RNS Number:7327I
AssetCo PLC
29 November 2007
For Immediate Release 29 November 2007
("AssetCo" and or the "Company")
Results for the six months ended 30 September 2007
AssetCo plc, (AIM : ASTO) a leading provider of support services to the UK Fire
and Rescue Service, is pleased to announce its results for the six months ended
30 September 2007. A summary of key points follows :
Financial
* Pre tax profit increased by 213% to #4.7m
* EBITDA of #11.6m (2006 : #8.1m)
* Fully diluted earnings per share rose by 67% to 5.5p (2006 : 3.3p)
* Net assets were #32.7m (2006 : #6.5m)
Business
* Significant contract revenue gains have been achieved in the period
under review
o LFEPA - whole life contract value has increased by #89m to #489m since
March 2007
o LFR - whole life contract value has increased by #6m to #65m since
March 2007
* Formation of Emergency Resource function
o Focus on specialist human resources solutions to the emergency services
o To be headed by Jeff Ord CBE, HM Inspector of Fire
* Acquisition of AES Group for #4m
o Designer, builder and installer of integrated electrical and
communications systems for specialist emergency services vehicles
* Strategic Investment in Miquest Limited
o Integrated asset management software solution provider to emergency
services
* Disposal of non-core business
* Overseas opportunities
o Approaches to replicate support service model internationally
Outlook
* Current trading ahead of expectations
* New Dimensions and Fireguard Contracts expected to be awarded summer
2008
* Next Fire and Rescue Authority contract anticipated to come to market in
Q4
* Continuing benefits from integration of acquired business
* Further niche acquisitions currently under negotiation
John Shannon, Chief Executive Officer, commented:
"We have had a successful six months in terms of meeting our financial and
operational targets. We are confident that this progress can be maintained and
that the increase in capabilities from our recent acquisition and investment,
and the launch of the new Emergency Resource function, will ensure that we are
ideally placed to leverage the knowledge and expertise gained in our unique
business partnership model with LFEPA and LFR to the benefit of emerging
national and international demand."
For more information please contact:
AssetCo plc Tel: +44 (0) 20 8515 3999
John Shannon
Frank Flynn
Buchanan Communications Tel: +44 (0) 20 7466 5000
Tim Anderson
Isabel Podda
REPORT OF THE CHIEF EXECUTIVE OFFICER
Introduction
Our strong trading performance for the half year to 30 September 2007 reflects:
i) The significant growth of our core 20-year Fire and
Rescue Service ("FRS") contracts, driven by the expansion in our service
capabilities; and
ii) The early benefits from our establishment of an integrated
supply chain offering to the FRS market.
In line with our strategy as outlined in our Annual Report we continue to:
*Position the business as a long-term support services partner for the
emergency services;
*Wind down non-emergency business activities; and
*Streamline our internal operations for performance and cost efficiency.
International Financial Reporting Standards
This is the first set of financial statements that we are required to prepare in
accordance with International Financial Reporting Standards ("IFRS"). In
preparing these financial statements we have started from an opening balance
sheet at 1 April 2006, our transition date to IFRS, and made those changes in
accounting policies and other restatements required by IFRS 1 for first time
adoption of IFRS. Under IFRS the business combination of AssetCo and Asfare,
which took place in March 2007, is required to be treated as a reverse
acquisition. The transition to IFRS is explained more fully in Note 8 to these
interim financial statements.
Financial results for the six months ended 30 September 2007
We are pleased to report a strong performance for the six months ended 30
September 2007 with profit before tax increasing by 213% to #4.7 million (Six
months ended 30 September 2006: #1.5 million) on turnover of #27.6 million (Six
months ended 30 September 2006: #52.9 million).
Our strategy to progressively move out of non-emergency business activities is
reflected in the reduction in turnover. Revenue from non-emergency fleet
management contracts reduced from #36.2 million in the six months ended 30
September 2006 to #6.4 million in the period under review. Non-emergency
revenues will continue to decline as contracts reduce.
EBITDA (before share based payments) for the six months ended 30 September 2007
rose to #11.6 million (Six months ended 30 September 2006: #8.1 million) as the
table below shows.
Six months ended
30.9.07 30.9.06
#'000 #'000
Operating profit 7,101 3,559
Depreciation (Note 4) 4,199 4,588
Share-based payments 281 -
-------- --------
EBITDA 11,581 8,147
-------- --------
Fully diluted earnings per share rose by 67% to 5.5 pence (Six months ended 30
September 2006: 3.3 pence).
Net assets at 30 September 2007 were #32.7 million (30 September 2006: #6.5
million).
Strategy
The emergency services, and particularly the FRS market in the UK, have been
moving progressively towards the procurement of fully outsourced support
services. Our strategy is to organise and equip the business with sufficient
scale, skills, and capabilities to best position us to compete successfully in
this sector where we can leverage off significant existing client relationships.
Overseas opportunities have allowed us to consider how to respond to demand from
new markets for the application of our knowledge, expertise and operational
support services.
Organisation
Our core business is based on improving our clients' business support functions
and processes to deliver operational and financial performance benefits. During
the period under review we have begun to benefit from the application of this
expertise following our establishment of a "near-shore" integrated back office
function which is already delivering clear synergies in traditionally dispersed
administrative functions.
In recognition of how our clients organise their operations to best meet their
needs, we had formed two distinct and dedicated business units focusing on
support for Emergency Services and Emergency Equipment respectively.
Demand for outsourcing operational support is increasingly driven by Government
response to changing environmental and terrorist threats. As a recognised and
leading partner to the Fire and Rescue and other emergency sectors, we consider
the business to be well positioned to provide operational excellence, long-term
capability and sustainable managed service solutions. The business is now even
more effectively organised and positioned for scale and growth.
The accelerated pace of investment in new technology and essential equipment to
support the changing demands of the emergency services now requires a new breed
of supplier with the capability to instigate and sustain a level of innovation,
product development and secure supply chain never before seen in this industry.
By reorganising our business to set up a unit dedicated to the development,
design, build and sourcing of such specialist equipment we now provide the
market with a fully integrated supply chain providing access to the best of
breed products and technology internationally available.
The emergency services are highly dependent upon appropriately skilled,
competent, and compliant resources. Recent trends in environmental and climatic
conditions and exposure to greater terrorist threat has accentuated that
dependency. With recruitment, training and staffing, the Fire and Rescue Service
alone invests more than #2.1 billion (82% of the total annual budget) on
resource-related deployment. Recognising the challenges this brings for the
sector, we have recently formed an Emergency Resources function which will offer
a specialist human resources solutions to the emergency services sector. Jeff
Ord CBE, who is currently HM Inspector of Fire for Scotland, will join the Group
on 1 December 2007 to head up this new operation to support both UK based and
overseas opportunities.
The management of the business is set up in such a way as to ensure the
expertise and synergies of each unit are appropriately exploited to be of
benefit to all clients and to complement our commercial goals.
Acquisition and investment
We continue to identify and integrate businesses which provide specialist skills
and services which will enhance our overall offering to the emergency services
and we are pleased to have recently completed the following synergistic
acquisition and strategic investment.
AES Group
AES designs, builds and installs integrated electrical and communication systems
for specialist emergency services vehicles and national communications projects
such as FireLink. It is a current provider to the Fire and Rescue Services' New
Dimensions project, contracted and operated by Communities and Local Government,
and brings a complementary set of technology and communication skills to enhance
the design, engineering and build capability offered by the Group's Papworth
Specialist Vehicles subsidiary.
The company has also developed and recently launched a telemetry product,
M-Flow, specifically for the emergency services market which enables the capture
of real time data from vehicles and the transmission of that information via
GPRS or Wi-Fi to fleet managers. Already adopted by a number of police forces in
the UK, including for use in helicopters, and as part of the New Dimensions
project, the technology will greatly enhance the nature and efficiency of
support and maintenance operations for all types of emergency services fleets
and make significant breakthroughs in their ability to reduce carbon emissions
and achieve searching environmental targets set by Government. We believe there
are exciting growth opportunities for this product with both existing and new
clients.
AES, with revenues of #4 million per annum, was acquired on 23 November 2007 for
#2.2 million, a multiple of four times earnings, comprising #1.25 million of
cash and #0.95 million satisfied by the issue of new shares. In addition,
deferred consideration of up to #1.8 million may be payable upon achieving
certain performance criteria.
Miquest Limited
Miquest provides integrated software solutions to the emergency services for the
management of assets. Using barcode and RFID technologies, the company's
services and solutions address the needs of basic asset location tracking,
tracking asset maintenance regimes, including mobile assets such as fleet,
protective clothing and equipment, the management of facilities, information and
technology and the tracking of personnel.
The product is well established in the FRS market and is currently adopted by
both our existing client, London Fire and Emergency Planning Authority
("LFEPA"), and the New Dimensions project.
On 26 November 2007 we acquired a 25% strategic position in Miquest for #380k.
Following two years of software development, Miquest reported profit before tax
of #50k on turnover of #300k in the year to 31 March 2007. The business has
secured orders of #700k for 2008.
The integration of M-Flow and Miquest product offerings will provide the
business with the ability to deliver an integrated asset management solution.
Further niche acquisitions have been identified and are currently under
negotiation.
Disposal
As part of our ongoing wind down of non-emergency business activities, we have
entered into an unconditional agreement to dispose of a small niche part of our
Northern Ireland business for #1.5 million (net assets of #0.5 million). This
transaction is scheduled to complete on or before 31 December 2007.
Current trading
Trading in quarter three has been ahead of the Board's expectations and trading
conditions around the Group remain favourable with opportunities increasing in
all key areas of business activity.
We are continuing our active pre-contract work in connection with the national
New Dimensions and Fireguard contracts which are expected to be awarded by the
summer of 2008. The New Dimensions contract, estimated at #130 million over a
16-year period, is to provide a total managed service solution for specialist
vehicles and equipment deployed following 9/11.
The Fireguard Business Continuity contract is to provide an outsourced business
continuity solution for emergency fire crew capability to support the FRS's
statutory obligations under the Civil Contingency Act.
New business development opportunities continue to increase. Several Fire and
Rescue Authorities ("FRAs") are informally grouping together to consider the
purchase of outsourced services and we have been actively supporting this move.
This collaboration, in process terms, extends the conversion timing but provides
larger combined opportunities with more scope and benefit for our products and
services. There are now 12 FRAs who are at a variety of stages of maturity and
from which the first contract is anticipated to come to market in quarter four
of the current financial year.
While this business development activity has continued, our account management
and service delivery teams have continued to grow our existing business
organically capitalising on the requirement for more wide ranging and
sophisticated support services as demands on the Fire and Rescue Services
increase nationally. We have seen strong organic growth in the contracts with
our existing clients.
LFEPA
Significant contract revenue gains have been achieved in the period under
review. The total value of the contract with LFEPA which had a value of #292
million at inception and #400 million at 31 March 2007, had increased to #489
million at 30 September 2007, to be realised over the twenty year term of the
contract.
We have successfully managed the largest build programme ever undertaken in the
UK Fire industry with the supply of 102 new fire appliances and over 40 other
specialist vehicles and numerous pieces of sophisticated technical operational
equipment. This equipment represents an investment of #28 million.
LFR
The contract with Lincolnshire Fire and Rescue Service ("LFR"), which is still
in its implementation phase, has grown in value from #59 million to #65 million
in the six months to 30 September 2007.
We are currently working with LFR to introduce 23 refurbished (ex London) and 33
new fire appliances. The value of this programme is approximately #8 million and
is due to be completed by 31 March 2008.
These support service contracts will provide LFEPA and LFR with the most modern
equipment available to meet the operational challenges being faced by the UK
FRS.
Dividend
It is the Board's current intention to declare a dividend based on the results
for the year ending 31 March 2008.
Outlook
We have had a successful six months in terms of meeting our financial and
operational targets. We are confident that this progress can be maintained and
that the increase in capabilities from our recent acquisition and investment,
and the launch of the new Emergency Resource function, will ensure that we are
ideally placed to leverage the knowledge and expertise gained in our unique
business partnership model with LFEPA and LFR to the benefit of emerging
national and international demand.
Our ongoing business development efforts in the UK and now overseas continue to
exploit our first mover advantage, positioning us well for major long term
contracts, and we look forward to further positive outcomes during 2008.
Our drive to support collaboration in our existing FRA pipeline will not impact
on our ability to deliver growth in 2008/9 as we continue to unlock efficiencies
across the business and extend our service penetration with existing clients.
John Shannon, Chief Executive Officer
27 November 2007
AUDITORS REPORT
Introduction
We have been engaged by the company to review the financial information in the
interim report for the six months ended 30 September 2007 which comprises the
consolidated interim income statement, consolidated interim balance sheet,
consolidated interim statement of changes in equity and the consolidated interim
cash flow statement and the related notes 1 to 8. We have read the other
information contained in the interim report which comprises the report of the
Chief Executive Officer and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity". Our review work has been
undertaken so that we might state to the company those matters we are required
to state to them in a review 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 for our review work, for this report, or for the
conclusion we have formed.
Directors' responsibilities
The interim report is the responsibility of, and has been approved by the
directors. The AIM Rules of the London Stock Exchange require that the
accounting policies and presentation applied to the interim figures are
consistent with those which will be adopted in the annual accounts having regard
to the accounting standards applicable for such accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial
information in the interim report based on our review.
Scope of review
We conducted our review in accordance with guidance contained in International
Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board for use in the United Kingdom. A review of
interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards of Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that any material modification should be made to the financial information in
the interim report for the six months ended 30 September 2007.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
LONDON THAMES VALLEY OFFICE
SLOUGH
27 November 2007
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2007
Six months ended
30.09.07 30.09.06
#'000 #'000
Revenue 27,634 52,941
Cost of sales (13,380) (46,582)
-------- --------
Gross profit 14,254 6,359
-------- --------
Administrative expenses (6,872) (2,938)
Administrative expenses - share-based payments (281) -
-------- --------
(7,153) (2,938)
Other gains/losses - net - 138
-------- --------
Operating profit 7,101 3,559
-------- --------
Finance income 96 80
Finance costs (2,529) (2,168)
-------- --------
Profit before taxation 4,668 1,471
-------- --------
Taxation (883) 113
-------- --------
Profit for the period 3,785 1,584
======== ========
Earnings per share
Basic 5.6p 3.3p
-------- --------
Diluted 5.5p 3.3p
-------- --------
CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)
for the six months ended 30 September 2007
30.09.07 30.09.07
Note #'000 #'000
ASSETS
Non-current assets
Property, plant and equipment 4 74,497 45,503
Goodwill 38,738 34,327
Other intangible assets 144 6
Retirement benefit surplus 329 329
113,708 80,165
-------- -------
Current assets
Inventories 3,043 3,010
Trade and other receivables 12,232 30,350
Cash and cash equivalents 11,854 875
-------- -------
27,129 34,235
-------- -------
Total assets 140,837 114,400
======== =======
EQUITY
Attributable to equity holders of the Company
Issued share capital 16,800 100
Share premium account 17,890 2,971
Reverse acquisition reserve (11,701) -
Other reserve 281 -
Retained earnings 9,411 3,438
-------- -------
Total equity 32,681 6,509
-------- -------
LIABILITIES
Non-current liabilities
Borrowings 75,012 49,193
Deferred income tax liabilities 3,958 1,814
Retirement benefit obligations 42 -
-------- -------
79,012 51,007
-------- -------
Current liabilities
Trade and other payables 16,416 43,287
Current income tax liabilities 285 -
Financial liabilities - 9,129
Borrowings 12,443 4,468
-------- -------
29,144 56,884
-------- -------
Total liabilities 108,156 107,891
-------- -------
Total equity and liabilities 140,837 114,400
======== =======
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the six months ended 30 September 2007
Share Capital Shrae premium Reverse Other reserve Retained Total Equity
acquisition earnings
reserve
account
#'000 #'000 #'000 #'000 #'000 #'000
At 1 April 100 2,971 - - 1,854 4,925
2006
Profit for
the - - - - 1,584 1,584
period --------- --------- --------- --------- --------- ---------
At 30
September 100 2,971 - - 3,438 6,509
2006 --------- --------- --------- --------- --------- ---------
Profit for
the - - - - 3,855 3,855
period
Accounting
for
the reverse
acquisition 16,700 14,919 (11,701) - (1,667) 18,251
(see note --------- --------- --------- --------- --------- ---------
8)
At 31 March
2007 16,800 17,890 (11,701) - 5,626 28,615
--------- --------- --------- --------- --------- ---------
Profit for
the - - - - 3,785 3,785
period
Movement
relating to
share-based
payments - - - 281 - 281
--------- --------- --------- --------- --------- ---------
At 30
September 16,800 17,890 (11,701) 281 9,411 32,681
2007 ========= ========= ========= ========= ========= =========
CONSOLIDATED INTERIM CASH FLOW STATEMENT (UNAUDITED)
for the six months ended 30 September 2007
Six months ended
30.09.07 30.09.06
Note #'000 #'000
Cash flows from operating activities
Cash generated from operations 5 9,969 13,790
-------- --------
Finance costs (2,529) (2,168)
-------- --------
Net cash generated from operating activities 7,440 11,622
-------- --------
-------- --------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash (1,879) -
acquired
(Purchase)/sale of intangible assets (100) 2
Purchases of property, plant and equipment (28,041) (3,459)
Proceeds from sale of property, plant and 180 6,818
equipment -------- --------
Net cash used in investing activities (29,840) 3,361
-------- --------
Cash flows from financing activities
Net increase in/(repayments of) borrowings 27,335 (2,126)
Net increase in/(repayments of) finance leases (3,408) (14,285)
Finance income 96 80
-------- --------
Net cash used in financing activities 24,023 (16,331)
-------- --------
Net increase/(decrease) in cash, cash
equivalents and 1,623 (1,348)
bank overdrafts
Cash, cash equivalents and bank overdrafts at
beginning 10,231 2,223
of the period -------- --------
Cash, cash equivalents and bank overdrafts at
end of 11,854 875
period ======== ========
NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Legal status and activities
AssetCo Plc ("the Company") and its subsidiaries (together "the Group") are
principally involved with the provision of management services to the emergency
services market. Other Group companies are engaged in automotive engineering,
the provision of asset management services and the supply of specialist
equipment to the homeland security market.
The Company is a public limited liability company incorporated and domiciled in
England and Wales. The address of its registered office is 800 Field End Road,
South Ruislip, Middlesex HA4 0QH.
The Company has its primary listing on the Alternative Investment Market ("AIM")
of the London Stock Exchange.
The Company's accounts for the year ended 31 March 2007 have been delivered to
the Registrar of Companies. Those accounts have received an unqualified audit
report which did not contain statements under Section 237 (2) and (3) of the
Companies Act 1985.
These financial statements are not statutory accounts within the meaning of
Section 240 of the Companies Act 1985.
These financial statements have not been audited but have been the subject of a
review. The scope of the review is set out on pages 10 and 11.
These Group consolidated financial statements were authorised for issue by the
Board of Directors on 27 November 2007.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below.
2.1 Basis of preparation
The accounts comply with the AIM Rules and have been prepared on a basis
consistent with the revenue and recognition principles of International
Financial Reporting Standards ("IFRS") that will be adopted when the Group
prepares its first annual IFRS accounts at 31 March 2008. The company has chosen
not to adopt IAS 34, Interim Financial Reporting.
This is the first period in which the financial statements have been prepared
under IFRS. A summary of the impact of the transition from UK GAAP to IFRS can
be found in Note 8.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies.
a) Standards, amendments and interpretations effective for the year ended 31
March 2008 but not yet relevant to the Group's operations
There are no standards, amendments or interpretations effective for the year
ended 31 March 2008 that are not yet relevant to the Group's operations.
b) Interpretations to existing standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Group's accounting periods beginning
on or after 1 April 2008 or later periods but which the Group has not early
adopted:
Standards
IFRS 8, Operating Segments (effective for annual periods beginning on or after 1
January 2009). IFRS 8 sets out requirements for disclosure of information about
an entity's operating segments and also about the entity's products and
services, the geographical areas in which it operates, and its major customers.
Management is currently assessing the impact of IFRS 8 on the Group's
operations.
IAS 1 (revised), Presentation of Financial Statements (effective for annual
periods beginning on or after 1 January 2009). IAS 1 (revised) sets out
revisions to the presentation of financial information. Management is currently
assessing the impact of IAS 1 (revised) on the financial statements of the
Group.
Interpretations
IFRIC 12, Service Concession Arrangements (effective for annual periods
beginning on or after 1 January 2008). IFRIC 12 is not relevant to the Group's
operations.
IFRIC 13, Customer Loyalty Programmes (effective for annual periods beginning on
or after 1 July 2008). IFRIC 13 is not relevant to the Group's operations.
IFRIC 14, IAS 9 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (effective for annual periods beginning on or
after 1 January 2008). Management is currently assessing the impact of IFRIC 14
on the Group's operations.
2.2 Consolidation
a) Reverse acquisition accounting
Under IFRS 3 "Business Combinations", the acquisition of AssetCo Group Limited
by the Company has been accounted for as a reverse acquisition and the
consolidated IFRS financial information of the Company is therefore a
continuation of the financial information of AssetCo Group Limited.
b) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which
the Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilites assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of identifiable net assets acquired is recorded as goodwill. If
the cost of an acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
c) Recognition of assets and liabilities as part of a business combination
In accordance with IFRS 3, Business Combinations, an intangible asset acquired
in a business combination is deemed to have a cost to the Group of its fair
value at the acquisition date. The fair value of the intangible asset reflects
market expectations about the probability that the future economic benefits
embodied in the asset will flow to the Group. Where an intangible asset might be
separable, but only together with a related tangible or intangible asset, the
group of assets is recognised as a single asset separated from goodwill where
the individual fair values of the assets in the group are not reliably
measurable. Where the individual fair value of the complimentary assets are
reliably measurable, the Group recognises them as a single asset provided the
individual assets have similar useful lives.
2.3 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
from the provision of services in the ordinary course of the Group's activities.
Revenue is shown net of value-added tax, returns, rebates and discounts and
after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the entity
and specific criteria have been met for each of the Group's activities as
described below. The amount of revenue is not considered to be reliably
measurable until all contingencies relating to the sale have been resolved. The
Group bases it estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each arrangement.
Rendering of services
Revenue from services rendered is recognised by reference to the stage of
completion of the transaction. Stage of completion is measured by reference to
the number of labour hours incurred to date as a percentage of total labour
hours expected to be incurred.
Revenue from services provided on a short-term or one-off basis is recognised
when the service is complete.
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the
goods have passed to the buyer and can be reliably measured and recovery of
consideration is considered probable, usually on despatch of goods.
Leasing
Revenue from the leasing of assets is recognised in the income statement on a
straight-line basis over the period of the hire.
Maintenance contracts
Long-term maintenance contracts are reviewed on an annual basis to assess the
reasonableness of their reported profitability in respect of recognised turnover
and related costs. Turnover and costs on these contracts are recognised in the
period services are delivered or received respectively.
2.4 Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments.
2.5 Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in sterling (#), which is the Company's functional and
presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
2.6 Government grants
Grants from the government are recognised at their fair value when there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions.
Government grants relating to costs are deferred and recognised in the income
statement over the period necessary to match them with the costs that they are
intended to compensate.
Government grants relating to property, plant and equipment are included in
non-current liabilities as deferred government grants and are credited to the
income statement on a straight-line basis over the expected lives of the related
assets.
2.7 Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance is charged to the income
statement during the financial period in which they are incurred.
Borrowing costs incurred specifically for the construction of an item of
property, plant and equipment are capitalised.
Depreciation on assets is calculated using the straight-line method to allocate
their cost to their residual values over their estimated useful lives as
follows:
Office furniture and equipment 4 - 7 years
IT equipment 2 - 3 years
Motor vehicles 3 - 4 years
Leasehold improvements Over the term of the lease
Fixtures and fittings 3 - 5 years
Equipment, plant and machinery 2 - 12 years
The residual values and useful lives of assets are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognised within "other (losses)/gains - net" in the
income statement.
2.8 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Separately recognised goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (separately identifiable cash
flows) for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to
benefit from the business combination in which the goodwill arose. The Group
allocates goodwill to each contract that it operates and the underlying business
to which the goodwill relates.
Computer software
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives of three to five years.
Costs associated with developing or maintaining computer software programmes are
recognised as an expense as incurred. Costs that are directly associated with
the development of identifiable and unique software products controlled by the
Group, and that will probably generate economic benefits exceeding costs beyond
one year, are recognised as intangible assets. Costs include the employee costs
incurred as a result of developing software and an appropriate portion of
relevant overheads.
Computer software development costs recognised as assets are amortised over
their estimated useful lives which do not exceed three years.
Impairment testing of goodwill, other intangible assets and property, plant and
equipment
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows. As a result, some
assets are tested individually for impairment and some are tested at
cash-generating unit level.
Goodwill, other individual assets or cash-generating units that include
goodwill, other intangible assets with an indefinite useful life, and those
intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the carrying amount
exceeds the recoverable amount of the asset or cash-generating unit. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously recognised may no
longer exist.
2.9 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in first-out (FIFO) method. The cost of finished
goods and work in progress comprises design costs, raw materials, direct labour,
other direct costs and related production overheads based on normal operating
capacity. It excludes borrowing costs. Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable
selling expenses.
2.10 Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default in payments are considered
indicators that the trade receivable is impaired. The amount of the provision is
the difference between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognised in the income statement within
administrative expenses. When a trade receivable is uncollectible, it is written
off against the allowance account for trade receivables. Subsequent recoveries
of amounts previously written off are credited against administrative expenses
in the income statement.
2.11 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks
and bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.
2.12 Equity
Issued share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Share premium
The share premium account represents the excess over nominal value of the fair
value of consideration received for equity shares, net of expenses of the share
issue.
Reverse acquisition reserve
The reverse acquisition reserve arises on the acquisition of AssetCo Group
Limited by the Company and represents the extent to which the reserves of
AssetCo Group Limited have been capitalised as a result of the business
combination.
Other reserve
The other reserve represents equity-settled share-based employee remuneration
until such share options are exercised.
2.13 Research and development
The Group incurs expenditure on research projects and on projects to apply
research findings to develop new or substantially improved products. This
expenditure is recognised in the income statement as an expense as incurred.
Once detailed criteria have been met that confirm that the product is both
technically and commercially feasible, any further expenditure incurred on the
project is capitalised if the expenditure is expected to be material.
2.14 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
2.15 Leases
Group as a lessee
The Group leases certain property, plant and equipment. Leases of property,
plant and equipment where the Group has substantially all the risk and rewards
of ownership are classified as finance leases. Finance leases are capitalised at
the commencement of the lease at the lower of the fair value of the leased asset
and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as
to achieve a constant rate on the finance balance outstanding. The corresponding
rental obligations, net of finance charges, are included in other short-term and
other long-term payables. The interest element of the finance cost is charged to
the income statement over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The
property, plant and equipment acquired under finance leases is depreciated over
the shorter of the useful life of the asset and the lease term.
Leases other than finance leases are classified as operating leases and payments
are charged to the income statement on a straight-line basis over the lease
term. Lease incentives, if applicable, are spread over the term of the lease.
Group as a lessor
When assets are leased out under a finance lease, the present value of the lease
payments is recognised as a receivable. The difference between the gross
receivable and the present value of the receivable is recognised as unearned
finance income.
Lease income is recognised over the term of the lease using the net investment
method, which reflects a constant periodic rate of return.
When assets are leased our under an operating lease, the asset is included in
the balance sheet based on the nature of the asset. Lease income is recognised
over the term of the lease on a straight-line basis.
2.16 Income taxes
Income tax payable is provided on taxable profits using tax rates enacted or
substantially enacted at the balance sheet date.
Income tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that is it probable that
future taxable profit will be available against which the temporary differences
can be utilised.
2.17 Trade payables
Trade payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
2.18 Employee benefits
Pension obligations - defined benefit schemes
Group companies operate two defined benefit pension schemes. The schemes are
generally funded through payments to insurance companies or trustee-administered
funds, determined by periodic actuarial calculations.
Typically, a defined benefit pension plan defines an amount of pension benefit
that an employee will receive on retirement, usually dependent upon one or more
factors such as age, years of service and compensation.
The asset or liability recognised in the balance sheet in respect of defined
benefit pension plans is the present value of the defined benefit obligation at
the balance sheet date less the fair value of plan assets, together with
adjustments for unrecognised actuarial gains or losses and past service costs.
The defined benefit surplus or obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the
defined benefit surplus or obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid and that have
terms to maturity approximating to the terms of the related pension liability.
The interest element of the defined benefit cost represents the change in
present value of scheme obligations resulting from the passage of time, and is
determined by applying the discount rate to the opening present value of the
benefit obligation, taking into account material changes in the obligation
during the year. The expected return on plan assets is based on an assessment
made at the beginning of the year of long-term market returns on scheme assets,
adjusted for the effect on the fair value of plan assets of contributions
received and benefits paid during the year. The difference between the expected
return on plan assets and the interest cost is recognised in the income
statement as other finance revenue or cost.
Past-service costs are recognised immediately in income, unless changes to the
pension plan are conditional on the employees remaining in service for a
specified period of time (the vesting period). In this case, the past-service
costs are amortised on a straight-line basis over the vesting period.
Actuarial gains and losses are recognised as an expense and charged or credited
to the income statement over the employees' expected average remaining working
lives. The resulting surplus or deficit is presented with other net assets on
the balance sheet. The related deferred tax is shown within other deferred tax
balances. A surplus is recognised only to the extent that it is recoverable by
the Group.
Pension contributions - defined contribution scheme
For defined contribution plans, the Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid.
Contributions to defined contribution schemes are recognised in the income
statement during the period in which they become payable.
Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans.
The fair value of the employee services received in exchange for the grant of
the options is recognised as an expense. The total amount to be expensed over
the vesting period is determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting conditions, for example,
profitability. Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. At each balance sheet date, the
entity revises its estimates of the number of options that are expected to vest.
It recognises the impact of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment to equity. The proceeds
received net of any directly attributable transaction costs are credited to
share capital (nominal value) and share premium when the options are exercised.
Termination benefits
Termination benefits are payable when an employment is terminated by the Group
before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either: terminating the employment
of current employees according to a detailed formal plan without possibility of
withdrawal; or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after
the balance sheet date are discounted to their present value
2.19 Financial instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. Where the contractual
obligations of financial instruments, including share capital, are equivalent to
a similar debt instrument, those financial instruments are classed as financial
liabilities. Financial liabilities are classified as such in the balance sheet.
Finance costs and gains or losses relating to financial liabilities are included
in the income statement. Finance costs are calculated so as to produce a
constant rate or return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the
definition of a financial liability then this is classed as an equity
instrument. Dividends and distributions relating to equity instruments are
debited direct to equity.
2.20 Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of
resources will be required to settle the obligation; and the amount has been
reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the class of
obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations
may be small.
Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognised
as an interest expense.
2.21 Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved by the Company's shareholders.
3. Primary segment information
The Group is organised into two main business segments which are the Emergency
Services Division and the Emergency Equipment Division. The legacy non-core
business of fleet management is separately disclosed as Non Emergency.
All assets and liabilities of the Group are allocated to individual segments.
Six months ended 30 September 2007
Emergency Emergency Non Consolidationad Group
Services Equipment Emergency justments
#'000 #'000 #'000 #'000 #'000
Continuing
operations
Segment revenue 11,393 32,470 6,355 (22,584) 27,634
========= ======== ========= ========== =========
Segment result 2,509 2,387 53 (281) 4,668
========= ======== ========= ========== =========
The consolidation adjustments relate to the elimination of inter-segment sales
(#22.584 million) and a charge for share-based payments (#281,000).
Six months ended 30 September 2006
Emergency Emergency Non Emergency Consolidation Group
Services Equipment adjustments
#'000 #'000 #'000 #'000 #'000
Continuing
operations
Segment 10,315 6,392 36,234 - 52,941
revenue ========= ========= ========= ========== =========
Segment 1,972 27 1,457 (1,985) 1,471
result ========= ========= ========= ========== =========
The consolidation adjustments relate to the movement on the valuation of the
pension scheme and an effective finance cost on the fair value of shares
classified as financial liabilities.
4. Property, plant and equipment
Six months ended 30 September 2006
Leasehold Fixtures and Equipment, Assets under Total
improvements fittings plant and long-term
machinery arrangements
#'000 #'000 #'000 #'000 #'000
Opening net
book amount at
1 April 2006 1,129 1,847 13,680 36,656 53,312
Additions 588 5 1,488 1,378 3,459
Net book value
of disposals - - - (6,680) (6,680)
Depreciation (36) (16) (1,900) (2,636) (4,588)
---------- --------- --------- --------- ---------
Closing net
book amount at
30 September
2006 1,681 1,836 13,268 28,718 45,503
========== ========= ========= ========= =========
Six months ended 30 September 2007
Leasehold Fixtures and Equipment, Assets under Total
improvements fittings plant and long-term
machinery arrangements
#'000 #'000 #'000 #'000 #'000
Opening net
book amount at
1 April 2007 1,996 1,850 10,571 36,418 50,835
Additions 15 10 2,950 25,066 28,041
Net book value
of disposals - - - (180) (180)
Depreciation (102) (21) (383) (3,693) (4,199)
--------- --------- --------- --------- ---------
Closing net
book amount at
30 September
2007 1,909 1,839 13,138 57,611 74,497
========= ========= ========= ========= =========
5. Reconciliation of profit before tax to net cash generated from operations
Six months Six months
ended ended
30.9.07 30.9.06
#'000 #'000
Profit before taxation 4,668 1,471
Adjustments for:
- Depreciation 4,199 4,588
- Profit on disposal of property, plant and
equipment - (138)
- Increase in share-based payments 281 -
- Decrease in retirement benefit obligations - (101)
- Finance income (96) (80)
- Finance costs 2,529 2,168
Changes in working capital
- Inventories 1,192 5,619
- Trade and other receivables 1,820 17,009
- Trade and other payables (4,624) (16,746)
-------- --------
Cash generated from operations 9,969 13,790
======== ========
Reconciliation of net cash flow to movement in net debt
Six months Six months
ended ended
30.9.07 30.9.06
#'000 #'000
Net increase/(decrease) in cash and cash equivalents 1,623 (1,348)
Net cash (inflow)/outflow from debt and lease
financing (23,927) 16,375
-------- --------
(Increase)/decrease in net debt in the period (22,304) 15,027
-------- --------
Opening net debt (53,297) (76,978)
-------- --------
Closing net debt (75,601) (61,951)
======== ========
6. Business combinations
During the period, the Group completed two acquisitions.
Simentra Limited
On 16 April 2007, the Group acquired 100% of the issued share capital of
Simentra Limited for consideration of #450,000. The net assets acquired in the
transaction, and the goodwill arising, are as follows:
Carrying amount before Fair value Fair value
combination adjustments
#'000 #'000 #'000
Cash and cash
equivalents 10 - 10
Trade and
other payables (40) - (40)
--------- --------- ---------
Net (30) - (30)
liabilities ========= ========= =========
Goodwill 480
---------
Total
consideration,
satisfied by
cash 450
=========
The Group invested in this business seeking to benefit from business
relationships that were non-contractual at the time of acquisition.
Blue Amber Red Limited
On 14 June 2007, the Group acquired 100% of the issued share capital of Blue
Amber Red Limited for consideration of #63,000. The net assets acquired in the
transaction, and the goodwill arising, are as follows:
Carrying amount before Fair value Fair value
combination adjustments
#'000 #'000 #'000
Inventories 64 - 64
Cash and cash
equivalents 24 - 24
Trade and
other payables (30) - (30)
--------- --------- ---------
Net assets 58 - 58
========= ========= =========
Goodwill 5
---------
Total
consideration,
satisfied by
cash 63
=========
7. Events after the balance sheet date
On 23 November 2007, the Group acquired all of the issued share capital of Auto
Electrical Services (Manchester) Limited, a software company that designs,
builds and installs integrated electrical and communication systems for
specialist vehicles, for total consideration of #2.2 million of which #1.25
million was payable on completion.
On 26 November 2007, the Group acquired 25% of the issued share capital of
Miquest Limited, a company which provides integrated solutions for asset
management, for consideration of #380,000.
8. First time adoption of International Financial Reporting Standards
For all periods up to and including the year ended 31 March 2007, the Group
prepared its financial statements in accordance with United Kingdom generally
accepted accounting practice (UK GAAP). These interim financial statements, for
the six months ended 30 September 2007, are the first that the Group is required
to prepare that are consistent with the revenue and recognition principles of
International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU).
In preparing these interim financial statements, the Group has started from an
opening balance sheet as at 1 April 2006, the Group's date of transition to
IFRS, and made those changes in accounting policies and other restatements
required by IFRS 1 for the first-time adoption of IFRS.
This note explains the principal adjustments made by the Group in re-stating its
UK GAAP balance sheet as at 1 April 2006 and its previously published UK GAAP
financial statements for the year ended 31 March 2007.
Exemptions applied
IFRS 1 provides a number of optional exemptions to the general principles of
full retrospective application of IFRS. The Group has elected to take advantage
of the following optional exemption.
Business combinations
IFRS 3 Business Combinations, has not been applied to acquisitions of
subsidiaries or of interests in joint ventures that occurred before 1 April
2006.
Reconciliation of equity at 1 April 2006
Note
UK GAAP A B IFRS
#'000 #'000 #'000 #'000
Non-current assets
Property, plant and equipment 53,320 (8) - 53,312
Goodwill 34,327 - - 34,327
Other intangible assets - 8 - 8
Retirement benefit surplus - 228 - 228
Current assets
Inventories 8,629 - - 8,629
Trade and other receivables 47,587 (228) - 47,359
Cash and cash equivalents 2,223 - - 2,223
Current liabilities
Trade and other payables (60,033) - - (60,033)
Current income tax liabilities (113) - - (113)
Borrowings (6,354) - - (6,354)
Shares classified as financial liabilities (10,000) - 1,667 (8,333)
Non-current liabilities
Borrowings (64,514) - - (64,514)
Deferred income tax liabilities (1,814) - - (1,814)
--------- --------- --------- ---------
Net assets 3,258 - 1,667 4,925
========= ========= ========= =========
Equity
Share capital 100 - - 100
Share premium account 2,971 - - 2,971
Profit and loss account 187 - 1,667 1,854
--------- --------- --------- ---------
Total equity 3,258 - 1,667 4,925
========= ========= ========= =========
Notes
(A) Under UK GAAP, software costs were included within tangible fixed assets.
Under IAS 38, "Intangible Assets", computer software requires separate
disclosure on the face of the balance sheet as an intangible asset. The effect
of this balance sheet reclassification is to move software costs with a net book
amount of #8,000 from property, plant and machinery to other intangible assets.
Also under UK GAAP, surpluses and deficits in relation to pension schemes were
classified within other debtors or other creditors respectively. Under IAS 19,
"Employee Benefits", separate disclosure is required on the face of the balance
sheet. The effect of this balance sheet reclassification is to move #228,000
from trade and other receivables and show this amount separately within
non-current assets.
(B) In accordance with IAS 39, "Financial Instruments: Recognition and
Measurement", a financial liability is required to be measured initially at fair
value. At the date of transition to IFRS, the fair value of the shares
classified as financial liabilities has been calculated to be #8.333 million
instead of the #10 million recorded under UK GAAP. An adjustment of #1.667
million has therefore been reflected in reserves and shares classified as
financial liabilities.
The amortisation of goodwill arising prior to the date of transition to IFRS has
been netted with the cost of the goodwill.
Reconciliation of equity at 30 September 2006
Note
UK GAAP A B C D IFRS
#'000 #'000 #'000 #'000 #'000 #'000
Non-current assets
Property, plant and 45,509 - (6) - - 45,503
equipment
Goodwill 33,290 1,037 - - - 34,327
Other intangible - - 6 - - 6
assets
Retirement benefit - - 329 - - 329
surplus
Current assets
Inventories 3,010 - - - - 3,010
Trade and other 30,679 - (329) - - 30,350
receivables
Cash and cash 875 - - - - 875
equivalents
Current liabilities
Trade and other (43,287) - - - - (43,287)
payables
Borrowings (4,468) - - - - (4,468)
Shares classified as
financial (10,000) - - 871 - (9,129)
liabilities
Non-current
liabilities
Borrowings (49,193) - - - - (49,193)
Deferred income tax
liabilities (1,814) - - - - (1,814)
--------- -------- ------- ------- ------- --------
Net assets 4,601 1,037 - 871 - 6,509
========= ======== ======= ======= ======= ========
Equity
Share capital 100 - - - - 100
Share premium account 2,971 - - - - 2,971
Profit and loss account 1,530 1,037 - 871 - 3,438
--------- -------- ------- ------- ------- --------
Total equity 4,601 1,037 - 871 - 6,509
========= ======== ======= ======= ======= ========
Notes
(A) Under UK GAAP, goodwill was amortised over its estimated expected useful
life. Under IFRS 3 "Business Combinations", goodwill is considered to have an
indefinite life and is therefore not amortised but subject to annual impairment
testing. The goodwill charge made under UK GAAP has been reversed under IFRS
from 1 April 2006, the IFRS transition date. The IFRS restatement results in a
reduction in the amortisation charge, within administrative expenses, of #1.037
million for the six months ended 30 September 2006 and a corresponding increase
in goodwill as at 30 September 2006.
(B) Under UK GAAP, software costs were included within tangible fixed assets.
Under IAS 38, "Intangible Assets", computer software requires separate
disclosure on the face of the balance sheet as an intangible asset. The effect
of this balance sheet reclassification is to move software costs with a net book
amount of #6,000 from property, plant and machinery to other intangible assets.
Also under UK GAAP, surpluses and deficits in relation to pension schemes were
classified within other debtors or other creditors respectively. Under IAS 19,
"Employee Benefits", separate disclosure is required on the face of the balance
sheet. The effect of this balance sheet reclassification is to move #329,000
from trade and other receivables and show this amount separately within
non-current assets.
(C) In accordance with IAS 39, "Financial Instruments: Recognition and
Measurement", a financial liability is required to be measured at fair value. At
30 September 2006, the fair value of the shares classified as financial
liabilities has been calculated to be #9.129 million instead of the #10 million
recorded under UK GAAP. The decrease in the fair value of this financial
liability of #871,000 has been reflected in the carrying value of the shares
classified as financial liabilities at 30 September 2006.
Reconciliation of equity at 31 March 2007
Note
UK GAAP A B C D IFRS
#'000 #'000 #'000 #'000 #'000 #'000
Non-current assets
Property, plant and
equipment 50,879 - - (44) - 50,835
Goodwill 112,123 (74,077) 2,070 - (3,257) 36,859
Other intangible - - - 44 - 44
assets
Retirement benefit - - - 329 - 329
surplus
Current assets
Inventories 4,235 - - - - 4,235
Trade and other
receivables 14,381 - - (329) - 14,052
Cash and cash 10,231 - - - - 10,231
equivalents
Current liabilities
Trade and other payables (21,058) - - 42 - (21,016)
Current income tax liabilities (213) - - - - (213)
Borrowings (13,765) - - - - (13,765)
Non-current
liabilities
Borrowings (49,763) - - - - (49,763)
Deferred income tax
liabilities (3,171) - - - - (3,171)
Retirement benefit
obligations - - - (42) - (42)
--------- -------- ------- ------- ------- --------
Net assets 103,879 (74,077) 2,070 - (3,257) 28,615
========= ======== ======= ======= ======= ========
Equity
Share capital 16,800 - - - - 16,800
Share premium 17,890 - - - - 17,890
account
Merger reserve 68,293 (68,293) - - - -
Reverse acquisition
reserve - (8,367) - - (3,334) (11,701)
Profit and loss 896 2,583 2,070 - 77 5,626
account --------- -------- ------- ------- ------- --------
Total equity 103,879 (74,077) 2,070 - (3,257) 28,615
========= ======== ======= ======= ======= ========
Notes
(A) On 30 March 2007, AssetCo Group Limited completed the reverse
acquisition of Asfare Group Plc. On the same day, the name of Asfare Group Plc
was changed to AssetCo Plc. Under UK GAAP, a "true and fair" over-ride was
adopted and the transaction was accounted for using conventional acquisition
accounting. Under IFRS, the business combination qualifies as a reverse
acquisition and has been accounted for as such. The factors indicating that a
reverse acquisition has taken place include the fact that the former directors
and shareholders of AssetCo Group Limited hold 59% of the equity of the combined
entity and have the power to govern the financial and operating policies of the
Enlarged Group. Reverse acquisition accounting has resulted in a reverse
acquisition reserve replacing the merger reserve previously reported under UK
GAAP, lower goodwill and the share capital and share premium account of the
company formerly known as Asfare Group Plc replacing those of AssetCo Group
Limited. The net assets acquired in the transaction, and the goodwill arising,
are as follows:
Carrying amount before Fair value Fair value
combination adjustments
#'000 #'000 #'000
Goodwill 5,768 - 5,768
Property,
plant and
equipment 371 - 371
Inventories 1,363 - 1,363
Trade and
other
receivables 3,108 - 3,108
Cash and cash
equivalents 797 - 797
Trade and
other payables (4,650) - (4,650)
Borrowings (2,057) - (2,057)
--------- --------- ---------
Net assets 4,700 - 4,700
========= ========= =========
Goodwill 3,552
---------
Deemed
consideration 8,252
=========
By adopting reverse acquisition accounting, the merger reserve of #68.293
million, previously reported under UK GAAP, is replaced by a reverse acquisition
reserve of #8.367 million, which represents the extent of the reserves of
AssetCo Group Limited which have been capitalised. The adjustment to the profit
and loss account of #2.583 million reflects the fact that the retained earnings
of AssetCo Group Limited at 30 March 2007 (#3.479 million) are replacing those
of Asfare Group Plc, previously reported under UK GAAP. A corresponding
adjustment to goodwill of #74.077 million is required.
(B) Under UK GAAP, goodwill was amortised over its estimated expected useful
life. Under IFRS 3 "Business Combinations", goodwill is considered to have an
indefinite life and is therefore not amortised but subject to annual impairment
testing. The goodwill charge made under UK GAAP has been reversed under IFRS
from 1 April 2006, the IFRS transition date. The IFRS restatement results in a
reduction in the amortisation charge, within administrative expenses, of #1.033
million for the six months ended 31 March 2007 (#2.070 million for the year
ended 31 March 2007) and a corresponding increase in goodwill as at 31 March
2007.
(C) Under UK GAAP, software costs were included within tangible fixed assets.
Under IAS 38, "Intangible Assets", computer software requires separate
disclosure on the face of the balance sheet as an intangible asset. The effect
of this balance sheet reclassification is to move software costs with a net book
amount of #44,000 from property, plant and machinery to other intangible assets.
Also under UK GAAP, surpluses and deficits in relation to pension schemes were
classified within other debtors or other creditors respectively. Under IAS 19,
"Employee Benefits", separate disclosure is required on the face of the balance
sheet. The effect of this balance sheet reclassification is to move #329,000
from trade and other receivables and #42,000 from trade and other payables and
show these amounts separately within non-current assets and non-current
liabilities.
(D) Under UK GAAP costs incurred by Asfare Group Plc in connection with the
business combination with AssetCo Group Limited were capitalised in goodwill.
Under IFRS, the business combination is deemed to be a reverse acquisition and,
in substance, AssetCo Group Limited acquired Asfare Group Plc. The costs
incurred by Asfare Group Plc should therefore not be reflected in goodwill but
charged to the income statement. The result is an increase in administrative
expenses of #1.59 million for the year ended 31 March 2007.
Under IFRS, the carrying value of financial liabilities is required to be stated
at fair value. An assessment of the fair value of shares classified as financial
liabilities at 30 March 2007, the date at which the shares were re-purchased,
results in a net increase in finance costs of #1.667 million for the year ended
31 March 2007. On the same date, deferred consideration of #5 million was waived
by the former owners of AssetCo Group Limited which results in a finance gain of
#3.334 million for the year ended 31 March 2007.
Reconciliation of profit for the six months ended 30 September 2006
Note
UK GAAP A B C IFRS
#'000 #'000 #'000 #'000 #'000
Turnover 52,941 - - - 52,941
Cost of sales (46,582) - - - (46,582)
--------- -------- ------- ------- --------
Gross profit 6,359 - - - 6,359
--------- -------- ------- ------- --------
Administrative expenses (3,837) 1,037 (138) - (2,938)
Profit on disposal of fixed - - 138 - 138
assets --------- -------- ------- ------- --------
Operating profit 2,522 1,037 - - 3,559
--------- -------- ------- ------- --------
Finance income 80 - - - 80
Finance costs (1,372) - - (796) (2,168)
--------- -------- ------- ------- --------
Profit on ordinary activities
before 1,230 1,037 - (796) 1,471
taxation --------- -------- ------- ------- --------
Tax on profit on ordinary 113 - - - 113
activities
Profit on ordinary activities
after 1,343 1,037 - (796) 1,584
taxation ========= ======== ======= ======= ========
Notes
(A) As noted in the reconciliation of equity at 30 September 2006, amortisation
of #1.037 million reported under UK GAAP has been reversed under IFRS.
(B) Under UK GAAP, the profit on disposal of fixed assets was reported within
administrative expenses. Under IFRS, for presentational purposes only, the
profit on disposal has been separately shown on the face of the income
statement.
(C) Under IFRS, the carrying value of financial liabilities is required to be
stated at fair value. An assessment of the fair value of shares classified as
financial liabilities at 30 September 2006 results in an increase in finance
costs of #796,000 for the six months ended 30 September 2006.
Reconciliation of profit for the year ended 31 March 2007
Note
UK GAAP A B C D IFRS
#'000 #'000 #'000 #'000 #'000 #'000
Revenue 94,106 - - - - 94,106
Cost of sales (70,644) - - - - (70,644)
-------- ------- -------- -------- ------- -------
Gross profit 23,462 - - - - 23,462
-------- ------- -------- -------- ------- -------
Administrative (16,614) 2,070 (138) - (1,590) (16,272)
expenses
Profit on disposal
of - - 138 - - 138
fixed assets -------- ------- -------- -------- ------- -------
Operating profit 6,848 2,070 - - (1,590) 7,328
-------- ------- -------- -------- ------- -------
Finance income 45 - - 3,334 - 3,379
Finance costs (3,603) - - (1,667) - (5,270)
-------- ------- -------- -------- ------- -------
Profit on ordinary
activities before 3,290 2,070 - 1,667 (1,590) 5,437
taxation -------- ------- -------- -------- ------- -------
Tax on profit on
ordinary 2 - - - - 2
activities -------- ------- -------- -------- ------- -------
Profit on ordinary
activities after 3,292 2,070 - 1,667 (1,590) 5,439
taxation ======== ======= ======== ======== ======= =======
Notes
(A) As noted in the reconciliation of equity at 31 March 2007, amortisation of
#2.070 million reported under UK GAAP has been reversed under IFRS.
(B) Under UK GAAP, the profit on disposal of fixed assets was reported within
administrative expenses. Under IFRS, for presentational purposes only, the
profit on disposal has been separately shown on the face of the income
statement.
(C) Under IFRS, the carrying value of financial liabilities is required to be
stated at fair value. An assessment of the fair value of shares classified as
financial liabilities at 30 March 2007, the date at which the shares were
re-purchased, results in a net increase in finance costs of #1.667 million for
the year ended 31 March 2007. On the same date, deferred consideration of #5
million was waived by the former owners of AssetCo Group Limited which results
in a finance gain of #3.334 million for the year ended 31 March 2007.
(D) Under UK GAAP costs incurred by Asfare Group Plc in connection with the
business combination with AssetCo Group Limited were capitalised in goodwill.
Under IFRS, the business combination is deemed to be a reverse acquisition and,
in substance, AssetCo Group Limited acquired Asfare Group Plc. The costs
incurred by Asfare Group Plc should therefore not be reflected in goodwill but
charged to the income statement. The result is an increase in administrative
expenses of #1.59 million for the year ended 31 March 2007.
Cash flows
There have been no material changes to the information previously published in
the Group's cash flow statements during the periods under review.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRBDBCXDGGRI
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