26th Jun 2007 07:03
Glotel PLC26 June 2007 26th June 2007 Glotel Plc Results for the year ended 31 March 2007 Glotel Plc announces its results for the year ended 31 March 2007 and arecommended offer for the Company from Spring Group Plc. Highlights • Recommended Offer of 70p per share cash • Group sales declined by 10% from £134.2m to £120.3m • Profit before tax decreased to £2.1m (2006: £4.0m) • Gross profit percentage of 19.1% compared to 19.9% in 2006 • Cash generated from operating activities of £3.4m (2006: 3.0m) • Year end net cash balance of £3.3m (2006:£2.5m) Recommended Offer It has been announced today that the board of Spring Group PLC and theIndependent Directors of Glotel plc have reached agreement on the terms of arecommended cash offer by Spring (Corporate) Limited for the entire issued andto be issued share capital of Glotel plc. The Independent Directors of Glotelplc consider the terms of the Offer to be fair and reasonableand, accordingly, have decided to recommend that Glotel shareholders accept theOffer. The Independent Directors (comprising Les Clark, Jonathan Brooks, RobinSaxby and Glyn Hirsch) have irrevocably undertaken to accept or procure theacceptance of the offer in respect of their entire beneficial shareholdings of9,766,928 Glotel shares, which in aggregate represent approximately 25.1% percent. of the existing issued capital of Glotel plc. Andy Baker was notinvolved in the decision to recommend the offer given his ongoing role with theenlarged group following completion of the offer. Spring has also received an irrevocable undertaking from Andy Baker to accept orprocure the acceptance of the offer in respect of his entire beneficial holdingof 9,336,064 Glotel shares representing 24% of Glotel's existing issued sharecapital. Further details regarding this Offer will be set out in an Offer Document whichwill be posted to Shareholders as soon as possible. - ends - Glotel Plc Les Clark, Chairman 020 7484 3000 Weber Shandwick Financial Nick Oborne 020 7067 0700 Glotel Plc Preliminary Results for the year ended 31 March 2007 Chairman's and Chief Executive's Statement 2006-7 was a challenging year for the group and our profitability was adverselyaffected by a number of factors. The first of these was the weak US dollar,which not only affected the contribution from our US business but also resultedin significant exchange losses on dollar balances held to fund our London-basedinternational telecommunications business. Secondly, we saw a drop-off inactivity with our US telecommunications customers last winter and while this wasonly temporary, it had a material impact on our profitability in the final threemonths of 2006-7. Thirdly, we saw increased margin pressures in the UK, notablyin the public sector. This was partly as a result of the 'Catalist' tenderingprocess for the UK public sector which had the effect of dampening UK PublicSector margins. In spite of these set-backs, our strategy remains the same: we wish to furtherdevelop our presence in the international telecommunications staffing market,and significantly increase our presence in the USA which remains an extremelyprofitable market. In EMEA and Australia we have taken steps to reduce the costbase of both businesses and we expect both to make a positive contribution togroup results in the year to come. Results Group revenues for the year to 31st March 2007 were £120.3m (2006: £134.2m), areduction of 10%. The group gross profit margin percentage declined slightly to19.1% (2006:19.9%) Foreign exchange losses amounted to £0.4m due to the significant weakening ofthe USA dollar against the pound. A major part of our international business aswell as our USA business is denominated in dollars. Operating Profit for the year to 31st March 2007 was £2.2m (2006: £4.4m)inclusive of IFRS share option expenses of £83k ( 2006: £152k). The basic earnings per share for the period was 3.4p (2006: 6.5p). The Board isnot recommending the payment of a final dividend (2006:1.0p). Our net cash balance at 31st March 2007 was £3.3m (2006: £2.5m). Operational highlights The current services provided by Glotel comprise contract staffing, hybridstaffing (USA only) and permanent placements which represent approximately 6% ofNet Fee Income. In the USA our 'hybrid pricing' model which incorporates certainlevels of project management with contract staffing continued to bewell-received by our clients and to generate higher gross margins. We opened an office in San Diego, California, bringing the total number ofoffices to 21 and are able to serve clients in 30 separate countries. Providingcompliant solutions to the assignment of our engineers into the internationalmarket is a major selling point and we maintain a dedicated team who researchand apply the appropriate solutions. In 2006-7, the group extended its decentralised operating structure withsignificant autonomy given to the three operating units in USA, EMEA (Europe,Middle East and Africa) and the Asia Pacific region. All trading units havededicated resources to support our global telecommunication clients and wemaintain a small central unit for corporate purposes in London. We moved theEMEA and Glotel head office from Leicester Square to Paddington in December2006. The dilapidations and removal costs offset the reduction in rent and sothere was no financial benefit in the year. However the relocation will resultin cost savings of approximately £0.3 million per annum from the 2007-8 year. EMEASales in EMEA of £61m were 4.5% above last year but there was significantpressure on our gross margin which dropped to £7.1m (2006: £8.6m). Margins inthe public sector saw a significant deterioration due to re-tendering andcompetitive pressure. During the year, our largest UK customer announced its intention to reduce thenumber of suppliers of contract labour and appoint one master vendor. We wereunsuccessful in this process but there was no effect in the 2007 financial yearsince the transition of staff did not take place. To date, the transition hasstill not commenced. The international telecommunications sector continues to be a great opportunityfor Glotel. We have made progress during the period with two major equipmentvendors that are embarking on some major international infrastructure projects. USAThe USA remained our most profitable region in 2006-7, representing 39% of grouprevenue (2006: 42%) and 86% (2006:63%) of our operating profit before centralcharges. The operating profit for the USA of £3.2m (2006: £3.7m) was 14% lower.£0.2m of this reduction can be explained by the weakness of the US dollar during2006-7 compared to the previous year. A significant proportion of our USA sales comes from two telecommunicationsvendors and during the last week of December 2006 both of these clientssuspended their projects, resulting in some contractor layoffs. This action hada significant impact on our expectations for the year and was reported at thattime. During February and March 2007 these projects were reinstated andcontractor numbers returned to previous levels.Due to the mix of Hybrid 'solutions' projects and regular contact assignmentsthe gross profit percentage in the USA continues to improve and rose to 29.5%for the year. (2006: 27.2%) Results for the year were affected by a mediated settlement of a class actionagainst Glotel Inc. with respect to a dispute over overtime and meal breakpayments for certain telecommunications contractors. The company strenuouslydefended itself but decided to settle the action at a cost of £0.6m. Asia PacThe termination of a high volume low margin account in Australia had an adverseimpact on the results for the year and the Asia Pacific business made only anominal profit for the year (2006:£0.8m). However we opened a number of newaccounts to broaden our client base. This success has established a new platformfor the business. In addition we were recently appointed as a specialistsupplier to a tier-one telecommunications client who is one of the largest usersof contract staff in Australia. Our permanent team in Australia remainsproductive and represented 27% of net fee income for the region. We reduced theAustralian cost base in the final quarter and this has already had a favourableimpact on results in the current financial year. Employees Our headcount grew in 2006/7 from an average of 227 employees to 235 in March2007. We are grateful for the loyalty and commitment of our staff during adifficult year and on behalf of the board we would like to thank them for theirhard work and dedication. We have a number of new employees who started in theyear and our recruitment continues. Outlook The last financial year was disappointing but is now well behind us. We haveadjusted our cost base in the UK and Australia so that these businesses will bebetter able to cope with the lower margin market conditions of these countriesand we remain committed to developing our US business which remains by far themost profitable region for the group. We have had a good start to the year andlook forward to being part of a larger group which will give us much-neededscale, especially in the UK. Les Clark Andy BakerChairman Chief Executive26th June 2007 - ends - For further information, please contact: Glotel Plc Les Clark, Chairman 020 7484 3000Andy Baker, Chief Executive www.glotel.comWeber Shandwick Financial, Nick Oborne 020 7067 0700 Consolidated Income Statement for the year ended 31 March 2007 Year ended Year ended 31 March 31 March 2007 2006 Note £'000 £'000--------------------------------------------------------------------------------Revenue 3 120,285 134,175Cost of sales (97,299) (107,423)-------------------------------------------------------------------------------- Gross profit 22,986 26,752 Operating expenses (20,752) (22,342)-------------------------------------------------------------------------------- Operating profit 3 2,234 4,410 Finance income 4 64 12Finance costs 4 (210) (402)-------------------------------------------------------------------------------- Profit before tax 3,4 2,088 4,020Taxation 6 (783) (1,575)-------------------------------------------------------------------------------- Retained profit for the year 1,305 2,445-------------------------------------------------------------------------------- Basic earnings per share 7 3.4p 6.5pDiluted earnings per share 7 3.4p 6.4p-------------------------------------------------------------------------------- The amount of loss after taxation and dividends for the financial year dealtwith in the accounts of Glotel Plc is £681,000 (2006:£578). The results for the year and the prior year derive entirely from continuingoperations. Balance Sheets The Group The Company 31 March 31 March 31 March 31 March Note 2007 2006 2007 2006 1 Restated £'000 £'000 £'000 £'000--------------------------------------------------------------------------------ASSETSNon-Current assetsIntangible assets 9 428 580 - -Property, plant and 10 974 1,116 - -equipmentInvestments 11 - - 18,073 18,073Deferred tax assets 498 297 - --------------------------------------------------------------------------------- 1,900 1,993 18,073 18,073Current assetsTrade and other 12 27,175 28,497 2,337 2,767receivablesCash and cash equivalents 4,896 4,162 360 335-------------------------------------------------------------------------------- 32,071 32,659 2,697 3,102 LIABILITIESCurrent liabilitiesFinancial liabilities 14 (1,613) (1,681) - -Current tax liabilities (1,094) (888) - -Trade and other payables 13 (10,278) (10,781) (1,284) (1,023)Provisions 15 - - - --------------------------------------------------------------------------------- (12,985) (13,350) (1,284) (1,023)-------------------------------------------------------------------------------- Net current assets 19,086 19,309 1,413 2,079-------------------------------------------------------------------------------- Net assets 20,986 21,302 19,486 20,152-------------------------------------------------------------------------------- SHAREHOLDERS' EQUITYCalled up share capital 17 1,943 1,940 1,943 1,940Share premium account 16,248 16,235 16,248 16,235Other reserves 100 100 - -Profit and loss account 2,695 3,027 1,295 1,977--------------------------------------------------------------------------------Shareholders' equity 20,986 21,302 19,486 20,152-------------------------------------------------------------------------------- Statements of Changes in Shareholders' Equity The Group Share Share Other Profit and Total Note capital premium reserves loss account equity -------------------------------------------------------------------------------------------------- £'000 £'000 £'000 £'000 £'000 Balance at 1 1,912 15,969 100 (369) 17,612April 2005 Currencytranslation - - - 719 719 differencesProfit for the - - - 2,445 2,445 year Employee shareoption scheme:New share capital 28 266 - - 294 issued under share option schemes Exercise of - - - 80 80 share options released from ESTShare option expense - - - 152 152-------------------------------------------------------------------------------------------------- Balance at 31March 2006 and 1 April 2006 1,940 16,235 100 3,027 21,302 Currencytranslation differences - - - (1,145) (1,145) Profit for the year - - - 1,305 1,305Dividends 8 - - - (575) (575) Employee shareoption scheme:New share capital 3 13 - - 16 issued under share option schemesExercise of - - - - - share options released from ESTShare optionexpense - - - 83 83 ------------------------------------------------------------------------------------------------ Balance at 31 March 2007 1,943 16,248 100 2,695 20,986------------------------------------------------------------------------------------------------ The Company Share Share Other Profit and Total Loss------------------------------------------------------------------------------------------------ capital premium reserves account equity £'000 £'000 £'000 £'000 £'000Balance at 1 1,912 15,969 - 1,516 19,397April 2005(as previously reported) Reclassification - - - 380 380(see note 1) Balance at 1 1,912 15,969 - 1,896 19,777 April 2005 (restated) Profit for the - - - 1 1 year Employee shareoption scheme:New share 28 266 - - 294 capital issued under share option schemes Exercise of - - - 80 80shareoptions released from EST ------------------------------------------------------------------------------------------------ Balance at 31 March 1,940 16,235 - 1,977 20,1522006 and 1 April 2006(restated) Loss for the year - - - (107) (107) Dividends 8 - - (575) (575) Employee shareoption scheme:New share 3 13 - - 16 capital issued under share option schemes Exercise of share - - - - - options released from EST ------------------------------------------------------------------------------------------------ Balance at 31 1,943 16,248 - 1,295 19,486March 2007 ------------------------------------------------------------------------------------------------ Cash Flow Statements The The Group Company 31 March 31 March 31 March 31 March Note 2007 2006 2007 2006 1 Restated £'000 £'000 £'000 £'000------------------------------------------------------------------------------------- Cash flows fromoperatingactivitiesCash generatedfrom/(used in)operations (i) 3,422 2,985 600 335Interest 64 12 - 1receivedInterest paid (210) (402) - -Tax paid (1,244) (380) - -------------------------------------------------------------------------------------- Net cashgeneratedfrom operating 2,032 2,215 600 336activities Cash flows frominvestingactivitiesPurchase ofintangible (179) (329) - -assetsPurchase ofproperty, (370) (983) - -plant andequipmentProceeds from - - - -sale ofintangiblesProceeds fromsale ofproperty, plant - 1,032 - -and equipment------------------------------------------------------------------------------------- Net cash used ininvesting (549) (280) - -activities Cash flows fromfinancingactivitiesNet proceedsfromexercise ofshareoptions - 80 - -(EmployeeShare Trustsharesused)Net proceedsfromissue ofordinaryshare capital on 16 294 - -exercise ofshareoptionsDividend paid toshareholders (575) - (575) -------------------------------------------------------------------------------------- Net cash (usedin)/generated from (559) 374 (575) -financingactivities Exchange losses on cash and cash equivalents (122) (66) - -------------------------------------------------------------------------------------- Increase in cashand 802 2,243 25 336cash equivalents Cash and cashequivalents atbeginning of 2,481 238 336 -year ------------------------------------------------------------------------------------- Cash and cashequivalents atend of 3,283 2,481 361 336year ------------------------------------------------------------------------------------- Note: as permitted by International Accounting Standard 7, 'Cash flowstatements', cash and cash equivalents as disclosed in the cash flow statementincorporates cash in hand, deposits held at call with banks and other short-termhighly liquid investments with initial maturities of three months or less net ofoverdrafts and advances drawn on invoice discounting facilities. Note to theCash Flow Statements(i) Reconciliation of profit after tax to cash used in operations The Group The Company 31 March 31 March 31 March 31 March 2007 2006 2007 2006 Restated Note £'000 £'000 £'000 £'000 -------------------------------------------------------------------------Profit/(loss) 1,305 2,445 (107) 1 for the yearAdjustmentsfor: taxation 783 1,575 - - depreciation 489 500 amortisation 266 136 - - loss/(profit) 34 (14) - - on sale of fixed assets interest income (64) (12) - (1) interest expense 210 402 - - share based 83 152 - - payment expenseChanges in working capital trade and other 723 (1,899) 600 335receivables trade and other (407) (242) 107 - payables provisions (58) - -------------------------------------------------------------------------- Cash generatedfrom operations 3,422 2,985 600 335------------------------------------------------------------------------- Notes to the Financial Information 1 General informationGlotel plc ('the Company') and its subsidiaries (together 'the Group') providestaffing resource solutions to blue chip organisations around the world. TheGroup's principal focus is on providing temporary IT staff to thetelecommunications, networking and technology markets. Additionally, the Groupis expanding its permanent staffing division in order to create a morecomprehensive suite of staff resource products and enhance its position as aleading provider of IT professionals globally. The Company is a public limited company incorporated in England and Wales. Theaddress of its registered office is Bridge House 63-65 North Wharf RoadPaddington London W2 1LA The parent company balance sheet, cash flow statement and statement of changesin shareholders' equity as at 31 March 2006 have been restated to reclassifycertain balances relating to the Employee Benefit Trust. 2 Summary of significant accounting policiesThe principal accounting policies applied in the preparation of thisconsolidated financial information are set out below. These policies have beenconsistently applied to all of the years presented. The group's accountingpolicies apply to the parent company as well as to the group as a whole. 2.1 Basis of preparationThe financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 March 2006 and 2007. The financial information has been extracted from the audited consolidatedfinancial statements for the year ended 31 March 2007. Those financialstatements, on which the auditors, PricewaterhouseCoopers LLP, have given anunqualified opinion, will be delivered to the Registrar of Companies on 26 June2007. The comparative figures relating to the year ended 31 March 2006 are takenfrom the audited consolidated financial statements for that year, which havealready been filed with the Registrar of Companies The financial information has been prepared in accordance with the EU-adoptedInternational Financial Reporting Standards (IFRS) and IFRIC interpretations andwith those parts of the Companies Act 1985 which are applicable to companiesreporting under IFRS. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Group's accountingpolicies. The following standards, amendments and interpretations to published standardsare mandatory for accounting periods beginning on or after 1 April 2006 but theyare not relevant to the group's operations: IAS 21 (Amendment), Net investment in a foreign operation;IAS 39 (Amendment), Cash flow hedge accounting of forecast intragrouptransactions;IAS 39 (Amendment), The fair value option;IAS 39 and IFRS 4 (Amendment), Financial guarantee contracts;IFRS 6, Exploration for and evaluation of mineral resources;IFRIC 4, Determining whether an arrangement contains a lease;IFRIC 5, Rights to interests arising from decommissioning, restoration andenvironmental rehabilitation funds; andIFRIC 6, Liabilities arising from participating in a specific market - Wasteelectrical and electronic equipment. The following interpretations to existing standards have been published that aremandatory forthe group's future accounting periods but which the group has not early adopted: IFRS 7, Financial instruments: Disclosures (effective for annual periodsbeginning on or after 1 January 2007). IFRS 7 introduces new disclosuresrelating to financial instruments. The group will apply IFRS 7 from 1 April2007, but it is not expected to have any impact on the classification andvaluation of the group's financial instruments. IFRS 8, Operating segments (effective for annual periods beginning on or after 1January 2009). IFRS 8 extends the scope of segmental reporting, but is notexpected to have any impact on the group's accounts. IFRIC 8, Scope of IFRS 2 (effective from annual periods beginning on or after 1May 2006). IFRIC 8 requires consideration of transactions involving the issuanceof equity instruments - where the identifiable consideration received is lessthan the fair value of the equity instruments issued - to establish whether ornot they fall within the scope of IFRS 2. The group will apply IFRIC 8 from 1April 2007, but it is not expected to have any impact on the group's accounts. IFRIC 10, Interim Financial Reporting and Impairment (effective for annualperiods beginning on or after 1 November 2006). IFRIC 10 prohibits theimpairment losses recognised in an interim period on goodwill and investments inequity instruments and infinancial assets carried at cost to be reversed at a subsequent balance sheetdate. The group will apply IFRIC 10 from 1 April 2007 but it is not expected tohave any impact on the group's accounts. 2.2 ConsolidationThe Group financial statements consolidate the financial statements of GlotelPlc and its subsidiaries. Inter-company transactions, balances and unrealisedgains or losses on transactions between group companies are eliminated. 2.3 Critical Estimate and JudgementsTo be able to prepare accounts according to generally accepted accountingprinciples, management and the Board of directors must make estimates andassumptions that affect the asset and liability items and revenue and expenseitems recorded in the financial statements. These estimates are based onhistorical experience and various other assumptions that management and theBoard believe are reasonable under the circumstances, the results of which formthe basis of making judgements about the carrying value of the assets andliabilities that are not readily apparent from other sources. Actual results maydiffer from these estimates under different assumptions or conditions. Areascomprising critical judgement that may significantly impact earnings andfinancial position are valuation of share based payments, income taxes, andlitigation and contingent liabilities, all of which are discussed in therespective notes. 2.4 Segment reportingA business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that aresubject to risks and returns that are different from those of segments operatingin other economic environments. The returns earned by the Group are predominantly affected by the region inwhich it operates and accordingly management considers that the primaryreporting segment is based on geographic location of the assets that generatethose returns. Management considers that the Group only operates in one businesssegment, that of providing human capital resource solutions to clients. 2.5 Foreign currency translation(a) Functional and presentation 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 functionalcurrency. (b) Transactions and balancesForeign currency transactions are translated into the functional currency usingthe exchange rate prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. (c) Group companiesThe results and financial position of all Group entities (none of which has thecurrency of a hyperinflationary economy) that have a functional currencydifferent from the Group's presentation currency are translated into thepresentation currency as follows:- assets and liabilities for each balance sheet presented are translated at theclosing rate at the date of that balance sheet;- income and expenses for each income statement are translated at averageexchange rates; and- all resulting exchange differences are recognised as a separate component ofshareholders' equity (currency translation adjustment). Exchange differences arising from the translation of the net investment inforeign entities are taken to shareholders' equity on consolidation. Thisincludes foreign exchange differences arising on the translation of loans thatmanagement deems to be as permanent as equity. When a foreign operation is soldor a loan deemed to be as permanent as equity is settled, such exchangedifferences are recycled through the income statement. 2.6 Property, plant and equipmentAll property, plant and equipment (PPE) is shown at historical cost lesssubsequent depreciation and impairment. Cost includes expenditure that isdirectly attributable to the acquisition of the items. Subsequent costs areincluded in the asset's carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associatedwith the item will flow to the Group and the cost of the item can be measuredreliably. All other repairs and maintenance are charged to the income statementduring the financial period in which they occur. Depreciation on assets is calculated using the straight-line method to allocatethe cost of each asset to its residual value over its estimated useful life, asfollows:Leasehold improvements 20% per annumMotor vehicles 25% per annumComputer equipment 33 1/3rd % to 50% per annumOffice equipment 20% per annumFixtures and fittings 20% per annum The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amountif the asset's carrying amount is greater than its estimated recoverable amount(Note 2.9). 2.7 Intangible assetsAcquired computer software licenses are capitalised on the basis of the costsincurred to acquire and bring to use the specific software. These costs areamortised over their estimated useful lives (three to five years). Costs associated with developing or maintaining computer software programmes arerecognised as an expense as incurred. Costs that are directly associated withthe production of identifiable and unique software products controlled by theGroup, and that are expected to generate economic benefits exceeding costsbeyond one year, are recognised as intangible assets. Direct costs include thesoftware development employee costs and an appropriate portion of relevantoverheads. Computer software development costs recognised as assets are amortised overtheir estimated useful lives (two to three years). 2.8 InvestmentsInvestments are held as fixed assets and are stated at cost less amountsprovided for impairment. 2.9 Impairment of non-financial assetsAssets that are subject to amortisation or depreciation are reviewed forimpairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for theamount by which the asset's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset's fair value less costs to sell andvale in use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows(cash-generating units). Non-financial assets that suffered an impairment arereviewed for possible reversal of the impairment at each reporting date. 2.10 Trade receivablesTrade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of the receivables. The amount ofthe provision is the difference between the asset's carrying amount and thepresent value of the estimated future cash flows, discounted at the effectiveinterest rate. The amount of the provision is recognised in the incomestatement. 2.11 Cash, cash equivalents and financial liabilitiesCash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with initial maturities ofthree months or less. Financial liabilities include bank overdrafts and amountsdrawn on invoice discounting facilities. Financial liabilities are shown withincurrent liabilities on the balance sheet. For the purposes of the cash flowstatement, and as permitted by IAS 7, movements in bank overdrafts and advancesdrawn on invoice discounting facilities are treated as movements in cash andcash equivalents. Cash, cash equivalents and financial liabilities are initially recognised atfair value and subsequently measured at amortised cost. All such financialassets and liabilities either carry a floating interest rate or are non-interestbearing. Some of the subsidiary companies carry an element of cash and cashequivalents in a currency other than their functional currency. Such balancesare translated at the period end exchange rate and any gains or losses arisingon retranslation are recognised in the income statement. 2.12 BorrowingsBorrowings are recognised initially at fair value, net of transaction costsincurred. Borrowings, including those drawn under invoice discountingarrangements, are subsequently stated at amortised cost. 2.13 ProvisionsProvisions for restructuring costs and legal claims are recognised when:- the Group has a present legal or constructive obligation as a result of past events;- it is more likely than not that an outflow of resources will be required to settle the obligation; and- the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employeetermination payments. Provisions are measured at the present value of management's best estimate ofthe expenditure required to settle the present obligation at the balance sheetdate. Provisions for onerous contracts are recognised when the expected benefits to bederived by the Group from a contract are lower than the unavoidable cost ofmeeting its obligations under the contract. 2.14 Employee Benefits(a) Pension obligationsThe Group operates a defined contribution pension scheme whereby the Group paysfixed contributions to privately administered insurance plans on a contractualbasis. The Group has no further financial obligations once the contributionshave been paid. The contributions are recognised as an employee benefit expensewhen they are due. (b) Termination benefitsTermination benefits are payable when employment is terminated before the normalretirement date, or when an employee accepts voluntary redundancy in exchangefor these benefits. The Group recognises termination benefits when it isdemonstrably committed to either: terminating the employment of currentemployees according to a detailed formal plan without possibility of withdrawal;or providing termination benefits as a result of an offer made to encouragevoluntary redundancy. (c) Share based plansThe Company Share Option Plan (SOP) allows employees to acquire shares in theCompany. The fair value of options granted under the SOP is recognised as anemployee expense with a corresponding increase in equity. The fair value ismeasured at grant date and spread over the period during which the employeesbecome unconditionally entitled to the options. The fair value of the optionsgranted is measured using the Black-Scholes model, taking into account the termsand conditions upon which the options were granted. The amount recognised as anexpense is adjusted, each period, to reflect the actual number of share optionsthat vest. The proceeds received net of any directly attributable transactioncosts are credited to share capital (nominal value) and share premium when theoptions are exercised. 2.15 Revenue recognitionRevenue comprises the fair value of the services provided, net of any domesticrevenue tax, after eliminating revenue within the Group. Revenue relating to the Group's contract business is charged on a time andmaterials basis, and is recognised as services are rendered as validated byreceipt of a client approved timesheet or equivalent. Permanent placement fees are recognised at the time the individual startsemployment. Revenue relating to the provision of project solutions to clients, whereby thecontracted revenue is fixed at the outset of the contract, is recognised in theaccounting period in which services are rendered, by reference to the stage ofcompletion of the specific transaction. Contracts are continually reviewed forprofitability and if it is probable that contract costs will exceed contractrevenue on any specific contract, the expected loss is recognised as an expenseimmediately. 2.16 LeasesLeases where the lessor retains substantially all the risks and rewards ofownership are classified as operating leases. Payments made under operatingleases (net of any incentives received from the lessor) are charged to theincome statement on a straight-line basis over the period of the lease. 2.17 TaxationCurrent tax, including UK corporation tax and foreign tax, is provided atamounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantially enacted at the balance sheet date. Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. Deferred tax is notaccounted for if it arises from the initial recognition of an asset or liabilityin a transaction, other than a business combination, that at the time of thetransaction affects neither accounting nor taxable profit or loss. Deferred taxis determined using tax rates and laws that have been enacted or substantiallyenacted by the balance sheet date and are expected to apply when the relateddeferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Deferred tax is provided on temporary differences arising on investments insubsidiaries except where the timing of the reversal of the temporary differenceis controlled by the Group and it is probable that the temporary difference willnot reverse in the foreseeable future. 3 Segmental informationThe returns earned by the Group are predominantly affected by the region inwhich it operates and accordingly management considers that the primaryreporting segment is based on the geographic location of the assets thatgenerate those returns. Management considers that the Group only operates in onebusiness segment, that of providing human resource solutions to clients. Thegeographical split of the results of the Group is as follows: Revenue Segment result Year ended Year ended Year ended Year ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------EMEA 60,991 58,368 468 1,407North-America 46,380 55,952 3,179 3,707Asia-Pacific 12,914 19,855 59 775-------------------------------------------------------------------------------- 120,285 134,175 3,706 5,889Centralactivities (1,472) (1,479)--------------------------------------------------------------------------------Operatingprofit 2,234 4,410Interestreceivable 64 12Interestpayable (210) (402)--------------------------------------------------------------------------------Profit beforetax 2,088 4,020Taxation (783) (1,565)-------------------------------------------------------------------------------- Retainedprofit for theyear 1,305 2,445--------------------------------------------------------------------------------The revenue figures above represent revenue to third parties by geographicalorigin and destination. The geographical split of depreciation, amortisation, impairment of tradereceivables, capital expenditure and the net assets/(liabilities) of the Groupare as follows: Depreciation Amortisation Impairment of Capital trade expenditure receivables----------------------------------------------------------------------------------------------------------------------- Year ended Year ended Year ended Year ended Year ended Year ended Year ended Year ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 31 March 2007 31 March 2006 31 March 2007 31 March 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000EMEA 157 164 181 126 36 55 327 310North-America 265 272 67 - (159) 117 207 898Asia-Pacific 67 64 18 10 12 11 78 105----------------------------------------------------------------------------------------------------------------------- 489 500 266 136 (111) 183 612 1,313----------------------------------------------------------------------------------------------------------------------- Capital expenditure represents gross additions to intangible assets as well asproperty, plant and equipment. Intangible assets includes computer softwaresolely. The geographical split of gross assets and liabilities of the Group, stated netof inter-company balances, is as follows: Gross Assets Gross liabilities Year ended Year ended Year ended Year ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------EMEA 17,424 17,509 (7,966) (8,346)North-America 13,588 13,976 (3,707) (3,834)Asia-Pacific 2,959 3,167 (1,312) (1,170)------------------------------------------------------------------------------- 33,971 34,652 (12,985) (13,350)-------------------------------------------------------------------------------The figures for gross assets shown above represent the sum of non-current assetsof £1,900k and current assets of £32,071k : (2006: £1,993k and £32,659respectively) 4 Profit before taxationThe profit before taxation is stated after: Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------Depreciation costs on owned assets 489 500Amortisation of intangible assets 266 136(Write back)/impairment of trade receivables (111) 183Mediated settlement of US legal action 635 -Release of provisions made but not required (159) -Foreign Exchange Losses (Gains) 426 (108) Operating lease rental costs:Plant and machinery 296 178Properties and other 1,195 1,190------------------------------------------------------------------------------- 1,491 1,368------------------------------------------------------------------------------- Auditors' remunerationAudit services- fees payable to the Company's auditor forthe audit of the parent company andconsolidated accounts 90 98- fees payable to the Company's auditor forthe audit of subsidiaries pursuant tolegislation 88 75Non-audit services- Other services 28 22- Taxation services 67 72-------------------------------------------------------------------------------Total auditors remuneration 273 267------------------------------------------------------------------------------- Net finance costsBank overdrafts (5) (8)Other loans (205) (394)-------------------------------------------------------------------------------Finance costs (210) (402)Finance income 64 12-------------------------------------------------------------------------------Net finance costs (146) (390)------------------------------------------------------------------------------- 5a) Staff costs and numbers (includingDirectors) Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------Wages and salaries 11,104 12,523Social security costs 1,036 1,283Other pension costs 129 149Share option expense 83 152------------------------------------------------------------------------------- 12,352 14,107------------------------------------------------------------------------------- The average number of staff during the year was: Year ended Year ended 31 March 2007 31 March 2006-------------------------------------------------------------------------------EMEA (including central activities) 81 82North America 127 116Asia-Pacific 27 29------------------------------------------------------------------------------- 235 227------------------------------------------------------------------------------- All employees are engaged in the operation, management or administration of theGroup. 5b) Directors emoluments and key managementremuneration Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------Emoluments including benefits in kind andpension contributions:Salaries and short-term employee benefits 587 779Share based payments (5) 5------------------------------------------------------------------------------- 582 784 ------------------------------------------------------------------------------- The Board considers that key management consists solely of the Board itself. Pension contributions payable by the Group in respect of the highest paidDirector amounted to £nil during the year ended 31 March 2007 (2006: £nil). The aggregate value of pension contributions payable by the Group in respect ofthe Directors who were members of the Glotel Personal Pension Plan, orequivalent scheme, was £nil (2006: £5,000). As at 31 March 2007, retirementbenefits were accruing under this Plan in respect of no Directors (2006: noDirectors). Further details of Directors' remuneration are shown in the Remuneration Reporton pages 10 to 12. 6 Taxation Year ended Year ended 31 March 2007 31 March 2006Analysis of charge in year £'000 £'000-------------------------------------------------------------------------------Current tax charge 1,024 1,430Adjustment in respect of prior years (40) 62Deferred tax (201) 83Taxation 783 1,575------------------------------------------------------------------------------- A reconciliation of the tax charge applicable to the Group's profit before taxat the UK statutory rate of 30% (2005: 30%) with the tax charge at the Group'seffective tax rate is set out below: Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------Profit before tax 2,088 4,020Standard rate of Corporation tax in UK 30% 30%-------------------------------------------------------------------------------Profit before tax at UK statutory rate 626 1,206Higher tax rates on overseas earnings 163 240Expenses not deductible 48 79(Over)/under provisions in respect of prioryears (40) 62Tax losses used not previously recognised (52) (248)Foreign exchange 24 19Irrecoverable withholding tax on overseasincome 98 201Other (84) -Tax losses not recognised - 16-------------------------------------------------------------------------------Tax charge on profit for the year 783 1,575-------------------------------------------------------------------------------The movement on the deferred tax account is as shown below: 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------At 1 April 297 380Income statement credit/(charge) 225 (64)Exchange differences (24) (19)At 31 March 498 297-------------------------------------------------------------------------------The above deferred tax assets relate to accelerated capital allowances andcertain provisions made by the Group. Factors that may affect future tax chargesThe Group has recognised deferred tax assets where there are forecast taxableprofits from which the future reversal of the underlying timing differences canbe deducted. The only unrecognised deferred tax assets are in respect of tax losses andamount to £126,000 (31 March 2006: £85,000). Should future profits be higherthan those currently forecast in certain countries, future tax charges will bereduced as a result of tax losses for which a deferred tax asset is notcurrently recognised. 7 Earnings per shareBasic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year, excluding those hold in the employee share trust(note 18), which are treated as cancelled. The weighted average number of shares used in the calculation of the basic anddiluted earnings per share is set out below: Year ended Year ended Year ended Year ended 31 March 2007 31 March 2007 31 March 2006 31 March 2006 Average no Earnings per Average no Earnings per of shares share pence of shares share price-------------------------------------------------------------------------------Basic earningsper share 38,337,777 3.4 37,860,244 6.5-------------------------------------------------------------------------------Dilutedearnings pershare 38,421,804 3.4 38,377,300 6.4------------------------------------------------------------------------------- The calculation of basic and diluted earnings per share has been based on aprofit for the financial year of £1,305,000 (2006: £2,445,000). The difference between the weighted average number of shares included in thebasic earnings per share calculation and that used in the diluted earnings pershare calculations represents the dilutive impact of the Group's share optionand incentive plans (note18): Year ended Year ended 31 March 2007 31 March 2006-------------------------------------------------------------------------------Average number of shares included in basicearnings per share calculations 38,337,777 37,860,244Average number of dilutive share options 84,027 517,056-------------------------------------------------------------------------------Average number of shares included in dilutedearnings per share calculations 38,421,804 38,377,300------------------------------------------------------------------------------- 8 DividendsGroup and Company: An interim dividend of 0.5 pence per share was paid to shareholders in November2006.The directors are not proposing a final dividend in respect of the financialyear ended 31 March 2007. (2006: 1 pence per share) 9 Intangible assets - the Group All of the Group's intangible assets are in the form of computer software 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------CostAt 1 April 1,982 1,619Additions 179 329Disposals (241) -Exchange difference (70) 34-------------------------------------------------------------------------------At 31 March 1,850 1,982------------------------------------------------------------------------------- Accumulated amortisationAt 1 April 1,402 1,248Charge for the year 266 136Disposals (215) -Exchange difference (31) 18-------------------------------------------------------------------------------At 31 March 1,422 1,402------------------------------------------------------------------------------- Net book valueAt 31 March 428 580------------------------------------------------------------------------------- 10 Property, plant and equipment - the Group Computer Motor and office Fixtures and Leasehold vehicles equipment fittings improvements Total £'000 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------CostAt 1 April 2006 130 3,303 999 1,029 5,461Additions - 181 37 215 433Disposals - (945) (363) (581) (1,889)Exchange (13) (167) (67) (54) (301)difference -------------------------------------------------------------------------------At 31 March 2007 117 2,372 606 609 3,704------------------------------------------------------------------------------- AccumulateddepreciationAt 1 April 2006 130 2,753 800 662 4,345Charge for the - 300 56 133 489yearDisposals - (944) (358) (581) (1,883)Exchange (13) (141) (49) (18) (221)difference -------------------------------------------------------------------------------At 31 March 2007 117 1,968 449 196 2,730------------------------------------------------------------------------------- Net book valueAt 31 March 2007 - 404 157 413 974-------------------------------------------------------------------------------At 31 March 2006 - 550 199 367 1,116------------------------------------------------------------------------------- Computer Motor and office Fixtures and Leasehold vehicles equipment fittings improvements Total £'000 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------CostAt 1 April 2005 183 2,974 809 727 4,693Additions - 365 188 431 984Disposals (65) (143) (31) (136) (375)Exchange 12 107 33 7 159differenceAt 31 March 2006 130 3,303 999 1,029 5,461------------------------------------------------------------------------------- AccumulateddepreciationAt 1 April 2005 172 2,544 738 615 4,069Charge for the 5 259 62 174 500yearDisposals (59) (143) (31) (135) (368)Exchange 12 93 31 8 144difference -------------------------------------------------------------------------------At 31 March 2006 130 2,753 800 662 4,345------------------------------------------------------------------------------- Net book valueAt 31 March 2006 - 550 199 367 1,116-------------------------------------------------------------------------------At 31 March 2005 11 430 71 112 624------------------------------------------------------------------------------- 11 Fixed asset investments - the Company The Company 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------Cost and net book valueSubsidiary undertakings 18,073 18,073------------------------------------------------------------------------------- Total 18,073 18,073------------------------------------------------------------------------------- The Company has investments in the following subsidiary undertakings and otherinvestments:Name of Country of Principal activity Type of Proportion ofcompany incorporation shares shares held by the Group------------------------------------------------------------------------------- GlotelInternationalLtd England Providing IT and £1 Ord 100% telecommunications shares consultants Glotel, Inc USA Providing IT and US $1 Ord 100% telecommunications shares consultants Glotel ManagedServices Ltd England Providing IT and £1 Ord 100% telecommunications shares consultants Glotel Pty Ltd Australia Providing IT and Aus $1 Ord 100% telecommunications shares consultantsGlotel (NewZealand) Ltd New Zealand Providing IT and NZ $1 Ord 100% telecommunications shares consultants Glotel India Providing IT and Indian 100%Technology telecommunications rupeeSolutions Ltd consultants 10 Ord shares Glotel BV The Providing IT and €454 Ord 100% Netherlands telecommunications shares consultants Glotel GmbH Germany Providing IT and €0.51 Ord 100% telecommunications shares consultants Glotel SRL Argentina Providing IT and 10 AR $ 100% telecommunications Ord consultants shares GlotelHoldings Plc* England Intermediate holding £1 Ord 100% company shares Contract England Dormant £1 Ord 100%Accountants PLC shares Global England Dormant £1 Ord 100%Telecommunications sharesResource Ltd Glotel IT England Dormant £1 Ord 100%Ltd shares Glotel England Financing company £1 Ord 100%Investments sharesLimited Comms & PC England Dormant £1 Ord 100%People Ltd shares Comms & PC England Dormant £1 Ord 100%People shares(Europe) Ltd Comms People England Dormant £1 Ord 100%Ltd shares Comms People, USA Dormant US $1 Ord 100%Inc shares Comms People Singapore Dormant Sing $1 100%(Singapore) OrdPTE Ltd shares Glotel IT Singapore Dormant Sing $1 100%(Singapore) Ord PTE Ltd shares ------------------------------------------------------------------------------- * The shares in this subsidiary undertaking are owned directly by the Company. 12 Trade and other receivables The Group The Company 31 March 2007 31 March 2006 31 March 2007 31 March 2006 Restated £'000 £'000 £'000 £'000-------------------------------------------------------------------------------Tradereceivables 16,467 19,088 - -Less:provisions forimpairment ofreceivables (470) (699) - --------------------------------------------------------------------------------Tradereceivables -net 15,997 18,389 - -Amounts owedby Groupundertakings - - 2,329 2,767Other debtors 1,424 1,651 - -Prepaymentsand accruedincome 9,754 8,457 8 -------------------------------------------------------------------------------- 27,175 28,497 2,337 2,767------------------------------------------------------------------------------- There is no concentration of credit risk with respect to trade receivables, asthe Group has a large number of customers, internationally dispersed. Due tothis, management believes there is no further credit risk provision required inexcess of normal provision for doubtful receivables. The carrying value of trade and other receivables also represents their fairvalue. 13 Trade and other payables The Group The Company 31 March 2007 31 March 2006 31 March 2007 31 March 2006 Restated £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------Trade payables 656 698 (107) (29)Amounts owedto Groupundertakings - - (1,177) (994)Other payables 178 652 - -Taxation andsocialsecurity 926 1,472 - -Accruals anddeferredincome 8,518 7,959 ------------------------------------------------------------------------------------ 10,278 10,781 (1,284) (1,023)----------------------------------------------------------------------------------- 14 Financial liabilities The The Company Group 31 March 2007 31 March 2006 31 March 2007 31 March 2006 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------Bankoverdrafts 1,156 1,488 - -Invoicediscountingadvances 457 193 - ------------------------------------------------------------------------------------- 1,613 1,681 - -------------------------------------------------------------------------------------Amounts advanced to the Group under invoice discounting arrangements are securedby charges over book debts totaling £572,000 (2005: £235,000). The Group mayborrow up to a maximum of between 80% and 85% of trade debts approved by thefinance providers under the invoice discounting arrangements. Interest ispayable on advances at a rate of 1.5% and 1.25% above the local base rate in theUK and Australia respectively and 1.5% above the bank's prime rate in the USA.Under such arrangements the Group bears all the risks associated with collectingthe related trade debtors. 15 Provisions - The Group 31 March 2007 31 March 2006 £'000 £'000-------------------------------------------------------------------------------At 1 April - 58Utilised in year - (58)------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- All provisions related to the ongoing costs of properties which were surplus tothe Group's requirements. 16 Operating lease commitmentsThe Group has committed to making the following future minimum operating leasepayments: Land and Other Buildings 31 March 2007 31 March 2006 31 March 2007 31 March 2006 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------Leases whichexpireWithin oneyear 76 1,395 23 124Between oneand five years 3,076 2,721 80 46------------------------------------------------------------------------------- 3,152 4,116 103 170-------------------------------------------------------------------------------The Company has no operating lease commitments. 17 Share capital 31 March 31 March 31 March 31 March 2007 2007 2006 2006 Number £'000 Number £'000-------------------------------------------------------------------------------AuthorisedOrdinaryshares of 5peach 50,000,000 2,500 50,000,000 2,500Allotted, issued and fullypaidOrdinaryshares of 5peach 38,856,398 1,943 38,800,148 1,940------------------------------------------------------------------------------- 18 Share option and incentive plansThe Glotel Company Share Option Plan ('SOP') was established in March 1999. TheGlotel Company Savings Related Scheme ('SRS') was established in May 1999.Options outstanding at 31 March 2007 under the Glotel Plc share option planswere as follows: Options granted Number of Option price Earliest date options in pence exercisable '000 from---------------------------------------------------------------------------------------SOP 1999-2005 2,506 37-427 20 April 2000 SRS 2001 Nil 30 1 September 2006--------------------------------------------------------------------------------------- SOP Number of SOP Weighted SRS Number SRS Weighted options ave. exercise of options ave. exercise '000 price (pence) of '000 price (pence) --------------------------------------------------------------------------------------- Options 2,506 91 56 30outstandingat 1 April 2006Granted - - - -Exercised - - (56) 30Lapsed/cancelled (650) 91 - ---------------------------------------------------------------------------------------- Options 1,856 91 - -outstandingat 31 March 2007Weighted 7 - - -averageremaininglifeof optionsoutstandingat 31 March 2007(years)Options 763 - - -exercisableat 31 March 2007 -----------------------------------------------------------------------------------------The weighted average price of Glotel plc shares during the year ended 31 March2007 was 68 pence (2006: 89 pence). The weighted average remaining life ofoptions outstanding under the SOP as at 31 March 2007 was 7 years (2006: 8years). Options are normally exercisable between the third and tenth anniversary of thedate of the grant, although options may be exercised earlier in certaincircumstances. Options granted under the SOP, except those granted at 76p, aresubject to performance criteria based upon growth in earnings per share.Exercise of an option is subject to continued employment. The Group has borne an expense under IFRS 2 'Share-based payments' in relationto all share options granted after 7 November 2002, that have not vested by 1January 2005. Options were valued using the Black-Scholes option-pricing model.No performance conditions were included in the fair value calculations. The fairvalue per option granted and the assumptions used in the calculation were asfollows:Grant date 23 July 2004 19 January 2005 18 August 2005 19 December 2005 Share price atgrant date(pence) 123 103 100 84Exercise price(pence) 123 103 100 84Expectedvolatility 50% 46% 46% 45%Life of option(years) 5 5 5 5Dividend yield nil nil nil nilexpected onunderlying sharesRisk freeinterest rateover life ofoption 5.00% 5.00% 4.63% 4.55%Value ofoption (pence) 61 48 46 38----------------------------------------------------------------------------------- Volatility has been estimated by taking the historical volatility of thecompany's share price since March 2002. Vesting estimates take into account thecompany's staff retention rate. The expected life is the average expected periodto exercise. The risk free rate of return is the yield on zero-coupon UKgovernment bonds of a term consistent with the assumed option life. An Employee Share Trust ('EST') was established in the year to 31 March 2000 toacquire Glotel shares to satisfy future requirements of employee share plans.The EST is funded by loans and gifts from the Group. The EST has waived itsrights to dividends. During the year to 31 March 2007, the EST released noshares (2006: 335,500 shares) to meet exercises of share options. At 31 March2007, the EST held 495,042 shares (2006: 495,042 shares), which had a marketvalue of £294k (2006: £425k). 19 PensionsThe Glotel Personal Pension Plan is a defined contribution plan and is open toall UK employees who have completed three months' service. The Group contributesthe equivalent of 5% of an employee's pensionable salary into his/her personalpension plan, provided that he/she contributes at least the same amount. Thepension cost, which represents the contributions payable by the Group under theGlotel Personal Pension Plan, amounted to £59,000 for the year ended 31 March2007 (2006: £76,000). Included in creditors due within one year is £7,000 (2006:£10,000) in respect of contributions due to such pension plans. The Company's US subsidiary (Glotel, Inc) has a defined contribution Savings andInvestment Plan. This plan covers substantially all the Group's US employees whomeet minimum age and service requirements, and allows participants to defer aportion of their annual compensation on a pre-tax basis. Company contributionsto the plan may be made at the discretion of Glotel, Inc. The Group made nocontributions to the plan during the two years ended 31 March 2007. The Company's Australian subsidiary (Glotel Pty Limited) must remit anemployers' contribution towards all employees state pension plan under asuperannuation scheme. The pension cost borne by the Group under this schemetotaled £70,000 (2006: £73,000). The Group does not have any defined benefit pension arrangements. 20 Financial instrumentsThe Group's financial instruments comprise cash, bank overdrafts, advances drawnon invoice discounting facilities, provisions for liabilities and charges andvarious items such as trade debtors, and trade creditors that arise directlyfrom its operations. It is, and has been throughout the period under review, theGroup's policy that no trading in derivative financial instruments shall beundertaken. The main risks arising from the Group's financial instruments are interest raterisk, liquidity risk and foreign currency risk. Interest rate riskThe Group finances its operations through a mixture of retained profits and,when required, bank overdrafts and invoice discounting facilities. It is theGroup's practice to utilise floating rate facilities. The interest rateexposures arising are not hedged. The Group invests surplus cash as floatingrate interest earning deposits with UK, US, Australian and European banks. LiquidityThe Group's policy is to ensure that it has adequate financial resources toenable it to finance its day-to-day operations, based on cash flow projections.The Group's working capital requirements are generally short term in nature. Asa result the Group utilises short term overdraft and discounting facilitiesrather than longer term financing. Foreign currency riskThe Group has significant overseas subsidiaries, the largest of which is Glotel,Inc. which operates in the USA. The revenues and expenses of this subsidiary aredenominated in US dollars. The Group does not hedge its net investment inoverseas subsidiaries. The Group's businesses generally raise invoices and incurexpenses in their local currencies. As a result the Group's businesses do nothave any significant currency exposures to third parties. Borrowing facilitiesThe Group had maximum floating rate invoice discounting facilities available at31 March 2007 of £14.0 million (2006: £15.2 million). Based on the debtor bookat 31 March 2007 the maximum potential drawdown under these facilities was£7,166,000 (2006: £9,954,000). These facilities are on a rolling 12 month noticeperiod. The Group also has an overdraft facility of £3,000,000 of which£3,000,000 (2006: £1,681,000) was undrawn at 31 March 2007. Fair values of financial instrumentsAs at 31 March 2007 and 31 March 2006, there were no material differencesbetween the fair values and the book values of the Group's financial assets andliabilities. Interest rate risk profile of financial instruments The following table sets out the carrying amount of the Group's financialinstruments that are exposed to interest rate risk at 31 March 2007 and 31 March2006. Note that all financial instruments have a maturity of less than one year. 31 March 2007 31 March 2006 Effective Carrying amount Effective Carrying amount interest rate% Total interest rate% Total £'000 £'000--------------------------------------------------------------------------------Floating rate: 3.5% 4,896 3.6% 4,162Cash and cashequivalents 7.0% (1,156) 6.3% (1,488)Bankoverdrafts 9.3% (457) 6.9% (193)Advances drawnon invoicediscountingfacilities 3,283 2,481-------------------------------------------------------------------------------- The above floating rate financial assets and liabilities represent cashdeposited on over-night banking facilities earning interest based on bankovernight, weekly deposit and REPO rates, and bank overdrafts and invoicediscounting advances on which interest is charged based on LIBOR and local baseinterest rates adjusted by variable margins. Currency exposuresExposures that give rise to net currency gains and losses in the profit and lossaccount are shown below. These comprise monetary assets and liabilities of theGroup that are not denominated in the functional currency of the operating unitinvolved. Net foreign currency monetary assets Net foreign currency monetary assets Year Year Year Year Year Year Year Year Year Year ended ended ended ended ended ended ended ended ended ended 31 31 31 31 31 31 31 31 31 31 March March March March March March March March March March 2007 2007 2007 2007 2007 2006 2006 2006 2006 2006 Sterling US Euro Other Total Sterling US Euro Other Total Dollar Dollar £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------------------FunctionalcurrencyofGroupoperation:Sterling - 694 699 - 1,393 - 1,846 880 10 2,736Other 1 320 - - 321 - 44 - - 44-------------------------------------------------------------------------------------------Total 1 1,014 699 - 1,714 - 1,890 880 10 2,780------------------------------------------------------------------------------------------- 21 Related Party TransactionsThe Company carried out no inter company trading during the year (2006: nil).The amounts owed to the Company by Group undertakings reduced during the yeardue to payment of monies owed to Glotel Plc. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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