-------+--------+--------+---------+
| | | | | 6,036 |
+-------------------------------------------+-------+--------+--------+---------+
(j) Depreciation and amortisation
+--------------------------------------------------+-----+--------------+--+--------------+
| | | Depreciation | | Amortisation |
+--------------------------------------------------+-----+--------------+--+--------------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------------------+-----+--------------+--+--------------+
| Discontinued business - see note (h) | | 299 | | - |
+--------------------------------------------------+-----+--------------+--+--------------+
| Reclassification from property, plant and | | 16 | | (16) |
| equipment to other intangibles | | | | |
+--------------------------------------------------+-----+--------------+--+--------------+
| Amortisation of other intangible assets - see | | - | | (64) |
| note (b) | | | | |
+--------------------------------------------------+-----+--------------+--+--------------+
| | | 315 | | (80) |
+--------------------------------------------------+-----+--------------+--+--------------+
(k) Exceptional costs
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | 2007 |
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | GBP'000 |
+-------------------------------------------+-------+--------+--------+---------------+
| Discontinued business - see note (h) | | | | 2,482 |
+-------------------------------------------+-------+--------+--------+---------------+
| Goodwill amortisation - see note (b) | | | | 62 |
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | 2,544 |
+-------------------------------------------+-------+--------+--------+---------------+
(l) Finance costs
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | 2007 |
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | GBP'000 |
+-------------------------------------------+-------+--------+--------+---------------+
| Movement in fair value of derivative financial instrument | | (4) |
| - see note (d) | | |
+-------------------------------------------+-------+--------+--------+---------------+
(m) Income tax credit
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | 2007 |
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | GBP'000 |
+-------------------------------------------+-------+--------+--------+---------------+
| Holiday pay expense - see note (e) | | | | 6 |
+-------------------------------------------+-------+--------+--------+---------------+
| Share-based payments - see note (e) | | | | 6 |
+-------------------------------------------+-------+--------+--------+---------------+
| | | | | 12 |
+-------------------------------------------+-------+--------+--------+---------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BPMPTMMTTBIL
Bns Telecom (LSE:BTP)
Historical Stock Chart
From Nov 2024 to Dec 2024
Bns Telecom (LSE:BTP)
Historical Stock Chart
From Dec 2023 to Dec 2024
