29th Nov 2007 07:01
AssetCo PLC29 November 2007 For Immediate Release 29 November 2007 ("AssetCo" and or the "Company") Results for the six months ended 30 September 2007 AssetCo plc, (AIM : ASTO) a leading provider of support services to the UK Fireand Rescue Service, is pleased to announce its results for the six months ended30 September 2007. A summary of key points follows : Financial • Pre tax profit increased by 213% to £4.7m • EBITDA of £11.6m (2006 : £8.1m) • Fully diluted earnings per share rose by 67% to 5.5p (2006 : 3.3p) • Net assets were £32.7m (2006 : £6.5m) Business • Significant contract revenue gains have been achieved in the period under review o LFEPA - whole life contract value has increased by £89m to £489m since March 2007 o LFR - whole life contract value has increased by £6m to £65m since March 2007 • Formation of Emergency Resource function o Focus on specialist human resources solutions to the emergency services o To be headed by Jeff Ord CBE, HM Inspector of Fire • Acquisition of AES Group for £4m o Designer, builder and installer of integrated electrical and communications systems for specialist emergency services vehicles • Strategic Investment in Miquest Limited o Integrated asset management software solution provider to emergencyservices • Disposal of non-core business • Overseas opportunities o Approaches to replicate support service model internationally Outlook • Current trading ahead of expectations • New Dimensions and Fireguard Contracts expected to be awarded summer 2008 • Next Fire and Rescue Authority contract anticipated to come to market in Q4 • Continuing benefits from integration of acquired business • Further niche acquisitions currently under negotiation John Shannon, Chief Executive Officer, commented: "We have had a successful six months in terms of meeting our financial andoperational targets. We are confident that this progress can be maintained andthat the increase in capabilities from our recent acquisition and investment,and the launch of the new Emergency Resource function, will ensure that we areideally placed to leverage the knowledge and expertise gained in our uniquebusiness partnership model with LFEPA and LFR to the benefit of emergingnational and international demand." For more information please contact: AssetCo plc Tel: +44 (0) 20 8515 3999John ShannonFrank Flynn Buchanan Communications Tel: +44 (0) 20 7466 5000Tim AndersonIsabel Podda REPORT OF THE CHIEF EXECUTIVE OFFICER Introduction Our strong trading performance for the half year to 30 September 2007 reflects: i) The significant growth of our core 20-year Fire andRescue Service ("FRS") contracts, driven by the expansion in our servicecapabilities; and ii) The early benefits from our establishment of an integratedsupply chain offering to the FRS market. In line with our strategy as outlined in our Annual Report we continue to: •Position the business as a long-term support services partner for the emergency services; •Wind down non-emergency business activities; and •Streamline our internal operations for performance and cost efficiency. International Financial Reporting Standards This is the first set of financial statements that we are required to prepare inaccordance with International Financial Reporting Standards ("IFRS"). Inpreparing these financial statements we have started from an opening balancesheet at 1 April 2006, our transition date to IFRS, and made those changes inaccounting policies and other restatements required by IFRS 1 for first timeadoption of IFRS. Under IFRS the business combination of AssetCo and Asfare,which took place in March 2007, is required to be treated as a reverseacquisition. The transition to IFRS is explained more fully in Note 8 to theseinterim financial statements. Financial results for the six months ended 30 September 2007 We are pleased to report a strong performance for the six months ended 30September 2007 with profit before tax increasing by 213% to £4.7 million (Sixmonths ended 30 September 2006: £1.5 million) on turnover of £27.6 million (Sixmonths ended 30 September 2006: £52.9 million). Our strategy to progressively move out of non-emergency business activities isreflected in the reduction in turnover. Revenue from non-emergency fleetmanagement contracts reduced from £36.2 million in the six months ended 30September 2006 to £6.4 million in the period under review. Non-emergencyrevenues will continue to decline as contracts reduce. EBITDA (before share based payments) for the six months ended 30 September 2007rose to £11.6 million (Six months ended 30 September 2006: £8.1 million) as thetable below shows. Six months ended 30.9.07 30.9.06 £'000 £'000Operating profit 7,101 3,559Depreciation (Note 4) 4,199 4,588Share-based payments 281 - -------- -------- EBITDA 11,581 8,147 -------- -------- Fully diluted earnings per share rose by 67% to 5.5 pence (Six months ended 30September 2006: 3.3 pence). Net assets at 30 September 2007 were £32.7 million (30 September 2006: £6.5million). Strategy The emergency services, and particularly the FRS market in the UK, have beenmoving progressively towards the procurement of fully outsourced supportservices. Our strategy is to organise and equip the business with sufficientscale, skills, and capabilities to best position us to compete successfully inthis sector where we can leverage off significant existing client relationships. Overseas opportunities have allowed us to consider how to respond to demand fromnew markets for the application of our knowledge, expertise and operationalsupport services. Organisation Our core business is based on improving our clients' business support functionsand processes to deliver operational and financial performance benefits. Duringthe period under review we have begun to benefit from the application of thisexpertise following our establishment of a "near-shore" integrated back officefunction which is already delivering clear synergies in traditionally dispersedadministrative functions. In recognition of how our clients organise their operations to best meet theirneeds, we had formed two distinct and dedicated business units focusing onsupport for Emergency Services and Emergency Equipment respectively. Demand for outsourcing operational support is increasingly driven by Governmentresponse to changing environmental and terrorist threats. As a recognised andleading partner to the Fire and Rescue and other emergency sectors, we considerthe business to be well positioned to provide operational excellence, long-termcapability and sustainable managed service solutions. The business is now evenmore effectively organised and positioned for scale and growth. The accelerated pace of investment in new technology and essential equipment tosupport the changing demands of the emergency services now requires a new breedof supplier with the capability to instigate and sustain a level of innovation,product development and secure supply chain never before seen in this industry.By reorganising our business to set up a unit dedicated to the development,design, build and sourcing of such specialist equipment we now provide themarket with a fully integrated supply chain providing access to the best ofbreed products and technology internationally available. The emergency services are highly dependent upon appropriately skilled,competent, and compliant resources. Recent trends in environmental and climaticconditions and exposure to greater terrorist threat has accentuated thatdependency. With recruitment, training and staffing, the Fire and Rescue Servicealone invests more than £2.1 billion (82% of the total annual budget) onresource-related deployment. Recognising the challenges this brings for thesector, we have recently formed an Emergency Resources function which will offera specialist human resources solutions to the emergency services sector. JeffOrd CBE, who is currently HM Inspector of Fire for Scotland, will join the Groupon 1 December 2007 to head up this new operation to support both UK based andoverseas opportunities. The management of the business is set up in such a way as to ensure theexpertise and synergies of each unit are appropriately exploited to be ofbenefit to all clients and to complement our commercial goals. Acquisition and investment We continue to identify and integrate businesses which provide specialist skillsand services which will enhance our overall offering to the emergency servicesand we are pleased to have recently completed the following synergisticacquisition and strategic investment. AES Group AES designs, builds and installs integrated electrical and communication systemsfor specialist emergency services vehicles and national communications projectssuch as FireLink. It is a current provider to the Fire and Rescue Services' NewDimensions project, contracted and operated by Communities and Local Government,and brings a complementary set of technology and communication skills to enhancethe design, engineering and build capability offered by the Group's PapworthSpecialist Vehicles subsidiary. The company has also developed and recently launched a telemetry product,M-Flow, specifically for the emergency services market which enables the captureof real time data from vehicles and the transmission of that information viaGPRS or Wi-Fi to fleet managers. Already adopted by a number of police forces inthe UK, including for use in helicopters, and as part of the New Dimensionsproject, the technology will greatly enhance the nature and efficiency ofsupport and maintenance operations for all types of emergency services fleetsand make significant breakthroughs in their ability to reduce carbon emissionsand achieve searching environmental targets set by Government. We believe thereare exciting growth opportunities for this product with both existing and newclients. AES, with revenues of £4 million per annum, was acquired on 23 November 2007 for£2.2 million, a multiple of four times earnings, comprising £1.25 million ofcash and £0.95 million satisfied by the issue of new shares. In addition,deferred consideration of up to £1.8 million may be payable upon achievingcertain performance criteria. Miquest Limited Miquest provides integrated software solutions to the emergency services for themanagement of assets. Using barcode and RFID technologies, the company'sservices and solutions address the needs of basic asset location tracking,tracking asset maintenance regimes, including mobile assets such as fleet,protective clothing and equipment, the management of facilities, information andtechnology and the tracking of personnel. The product is well established in the FRS market and is currently adopted byboth our existing client, London Fire and Emergency Planning Authority("LFEPA"), and the New Dimensions project. On 26 November 2007 we acquired a 25% strategic position in Miquest for £380k.Following two years of software development, Miquest reported profit before taxof £50k on turnover of £300k in the year to 31 March 2007. The business hassecured orders of £700k for 2008. The integration of M-Flow and Miquest product offerings will provide thebusiness with the ability to deliver an integrated asset management solution. Further niche acquisitions have been identified and are currently undernegotiation. Disposal As part of our ongoing wind down of non-emergency business activities, we haveentered into an unconditional agreement to dispose of a small niche part of ourNorthern Ireland business for £1.5 million (net assets of £0.5 million). Thistransaction is scheduled to complete on or before 31 December 2007. Current trading Trading in quarter three has been ahead of the Board's expectations and tradingconditions around the Group remain favourable with opportunities increasing inall key areas of business activity. We are continuing our active pre-contract work in connection with the nationalNew Dimensions and Fireguard contracts which are expected to be awarded by thesummer of 2008. The New Dimensions contract, estimated at £130 million over a16-year period, is to provide a total managed service solution for specialistvehicles and equipment deployed following 9/11. The Fireguard Business Continuity contract is to provide an outsourced businesscontinuity solution for emergency fire crew capability to support the FRS'sstatutory obligations under the Civil Contingency Act. New business development opportunities continue to increase. Several Fire andRescue Authorities ("FRAs") are informally grouping together to consider thepurchase of outsourced services and we have been actively supporting this move.This collaboration, in process terms, extends the conversion timing but provideslarger combined opportunities with more scope and benefit for our products andservices. There are now 12 FRAs who are at a variety of stages of maturity andfrom which the first contract is anticipated to come to market in quarter fourof the current financial year. While this business development activity has continued, our account managementand service delivery teams have continued to grow our existing businessorganically capitalising on the requirement for more wide ranging andsophisticated support services as demands on the Fire and Rescue Servicesincrease nationally. We have seen strong organic growth in the contracts withour existing clients. LFEPA Significant contract revenue gains have been achieved in the period underreview. The total value of the contract with LFEPA which had a value of £292million at inception and £400 million at 31 March 2007, had increased to £489million at 30 September 2007, to be realised over the twenty year term of thecontract. We have successfully managed the largest build programme ever undertaken in theUK Fire industry with the supply of 102 new fire appliances and over 40 otherspecialist vehicles and numerous pieces of sophisticated technical operationalequipment. This equipment represents an investment of £28 million. LFR The contract with Lincolnshire Fire and Rescue Service ("LFR"), which is stillin its implementation phase, has grown in value from £59 million to £65 millionin the six months to 30 September 2007. We are currently working with LFR to introduce 23 refurbished (ex London) and 33new fire appliances. The value of this programme is approximately £8 million andis due to be completed by 31 March 2008. These support service contracts will provide LFEPA and LFR with the most modernequipment available to meet the operational challenges being faced by the UKFRS. Dividend It is the Board's current intention to declare a dividend based on the resultsfor the year ending 31 March 2008. Outlook We have had a successful six months in terms of meeting our financial andoperational targets. We are confident that this progress can be maintained andthat the increase in capabilities from our recent acquisition and investment,and the launch of the new Emergency Resource function, will ensure that we areideally placed to leverage the knowledge and expertise gained in our uniquebusiness partnership model with LFEPA and LFR to the benefit of emergingnational and international demand. Our ongoing business development efforts in the UK and now overseas continue toexploit our first mover advantage, positioning us well for major long termcontracts, and we look forward to further positive outcomes during 2008. Our drive to support collaboration in our existing FRA pipeline will not impacton our ability to deliver growth in 2008/9 as we continue to unlock efficienciesacross the business and extend our service penetration with existing clients. John Shannon, Chief Executive Officer 27 November 2007 AUDITORS REPORT Introduction We have been engaged by the company to review the financial information in theinterim report for the six months ended 30 September 2007 which comprises theconsolidated interim income statement, consolidated interim balance sheet,consolidated interim statement of changes in equity and the consolidated interimcash flow statement and the related notes 1 to 8. We have read the otherinformation contained in the interim report which comprises the report of theChief Executive Officer and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with guidance containedin ISRE (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity". Our review work has beenundertaken so that we might state to the company those matters we are requiredto state to them in a review report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company for our review work, for this report, or for theconclusion we have formed. Directors' responsibilities The interim report is the responsibility of, and has been approved by thedirectors. The AIM Rules of the London Stock Exchange require that theaccounting policies and presentation applied to the interim figures areconsistent with those which will be adopted in the annual accounts having regardto the accounting standards applicable for such accounts. Our responsibility Our responsibility is to express to the Company a conclusion on the financialinformation in the interim report based on our review. Scope of review We conducted our review in accordance with guidance contained in InternationalStandard on Review Engagements (UK and Ireland) 2410, "Review of InterimFinancial Information Performed by the Independent Auditor of the Entity" issuedby the Auditing Practices Board for use in the United Kingdom. A review ofinterim financial information consists of making enquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an auditconducted in accordance with International Standards of Auditing (UK andIreland) and consequently does not enable us to obtain assurance that we wouldbecome aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat any material modification should be made to the financial information inthe interim report for the six months ended 30 September 2007. GRANT THORNTON UK LLPREGISTERED AUDITORCHARTERED ACCOUNTANTSLONDON THAMES VALLEY OFFICESLOUGH 27 November 2007 CONSOLIDATED INCOME STATEMENTfor the six months ended 30 September 2007 Six months ended 30.09.07 30.09.06 £'000 £'000 Revenue 27,634 52,941Cost of sales (13,380) (46,582) -------- -------- Gross profit 14,254 6,359 -------- -------- Administrative expenses (6,872) (2,938)Administrative expenses - share-based payments (281) - -------- -------- (7,153) (2,938)Other gains/losses - net - 138 -------- -------- Operating profit 7,101 3,559 -------- -------- Finance income 96 80Finance costs (2,529) (2,168) -------- -------- Profit before taxation 4,668 1,471 -------- -------- Taxation (883) 113 -------- -------- Profit for the period 3,785 1,584 ======== ========Earnings per share Basic 5.6p 3.3p -------- -------- Diluted 5.5p 3.3p -------- -------- CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)for the six months ended 30 September 2007 30.09.07 30.09.07 Note £'000 £'000 ASSETSNon-current assetsProperty, plant and equipment 4 74,497 45,503Goodwill 38,738 34,327Other intangible assets 144 6Retirement benefit surplus 329 329 113,708 80,165 -------- ------- Current assets Inventories 3,043 3,010Trade and other receivables 12,232 30,350Cash and cash equivalents 11,854 875 -------- ------- 27,129 34,235 -------- ------- Total assets 140,837 114,400 ======== ======= EQUITYAttributable to equity holders of the CompanyIssued share capital 16,800 100Share premium account 17,890 2,971Reverse acquisition reserve (11,701) -Other reserve 281 -Retained earnings 9,411 3,438 -------- -------Total equity 32,681 6,509 -------- ------- LIABILITIESNon-current liabilitiesBorrowings 75,012 49,193Deferred income tax liabilities 3,958 1,814Retirement benefit obligations 42 - -------- ------- 79,012 51,007 -------- ------- Current liabilitiesTrade and other payables 16,416 43,287Current income tax liabilities 285 -Financial liabilities - 9,129 Borrowings 12,443 4,468 -------- ------- 29,144 56,884 -------- -------Total liabilities 108,156 107,891 -------- -------Total equity and liabilities 140,837 114,400 ======== ======= CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED)for the six months ended 30 September 2007 Share Capital Shrae premium Reverse Other reserve Retained Total Equity acquisition earnings reserve account £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 100 2,971 - - 1,854 4,9252006Profit forthe - - - - 1,584 1,584period --------- --------- --------- --------- --------- --------- At 30September 100 2,971 - - 3,438 6,5092006 --------- --------- --------- --------- --------- --------- Profit forthe - - - - 3,855 3,855periodAccountingforthe reverseacquisition 16,700 14,919 (11,701) - (1,667) 18,251(see note --------- --------- --------- --------- --------- ---------8) At 31 March2007 16,800 17,890 (11,701) - 5,626 28,615 --------- --------- --------- --------- --------- --------- Profit forthe - - - - 3,785 3,785periodMovementrelating toshare-basedpayments - - - 281 - 281 --------- --------- --------- --------- --------- --------- At 30September 16,800 17,890 (11,701) 281 9,411 32,6812007 ========= ========= ========= ========= ========= ========= CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED)for the six months ended 30 September 2007 Six months ended 30.09.07 30.09.06 Note £'000 £'000Cash flows from operating activitiesCash generated from operations 5 9,969 13,790 -------- --------Finance costs (2,529) (2,168) -------- -------- Net cash generated from operating activities 7,440 11,622 -------- -------- -------- -------- Cash flows from investing activitiesAcquisition of subsidiaries, net of cash (1,879) -acquired(Purchase)/sale of intangible assets (100) 2Purchases of property, plant and equipment (28,041) (3,459)Proceeds from sale of property, plant and 180 6,818equipment -------- -------- Net cash used in investing activities (29,840) 3,361 -------- -------- Cash flows from financing activitiesNet increase in/(repayments of) borrowings 27,335 (2,126)Net increase in/(repayments of) finance leases (3,408) (14,285)Finance income 96 80 -------- -------- Net cash used in financing activities 24,023 (16,331) -------- -------- Net increase/(decrease) in cash, cashequivalents and 1,623 (1,348)bank overdraftsCash, cash equivalents and bank overdrafts atbeginning 10,231 2,223of the period -------- -------- Cash, cash equivalents and bank overdrafts atend of 11,854 875period ======== ======== NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED) 1. Legal status and activities AssetCo Plc ("the Company") and its subsidiaries (together "the Group") areprincipally involved with the provision of management services to the emergencyservices market. Other Group companies are engaged in automotive engineering,the provision of asset management services and the supply of specialistequipment to the homeland security market. The Company is a public limited liability company incorporated and domiciled inEngland and Wales. The address of its registered office is 800 Field End Road,South Ruislip, Middlesex HA4 0QH. The Company has its primary listing on the Alternative Investment Market ("AIM")of the London Stock Exchange. The Company's accounts for the year ended 31 March 2007 have been delivered tothe Registrar of Companies. Those accounts have received an unqualified auditreport which did not contain statements under Section 237 (2) and (3) of theCompanies Act 1985. These financial statements are not statutory accounts within the meaning ofSection 240 of the Companies Act 1985. These financial statements have not been audited but have been the subject of areview. The scope of the review is set out on pages 10 and 11. These Group consolidated financial statements were authorised for issue by theBoard of Directors on 27 November 2007. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of theseconsolidated financial statements are set out below. 2.1 Basis of preparation The accounts comply with the AIM Rules and have been prepared on a basisconsistent with the revenue and recognition principles of InternationalFinancial Reporting Standards ("IFRS") that will be adopted when the Groupprepares its first annual IFRS accounts at 31 March 2008. The company has chosennot to adopt IAS 34, Interim Financial Reporting. This is the first period in which the financial statements have been preparedunder IFRS. A summary of the impact of the transition from UK GAAP to IFRS canbe found in Note 8. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise its judgement in the process of applying the Group's accountingpolicies. a) Standards, amendments and interpretations effective for the year ended 31March 2008 but not yet relevant to the Group's operations There are no standards, amendments or interpretations effective for the yearended 31 March 2008 that are not yet relevant to the Group's operations. b) Interpretations to existing standards that are not yet effective Certain new standards, amendments and interpretations to existing standards havebeen published that are mandatory for the Group's accounting periods beginningon or after 1 April 2008 or later periods but which the Group has not earlyadopted: Standards IFRS 8, Operating Segments (effective for annual periods beginning on or after 1January 2009). IFRS 8 sets out requirements for disclosure of information aboutan entity's operating segments and also about the entity's products andservices, the geographical areas in which it operates, and its major customers.Management is currently assessing the impact of IFRS 8 on the Group'soperations. IAS 1 (revised), Presentation of Financial Statements (effective for annualperiods beginning on or after 1 January 2009). IAS 1 (revised) sets outrevisions to the presentation of financial information. Management is currentlyassessing the impact of IAS 1 (revised) on the financial statements of theGroup. Interpretations IFRIC 12, Service Concession Arrangements (effective for annual periodsbeginning on or after 1 January 2008). IFRIC 12 is not relevant to the Group'soperations. IFRIC 13, Customer Loyalty Programmes (effective for annual periods beginning onor after 1 July 2008). IFRIC 13 is not relevant to the Group's operations. IFRIC 14, IAS 9 - The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction (effective for annual periods beginning on orafter 1 January 2008). Management is currently assessing the impact of IFRIC 14on the Group's operations. 2.2 Consolidation a) Reverse acquisition accounting Under IFRS 3 "Business Combinations", the acquisition of AssetCo Group Limitedby the Company has been accounted for as a reverse acquisition and theconsolidated IFRS financial information of the Company is therefore acontinuation of the financial information of AssetCo Group Limited. b) Subsidiaries Subsidiaries are all entities (including special purpose entities) over whichthe Group has the power to govern the financial and operating policies generallyaccompanying a shareholding of more than one half of the voting rights.Subsidiaries are fully consolidated from the date on which control istransferred to the Group. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilites assumed in a business combination are measured initially at theirfair values at the acquisition date, irrespective of the extent of any minorityinterest. The excess of the cost of acquisition over the fair value of theGroup's share of identifiable net assets acquired is recorded as goodwill. Ifthe cost of an acquisition is less than the fair value of the net assets of thesubsidiary acquired, the difference is recognised directly in the incomestatement. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated. Unrealised losses are also eliminatedbut considered an impairment indicator of the asset transferred. Accountingpolicies of subsidiaries have been changed where necessary to ensure consistencywith the policies adopted by the Group. c) Recognition of assets and liabilities as part of a business combination In accordance with IFRS 3, Business Combinations, an intangible asset acquiredin a business combination is deemed to have a cost to the Group of its fairvalue at the acquisition date. The fair value of the intangible asset reflectsmarket expectations about the probability that the future economic benefitsembodied in the asset will flow to the Group. Where an intangible asset might beseparable, but only together with a related tangible or intangible asset, thegroup of assets is recognised as a single asset separated from goodwill wherethe individual fair values of the assets in the group are not reliablymeasurable. Where the individual fair value of the complimentary assets arereliably measurable, the Group recognises them as a single asset provided theindividual assets have similar useful lives. 2.3 Revenue recognition Revenue comprises the fair value of the consideration received or receivablefrom the provision of services in the ordinary course of the Group's activities.Revenue is shown net of value-added tax, returns, rebates and discounts andafter eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliablymeasured, it is probable that future economic benefits will flow to the entityand specific criteria have been met for each of the Group's activities asdescribed below. The amount of revenue is not considered to be reliablymeasurable until all contingencies relating to the sale have been resolved. TheGroup bases it estimates on historical results, taking into consideration thetype of customer, the type of transaction and the specifics of each arrangement. Rendering of services Revenue from services rendered is recognised by reference to the stage ofcompletion of the transaction. Stage of completion is measured by reference tothe number of labour hours incurred to date as a percentage of total labourhours expected to be incurred. Revenue from services provided on a short-term or one-off basis is recognisedwhen the service is complete. Sale of goods Revenue is recognised when the significant risks and rewards of ownership of thegoods have passed to the buyer and can be reliably measured and recovery ofconsideration is considered probable, usually on despatch of goods. Leasing Revenue from the leasing of assets is recognised in the income statement on astraight-line basis over the period of the hire. Maintenance contracts Long-term maintenance contracts are reviewed on an annual basis to assess thereasonableness of their reported profitability in respect of recognised turnoverand related costs. Turnover and costs on these contracts are recognised in theperiod services are delivered or received respectively. 2.4 Segment reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that aresubject to risks and returns that are different from those of segments operatingin other economic environments. 2.5 Foreign currency translation a) Functional and presentation currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates ("the functional currency"). The consolidated financialstatements are presented in sterling (£), which is the Company's functional andpresentation currency. b) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. 2.6 Government grants Grants from the government are recognised at their fair value when there is areasonable assurance that the grant will be received and the Group will complywith all attached conditions. Government grants relating to costs are deferred and recognised in the incomestatement over the period necessary to match them with the costs that they areintended to compensate. Government grants relating to property, plant and equipment are included innon-current liabilities as deferred government grants and are credited to theincome statement on a straight-line basis over the expected lives of the relatedassets. 2.7 Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation.Historical cost includes expenditure that is directly attributable to theacquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item will flow to the Group and the cost of theitem can be measured reliably. The carrying amount of the replaced part isderecognised. All other repairs and maintenance is charged to the incomestatement during the financial period in which they are incurred. Borrowing costs incurred specifically for the construction of an item ofproperty, plant and equipment are capitalised. Depreciation on assets is calculated using the straight-line method to allocatetheir cost to their residual values over their estimated useful lives asfollows: Office furniture and equipment 4 - 7 years IT equipment 2 - 3 years Motor vehicles 3 - 4 years Leasehold improvements Over the term of the lease Fixtures and fittings 3 - 5 years Equipment, plant and machinery 2 - 12 years The residual values and useful lives of assets are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amountif the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with thecarrying amount and are recognised within "other (losses)/gains - net" in theincome statement. 2.8 Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair valueof the Group's share of the net identifiable assets of the acquired subsidiaryat the date of acquisition. Goodwill on acquisitions of subsidiaries is includedin intangible assets. Separately recognised goodwill is tested annually forimpairment and carried at cost less accumulated impairment losses. Impairmentlosses on goodwill are not reversed. Gains and losses on the disposal of anentity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units (separately identifiable cashflows) for the purpose of impairment testing. The allocation is made to thosecash-generating units or groups of cash-generating units that are expected tobenefit from the business combination in which the goodwill arose. The Groupallocates goodwill to each contract that it operates and the underlying businessto which the goodwill relates. Computer software Acquired computer software licences are capitalised on the basis of the costsincurred to acquire and bring to use the specific software. These costs areamortised over their estimated useful lives of three to five years. Costs associated with developing or maintaining computer software programmes arerecognised as an expense as incurred. Costs that are directly associated withthe development of identifiable and unique software products controlled by theGroup, and that will probably generate economic benefits exceeding costs beyondone year, are recognised as intangible assets. Costs include the employee costsincurred as a result of developing software and an appropriate portion ofrelevant overheads. Computer software development costs recognised as assets are amortised overtheir estimated useful lives which do not exceed three years. Impairment testing of goodwill, other intangible assets and property, plant andequipment For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows. As a result, someassets are tested individually for impairment and some are tested atcash-generating unit level. Goodwill, other individual assets or cash-generating units that includegoodwill, other intangible assets with an indefinite useful life, and thoseintangible assets not yet available for use are tested for impairment at leastannually. All other individual assets or cash-generating units are tested forimpairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amountexceeds the recoverable amount of the asset or cash-generating unit. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell, and value in use based on an internal discounted cash flowevaluation. With the exception of goodwill, all assets are subsequentlyreassessed for indications that an impairment loss previously recognised may nolonger exist. 2.9 Inventories Inventories are stated at the lower of cost and net realisable value. Cost isdetermined using the first-in first-out (FIFO) method. The cost of finishedgoods and work in progress comprises design costs, raw materials, direct labour,other direct costs and related production overheads based on normal operatingcapacity. It excludes borrowing costs. Net realisable value is the estimatedselling price in the ordinary course of business, less applicable variableselling expenses. 2.10 Trade receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of the receivables. Significantfinancial difficulties of the debtor, probability that the debtor will enterbankruptcy or financial reorganisation, and default in payments are consideredindicators that the trade receivable is impaired. The amount of the provision isthe difference between the asset's carrying amount and the present value ofestimated future cash flows, discounted at the original effective interest rate.The carrying amount of the asset is reduced through the use of an allowanceaccount, and the amount of the loss is recognised in the income statement withinadministrative expenses. When a trade receivable is uncollectible, it is writtenoff against the allowance account for trade receivables. Subsequent recoveriesof amounts previously written off are credited against administrative expensesin the income statement. 2.11 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banksand bank overdrafts. Bank overdrafts are shown within borrowings in currentliabilities on the balance sheet. 2.12 Equity Issued share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or optionsare shown in equity as a deduction, net of tax, from the proceeds. Share premium The share premium account represents the excess over nominal value of the fairvalue of consideration received for equity shares, net of expenses of the shareissue. Reverse acquisition reserve The reverse acquisition reserve arises on the acquisition of AssetCo GroupLimited by the Company and represents the extent to which the reserves ofAssetCo Group Limited have been capitalised as a result of the businesscombination. Other reserve The other reserve represents equity-settled share-based employee remunerationuntil such share options are exercised. 2.13 Research and development The Group incurs expenditure on research projects and on projects to applyresearch findings to develop new or substantially improved products. Thisexpenditure is recognised in the income statement as an expense as incurred. Once detailed criteria have been met that confirm that the product is bothtechnically and commercially feasible, any further expenditure incurred on theproject is capitalised if the expenditure is expected to be material. 2.14 Borrowings Borrowings are recognised initially at fair value, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost; any differencebetween the proceeds (net of transaction costs) and the redemption value isrecognised in the income statement over the period of the borrowings using theeffective interest method. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. 2.15 Leases Group as a lessee The Group leases certain property, plant and equipment. Leases of property,plant and equipment where the Group has substantially all the risk and rewardsof ownership are classified as finance leases. Finance leases are capitalised atthe commencement of the lease at the lower of the fair value of the leased assetand the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so asto achieve a constant rate on the finance balance outstanding. The correspondingrental obligations, net of finance charges, are included in other short-term andother long-term payables. The interest element of the finance cost is charged tothe income statement over the lease period so as to produce a constant periodicrate of interest on the remaining balance of the liability for each period. Theproperty, plant and equipment acquired under finance leases is depreciated overthe shorter of the useful life of the asset and the lease term. Leases other than finance leases are classified as operating leases and paymentsare charged to the income statement on a straight-line basis over the leaseterm. Lease incentives, if applicable, are spread over the term of the lease. Group as a lessor When assets are leased out under a finance lease, the present value of the leasepayments is recognised as a receivable. The difference between the grossreceivable and the present value of the receivable is recognised as unearnedfinance income. Lease income is recognised over the term of the lease using the net investmentmethod, which reflects a constant periodic rate of return. When assets are leased our under an operating lease, the asset is included inthe balance sheet based on the nature of the asset. Lease income is recognisedover the term of the lease on a straight-line basis. 2.16 Income taxes Income tax payable is provided on taxable profits using tax rates enacted orsubstantially enacted at the balance sheet date. Income tax is recognised in the income statement except to the extent that itrelates to items recognised directly in equity, in which case it is recognisedin equity. Deferred income tax is provided in full, using the liability method, ontemporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the consolidated financial statements. However,the deferred income tax is not accounted for if it arises from initialrecognition of an asset or liability in a transaction other than a businesscombination that at the time of the transaction affects neither accounting nortaxable profit or loss. Deferred income tax is determined using tax rates (andlaws) that have been enacted or substantially enacted by the balance sheet dateand are expected to apply when the related deferred income tax asset is realisedor the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that is it probable thatfuture taxable profit will be available against which the temporary differencescan be utilised. 2.17 Trade payables Trade payables are recognised initially at fair value and subsequently measuredat amortised cost using the effective interest method. 2.18 Employee benefits Pension obligations - defined benefit schemes Group companies operate two defined benefit pension schemes. The schemes aregenerally funded through payments to insurance companies or trustee-administeredfunds, determined by periodic actuarial calculations. Typically, a defined benefit pension plan defines an amount of pension benefitthat an employee will receive on retirement, usually dependent upon one or morefactors such as age, years of service and compensation. The asset or liability recognised in the balance sheet in respect of definedbenefit pension plans is the present value of the defined benefit obligation atthe balance sheet date less the fair value of plan assets, together withadjustments for unrecognised actuarial gains or losses and past service costs.The defined benefit surplus or obligation is calculated annually by independentactuaries using the projected unit credit method. The present value of thedefined benefit surplus or obligation is determined by discounting the estimatedfuture cash outflows using interest rates of high-quality corporate bonds thatare denominated in the currency in which the benefits will be paid and that haveterms to maturity approximating to the terms of the related pension liability. The interest element of the defined benefit cost represents the change inpresent value of scheme obligations resulting from the passage of time, and isdetermined by applying the discount rate to the opening present value of thebenefit obligation, taking into account material changes in the obligationduring the year. The expected return on plan assets is based on an assessmentmade at the beginning of the year of long-term market returns on scheme assets,adjusted for the effect on the fair value of plan assets of contributionsreceived and benefits paid during the year. The difference between the expectedreturn on plan assets and the interest cost is recognised in the incomestatement as other finance revenue or cost. Past-service costs are recognised immediately in income, unless changes to thepension plan are conditional on the employees remaining in service for aspecified period of time (the vesting period). In this case, the past-servicecosts are amortised on a straight-line basis over the vesting period. Actuarial gains and losses are recognised as an expense and charged or creditedto the income statement over the employees' expected average remaining workinglives. The resulting surplus or deficit is presented with other net assets onthe balance sheet. The related deferred tax is shown within other deferred taxbalances. A surplus is recognised only to the extent that it is recoverable bythe Group. Pension contributions - defined contribution scheme For defined contribution plans, the Group pays contributions to publicly orprivately administered pension insurance plans on a mandatory, contractual orvoluntary basis. The Group has no further payment obligations once thecontributions have been paid. Contributions to defined contribution schemes are recognised in the incomestatement during the period in which they become payable. Share-based compensation The Group operates a number of equity-settled, share-based compensation plans.The fair value of the employee services received in exchange for the grant ofthe options is recognised as an expense. The total amount to be expensed overthe vesting period is determined by reference to the fair value of the optionsgranted, excluding the impact of any non-market vesting conditions, for example,profitability. Non-market vesting conditions are included in assumptions aboutthe number of options that are expected to vest. At each balance sheet date, theentity revises its estimates of the number of options that are expected to vest.It recognises the impact of the revision to original estimates, if any, in theincome statement, with a corresponding adjustment to equity. The proceedsreceived net of any directly attributable transaction costs are credited toshare capital (nominal value) and share premium when the options are exercised. Termination benefits Termination benefits are payable when an employment is terminated by the Groupbefore the normal retirement date, or whenever an employee accepts voluntaryredundancy in exchange for these benefits. The Group recognises terminationbenefits when it is demonstrably committed to either: terminating the employmentof current employees according to a detailed formal plan without possibility ofwithdrawal; or providing termination benefits as a result of an offer made toencourage voluntary redundancy. Benefits falling due more than 12 months afterthe balance sheet date are discounted to their present value 2.19 Financial instruments Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. Where the contractualobligations of financial instruments, including share capital, are equivalent toa similar debt instrument, those financial instruments are classed as financialliabilities. Financial liabilities are classified as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are includedin the income statement. Finance costs are calculated so as to produce aconstant rate or return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting thedefinition of a financial liability then this is classed as an equityinstrument. Dividends and distributions relating to equity instruments aredebited direct to equity. 2.20 Provisions Provisions are recognised when the Group has a present legal or constructiveobligation as a result of past events; it is probable that an outflow ofresources will be required to settle the obligation; and the amount has beenreliably estimated. Where there are a number of similar obligations, the likelihood that an outflowwill be required in settlement is determined by considering the class ofobligations as a whole. A provision is recognised even if the likelihood of anoutflow with respect to any one item included in the same class of obligationsmay be small. Provisions are measured at the present value of the expenditures expected to berequired to settle the obligation using a pre-tax rate that reflects currentmarket assessments of the time value of money and the risks specific to theobligation. The increase in the provision due to passage of time is recognisedas an interest expense. 2.21 Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends areapproved by the Company's shareholders. 3. Primary segment information The Group is organised into two main business segments which are the EmergencyServices Division and the Emergency Equipment Division. The legacy non-corebusiness of fleet management is separately disclosed as Non Emergency. All assets and liabilities of the Group are allocated to individual segments. Six months ended 30 September 2007 Emergency Emergency Non Consolidationad Group Services Equipment Emergency justments £'000 £'000 £'000 £'000 £'000ContinuingoperationsSegment revenue 11,393 32,470 6,355 (22,584) 27,634 ========= ======== ========= ========== ========= Segment result 2,509 2,387 53 (281) 4,668 ========= ======== ========= ========== ========= The consolidation adjustments relate to the elimination of inter-segment sales(£22.584 million) and a charge for share-based payments (£281,000). Six months ended 30 September 2006 Emergency Emergency Non Emergency Consolidation Group Services Equipment adjustments £'000 £'000 £'000 £'000 £'000ContinuingoperationsSegment 10,315 6,392 36,234 - 52,941revenue ========= ========= ========= ========== ========= Segment 1,972 27 1,457 (1,985) 1,471result ========= ========= ========= ========== ========= The consolidation adjustments relate to the movement on the valuation of thepension scheme and an effective finance cost on the fair value of sharesclassified as financial liabilities. 4. Property, plant and equipment Six months ended 30 September 2006 Leasehold Fixtures and Equipment, Assets under Total improvements fittings plant and long-term machinery arrangements £'000 £'000 £'000 £'000 £'000 Opening netbook amount at1 April 2006 1,129 1,847 13,680 36,656 53,312Additions 588 5 1,488 1,378 3,459Net book valueof disposals - - - (6,680) (6,680)Depreciation (36) (16) (1,900) (2,636) (4,588) ---------- --------- --------- --------- --------- Closing netbook amount at30 September2006 1,681 1,836 13,268 28,718 45,503 ========== ========= ========= ========= ========= Six months ended 30 September 2007 Leasehold Fixtures and Equipment, Assets under Total improvements fittings plant and long-term machinery arrangements £'000 £'000 £'000 £'000 £'000 Opening netbook amount at1 April 2007 1,996 1,850 10,571 36,418 50,835Additions 15 10 2,950 25,066 28,041Net book valueof disposals - - - (180) (180)Depreciation (102) (21) (383) (3,693) (4,199) --------- --------- --------- --------- --------- Closing netbook amount at30 September2007 1,909 1,839 13,138 57,611 74,497 ========= ========= ========= ========= ========= 5. Reconciliation of profit before tax to net cash generated from operations Six months Six months ended ended 30.9.07 30.9.06 £'000 £'000 Profit before taxation 4,668 1,471 Adjustments for:- Depreciation 4,199 4,588- Profit on disposal of property, plant andequipment - (138)- Increase in share-based payments 281 -- Decrease in retirement benefit obligations - (101)- Finance income (96) (80)- Finance costs 2,529 2,168 Changes in working capital- Inventories 1,192 5,619- Trade and other receivables 1,820 17,009- Trade and other payables (4,624) (16,746) -------- -------- Cash generated from operations 9,969 13,790 ======== ======== Reconciliation of net cash flow to movement in net debt Six months Six months ended ended 30.9.07 30.9.06 £'000 £'000 Net increase/(decrease) in cash and cash equivalents 1,623 (1,348)Net cash (inflow)/outflow from debt and leasefinancing (23,927) 16,375 -------- -------- (Increase)/decrease in net debt in the period (22,304) 15,027 -------- -------- Opening net debt (53,297) (76,978) -------- -------- Closing net debt (75,601) (61,951) ======== ======== 6. Business combinations During the period, the Group completed two acquisitions. Simentra Limited On 16 April 2007, the Group acquired 100% of the issued share capital ofSimentra Limited for consideration of £450,000. The net assets acquired in thetransaction, and the goodwill arising, are as follows: Carrying amount before Fair value Fair value combination adjustments £'000 £'000 £'000 Cash and cashequivalents 10 - 10Trade andother payables (40) - (40) --------- --------- --------- Net (30) - (30)liabilities ========= ========= ========= Goodwill 480 --------- Totalconsideration,satisfied bycash 450 ========= The Group invested in this business seeking to benefit from businessrelationships that were non-contractual at the time of acquisition. Blue Amber Red Limited On 14 June 2007, the Group acquired 100% of the issued share capital of BlueAmber Red Limited for consideration of £63,000. The net assets acquired in thetransaction, and the goodwill arising, are as follows: Carrying amount before Fair value Fair value combination adjustments £'000 £'000 £'000 Inventories 64 - 64Cash and cashequivalents 24 - 24Trade andother payables (30) - (30) --------- --------- --------- Net assets 58 - 58 ========= ========= ========= Goodwill 5 --------- Totalconsideration,satisfied bycash 63 ========= 7. Events after the balance sheet date On 23 November 2007, the Group acquired all of the issued share capital of AutoElectrical Services (Manchester) Limited, a software company that designs,builds and installs integrated electrical and communication systems forspecialist vehicles, for total consideration of £2.2 million of which £1.25million was payable on completion. On 26 November 2007, the Group acquired 25% of the issued share capital ofMiquest Limited, a company which provides integrated solutions for assetmanagement, for consideration of £380,000. 8. First time adoption of International Financial Reporting Standards For all periods up to and including the year ended 31 March 2007, the Groupprepared its financial statements in accordance with United Kingdom generallyaccepted accounting practice (UK GAAP). These interim financial statements, forthe six months ended 30 September 2007, are the first that the Group is requiredto prepare that are consistent with the revenue and recognition principles ofInternational Financial Reporting Standards (IFRS) as adopted by the EuropeanUnion (EU). In preparing these interim financial statements, the Group has started from anopening balance sheet as at 1 April 2006, the Group's date of transition toIFRS, and made those changes in accounting policies and other restatementsrequired by IFRS 1 for the first-time adoption of IFRS. This note explains the principal adjustments made by the Group in re-stating itsUK GAAP balance sheet as at 1 April 2006 and its previously published UK GAAPfinancial statements for the year ended 31 March 2007. Exemptions applied IFRS 1 provides a number of optional exemptions to the general principles offull retrospective application of IFRS. The Group has elected to take advantageof the following optional exemption. Business combinations IFRS 3 Business Combinations, has not been applied to acquisitions ofsubsidiaries or of interests in joint ventures that occurred before 1 April2006. Reconciliation of equity at 1 April 2006 Note UK GAAP A B IFRS £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 53,320 (8) - 53,312Goodwill 34,327 - - 34,327Other intangible assets - 8 - 8Retirement benefit surplus - 228 - 228Current assetsInventories 8,629 - - 8,629Trade and other receivables 47,587 (228) - 47,359Cash and cash equivalents 2,223 - - 2,223 Current liabilitiesTrade and other payables (60,033) - - (60,033)Current income tax liabilities (113) - - (113)Borrowings (6,354) - - (6,354)Shares classified as financial liabilities (10,000) - 1,667 (8,333) Non-current liabilitiesBorrowings (64,514) - - (64,514)Deferred income tax liabilities (1,814) - - (1,814) --------- --------- --------- --------- Net assets 3,258 - 1,667 4,925 ========= ========= ========= ========= EquityShare capital 100 - - 100Share premium account 2,971 - - 2,971Profit and loss account 187 - 1,667 1,854 --------- --------- --------- --------- Total equity 3,258 - 1,667 4,925 ========= ========= ========= ========= Notes (A) Under UK GAAP, software costs were included within tangible fixed assets.Under IAS 38, "Intangible Assets", computer software requires separatedisclosure on the face of the balance sheet as an intangible asset. The effectof this balance sheet reclassification is to move software costs with a net bookamount of £8,000 from property, plant and machinery to other intangible assets. Also under UK GAAP, surpluses and deficits in relation to pension schemes wereclassified within other debtors or other creditors respectively. Under IAS 19,"Employee Benefits", separate disclosure is required on the face of the balancesheet. The effect of this balance sheet reclassification is to move £228,000from trade and other receivables and show this amount separately withinnon-current assets. (B) In accordance with IAS 39, "Financial Instruments: Recognition andMeasurement", a financial liability is required to be measured initially at fairvalue. At the date of transition to IFRS, the fair value of the sharesclassified as financial liabilities has been calculated to be £8.333 millioninstead of the £10 million recorded under UK GAAP. An adjustment of £1.667million has therefore been reflected in reserves and shares classified asfinancial liabilities. The amortisation of goodwill arising prior to the date of transition to IFRS hasbeen netted with the cost of the goodwill. Reconciliation of equity at 30 September 2006 Note UK GAAP A B C D IFRS £'000 £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and 45,509 - (6) - - 45,503equipmentGoodwill 33,290 1,037 - - - 34,327Other intangible - - 6 - - 6assetsRetirement benefit - - 329 - - 329surplusCurrent assetsInventories 3,010 - - - - 3,010Trade and other 30,679 - (329) - - 30,350receivablesCash and cash 875 - - - - 875equivalentsCurrent liabilitiesTrade and other (43,287) - - - - (43,287)payablesBorrowings (4,468) - - - - (4,468)Shares classified asfinancial (10,000) - - 871 - (9,129)liabilitiesNon-currentliabilitiesBorrowings (49,193) - - - - (49,193)Deferred income taxliabilities (1,814) - - - - (1,814) --------- -------- ------- ------- ------- -------- Net assets 4,601 1,037 - 871 - 6,509 ========= ======== ======= ======= ======= ======== EquityShare capital 100 - - - - 100Share premium account 2,971 - - - - 2,971Profit and loss account 1,530 1,037 - 871 - 3,438 --------- -------- ------- ------- ------- -------- Total equity 4,601 1,037 - 871 - 6,509 ========= ======== ======= ======= ======= ======== Notes (A) Under UK GAAP, goodwill was amortised over its estimated expected usefullife. Under IFRS 3 "Business Combinations", goodwill is considered to have anindefinite life and is therefore not amortised but subject to annual impairmenttesting. The goodwill charge made under UK GAAP has been reversed under IFRSfrom 1 April 2006, the IFRS transition date. The IFRS restatement results in areduction in the amortisation charge, within administrative expenses, of £1.037million for the six months ended 30 September 2006 and a corresponding increasein goodwill as at 30 September 2006. (B) Under UK GAAP, software costs were included within tangible fixed assets.Under IAS 38, "Intangible Assets", computer software requires separatedisclosure on the face of the balance sheet as an intangible asset. The effectof this balance sheet reclassification is to move software costs with a net bookamount of £6,000 from property, plant and machinery to other intangible assets. Also under UK GAAP, surpluses and deficits in relation to pension schemes wereclassified within other debtors or other creditors respectively. Under IAS 19,"Employee Benefits", separate disclosure is required on the face of the balancesheet. The effect of this balance sheet reclassification is to move £329,000from trade and other receivables and show this amount separately withinnon-current assets. (C) In accordance with IAS 39, "Financial Instruments: Recognition andMeasurement", a financial liability is required to be measured at fair value. At30 September 2006, the fair value of the shares classified as financialliabilities has been calculated to be £9.129 million instead of the £10 millionrecorded under UK GAAP. The decrease in the fair value of this financialliability of £871,000 has been reflected in the carrying value of the sharesclassified as financial liabilities at 30 September 2006. Reconciliation of equity at 31 March 2007 Note UK GAAP A B C D IFRS £'000 £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant andequipment 50,879 - - (44) - 50,835Goodwill 112,123 (74,077) 2,070 - (3,257) 36,859Other intangible - - - 44 - 44assetsRetirement benefit - - - 329 - 329surplusCurrent assetsInventories 4,235 - - - - 4,235Trade and otherreceivables 14,381 - - (329) - 14,052Cash and cash 10,231 - - - - 10,231equivalents Current liabilitiesTrade and other payables (21,058) - - 42 - (21,016)Current income tax liabilities (213) - - - - (213)Borrowings (13,765) - - - - (13,765) Non-currentliabilitiesBorrowings (49,763) - - - - (49,763)Deferred income taxliabilities (3,171) - - - - (3,171)Retirement benefitobligations - - - (42) - (42) --------- -------- ------- ------- ------- -------- Net assets 103,879 (74,077) 2,070 - (3,257) 28,615 ========= ======== ======= ======= ======= ======== EquityShare capital 16,800 - - - - 16,800Share premium 17,890 - - - - 17,890accountMerger reserve 68,293 (68,293) - - - -Reverse acquisitionreserve - (8,367) - - (3,334) (11,701)Profit and loss 896 2,583 2,070 - 77 5,626account --------- -------- ------- ------- ------- -------- Total equity 103,879 (74,077) 2,070 - (3,257) 28,615 ========= ======== ======= ======= ======= ======== Notes (A) On 30 March 2007, AssetCo Group Limited completed the reverseacquisition of Asfare Group Plc. On the same day, the name of Asfare Group Plcwas changed to AssetCo Plc. Under UK GAAP, a "true and fair" over-ride wasadopted and the transaction was accounted for using conventional acquisitionaccounting. Under IFRS, the business combination qualifies as a reverseacquisition and has been accounted for as such. The factors indicating that areverse acquisition has taken place include the fact that the former directorsand shareholders of AssetCo Group Limited hold 59% of the equity of the combinedentity and have the power to govern the financial and operating policies of theEnlarged Group. Reverse acquisition accounting has resulted in a reverseacquisition reserve replacing the merger reserve previously reported under UKGAAP, lower goodwill and the share capital and share premium account of thecompany formerly known as Asfare Group Plc replacing those of AssetCo GroupLimited. The net assets acquired in the transaction, and the goodwill arising,are as follows: Carrying amount before Fair value Fair value combination adjustments £'000 £'000 £'000 Goodwill 5,768 - 5,768Property,plant andequipment 371 - 371Inventories 1,363 - 1,363Trade andotherreceivables 3,108 - 3,108Cash and cashequivalents 797 - 797Trade andother payables (4,650) - (4,650)Borrowings (2,057) - (2,057) --------- --------- --------- Net assets 4,700 - 4,700 ========= ========= ========= Goodwill 3,552 --------- Deemedconsideration 8,252 ========= By adopting reverse acquisition accounting, the merger reserve of £68.293million, previously reported under UK GAAP, is replaced by a reverse acquisitionreserve of £8.367 million, which represents the extent of the reserves ofAssetCo Group Limited which have been capitalised. The adjustment to the profitand loss account of £2.583 million reflects the fact that the retained earningsof AssetCo Group Limited at 30 March 2007 (£3.479 million) are replacing thoseof Asfare Group Plc, previously reported under UK GAAP. A correspondingadjustment to goodwill of £74.077 million is required. (B) Under UK GAAP, goodwill was amortised over its estimated expected usefullife. Under IFRS 3 "Business Combinations", goodwill is considered to have anindefinite life and is therefore not amortised but subject to annual impairmenttesting. The goodwill charge made under UK GAAP has been reversed under IFRSfrom 1 April 2006, the IFRS transition date. The IFRS restatement results in areduction in the amortisation charge, within administrative expenses, of £1.033million for the six months ended 31 March 2007 (£2.070 million for the yearended 31 March 2007) and a corresponding increase in goodwill as at 31 March2007. (C) Under UK GAAP, software costs were included within tangible fixed assets.Under IAS 38, "Intangible Assets", computer software requires separatedisclosure on the face of the balance sheet as an intangible asset. The effectof this balance sheet reclassification is to move software costs with a net bookamount of £44,000 from property, plant and machinery to other intangible assets. Also under UK GAAP, surpluses and deficits in relation to pension schemes wereclassified within other debtors or other creditors respectively. Under IAS 19,"Employee Benefits", separate disclosure is required on the face of the balancesheet. The effect of this balance sheet reclassification is to move £329,000from trade and other receivables and £42,000 from trade and other payables andshow these amounts separately within non-current assets and non-currentliabilities. (D) Under UK GAAP costs incurred by Asfare Group Plc in connection with thebusiness combination with AssetCo Group Limited were capitalised in goodwill.Under IFRS, the business combination is deemed to be a reverse acquisition and,in substance, AssetCo Group Limited acquired Asfare Group Plc. The costsincurred by Asfare Group Plc should therefore not be reflected in goodwill butcharged to the income statement. The result is an increase in administrativeexpenses of £1.59 million for the year ended 31 March 2007. Under IFRS, the carrying value of financial liabilities is required to be statedat fair value. An assessment of the fair value of shares classified as financialliabilities at 30 March 2007, the date at which the shares were re-purchased,results in a net increase in finance costs of £1.667 million for the year ended31 March 2007. On the same date, deferred consideration of £5 million was waivedby the former owners of AssetCo Group Limited which results in a finance gain of£3.334 million for the year ended 31 March 2007. Reconciliation of profit for the six months ended 30 September 2006 Note UK GAAP A B C IFRS £'000 £'000 £'000 £'000 £'000 Turnover 52,941 - - - 52,941Cost of sales (46,582) - - - (46,582) --------- -------- ------- ------- -------- Gross profit 6,359 - - - 6,359 --------- -------- ------- ------- -------- Administrative expenses (3,837) 1,037 (138) - (2,938)Profit on disposal of fixed - - 138 - 138assets --------- -------- ------- ------- -------- Operating profit 2,522 1,037 - - 3,559 --------- -------- ------- ------- -------- Finance income 80 - - - 80Finance costs (1,372) - - (796) (2,168) --------- -------- ------- ------- -------- Profit on ordinary activitiesbefore 1,230 1,037 - (796) 1,471taxation --------- -------- ------- ------- -------- Tax on profit on ordinary 113 - - - 113activities Profit on ordinary activitiesafter 1,343 1,037 - (796) 1,584taxation ========= ======== ======= ======= ======== Notes (A) As noted in the reconciliation of equity at 30 September 2006, amortisationof £1.037 million reported under UK GAAP has been reversed under IFRS. (B) Under UK GAAP, the profit on disposal of fixed assets was reported withinadministrative expenses. Under IFRS, for presentational purposes only, theprofit on disposal has been separately shown on the face of the incomestatement. (C) Under IFRS, the carrying value of financial liabilities is required to bestated at fair value. An assessment of the fair value of shares classified asfinancial liabilities at 30 September 2006 results in an increase in financecosts of £796,000 for the six months ended 30 September 2006. Reconciliation of profit for the year ended 31 March 2007 Note UK GAAP A B C D IFRS £'000 £'000 £'000 £'000 £'000 £'000 Revenue 94,106 - - - - 94,106Cost of sales (70,644) - - - - (70,644) -------- ------- -------- -------- ------- ------- Gross profit 23,462 - - - - 23,462 -------- ------- -------- -------- ------- ------- Administrative (16,614) 2,070 (138) - (1,590) (16,272)expensesProfit on disposalof - - 138 - - 138fixed assets -------- ------- -------- -------- ------- ------- Operating profit 6,848 2,070 - - (1,590) 7,328 -------- ------- -------- -------- ------- ------- Finance income 45 - - 3,334 - 3,379Finance costs (3,603) - - (1,667) - (5,270) -------- ------- -------- -------- ------- ------- Profit on ordinaryactivities before 3,290 2,070 - 1,667 (1,590) 5,437taxation -------- ------- -------- -------- ------- ------- Tax on profit onordinary 2 - - - - 2activities -------- ------- -------- -------- ------- ------- Profit on ordinaryactivities after 3,292 2,070 - 1,667 (1,590) 5,439taxation ======== ======= ======== ======== ======= ======= Notes (A) As noted in the reconciliation of equity at 31 March 2007, amortisation of£2.070 million reported under UK GAAP has been reversed under IFRS. (B) Under UK GAAP, the profit on disposal of fixed assets was reported withinadministrative expenses. Under IFRS, for presentational purposes only, theprofit on disposal has been separately shown on the face of the incomestatement. (C) Under IFRS, the carrying value of financial liabilities is required to bestated at fair value. An assessment of the fair value of shares classified asfinancial liabilities at 30 March 2007, the date at which the shares werere-purchased, results in a net increase in finance costs of £1.667 million forthe year ended 31 March 2007. On the same date, deferred consideration of £5million was waived by the former owners of AssetCo Group Limited which resultsin a finance gain of £3.334 million for the year ended 31 March 2007. (D) Under UK GAAP costs incurred by Asfare Group Plc in connection with thebusiness combination with AssetCo Group Limited were capitalised in goodwill.Under IFRS, the business combination is deemed to be a reverse acquisition and,in substance, AssetCo Group Limited acquired Asfare Group Plc. The costsincurred by Asfare Group Plc should therefore not be reflected in goodwill butcharged to the income statement. The result is an increase in administrativeexpenses of £1.59 million for the year ended 31 March 2007. Cash flows There have been no material changes to the information previously published inthe Group's cash flow statements during the periods under review. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Assetco