28th Mar 2008 07:01
Glen Group PLC28 March 2008 28 March 2008 Glen Group plc ("Glen Group" or "the Company") Final Results Glen Group, the Edinburgh based provider of telecommunication solutions to theSME market, is pleased to announce its final results for the year ended 30September 2007. Operating Highlights: • Pinnacle Telecom Group, acquired in June 2007, provides stable recurring income and is now at the heart of the business. • Major downsizing of Glen Communications in the second half, resulting in exceptional costs of £305k, strengthens the business going forward • Since the year end, the businesses of Eclectic Group Limited ("Eclectic") and its wholly owned subsidiary I G Software Limited ("inGroup") sold to Maxima Holdings plc for a net cash consideration of £2.7m. Carrying value of assets reduced to estimated realisation • All bank debt eliminated post year end Financial Highlights: • Turnover increases 80% from £3.7m to £6.7m (under IFRS the turnover from the continuing business increases from £965k to £1.01m) • Operating loss before goodwill impairment, intangible amortisation and exceptionals widens from £597k to £1.2m under IFRS treatment • A prudent approach taken to the carrying value of goodwill and intangible assets with £1.06m written off Eric M Hagman, Chairman of Glen Group commented: "The company has come to a crossroads. Its size is small in the public arena,particularly in the present climate and the profits generated by the remainingbusiness, focused around Pinnacle, are not sufficient to cover all the costs ofthe holding company, Glen Group plc. However, following the disposal of Eclecticand inGroup, we have a debt free balance sheet with cash in hand. Your Board continues to explore all possible options to return the business to aprofitable and cash generative model. Whilst we review our options, ouroperational focus is the communications business which continues to meet ourfinancial targets. We expect to complete the review by the summer 2008, and Ican assure all shareholders that the agreed approach will meet our cash andprofit criteria from commencement." Enquiries: Glen Group plcGraham J Duncan, Chief Executive Officer Tel: 0845 119 2100 Jonathan WrightSeymour Pierce Tel: 020 7107 8000 Pelham PRAlex Walters Tel: 020 3170 7435 CHAIRMAN'S STATEMENT Overview We have had a disappointing year. Our operating loss, before IFRS adjustmentsand exceptional costs as more fully explained in the Business Review, was £1.2mcompared to £597k last year. Although the first half saw us trading in line withexpectations, the second half has been coloured by several major events.On the positive side we acquired the Pinnacle Telecom Group of companies earlyin June 2007, giving us valuable recurring income and a move into mainstreamtelecommunications. We also acquired I G Software Limited ("inGroup") in August as an add-on to theservice portfolio of Eclectic, a provider of business intelligence solutions tothe corporate and middle market space. Eclectic was the biggest company in the group and sat at the heart of thebusiness in terms of turnover and profit. However, Eclectic performed belowexpectations, particularly in the second half, and when the opportunity arose weelected to dispose of Eclectic and inGroup and completed the sale in earlyJanuary 2008. During the year we also materially downscaled the activities of GlenCommunications. Eclectic and inGroup In the first half, Eclectic reported a strong operating profit of £191k. Thiswas after an investment of £76k incurred in that period to develop Oracle andMicrosoft consultancy practices. In the second half Eclectic experienced anoperating loss of £116k making the full year operating profit a mostdisappointing £75k. Although part of this was caused by an increasing investmentin the new practices, which resulted in further costs of £136k in the secondhalf, the result was significantly below expectations resulting in your Boardimmediately having to consider the future of this business. The Eclectic business was also augmented at the beginning of August with theacquisition of inGroup. From the date of acquisition this company performedpoorly and contributed a very modest £6k to operating profit over the two monthperiod from acquisition to the year end. Although its performance picked upafter the year end, the operating result for the year fell well below ourexpectations. Given the economic climate, particularly in respect of the credit markets andour significant involvement with the financial services industry, your Boardfelt that the risk of continuing in this business could overwhelm the group.Accordingly, we moved quickly to dispose of these businesses, and completed thesale in early January 2008. We believe that it was a timely sale. Glen Communications Since our original AIM admission in December 2004, we have invested significantsums in developing the Glen Communications business using a direct sales team.This company was our prime SME focussed business, but much of its income wasnon-recurring. The acquisition last year of ExploreIT allowed us to have a morerounded portfolio of integrated services to the SME market, as well ascontributing some recurring income. As outlined to shareholders in our interimstatement, we started to reduce the size of the sales team and concentrate onIT-centric services which could give us higher revenues and margins from eachsale. However, we found that the transition to IT was developing at a slowerpace than we expected.The acquisition of Pinnacle in June 2007 gave us the impetus to abandon both thedirect selling and the project driven business, allowing us to concentrate onrecurring income streams. Although we firmly believe that there was nothingfundamentally wrong with a direct sales strategy, it was expensive and becomingincreasingly difficult to fund. We also believe that the time scale toprofitability was too long and difficult to sustain, given our size. We haveincurred material costs in downsizing this business, which included thedeparture of the Managing Director and all the employees of that company. Pinnacle Group The acquisition of this company in June 2007 has proven to be a success story.With stable recurring income, and an increasing customer base, Pinnacle hasperformed well and the various companies in the Pinnacle group have contributedoperating profit of £41k since acquisition. Your Board has given approval toexpand this business, in a manner consistent with a prudent approach. Thedevelopment of this business maximises the skill set of our highly experiencedteam. Our CEO, Graham Duncan, has 25 years of experience in the telecom businessand Alan Bonner, who co-founded Pinnacle and is its MD, has been in the businessover 10 years. Summary The company has come to a crossroads. Its size is small in the public arena,particularly in the present climate and the profits generated by the remainingbusiness, focused around Pinnacle, are not sufficient to cover all the costs ofthe holding company, Glen Group plc. However, following the disposal of Eclecticand inGroup, we have a debt free balance sheet with cash in hand. Your Board continues to explore all possible options to return the business to aprofitable and cash generative model. Whilst we review our options, ouroperational focus is the communications business which continues to meet ourfinancial targets. We expect to complete the review by the summer 2008, and Ican assure all shareholders that the agreed approach will meet our cash andprofit criteria from commencement. In order to strengthen our Board, I was delighted a few weeks ago to welcome tothe Board David Hewitt, a sales specialist of considerable experience, as anadditional non-executive director His skill set will give Graham Duncan, ourCEO, valuable support as we seek to move the business forward. David Hewitt willcome up for election at our Annual General Meeting. I would also like to paytribute to Peter Ford who retires by rotation at the AGM and is not seekingre-election. Peter has made a major contribution to the Company over a six yearperiod but now feels that the time is right to move on. On behalf of all membersof the Board, I wish him well. This has been a year of immense change, the funding of which has had a majorimpact on our operating costs. This, coupled with the requirements of IFRSaccounting, has had a profound effect on our results. With these changes, andcosts, behind us we anticipate a period of stability and sustainable growthgoing forward. Full details of the financial performance for the full year are contained in theBusiness Review. Eric M Hagman CBE CHAIRMAN 28 March 2008 BUSINESS REVIEW Introduction The year can be characterised as one of significant change. Following theacquisition on 7 June 2007 of Pinnacle Group Limited and its related companiesPinnacle Telecom plc, Pinnacle Mobile Limited and Sports Club Telecom Limited(collectively "Pinnacle Group") the integrated communications business wasredefined around the telecom operations of Pinnacle Group. Glen CommunicationsLimited and its wholly owned subsidiary Explore IT Limited stopped activeselling of project based IT services to the SME market and its Managing Directorleft following a material downscaling of this business which included thewithdrawal of the direct sales team. As outlined in the Chairman's Statement,major changes have also been actioned since the year end with the sale on 7January 2008 of Eclectic and inGroup to Maxima Holdings plc. The transactiontook the form of a sale of the assets and undertaking of the businesses ofEclectic and inGroup, including its people, supply agreements, customercontracts, the Eclectic and inGroup names and other related data, all witheffect as at close of business on 31 December 2007. Glen Group plc hasguaranteed the obligations of Eclectic and inGroup under the agreement. Thepractical effect of selling the business undertakings, rather than the sharecapital of the companies, is that Glen is left with the two legal entities towind down. This is currently in progress and is expected to take several monthsto complete. The total cash consideration received was £2.72m.These actions have left the retained businesses operating with fewer than 10employees out of a single office in Edinburgh, and the cost structures have beencompletely overhauled. Since 7 January 2008, the Glen Group has consisted of five operating companiesall addressing the SME market. Following a strategic review of our SME focusedbusinesses conducted after the acquisition of Pinnacle Group in June 2007 theentire business was refocused on services that can generate recurring incomestreams.The retained businesses are as follows: • Pinnacle Telecom plc and Sports Club Telecom Limited, which provide line rental and calls, utilising the group's own in-house billing system; • Pinnacle Mobile Limited which provides a range of mobile voice and data services; • Glen Communications Limited, which principally provides voice-based hosted broadband services (hosted "VoIP") and will in the future provide a range of application-based hosted solutions; and • Explore IT Limited, which provides external IT support services and internal technical support for our IP (Internet Protocol) solutions. Our customer acquisition strategy is now focused on generating customers for ourtelecom solutions business where we package line rental and calls for businesscustomers. This service is at the core of the Pinnacle Group and the strategygoing forward is to cross sell our other services into this customer base. Ourcustomer acquisition strategy is being driven by the use of an offshore callcentre under the control of an experienced consultant with several years ofsuccess in this area. The use of an offshore call centre has been introducedsince the year end and has recently been up-scaled following a successful trialperiod. It is our intention to introduce other indirect channels to marketduring 2008. These changes were designed to a) significantly lower our costs, b) deliverservices and cross selling opportunities into business areas which we perceiveto be the fastest growing in the integrated communications space, c) deliverregular recurring income to our business and d) provide a much more focusedapproach to the marketplace. As an innovative company, we constantly examine the application of newtechnologies to our market as the market moves away from traditionaltelecommunication technologies to those that use IP technology, the language ofthe Internet. We see rapid change, and therefore opportunities, in introducingIP based solutions to customers in this fast moving market and are currentlyexamining a number of initiatives in this area. Accounting under the IFRS rules requires us to treat the sale of Eclectic andinGroup, which took place after the year end, as a single line item headed"discontinued operations" in the consolidated income statement to 30 September2007 and as "assets included in disposal groups" in the consolidated balancesheet at 30 September 2007. Moreover, the 2006 comparative figures in theconsolidated income statement have also been similarly adjusted. In theconsolidated balance sheet at 30 September 2007, there is also an adjustmentwhich writes down the carrying value of the disposal groups to the anticipatedrealisable value of the assets and businesses sold. This presentation, in our view, makes comparison against the previouslypublished figures for 2006 and the half year to 31 March 2007 very difficult.Accordingly, we have shown below the results for 2007 in a format which webelieve makes for a simpler understanding and an easier comparison against thepublished results for 2006. 1) Revised Presentation The consolidated income statement for the year ended 30 September 2007 and the2006 figures, as published in the prior year, are as follows: CONSOLIDATED INCOME STATEMENT 12 Months 12 Months 30 September 2007 30 September 2006Revenue: £ £ Eclectic 5,499,844 2,733,144inGroup 171,091 -Glen Communications, including Explore IT 638,044 965,101Pinnacle Group 376,826 - Totals 6,685,805 3,698,245 Cost of Sales (4,917,696) (2,365,896) Gross Profit 1,768,109 1,332,349 Administration expenses (2,894,803) (1,921,571) Operating loss before amortisation,impairment and fundamentalreorganisation (1,126,694) (589,222) Amortisation of intangibles (65,741) -Impairment of goodwill (1,444,111) -Exceptional cost of fundamentalreorganisation (305,415) - Operating loss (2,941,961) (589,222)Finance costs (62,195) (20,566) Loss before taxation (3,004,156) (609,788)Taxation (1,221) (3,803) Loss for the year (3,005,377) (613,591) 2) Revenue Revenue for the full year was £6,685,805 compared to £3,698,245 in theequivalent period last year, a rise of approximately 80%, due largely to theimpact of acquisitions. An analysis of revenue is as follows: CONSOLIDATED INCOME STATEMENT 12 Months 12 Months 30 September 2007 30 September 2006Revenue: £ £ Eclectic 5,499,844 2,733,144In Group 1 171,091 -Glen Communications, includingExplore IT Limited 638,044 965,101Pinnacle Group 2 376,826 - Totals 6,685,805 3,698,245 Notes: 1. From date of acquisition on 10 August 20072. From date of acquisition on 7 June 2007 Revenue in the first half of the financial year was reported at £2,924,819. Thesecond half revenue therefore amounts to £3,760,986, an increase of 28.5% in thesecond half, which can be mainly explained by the impact of acquisitions in thesecond half, coupled with a rising revenue from Eclectic mainly due to theeffect of licence sales.The revenue in Glen Communications, including Explore IT, has been adverselyaffected by the removal of the direct sales team coupled with a significantreduction in other staff numbers including the closure of the office inRotherham and the abandonment of project based IT solutions aimed at the SMEmarket and sold through Explore IT. 3) Gross Margins The overall gross profit for the full year was £1,768,109, representing a grossmargin of 26.4%. This compares to a gross margin of 36.0% for last year. Themargin has been adversely affected by a changing mix of services, but morematerially by costs of £212,467 incurred by Eclectic in establishing Oracle andMicrosoft practices, which have had little impact on the top line in the currentyear. Without these costs, the margin would have been 29.6%. In addition,Eclectic's licence sales represent 26.6% of Eclectic's overall revenue, andhistorically sold on low margins, compared to just 13.3% of revenue last year.These factors have adversely affected the overall margin. 4) Exceptional Reorganisation Costs As well as the development costs of £212,467 mentioned above which are includedin cost of sales, the operating result for the year has also been verymaterially affected by the costs of a fundamental reorganisation totalling£305,415. These costs relate to specific moves taken to eliminate the directsales team, close the Rotherham office, release people and abandon the ITproject business. The majority of these costs relate to contractual terminationand benefits paid to senior managers and others who have left the business. 5) Operating Loss before amortisation, impairment and fundamental reorganisation In the full year we have incurred an operating loss of £1,126,694 (2006:£589,222). Without the development costs, noted above, the operating loss wouldhave been £914,227. In the first half of the financial year, the operating losswas reported as £565,350. In the second half, the operating loss has reducedmarginally to £561,344. An analysis of the operating profit and loss by company and/or business unit isas follows: CONSOLIDATED INCOME STATEMENT 12 Months 12 Months 30 September 30 September 2007 2006Operating profit/(loss) before exceptional £ £costs: Eclectic 1 75,030 147,941In Group 2 6,337 -Glen Communications, includingExplore IT Limited (681,888) (365,894)Pinnacle Group 3 41,302 -Glen Group plc (567,475) (371,269)Totals (1,126,694) (589,222) Notes: 1 2006 figures cover a seven and a half month period2 From date of acquisition on 10 August 20073. From date of acquisition on 7 June 2007 The overall performance for the year has been disappointing and major steps havebeen taken to fundamentally change the structure of the business. Comments onthe individual performance by business unit are as follows: a) Eclectic The result has been coloured by the investment made to develop Oracle andMicrosoft practices during the year which totalled £212,467, without thegeneration of any corresponding material income. With these development costsexcluded, Eclectic would have delivered a profit of £287,497. It was anticipatedthat the development costs would self fund over a 12 month period and, becausethis did not materialise, the actual performance fell well short of our internalbudgets. This business was sold on 7 January 2008. b) inGroup InGroup was acquired less than two months before the year end and its initialtrading was disappointing, delivering a profit of £6,337 over that period. Inthe short period under which we owned the business, we had taken material stepsto integrate its operations with that of Eclectic, a process which had beenlargely completed by the time we sold the business on 7 January 2008. c) Glen Communications/Explore IT In the first half of the year, Glen Communications, together with Explore IT,returned an operating loss of £276,420 before reorganisation costs. In thesecond half the losses have been reduced to £168,590. Since acquiring Pinnaclein June 2007, we have reduced Glen Communications to a near shell. It no longerhas any employees and much of the loss for the year to 30 September 2007 istaken up by salary and benefit costs, employee termination costs, office closurecosts and costs associated with running a direct sales team, all of which hasnow been eliminated. Explore IT has also been slimmed down but it carries an important skill set forour business going forward and has a solid base of recurring income. d) Pinnacle Group Since acquisition, Pinnacle has delivered a performance in line with ourexpectations and it is running profitably on a base of mainly recurring income.Since acquisition the Pinnacle companies have delivered an operating profit of£41,302. Apart from its people, its key assets are its billing system, which weare continuing to develop, and its customer base which delivers a steady streamof recurring income. e) Glen Group plc The holding company carries all the costs of the Board and the AIM listingcosts. Although the costs have increased from £371,269 last year to £567,475this year, an increase of £196,206, much of this cost can be attributed to theaccounting group which we created inside the holding company structure followingthe acquisition of Eclectic. This group was disbanded in late September when theaccounting costs were transferred back to the operating companies. f) Financing During the year, the earn-out provisions associated with the acquisition ofEclectic in February 2006 crystallised. Eclectic delivered the maximum level ofprofits under the terms of the earn-out conditions and, accordingly, Glen Groupissued 73,825,818 shares at 1.067p per share to satisfy the deferredconsideration payable to the vendors, all in accordance with the earn-outformula contained in the sale and purchase agreement. On 27 February 2007, following shareholder approval, the company's share capitalwas reorganised. Holders of each ordinary share of nominal one penny eachreceived one ordinary share of nominal one-tenth of a penny and one deferredshare of nominal nine-tenths of a penny. The conditions attaching to thedeferred shares render them worthless and the practical effect is to lower thenominal value of the shares to one-tenth of a penny to allow the company toissue shares in the future. This had not been possible throughout most of 2006as the market price of the shares had fallen below the original nominal value ofone penny per share, and the issue of shares at a discount to the nominal valueis unlawful. At the same time as the reorganisation became effective, the company raised afurther £500,000 (before expenses) in new equity, applied to expanding workingcapital, by the issue of 100,000,000 new ordinary shares at 0.50 pence pershare. The company has also issued further equity during the year as follows: • On 14 May 2007 the company raised £350,000 (before expenses) by the issue of 100,000,000 new ordinary shares at 0.35 pence per share in order to assist acquisitions, particularly the costs of due diligence, and provide further working capital, • On 6 June 2007 the company announced the acquisition of Pinnacle Group Limited for a consideration of £700,000 satisfied by the issue of 122,727,273 shares at 0.55 pence per share and £25,000 in cash. The shares were issued at a premium of 15.8% to the then mid-market price. • On 25 June 2007, the company issued 3,863,636 new ordinary shares at 0.55 pence per share to acquire certain minority interests in Sports Club Telecom Limited and 1,000,000 new ordinary shares at 0.55 pence per share to acquire 50% of the shares in Pinnacle Mobile Limited, giving the group 100% ownership of both companies. These shares were issued at a premium of 15.8% to the then mid-market price. • On 9 August 2007, the company announced the acquisition of I G Software Limited ("inGroup") for a consideration of £1,350,000 satisfied by the issue of 200,000,000 new ordinary shares at 0.55 pence per share and £250,000 in cash. The shares were issued at a premium of 100% to the then mid-market price. • On 23 August 2007 the company raised £400,000 (before expenses) by the issue of 200,000,000 new ordinary shares at 0.20 pence per share in order to provide further working capital. • On 19 September 2007 the company completed a follow-on fund raising of £130,000 (before expenses) by the issue of 65,000,000 new ordinary shares at 0.20 pence per share in order to provide further working capital. Where shares are issued at a premium to the mid-market price, a fair valueadjustment is processed in the financial statements which recognises thedifference between the value of shares issued at a premium and the value of therelevant shares had they been issued at the prevailing mid-market price. In theyear to 30 September 2007 the fair value adjustment was £646,909 (2006:£417,221) 6) Amortisation of intangibles, impairment of goodwill and exceptionalcost of fundamental reorganisation In accordance with IFRS, we have reviewed the assets acquired on the acquisitionof Pinnacle Group Limited (consisting of Pinnacle Telecom plc and Sports ClubTelecom Limited), and have allocated the net goodwill that was created,totalling £717,109, as follows: Billing system £150,000 Customer base £567,109 We are amortising these intangible assets over five years. Along with theamortisation of intangibles in ExploreIT, this has resulted in a charge to theconsolidation income statement of £65,741. The Board has also reviewed thecarrying cost of the goodwill relating to Glen Communications and ExploreIT andhave determined that it is prudent to write it off. This has resulted in acharge of £994,111 in the consolidated income statement.The costs of fundamental reorganisation are commented on at 4) above. 7) Discontinued operations This consists of the profits of Eclectic and inGroup which have been retainedfor the period, totalling £28,219, less a write down of £450,000 relating to theestimated realisable value of the assets retained, following the sale of thebusiness of these companies in January 2008. Graham J Duncan MA CA CHIEF EXECUTIVE 28 March 2008 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 Year Year ended ended 2007 2006 £ £ Revenue 1,014,870 965,101 Cost of sales (777,911) (550,532) Gross profit 236,959 414,569 Administration expenses (1,445,020) (1,011,732) Operating loss before amortisation,impairment of goodwill and (1,208,061) (597,163)exceptional cost Amortisation of intangibles (65,741) -Impairment of goodwill (994,111) -Exceptional cost of fundamentalreorganisation (305,415) - Operating loss (2,573,328) (597,163) Interest receivable 2,771 3,054Interest payable (12,600) (10,170) Finance costs (9,829) (7,116) Loss before tax (2,583,157) (604,279) Taxation (439) (3,803) Loss for the year from continuingoperations (2,583,596) (608,082) Discontinued operationsLoss for the year from discontinuedoperations (421,781) (5,509) Loss for the year (3,005,377) (613,591) Loss per share- Loss per share basic and diluted -continuing (0.46)p (0.28)p- Loss per share basic and diluted -discontinued (0.07)p (0.00)p- Loss per share basic and diluted - total (0.53)p (0.28)p There are no other gains or losses other than the loss for the year. CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2007 2007 2006 £ £AssetsNon-current assetsGoodwill - 3,562,740Intangible assets 751,368 100,000Property, plant and equipment 105,132 112,667 856,500 3,775,407 Current assetsInventories 22,524 26,752Trade and other receivables 1,729,599 1,571,471Cash and cash equivalents 157,361 1,075 Total current assets 1,909,484 1,599,298Assets included in disposal groups 2,749,005 Total assets 5,514,989 5,374,705 Short term borrowings (587,308) (578,731)Trade payables (1,234,194) (939,817)Other taxes and socialsecurity costs (442,776) (160,213)Accruals and other payables (384,987) (242,173) Total current liabilities (2,649,265) (1,920,934)Non-current liabilities Long-term borrowings (65,155) (87,557) Total liabilities (2,714,420) (2,008,491) Net assets 2,800,569 3,366,214 Equity attributable to equity holders of the parent Share capital 4,807,680 3,276,831Share premium account 3,207,593 860,817Shares to be issued - 787,500Other reserve 16,544 20,028Fair value adjustment (1,064,130) (417,221)Profit and loss account (4,167,118) (1,161,741) Total equity 2,800,569 3,366,214 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2007 Share Share Shares to Other Fair Retained Capital Premium be issued Reserve Value Earnings Total £ £ £ £ £ £ £ At 1 October 2005 600,000 957,541 - 815 - (548,150) 1,010,206Loss for the year - - - - - (613,591) (613,591) Recognised directly inequity Share issue 2,676,831 - - - (417,221) - 2,259,610Shares to be issued aspart of acquisition - - 787,500 - - - 787,500Premium on share issue - 335,669 - - - - 335,669Expenses incurredon share issue - (432,393) - - - - (432,393)Share-based payments - - - 19,213 - - 19,213 Net changedirectly in equity 2,676,831 (96,724) 787,500 19,213 (417,221) - 2,969,599 Total movements 2,676,831 (96,724) 787,500 19,213 (417,221) (613,591) 2,356,008 Equity at 30 September 2006 3,276,831 860,817 787,500 20,028 (417,221) (1,161,741) 3,366,214 At 1 October 2006 3,276,831 860,817 787,500 20,028 (417,221) (1,161,741) 3,366,214Loss for the year - - - - - (3,005,377) (3,005,377) Recognised directly inequity Share issue 1,530,849 - - - (646,909) - 883,940Shares issued as partof acquisition - - (787,500) - - - (787,500)Premium on share issue - 2,438,401 - - - - 2,438,401Share based payments - - - 8,272 - - 8,272Lapse of share options - - - (11,765) - - (11,765)Expenses incurredon share issue (91,625) (91,625) Net change directlyin equity 1,530,849 2,346,776 (787,500) (3,484) (646,909) - 2,439,732 Total movements 1,530,849 2,346,776 (787,500) (3,484) (646,909) (3,005,377) (565,645) Equity at 30 September 2007 4,807,680 3,207,593 - 16,544 (1,064,130) (4,167,118) 2,800,569 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 2007 2006 £ £Cash flows from operating activitiesOperating loss (including discontinued operations) (2,491,961) (589,222)Adjustments for:Depreciation 93,778 49,596Amortisation 65,741 -Impairment of goodwill 994,110 -Release of negative goodwill (9,557) -Other non-cash items (3,484) 19,213Payment of corporation tax (8,712) -Decrease/(increase) in inventories 11,228 (16,639)Decrease/(increase) in trade and other receivables 331,844 (1,362,845)Increase in trade payables, accruals and othercreditors 70,872 1,099,760 Net cash outflow from operating activities (946,141) (800,137) Cash flows from investing activitiesPurchase of property, plant and equipment (135,220) (56,573)Sale of property, plant and equipment - 474Acquisition of subsidiaries, net of cash 25,292 (2,412,993)acquired Net cash used in investing activities (109,928) (2,469,092) Cash flows from financing activitiesInterest paid (net) (62,195) (20,556)Issue of shares 1,380,000 3,012,500Receipt of bank finance - 84,215Repayment of bank borrowing (28,716) (32,612)Repayment of directors' and shareholder loans - (40,000)Former subsidiary director's loan notes lessrepayments (50,000) 50,000Receipt of finance leases less repayments 34,695 9,547Expenses paid in connection with share issues (91,625) (432,393) Net cash from financing activities 1,182,159 2,630,701 Net (decrease)/increase in cash 126,090 (638,538)Cash and cash equivalents at beginning of period (475,547) 162,991 Cash and cash equivalents at end of period (349,457) (475,547) Cash and cash equivalents comprise:Cash and cash equivalents 157,361 1,075Bank overdrafts (506,818) (476,622) (349,457) (475,547) Note:The report and accounts of the company for the year ended 30 September 2007 willbe despatched to shareholders on 31 March 2008 and will be available from thatdate to be viewed on the company's website at www.glengroup.co.uk. 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