29th Nov 2007 07:00
Z Group PLC29 November 2007 29 November 2007 Z GROUP plc Interim Results for the six months ended 31 August 2007 and the proposed sale ofits operating subsidiaries Z GROUP plc (Z GROUP or the Group), the AIM listed developer and provider ofleading consumer internet technologies, today announces its unaudited interimresults for the six months ended 31 August 2007. Summary of Interim Results • Revenues were £1.0m (2006: £1.5m) in line with anticipated market expectations• Gross margins remained stable at 74% (2006: 76%)• Write down in investment of OnShare - including goodwill impairment - of £6.9m• Other administrative costs of £0.9m (2006: £1.4m)• As a result, the Group reported a six month loss before tax of £7.1m (2006: loss £0.5m)• Loss per share of 29.8p (2006: loss of 1.7p)• Underlying loss per share, as adjusted for non-cash items, of 0.6p (2006: loss of 0.3p)• Cash at bank £1.6m (2006: £3.6m) Z GROUP also announces today that the Board has entered discussions with JackBekhor and Jamie True, the Group's joint CEOs, to sell to them the operatingsubsidiaries of the Group. For further information: Z GROUP plc John Standen Tel: +44 (0) 8700 111 173(Chairman) Duncan Neale Tel: +44 (0) 8700 111 173(Finance Director) Landsbanki Securities (UK) Limited (NOMAD) Jeff Keating / Tom Hulme Tel: +44 (0) 20 7426 9593(Corporate Finance) Chairman's statement Summary On 12 September 2007 the Board announced a trading update and indicated that,whilst trading was in line with management expectations for the six months to 31August 2007, the results for the year would be adversely affected both by thelack of take-up by consumers for OnShare and the anticipated decliningperformance of ONSPEED. Consequently, a write-off of our investment in OnSharewas likely to take place this financial year as a prudent measure. Also, weindicated that we were looking at alternative ways to generate revenue from theOnShare technology. The financial results for the six months to 31 August 2007 are set out below.Turnover was £1.0 million and the trading loss, including the proposed write-offof our investment in Onshare Ltd which totals £6.9 million, amounts to £7.1million. Our cash balance was £1.6m at 31 August 2007. When Z GROUP came to AIM in June 2005, the intention was to grow the companywith a world beating product portfolio for users of the web. ONSPEED was alreadyestablished in its marketplace and OnShare was under development. OnShare hastaken much longer to come to market than originally anticipated and its futureis now uncertain: consumer uptake has been slow and it is not consideredeconomically viable in its current form. The joint CEOs, Jack Bekhor and Jamie True, now believe that the sale ofsoftware products to consumers for web enhancing purposes has becomeincreasingly difficult as such products are now mostly being provided free.Consequently, with our principal product ONSPEED declining in turnover andOnShare unviable, the Board has entered discussions with the joint CEOs to sellto them the operating subsidiaries of the Group for a nominal consideration ('the Proposal'). This Proposal would result in Z GROUP becoming an investmentcompany, should stem the trading losses considerably and is expected to leavethe Group with cash resources in excess of £1m and the obligation of the leaseon its premises. The Board has appointed a committee of independent directors,comprising Polly Williams, Duncan Neale and me, to negotiate the Proposal withthe joint CEOs. The Proposal will require shareholder approval and, if agreementis reached, a circular will be issued to shareholders to gain their consent tothe sale. Financial summary Turnover of £1.0 million for the six months to 31 August 2007, compared withturnover of £1.5 million for the same period last year. Administrative costs have been cut during the period to £0.9 million (2006: £1.4million), reflecting the impact of a significant cost-cutting exercise carriedout by the executive team. The write down of our investment in OnShare equates to £6.9 million. After a charge of £27,000 in respect of share option charges, the resultingoperating loss was £7.1 million. In spite of cost-cutting, our cash balance at 31 August 2007 had fallen to £1.6million compared with £2.2 million at 28 February 2007. Since 31 August 2007 ourcash has reduced further and at 31 October 2007 was £1.3 million, representingan average monthly cash burn of £110,000 since 1 March 2007. In addition, the accounts are presented for the first time in accordance withInternational Financial Reporting Standards (IFRS). Operations ONSPEED has performed in line with management expectations. ONSPEED Mobile remains available to generate income. However, the directors haveundertaken extensive negotiations over the past eighteen months with operatorsto try to commercialise this product profitably and to date no contract ofsubstance has proved possible. The Net2Roam product provides revenue of £0.1 million, and Shrink My Tunes madea small contribution to Group turnover in the period. OnShare was launched to a test group of users in March 2006 and a soft launchfollowed in February 2007 after a number of required improvements wereidentified and incorporated into the product. By June 2007 the growth in userswas exceeding the directors' original expectations and we had planned to launchthe product commercially by September of this year. We issued the trading updateon 12 September 2007 to advise shareholders that the take up from consumers hadunfortunately not been sufficiently encouraging for us to undertake thecommercial launch with any confidence of a profitable outcome. The R&D investedin OnShare's underlying protocol "ActiveStream" is also considered unlikely togenerate any additional income in the foreseeable future. Immediate future In view of the continued trading losses and the erosion of cash, the directorsbelieve that shareholders interests' would be best served by securing a speedysolution to the current problems of the Group. Accordingly, the Proposal or anyother comparable solution will be pursued by the Board, or by the Committee ofIndependent Directors, as a matter of urgency. Shareholders will be keptinformed of progress as appropriate. John StandenChairman29 November 2007 Independent Review report to Z GROUP plcFor the six months ended 31 August 2007 Introduction We have been instructed by the Company to review the financial information forthe six months ended 31 August 2007 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement of changesin equity and the consolidated cash flow statement and related notes. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company inaccordance with the terms of our engagement. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the AIMrules of the London Stock Exchange which require that it must be prepared in aform consistent with that which will be adopted in the next annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 August 2007. Baker Tilly UK Audit LLPLondon, UK29 November 2007 Condensed Consolidated Interim Income Statementfor the six months ended 31 August 2007 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 31 August 2007 31 August 2006 28 February 2007 Notes £'000 £'000 £'000Continuing operations Revenue 1,016 1,536 2,630Cost of sales (260) (361) (651) -------------- ------------- ---------Gross profit 756 1,175 1,979Share option expense (27) (268) (344) Write-down of intangible fixed assets 5 (3,110) Impairment of goodwill 4 (3,804)Other administrative expenses (911) (1,449) (2,811) -------------- ------------- -------------Operating loss (7,096) (542) (1,176)Financial income 24 64 101 -------------- ------------- -------------Loss before tax (7,072) (478) (1,075)Income tax expense - 143 64 -------------- ------------- -------------Loss for the period (7,072) (335) (1,011) Basic & diluted loss per share 6 (29.8p) (1.7p) (5.0p) Condensed Consolidated Interim Balance Sheetat 31 August 2007 Unaudited Restated Restated 31 August 2007 Unaudited Unaudited Notes 31 August 2006 28 February 2007 £'000 £'000 £'000AssetsNon-current assetsGoodwill 4 - - 3,804Intangible assets 5 15 2,020 2,631Property, plant and equipment 177 232 200 -------------- ------------- ------------- 192 2,252 6,635Current assetsInventories 51 83 56Trade and other receivables 539 1,119 683Cash and cash equivalents 1,629 3,598 2,256 -------------- ------------- ------------- 2,219 4,800 2,995 Total assets 2,411 7,052 9,630 LiabilitiesCurrent liabilitiesTrade and other payables (640) (1,325) (772)Current tax liabilities (80) (101) (197)Obligations under finance leases (9) (8) (4)Bank overdrafts and loans - - (11) -------------- ------------- ------------- (728) (1,434) (984) -------------- ------------- ------------- Net current assets 1,490 3,366 2,011 Non-current liabilitiesDeferred tax (40) (5) (39)Other provisions (73) (52) -Obligations under finance leases (25) (21) (17) -------------- ------------- ------------- (137) (78) (56) -------------- ------------- ------------- -------------- ------------- -------------Net assets 1,545 5,540 8,590 -------------- ------------- -------------Shareholders equityCalled up share capital 1,187 986 1,187Share premium account 5,968 2,342 5,968Merger reserve 1,066 1,066 1,066Share based payments reserve 798 758 771Retained (losses) / earnings (7,474) 388 (402) ============== ============== ==============Total shareholders equity 1,545 5,540 8,590 ============== ============== ============== Consolidated Statement of Changes in Equityfor the period ended 31 August 2007 Share Share Merger Share based Retained Total capital premium reserve payments (losses) / reserve earnings £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 March 2006 974 2,322 1,066 740 296 5,398 Loss for the six month period ended 31 August 2006 - - - - (158) (158) -------- -------- -------- -------- -------- --------Total recognised (expense) / income for the period - - - - (158) (158) Share option charge in the period - - - 268 268Adjustment for options subsequently (250) 250 0exercised or forfeitedShares issued in the period 12 20 - - - 32 -------- -------- -------- -------- -------- --------Balance at 31 August 2006 986 2,342 1,066 758 388 5,540 -------- -------- -------- -------- -------- -------- Balance at 1 March 2006 974 2,322 1,066 740 296 5,398 Loss for the year-ended 28 February 2007 - - - - (1,011) (1,011) -------- -------- -------- -------- -------- --------Total recognised (expense) / income for the year - - - - (1,011) (1,011) Share option charge in the year - - - 344 - 344Adjustment for options subsequently exercised or forfeited (313) 313 0Shares issued in the period 213 3,646 - - - 3,859 -------- -------- -------- -------- -------- --------Balance at 28 February 2007 1,187 5,968 1,066 771 (402) 8,590 -------- -------- -------- -------- -------- -------- Balance at 1 March 2007 1,187 5,968 1,066 771 (402) 8,590 Loss for the six month period ended 31 August 2007 - - - - (7,072) (7,072) -------- -------- -------- -------- -------- --------Total recognised (expense) / income for the period - - - 0 (7,072) (7,072) Share option charge in the period - - - 27 - 27Shares issued in the period - - - - - - -------- -------- -------- -------- -------- --------Balance at 31 August 2007 1,187 5,968 1,066 798 (7,474) 1,545 -------- -------- -------- -------- -------- -------- Condensed Consolidated Interim Statement of Cash Flowsfor the six months ended 31 August 2007 Unaudited Unaudited Restated Six months Six months Unaudited ended ended Year ended 31 August 31 August 28 February 2007 2006 2007 £'000s £'000s £'000sCash flows used in operating activitiesOperating loss for the period (7,096) (542) (1,176)Depreciation 21 51 123Amortisation 4 22 44Impairment of intangible fixed assets (Note 5) 3,110Impairment of goodwill (Note 4) 3,804Share option charge 27 268 344FX movement 9 2Decrease / (increase) in stocks 5 (9) 17Decrease in trade and other receivables 144 507 686Increase in trade and other payables (173) (54) (249) -------- -------- --------Net cash from operating activities (146) 243 (209) Income tax paid 0 0 (290) -------- -------- --------Net cash flows used in operating activities 0 0 (290) -------- -------- -------- Cash flows used in investing activitiesInterest receivable 24 64 101Purchase of property, plant and equipment (1) (172) (319)Purchase of intangible fixed assets (498) (686) (1,208) -------- -------- --------Net cash flows used in investing activities (475) (794) (1,426) -------- -------- -------- Cash flows from financing activitiesShare issue 32 55Finance lease (6) (9) (9) -------- -------- --------Net cash flows used in investing activities (6) 23 46 -------- -------- --------Net increase / (decrease) in cash and cash equivalents (627) (528) (1,879) Cash and cash equivalents at start of period 2,220 4,099 4,099 -------- -------- --------Cash and cash equivalents at end of period 1,593 3,571 2,220 -------- -------- -------- Notes to the Consolidated Interim reportfor the six months ended 31 August 2007 1. Basis of preparation From 1 March 2007, the Group has adopted International Financial ReportingStandards (IFRS) as adopted by the EU in the preparation of the consolidatedfinancial statements. Prior to this accounting period, the Group prepared its audited annual financialstatements under UK Generally Accepted Accounting Principles (UK GAAP). Forperiods commencing 1 March 2007, the Group is required to prepare its annualconsolidated financial statements in accordance with IFRS as adopted by theEuropean Union (EU) and implemented in the UK. As the financial statements forthe year to 28 February 2008 will include comparatives for the year ended 28February 2007, the Group's date of transition to IFRS is 1 March 2006 and thecomparatives will be restated to IFRS. Accordingly, the financial informationfor the six months to 31 August 2006 has been restated to present thecomparative information in accordance with IFRS based on a transition date of 1March 2006. Note 7 of this interim financial information sets out how theGroup's previous financial position is affected by the change to IFRS. The financial information for the six months ended 31 August 2007 and 31 August2006 is unaudited. The comparative figures for the year ended 28 February 2007were derived from the Group's audited financial statements for that period asfiled with the Registrar of Companies as restated for IFRS. The financialinformation does not constitute the financial statements for that period. Thoseaccounts received an unqualified audit report which did not contain anystatement under s237 (2) or (3) of the Companies Act 1985. At the date of authorisation of this report the following Standards andInterpretations which have not been applied in these financial statements werein issue but not yet effective: IFRS 8 Operating SegmentsIFRIC 8 Scope of IFRS 2 Share-based PaymentIFRIC 9 Reassessment of Embedded DerivativesIFRIC 10 Interim Financial Reporting and ImpairmentIFRIC 11 Group and Treasury Share TransactionsIFRIC 12 Service Concession Arrangements The directors have also considered the amendments to IAS 1 and IAS 23. The directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialstatements of the Group when the relevant statements come into effect forperiods commencing on or after 1 April 2007. 2. Principal Accounting Policies of the Group Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and enterprises controlled by the Company (its subsidiaries) made upto 28 February each year. The excess of the cost of acquisition over the fairvalues of the Group's share of identifiable net assets, including intangibleassets, acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair value of identifiable net assets acquired (i.e.discount on acquisition) is recognised directly in the income statement. 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 initially measured at fairvalue at acquisition date irrespective of the extent of any minority interest.The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. When necessary,adjustments are made the financial statements of subsidiaries to bring theaccountant policies used into line with those used by other members of theGroup. All intra-Group transactions, balances, and unrealised gains on transactionsbetween Group companies are eliminated on consolidation. Unrealised losses arealso eliminated unless the transaction provides evidence of an impairment of theasset transferred. Goodwill Goodwill, which represents the difference between the purchase consideration andthe fair values of those net assets (or book value of those net assets if thedifference between the book value and fair value is immaterial), is initiallyrecognised as an asset at cost and is subsequently measured at cost less anyaccumulated impairment losses. An impairment loss recognised for goodwill isnot reversed in a subsequent period. Intangible fixed assets - software development cost Z GROUP invests a significant proportion of its resources in the development ofits own intellectual property to bring new products and services to the market.Development expenditure (principally in the form of the salary costs of itsdevelopers) is capitalised when its future recoverability can be foreseen withreasonable assurance. All research and other development costs are written offas incurred. Intangible fixed assets - website development cost The Group capitalises website development costs to comply with SIC32. Property Plant and Equipment Property, plant and equipment are initially recorded at cost of purchase and aredepreciated on a straight-line basis over their estimated useful lives, asfollows: Computer equipment 4 yearsOffice equipment, fixtures and fittings 4 yearsMotor vehicles 4 years Leasing Where the Group enters into a lease which entails taking substantially all therisks and rewards of ownership, the lease is treated as a finance lease. Theasset is recorded in the balance sheet as a tangible fixed asset and isdepreciated in accordance with the above depreciation policies. Futureinstalments under such leases, net of finance charges, are included withcreditors. Rentals payable are portioned between the finance element, which ischarged to the income statement, and the capitol element which reduces theoutstanding obligation for future instalments. All other leases are classified as operating leases. Rentals applicable tooperating leases are charged against profits as incurred. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indications exist,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). An intangible asset with an indefiniteuseful life is tested for impairment annually and whenever there is anindication that the asset may be impaired. The recoverable amount is the higher of fair value less costs to sell and valuein use. In assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific tothe asset for which the estimates for future cash flows have been adjusted. If the recoverable amount of an asset is estimated to be less than its carryingamount, the carrying amount of the asset is reduced to its recoverable amount.An impairment loss is recognised as an expense immediately, unless the relevantasset is carried at a re-valued amount, in which case the impairment loss istreated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the assetis increased to the revised estimate of its recoverable amount, so that theincreased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognised for the asset in prioryears. A reversal of an impairment loss is recognised as income immediately,unless the relevant asset is carried at a re-valued amount, in which case theimpairment loss is treated as revaluation increase. Inventories Inventories are stated at the lower of cost and net realisable value. Netrealisable value is based upon the estimated selling price less further costsexpected to be incurred to completion and disposal. Provision is made for anyobsolete or slow-moving items. Revenue recognition Revenue from the sales of licences is recognised in full when an agreement issigned, when delivery and acceptance of the software by the customer hasoccurred, when the fee is fixed and determinable and when collection isconsidered probable. Revenue relating to the provision of services are delivered with that portionrelating to subsequent year included in the deferred income. Revenue is stated exclusive of Value Added Tax. Share based payments The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1March 2006. The Group issues share options to certain employees. These options are measuredat fair value at the date of the grant, using the Black-Scholes option-pricingmodel. The fair value of the options is expensed on a straight-line basis overthe vesting period, based on the Group's estimate of when shares will vest,applying the assumptions on a consistent basis with those used in the auditedfinancial statements for the year ended 28 February 2007. Taxation Deferred tax assets are recognised only to the extent that it is probable thatthey will be recovered through sufficient future taxable profit. The carryingamount of deferred tax assets is revalued at each balance sheet date. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised, based on taxrates and laws that have been enacted or substantively enacted by the balancesheet date. Deferred tax is charged or credited in the income statement, exceptwhere it relates to items charged or credited directly to equity, in which casethe deferred tax is also taken directly to equity. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates and assumptions will, by definition, seldom equal therelated actual results. The estimates and assumptions that have a significantrisk of causing a material adjustment to the carrying amounts of asset andliabilities within the next financial year are discussed below. Estimation of software development costs Z GROUP invests a significant proportion of its resources in the development ofits own intellectual property to bring new products and services to the market.Development expenditure (principally in the form of the salary costs of itsdevelopers) is capitalised when its future recoverability can be foreseen withreasonable assurance. Employees of the Group typically work on a number ofprojects at any given time, some of which relate to development work and some ofwhich relate to existing products. As such, the employees have to estimate theamount of time devoted to each project, which means that the quantum of anycapitalised development cost is reliant on the accuracy of the employees'estimates. Share-based payments The Group issues share-based payments to certain employees. The fair value andthe vesting periods use management assumptions in their calculation. Whilemanagement believes that the assumptions used are appropriate, a change in theassumptions used would impact the results of the Group. 3. Segmental information The Group has one business segment - the supply of software for data compressionpurposes, with all activities taking place in the UK. Consequently, there isno reporting by business segment 4. Goodwill The Group purchased the 49% minority interest in Onshare Limited for a totalconsideration of £3,804,160 on 15 December. The transaction gave rise togoodwill of £3,804,160 since, at the date of acquisition, Onshare Limited hadnet liabilities. The Board of Z GROUP does not believe that Onshare will generate any income inthe foreseeable future, and as such consider the goodwill associated withOnshare Limited to be fully impaired. Consequently, there is an impairmentcharge in the current period of £3,804,160. 5. Intangible Fixed Assets Unaudited Unaudited Unaudited Unaudited Restated Intellectual Unaudited Development Website property Domain expenditure expenditure rights names Total £'000 £'000 £'000 £'000 £'000 Cost 1 March 2007 2,292 467 65 13 2,837 Additions 492 3 3 498 Impairment (2,784) (465) (68) (3,317) -------- -------- -------- -------- -------- 31 August 2007 - 2 16 18 -------- -------- -------- -------- -------- Amortisation 1 March 2007 (37) (153) (14) (2) (206) Charged in the period 3 (1) (4) Impairment 37 153 17 207 -------- -------- -------- -------- -------- 31 August 2007 - - - (3) (3) -------- -------- -------- -------- -------- Net book value 31 August 2007 - 2 - 13 15 28 February 2007 2,255 314 51 11 2,631 The net impairment charge in the period is £3,110,000 (£3,317,000 less £207,000)and is the result of the Board of Z GROUP's belief that Onshare will notgenerate any income in the foreseeable future. 6. Earnings per share The calculation of basic earnings per share is based upon the profit after taxdivided by the weighted average number of shares in issue during the period. The calculation of fully diluted earnings per share is based upon the profitafter tax divided by the weighted average number of shares in issue during theperiod after taking into account the dilutive effect of share options. Loss after tax Weighted averageBasic & diluted loss per share £'000 number of shares EPS (pence) 6 months ended 31 August 2007 (7,072) 23,745,879 (29.8)6 months ended 31 August 2006 (335) 19,562,666 (1.7)12 months ended 28 February 2007 (1,011) 20,284,347 (5.0) Due to the loss incurred in the above periods, there is no dilutive effect fromthe issue of share options. 7. Explanation of transition to IFRS The Group's financial statements for the year ended 28 February 2008 will be thefirst financial statements that comply with International Financial ReportingStandards (IFRS). The Group's financial statements prior to and including 28February 2007 had been prepared in accordance with Generally Accepted AccountingPrinciples in the United Kingdom (UK GAAP). As required by IFRS 1, the impact of the transition from UK GAAP to IFRS isexplained below. The accounting policies set out above have been appliedconsistently to all periods presented in this interim financial information andin preparing an opening IFRS balance sheet at 1 March 2006 for the purposes oftransition to IFRS. IAS 1 - Presentation of Financial Statements. The form and presentation in theUK GAAP financial statements has been changed to be in compliance with IAS 1. IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS7, presents cash flows in thee categories : cash flows from operatingactivities, cash flows from investing activities and cash flows from financingactivities. Other than the reclassification of cash flow into the newdisclosure categories, there are no significant differences between the Group'sCash Flow Statement under UK GAAP and IFRS. Consequently, no cash flowreconciliations are provided. Purchases of tangible fixed assets under UK GAAPhave been reclassified to purchases of intangible assets and purchases ofproperty, plant and equipment under IFRS. There is no change to the reported losses in the year ended 28 February 2007 asa result of the transition to IFRS. Reconciliation of shareholders equity at 1 March 2006 UK GAAP Effects of IFRS transition to IFRS Notes £'000s £'000s £'000sNon-current assetsGoodwill 0 0 0Intangible assets 1 1,151 235 1,386Property, plant and equipment 1 319 (235) 84 -------- -------- -------- 1,470 0 1,470 -------- -------- --------Current assetsInventories 64 0 64Trade and other receivables 1,369 0 1,369Cash and cash equivalents 4,135 0 4,135 -------- -------- -------- 5,568 0 5,568 -------- -------- -------- Total assets 7,038 0 7,038 ======== ======== ======== Current liabilitiesTrade and other payables (1,161) 0 (1,161)Current tax liabilities (382) 0 (382)Obligations under finance leases (9) 0 (9)Bank overdrafts and loans (1) 0 (1) -------- -------- -------- (1,553) 0 (1,553) -------- -------- -------- -------- -------- --------Net current assets 4,015 0 4,015 -------- -------- -------- Non-current liabilitiesDeferred tax (61) 0 (61)Other provisions 0 0 0Obligations under finance leases (26) 0 (26) -------- -------- -------- (87) 0 (87) -------- -------- -------- -------- -------- --------Net assets 5,398 0 5,398 ======== ======== ======== Shareholders equityCalled up share capital 974 0 974Share premium account 2,322 0 2,322Merger reserve 1,066 0 1,066Share based payments reserve 740 0 740Retained earnings 296 0 296 -------- -------- --------Total shareholders equity 5,398 0 5,398 ======== ======== ======== Reconciliation of shareholders equity at 31 August 2006 UK GAAP Effects of IFRS transition to IFRS Notes £'000s £'000s £'000sNon-current assetsGoodwill 0 0 0Intangible assets 1 1,815 205 2,020Property, plant and equipment 1 437 (205) 232 -------- -------- -------- 2,252 0 2,252 -------- -------- --------Current assetsInventories 83 0 83Trade and other receivables 1,119 0 1,119Cash and cash equivalents 3,598 0 3,598 -------- -------- -------- 4,800 0 4,800 -------- -------- -------- -------- -------- --------Total assets 7,052 0 7,052 ======== ======== ======== Current liabilitiesTrade and other payables (1,325) 0 (1,325)Current tax liabilities (101) 0 (101)Obligations under finance leases (8) 0 (8)Bank overdrafts and loans 0 0 0 -------- -------- -------- (1,434) 0 (1,434) -------- -------- -------- -------- -------- --------Net current assets 3,366 0 3,366 -------- -------- --------Non-current liabilitiesDeferred tax (5) 0 (5)Other provisions (52) 0 (52)Obligations under (21) 0 (21)finance leases -------- -------- -------- (78) 0 (78) -------- -------- -------- -------- -------- --------Net assets 5,540 0 5,540 ======== ======== ======== Shareholders equityCalled up share capital 986 0 986Share premium account 2,342 0 2,342Merger reserve 1,066 0 1,066Share based payments reserve 758 0 758Retained earnings 388 0 388 -------- -------- --------Total shareholders equity 5,540 0 5,540 ======== ======== ======== Reconciliation of shareholders equity at 28 February 2007 UK GAAP Effects of IFRS transition to IFRS Notes £'000s £'000s £'000sNon-current assetsGoodwill 3,804 0 3,804Intangible assets 1 2,316 315 2,631Property, plant and equipment 1 515 (315) 200 -------- -------- -------- 6,635 0 6,635 -------- -------- --------Current assetsInventories 56 0 56Trade and other receivables 683 0 683Cash and cash equivalents 2,256 0 2,256 -------- -------- -------- 2,995 0 2,995 -------- -------- -------- -------- -------- --------Total assets 9,630 0 9,630 ======== ======== ======== Current liabilitiesTrade and other payables (772) 0 (772)Current tax liabilities (197) 0 (197)Obligations under finance leases (4) 0 (4)Bank overdrafts and loans (11) 0 (11) -------- -------- -------- (984) 0 (984) -------- -------- -------- -------- -------- --------Net current assets 2,011 0 2,011 -------- -------- -------- Non-current liabilitiesDeferred tax (39) 0 (39)Other provisions 0 0 0Obligations under finance leases (17) 0 (17) -------- -------- -------- (56) 0 (56) -------- -------- -------- -------- -------- --------Net assets 8,590 0 8,590 ======== ======== ======== Shareholders equityCalled up share capital 1,187 0 1,187Share premium account 5,968 0 5,968Merger reserve 1,066 0 1,066Share based payments reserve 771 0 771Retained earnings (402) 0 (402) -------- -------- --------Total shareholders equity 8,590 0 8,590 ======== ======== ======== Notes to the reconciliation of shareholders equity 1. Classification of website costs Website development cost is included within intangibles under IFRS rather thantangible assets as is the norm under UK GAAP. The effect of this is toreclassify website development cost of £234,964 at March 2007, £205,296 atAugust 2006 and £314,574 at February 2007 from tangible assets to intangibleassets. Total net assets remain unchanged by this adjustment. ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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