26th Sep 2005 07:00
P&MM Group PLC26 September 2005 P&MM GROUP PLC ("P&MM" or "The Company")Interim financial statementsFor the period ended30 June 2005 Company number: 4665490 26 September 2005 Financial Highlights Unaudited Interim Results for the period ended 30 June 2005 Gross profit £5,039,000 (2004 £3,250,000), up 55%Operating profit £889,000 (2004 £490,000), up 81%Profit before tax £927,000 (2004 £390,000), up 138% • Basic earnings per share 2.58 pence (2004 1.38 pence), up 87% • Net assets £5,247,000 (2004 £4,580,000), up 15% • Positive outlook Trading Review I am pleased to report the interim results for P&MM Group plc for the 6 monthperiod to June 2005. These demonstrate significant progress achieved during theperiod and reflect a combination of mainly organic growth and one acquisition.The first half has also benefited from some significant activity that impactedthe second half in 2004. Operating profits before tax have increased by 81% to £889,000 (2004 £490,000)on gross profit that has increased by 55% to £5,039,000 (2004 £3,250,000).Profits before tax have increased by 138% to £927,000 (2004 £390,000). Basicearnings per share have increased by 87% to 2.58 pence (2004 1.38 pence). Netassets have increased by 15% to £5,247,000 from £4,580,000 at 31 December 2004providing the Group with continued scope to make appropriate investments tofurther its development. As stated in the Company's AIM admission document, theCompany currently intends to initiate a dividend policy in the medium term asand when its resources allow. In my statement to shareholders with the results for the year ended December2004, I announced that on 9 February 2005 the Group had acquired AYM, a leadingperformance improvement and motivation company for a total consideration of£682,000 with the intention of operating AYM as a separate subsidiary. Followingplanned organisational changes to AYM I am pleased to report that the companyhas met its performance expectations contributing £112,000 to Group operatingprofit in the 5 months since acquisition. Fotorama continues to perform well in its specialised field of 'fixed fee'promotions and is now regarded as the industry leader. It was acquired shortlybefore our AIM listing in August 2004, which raised £2.5m to fund acquisitions. The Group is one of the leading performance improvement businesses in the UKwith over 15 years' experience in delivering incentive and motivation programmesto clients. These programmes focus on the rewarding of employees, distributorsand customers. The Group has three operating divisions: sales promotion,incentive travel and event management and motivation and incentive programmes. Operational Highlights The sales promotion division has again performed well, maintaining its stronggrowth of last year. It has retained more clients and run more promotions thanin previous years. The division's cinema offering still continues to performwell as a key motivator for all brands and further developments are in hand.This division's expertise and experience has enabled it to develop into therapidly expanding employee benefits sector, initially through the introductionof "Lifestyle" its voluntary benefits offering, followed by solutions that allowour clients to take advantage of specific tax concessions on computers (HCIinitiative), bikes and childcare for employees. These products have had anexcellent market introduction resulting in new clients in both the private andpublic sectors The annual purchase cycle has to date resulted in a 100% repeatpurchase pattern demonstrating the value of the offering and indicatingexcellent future revenues. The travel and event management division has continued to demonstrate sustainedgrowth and has been unaffected by any international incidents. I am pleased toreport excellent forward visibility for further growth in 2006 and this areacontinues to prosper. The motivation and incentive programmes division has made further investment inboth sales and product development to take advantage of the increasingrecognition by UK companies of the need to find new and innovative ways ofmotivating employees. The use of technology to provide both UK and Pan-Europeansolutions continues to generate additional revenues. Outlook Trading remains encouraging with the Group which has attracted many new clientsin the period. This, combined with industry expenditure forecasts indicatinghealthy increases, particularly in the specialist areas of the Group's business,gives rise to an optimistic outlook for future growth. The Group continuesactively to pursue opportunities for consolidation and diversification. The Group's consolidated financial results for the period have been prepared forthe first time under International Financial Reporting Standards (IFRS). Theimpact on these results, and the comparatives, is not significant. Colin Lloyd Chairman 6 months 6 months ended 12 months ended ended 30 30 June 2004 31 December June 2005 2004 Note £000 £000 £000 Sales 4 27,066 17,629 42,704Cost of sales (22,027) (14,379) (34,389)Gross profit 5,039 3,250 8,315 Administrativeexpenses (4,150) (2,760) (6,670)Operatingprofit 4 889 490 1,645Finance costs- net 38 (100) (90)Profit beforeincome tax 927 390 1,555Income taxexpense 5 (279) (117) (455)Profit for theperiod 9 648 273 1,100 Attributable to:Equity holdersof the Company 648 273 1,100 Earnings per share for profitattributable to the equityholders of the Company duringthe year (expressed in pence) - basic 6 2.58 1.38 5.08- diluted 6 2.54 1.38 5.03 There are no gains and losses other than the profit for the period. The accompanying accounting policies and notes form part of these financialstatements Note At 30 June At 30 June At 31 December 2005 2004 2004 £000 £000 £000 ASSETSNon-current assetsProperty, plantand equipment 300 222 263Goodwill 3,880 3,075 3,223Deferred incometax assets 107 66 79 4,287 3,363 3,565 Current assetsInventories 111 74 268Trade and otherreceivables 7,554 14,243 8,498Cash and cashequivalents 3,478 1,681 5,075 11,143 15,998 13,841Total assets 15,430 19,361 17,406 EQUITYCapital and reserves attributableto the Company's equity holdersShare capital 126 99 126Share premiumaccount 2,882 410 2,879Other reserves 75 75 75Retained earnings 2,164 666 1,500Total equity 9 5,247 1,250 4,580 LIABILITIESNon-current liabilitiesBorrowings 603 1,023 813Deferred income tax liabilities - - - 603 1,023 813 Current liabilitiesTrade and otherpayables 8,817 15,995 11,113Current income taxliabilities 343 413 480Borrowings 420 680 420 9,580 17,088 12,013Total liabilities 10,183 18,111 12,826Total equity andliabilities 15,430 19,361 17,406 The accompanying accounting policies and notes form part of these financialstatements. 6 months 6 months ended 12 months ended ended 30 30 June 2004 31 December June 2005 2004 £000 £000 £000 Cash flows from operatingactivitiesCash (usedin)/generatedfromoperations (744) 296 2,233Interest paid (49) (70) (134)Income taxpaid (441) 7 (278)Net cash (usedin)/generatedfrom operatingactivities (1,234) 233 1,821 Cash flows from investingactivitiesAcquisition ofsubsidiary,net of cashacquired (33) - -Purchases ofproperty,plant andequipment(PPE) (57) (30) (118)Purchase ofunincorporatedtrade - - (206)Proceeds fromsale of PPE 2 - -Interestreceived 137 20 144Net cashgeneratedfrom/(used in)investingactivities 49 (10) (180) Cash flows from financingactivitiesProceeds fromissue ofshares 3 - 2,496Repayments ofborrowings (415) (260) (780)Net cash (usedin)/generatedfrom financingactivities (412) (260) 1,716 Net(decrease)/increase in cash (1,597) (37) 3,357Cash atbeginning ofperiod 5,075 1,718 1,718Cash at end ofperiod 3,478 1,681 5,075 Cash generated from operations 6 months 6 months ended 12 months ended ended 30 30 June 2004 31 December June 2005 2004 £000 £000 £000 Profit for theperiod 943 390 1,562Adjustments for:- depreciation 76 62 167- interestexpense (38) 100 90Changes in working capital (excludingthe effects of acquisition andexchange differences onconsolidation):- inventories 467 40 (154)- trade andotherreceivables 1,903 (8,292) (2,547)- trade andother payables (4,095) 7,996 3,115Cash (usedin)/generatedfromoperations (744) 296 2,233 The accompanying accounting policies and notes form part of these financialstatements. 1 General information P&MM Group plc ("the Company") and its subsidiaries (together "P&MM Group plc"or "the Group") are involved in the development and administration of thirdparty motivation programmes and the provision of incentive travel, eventmanagement, communications programmes and trade and consumer promotions. The Company is a limited liability company incorporated and domiciled inEngland. The address of its registered office is Rockingham Drive, Linford Wood,Milton Keynes MK14 6LY. The Company has its primary listing on the Alternative Investment Market ofLondon Stock Exchange. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 22 September 2005. 2 Summary of significant accounting policies 2.1 Basis of preparation These June 2005 interim consolidated financial statements of P&MM Group plc arefor the six months ended 30 June 2005. They have been prepared in accordancewith International Accounting Standard 34 Interim Financial Reporting and therequirements of International Financial Reporting Standard 1 First-time Adoptionof International Financial Reporting Standards relevant to interim reports.These financial statements have been prepared on the basis of the recognitionand measurement requirements those IFRS standards and IFRIC interpretationsissued and effective or issued and early adopted as at the time of preparingthese statements. The IFRS standards and IRFIC interpretations that will beapplicable at 31 December 2005, including those that will be applicable on anoptional basis, are not known with certainty at the time of preparing theseinterim financial statements. The policies set out below have been consistently applied to all the yearspresented. P&MM Group plc's consolidated financial statements were prepared in accordancewith UK Generally Accepted Accounting Principles (UKGAAP) until 31 December2004. UKGAAP differs in some areas from International Financial ReportingStandards (IFRS). In preparing P&MM Group plc's 2005 consolidated interimfinancial statements, management has amended certain accounting, valuation andconsolidation methods applied in the UKGAAP financial statements to comply withIFRS. The comparative figures in respect of 2004 were restated to reflect theseadjustments, except as described in the accounting policies. Reconciliations and descriptions of the effect of the transition from UKGAAP toIFRS on the Group's equity and its net income and cash flows are provided inNote 3. The consolidated interim financial statements have been prepared under thehistorical cost convention. The preparation of financial statements in accordance with IAS 34 requires theuse of certain critical accounting estimates. It also requires management toexercise judgement in the process of applying the Group's accounting policies.The areas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the consolidated interim financialstatements, are disclosed in Note 2.15. 2.2 Consolidation Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies generally accompanying a shareholding of morethan one half of the voting rights. The existence and effect of potential votingrights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. Subsidiaries are fullyconsolidated from the date on which control is transferred to the Group. Theyare de-consolidated from the date on which control ceases. 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 contingentliabilities 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 value of the Group'sshare of the identifiable net assets acquired is recorded as goodwill. If thecost of acquisition is less than the fair value of the group's share of the netassets of the subsidiary acquired, the difference is recognised directly in theincome statement. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairment of the assettransferred. 2.3 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 issubject to risks and returns that are different from those of segments operatingin other economic environments. The Group's business segments are the primarybasis of segment reporting. 2.4 Foreign currency translation (a) Functional and presentational currencyItems 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 andpresentational currency. (b) Transactions and balancesForeign 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 of year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement.Foreign exchange gains and losses resulting from the settlement of foreigncurrency transactions and from the translation at the year-end exchange rate ofmonetary assets and liabilities denominated in foreign currencies are recognisedin the income statement, except where hedge accounting is applied. 2.5 Property, Plant and Equipment All property, plant and equipment (PPE) is shown at cost less subsequentdepreciation and impairment. Cost includes expenditure that is directlyattributable to the acquisition of the items. Subsequent costs are included inthe asset's carrying amount or recognised as a separate asset, as appropriate,only when it is probable that future economic benefits associated with the itemwill flow to the Group and the cost of the item can be measured reliably. Allother repairs and maintenance are charged to the income statement during thefinancial period in which they are incurred. Depreciation on assets is calculated using the straight-line method at 20% to25% so to allocate the cost of each asset less its residual value over itsestimated useful life. The assets' residual values and useful lives arereviewed, and adjusted if appropriate, at each balance sheet date. 2.6 Intangible assets 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. Goodwill is tested annually for impairment and carried atcost lessaccumulated impairment losses. Gains and losses on the disposal of an entityinclude the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairmenttesting. 2.7 Inventories Inventories are stated at the lower of cost and net realisable value. 2.8 Trade receivables Trade receivables are stated at their cost less impairment losses. 2.9 Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held at call withbanks with an original maturity of three months or less. For the purpose of thecash flow statement, cash and cash equivalents are as defined above, net ofoutstanding bank overdrafts. 2.10 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. 2.11 Deferred income tax 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. Thedeferred income tax is not accounted for if it arises from initial recognitionof an asset or liability in a transaction, other than a business combination,that at the time of the transaction affects neither accounting nor taxableprofit or loss. Deferred income tax is determined using tax rates (and laws)that have been enacted or substantially enacted by the balance sheet date andare expected to apply when the related deferred income tax asset is realised orthe deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable thatfuture taxable profit will be available against which the temporary differencescan be utilised. 2.12 Employee Benefits (a) Pension obligationsGroup companies operate defined contribution schemes for its employees. They aremoney purchase schemes with pensions provided by independent pension suppliers.The contributions are recognised as employee benefit expense when they are due. (b) Share-based plansThe share option programmes allow Group employees to acquire shares of theCompany. The fair value of options granted is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grantdate and spread over the period during which the employees becomeunconditionally entitled to the options. The fair value of the options grantedis usually measured using a binomial model, taking account of the terms andconditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options that vestwhere forfeiture is due to performance criteria not being met during the life ofthe option. 2.13 Revenue recognition Revenue comprises the fair value of the sale of goods and services, net ofvalue-added-tax, rebates and discounts and after eliminating sales within theGroup. Revenue is recognised as follows: (a) Sales of goodsSales of goods are recognised when a Group entity has delivered products to thecustomer, the customer has accepted the products; and collectibility of therelated receivables is reasonably assured. (b) Sales of servicesSales of services are recognised in the accounting period in which the servicesare rendered, by reference to completion of the specific transaction, assessedon the basis of the actual service provided as a proportion of the totalservices to be provided. 2.14 Leases Payments made under operating leases are charged to the income statement on astraight-line basis over the period of the lease. 2.15 Interim Measurement Note Current income tax expense is recognised in these interim consolidated financialstatements based on management's best estimates of the weighted average annualincome tax rate expected for the full financial year. 3 Transition to IFRS 3.1 Basis of transition to IFRS 3.1.1 Application of IFRS 1 The Group's financial statements for the year ended 31 December 2005 will be thefirst annual financial statements that comply with IFRS. These interim financialstatements have been prepared as described in note 2.1. The Group has appliedIFRS 1 in preparing these consolidated interim financial statements. P & MM Group plc's transition date is 1 January 2004. The Group prepared itsopening IFRS balance sheet at that date. The reporting date of these interimconsolidated financial statements is 30 June 2005. The Group's IFRS adoptiondate is 1 January 2005. In preparing these interim consolidated financial statements in accordance withIFRS 1, the Group has applied the mandatory exceptions and certain of theoptional exemptions from full retrospective application of IFRS. 3.1.2 Exemptions from full retrospective application elected by the Group P & MM Group plc has elected to apply the following optional exemptions fromfull retrospective application. (a) Business combinations exemption P & MM Group plc has applied the business combinations exemption in IFRS 1. Ithas not restated business combinations that took place prior to the 1 January2004 transition date. (b) Share-based payment transaction exemptionThe Group has elected to apply the share-based payment exemption. It applied toIFRS 2 from 1 January 2004 to those options that were issued after 7 November2002 but that have not vested by 1 January 2005. 3.2 Reconciliations between IFRS and GAAP The following reconciliations provide a quantification of the effect of thetransition to IFRS, with notes to the reconciliations contained at note 3.2.5: - net income at 30 June 2004 (note 3.2.1)- net income at 31 December 2004 (note 3.2.2)- equity at 30 June 2004 (note 3.2.3)- equity at 31 December 2004 (note 3.2.4) Equity at 1 January 2004 under IFRS is the same as under UKGAAP. 3.2.1 Reconciliation of net income for six months ended 30 June 2004 Note UKGAAP Effect of IFRS transition to IFRS £000 £000 £000 Sales 17,629 - 17,629Cost of sales (14,379) - (14,379)Gross profit 3,250 - 3,250Administrative expenses (2,760) - (2,760)Goodwill amortisation 3.2.5.b (78) 78 -Operating profit/(loss) 412 78 490Finance costs - net (100) - (100)Profit before tax 312 78 390Income tax expense (117) - (117)Profit for the period 195 78 273 3.2.2 Reconciliation of net income for year ended 31 December 2004 Note UKGAAP Effect of IFRS transition to IFRS £000 £000 £000 Sales 42,704 - 42,704Cost of sales (34,389) - (34,389)Gross profit 8,315 - 8,315Administrative expenses 3.2.5.a (6,663) (7) (6,670)Goodwill amortisation 3.2.5.b (185) 185 -Operating profit/(loss) 1,467 178 (1,645)Finance costs - net (90) - (90)Profit before tax 1,377 178 1,555Income tax expense (455) - (455)Profit for the period 922 178 1,100 3.2.3 Reconciliation of equity at 30 June 2004 Note UKGAAP Effect of IFRS transition to IFRS £000 £000 £000ASSETS Non-current assetsProperty, plant andequipment 222 - 222Goodwill 3.2.5.b 2,997 78 3,075Deferred income taxassets 66 - 66 3,285 78 3,363Current assetsInventories 74 - 74Trade and otherreceivables 14,243 - 14,243Cash and cashequivalents 1,681 - 1,681 15,998 - 15,998Total assets 19,283 78 19,361 EQUITYCapital and reserves attributable toequity holdersShare capital 99 - 99Share premium 410 - 410Other reserves 75 - 75Retained earnings 3.2.5.b 588 78 666Total equity 1,172 78 1,250 LIABILITIESNon-current liabilities Borrowings 1,023 - 1,023 1,023 - 1,023Current liabilitiesTrade and other payables 15,995 - 15,995Current income taxliabilities 413 - 413Borrowings 680 - 680 17,088 - 17,088Total liabilities 18,111 - 18,111Total equity andliabilities 19,283 78 19,361 3.2.4 Reconciliation of equity at 31 December 2004 Note UKGAAP Effect of IFRS transition to IFRS £000 £000 £000ASSETS Non-current assetsProperty, plant andequipment 263 - 263Goodwill 3.2.5.b 3,038 185 3,223Deferred income taxassets 79 - 79 3,380 185 3,565Current assetsInventories 268 - 268Trade and otherreceivables 8,498 - 8,498Cash and cashequivalents 5,075 - 5,075 13,841 - 13,841Total assets 17,221 185 17,406 EQUITYCapital and reserves attributable toequity holdersShare capital 126 - 126Share premium account 2,879 - 2,879Other reserves 75 - 75Retained earnings 3.2.5.b 1,315 185 1,500Total equity 4,395 185 4,580 LIABILITIESNon-current liabilities Borrowings 813 - 813 813 - 813Current liabilitiesTrade and other payables 11,113 - 11,113Current income taxliabilities 480 - 480Borrowings 420 - 420 12,013 - 12,013Total liabilities 12,826 - 12,826Total equity andliabilities 17,221 185 17,406 3.2.5 Notes to the reconciliations (a) The Group has applied IFRS 2: Share-based payments to its share optionschemes at 1 January 2005, detailed in note 7. The effect of accounting forequity-settled share-based payments transactions at fair value is to increaseemployee benefit costs by £nil in the six months to 30 June 2004 and £7,000 inthe twelve months to 31 December 2004. (b) Under UKGAAP goodwill is required to be amortised over its expected usefullife and that life should not be greater than 20 years. However, under IAS 38:Intangible assets, amortisation of goodwill is not permitted, instead goodwillshould be reviewed annually for any impairment. As permitted under IFRS 1: Firsttime adoption of IFRSs, the Group has elected to adopt the net book value of thegoodwill in its balance sheet at 31 December 2003 as the deemed value ofgoodwill for transition to IFRS. Under UKGAAP, amortisation of £78,000 and£185,000 was charged in the periods to 30 June 2004 and 31 December 2005. Upontransition to IFRS, these charges have been reversed. 4 Segment Information At 30 June 2005, the Group is organised into three main business segments;development and administration of third party motivation programmes, theprovision of incentive travel, event management and communication programmes andtrade and consumer promotions. Unallocated costs represent corporate expenses. The segment results for the six months ended 30 June 2005 are as follows: Motivation Travel and Events Sales Unallocated Group Promotions £000 £000 £000 £000 £000 Total grosssegment sales 5,834 17,732 3,500 - 27,066 Operatingprofit/(loss) 110 844 2 (67) 889Finance costs- net 38Profit beforeincome tax 927Income taxexpense (279)Profit forthe 648period The segment results for the six months ended 30 June 2004 are as follows: Motivation Travel and Events Sales Unallocated Group Promotions £000 £000 £000 £000 £000 Total grosssegment sales 5,675 8,510 3,444 - 17,629 Operatingprofit/(loss) 323 443 (249) (27) 490Finance costs- net (100)Profit beforeincome tax 390Income taxexpense (117)Profit forthe 273period The segment results for the year ended 31 December 2004 are as follows: Motivation Travel and Events Sales Unallocated Group Promotions £000 £000 £000 £000 £000 Total grosssegment sales 11,803 21,023 9,878 - 42,704 Operatingprofit/(loss) 508 521 691 (75) 1,645Finance costs- net (90)Profit beforeincome tax 1,555Income taxexpense (455)Profit forthe 1,100period 5 Income tax expenses 6 months 6 months 12 months ended 31 December ended 30 ended 30 2004 June 2005 June 2004 £000 £000 £000 Current tax 296 128 479Deferred tax (17) (11) (24) 279 117 455 The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate applicable to profits ofthe consolidated companies as follows: 6 months 6 months 12 months ended 31 December ended 30 ended 30 2004 June 2005 June 2004 £000 £000 £000 Profit before tax 927 390 1,555 Tax calculated atdomestic taxrates applicableto profits in therespectivecountries 278 117 467Corporation taxrate difference - - (12)Expenses notdeductible fortax purposes 1 - -Tax charge 279 117 455 The weighted average applicable tax rate was 30% (2004: 30%). 6 Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period. 6 months 6 months 12 months ended ended 30 ended 30 31 December June 2005 June 2004 2004 £000 £000 £000 Profitattributable toequity holders ofthe Company 648 273 1,100Weighted averagenumber ofordinary sharesin issue(thousands) 25,115 19,745 21,643Basic earningsper share inpence 2.58 1.38 5.08 Diluted Diluted earnings per share is calculated adjusting the weighted average numberof ordinary shares outstanding to assume conversion of all contracted dilutivepotential ordinary shares. The Company has only one category of dilutivepotential ordinary shares, share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options. The number ofshares calculated as above is compared with the number of shares that would havebeen issued assuming the exercise of the share options. 6 months 6 months 12 months ended ended 30 ended 30 31 December June 2005 June 2004 2004 £000 £000 £000 Profitattributable toequity holders ofthe Company 648 273 1,100Weighted averagenumber ofordinary sharesin issue(thousands) 25,115 19,745 21,643Adjustment forshare options(thousands) 410 - 225Weighted averagenumber ofordinary sharesfor dilutedearnings pershare (thousands) 25,525 19,745 21,868Diluted earningsper share inpence 2.54 1.38 5.03 7 Share-based payments The Group has two contracted share option schemes. The EMI Option Schemedisclosed in the Group's most recent financial statements and a Sharesave Schemeintroduced on 28 April 2005. Additionally, as noted in the Group's most recentfinancial statements the Company proposes to issue options to C T Lloyd byreference to the growth in market capitalisation of the Company. The followingcontracted and proposed options have been valued in accordance with theprovisions of IFRS 2. Scheme Date of Number of Option price Vesting Life of option Fair Value original grant options conditions EMI Option Scheme 29/03/2004 150,000 0.4285 p 2 years from 10 Years 0.0146 p 25/08/2004 SharesaveScheme 28/04/2005 495,307 0.64 p 3 Years 3 Years 0.2341 p C T LloydOption Schene - 775,672 0.005 p Each 20% growth 10 Years 0.1199 p in market value The fair value of services received in return for share options granted toemployees is measured by reference to the fair value of share options granted.The estimate of fair value of the services received is measured based on abinomial lattice model for the contracted EMI and Sharesave Schemes and a MonteCarlo model for the proposed C T Lloyd Scheme. The vesting period is used as aninput to those models. The following additional assumptions were used: - Expected volatility of 32% based on the average volatility of the companies inthe FTSE All Share Media Sector over the last 3 years.- No expected dividends.- Risk free interest rate of 4.54%. 8 Acquisition of subsidiaries On 8 February 2005 the Company acquired the entire issued share capital of AYMServices Limited ("AYM") for a cash consideration of £682,000. AYM is aperformance improvement agency that provides motivation and incentiveprogrammes, incentive travel and conference production management to corporateclients. In the 5 months to 30 June 2005, the business contributed £112,000 and£87,000 respectively to consolidated operating profit and consolidated profitfor the period. If AYM had been acquired on 1 January 2005, consolidated revenueand profit of the Group for 2005 would have been £27,534,000 and £653,000. The acquisition had the following effect on the Group's assets and liabilities: Recognised and carrying amount £000 Plant, property and equipment 58Inventories 310Trade and other receivables 1,141Cash and cash equivalents 725Trade and other payables (2,133) Net identifiable assets and liabilities 101Goodwill on acquisition 657Consideration paid, including costs 758 The recognised amounts are provisional and may be revised in due course. Asignificant part of the acquisition cost can be attributed to the accountdirection and production know-how of key personnel of AYM. At acquisitionhowever, no intangible asset qualified for recognition in this respect. Thesecircumstances contributed to the amount recognised as goodwill. 9 Statement of changes in equity Share capital Share Other Retained Total Premium Reserves earnings equity £000 £000 £000 £000 £000 Balance at 1January 2004 99 410 75 393 977Profit for theperiod - - - 273 273Share based payments - - - - -Balance at 30 June2004 99 410 75 666 1,250Issue of shares 27 2,873 - - 2,900Issue costs - (404) - - (404)Profit for theperiod - - - 827 827Share basedpayments - - - 7 7Balance at 31December 2004 126 2,879 75 1,500 4,580Issue costs - 3 - - 3Profit for theperiod - - - 648 648Share basedpayments - - - 16 16Balance at 30 June2005 126 2,882 75 2,164 5,247 Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises the consolidated interimincome statement, consolidated interim balance sheet, consolidated interimcashflow statement and the related notes 1 to 9. We have read the otherinformation contained in the interim report which comprises only the chairman'sstatement and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial 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 them 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 is theresponsibility of, and has been approved by, the directors. The directors areresponsible for preparing the interim report in accordance with the AIM Rules ofthe London Stock Exchange. As disclosed in note 2.1, the next annual financial statements of the group willbe prepared in accordance with those International Financial Reporting Standardsadopted for use by the European Union. This interim report has been prepared inaccordance with International Accounting Standard 34 "Interim FinancialReporting" and the requirements of IFRS 1 "First-time Adoption of InternationalFinancial Reporting Standards" relevant to interim reports. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. 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 2005. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTSCentral Milton Keynes22 September 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCM.L