RNS Number:1545E
Network Data Holdings PLC
20 September 2007
20 September 2007
NETWORK DATA HOLDINGS PLC
("Network Data" or "the Group")
Unaudited interim results for the period ended 30 June 2007
Highlights
Network Data Holdings plc, the AIM traded financial intermediary company, today
announces its results for the six month period to 30 June 2007.
* Group turnover up by 20% from #13.4m in H1 2006 to #16.2m in H1 2007
* Group loss of #515,000 in H1 2007 as a result of continued investment in
HIPSTAR and R&D expenditure on Homeowners Mortgages Limited
* Network Data Limited performing strongly, PBT up 39% from #880,000 in H1
2006 to #1,219,000 in H1 2007
* Network Surveyors Limited carried out nearly 7,000 surveys in H1 2007 vs.
4,300 in H1 2006
* Home Information Packs ("HIPs") are now mandatory for four and three
bedroom properties - approximately 66% of all homes
* Slow start for the HIPs market - 2008 will be more fully representative
Richard Griffiths, Chief Executive of Network Data, commented:
"Trading in the first half of 2007 has been in line with our expectations. Our
core business, NDL, has performed strongly and continues to maintain its
position as the largest mortgage network in the UK. Our continued investment in
the Home Information Pack market will produce long term returns and we expect to
see the Government announce the full roll-out of the HIPs program to include one
and two bedroom properties very shortly. We strive to grow the activities of
the Group in the close-knit property and mortgage markets and will continue to
invest in projects that best suit the long term aspirations of the Group".
Enquiries:
Network Data Holdings plc
Richard Griffiths, Chief Executive
01932 875728
Noble & Company Limited
John Riddell
020 7763 2200
NETWORK DATA HOLDINGS PLC
("Network Data" or "the Group")
Unaudited interim results for the period ended 30 June 2007
Chairman's Statement
I am pleased to report our interim results for the six month period to 30 June
2007, which indicate strong and profitable growth in our core businesses,
continued investment in HIPSTAR and research & development costs of our new
business, Homeowners Mortgages Limited.
The results for the half-year are in line with our expectations.
Sales increased by 20% compared to the same period last year, driven by the
strong growth in Network Data Limited and Network Surveyors Limited. Gross
profit margin was 26.4%, vs. 28% in H1 2006 and 27% for the whole of 2006. As we
have commented before, we fully expect the gross margin to decrease as our
business becomes more focused on the lower margin but higher volume mortgage
sales.
Profit before tax was a loss of #515,000 compared to a profit of #449,000 for H1
2006 as a result of the ongoing planned expenditure on HIPSTAR and investment of
approximately #200,000 in Homeowners Mortgages Limited.
Financial Performance of Operating Companies
Company H1 2007 H1 2006
#'000 #'000
Sales
Network Data Limited 14,783 12,557
Network Surveyors Limited 1,348 977
HIPSTAR Limited 106 -
Less inter company sales (71) (88)
TOTAL SALES 16,166 13,446
Profit / (Loss) before tax
Network Data Limited 1,219 880
Network Surveyors Limited (172) 12
HIPSTAR Limited (1,365) (443)
Homeowners Mortgages (197) -
TOTAL PROFIT / (LOSS) BEFORE TAX (515) 449
Network Data Limited ("NDL")
The UK mortgage market lending experienced substantial growth in the first half
of 2007 with the Council of Mortgage Lenders' figures indicating that gross
lending increased by 11% from #160bn in H1 2006 to #177.6bn H1 2007.
NDL showed stronger growth than the market with mortgage revenues increased by
18% on H1 2006 to #14.8m. This growth was principally achieved by a combination
of two factors; recruitment of better performing mortgage brokers to replace
smaller producers that ceased to be members of the network, and a continued
training program to increase sales competency.
Profit before tax increased by 39% to #1.2m.
Network Surveyors Limited ("NSL")
NSL, the panel manager for property valuations on behalf of mortgage lenders,
performed strongly in H1 2007 with nearly 7,000 surveys completed compared to
4,300 in H1 2006.
NSL is also responsible for producing the Energy Performance Certificate, which
forms a component part of the HIP as required under EU legislation
NSL acts as a sub-contractor to HIPSTAR and other third-party HIPs providers.
We have invested in building up this part of NSL ahead of the introduction of
HIPs.
Due to the delay and phased implementation of the HIPs program (see below), NSL
made a loss for the period of #172.000.
Hipstar Limited ("HIPSTAR")
In the trading statement issued on 19 July 2007, we commented on the
well-publicised delay in the implementation of the Government's Home Information
Pack legislation, which had originally been planned for 1 June 2007.
HIPs were finally introduced for 4+ bedroom properties on 1 August 2007 and for
3 bedroom properties on 10 September 2007 representing 66% of all home sales.
The postponement from 1 June 2007, and the phased implementation, has meant that
the Group has been carrying the costs but receiving no income from HIPSTAR for a
longer period than originally forecast.
Costs of HIPSTAR for the H1 2007 amounted to #1.3m compared to #0.4m for H1
2006.
Sales of geographical franchise areas to energy assessors and home inspectors
amounted to #819,000 as at 30 June 2007. The franchise fees have been placed on
the balance sheet and will only be released to the sales and profit & loss
figures from the inception of the HIPs program on 1 August 2007 and therefore
will be included in the full year results for 2007.
Homeowners Mortgages Limited ("HOM")
We have progressed the research & development phase of HOM. The intention is for
HOM to be a genuine whole-of-market lender covering all classes of mortgages
from prime through to sub-prime and encompassing specialist areas such as
buy-to-let and self-certification.
To date we have invested #197,000 in the recruitment of a CEO and Compliance
Director and accompanying R&D costs and professional fees.
The application to the Financial Services Authority (FSA) for authorisation of
HOM as a mortgage lender has progressed to its final stages.
However, whilst we stated in our AGM statement on 27 April 2007 that our plans
were to launch the new lender in September 2007, in the light of the
extraordinary state of the global capital markets the launch of HOM is
anticipated now in January 2008.
Current Trading
Network Data Limited
Volumes of transactions in NDL have continued to perform well during July and
August. The Council of Mortgage Lenders continues to forecast an uplift of 5%
on the record lending figure of #345bn achieved in 2006.
However, financial markets worldwide are beginning to be affected by the
problems associated with the sub-prime mortgage market in the US.
The sub-prime market in the UK is a relatively small component - approximately
15% - of the overall mortgage market and NDL's own business. General market
confidence will be much more important in determining the overall state of the
housing market. This has held up better than expected this year but the long
anticipated slow down in the mortgage markets may now be beginning to
materialise as a result of the five base rate increases over the past 12 months
and the additional increase in rates for sub-prime business.
The Directors believe that re-mortgaging will continue to increase in
importance. The Council of Mortgage Lenders estimates that over 2 million fixed
rate deals will mature over this year and the next which will require
re-mortgaging. The key driver for NDL's business remains the number of
transactions ie. property purchases and remortgaging, rather than house price
movements.
Network Surveyors Limited
The number of valuation instructions has shown a noticeable downturn over the
traditionally slow summer period.
The focus remains on becoming a major provider of Energy Performance
Certificates.
Hipstar Limited
In the light of the confusion regarding the introduction of HIPs, we had
forecast that the uptake of HIPs would be slow initially, particularly with the
phased implementation.
If the volumes of transactions continue at the rate we have seen at the
beginning of the launch of HIPs, then HIPSTAR will not make a positive
contribution in 2007 and the Group will continue to meet the ongoing costs of
the operation.
However, the Directors consider that it is still too early to judge how the
market for HIPs will evolve. A Government announcement is expected in the near
future regarding the full roll-out of the HIPs program to encompass 1 and 2
bedroom residential properties.
We are seeing healthy sales of the remainder of the franchise areas to energy
assessors and home inspectors which are contributing circa #100,000 cash each
month.
Homeowners Mortgages Limited
In the light of the recent events in the global mortgage markets, it would seem
appropriate to comment on the woes of the sub-prime market which have dominated
the national and trade media in the past few weeks.
The mortgage rates for sub-prime have increased significantly over the past few
weeks. This reflects the fact that the market is now re-pricing mortgage
products for the risk of this type of borrower and this is seen by many industry
commentators as a long overdue redress or correction of the differential pricing
between prime and sub-prime mortgages rates.
The adverse credit sector will continue to be of interest to HOM due to the
higher margins than the mainstream sector. The current global crisis may
provide an opportunity as the number of players in the market is likely to
decrease; Victoria Mortgages and some minor lenders have already closed down to
new business.
It is likely that some of the major lenders will review or postpone their
planned entries into the sub-prime market
Datamonitor has estimated that in 2005, 9.1 million individuals, just under a
fifth of the adult population, were systematically refused credit by the
mainstream lenders. The Directors believe that the number of home buyers
requiring such mortgages will continue to increase due to the impact on debt
levels of higher interest rates and mortgage rates.
Accordingly we are continuing to progress our plans for the launch of HOM. Full
and final authorisation from the FSA is now dependent on confirmed mortgage
funding arrangements and the provision of the required working capital.
Agreement in principle on these financing issues has been reached with a major
European bank. We are working towards completion of the legal documentation by
November with the launch of HOM is anticipated now for January 2008.
However, the launch of HOM is continually being assessed in the light of the
developments in the global markets and discussions with possible funding
sources.
Outlook
Whilst we have seen a number of delays in the implementation of the HIPs program
in the first half of this year which has affected the businesses of HIPSTAR and
NSL, the Directors continue to believe that the Group as a whole will benefit
from a continued push to take significant market share of the HIPs market.
It remains to be seen to what extent the stability and confidence of the housing
market in the UK has been affected by the global turmoil in the financial
markets over the last few months. Shareholders can be reassured that the Group
will proceed with caution.
The Directors believe the business models of the existing businesses to be more
robust than many of the other players in the market and see the Group being well
positioned to take advantage of opportunities to increase business volumes.
2008 will be a key year for the Group as the first fully representative year for
the HIPs market. This will enable us to comment more fully on the market share
of HIPs and the volume of business being put through both HIPSTAR and NSL.
We believe that HIPSTAR is well positioned to take a significant market share,
far higher than a 3% market share that is required for the business to break
even once the HIPs program is fully on-stream.
Finally we are grateful to our customers for their continued support and to all
our employees, which now number over 200, for their hard work and enthusiasm.
Grenville Folwell
Chairman
20 September 2007
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the 6 months ended 30 June 2007
Restated Restated
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Continuing Operations
Revenue 16,166 13,446 29,172
Cost of sales (11,896) (9,719) (21,452)
Gross profit 4,270 3,727 7,720
Other operating income - - 250
Administrative expenses (4,640) (3,163) (7,142)
Exceptional administrative expenses - - (306)
Operating (loss)/profit (370) 564 522
Investment revenues 2 - 4
Finance costs (147) (115) (255)
(Loss)/profit before tax (515) 449 271
Tax 154 (134) (119)
Profit for the period attributable to equity (361) 315 152
shareholders
Earnings per share
Basic (1.3)p 0.7p 0.5p
Diluted (1.2)p 0.6p 0.5p
CONSOLIDATED BALANCE SHEET
At 30 June 2007
Restated Restated
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Non-current assets
Intangible assets 354 - 50
Property, plant and equipment 5,716 5,541 5,749
Deferred tax asset 695 85 176
6,765 5,626 5,975
Current assets
Trade and other receivables 1,214 1,223 1,213
Cash and cash equivalents 313 523 544
1,527 1,746 1,757
Total assets 8,292 7,372 7,732
Current Liabilities
Trade and other payables 3,805 2,511 2,872
Current tax liabilities 441 - 76
Obligations under finance leases 204 93 205
Bank overdrafts and loans 358 532 474
4,808 3,136 3,627
Net current liabilities (3,281) (1,305) (1,870)
Non-current liabilities
Bank loans 2,622 2,898 2,760
Obligations under finance leases 197 134 249
Liability for share based payments 20 - -
2,839 3,032 3,009
Total liabilities 7,647 6,168 6,636
Net assets 645 1,204 1,096
EQUITY
Share capital 2,818 2,755 2,810
Share premium account - - -
Other reserves (1,368) (1,368) (1,368)
Retained earnings (805) (183) (346)
Total equity 645 1,204 1,096
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 30 June 2007
Restated
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 2006 31 December
2007 2006
#'000 #'000 #'000
Operating (loss) / profit for the period (370) 564 522
Adjustments for
Depreciation of property, plant and equipment 171 144 308
Share based payment expense 20 - -
(Gain) / loss on disposal of property, plant and (3) - 5
equipment
Operating cash flows before movements in working (182) 708 835
capital
Decrease / (increase) in receivables (1) (421) (409)
Increase / (decrease) in payables 908 368 735
Cash generated by operations 725 655 1,161
Interest paid (122) (110) (234)
Net cash from operating activities 603 545 927
Investing activities
Interest received 2 - 4
Proceeds on disposal of property, plant and equipment 32 22 36
Purchases of property, plant and equipment (134) (141) (260)
Expenditure on intangible assets (304) - (50)
Net cash used in investing activities (404) (119) (270)
Financing activities
Dividends paid (98) - -
Repayments of borrowings (254) (71) (307)
Repayments of obligations under finance leases (86) (62) (131)
Proceeds on issue of shares 8 - 220
Increase / (decrease) in bank overdrafts - - 40
Share issue costs charged against share premium - - (165)
Net cash (used in) / from financing activities (430) (133) (343)
Net increase / (decrease) in cash and cash equivalents (231) 293 314
Cash and cash equivalents at beginning of period 544 230 230
Cash and cash equivalents at end of period 313 523 544
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2006
Ordinary Share Retained Other Total
Share premium earnings reserves
capital
#'000 #'000 #'000 #'000 #'000
Balance at 1 January 2006 2,755 - (498) (1,368) 889
Profit for the period - - 315 - 315
Balance at 31 June 2006 2,755 (183) (1,368) 1,204
For the year ended 31 December 2006
Ordinary Share Retained Other Total
Share premium earnings reserves
capital
#'000 #'000 #'000 #'000 #'000
Balance at 1 January 2006 2,755 - (498) (1,368) 889
Profit for the year 152 152
Shares issued in year 55 165 - - 220
Share issue costs - (165) - - (165)
Balance at 31 December 2006 2,810 - (346) (1,368) 1,096
For the 6 months ended 30 June 2007
Ordinary Share Retained Other Total
Share premium earnings reserves
capital
#'000 #'000 #'000 #'000 #'000
Balance at 31 December 2006 2,810 - (381) (1,368) 1,061
Changes in accounting policy - - 35 - 35
Restated balance 31 December 2006 2,810 - (346) (1,368) 1,096
Loss for the period - - (361) - (361)
Shares issued 8 - - - 8
Dividend paid - - (98) - (98)
Balance at 31 June 2007 2,818 - (805) (1,368) 645
Notes to the interim financial statements
For the six months ended 30 June 2007
Preparation of the interim financial information
For the year ending 31 December 2007 the Group will be required to prepare
consolidated financial statements under International Financial Reporting
Standards as adopted by the European Union. These will be those International
Accounting Standards, International Financial Reporting Standards and related
interpretations (SIC-IFRIC interpretations), subsequent amendments to those
standards and related interpretations, and future standards and interpretations
issued or adopted by the International Accounting Standards Board (IASB) that
have been endorsed by the European Union. This process is ongoing and the
European Union has yet to endorse certain standards issued by the IASB.
These interim financial statements have been prepared in accordance with the
recognition and measurement rules as adopted by the EU using the best knowledge
of the expected standards and interpretations of the International Accounting
Standard Board, facts and circumstances, and accounting policies that will be
applied when the Group prepares its first set of published IFRS financial
statements as at 31 December 2007. The condensed financial information has been
prepared in accordance with IAS 34 "Interim Financial Reporting". These
policies along with the reconciliations and descriptions of the effect of the
transition from UK GAAP to IFRS on the Group's equity and its net income are
attached.
This interim report does not constitute statutory accounts of the Group within
the meaning of section 240 of the Companies Act 1985. Statutory accounts for
the year ended 31 December 2006, which were prepared under UK GAAP, have been
filed with the Registrar of Companies. The Auditors' report on those accounts
was unqualified and did not contain a statement under section 237 of the
Companies Act 1985.
Notes to the Accounts
1. General Information
Network Data Holdings Plc is a company incorporated in the United Kingdom under
the Companies Act 1985. The address of the registered office is Botleys Mansion,
Stonehill Road, Chertsey, KT16 0AP.
Accounting Policies
International Financial Reporting Standards ("IFRS")
These are the first set of results the Group has reported under IFRS. The
comparative information has been restated and reconciliations from UK Generally
Accepted Accounting Practice (UK GAAP) to IFRS are given in the notes. As a
result the Group has been required to capitalise certain development costs.
Restatement of financial information under International Financial Reporting
Standards ("IFRS")
This is the first year that the Group will present its financial statements
under IFRS. The Company reported under UK GAAP in its previously published
financial statements for the year ended 31 December 2006. The date of
transition to IFRS is 1 January 2006.
At the date of transition to IFRS and during the six months ended 30 June 2006
there is no adjustment required to Equity or the Recognised Income and Expense.
During the second half of 2006, the Group has capitalised software development
of #50,000 as intangible fixed assets. This was previously expensed in the
period. A corresponding adjustment to deferred tax of #15,000 has been made.
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with the International
Financial Reporting Standards (IFRSs). The financial statements have also been
prepared in accordance with IFRSs adopted by the European Union and therefore
the group financial statements comply with article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain properties. The principal accounting policies
adopted are set out as below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
Network Data Holdings plc was incorporated on 21 March 2006 and on 27 April 2006
acquired the shares of Network Data Limited. The transfer of ownership has been
accounted for as a group reconstruction and falls outside the scope of IFRS3 on
the basis that it is a business combination involving entities under common
control and the shareholders of the subsidiary companies and their rights,
relative to each other, were unchanged. Accordingly the shareholders had a
continuing interest in the business both before and after the transfer of
ownership.
Under the group reconstruction the assets and liabilities of the subsidiary
undertakings were transferred to Network Data Holdings plc at their book value.
Furthermore, the relevant income and expenditure and cash flows of the
subsidiary companies, to the date of transfer, are included in the prior year
comparative figures in the 31 December 2006 financial statements. Consequently,
the consolidated financial statements to 31 December 2006 were prepared as if
Network Data Holdings plc had been in existence for the whole of the previous
year.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales related
taxes.
Commission income for mortgage and insurance is recognised on the date the
mortgage advance is made or the insurance policy was put on risk. For term
assurance commission amounts are deferred to recognise the risk that commissions
may be reclaimed on policies that are subsequently cancelled. This amount is
included within deferred income within the balance sheet.
Subscription income for membership and websites is invoiced monthly and
recognised in the month to which the subscription relates.
Valuation income is recognised in the month in which the valuation is performed.
Valuation fees received in advance of the valuation being performed are
included within trade creditors and accruals within the balance sheet.
Franchise fees are earned evenly over the period of the franchise. The amount
of the franchise fee invoiced in excess of the amount earned is included within
trade creditors and accruals within the balance sheet.
Revenues for the provision of Home Information Packs ("HIP")are recognised when
the HIP is complete and is made available to the customer. The amount invoiced
in excess of the amount earned is included within trade creditors and accruals
within the balance sheet.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset's net carrying amount.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the
Group's obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or
services, or for administrative purposes, are stated in the balance sheet at
their revalued amounts, being the fair value at the date of revaluation, less
any subsequent accumulated depreciation and subsequent accumulated impairment
losses. Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be determined
using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings
is credited to the properties revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset previously recognised as an
expense, in which case the increase is credited to the income statement to the
extent of the decrease previously charged. A decrease in carrying amount arising
on the revaluation of such land and buildings is charged as an expense to the
extent that it exceeds the balance, if any, held in the properties revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to income. On the subsequent sale
or retirement of a revalued property, the attributable revaluation surplus
remaining in the properties revaluation reserve is transferred directly to
retained earnings.
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets,
other than land and properties under construction, over their estimated useful
lives, using the straight-line method (except motor vehicles which are reducing
balance) as follows:
Freehold land Nil
Freehold buildings 50 years
Computers and office equipment 3 years
Fixtures and fittings 4 to 15 years
Motor vehicles 4 years
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in income.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
An internally-generated intangible asset arising from the Group's software
development is recognised only if all the following conditions are met:
* An asset is created that can be identified (such as software and new
processes);
* It is probable that the asset created will generate future economic benefits;
and
* The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis
over their useful lives of 3 years. Where no internally-generated intangible
asset can be recognised, development expenditure is recognised as an expense in
the period in which it is incurred.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Trade Receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in profit or loss when there is no objective evidence that the asset
is impaired. The allowance recognised is measured as the difference between the
asset's carrying amount and the present value of estimated future cash flows
discounted at the effective interest rate computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the group after
deducting all of its liabilities.
Bank Borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
accrual basis in profit or loss using the effective interest rate method and are
added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
Trade Payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity Instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested at 1
January 2005.
The group issues equity-settled and cash-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair value
(excluding the effect of non market-based vesting conditions) at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the group's estimate of shares that will eventually vest and
adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions, and behavioural
considerations.
A liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each balance sheet date for
cash-settled, share-based payments.
3. Critical accounting judgements and key sources of estimation
uncertainty
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are discussed below.
The Directors estimate that Hipstar Limited will secure sufficient market share
to make sufficient taxable profits to utilise the deferred tax asset at the
balance sheet date.
4. Share capital
On 31 March 2007, 7,500 ordinary 10p shares were issued at par under the
exercise of share options.
5. Other reserves
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 2007 30 June 2006 31 December 2006
#'000 #'000 #'000
Reserve arising on group reconstruction (1,732) (1,732) (1,732)
Property revaluation reserve 364 364 364
Other reserves (1,368) (1,368) (1,368)
6. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
Restated Restated
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 2006 31 December
2007 2006
#'000 #'000 #'000
Earnings for the purposes of basic earnings per share being net
profit attributable to equity holders of the parent
(361) 315 152
Earnings for the purposes of diluted earnings per share (361) 315 152
Number of shares
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 2006 31 December
2007 2006
Weighted average number of ordinary shares for the purposes of
basic earnings per share
28,151,055 27,509,388 27,681,472
Effect of dilutive potential ordinary shares:
Share options 2,790,050 1,505,889 2,492,740
Weighted average number of ordinary shares for the purposes of
diluted earnings per share 30,941,105 29,015,277 30,174,212
7. Events after the balance sheet date
After the balance sheet date, 7,500 ordinary shares were issued at par under the
exercise of share options.
8. Business and geographical segments continued
Segment information about the businesses is presented below.
Unaudited results for the 6 months ended 30 June 2007
Network Network Homeowners
Data Surveyors Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
REVENUE
External sales 14,712 1,348 106 - - 16,166
Inter segment
sales
71 - - - ( 71) -
Total revenue 14,783 1,348 106 - (71) 16,166
Inter-segment sales are charged at prevailing market prices.
Profit / (loss) before tax
Segment result 1,219 (172) (1,365) (197) - (515)
Tax 154
Loss after tax (361)
Network Network Homeowners
Data Surveyor Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
BALANCE SHEET
ASSETS
Segment assets 9,379 478 1,521 93 (3,179) 8,288
Unallocated corporate assets 4
Consolidated total assets 8,292
LIABILITIES
Segment 6,596 599 3,410 231 (3,210) 7,626
liabilities
Unallocated corporate 21
liabilities
Consolidated total liabilities 7,647
Unaudited results for the 6 months ended 30 June 2006
Network Network Homeowners
Data Surveyors Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
REVENUE
External sales 12,469 977 - - - 13,446
Inter segment
sales
88 - - - ( 88) -
Total revenue 12,557 977 - - (88) 13,446
Inter-segment sales are charged at prevailing market prices.
Profit / (loss) before tax
Segment result 880 12 (443) - - 449
Tax (134)
Profit after tax 315
Network Network Homeowners
Data Surveyors Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
BALANCE SHEET
ASSETS
Segment assets 7,550 618 63 - (859) 7,372
Unallocated corporate assets -
Consolidated total assets 7,372
LIABILITIES
Segment 5,697 639 506 - (674) 6,168
liabilities
Unallocated corporate -
liabilities
Consolidated total liabilities 6,168
Unaudited results for the year ended 31 December 2006
Network Network Homeowners
Data Surveyors Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
REVENUE
External sales 12,469 977 - - - 13,446
Inter segment
sales
88 - - - ( 88) -
Total revenue 12,557 977 - - (88) 13,446
Inter-segment sales are charged at prevailing market prices.
Profit / (loss) before tax
Segment result 1,861 11 (1,333) - - 539
Unallocated corporate costs (268)
Profit before tax 271
Tax (119)
Profit after tax 152
Network Network Homeowners
Data Surveyors Hipstar Mortgages Eliminations Consolidated
#'000 #'000 #'000 #'000 #'000 #'000
BALANCE SHEET
ASSETS
Segment assets 8,732 226 517 - (1,818) 7,657
Unallocated corporate assets 75
Consolidated total assets 7,732
LIABILITIES
Segment 6,428 231 1,486 - (1,537) 6,608
liabilities
Unallocated corporate 46
liabilities
Consolidated total liabilities 6,654
This information is provided by RNS
The company news service from the London Stock Exchange
END
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