RNS Number:5623K
Global Marine Energy PLC
24 December 2007
Interim Results
For the Period ended 30 September 2007
Global Marine Energy Plc ("GME" or the "Group"), the oilfield services business,
announces its Interim Results for the period ended 30 September 2007.
Key points:
O Restructured management team and new acting Chief Executive appointed,
post half year;
O Issues highlighted by Strategic Review are being addressed;
O Increase in turnover to �14.5m (2006: �6.1m);
O Impact of provisions for losses on future crane contracts amounted to
�1.6m (2006: � 0.75m)
O Additional funding secured;
O Bid for Company progressing.
Brent Fitzpatrick, Chairman, Global Marine Energy Plc commented:
"Having restructured the management team and appointed a new and highly
experienced acting Chief Executive, the Board believes it is now in a position
to move the Group forward.
"Now that we have secured finance for our ongoing working capital requirements,
GME is on a firmer financial footing upon which we can build. We now need to
focus on achieving profitable sales growth".
For further information:
Global Marine Energy Plc Tel: 01274 531 862
Brent Fitzpatrick Chairman
Andrew Gibson Finance Director
Bankside Consultants Tel: 020 7444 4140
Michael Padley/Susan Scott
Noble and Company Limited Tel: 0207 763 2200
Matthew Hall
Chairman's Statement
Having restructured the management team and appointed a new and highly
experienced acting Chief Executive, the new Board feels it is now in a position
to move the Group forward. Issues highlighted by the strategic review have been
addressed and new reporting procedures are being implemented.
The loss for the period under review is �2.9 million; the bulk of which is made
up of provisions on future crane contracts.
We are restructuring our US operations and have already appointed a new
operations manager and a new US financial controller who, in conjunction with
the Board, will be reviewing and renegotiating contracts to enable a profitable
outcome from our current order book
However, a number of contracts are expected to continue to affect the Company's
performance in the current financial year. Where losses are foreseeable these
have been provided for in the current financial statements as per accounting
standards.
The order book continues to grow and enquiry levels remain high but the emphasis
is on ensuring that we only take-on profitable business.
The recommended offer by EMER International Group Limited is progressing and it
is expected that the offer document will be posted on or around 4 February 2008.
I should also like to thank Spring Capital for having the conviction to invest
in GME. The funds that they have made available will allow us to improve the
business operationally and improve financial planning within the Group.
The Group still faces challenging times ahead but, now that we have secured
finance for our ongoing working capital requirements, GME is on a firmer
financial footing upon which we can build. We are operating in a buoyant
marketplace and there is strong demand for GME's quality products and after
sales' services worldwide. We now need to focus on achieving profitable sales
growth.
Brent Fitzpatrick, Chairman
Finance Director's Statement
This is the first time the Company has reported under International Financial
Reporting Standards (IFRS) The Interim Report is therefore much longer than
usual as it contains a number of reconciliations between UK GAAP and IFRS. The
accounts for prior periods have been restated under IFRS and whilst audited
under UK GAAP have not yet been audited under IFRS. There have been a number of
changes to previous periods, the most material being adjustments arising in the
financial statements to the year 31 March 2006. These adjustments reduced the
loss in the year to 31 March 2007 but increased the loss in the year to 31 March
2006.
The directors are pleased to note that there has been a significant increase in
turnover in this half year compared to the same period last year. Turnover for
this period exceeds the turnover for the whole of the year to 31 March 2007.
Turnover will continue to grow as GME delivers its current order book. Despite
significant provisions for losses on contracts to be delivered in the future the
Company produced a gross profit. The Company will continue to look for ways of
increasing gross margin in the future through a mixture of greater sales values
and lower construction costs.
Overheads remain high as a proportion of sales and a cost reduction plan is
being implemented. The costs of professional advise during the strategic review
and subsequent bid process is a significant factor. These costs have been
separated out on the face of the profit and loss account as an exceptional item.
The Company now has a working capital facility from Spring Capital of Singapore.
This loan will enable the Company to meet its financial commitments and aid the
delivery of the Company's significant order book.
About GME
Headquartered in Shipley, Yorkshire, Global Marine Energy Plc ("GME") is an
oilfield services business with a strong emphasis on supplying equipment for
offshore drilling and exploration. The Company has an operation based in
Houston, Patriot Mechanical Handling, Inc. ("Patriot") providing comprehensive
engineering solutions for mechanical handling to the offshore oil and gas
industry.
For further information, please visit the website, www.gmeplc.com.
Consolidated Income Statement
for the six months ended 30 September
Six months ended Year ended
30 September 30 September 31 March
2007 2006 2007
Unaudited Unaudited Unaudited
Note � � �
Continuing operations
Revenue 14,547,494 6,051,979 10,495,964
Cost of sales (13,157,673) (5,746,248) (10,891,078)
------------ ------------ ------------
Gross profit/(loss) 1,389,821 305,731 (395,114)
Selling and administrative expenses (3,976,257) (2,863,823) (6,815,279)
------------ ------------ ------------
Operating loss from continuing operations
before exceptional items (2,586,436) (2,558,092) (7,210,393)
Exceptional expenses 5 (372,717) - (1,039,137)
------------ ------------ ------------
Operating Loss from continuing operations (2,959,153) (2,558,092) (8,249,530)
Net finance income/(expense) 33,225 (20,495) (6,476)
------------ ------------ ------------
Loss from continuing operations before taxation (2,925,928) (2,578,587) (8,256,006)
Taxation - - (47,613)
------------ ------------ ------------
Loss for the period from continuing operations (2,925,928) (2,578,587) (8,303,619)
Discontinued operations
Loss after tax from discontinued operations - - (1,580,971)
------------ ------------ ------------
Loss for the period (2,925,928) (2,578,587) (9,884,590)
------------ ------------ ------------
------------ ------------ ------------
Loss per share - Continuing operations
Basic (pence) (3.9p) (4.4p) (11.0p)
Diluted (pence) (3.9p) (4.4p) (11.0p)
Loss per share for the year - All operations
Basic (pence) (3.9p) (4.4p) (13.1p)
Diluted (pence) (3.9p) (4.4p) (13.1p)
Consolidated Statement of Changes in Equity (unaudited)
Called up Foreign
Share Share Exchange Other Retained Total
Capital Premium Reserve Reserves Earnings Equity
�000 �000 �000 �000 �000 �000
Balance at 1 April 2006 1,119,752 10,769,511 10,925 208,038 (9,154,486) 2,953,740
Currency translation differences - - - - - -
Share based payments - - - - - -
Loss for six month period ended
30 September 2006 - - - - (2,578,587) (2,578,587)
----------- ----------- ----------- ----------- ----------- -----------
Total recognised (expense)/income
for the period - - - - (2,578,587) (2,578,587)
Shares issued in the period 675,000 3,040,567 - - - 3,715,567
----------- ----------- ----------- ----------- ----------- -----------
Balance at 30 September 2006 1,794,752 13,810,078 10,925 208,038 (11,733,073) 4,090,720
----------- ----------- ----------- ----------- ----------- -----------
Balance at 1 April 2006 1,119,752 10,769,511 10,925 208,038 (9,154,486) 2,953,740
Currency translation differences - - (224,805) - - (224,805)
Share based payments - - - 18,419 - 18,419
Loss for year ended 31 March 2007 - - - - (9,884,590) (9,884,590)
----------- ----------- ----------- ----------- ----------- -----------
Total recognised (expense)/income
for the year - - (224,805) 18,419 (9,884,590)(10,090,976)
Shares issued in the year 675,000 3,035,665 - - - 3,710,665
----------- ----------- ----------- ----------- ----------- -----------
Balance at 31 March 2007 1,794,752 13,805,176 (213,880) 226,457 (19,039,076) 3,426,571
----------- ----------- ----------- ----------- ----------- -----------
Called up Foreign
Share Share Exchange Other Retained Total
Capital Premium Reserve Reserves Earnings Equity
�000 �000 �000 �000 �000 �000
Balance at 1 April 2007 1,794,752 13,805,176 (213,880) 226,457 (19,039,076) (3,426,571)
Currency translation differences - - 130,168 - - 130,168
Share based payments - - - 66,250 - 66,250
Loss for the six month period ended
30 September 2007 - - - - (2,925,928) (2,925,928)
----------- ----------- ----------- ----------- ----------- -----------
Total recognised (expense)/income
for the period - - 130,168 66,250 (2,925,928) (2,729,510)
Shares issued in the period 72,880 - - - - 72,880
----------- ----------- ----------- ----------- ----------- -----------
Balance at 30 September 2007 1,867,632 13,805,176 (83,712) 292,707 (21,965,004) (6,083,201)
----------- ----------- ----------- ----------- ----------- -----------
Consolidated Balance Sheet
as at 30 September
Note 30 September 30 September 31 March
2007 2006 2007
Unaudited Unaudited Unaudited
� � �
Non-current assets
Intangible assets - goodwill - 221,553 -
- other intangible assets 21,307 29,322 28,752
Property, plant and equipment 288,812 411,580 276,411
--------------- --------------- ---------------
310,119 662,455 305,163
Current assets
Inventories 1,883,478 2,720,586 773,078
Trade and other receivables 13,472,456 4,040,408 4,670,267
Cash and cash equivalents 876,920 1,510,201 3,378,312
--------------- --------------- ---------------
16,232,854 8,271,195 8,821,657
--------------- --------------- ---------------
Total assets 16,542,973 8,933,650 9,126,820
--------------- --------------- ---------------
Current liabilities
Trade and other payables (22,578,043) (4,842,930) (11,166,577)
Financial liabilities (48,131) - (302,415)
Provisions - - (1,046,652)
--------------- --------------- ---------------
(22,626,174) (4,842,930) (12,515,644)
Non-current liabilities
Financial liabilities - - (37,747)
--------------- --------------- ---------------
- - (37,747)
--------------- --------------- ---------------
Total liabilities (22,626,174) (4,842,930) (12,553,391)
--------------- --------------- ---------------
Net (liabilities) / assets (6,083,201) 4,090,720 (3,426,571)
--------------- --------------- ---------------
Equity
Called up share capital 1,867,632 1,794,752 1,794,752
Share premium 13,805,176 13,810,078 13,805,176
Foreign exchange reserves (83,712) 10,925 (213,880)
Other reserves 292,707 208,038 226,457
Retained earnings (21,965,004) (11,733,073) (19,039,076)
--------------- --------------- ---------------
Equity shareholders' (deficit)/ funds (6,083,201) 4,090,720 (3,426,571)
--------------- --------------- ---------------
Consolidated Statement of Cash Flows
for the six months ended 30 September
Six months Year ended
ended
30 September 30 September 31 March
2007 2006 2007
Unaudited Unaudited Unaudited
Note �000 �000 �000
Net cash (outflow)/ inflow
from operating activities
Cash generated from 4 (2,670,508) (2,200,116) 167,865
operations
Income tax paid - - (47,613)
--------------- --------------- ---------------
Net cash flow from (2,670,508) (2,200,116) 120,252
operating activities
Cash flows from investing
activities
Interest Received 33,246 19,032 30,389
Disposal of subsidiary - - 245,456
undertakings
Purchase of property, plant (63,349) 1,416 (206,789)
and equipment
Purchase of intangible (2,114) (13,861) (13,291)
assets
--------------- --------------- ---------------
Net cash flow from (16,880) 6,587 55,765
investing activities
--------------- --------------- ---------------
Cash flows from financing
activities
Interest paid (21) (39,527) (61,931)
Proceeds from issue of 72,880 3,715,567 3,710,665
share capital
Repayment of borrowings - - (125,000)
Repayment of capital (13,277) - (9,227)
element of hire purchase
contracts
--------------- --------------- ---------------
Net cash flow from 59,582 3,676,040 3,514,507
financing activities
--------------- --------------- ---------------
Net increase in cash and (2,627,806) 1,482,511 3,690,524
cash equivalents
Effect of foreign exchange 130,168 (13,566) (147,055)
rate changes
--------------- --------------- ---------------
(2,497,638) 1,468,945 3,543,469
Cash and cash equivalents 3,374,558 (168,910) (168,910)
at beginning of the period
--------------- --------------- ---------------
Cash and cash equivalents 876,920 1,300,035 3,374,559
at the end of the period*
--------------- --------------- ---------------
* For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents, net of outstanding bank
overdrafts.
Reconciliation of Net Cash flow to Movement in Debt
September 2007 September 2006 March 2007
Unaudited Unaudited Unaudited
Note �000 �000 �000
Net Funds/ (Debt) at 1 April 3,038,150 (568,910) (568,910)
Increase in cash in the period (2,297,638) 1,468,945 3,543,468
New finance lease - - (70,635)
Cash inflow from change in net debt and 13,277 - 134,227
lease financing
--------------- --------------- ---------------
Net Funds at 31 March 553,789 900,035 3,038,150
--------------- --------------- ---------------
1. Authorisation of interim financial information and statement of
compliance with IFRSs
The interim financial information of Global Marine Energy Plc and its
subsidiaries (the 'Group') for the period ended 30 September 2007 were
authorised for issue by the board of directors on
20 December 2007. Global Marine Energy Plc is a public limited company
incorporated and domiciled in England and Wales. The Company's ordinary shares
are traded on the London Stock Exchange.
The principal accounting policies adopted by the Group are set out in note 2.
2. Accounting policies
Basis of preparation
The interim financial information has been prepared for the first time in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") as adopted by the EU, which have been
adopted from 1 April 2006 with comparative figures restated accordingly. The
reconciliations to IFRSs from the previously published UK GAAP financial
statements are summarised in note 6.
The accounting policies are based on current IFRS, International Financial
Reporting Interpretation Committee ("IFRIC") interpretations and current
International Accounting Standards Board ("IASB") exposure drafts that are
expected to be issued as final standards and adopted by the EU such that they
are effective for the year ending 31 March 2008. These standards are subject to
ongoing review and endorsement by the EU and further IFRIC interpretations and
may therefore be subject to change. The Group's first IFRS financial statements
may consequently be prepared on the basis of accounting policies or
presentations that are different to those set out in the interim financial
information.
The interim financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985 and are unaudited. The
financial information for the year ended
31 March 2007 is based on the statutory accounts for the year ended 31 March
2007, as restatement under IFRS as described above. Those accounts, upon which
the auditors issued a qualified opinion, have been delivered to the Registrar of
Companies.
The preparation of financial information requires management to make estimates
and assumptions that effect the amounts reported for assets and liabilities as
+at the balance sheet date and the amounts reported for revenues and expenses
during the year. The nature of estimation means that actual outcomes could
differ from those estimates.
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant risk of
causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year are the measurement and impairment of goodwill,
the estimation of share-based payment costs and the estimation of costs to
complete on contracts. The estimation of share-based payment costs requires the
selection of an appropriate valuation model, consideration as to the inputs
necessary for the valuation model chosen and the estimation of the number of
awards that will ultimately vest, inputs for which arise from judgements
relating to the probability of meeting non-market performance conditions and the
continuing participation of employees.
2. Accounting policies (continued)
Basis of consolidation
Subsidiaries are consolidated from the date of their acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of voting
rights; currently exercisable or convertible potential voting rights; or by way
of contractual agreement. The financial statements of subsidiaries used in the
preparation of the consolidated financial statements are prepared for the same
reporting period as the parent company and are based on consistent accounting
policies. All inter-company balances and transactions, including unrealised
profits arising from them, are eliminated.
Minority interests represent the portion of profit or loss and net assets in
subsidiaries that is not held by the Group and is presented within equity in the
consolidated balance sheet, separately from the parent shareholders' equity.
Long term contracts
Long term contracts are assessed on a contract by contract basis and reflected
in the income statement by recording revenue and related costs as contract
activity progresses, and where the Company has met its contractual obligations.
Revenue is ascertained in a manner appropriate to the stage of completion of the
contract, and credit taken for profit earned to once the design phase has been
fully completed and when the outcome of the contract can be assessed with
reasonable certainty. Stage of completion is determined with reference to the
proportion of contract cost incurred for work performed to date compared to the
estimated total contract costs. Full provision is made for all known or expected
losses on individual contracts immediately such losses are foreseen. Variations
in contract work, claims and incentive payments are included to the extent that
it is probable they will result in revenue.
Pre contract costs are expensed to the income statement and not included as part
of contract costs since prior to that point the group is not able to determine
with sufficient probability that the contract will be obtained.
Exceptional costs
The group discloses items of income or expense as exceptional where the cost or
income is of such size or incidence that the additional disclosure is required
for the reader to understand the financial statements.
2. Accounting policies (continued)
Goodwill
Business combinations on or after 1 April 2004 are accounted for under IFRS 3
using the purchase method. Any excess of cost of the business combination over
the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities is recognised in the balance sheet as
goodwill and is not amortised. To the extent that the net fair value of the
acquired entity's identifiable assets, liabilities and contingent liabilities is
greater than the cost of the investment, a gain is recognised immediately in the
income statement. Goodwill recognised as an asset as at 31 March 2004 is
recorded at its carrying amount under UK GAAP and is not amortised.
After initial recognition, goodwill is stated at cost less any accumulated
impairment losses, with the carrying value being reviewed for impairment, at
least annually and whenever events or changes in circumstances indicate that the
carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related
cash-generating units monitored by management. Where the recoverable amount of
the cash-generating unit is less than its carrying amount, including goodwill,
an impairment loss is recognised in the income statement.
The carrying amount of goodwill allocated to a cash-generating unit is taken
into account when determining the gain or loss on disposal of the unit, or of an
operation within it.
Intangible assets
Intangible assets acquired separately from a business are carried initially at
cost.
Following initial recognition, the intangible assets are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is
provided at rates calculated to write off the cost, less estimated residual
value, of each asset evenly over its expected useful life, as follows:
Computer software 33 to 50% per annum
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Cost comprises the aggregate amount paid and
the fair value of any other consideration given to acquire the asset and
includes costs directly attributable to making the asset capable of operating as
intended.
Depreciation is provided on all property, plant and equipment at rates
calculated to write off the cost, less estimated residual value, of each asset
evenly over its expected useful life, as follows:
Leasehold property 16-33% per annum
Plant and equipment 20 to 50% per annum
The carrying values of property, plant and equipment are reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be
recoverable, and are written down immediately to their recoverable amount.
Useful lives and residual values are reviewed annually and where adjustments are
required these are made prospectively.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on the derecognition of the asset is included in
the income statement in the period of derecognition.
2. Accounting policies (continued)
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets. Where the carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Impairment losses on continuing operations are recognised in the income
statement in those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognised. If that is the case the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in profit or loss unless the asset is carried
at revalued amount, in which case the reversal is treated as a revaluation
increase. After such a reversal the depreciation charge is adjusted in future
periods to allocate the asset's revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of
finished stocks and work in progress includes all costs incurred in bringing
each product to its present location and condition including the overheads
appropriate to the sate of manufacture.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred to completion and disposal.
Income taxes
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the tax authorities, based on tax rates and laws that
are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
* where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
* in respect of taxable temporary differences associated with
investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future; and
2. Accounting policies (continued)
* deferred income tax assets are recognised only to the extent that it
is probable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses can be
utilised.
Deferred income tax is measured on an undiscounted basis at the tax rates that
are expected to apply in the year in which the related asset or liability is
settled, based on tax rates and laws enacted or substantively enacted at the
balance sheet date.
Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency rate of exchange ruling at the
balance sheet date. All differences are taken to the income statement, except
for differences on monetary assets and liabilities that form part of the Group's
net investment in a foreign operation. These are taken directly to equity until
the disposal of the net investment, at which time they are recognised in income
statement.
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. Income and expenses are
translated at weighted average exchange rates for the year. The resulting
exchange differences are taken directly to a separate component of equity. On
disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in the income
statement.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions.
Pensions
The Group operates a defined contribution pension scheme whose assets are held
separately from those of the Group in an independently administered fund.
Contributions are charged to the income statement as they become payable.
Leases
Assets held under finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease, with a corresponding liability being
recognised for the lower of the fair value of the leased asset and the present
value of the minimum lease payments. Lease payments are apportioned between the
reduction of the lease liability and finance charges in the income statement so
as to achieve a constant rate of interest on the remaining balance of the
liability. Assets held under finance leases are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
Leases where the lessor retains a significant portion of the risks and benefits
of ownership of the asset are classified as operating leases and rentals payable
are charged in the income statement on a straight line basis over the lease
term.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original
invoiced value and recoverable amount. Where the time value of money is
material, receivables are carried at amortised cost. Provision is made when
there is objective evidence that the Group will not be able to recover balances
in full. Balances are written off when the probability of recovery is assessed
as being remote.
2. Accounting policies (continued)
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and in
hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Convertible loan note
Obligations for loan notes issued are recognised when the Group becomes party to
the related contracts and are measured initially at fair value less directly
attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Gains and losses arising on the repurchase, settlement, conversion into shares
or otherwise cancellation of liabilities are recognised respectively in finance
revenue and finance cost.
Provisions
Provision for loss making contracts is recognised for the amount by which costs
exceeds revenue based on the best estimate of the expenditure required to settle
the Group's liability.
A provision is recognised when the Group has a legal or constructive obligation
as a result of a past event and it is probable that an outflow of economic
benefits will be required to settle the obligation. If the effect is material,
expected future cash flows are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability.
The expense relating to any provision is presented in the income statement net
of any reimbursement. Where discounting is used, the increase in the provision
due to unwinding the discount is recognised as a finance cost.
Share-based payments
The cost of equity-settled transactions with employees, for awards granted after
7 November 2002 that had not vested by 1 April 2006, is measured by reference to
the fair value at the date on which they are granted. The fair value is
determined by an external valuer using an appropriate pricing model.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions and of
the number of equity instruments that will ultimately vest or, in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement, with a corresponding entry in equity.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of earnings per share.
2. Accounting policies (continued)
New standards and interpretations not applied
IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these financial statements:
International Financial Reporting Standard Effective date
IFRS 8 Operating Segments 1 January 2009
IFRIC Interpretations
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Programmes 1 July 2008
IFRIC 14 IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction 1 January 2008
The directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Group's financial statements
in the period of initial application.
3. Dividends
No dividend is proposed to be paid in respect of the period.
4. Cash flow analysis
Cash generated from/ (absorbed by) operations
Six months ended Year ended
30 September 30 September 31 March
2007 2006 2007
Unaudited Unaudited Unaudited
�000 �000 �000
Loss for the (2,925,928) (2,578,587) (9,884,590)
period
Adjustments
for:
Tax on - - 47,613
continuing
operations
Net finance (33,225) 20,495 31,542
(income)/
costs
Loss on - - 1,039,137
disposal of
discontinued
operation
Loss on sale - - 32,016
of property,
plant and
equipment
Depreciation 35,611 15,073 226,289
of property,
plant and
equipment
Amortisation 9,559 6,006 236,601
and
Impairment
of
intangible
assets
Share based 66,250 59,162 89,314
payments
(Increase)/ (1,110,400) 1,466,902 1,879,238
decrease in
inventories
(Increase)/ (8,802,189) 645,413 (956,761)
decrease in
trade and
other
receivables
Increase/ 10,089,814 (1,834,580) 7,427,466
(decrease)
in trade and
other
payables
--------------- --------------- ---------------
Cash (2,670,508) (2,200,116) 167,865
(absorbed
by)/
generated
from
operations
--------------- --------------- ---------------
Analysis of net debt
Cash at bank, Invoice Finance Bank Convertible
in hand financing leases loan Loan note Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
� � � � � �
At 1 April 621,523 (790,433) - (75,000) (325,000) (568,910)
2006
Cash flow 963,779 505,166 - - - 1,468,945
Non cash - - - - - -
changes
--------- --------- --------- --------- --------- ---------
At 30 1,585,302 (285,267) - (75,000) (325,000) 900,035
September
2006
--------- --------- --------- --------- --------- ---------
Cash at bank, Invoice Finance Bank Convertible
in hand financing leases loan Loan note Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
� � � � � �
At 1 April 621,523 (790,433) - (75,000) (325,000) (568,910)
2006
Increase in 2,756,789 786,679 - - - 3,543,468
cash
Cash flow
from change
in leases - - 9,227 75,000 50,000 134,227
and net debt
Non cash - - (70,635) - - (70,635)
changes
--------- --------- --------- --------- --------- ---------
At 31 March 3,378,312 (3,754) (61,408) - (275,000) 3,038,150
2007
--------- --------- --------- --------- --------- ---------
At 1 April 3,378,312 (3,754) (61,408) - (275,000) 3,038,150
2007
Decrease in (2,501,392) 3,754 - - - (2,497,638)
cash
Cash flow
from change
in leases - - 13,277 - - 13,277
and net debt
--------- --------- --------- --------- --------- ---------
At 30 876,920 - (48,131) - (275,000) 553,789
September
2007
--------- --------- --------- --------- --------- ---------
5. Exceptional expenses
Exceptional items for the period relate to legal and professional costs relating
to the bids for the company by IDM Group Limited and EMER International Group
Limited.
Exceptional items for the year ended 31 March 2007 relate to the cost of closure
of NIM Engineering Limited and Ansel Jones Paisley Limited and the write off of
inter-company receivables within the group relating to these companies.
6. Transition to IFRSs
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 principles (UK GAAP). Financial statements for the year
ending 31 March 2008 will be the first the Group is
required to prepare in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU).
Accordingly, the Group has prepared interim financial statements which comply
with the recognition and measurement criteria of IFRSs which have been adopted
from 1 April 2006 with comparative figures restated accordingly. The significant
accounting policies meeting the requirements of IFRSs are described in Note 2.
In preparing these interim financial reports, the Group has started from an
opening balance sheet as at 1 April 2006, the Group's date of transition to
IFRSs, 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 restating 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. The adjustments to IFRSs are classified below
under three headings: 'reclassification' 'remeasurement' and 'restatement'.
Exemptions applied
IFRS 1 allows first-time adopters certain exemptions from the general
requirement to apply IFRSs retrospectively. The Group has made the following
decisions regarding the exemptions available under IFRS 1: TC "2. Accounting
policies" /l "3"
* The group has elected to set the cumulative translation differences for
all foreign operations to zero at 1 April 2006; and
* The Group has chosen to apply IFRS 3 "Business Combinations" prospectively
from 1 April 2004 and has not restated goodwill arising from transactions
prior to this date.
* IFRS 2 Share-based Payment has not been applied to any equity instruments
that were granted on or before 7 November 2002.
Transition to IFRS (continued)
Group reconciliation of equity as at 1 April 2006
Reclassi- Remeasure- Restate-
Note UK GAAP fications ments ments IFRS
� � � � �
Non-current
assets
Intangible d, g 455,459 - 140,666 (374,571) 221,554
Assets -
Goodwill
Intangible a - 15,461 - - 15,461
Assets - Other
Property, a 449,435 (15,461) - - 433,974
plant and
equipment
--------------- --------------- --------------- --------------- ---------------
904,894 - 140,666 (374,571) 670,989
Current assets
Inventories 4,187,488 - - - 4,187,488
Trade and 5,113,079 - - (368,096) 4,744,983
other
receivables
Cash and cash 621,523 - - - 621,523
equivalents
--------------- --------------- --------------- --------------- ---------------
9,922,090 - - (368,096) 9,553,994
--------------- --------------- --------------- --------------- ---------------
Total assets 10,826,984 - 140,666 (742,667) 10,224,983
--------------- --------------- --------------- --------------- ---------------
Current
liabilities
Trade and b, e, g (4,874,875) (107,759) (24,419) (1,073,757) (6,080,810)
other payables
Financial (1,190,433) - - - (1,190,433)
liabilities
Income tax - - - - -
liabilities
Provisions - - - - -
--------------- --------------- --------------- --------------- ---------------
(6,065,308) (107,759) (24,419) (1,073,757) (7,271,243)
--------------- --------------- --------------- --------------- ---------------
Total (6,065,308) (107,759) (24,419) (1,073,757) (7,271,243)
liabilities
--------------- --------------- --------------- --------------- ---------------
Net assets/ 4,761,676 (107,759) 116,247 (1,816,424) 2,953,740
(liabilities)
--------------- --------------- --------------- --------------- ---------------
-------------- ------------- -------------- -------------- --------------
Equity
Called up 1,119,752 - - - 1,119,752
share capital
Share premium g 10,820,275 - - (50,764) 10,769,511
Foreign c - 10,925 - - 10,925
exchange
reserves
Other reserves b, f 222,442 (101,880) 87,476 - 208,038
Retained c, d, e, g (7,400,793) (16,804) 28,771 (1,765,660) (9,154,486)
earnings
--------------- --------------- --------------- --------------- ---------------
Total equity/ 4,761,676 (107,759) 116,247 (1,816,424) 2,953,740
(deficit)
--------------- --------------- --------------- --------------- ---------------
-------------- ------------- -------------- -------------- ---------------
Transition to IFRSs (continued)
Group reconciliation of equity as at 31 March 2007
Reclassi- Remeasure- Restate-
Note UK GAAP fications ments ments IFRSs
� � � � �
Non-current
assets
Intangible - - - - -
Assets -
Goodwill
Intangible a - 28,752 - - 28,752
Assets - Other
Property, a 305,163 (28,752) - - 276,411
plant and
equipment
--------------- --------------- --------------- --------------- ---------------
305,163 - - - 305,163
Current assets
Inventories 773,078 - - - 773,078
Trade and 4,670,267 - - - 4,670,267
other
receivables
Cash and cash 3,378,312 - - - 3,378,312
equivalents
--------------- --------------- --------------- --------------- ---------------
8,821,657 - - - 8,821,657
--------------- --------------- --------------- --------------- ---------------
Total assets 9,126,820 - - - 9,126,820
--------------- --------------- --------------- --------------- ---------------
Current
liabilities
Trade and b, e (11,149,748) (5,879) (10,950) - (11,166,577)
other payables
Financial (302,415) - - - (302,415)
liabilities
Income tax - - - - -
liabilities
Provisions (1,046,652) - - - (1,046,652)
--------------- --------------- --------------- --------------- ---------------
(12,498,815) (5,879) (10,950) - (12,515,644)
Non-current
liabilities
Financial (37,747) - - - (37,747)
liabilities
--------------- --------------- --------------- --------------- ---------------
(37,747) - - - (37,747)
--------------- --------------- --------------- --------------- ---------------
Total (12,536,562) (5,879) (10,950) - (12,553,391)
liabilities
--------------- --------------- --------------- --------------- ---------------
Net assets/ (3,409,742) (5,879) (10,950) - (3,426,571)
(liabilities)
--------------- --------------- --------------- --------------- ---------------
--------------- ------------ -------------- -------------- ---------------
Equity
Called up 1,794,752 - - - 1,794,752
share capital
Share premium g 13,855,940 - - (50,764) 13,805,176
Foreign b - (213,880) - - (213,880)
exchange
reserves
Other reserves f 138,981 - 87,476 - 226,457
Retained d, e, f, g (19,199,415) 208,001 (98,426) 50,764 (19,039,076)
earnings
--------------- --------------- --------------- --------------- ---------------
Total equity/ (3,409,742) (5,879) (10,950) - (3,426,571)
(deficit)
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
Transition to IFRSs (continued)
Group reconciliation of income statement for the year ended 31 March 2007
Remeaure- Restate-
Note UK GAAP ments ments IFRSs
� � � �
Continuing
operations
Revenue g 10,176,260 - 319,704 10,495,964
Cost of sales g (11,933,888) - 1,042,810 (10,891,078)
--------------- --------------- --------------- ---------------
Gross loss (1,757,628) - 1,362,514 (395,114)
Selling and d, e, g (7,141,992) (127,198) 453,911 (6,815,279)
administrative
expenses
--------------- --------------- --------------- ---------------
Operating loss (8,899,620) (127,198) 1,816,425 (7,210,393)
from
continuing
operations
Exceptional (1,039,137) - - (1,039,137)
expenses
--------------- --------------- --------------- ---------------
Loss from (9,938,757) (127,198) 1,816,425 (8,249,530)
continuing
operations
Net finance (6,476) - - (6,476)
expense
--------------- --------------- --------------- ---------------
Loss from (9,945,233) (127,198) 1,816,425 (8,256,006)
continuing
operations
before
taxation
Taxation (47,613) - - (47,613)
--------------- --------------- --------------- ---------------
Loss for the (9,992,846) (127,198) 1,816,425 (8,303,619)
period from
continuing
operations
Discontinued
operations
Loss after tax (1,580,971) - - (1,580,971)
from
discontinued
operations
--------------- --------------- --------------- ---------------
Loss for the (11,573,817) (127,198) 1,816,425 (9,884,590)
period
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Transition to IFRSs (continued)
Group reconciliation of equity as at 30 September 2006
Reclassi- Remeasure- Restate-
Note UK GAAP fications ments ments IFRSs
� � � � �
Non-current
assets
Intangible d 412,582 - 183,543 (374,572) 221,553
Assets -
Goodwill
Intangible a - 29,322 - - 29,322
Assets - Other
Property, a 440,902 (29,322) - - 411,580
plant and
equipment
--------------- --------------- --------------- --------------- ---------------
853,484 - 183,543 (374,572) 662,455
Current assets
Inventories 2,720,586 - - - 2,720,586
Trade and g 4,028,674 - - 11,734 4,040,408
other
receivables
Cash and cash 1,510,201 - - - 1,510,201
equivalents
--------------- --------------- --------------- --------------- ---------------
8,259,461 - - 11,734 8,271,195
--------------- --------------- --------------- --------------- ---------------
Total assets 9,112,945 - 183,543 (362,838) 8,933,650
--------------- --------------- --------------- --------------- ---------------
Current
liabilities
Trade and b, e, g (4,549,809) (107,759) (7,440) (177,922) (4,842,930)
other payables
--------------- --------------- --------------- --------------- ---------------
(4,549,809) (107,759) (7,440) (177,922) (4,842,930)
Non-current
liabilities
Financial - - - - -
liabilities
Other payables - - - - -
--------------- --------------- --------------- --------------- ---------------
- - - - -
--------------- --------------- --------------- --------------- ---------------
Total (4,549,809) (107,759) (7,440) (177,922) (4,842,930)
liabilities
--------------- --------------- --------------- --------------- ---------------
Net assets/ 4,563,136 (107,759) 176,103 (540,760) 4,090,720
(liabilities)
--------------- --------------- --------------- --------------- ---------------
--------------- ------------ -------------- --------------- ---------------
Equity
Called up 1,794,752 - - - 1,794,752
share capital
Share premium g 13,860,842 - - (50,764) 13,810,078
Foreign c - 10,925 - - 10,925
exchange
reserves
Other reserves b, f, 222,442 (101,880) 87,476 - 208,038
Retained b, c, d, e, (11,314,900) (16,804) 88,627 (489,996) (11,733,073)
earnings f, g
--------------- --------------- --------------- --------------- ---------------
Total equity/ 4,563,136 (107,759) 176,103 (540,760) 4,090,720
(deficit)
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
Transition to IFRSs (continued)
Group reconciliation of income statement for the period ended 30 September 2006
Remeaure- Restate-
Note UK GAAP ments ments IFRSs
� � � �
Continuing
operations
Revenue g 5,732,275 - 319,704 6,051,979
Cost of sales g (6,619,273) - 873,025 (5,746,248)
--------------- --------------- --------------- ---------------
Gross profit/ (886,998) - 1,192,729 305,731
(loss)
Selling and d, e, g (3,006,614) 59,856 82,935 (2,863,823)
administrative
expenses
--------------- --------------- --------------- ---------------
Operating loss (3,893,612) 59,856 1,275,664 (2,558,092)
from
continuing
operations
--------------- --------------- --------------- ---------------
Loss from (3,893,612) 59,856 1,275,664 (2,558,092)
continuing
operations
Net finance (20,495) - - (20,495)
income/
(expense)
--------------- --------------- --------------- ---------------
Loss from (3,914,107) 59,856 1,275,664 (2,578,587)
continuing
operations
before
taxation
Taxation - - - -
--------------- --------------- --------------- ---------------
Loss for the (3,914,107) 59,856 1,275,664 (2,578,587)
period from
continuing
operations
--------------- --------------- --------------- ---------------
--------------- ------------- -------------- ---------------
Transition to IFRSs (continued)
Group reconciliation of equity as at 1 April 2006
Transition to IFRSs (continued)
The following changes to accounting policies and presentation resulted from the
transition to IFRSs:
Reclassifications
a) Intangible assets
IAS 38 - Intangible assets requires that software costs which are not integral
to the operation of the piece of machinery be classified as intangible assets.
The costs and depreciation relating to expenditure on software which is not
integral to the operation of machinery has been reclassified from property plant
and equipment to intangible assets.
A reclassification �15,461 was made on transition to IFRS on 1 April 2006 and
further reclassifications were made during the period to 30 September 2006
(�29,322) and year to 31 March 2007 (�28,752).
b) Shares to be issued
IAS 32 - Financial Instruments: Presentation states that where a contract is
settled in an entity's own equity and the entity is required to deliver a
variable number of shares whose value equals a fixed amount then the contract is
not an equity instrument, but is a financial asset or a financial liability.
Shares to be issued have been reclassified as liabilities in other creditors due
within one year in accordance with IAS 32. Exchange differences arising on the
liability within the balance sheet are recognised in the income statement in the
period in which they arise.
c) Foreign exchange reserve
IAS 21 - Foreign Exchange states that in consolidated financial statements that
exchange differences arising on investments in foreign operations shall be
recognised initially in a separate component of equity. The amounts were
previously recognised in the profit and loss reserve under UK GAAP and have been
reclassified to a separate foreign exchange reserve under IFRS.
Remeasurements
d) Goodwill
Under UK GAAP, the Group amortised goodwill over its useful economic life. IFRS
3 - Business Combinations requires that goodwill is not amortised but is subject
to an annual impairment review instead. IFRS requires that an impairment test is
carried out at the date of transition to IFRSs based on the conditions at the
time of transition to IFRSs. No impairment was identified at the date of
transition and no adjustments to the carrying value of goodwill were made.
Subsequent impairment tests performed in accordance with IAS 38 at 31 March 2007
resulted in the impairment of the goodwill balance in full.
The remeasurement adjustments made to the Group balance sheet reverse the
amortisation of goodwill charged under UK GAAP since 1 April 2004 (the date from
which the Group has elected to apply IFRS 3) as follows:
Amortisation
�
Amortisation charged from 1 April 2004 to date of transition 140,666
Amortisation charged in the period to 30 September 2006 42,877
---------
183,543
---------
e) Holiday pay accrual
IAS 19 - Employee Benefits requires that where an entity compensates employees
for holiday, an accrual be recognised to the extent that accumulated untaken
entitlement can be carried forward and taken or paid in a future period. Holiday
pay accruals were not recognised by the group under UK GAAP. The following
accruals were made in accordance with IAS 19.
Accrual
�
1 April 2006 24,419
30 September 2006 7,440
31 March 2007 10,950
f) Share based payments
IFRS 2 - Share based payments requires the fair value of options which
ultimately vest to be charged to the income statement over the vesting or
performance period. The fair value is determined at the date of the grant using
an appropriate pricing model. The group has taken the exemption available under
IFRS 1 not to calculate the share based payment costs for any equity instruments
that were granted on or before 7 November 2002. The cost of share options issued
subsequent to this date totalling �87,476 that were not recognised under UK GAAP
have been recognised within reserves on transition (1 April 2006).
Effects of IFRS remeasurements on the profit reported under UK GAAP
Six months to Year ended
30 September 31 March
2006 2007
Unaudited Unaudited
Reversal of goodwill amortisation 42,877 48,078
Decrease in holiday pay accrual in the period 16,979 13,468
Impairment of goodwill - (188,744)
----------- -----------
Increase / (decrease) in reported profit for the year
59,856 (127,198)
----------- -----------
Effects of IFRS remeasurements on the equity
reported under UK GAAP
30 September 31 March
1 April 2006 2006 2007
Unaudited Unaudited Unaudited
�000 �000 �000
Reversal of goodwill amortisation 140,666 183,543 188,744
from 1 April 2004
Impairment of goodwill - - (188,744)
Recognition of holiday pay accrual (24,418) (7,440) (10,950)
--------------- --------------- ---------------
Increase / (decrease) in reported equity 116,248 176,103 (10,950)
--------------- --------------- ---------------
g) Restatements
In the year to 31 March 2007 it came to light that some significant costs were
recorded in the year to 31 March 2007 which related to contracts which had been
regarded as completed or substantially completed in the year to 31 March 2006.
IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors requires
that material prior period errors be corrected retrospectively by restating the
comparative amounts for the prior period(s) presented in which the error
occurred; or if the error occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities and equity for the
earliest prior period presented.
The Group has restated the prior period results for errors which were not
considered fundamental under UK GAAP, but which should be corrected through
prior period adjustments in accordance with IAS 8.
Presentation of financial reports
The overall presentation of the interim financial statements have been affected
by the application of IAS 1 "Presentation of Financial Statements" and IAS 7 "
Cash Flow Statements"
Restatement of cash flow statement from UK GAAP to IFRS
The transition from UK GAAP to IFRS has no effect upon the reported cash flows
by the group. The IFRS cash flow statement is presented in a different format
from that required under UK GAAP with cash flows split into three categories of
activities - operating activities, investing activities and financing
activities. The reconciling items between the UK GAAP presentation and the IFRS
presentation have no net impact on the cash flows generated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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