31st May 2007 07:02
Company Health Group PLC31 May 2007 Embargoed until: 07.00, 31 May 2007 COMPANY HEALTH GROUP PLC ("The Group") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Company Health Group plc (AIM: CHT), an established provider of healthcareservices including occupational health, ergonomics, recruitment, physiotherapyand medical evidence collection and testing for financial service companiestoday announces preliminary results for the year ended 31 December 2006. Highlights: o First full year results since Admission to AIM o Reported sales up to £4.4 million o Profitability maintained (following conversion to IFRS) o Rationalisation and restructure of occupational health subsidiary andrelocation to Team Valley Industrial Estate, Gateshead o Successful acquisition of Cheviot Artus - recruitment agency and occupationalhealth provider o The first four months of 2007 are showing significant improvement over theequivalent period in 2006 •Sales up 75% to £2.5 million •EBITDA up 184% to £125,000 Commenting on the results Ralph Gough, Chairman and Chief Executive, said: "Wehave achieved a satisfying mix of organic growth within the Group as well asexpansion via the acquisition of a complementary and earnings enhancingoccupational health provider and recruitment business. He added: "There is positive evidence to show that in both the public andprivate sectors real weight is being put behind the Government and the Health &Safety Executive's commitment to improve the workplace environment. In essenceit is recognition of the fact that a healthy and engaged workforce makes goodbusiness sense. It is therefore in everyone's interest to provide properoccupational health care and the right workplace environment. This developmentcan only help our businesses to succeed as the demand for our services continuesto grow. "As a Group we continue to seek out attractive acquisition targets that willcomplement our service offering and add to our sustained profitability, whilstalso furthering our geographic reach. We have already proven our ability todeliver on our acquisition strategy and we will seek to maintain the momentumachieved thus far." For further information please contact: Ralph Gough, Chairman and Chief Executive Simon Hudson / Clemmie CarrCompany Health Group Tavistock CommunicationsTel: 020 7553 8820 Tel: 020 7920 3150 Jim McGeeverH B CorporateTel: 020 7510 8600 CHAIRMAN'S STATEMENT I am pleased to report our final results to shareholders after a productive yearfor Company Health Group ("CHT"). During our second financial period as a publiccompany - and the first full 12 months - we have been delivering on our statedstrategy at the time of Admission to AIM. This strategy was to build ourexisting healthcare businesses and to make selective acquisitions to achievecritical mass and national presence in our chosen areas of activity. We have achieved a mix of both organic growth within the Group as well asexpansion via the acquisition of a complementary and earnings enhancingoccupational health provider and recruitment business. FINANCIAL OVERVIEW The Group had a total turnover of £4.4 million (eighteen month period ended 31December 2005 - £2.7 million). Gross profit was £2.0 million (period ended 31December 2005 - £1.3 million). Profit on ordinary activities before taxation was£120,518 (period ended 31 December 2005 - £152,280). Retained profit was£121,447 (period ended 31 December 2005 - £128,031) which equates to a basicprofit of 0.28 pence per share (period ended 31st December 2005 - 0.62 pence).Note 2 contains a more detailed breakdown of the contribution of the operatingsubsidiaries in terms of turnover and profit. The Group has adopted the new IFRS reporting standard and the comparative 2005figures have therefore been restated on the same basis. The tax charge for 2006 is a net credit due to an overprovision for 2005. Net Assets rose to £4.2 million from £3.8 million at the previous year end.The Group's bank facilities were renewed in February 2007 comprising a loan of£375,000 and an overdraft facility of £350,000. The Group also inherited aninvoice discounting facility from its acquisition in December 2006 which had abalance at the year end of £206,000. In April 2007, a loan note was issued for£300,000 to provide additional working capital for the Group, redeemable inDecember 2007. The acquisition consideration included an amount of £600,130 which was satisfiedby the issue in April 2007 of a loan note which is redeemable in October 2007.Under the heading of goodwill the accounts include an estimate of the furtherconsideration in respect of the earn-out payment due in the second quarter of2008. During the year in accordance with the agreement made at the time of theacquisition of the DTC Group plc a further 9,586,971 shares were issued to theDTC shareholders in settlement of the earn-out. During 2007, it is the Directors' intention to raise funds through the issue ofboth long - term convertible debt and equity, the proceeds of which will be usedto discharge deferred acquisition consideration and provide further workingcapital. Indicative offers of additional short - term facilities have beenreceived and the Board is continuing the negotiations in order to select themost appropriate arrangements for the Group. The Board is confident of securingthe additional funding shortly. DIVIDEND Although the Board has adopted a progressive dividend policy, at the currenttime the Directors are not recommending a dividend. The Group is still in theinitial stages of its development and has an active acquisition and growthstrategy, which at the moment precludes the recommendation and payment ofdividends. OPERATING REVIEW The Group is divided into three complementary areas of business: occupationalhealth, physiotherapy and ergonomic services, and medical evidence collectionfor the life insurance industry. Within the year all three made good progress -new contracts were won and we witnessed increased demand from existing clients,contributing to the collective growth in revenue during the period. It isparticularly pleasing to report that Diagnostic Technologies Corporation("DTC"), our medical evidence company, achieved a 23% increase over the previousperiod in both revenues and profits and the trend continues in the current year. In September 2006 we announced that our occupational health business, CompanyHealth ("CHL"), had moved offices and relocated its North East division to aflagship office in Team Valley (Gateshead's largest trading estate). The growthin CHL's activities made it necessary for us to seek larger offices with furtherroom for expansion and a greater number of consulting rooms for occupationalhealth rehabilitation and related advice services. Just south of Newcastle, Team Valley is a very extensive retail park of largeregional significance which continues to develop at pace. We anticipate that itwill provide potential for CHL to gain new customers from neighbouringbusinesses on the site as CHL is the only occupational health provider in thepark. In addition to our expansion and the opening of our new office in the North wealso made our most important acquisition to date in 2006. In December weacquired Cheviot Artus Limited ("CA"). This acquisition adds substantial valueto our occupational health operations and is discussed further underOccupational Health below. During the year we achieved significant new contract wins to provideoccupational health and physiotherapy / rehabilitation services to a number ofblue chip clients. These include investment bank Morgan Stanley, and a globalpharmaceutical company. In addition, we successfully won a contract withJobcentre Plus, the agency of the Department for Work and Pensions that assistspeople of working age from welfare into work, and helps employers to fill theirvacancies. Our subsidiary Milligan & Hill ("M&H") has been selected to provideergonomic assessments in both the London and South East regions as part ofJobcentre's Access to Work initiative. This contract is particularly significantfor us as it extends our geographical reach further into the South of England.Finally, in a three-year contract starting from October 2006 CHL was appointedby the National Probation Service ("NPS") to provide occupational healthservices to the 650 staff in the Lancashire branch of the NPS. OCCUPATIONAL HEALTH CHL our occupational health business has continued to develop its establishedposition in the marketplace this year. As the demand for the provision ofoccupational health services to employees continues to grow, so CHL has seenreferrals and opportunities to tender for contracts increase. We intend to grow this, our core area of business not only through the organicdevelopment of our customer base and contract wins but also through acquisition.In the last quarter of the year CHT acquired Cheviot Artus Ltd ("CA"). CA is theholding company for two businesses, one Cheviot Artus (Skipton)("CAS"),providing occupational health services, and the other Cheviot Recruitment ("CR")an occupational health recruitment business. CR supplies qualified andexperienced occupational health nurses and physicians as well as safety andenvironmental advisers to a broad client base. The Cheviot Group is profitableand in the year to 31 August 2006 reported operating profits of £11,337 onrevenues of £3,590,506. This acquisition complements our core occupational health activity, providesadditional geographic coverage and access to a diverse and comprehensive list ofcustomers. The synergistic benefits of this acquisition are clear. Therecruitment business will enable CHL to source qualified healthcareprofessionals for the business' own use and the access to a fund of healthcarespecialists will aid the tender process for national contracts as we will beable to source personnel "in-house" thus reducing our recruitment cost base. PHYSIOTHERAPY, ERGONOMICS AND SPORTS INJURY This year saw the successful integration of last year's acquisition, M&H. Thiscompany provides a range of physiotherapy and ergonomics services in its clinicin the City of London as well as providing an "in house" service to some of itsclients. It recently appointed Lindsay Flower as its new Director of ClinicalServices. Significant numbers of people are out of work due to a health condition ordisability - around 7.5% of the working age population. The numbers claimingincapacity benefit have trebled in the last twenty years from 700,000 to 2.4million. The government now pays out £13 billion a year on such benefits. The Department of Health is doing all it can to encourage best practice in theworkplace for employees to combat the 40 million working days that are lost eachyear due to occupational ill health and injury. M&H markets a software programme called "Ergopro" designed to highlightworkplace inefficiencies and problems and to demonstrate ways in which job andenvironmental design can enhance health and prevent potential health problems.Back injuries may be caused by badly designed or positioned desks and chairs,similarly eye strain may arise from the incorrect placement of screens andkeyboards. M&H can offer individual workstation assessments, training for thesafe use of office equipment and full ergonomic consultancy. Ergopro is designedto create the right workplace environment for the individual and consequentlypromote health and productivity. COLLECTION OF MEDICAL INFORMATION FOR THE LIFE ASSURANCE MARKET CHT's subsidiary DTC collects medical evidence for life insurance companies. Itis estimated that life insurance companies are currently spending around £100million a year on evidence collection. In 2004 DTC established a new arm to theevidence collection business, a paramedic examinations service. The year saw asignificant increase in revenue generated from this service compared to the sameperiod in 2005. This service is witnessing a healthy growth in demand and coupledwith the use of more electronic data capture, the service offered to clients isincreasingly more sophisticated. CURRENT TRADING AND OUTLOOK The Group has consolidated during the year and all indications for 2007 are thatwe are continuing to increase our activity in all divisions of the business. Theacquisition of Cheviot made at the end of the year will significantly enhanceour service offering and will substantially increase revenues and profits for2007. Cheviot is already making good progress demonstrated by the increase inrevenues in the first four months of 2007. In addition, we now have the abilityto cross sell all our occupational health services using CR which has a broadernational reach than our existing databases. As a Group we continue to seek out attractive acquisition targets that willcomplement our service offering and add to our sustained profitability, whilstalso furthering our geographic coverage. We have already proven our ability todeliver on our acquisition strategy and we will seek to maintain the momentumachieved thus far. I am pleased to report that so far this year we have three significant contractwins in the occupational health and medical collection areas of the Group. Inthis financial year we will be providing occupational health services to Walesand West Utilities. We will also be providing life style checks to the staff ofKent County Council to reduce sickness absence and improve the health and wellbeing of their employees. Lastly, a contract with Imperial College London hasbeen signed as part of a research project they are conducting in conjunctionwith the Cheshire Police. All three contract wins provide evidence of ourcontinuing organic growth and the expansion of our customer base throughout theUK. I would like to take this opportunity to thank all our existing shareholders fortheir support during the period, as well as welcome new shareholders to theGroup. I would also like to thank all Company Health Group employees for theirhard work in 2006 and their continued contribution to the Group. RALPH GOUGHChairman 30 May 2007 Company Health Group plc Consolidated Profit and Loss Accountfor the year ended 31 December 2006 Year ended eriod ended 31 December 31 December 2006 2005 as restated £ £--------------------------------------------------------------------------TURNOVER 4,350,357 2,685,980Cost of sales (2,331,130) (1,400,759)--------------------------------------------------------------------------Gross profit 2,019,227 1,285,221Operating expenses (1,827,645) (1,123,396)-------------------------------------------------------------------------- Operating profit before goodwill amortisation 191,582 161,825Goodwill amortisation (13,043) (7,588)--------------------------------------------------------------------------Operating profit 178,539 154,237Interest receivable 657 23,316Interest payable (58,678) (25,273)--------------------------------------------------------------------------Profit on ordinary activities before taxation 120,518 152,280Taxation on profit on ordinary activities 929 (24,249)--------------------------------------------------------------------------Retained profit on ordinary activities after taxation 121,447 128,031 --------------------------------------------------------------------------Basic earnings per share 0.28p 0.62p--------------------------------------------------------------------------Diluted earnings per share 0.24p 0.49p-------------------------------------------------------------------------- The results during the year to 31 December 2006 were derived from continuingoperations. In the eighteen-month period to 31 December 2005 the results werederived from acquisitions. The Group has no recognised gains or losses other than the profit for thefinancial period. Company Health Group plc Consolidated Balance Sheetat 31 December 2006 at 31 December at 31 December 2006 2005 as restated £ £ £ £--------------------------------------------------------------------------------------FIXED ASSETSIntangible assets 6,968,325 3,990,734Tangible assets 246,757 154,083-------------------------------------------------------------------------------------- 7,215,082 4,144,817--------------------------------------------------------------------------------------CURRENT ASSETSStocks 124,613 44,418Debtors 1,193,047 756,478Cash at bank and in hand 355,989 723,740-------------------------------------------------------------------------------------- 1,673,649 1,524,636CREDITORS, AMOUNTS FALLING DUE WITHIN ONE YEAR (3,097,862) (1,520,781)--------------------------------------------------------------------------------------NET CURRENT (LIABILITIES)/ASSETS (1,424,213) 3,855-------------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 5,790,869 4,148,672CREDITORS, AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (1,573,478) (273,195)-------------------------------------------------------------------------------------- 4,217,391 3,875,477-------------------------------------------------------------------------------------- CAPITAL AND RESERVESCalled up share capital 467,142 371,272Share premium account 2,567,369 1,944,216Shares to be issued 434,217 932,773Profit and loss account 748,663 627,216-------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 4,217,391 3,875,477-------------------------------------------------------------------------------------- These financial statements were approved by the Board on 25 May 2007 and signedon their behalf by: RE GOUGHGA GONZALEZ Directors Company Health Group plc Balance Sheetat 31 December 2006 at 31 December at 31 December 2006 2005 s restated £ £ £ £--------------------------------------------------------------------------------------FIXED ASSETSIntangible assets 16,202 -Tangible assets 74,938 747Investments 6,846,019 4,073,996-------------------------------------------------------------------------------------- 6,937,159 4,074,743CURRENT ASSETSDebtors 235,485 105,078Cash at bank and in hand 177,161 319,722-------------------------------------------------------------------------------------- 412,646 424,800 CREDITORS, AMOUNTS FALLING DUE WITHIN ONE YEAR (2,027,348) (456,886)--------------------------------------------------------------------------------------NET CURRENT LIABILITIES (1,614,702) (32,086)--------------------------------------------------------------------------------------TOTAL ASSETS LESS CURRENT LIABILITIES 5,322,457 4,042,657 CREDITORS, AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (1,556,423) (237,000) -------------------------------------------------------------------------------------- 3,766,034 3,805,657-------------------------------------------------------------------------------------- CAPITAL AND RESERVESCalled up share capital 467,142 371,272Share premium account 2,567,369 1,944,216Shares to be issued 434,217 932,773Profit and loss account 297,306 557,396-------------------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 3,766,034 3,805,657-------------------------------------------------------------------------------------- These financial statements were approved by the Board on 25 May 2007 and signedon their behalf by: RE GOUGHGA GONZALEZ Directors Company Health Group plc Consolidated Cash Flow Statementfor the period ended 31 December 2006 Year ended Period ended 31 December 31 December 2006 2005 as restated £ £ £ £ CASH GENERATED FROM OPERATING ACTIVITIES 481,427 (53,951) Interest paid (50,874) (21,802) Corporation tax paid (34,288) - ----------------------------------------------------------------------------------- (85,162) (21,802) NET CASH FLOW FROM OPERATING ACTIVITIES 396,265 (75,753) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangible fixed assets (24,212) - Purchase of tangible fixed assets (95,605) (27,023) Acquisition of subsidiary undertakings (151,666) - Net debt acquired with subsidiary undertakings (422,789) - Interest received 657 23,316 ----------------------------------------------------------------------------------Net cash outflow from investing activities (693,615) (3,707)---------------------------------------------------------------------------------- (297,350) (79,460) ----------------------------------------------------------------------------------CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (358,753) (18,392) New loan finance received - (375,000) Payment of finance lease obligations (36,254) (15,447) ----------------------------------------------------------------------------------Net cash outflow from financing activities (395,007) (408,839)----------------------------------------------------------------------------------NET DECREASE IN CASH AND CASH EQUIVALENTS (692,357) (488,299)----------------------------------------------------------------------------------CASH AND CASH EQUIVALENTS AT 1 JANUARY 2006 115,839 604,138-----------------------------------------------------------------------------CASH AND CASH EQUIVALENTS AT 31 DECEMBER 2006 (576,518) 115,839 --------------------------------------------------------------------+--------- CASH AND CASH EQUIVALENTS At 1 Other At 31 January Non Cash December 2006 Cash flow Changes 2006 £ £ £ £Cash in hand and at Bank 723,740 (367,751) - 355,989Overdrafts (607,901) (118,680) - (726,581)Debt finance - (205,926) - (205,926)-----------------------------------------------------------------------------------Cash and cash equivalents at 31 December 2006 115,839 (692,357) - (576,518)----------------------------------------------------------------------------------- Company Health Group plcConsolidated Statement of Changes in Shareholders' Equity Profit and Share Share Shares to Capital Loss TOTAL Capital Premium be issued Redemption Account EQUITY £ £ £ £ £ £------------------------------------------------------------------------------------------------BALANCES AT 1 JULY 2004 1,804,018 10,938,957 - 8,788 (12,180,417) 571,346 IFRS adjustment relating to amortisation charge onpurchased goodwill - - - - 97,283 97,283Profit for the period from the profit and loss account - - - - 30,748 30,748------------------------------------------------------------------------------------------------ Total income and expense for the period - - - - 128,031 128,031 Issue of shares 299,111 1,944,216 - - - 2,243,327Capital reorganisation (1,731,857) (10,938,957) - (8,788) 12,679,602 -Shares to be issued on acquisition ofsubsidiaries - - 932,773 - - 932,773-------------------------------------------------------------------------------------------------BALANCES AT 31 DECEMBER 2005 371,272 1,944,216 932,773 - 627,216 3,875,477Profit for the year from the profit and loss account - - - - 121,447 121,447-------------------------------------------------------------------------------------------------Total income and expense for the period - - - - 121,447 121,447Issue of completion shares on acquisition ofsubsidiary 95,870 623,153 (719,023) - - -Shares to be issued on acquisition of subsidiary - - 220,467 - - 220,467--------------------------------------------------------------------------------------------------BALANCES AT 31 DECEMBER 2006 467,142 2,567,369 434,217 - 748,663 4,217,391------------------------------------------------------------------------------------------------- Company Statement of Changes in Shareholders' Equity Profit and Share Share Shares to Capital Loss TOTAL Capital Premium be issued Redemption Account EQUITY £ £ £ £ £ £--------------------------------------------------------------------------------------------------BALANCES AT 1 JULY 2004 1,804,018 10,938,957 - 8,788 (12,180,417) 571,346 Profit for the period from the profit and lossaccount - - - - 58,211 58,211--------------------------------------------------------------------------------------------------Total income and expense for the period - - - - 58,211 58,211Issue of shares 299,111 1,944,216 - - - 2,243,327Capital reorganisation (1,731,857) (10,938,957) - (8,788) 12,679,602 -Shares to be issued on acquisition ofsubsidiaries - - 932,773 - - 932,773---------------------------------------------------------------------------------------------------BALANCES AT 31 DECEMBER 2005 371,272 1,944,216 932,773 - 557,396 3,805,657Loss for the year from theprofit and loss account - - - - (260,090) (260,090)---------------------------------------------------------------------------------------------------Total income and expense for the period - - - - (260,090) (260,090)Issue of completion shares on acquisition ofsubsidiary 95,870 623,153 (719,023) - - -Shares to be issued on acquisition of subsidiary - - 220,467 - - 220,467---------------------------------------------------------------------------------------------------BALANCES AT 31 DECEMBER 2006 467,142 2,567,369 434,217 - 297,306 3,766,034--------------------------------------------------------------------------------------------------- NOTES TO THE ACCOUNTSfor the period ended 31 December 2006 1. PRINCIPAL ACCOUNTING POLICIES (A) BASIS OF PREPARATION The financial information set out in this document does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 December 2006 will be delivered to the Registrarof Companies and made available to all shareholders shortly. No audit opinionhas yet been given on these accounts. The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards including standards andinterpretations issued by the International Accounting Standards Board. Theyhave been prepared using the historical cost convention. The preparation of the financial statements requires management to makeestimates and assumptions that affect the reported amounts of revenues,expenses, assets and liabilities, and the disclosure of contingent liabilitiesat the date of the financial statements. If in the future such estimates andassumptions which are based on management's best judgement at the date of thefinancial statements, deviate from the actual circumstances, the originalestimates and assumptions will be modified as appropriate in the year in whichthe circumstances change. Where necessary, the comparatives have beenreclassified or extended from the previously reported results to take intoaccount presentational changes. The Directors are in the process of negotiating additional financing as set outin the Financial Overview section of the Chairman's Statement. The Directors areconfident that this funding will be forthcoming, and have prepared cash flowprojections which indicate that the company and Group will be able to meet theirliabilities as they fall due; it is therefore appropriate that the results havebeen prepared on a going concern basis. The financial statements do not includeany adjustments that would be needed if the going concern basis is inappropriate. (B) BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of theCompany and its subsidiaries made up to 31 December 2006. The acquisition methodof accounting has been adopted. Under this method, the results of subsidiaryundertakings acquired or disposed of in the period are included in theconsolidated profit and loss account from the date of acquisition and up to thedate of disposal. The acquisition in the year took place on 7 December 2006 but the results for the period to 31 December are not material and have not been consolidated. (C) TURNOVER Turnover represents the value of goods and services supplied by the Group in theUK during the financial year, excluding value added tax. Income relating to theprovision of services is recognised only when the services have been delivered,quantified and it is certain that the economic benefit will flow to the company.The benefit of the sale of goods is recognised when the risks and rewards ofownership of the goods have passed to the buyer. (D) FIXED ASSETS AND DEPRECIATION Tangible fixed assets are stated at cost less accumulated depreciation.Depreciation is being provided so as to write off the assets over theirestimated useful lives as follows: Leasehold improvements - over 10 yearsMedical and office equipment, fixtures and fittings - between 10% straight line and 25% per annum on a reducing balance basis of costComputers - between 20% straight line and 33% per annum straight line (E) GOODWILL Goodwill arising from the acquisition of subsidiary undertakings, representingexcess of purchase consideration over the fair value of net assets acquired, isrecorded as an intangible asset. Goodwill is reviewed annually for impairment.Any impairment identified as a result of the review is charged in the profit andloss account. At transition date the net value of purchased goodwill and cumulativeamortisation was adopted as the fair value on that date. The adoption of IFRSshas lead to an adjustment of £97,283 in the comparatives as shown in note 6. (F) INTANGIBLE FIXED ASSETS Intangible fixed assets are stated at cost less any impairment. When therecoverable amount of an asset, being the higher of its net selling price andits value in use, is less than its carrying amount, then the carrying amount isreduced to its recoverable value. This reduction is reported in the profit andloss account as an impairment loss. Value in use is calculated using estimatedcash flows, generally over a ten-year period. These are discounted using anappropriate long-term interest rate. When an impairment arises, the useful lifeof the asset in question is reviewed and, if necessary, the future depreciation/amortisation charge is accelerated. Development costs relate to directly attributable costs incurred in thedevelopment of the paramedical examination business and a national physiotherapynetwork. The paramedical costs are amortised at a rate of £1 per completedparamedical examination case and in due course the physiotherapy network costswill be amortised at a rate of £2 per session. 2. SEGMENTAL INFORMATIONPeriod ended 31 December 2006 Turnover Operating Net assets profit £ £ £----------------------------------------------------------------------------Insurance medicals and related services 1,675,080 283,791 948,921Occupational health services 1,769,437 (27,634) 253,942Physiotherapy and ergonomic services 905,840 135,376 353,969---------------------------------------------------------------------------- 4,350,357 391,533 1,556,832Central (costs)/unallocated assets (212,994) 2,660,559---------------------------------------------------------------------------- 4,350,357 178,539 4,217,391---------------------------------------------------------------------------- 3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2006 2005 £ restated £----------------------------------------------------------------------Profit on ordinary activities before taxation isstated after charging:Amortisation of intangible assets 13,043 7,588Depreciation - owned 44,111 21,408Depreciation - leased - 7,008Auditors' remuneration - audit fees 29,770 22,500 - non-audit fees (taxation) 7,000 2,728Operating lease costs - property 81,137 37,381 - office equipment 4,310 13,746---------------------------------------------------------------------- 4. EARNINGS PER SHARE The calculation of basic earnings per share is based on the profit for theperiod of £121,447 (2005 - restated profit of £128,031) divided by the weightedaverage of ordinary shares in issue for the period ended 31 December 2006 of43,010,605 (2005 - 20,685,409). The calculation of diluted earnings per share is based on the profit for theperiod of £121,447 (2005 - restated profit of £128,031) divided by the dilutedweighted average of ordinary shares at the period ended 31 December 2006 of51,434,859 (2005 - 26,249,370). 5. RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATINGACTIVITIES 2006 2005 restated £ £---------------------------------------------------------------------Operating profit 178,539 154,237Depreciation 44,111 28,416Amortisation of intangibles 13,043 7,588(Increase)/decrease in stocks (31,128) 9,685(Increase)/decrease in debtors (36,712) (134,315)Increase/(decrease) in creditors 313,574 119,562)--------------------------------------------------------------------- 481,427 (53,951)--------------------------------------------------------------------- 6. EXPLANATION OF TRANSITION TO IFRS These are the Group's first consolidated financial statements prepared inaccordance with IFRSs. The accounting policies in note 1 have been applied inpreparing the consolidated financial statements for the year ended 31 December2006, the comparative information for the period ended 31 December 2005 and thepreparation of an opening IFRS Balance Sheet at 1 July 2004, the Group's date oftransition to IFRS. In preparing its opening IFRS balance sheet and comparative information for theperiod to 31 December 2005, the Group has adjusted amounts reported previouslyin financial statements prepared in accordance with UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's financial position and financial performance is set out in the followingtables. There have been no changes to the Group's cash position as a result ofthe transition. Company Health Group plcHow the transition from UK GAAP to IFRS has affected the Group and the Companyfor the period ended 31 December 2005 Group CompanyEquity as at: 31 1 31 1 December July December July 2005 2004 2005 2004 £ £ £ £---------------------------------------------------------------------------------TOTAL EQUITY REPORTED UNDER UK GAAP 3,778,194 571,346 3,805,657 571,346Adjustment of amortisation charge on purchased goodwill 97,283 - - ----------------------------------------------------------------------------------TOTAL EQUITY REPORTED UNDER IFRS 3,875,477 571,346 3,805,657 571,346--------------------------------------------------------------------------------- Group Company 31 1 December July 2005 2004Results for the period: £ £-----------------------------------------------------------------------------------PROFIT/(LOSS) FOR THE PERIOD REPORTED UNDER UK GAAP 30,748 (173,870)Adjustment of amortisation charge on purchased goodwill 97,283 ------------------------------------------------------------------------------------PROFIT/(LOSS) REPORTED UNDER IFRS 128,031 (173,870)----------------------------------------------------------------------------------- Effect on Group's earnings per share: Under Effect of IFRS UK GAAP transition to IFRS--------------------------------------------------------------------------Basic earnings per share 0.15p 0.47p 0.62pDiluted earnings per share 0.12p 0.37p 0.49p-------------------------------------------------------------------------- 7. DETAILS OF ACQUISITIONCheviot Artus Ltd (acquired 7 December 2006) Incorporating Cheviot Recruitment Ltd and CheviotArtus (Skipton) plc---------------------------------------------------------------NET ASSETS ACQUIRED:Intangible fixed assets 36,397Tangible fixed assets 41,180Work in progress 49,067Trade debtors 526,426Prepayments and other debtors 41,886Cash at bank and in hand (10,687)Trade creditors (255,741)Invoice discounting creditor (205,926)Directors loan accounts (270,106)Accruals and other creditors (42,201)Corporation tax (9,711)Other taxation and social security (58,586)---------------------------------------------------------------Net assets (158,002)Goodwill 2,424,737--------------------------------------------------------------- 2,266,735--------------------------------------------------------------- SATISFIED BY:Cash payable 99,870Loan note issued in April 2007 600,130Deferred consideration payable on earn-out period to January 2008 (estimate) 1,479,423-------------------------------------------------------------- 2,179,423 Costs of acquisition 87,312-------------------------------------------------------------- 2,266,735-------------------------------------------------------------- PERIOD FROM 1 SEPTEMBER 2006 TO DECEMBER 2006:Turnover 1,151,698Operating profit 13,190Profit before tax 744Taxation ----------------------------------------------------------------YEAR ENDED 31 AUGUST 2006Loss after tax (58,078)--------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CHT.L