30th Nov 2006 07:03
Redstone PLC30 November 2006 30 November 2006 REDSTONE PLC ("Redstone" or "the Group") Unaudited Interim Results for the six months ended 30 September 2006 Redstone (AIM:RED.L), a leading provider of IT & Communications solutions in theUK and Ireland, today announces its financial results for the six months ended30 September 2006. FINANCIAL HIGHLIGHTS •Revenue up by 42% to £47.4m** •Gross Profit up by 43% to £17.5m** •Gross Profit percentage up to 36.8% from 36.4%** •EBITDA profit of £2.9m* •Profit after tax for the period of £1.0m (second profitable half in succession) •Net cash generated from operating activities of £1.8m £€30m debt facility agreed with Barclays Bank plc ("Barclays") •Announcement of recommended offer for IDN Telecom plc ("IDN Telecom") * before IFRS 2 charges and holiday pay accrual** compared with six months ended 30 September 2005 OPERATIONAL HIGHLIGHTS •Successful acquisitions of Symphony Telecom Holdings plc and the Tolerant group of companies •Integration of the two businesses is progressing ahead of plan and will be materially completed by the end of December 2006 •Recommended offer for IDN Telecom which will add critical mass to the fixed line business and bring in excess of 2,000 additional B2B customers •Significant customer wins across divisions with organisations such as Xansa and examination boards from England, Northern Ireland and Wales •Customer retention in Telecoms good Martin Balaam, Chief Executive Officer, Redstone, commented, "Following the transformation of the Group last year, I am delighted to reportthat the Group has continued to build on the sound fundamentals of generatingprofits, growth and cash. We believe that the outlook for the Group is positiveand the Board remains committed to delivering growth both organically andacquisitively in the developing and consolidating telecoms and IT sector." ENQUIRIES:Redstone plc Tel. +44 (0)845 200 2200Martin Balaam, Chief Executive OfficerTim Perks, Chief Financial Officer ICIS Limited Tel. +44 (0)20 7651 8688Tom Moriarty or +44 (0)7769 937 626Paul Youens Chief Executive's Statement I am very pleased to report that Redstone has continued to make significantprogress over the six months ended 30 September 2006 and has become one of theleading IT & Communications solution providers for B2B customers within the UKand Ireland. Financial Highlights Solid performance has been achieved across the Group, including the recentlyacquired companies. Revenue increased by 42% to £47.4m (H1 FY06: £33.5m). GrossProfit increased by 43% to £17.5m (H1 FY06: £12.2m), with the gross profitpercentage increasing to 36.8% from 36.4% in the comparable period last year. Asa result of continued cost control EBITDA increased to £2.9m* for the periodcompared with a £2.0m loss for the corresponding period last year, and the Groupwas able to deliver a profit for the period of £1.0m. Net cash generated fromoperating activities was £1.8m, underpinning a strong balance sheet. Thefinancial performance has facilitated the Group securing a new £30m facilitywith Barclays. * before IFRS 2 charges and holiday pay accrual Operational Highlights Strategic acquisitions During the period Redstone successfully acquired Symphony Telecom Holdings plcand the Tolerant group of companies and can report that the integration of thetwo businesses is progressing ahead of plan and will be materially completed bythe end of December 2006. The acquisitions of Symphony and Tolerant were key milestones in Redstone'sgrowth strategy and, as well as approximately 11,000 additional B2B customers,brought with them three strategic elements: 1. A mobile business that is a service provider for both O2 and Vodafone in the UK, combined with a mobile distribution business servicing all five major mobile network operators in the UK: 3, O2, Orange, T-Mobile and Vodafone 2. A fixed line telecoms business which complements the existing Redstone fixed line minutes business 3. Additional scale to the Redstone Managed Solution business through the acquisition of Tolerant The recommended offer for IDN Telecom announced separately today, will add notonly additional critical mass to the fixed line Redstone Telecom business, butwill also bring with it in excess of 2,000 B2B customers and a strategicalliance with the Federation of Small Businesses. Redstone will continue to seekacquisition opportunities that add scale and skills and extend the customerbase. The Directors believe this to be in the best interests of shareholders asa whole. Business growth strategy and market positioning The strategic acquisitions to date, including the recommended offer for IDNTelecom, are key parts of a growth strategy that is designed to take fulladvantage of the developments within the Group's target market. Of particularnote is the requirement for companies to IP-enable their telecoms networks.Given its combined competencies in both telecoms and IT services, Redstone isuniquely well positioned to enable its customers to make this transition. Thereis also a strong market trend towards working with one IT and communicationssupplier. Redstone is well positioned to fulfil this requirement with its fivecore business units: Redstone Telecom provides high quality and reliable telephony network servicesto both the private and public sector, including inbound and outbound telephony,line rental, non geographic services, SMS and premium rate services. Redstone Mobile is a leading service provider for O2 and Vodafone and adistributor for all five major mobile network operators. Redstone Converged Solutions is a leading provider of converged IP solutions,with expertise in contact centres, voice and video, networks and security. Redstone Managed Solutions provides a comprehensive portfolio of infrastructureand internet services suitable for all businesses and public sectororganisations. Redstone Technology is a leading supplier of business critical servers,enterprise storage solutions, engineering support services and professionalservices and consultancy. Business development During the first half of the financial year Redstone continued to expand itscustomer base, both through customer wins and also through acquisitions.Converged Solutions secured a significant contract with Xansa to provide anend-to-end contact centre solution to the Northern Ireland Water Service. The Telecom division was selected to provide best-of-breed telecoms services toone of the country's largest contact call centres, Telecom Service CentresLimited. Managed Solutions further strengthened Redstone's position in theeducation sector and was awarded a three year contract with exam boards fromEngland, Wales and Northern Ireland for the secure transfer of candidates'results. In addition to winning new customers, Redstone has acquired a large number ofB2B customers from Symphony and Tolerant, and expects to gain further B2Bcustomers as a result of the recommended offer for IDN Telecom announced today.This will allow Redstone to build on its market position and provide anexcellent opportunity for the cross selling of services. It will also ensureRedstone has sufficient critical mass to be able to tender for some of the UK'slarger IT and communications projects. Capital Restructure The Company currently does not have any reserves available for distribution, andthis prevents the payment of a dividend, should the Board consider itappropriate. In order to address this situation, the Board is proposing areduction of the Company's share premium account which will increase the levelof its distributable reserves by an equivalent amount. The proposed reduction of the Company's share premium account requiresshareholder approval and confirmation by the Court before it can becomeeffective. The Company will be sending a Circular to shareholders in due courseconvening an extraordinary general meeting of shareholders for this purpose. Outlook The Directors believe that the outlook for the Group is positive and the Boardremains committed to delivering growth both organically and acquisitively in thedeveloping and consolidating telecoms and IT sector. Martin BalaamChief Executive30 November 2006 Consolidated Income Statement Six months Six months Year ended 30 ended 30 ended 31 September Septemeber March 2006 2005 2006 Note £000 £000 £000--------------------------------------------------------------------------------- Revenue 47,447 33,493 72,478 Cost of sales 3 (29,980) (21,286) (46,303)--------------------------------------------------------------------------------- Gross profit 17,467 12,207 26,175 Other operating income 239 210 568Selling and distribution costs (4,678) (8,026) (9,016)Administrative expenses (11,938) (23,767) (36,616)Restructuring costs - (4,062) (4,006)---------------------------------------------------------------------------------Operating profit/(loss)beforegoodwill impairment,amortisation 2,042 (2,802) (1,658)of intangibles and restructuringcosts Goodwill impairment - (16,078) (16,078)Amortisation of intangibles (952) (496) 1,153)Restructuring costs - (4,062) (4,006)--------------------------------------------------------------------------------- Operating profit/(loss) 1,090 (23,438) (22,895) Finance income 129 138 199Finance costs (371) (43) (221)--------------------------------------------------------------------------------- Profit/(loss) on ordinaryactivities before taxation 848 (23,343) (22,917) Tax on profit/(loss) onordinary activities 154 137 392--------------------------------------------------------------------------------- Profit/(loss) for the period(attributable to equityholders of the parent Company) 1,002 (23,206) (22,525)--------------------------------------------------------------------------------- Earnings per share Basic and diluted earningsper share 5 0.11p (3.49)p (3.22)p---------------------------------------------------------------------------------Non GAAP Measures Gross profit % (gross profitas a percentage of revenue) 36.8 36.4 36.1 EBITDA (earnings beforeinterest,tax, depreciation and amortisation) before goodwill 5 2,556 (2,189) (374)impairment and restructuringcosts Basic and diluted EBITDA pershare before goodwill impairment and restructuring costs 0.28p (0.33)p (0.05)p--------------------------------------------------------------------------------- Consolidated Statement of Changes in Equity Other reserves -------------------- Called up Share Share premium Merger Translation Retainede Total capital account reserve reserve earnings equity £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------At 1 April 2005 8,472 185,336 216 (170,313) 23,711Loss for the period (23,206) (23,206)Share-based payments 192 192Currency translationdifferences 40 40Shares issued 4,550 24,270 28,820Costs associatedwith share issue (1,507) (1,507)------------------------------------------------------------------------------------------------At 30 September 2005 13,022 208,099 216 40 (193,327) 28,050Profit for the period 681 681Share-based payments 274 274Currency translationdifferences 14 14Costs associatedwith share Issue 1 1------------------------------------------------------------------------------------------------At 1 April 2006 13,022 208,100 216 54 (192,372) 29,020Profit for the period 1,002 1,002Share-based payments 301 301Currency translationdifferences (155) (155)Shares issued 4,064 17,307 21,371Costs associatedwith share issue (360) (360)-------------------------------------------------------------------------------------------------At 30 September 2006 17,086 225,047 216 (101) (191,069) 51,179------------------------------------------------------------------------------------------------- Merger reserveThe merger reserve resulted from the acquisition of Redstone CommunicationsLimited (formerly Redstone Network Services Limited) and represents thedifference between the value of the shares acquired (nominal value plus relatedshare premium) and the nominal value of the shares issued. Translation reserveThe translation reserve is used to record exchange differences arising from thetranslation of the financial statements of foreign subsidiaries. Consolidated Balance Sheet 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000-------------------------------------------------------------------------------- AssetsNon-current assetsIntangible assets 63,649 35,207 32,828Property, plant and equipment 2,645 2,826 2,449Deferred tax asset 2,092 - 2,147Other non-current assets 639 581 545-------------------------------------------------------------------------------- 69,025 38,614 37,969-------------------------------------------------------------------------------- Current assetsInventories 862 938 241Trade and other receivables 20,661 13,848 15,490Cash and short term deposits 7,979 7,382 5,327-------------------------------------------------------------------------------- 29,502 22,168 21,058----------------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 98,527 60,782 59,027-------------------------------------------------------------------------------- Equity and liabilitiesEquityCalled up share capital 17,086 13,022 13,022Share premium account 225,047 208,099 208,100Other reserves 115 256 270Retained earnings (191,069) (193,327) (192,372)-------------------------------------------------------------------------------- 51,179 28,050 29,020-------------------------------------------------------------------------------- Current liabilitiesTrade and other payables 28,518 24,636 23,245Income tax payable 293 - 10Provisions 1,711 2,188 1,989-------------------------------------------------------------------------------- 30,522 26,824 25,244-------------------------------------------------------------------------------- Non-current liabilitiesTrade and other payables 182 - 197Provisions 1,139 2,680 1,492Loan notes 1,439 643 643Borrowings 9,755 - -Deferred tax liability 4,311 2,585 2,431-------------------------------------------------------------------------------- 16,826 5,908 4,763----------------------------------------------------------------------------------------------------------------------------------------------------------------Total equity and liabilities 98,527 60,782 59,027-------------------------------------------------------------------------------- Consolidated Cash Flow Statement Six months Six months Year ended 30 ended 30 ended 31 September September March 2006 2005 2006 Note £000 £000 £000-------------------------------------------------------------------------------- Cash flows from operatingactivitiesCash generated from 6 1,844 (4,089) (5,514)operationsIncome tax paid (4) (6) (91)--------------------------------------------------------------------------------Net cash flows from/(used in)operating activities 1,840 (4,095) (5,605)-------------------------------------------------------------------------------- Cash flows from investingactivitiesProceeds from sale ofproperty, plant and equipment - - 6Interest received 125 155 205Purchase of property, plantand equipment (342) (418) (726)Purchase of intangible assets (25) - (133)Acquisition of subsidiaries,net of cash acquired (19,879) (21,268) (21,442)--------------------------------------------------------------------------------Net cash flows used ininvesting activities (20,121) (21,531) (22,090)-------------------------------------------------------------------------------- Cash flows from financing activitiesProceeds from issue of shares 20,021 26,045 26,045Transaction costs of issuing shares (360) (1,507) (1,506)Proceeds from borrowings 5,000 - -Repayment of borrowings (3,416) - -Payment of finance leaseliabilities - (2) -Interest paid (287) (41) (60)--------------------------------------------------------------------------------Net cash flows from financingactivities 20,958 24,495 24,479-------------------------------------------------------------------------------- Net increase/(decrease) incash and cash equivalents 2,677 (1,131) (3,216)Effects of currency translation (25) - 30on cash and cash equivalentsCash and cash equivalents at1 April 5,327 8,513 8,513April --------------------------------------------------------------------------------Cash and cash equivalents at30September/31 March 7,979 7,382 5,327-------------------------------------------------------------------------------- Notes to the Results 1 Basis of preparation The interim financial information is unaudited but has been reviewed by theauditors, Ernst & Young LLP, and their report to Redstone plc is set out on page15. The interim report has been prepared in accordance with the accounting policiesand methods of computation set out in the 31 March 2006 annual financialstatements which were prepared under International Financial ReportingStandards. IAS 34 'Interim Financial Reporting' has not been applied to thisinterim financial information. The financial information contained in the interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985.Statutory accounts for the year ended 31 March 2006 have been filed with theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement made under Section 237(2) or Section 237(3) ofthe Companies Act 1985. The interim report was approved by the Board on 30 November 2006. 2 Segment reporting Primary reporting format - Business Segments (a) For the six months ended 30 September 2006 --------------------------------------------------------------------------------------------- Telecom Mobile Converged Managed Technology Central Total Telecom Solutions Solutions -------------------------------------------------------------------------------------------- £000 £000 £000 £000 £000 £000 £000 --------------------------------------------------------------------------------------------Revenue 16,743 8,197 13,822 4,283 4,402 - 47,447--------------------------------------------------------------------------------------------- Operatingcosts excludingshare-basedpayment transactions (14,685) (8,130) (14,018) (3,977) (4,011) (1,261) (46,082)Equity-settledshare basedpayments (16) - (98) (13) (15) (159) (301)Cash-settledshare-basedpayments - - - - - 26 26 --------------------------------------------------------------------------------------------Segment result 2,042 67 (294) 293 376 (1,394) 1,090--------------------------------------------------------------------------------------------- Net finance cost (242)Tax on profiton ordinaryactivities 154---------------------------------------------------------------------------------------------Profit for theperiod 1,002--------------------------------------------------------------------------------------------- Assets andliabilitiesSegment assets 29,580 14,703 25,117 10,670 10,392 5,973 96,435Unallocatedassets 2,092---------------------------------------------------------------------------------------------Total assets 98,527---------------------------------------------------------------------------------------------Segment liabilities 7,699 4,342 9,044 4,060 1,620 5,078 31,843Unallocatedliabilities 15,505--------------------------------------------------------------------------------------------- Total liabilities 47,348--------------------------------------------------------------------------------------------- Other segmentinformationCapital expenditureProperty,plant andequipment 52 4 61 79 37 109 342Property,plant andequipment - businesscombination 147 87 - 133 - - 367Intangibleasset - software - - - - - 25 25Intangible assetsacquired -business combination 16,103 11,343 - 4,302 - - 31,748----------------------------------------------------------------------------------------------Depreciation 78 10 75 238 15 98 514Amortisation 239 85 537 14 31 46 952--------------------------------------------------------------------------------------------- The new 'Mobile Telecom' division was created following the acquisition ofSymphony Telecom Holdings plc (note 4). 2 Segment reporting (b) For the six months ended 30 September 2005 Telecom Converged Managed Technology Central Total Solutions Solutions £000 £000 £000 £000 £000 £000-------------------------------------------------------------------------------- Revenue 14,065 14,814 2,033 2,581 - 33,493-------------------------------------------------------------------------------- Operating costsexcluding share-basedpayment transactions,goodwill impairment and restructuring costs (12,904) (18,118) (1,918) (2,418) (1,241) (36,599)Equity-settledshare basedpayments - (31) - - (161) (192) Goodwillimpairment (2,286) (13,792) - - - (16,078)Restructuringcosts (54) (1,636) (47) (144) (2,181) (4,062)-------------------------------------------------------------------------------- Segment result (1,179) (18,763) 68 19 (3,583) (23,438)-------------------------------------------------------------------------------- Net financeincome 95Tax on profiton ordinaryactivities 137--------------------------------------------------------------------------------Loss for theperiod (23,206)--------------------------------------------------------------------------------Assets andliabilitiesSegment assets 7,779 37,416 4,785 1,104 9,698 60,782-------------------------------------------------------------------------------- Segmentliabilities 6,804 10,502 1,800 1,056 9,342 29,504Unallocatedliabilities 3,228--------------------------------------------------------------------------------Totalliabilities 32,732-------------------------------------------------------------------------------- Other segmentinformationCapitalexpenditureProperty, plantand equipment - 63 144 7 162 376Property, plantand equipment -businesscombination - 384 - 42 - 426Intangibleasset -software - - - - 133 133Intangibleassets acquired- businesscombination - 20,788 - 7,879 - 28,667--------------------------------------------------------------------------------Depreciation 48 109 187 16 253 613Goodwillimpairment 2,286 13,792 - - - 16,078Amortisation - 447 - - 49 496-------------------------------------------------------------------------------- 2 Segment reporting (c) For the year ended 31 March 2006 Telecom Converged Managed Technology Central Total Solutions Solutions £000 £000 £000 £000 £000 £000-------------------------------------------------------------------------------------------Revenue 27,994 32,149 4,071 8,264 - 72,478------------------------------------------------------------------------------------------- Operating costsexcluding share-basedpayment transactions,goodwill impairment andrestructuring costs (25,539) (35,667) (3,837) (7,602) (2,116) (74,761)Equity-settledshare-based payments (10) (114) (12) (17) (313) (466)Cash-settledshare- based payments - - - - (62) (62)Goodwillimpairment (2,286) (13,792) - - - (16,078)Restructuringcosts (54) (1,674) (47) (248) (1,983) (4,006)---------------------------------------------------------------------------------------------Segment result 105 (19,098) 175 397 (4,474) (22,895)---------------------------------------------------------------------------------------------Net finance costs (22)Tax on profiton ordinaryactivities 392---------------------------------------------------------------------------------------------Loss for the year (22,525)--------------------------------------------------------------------------------------------- Assets and liabilitiesSegment assets 6,694 28,022 4,669 11,362 6,133 56,880Unallocatedassets 2,147------------------------------------------------------------------------------------------- Total assets 59,027------------------------------------------------------------------------------------------- Segmentliabilities 6,237 10,340 2,412 1,758 6,186 26,933Unallocatedliabilities 3,074------------------------------------------------------------------------------------------Total liabilities 30,007------------------------------------------------------------------------------------------ Other segment informationCapital expenditureProperty, plant andequipment - 170 296 60 200 726Property,plant andequipment acquired -business combination - 384 - 42 - 426Intangibleasset - software - - - - 133 133Intangibleassets acquired -business combinations - 20,788 - 7,879 - 28,667-------------------------------------------------------------------------------------------Depreciation 217 240 337 34 456 1,284Goodwillimpairment 2,286 13,792 - - - 16,078Amortisation - 956 - 57 140 1,153------------------------------------------------------------------------------------------- 2 Segment reporting Secondary reporting format - Geographical segments The analyses for the six months are as follows: 30 September 2006 30 September 2005 UK Ireland Other Total UK Ireland Other Total £000 £000 £000 £000 £000 £000 £000 £000-------------------------------------------------------------------------------------------Revenue 42,066 4,408 973 47,447 29,888 2,588 1,017 33,493-------------------------------------------------------------------------------------------Other segment informationSegment assets 86,043 10,392 - 96,435 59,678 1,104 - 60,782Unallocatedassets 2,092 --------------------------------------------------------------------------------------------Total assets 98,527 60,782------------------------------------------------------------------------------------------- Other segment informationCapital expenditure Property,plant andequipment 305 37 - 342 369 7 - 376 Property,plant andequipmentacquired -businesscombination 349 - 18 367 384 42 - 426 Intangibleasset -software 25 - 25 133 - - 133 Intangibleassetsacquired -businesscombination 31,748 - - 31,748 20,788 7,879 - 28,667-------------------------------------------------------------------------------------------- The analysis for the year ended 31 March 2006 is as follows: 31 March 2006 UK Ireland Other Total £000 £000 £000 £000--------------------------------------------------------------------------------Revenue 62,833 8,264 1,381 72,478--------------------------------------------------------------------------------Other segment informationSegment assets 45,518 11,362 - 56,880Unallocated assets 2,147--------------------------------------------------------------------------------Total assets 59,027-------------------------------------------------------------------------------- Other segment informationCapital expenditure Property, plant and equipment 666 60 - 726 Property, plant and equipment acquired- 384 42 - 426business combination Intangible asset - software 133 - 133 Intangible assets acquired - businesscombination 20,788 7,879 - 28,667-------------------------------------------------------------------------------- 3 Exceptional itemDuring the period, the Group concluded certain supplier negotiations whichresulted in a credit received of £1,000,000, reducing the reported cost of salesby the same amount. The effect of this credit is reported within operating costsof the Telecoms Business in note 2(a). 4 Business combinationsDuring the period Redstone acquired five companies Symphony Telecoms Holdingsplc, Tolerant Systems Limited, Net Adept Limited, Net Quest Limited and TrentDatacomms Limited. The acquisitions are subject to preliminary purchaseaccounting. On 18 July 2006 Redstone acquired Symphony Telecoms Holdings plc for a totalconsideration, including costs, of £18.7 million, such consideration beingsatisfied in cash. The Company issued 381,350,000 Ordinary shares for theplacing as at 18 July to finance the acquisition. On 19 July 2006 Redstone acquired Tolerant Systems Limited, Net Adept Limited,Net Quest Limited and Trent Datacomms Limited for a total consideration,including costs, of £4.0 million, such consideration being satisfied as to25,000,000 Redstone plc Ordinary shares for value of £1,350,000, £1,600,000 incash and £800,000 by way of loan notes. Following the issue of shares to fund the aforementioned acquisitions, theOrdinary share capital as at 30 September 2006 is £11,402,593, comprising1,140,259,263 Ordinary shares (30 September 2005 and 31 March 2006: £7,339,093comprising 733,909,263 Ordinary shares). 5 Earnings per shareBasic and diluted earnings per share are both calculated using a profit of£1,002,000 (30 September 2005: loss of £23,206,000 and 31 March 2006: loss of£22,525,000) and a weighted average number of shares of 898,225,656 (30September 2005: 664,291,440 and 31 March 2006: 699,004,985) There was no dilutive effect of share options at 30 September 2006, 30 September2005 or 31 March 2006. In addition, EBITDA (earnings before interest, tax, depreciation andamortisation) before goodwill impairment and restructuring costs per share hasbeen shown on the grounds that it is a common metric used by the market inmonitoring similar businesses. This measure is derived as follows: Six months Six months Year ended 30 ended 30 ended 31 September September March 2006 2005 2006 £000 £000 £000-------------------------------------------------------------------------------- Profit/(loss) for the period 1,002 (23,206) (22,525)Net finance costs/(income) 242 (95) 22Tax (154) (137) (392)Depreciation 514 613 1,284Amortisation of intangibles 952 496 1,153Restructuring costs - 4,062 4,006Goodwill impairment - 16,078 16,078--------------------------------------------------------------------------------EBITDA before goodwill impairment andrestructuring costs 2,556 (2,189) (374)IFRS 2 charges and holiday pay accrual 383 162 430--------------------------------------------------------------------------------EBITDA before goodwill impairment,restructuring 2,939 (2,027) 56costs, IFRS 2 charges and holiday pay accrual -------------------------------------------------------------------------------- 6 Cash generated from operations Six months Six months Year ended 30 ended 30 ended 31 September September March 2006 2005 2006 £000 £000 £000-------------------------------------------------------------------------------- Operating profit/(loss) 1,090 (23,438) (22,895)Adjustments for:Depreciation of property, plant and equipment 514 613 1,284Amortisation of intangible assets 952 496 1,153Goodwill impairment charge - 16,078 16,078Equity-settled share-based payments 301 192 466Cash-settled share-based payments (26) - 62Loss on disposal of property, plant and - - 32equipmentMovements in working capitalDecrease in inventories 68 128 825Decrease/(increase) in trade and other 2,618 (496) (2,119)receivables(Decrease)/increase in trade and other (2,863) 566 (776)payablesIncrease in non-current assets (94) (151) (116)(Decrease)/increase in provisions (716) 1,923 492--------------------------------------------------------------------------------Cash generated from operations 1,844 (4,089) (5,514)-------------------------------------------------------------------------------- INDEPENDENT REVIEW REPORT TO REDSTONE PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2006 which comprises the Consolidated IncomeStatement, Consolidated Statement of Changes in Equity, Consolidated BalanceSheet, Consolidated Cash Flow Statement, and the related notes 1 to 6. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company having regard to guidance contained inBulletin 1999/4 'Review of interim financial information' issued by the AuditingPractices Board. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company, for our work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report as required by the AIM Rulesissued by the London Stock Exchange. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Ernst & Young LLPLondon30 November 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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