28th Sep 2006 07:05
Watermark Group PLC28 September 2006 28 September 2006 Watermark Group plc - Interim Report June 2006 Chairman's and Chief Executive's letter to share owners Dear Share owner Financial summary Comparing consolidated operations for the 6 months to 30 June 2006 with 2005: SalesTurnover up 17% to £41.21m 2005: £35.18m MarginsGross profit margin up 11% to 41.13% 2005: 37.18%Operating profit margin pre exceptional items* down 63% to 2.81% 2005: 7.54% Operating (loss)/profit margin post exceptional items* down 109% to (0.66%) 2005: 7.54% Profits/(losses) Gross profit up 30% to £16.95m 2005: £13.08mEBITDA** down 86% to £0.43m 2005: £3.16mOperating profit pre exceptional items* down 56% to £1.16m 2005: £2.65mOperating (loss)/profit post exceptional items* down 111% to (£0.27m) 2005:£2.65mProfit before tax pre exceptional items* down 67% to £0.78m 2005: £2.35m(Loss)/profit before tax post exceptional items* down 128% to (£0.65m) 2005: £2.35m * Exceptional items relate to bad debt provisions and re-organisation costs as shown in the income statement. **EBITDA (earnings before interest, taxation, depreciation and amortisation) is calculated in note 4 on page 11. Total assets up 5% to £75.60m 2005: £72.15m Diluted (loss)/earnings per share down 151% to (1.79p) 2005: 3.52p 2006 has been a difficult period in the company's history. There have also beensome significant board changes. Maurice Ostro has been appointed Chief ExecutiveOfficer and Danny Bernstein, interim Chairman. Nick Scott has also joined theboard, to further strengthen the executive team, with his commercial expertise. The Services division has seen the renewal of some key contracts, against abackdrop of a very competitive and cost sensitive marketplace. It has alsosecured a number of new strategic contracts and successfully acquired theHeathrow based airline caterer, International Catering Limited. In May 2006, the company announced a reduction in profit expectations, and thenin July 2006 announced both a further reduction in expectations and thetermination of discussions in which the company was engaged with potentialproviders of private equity finance. Despite this, the group's underlying business remains profitable, albeit at alower level than the previous year. Management is currently taking action toaddress this through further restructuring of the business, both in terms ofimproving the net profitability of the Products division, and the fullintegration of the caterer, International Catering Limited, into the EncompassCentre at Heathrow, from its current separate Heathrow base. The Products division's Interim figures show growth in sales in 2006, comparedwith the previous year, at the required gross margin, but at a significantlyreduced operating margin. In the first half of 2005, certain ancillary revenuewas included within the results of the Products division, which has not beenrepeated in 2006, and this is partly responsible for this year's lower segmentalresult. In addition, the high Products divisional overhead base, which will beaddressed, together with the significant Products divisional write downsannounced on 20 July 2006, has resulted in an approximate breakeven positionbefore exceptional items for this division in the first six months. A further provision for doubtful debts has been made against the remainingbalance of commission monies owed within the Products division, which wereunprovided for on 20 July 2006, as the expected payments have not beenforthcoming within the agreed timeframe. In the event that payments are received, the provision will be released according to the group's accounting policy. These amount to £0.46m, and have been shown as an exceptional cost to the business. The total bad debt provision shown as an exceptional cost is £1.07m, and this all relates to the balance of a commission debt from 2005, which remains unpaid. The other exceptional costs of £0.36m relate to restructuring within, both the Products and Services divisions. The Services division's Interim figures include approximately two and a halfmonths of trading from International Catering Limited. If this contribution isexcluded, the Interim operating margin for the Services division has in factdecreased from 10% in 2005 to 5% this half year, reflecting a contractualdiscount on a major contract and a slower than expected delivery of efficienciesfrom the roll out of the group's Axapta IT system. To address these areas, the management structure of the business is being fullyintegrated and streamlined, so that effectively there is now one business unitoperating, rather than two, and the resultant overhead savings are expected toflow through in the group's future results. In addition, the integration ofInternational Catering Limited into the Encompass Centre at Heathrow, andadditional investment in the facility in the second half of the year, shouldconsolidate and improve operational efficiencies. The forecast full year operating margin for the Services division, is targetedat around 8%, which is more in line with historic levels. The anticipatedimprovement in the Products division's operating margin will not be seen until2007. The board has reviewed its forecast for the year, and, on a like forlike basis, the underlying expectation of pre exceptional, pre tax profit islikely to be in the range of £2m-£2.5m, as compared to the £3.1m announced on 20July 2006. This revision is a result of additional transition costs associatedwith the delayed integration of International Catering Limited, additionalcosts in rolling out the new IT solution, and the significant costs involved in progressing the various growth opportunities. As a result of providing for loss making contracts inherited on the acquisition of International Catering Limited, an additional £0.8m will be released to operating profit as a positive contribution in the year. In the Interim Results, £0.3m of this figure has been recognised. The company is operating within its bank facilities for its currentlevel of business. Management is also progressing the aforementioned new businessopportunities overseas which are key to the group's continued growth andsuccess, with the group's Heathrow operation having successfully proven both theoutsource catering model and the Encompass cabin management programme. It istherefore in the process of reviewing its funding requirements in relation tothe development of both its existing business and potential future expansionopportunities. The board has decided not to pay an interim dividend, in due regard to theabove. The group's Axapta IT system has been fully rolled out, which has involved asignificant amount of work and cost. This system is key to facilitating theintegration of the group's two UK catering businesses, the improved performanceof the Products division, and in providing the sound platform for any futuregrowth, either overseas or in the UK. Employees across the group have shown tremendous dedication and commitmentduring the year to date, despite the various changes, and on behalf of thecompany we would like to convey our sincere appreciation to them all. In summary, we remain positive about the future growth opportunities availableto this business and the ability of its management to take best advantage ofthem. Danny Bernstein Maurice OstroChairman Chief Executive Unaudited consolidated income statementfor the 6 months to 30 June 2006 Total Total 6 months Total 12 months Before to 30 6 months to to 31 exceptional Exceptional June 30 June December items items 2006 2005 2005 Note £'000 £'000 £'000 £'000 £'000 Revenue 3 41,211 - 41,211 35,181 80,087 Cost of sales (24,262) - (24,262) (22,102) (49,865) --------------------------------------------------------------------Gross profit 16,949 - 16,949 13,079 30,222 Operating and administrative costs (excluding exceptionalitems) (16,166) - (16,166) (9,830) (21,820) Movement in fair valueof derivative financialinstruments 376 - 376 (597) (872) Exceptional provision for bad debts - (1,074) (1,074) - - Exceptional re-organisation costs - (358) (358) - (1,358) -------------------------------------------------------------------- Total operating andadministrative expenses (15,790) (1,432) (17,222) (10,427) (24,050) Operating profit/(loss) 3 1,159 (1,432) (273) 2,652 6,172 Finance costs (391) - (391) (194) (1,058)Finance income 12 - 12 39 91Movement in fair valueof financial asset - - - (125) (179) Share of post tax lossof associate - - - (23) (40)Negative goodwill - 5 5 - - -------------------------------------------------------------------- (379) 5 (374) (303) (1,186) -------------------------------------------------------------------- Profit/(loss) before tax attributableto equity share owners 5 780 (1,427) (647) 2,349 4,986 Tax expense (135) - (135) (741) (1,166) -------------------------------------------------------------------- Profit/(loss) after taxattributable to equityshare owners 3 645 (1,427) (782) 1,608 3,820 ==================================================================== (Loss)/earnings per share(pence) Basic 6 (1.79p) 3.92p 9.09p Diluted 6 (1.79p) 3.52p 8.21p Unaudited consolidated balance sheetas at 30 June 2006 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 AssetsNon-current assetsProperty, plant and equipment 10,484 10,093 10,411Goodwill 30,216 30,075 30,075Intangible assets 1,667 1,020 1,308Investment in associate accountedfor using the equity method - 17 -Available for sale financial assets - 5 -Financial assets held at fair value through profit or loss 19 20 19Trade and other receivables - 112 1,092 ---------------------------------------- 42,386 41,342 42,905 Current assetsInventories 3,430 3,026 3,378Trade and other receivables 16,687 14,560 18,828Prepayments 5,035 5,500 2,858Fair value of derivative financial instruments 236 134 -Deferred taxation 377 - -Cash and short-term deposits 7,439 7,587 6,373 ---------------------------------------- 33,204 30,807 31,437 ----------------------------------------Total assets 75,590 72,149 74,342 ======================================== Equity and liabilitiesEquity attributable to equityshare owners of the parentIssued share capital 446 429 430Share premium account 21,581 21,486 21,518Shares to be issued 2,125 3,813 3,813Capital redemption reserve 24 24 24Merger reserve 5,321 3,506 3,506Unrealised gains and losses reserve - - (79)Foreign currency translation reserve (112) (22) 282Retained earnings 12,571 10,937 13,502 ----------------------------------------Total equity 41,956 40,173 42,996 Non-current liabilitiesTrade and other payables 404 - 50Interest bearing loans and borrowings 417 793 729Deferred consideration due after morethan one year 1,062 2,128 2,125Deferred income tax liabilities - 454 842 ---------------------------------------- 1,883 3,375 3,746 Current liabilitiesTrade and other payables 14,182 10,825 12,720Interest bearing loans and borrowings 14,250 15,267 12,994Deferred consideration due within one year 1,063 1,063 1,063Current income tax 489 347 603Fair value of derivative financialinstruments - - 220Provisions 1,767 1,099 - ---------------------------------------- 31,751 28,601 27,600 ----------------------------------------Total liabilities 33,634 31,976 31,346 ----------------------------------------Total equity and liabilities 75,590 72,149 74,342 ======================================== Unaudited consolidated cash flow statementfor the 6 months to 30 June 2006 6 months to 6 months to 12 months to 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Net cash flows from operatingactivitiesLoss/(profit) before tax (647) 2,349 4,986Depreciation, amortisation and negative goodwill 702 511 989Exceptional bad debt write off 1,074 - -Share based payment expense 94 90 184Finance income (12) (39) (91)Finance cost 391 194 1,058Movement in fair value of financial assets - 125 179Share of loss of associate - 23 40Movement in fair value of forward exchange rate contracts (376) 597 872Decrease in inventories 89 971 695Decrease/(increase) in trade and other receivables 2,599 (493) (2,953)(Decrease)/increase in trade payables and provisions 280 (3,389) (1,607) ----------------------------------------------Cash inflows generated from operations 4,474 939 4,352Interest received 12 39 91Interest paid (391) (194) (1,058)Income taxes paid (128) (1,523) (1,294) ----------------------------------------------Net cash inflows/(outflows) from operating activities 3,687 (739) 2,091 ---------------------------------------------- Cash flows from investingactivitiesProceeds from sale of freehold property 7,510 - -Purchase of property, plant and equipment (553) (405) (1,198)Purchase of intangible assets (491) (771) (1,088)Acquisition of subsidiary, net of cash acquired (2,678) (1,062) (1,062) ----------------------------------------------Net cash flows from/(used in) investing activities 3,788 (2,238) (3,348) ---------------------------------------------- Cash flows from financingactivitiesProceeds from issue of shares 66 58 91Payment of hire purchase and financelease obligations (304) (292) (552)Repayment of borrowings owed to acquisition vendors (7,230) - -Dividends paid to equity share owners (241) - (842) ----------------------------------------------Net cash flows used in financing activities (7,709) (234) (1,303) ---------------------------------------------- Net decrease in cash and cash equivalents (234) (3,211) (2,560)Net foreign exchange difference 53 220 432Cash and cash equivalents brought forward (6,035) (3,907) (3,907) ----------------------------------------------Cash and cash equivalents carried forward (6,216) (6,898) (6,035) ============================================== Unaudited consolidated statement of changes in equityas at 30 June 2006 Consolidated statement of changes in equity for the 6 months to 30 June 2006 Unrealised Shares Capital gains and Foreign Issued Share to be redemption Merger losses currency Retained Total capital premium issued reserve reserve reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 430 21,518 3,813 24 3,506 (79) 282 13,502 42,996Currency translationdifferences - - - - - - (394) - (394)Loss for theperiod - - - - - - - (782) (782)Derivativeforward exchange contracts - - - - - 79 - - 79Cost of sharebased payments - - - - - - - 94 94Deferred taxation - - - - - - - (2) (2) --------- 12,812Issue of sharecapital 14 - (1,688) - 1,815 - - - 141Exercise of share options 2 63 - - - - - - 65Equity dividends - - - - - - - (241) (241) -----------------------------------------------------------------------------------------At 30 June 2006 446 21,581 2,125 24 5,321 - (112) 12,571 41,956 ========================================================================================= Consolidated statement of changes in equity for the 6 months to 30 June 2005 Unrealised Shares Capital gains and Foreign Issued Share to be redemption Merger losses currency Retained Total capital premium issued reserve reserve reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 31 December2004 404 21,428 6,496 24 848 - (273) 9,607 38,534Effects of adopting IAS 32& IAS 39 - - - - - - - 731 731 -----------------------------------------------------------------------------------------At 1 January 2005 404 21,428 6,496 24 848 - (273) 10,338 39,265Currency translation differences - - - - - - 251 - 251Profit for theperiod - - - - - - - 1,608 1,608Cost of sharebased payments - - - - - - - 90 90 --------- 1,698Issue of sharecapital 25 - (2,683) - 2,658 - - - -Exercise of share options - 58 - - - - - - 58Equity dividends - - - - - - - (1,099) (1,099) -----------------------------------------------------------------------------------------At 30 June 2005 429 21,486 3,813 24 3,506 - (22) 10,937 40,173 ========================================================================================= Notes to the group accountsfor the 6 months to 30 June 2006 1. Corporate information The results for the year to 31 December 2005 do not constitute statutoryaccounts. They are an abridged version of the full accounts which received anunqualified report from the auditors and have been filed with the Registrar ofCompanies. The interim results are unaudited. Watermark Group plc is a public limited company incorporated and domiciled inEngland & Wales. The company's shares are publicly traded on the London StockExchange. The principal activities of the group are described in note 3. 2. Summary of significant accounting policies i. Basis of preparation The accounting policies applied in preparing the interim report for the periodended 30 June 2006 are unchanged from those adopted in the financial statementsfor the year ended 31 December 2005. The financial statements have been prepared on a historical cost basis, exceptfor derivative financial instruments and financial assets held at fair valuethrough profit or loss which are all measured at fair value. The consolidatedfinancial statements are presented in sterling and are rounded to the nearestthousand (£'000) except where otherwise indicated. ii. Statement of compliance This financial information has been prepared on the basis of the recognition andmeasurement requirements of IFRSs in issue that are adopted by the EU andeffective at 30 June 2006. The group has also complied with IFRSs as issued bythe IASB. 3. Segmental reporting The Watermark group is organised on a worldwide basis into two primary businesssegments, namely the Products and Services divisions. These reportable segmentsare the two strategic divisions for which monthly financial information isprovided to the board. The Products division provides a broad range of travel supplies predominately tothe international travel industry on a global basis. The Services division isone of the major suppliers of catering and media services to the internationaltravel industry within the United Kingdom. Whilst the group's two divisions are managed on a worldwide basis, they operatein three principal geographical areas of the world. The main region wheresignificant group revenues are earned is the UK, Europe & Middle East region andthis business is conducted from the United Kingdom. Operations in Asia areconducted through the Hong Kong subsidiary and in the Americas through the USAsubsidiary, whose offices are in Miami. Information on primary reporting by business segment is shown below. Segment revenue, expenses and results include transfers and transactions betweenbusiness segments. Such transactions are accounted for at competitive marketprices which would be charged to unaffiliated clients for similar goods. Allinter-segment transactions are eliminated on consolidation. Exceptional items relate to significant non-recurring expenditure of an unusualnature. Notes to the group accountsfor the 6 months to 30 June 2006 3. Segmental reporting (continued) Segmental information by business segment for 6 months to 30 June 2006 Products Services division division Eliminations Total 6 months to 6 months to 6 months to 6 months to 30 June 30 June 30 June 30 June 2006 2006 2006 2006 £'000 £'000 £'000 £'000 RevenueTravel supplies, cateringand media services 15,183 26,028 - 41,211Marketing, design, consultancy and commission - - - -Net sales to other segments 46 4 (50) - ------------------------------------------------------Total revenue 15,229 26,032 (50) 41,211 ====================================================== ResultSegment result before exceptional items 154 1,551 (15) 1,690Exceptional bad debt (1,074) - - (1,074)Exceptional restructuringcosts (187) (171) - (358) ------------------------------------------------------Segment result (1,107) 1,380 (15) 258 ==========================================Unallocated corporate expenses (531) ------------Operating loss (273)Interest expense (391)Interest income 12Negative goodwill write back 5Income tax (135) ------------Loss after tax (782) ============ Segmental information by business segment for 6 months to 30 June 2005 Products Services division division Eliminations Total 6 months to 6 months to 6 months to 6 months to 30 June 30 June 30 June 30 June 2005 2005 2005 2005 £'000 £'000 £'000 £'000 RevenueTravel supplies, cateringand media services 12,861 21,320 - 34,181Marketing, design, consultancy and commission 1,000 - - 1,000Net sales to other segments - - - - ------------------------------------------------------Total revenue 13,861 21,320 - 35,181 ====================================================== ResultSegment result beforeexceptional items 1,545 2,148 - 3,693Exceptional restructuringcosts - - - - ------------------------------------------------------Segment result 1,545 2,148 - 3,693 ==========================================Unallocated corporate expenses (1,041) ------------Operating profit 2,652Interest expense (194)Interest income 39Movement in fair value of financial assets (125)Share of loss of associate (23)Income tax (741) ------------Profit after tax 1,608 ============ Notes to the group accountsfor the 6 months to 30 June 2006 4. EBITDA (Earnings before interest, taxation, depreciation and amortisation) Reconciliation of operating (loss)/profit to EBITDA 12 months to 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005 £'000 £'000 £'000 Operating (loss)/profit (273) 2,652 6,172Depreciation 565 508 960Amortisation 142 - 29 -----------------------------------------------EBITDA 434 3,160 7,161 =============================================== Reconciliation of operating (loss)/profit to adjusted EBITDA (earnings beforeinterest, taxation, depreciation, amortisation and exceptional items) 12 months to 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005 £'000 £'000 £'000 Operating (loss)/profit (273) 2,652 6,172Depreciation 565 508 960Amortisation 142 - 29Exceptional bad debt 1,074 - -Exceptional re-organisation costs 358 - 1,358 -----------------------------------------------Adjusted EBITDA 1,866 3,160 8,519 =============================================== 5. (Loss)/profit before tax attributable to equity share owners Reconciliation of (loss)/profit before tax attributable to equity share ownersto adjusted profit before tax attributable to equity share owners 12 months to 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005 £'000 £'000 £'000 (Loss)/profit before tax attributable to equity share owners (647) 2,349 4,986Share based payment expense 94 90 184Exceptional bad debt 1,074 - -Exceptional re-organisation costs 358 - 1,358Movement in fair value of assetsheld at fair value through profit or loss - - 179 -----------------------------------------------Adjusted profits 879 2,439 6,707 =============================================== 6. (Loss)/earnings per share The following represents (loss)/earnings and share data used to calculate basic,diluted and adjusted earnings per share: 12 months to Ref 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005 £'000 £'000 £'000 (Loss)/earnings table Net (loss)/profit attributableto equity share owners A (782) 1,608 3,820- Exceptional items (post tax) 1,427 - 1,031- Share option costs 94 90 184- Movement in the fair value of assets held at fair value through profit or loss - 125 179 -----------------------------------------Adjusted net profit attributableto equity share owners B 739 1,823 5,214 ========================================= Weighted Weighted Weighted average shares average shares average shares 12 months to 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005Share table Ref Number Number Number Weighted average shares for basic earnings per share C 43,718,241 41,059,734 42,035,227- Share options 1,894,917 2,028,784 1,962,907- Contingent shares to be issued 847,318 2,537,376 2,537,376 -------------------------------------------------Weighted average shares for diluted earnings per share D 46,460,476 45,625,894 46,535,510 ================================================= Total earnings Total earnings Total earnings per share per share per share 12 months to 6 months to 6 months to 31 December Calculation 30 June 2006 30 June 2005 2005 formula Pence Pence Pence(Loss)/earnings per share table Basic (loss)/earnings per share A/C (1.79) 3.92 9.09Diluted (loss)/earnings per share A/D (1.79) 3.52 8.21Adjusted basic earnings per share B/C 1.69 4.44 12.40Adjusted diluted earnings per share B/D 1.59 4.00 11.20 Basic (loss)/earnings per share amounts are calculated by dividing net (loss)/profit for the period attributable to equity share owners (numerator) of theparent by the weighted number of ordinary shares in issue during the period(denominator). Diluted loss per share amounts are calculated using the same numerator anddenominator. Diluted earnings per share amounts are calculated using the samenumerator with the denominator adjusted for the dilutive effects of shareoptions and shares to be issued with regards to past acquisitions. Adjusted earnings per share, both basic and dilutive, use the denominatordescribed in the appropriate paragraphs above. For both adjusted basic earningsper share and adjusted diluted earnings per share the numerator is adjusted toremove the post tax impact of exceptional items from the calculations. Contingent deferred shares that form part of the sale and purchase agreementsfor company acquisitions are included within the calculation of diluted earningsper share only once relevant performance targets have been achieved. Excludedfrom the diluted earnings per share calculations were 1,370,968 (30 June 2005:2,022,010 and at 31 December 2005: 1,370,968) contingent deferred shares wherefuture performance targets had not yet been achieved at the reporting date. 7. Dividends paid and proposed 12 months to 6 months to 6 months to 31 December 30 June 2006 30 June 2005 2005 £'000 £'000 £'000 Paid during the year- Interim dividend for 2005 at 0.56 pence per share (2004: final dividend payment at 1.78 pence per share) 241 - 842 ============================================== Interim dividend declared forpayment and final dividendproposed for approval at AGM.- Interim dividend for 2005 at 0.56 pence per share - 258 258- Final dividend for 2005 at 1.96 pence per share (2004:1.78 pence per share) 743 841 727 ----------------------------------------------Total unrecognised dividend for 2006 743 1,099 985 ============================================== The interim dividend relating to the year ended 31 December 2005 and amountingto £241,000 was paid to share owners during January 2006. The final dividend relating to the year ended 31 December 2005 and amounting to£743,000 was approved by share owners at the AGM and was paid to share ownersduring July 2006. 8. Property, plant and equipment During the period the group has purchased plant & equipment amounting to£553,000 (6 months to June 2005: £405,000). 9. Intangible assets During the period the group has further developed intangible software products,amounting to £491,000 (6 months to 30 June 2005: £771,000). 10. Business combinations On 13 April 2006, Watermark Group plc, through its subsidiary Air Fayre Limited,acquired 100% of the share capital of International Catering Limited, anunlisted company incorporated in England & Wales. International Catering Limitedprovides catering and logistics services to the international travel industry. The purchase consideration was in the form of cash of £1. The fair value of theidentifiable assets and liabilities of International Catering Limited as at thedate of acquisition are set out below: Notes to the group accountsfor the 6 months to 30 June 2006 10. Business combinations (continued) Fair value Net book recognised on value on date of acquisition acquisition £'000 £'000 Property, plant and equipment 7,610 11,812Inventories 223 223Trade and other receivables 2,859 3,039Prepayments 70 70Deferred taxation 1,357 -Cash and short-term deposits 43 43 -------------------------------------Fair value of identifiable assets 12,162 15,187 ------------------------------------- Loan owed to former share owner (7,230) (7,230)Provision for dilapidations (404) (404)Provision for loss making supply contracts (2,067) -Trade and other payables (798) (798)Interest bearing loans and borrowings (1,281) (1,281) -------------------------------------Fair value of identifiable liabilities (11,780) (9,713) ------------------------------------- Fair value of net assets acquired 382 5,474 ================= Negative goodwill arising on acquisition (5) -----------------Purchase consideration including costsof acquisition 377 ================= Purchase considerationPurchase consideration in the form of cash (£1) -Costs associated with the acquisition 377 -----------------Total consideration 377 ================= Cash outflow on acquistionNet cash acquired with subsidiary (1,238)Cash paid including costs (377) -----------------Net cash outflow (1,615) ================= From the date of acquisition, International Catering Limited has positivelycontributed £285,000 to the net profit before the £5,000 credit of negativegoodwill to the income statement. Of the £285,000, £300,000 is a contribution tooperating profit from the release of the provision for inherited loss makingcontracts created on acquisition. If the consolidation had taken place at the start of the financial period, the contribution to the group's turnover would have been £9,434,000 and to the group's net loss before tax and write back of negative goodwill, a loss of £1,052,000. 11. Share capital During the period 103,300 ordinary shares of 1p each were allotted as a resultof the exercise of share options from which the group received totalconsideration of £66,000. A further 1,452,545 ordinary shares of 1p each were allotted under the terms ofsale and purchase agreements for company acquisitions. Independent review report to Watermark Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated profit andloss account, consolidated balance sheet, consolidated cash flow statement andthe related notes 1 to 11. We have read the other information contained in theinterim report which comprises only the Chairman's and Chief Executive's letterto share owners and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Our responsibilities donot extend to any other information. This report is made solely to the company's members, as a body, in accordancewith guidance contained in APB Bulletin 1999/4 "Review of Interim FinancialInformation". Our review work has been undertaken so that we might state to thecompany's members those matters we are required to state to it in a reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the company and thecompany's members as a body, for our review work, for this report, or for theconclusion 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 directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority, which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom auditing standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. 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 June 2006. GRANT THORNTON UK LLPChartered AccountantsSouthampton28 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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