Interim Results
Released: 13/06/2006
Glen Group PLC
13 June 2006
Glen Group plc
Interim Results for the six months ended 31 March 2006
Glen Group plc, the Edinburgh based provider of integrated IT and communication
services, today announces interim results for the period ended 31 March 2006.
Key points
• Strong performance from Eclectic, which in six weeks since acquisition
delivers 60% of first half turnover
• Eclectic making solid progress towards achieving the maximum earn out
target of £400,000 of PBITA before 31st July 2006
• Glen Communications rationalises activities and, since the end of the
half year, delivers first monthly operating profit since Glen Group moved
to AIM
• Expansion of services offering including launch of Glen Broadband Voice
and appointment as Value Added Resellers for Sage Financial Software
• Group well placed for further acquisitions and to expand services and
geographical coverage
• Early adoption of IFRS
Eric Hagman CBE, Chairman of Glen Group, commented:
'There is no doubt that the steps that we have taken in the first half have laid
the foundations on which we can expand the business. The Board, and executive
team led by Graham J Duncan, look forward to the challenge.'
13th June 2006
Enquiries:
Glen Group plc
Graham J Duncan, Chief Executive Officer Tel: 0845 119 2100
College Hill Associates
Alex Walters Tel: 020 7457 2020
CHAIRMAN'S STATEMENT
The financial statements for the half year period have been drawn up on the
basis of the recognition and measurement requirements of International Financial
Reporting Standards ('IFRS'), further details of which are contained in the
Chief Executive's Review.
We have made significant progress in the first half of the financial year. The
acquisition of Eclectic Holdings Limited ('Eclectic'), which concentrates its IT
services portfolio at the corporate market, was approved by shareholders in
February 2006. The results for the six months ended 31st March 2006 reflect just
six weeks performance from this acquisition, yet it contributed £588,856 of
turnover for the period which represents 60% of the entire first half
performance.
Following a rationalisation of the business of Glen Communications Limited
('Glen Communications'), our SME focused IT and communications integration
business, we are now starting to see real progress with turnover of £388,081 in
the first half more than double that of the equivalent period last year. During
March we moved its operational base to Rotherham in South Yorkshire and
reorganised its operations. This reorganisation involved exiting our pre-paid
phone card business, which was no longer a core activity, and actioning a number
of other personnel changes designed to benefit the company going forward. The
net costs of this exercise amounted to £49,867 and these costs are included in
other operating charges. As a result of this initiative we were very pleased to
see that, since the end of the half year, based on our internal unaudited
management accounts, we have seen the first monthly operating profit from Glen
Communications since we admitted the shares of Glen Group plc ('Glen Group') to
AIM in December 2004. This achievement is a direct result of the major cost
saving changes that we made to the business at the end of the period, coupled
with increasing stability and productivity from the sales team, which has lifted
monthly turnover above £100,000 for the first time.
As we announced on 31st March, Eclectic is making solid progress towards
achieving the maximum earn-out target of £400,000 of profits before interest,
taxation and amortisation ('PBITA') set for the former shareholders for the
twelve month period ending 31st July 2006. Under IFRS your Board are required to
assess the probability that the additional earn-out consideration will become
payable. Having given this due consideration, we have felt it appropriate to
provide for the maximum sum payable, all of which would be in Glen Group equity.
Although the Directors cannot yet be certain that the target will be achieved,
largely because the summer months are, historically, less robust than the rest
of the year, we remain positive. Full details are contained in note 6 to this
interim statement.
Glen Group relies on the two operating companies, Eclectic and Glen
Communications, to deliver sufficient profit to fund its costs and ultimately to
deliver an overall consolidated group profit. The costs of Glen Group for the
half year amounted to £159,413. In the period 15th February 2006 to 31st March
2006, Eclectic has contributed £75,077 of profits to support our group costs, an
encouraging result for what is just a six week period. Overall, the consolidated
group loss for the half year was £380,391.
Glen Communications continues to expand its core products and services. Since
the end of the half year we have launched a broadband voice service, also known
as Voice over IP, aimed at the business market, which we have branded Glen
Broadband Voice. This service uses a business grade broadband connection to
deliver voice services which are rich in features and which do not require the
customer to install their own switching equipment. This hosted service is an
example of the type of new services which utilise a broadband connection. The
provision of these types of services over broadband both wired and wireless, is
a core strategy of Glen Communications.
I am also pleased to report that Glen Communications has recently been appointed
value added resellers for Sage financial software products in the UK. Sage
targets the SME market, a core market for Glen Communications, and we look
forward to developing our services in this area.
Eclectic continues to win contracts in its core business intelligence practice.
This includes working as contractor on a number of public sector contracts where
Eclectic is rapidly positioning itself as a niche provider of these types of
services.
The expanded group now employs 57 people, with 75% of them directly involved in
selling and delivering services to our growing client base. As well as
increasing organic growth, we will be seeking acquisitions which can enhance our
product and services portfolio or can give us greater geographical coverage and
we remain active in this area. Our objective is to build a significant business
over time and create value for our shareholders as we progress down this road.
There is no doubt that the steps that we have taken in the first half have laid
the foundations on which we can expand the business. The Board, and executive
team led by Graham J Duncan, look forward to the challenge.
Eric M Hagman CBE
CHAIRMAN
13th June 2006
CHIEF EXECUTIVE'S REVIEW
The financial statements for the half year period have been drawn up on the
basis of the recognition and measurement requirements of International Financial
Reporting Standards ('IFRS'). Although AIM companies are not required to comply
with IFRS until 2007/2008, your Board have decided that we should adopt these at
the earliest possible opportunity. The main effect of the adoption has been to
unwind the merger accounting that we applied for the Glen Group plc ('Glen
Group') acquisition of Glen Communications Limited ('Glen Communications') in
late 2004 and this has created goodwill on the consolidated balance sheet. The
other main change, although not material to the half year, is to expense the
cost of share options. Our accounting policies under IFRS are contained in this
interim report.
The first half has seen significant change to the business. As indicated in the
Chairman's statement, we have consolidated the results of Eclectic Holdings
Limited and its subsidiaries ('Eclectic') for the period from 15th February 2006
to 31st March 2006 and since the period end, based on our internal unaudited
management accounts, we have seen the first operating profit from Glen
Communications since we admitted the shares of Glen Group to AIM in December
2004.
An analysis of the turnover across the last three six month periods is tabulated
below:
31st March 2006 30th September 2005 31st March 2005
Turnover £ £ £
Glen Communications
-Continuing 365,562 323,933 143,016
-Discontinued (phone cards) 22,519 32,043 39,405
Total 388,081 355,976 182,421
Eclectic from 15th February 588,856 - -
2006
--------------------------------------------------------------------------------
Total Turnover 976,937 355,976 182,421
--------------------------------------------------------------------------------
These results show steady progress, particularly as the first half of the year
is impacted by the Christmas and New Year holiday period. The 13% increase in
continuing turnover for the first half of 2005/2006 in Glen Communications
compared to the final six months of last year has been delivered notwithstanding
the reorganisation that took place during that period. Since the period end we
have seen a further, more material, lift in the turnover of Glen Communications.
Our gross margin for the half year was 42.25%. This continues to be robust,
despite the changing mix of services. Our aim remains to add value to the
products and services that we sell and support and continue to provide our
clients with a first class experience where they appreciate the value of the
services that we provide. This approach allows us to sell our services based on
value and quality.
Following the acquisition of Eclectic, we now have offices or facilities in
Glasgow, Edinburgh, Rotherham and London and are more widely represented by the
location of our sales teams. We can therefore provide our services over an
expanding area. Geographic coverage remains a key objective in the expansion of
the business.
Our cost structures continue to expand as the business expands. However, the
efforts made in the first half to lower the operational costs of Glen
Communications have been successful and we have removed, in general terms and
comparing like with like, about £200,000 of costs from this business over a 12
month period beginning 1st May 2006. Some of these cost savings will therefore
come through in the second half.
The cost structures of the business over the last three half yearly periods can
be further analysed as follows:
31st March 2006 30th September2005 31st March 2005
Other operating charges £ £ £
Glen Group 159,413 149,282 76,784*
Glen Communications
-Continuing 412,522 346,050 236,038
-Reorganisation costs 49,867 - -
Eclectic from 15th February 164,541 - -
2006
--------------------------------------------------------------------------------
Total operating charges 786,343 495,332 312,822
--------------------------------------------------------------------------------
* 4 months
CHIEF EXECUTIVE'S REVIEW (continued)
Overall, the group has incurred an operating loss before interest of £373,623
for the half year. An analysis of the operating loss before interest over the
last three half yearly periods is as follows:
1st March 2006 30th September 2005 31st March 2005
Operating loss £ £ £
Glen Group (159,413) (149,282) (76,784)*
Glen Communications
-Continuing (239,420) (191,164) (148,556)
Eclectic from 15th February 75,077 - -
2006
--------------------------------------------------------------------------------
Operating loss before (323,756) (340,446) (225,340)
reorganisation costs
--------------------------------------------------------------------------------
Glen Communications
-Reorganisation costs (49,867) - -
--------------------------------------------------------------------------------
Operating loss before interest(373,623) (340,446) (225,340)
--------------------------------------------------------------------------------
*4 months
Adjusting for the reorganisation costs, the continuing operating loss before
interest for the six months to 31st March 2006 amounts to £323,756 which
compares against a loss for the six months to 30th September 2005 of £340,446.
The retained loss for the six months after interest is £380,391, compared to
£226,453 for the equivalent period last year.
During the first half we raised further capital to complete the acquisition of
Eclectic, which constituted a reverse takeover under the AIM rules, and to
provide working capital for the group. Because of our size, the costs of the
acquisition and placing which we concluded on 15th February were material
amounting to approximately £485,000 in fees and other costs. The costs of the
acquisition itself, amounting to approximately £71,000, have been allocated to
goodwill, with the balance deducted from the share premium account.
At 31st March 2006, we had net funds of £114,458. The group has two banking
facilities, one for Eclectic and one for Glen Communications which together
provide overdraft facilities of £370,000.
Going forward we believe that the value added reseller business model is a
robust one and our strategy of providing a wide range of IT and communications
products and services to the SME market is the correct approach. In the
corporate space we continue to be niche focused which allows us to maximise our
consulting income based on the expertise of our people.
Graham J Duncan MA CA
CHIEF EXECUTIVE
13th June 2006
CONSOLIDATED INCOME STATEMENT- UNAUDITED
for the six months ended 31st March 2006
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
Note £ £ £
--------------------------------------------------------------------------------
Revenue
Continuing operations 388,081 182,421 538,397
Acquisitions 588,856 - -
--------------------------------------------------------------------------------
2 976,937 182,421 538,397
Cost of sales (564,217) (94,939) (296,029)
--------------------------------------------------------------------------------
Gross profit 412,720 87,482 242,368
Other operating charges (786,343) (312,822) (808,154)
--------------------------------------------------------------------------------
Operating loss 3 373,623) (225,340) (565,786)
Interest payable (9,319) (6,270) (16,109)
Interest receivable 2,551 5,157 6,716
--------------------------------------------------------------------------------
Finance costs (6,768) (1,113) (9,393)
Loss before taxation (380,391) (226,453) (575,179)
Taxation - - -
--------------------------------------------------------------------------------
Loss for the period (380,391) (226,453) (575,179)
--------------------------------------------------------------------------------
Loss per share 4
- basic (0.34)p (0.54)p (1.19)p
- fully diluted (0.33)p (0.54)p (1.18)p
There are no other gains and losses other than the loss for the period.
CONSOLIDATED BALANCE SHEET- UNAUDITED
at 31st March 2006
31st March 31st March 30th September
2006 2005 2005
Note £ £ £
--------------------------------------------------------------------------------
Assets
Non-current assets
Goodwill 3,925,682 935,316 933,418
Property, plant and equipment 103,408 36,704 50,317
--------------------------------------------------------------------------------
Total non-current assets 4,029,090 972,020 983,735
--------------------------------------------------------------------------------
Current assets
Inventories 16,603 4,873 10,113
Trade and other receivables 1,407,017 96,232 208,626
Cash and cash equivalents 311,966 274,842 211,160
--------------------------------------------------------------------------------
Total current assets 1,735,586 375,947 429,899
--------------------------------------------------------------------------------
Total assets 5,764,676 1,347,967 1,413,634
--------------------------------------------------------------------------------
Liabilities
Current liabilities
Short term borrowings 103,680 95,954 68,169
Trade and other payables 939,632 89,690 126,583
Accruals and deferred income 465,258 26,900 78,840
Other creditors 143,097 1,849 73,217
--------------------------------------------------------------------------------
Total current liabilities 1,651,667 214,393 346,809
--------------------------------------------------------------------------------
Non-current liabilities
Long-term borrowings 93,828 65,000 58,516
--------------------------------------------------------------------------------
Total non-current liabilities 93,828 65,000 58,516
--------------------------------------------------------------------------------
Total liabilities 1,745,495 279,393 405,325
--------------------------------------------------------------------------------
Net assets 4,019,181 1,068,574 1,008,309
--------------------------------------------------------------------------------
Equity
Share capital 3,276,831 500,000 600,000
Share premium account 879,473 771,180 957,541
Shares to be issued 787,500 - -
Other reserve 8,500 1,400 3,500
Profit and loss reserve 5 (933,123) (204,006) (552,732)
--------------------------------------------------------------------------------
Total equity 4,019,181 1,068,574 1,008,309
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT- UNAUDITED
for the six months ended 31st March 2006
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
£ £ £ £ £ £
Cash flows from operating activities
Operating loss (373,623) (225,340) (565,786)
Adjustments for
Depreciation and amortisation 14,274 6,332 19,412
Other non-cash items 5,000 1,400 3,500
(Increase)/decrease in inventories (6,490) 3,363 (1,877)
Increase in trade and other (1,198,391) (28,623) (145,767)
receivables
Increase in trade payables,
accruals and other creditors 1,309,347 41,643 166,596
--------------------------------------------------------------------------------
Net cash outflow from operating (249,883) (201,225) (523,922)
activities
--------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of property, plant and (67,365) (31,507) (56,492)
equipment
Sale of property, plant and equipment - - 190
Acquisition of subsidiary, net (2,204,764) - -
of cash acquired
--------------------------------------------------------------------------------
Net cash used in investing (2,272,129 ) (31,507) (56,302)
activities
--------------------------------------------------------------------------------
Cash flows from financing activities
Interest paid (net) (6,768) (1,113) (9,393)
Issue of shares 3,012,500 750,000 1,050,000
Receipt of bank finance 50,000 - -
Repayment of borrowing (9,688) (10,000) (16,486)
Receipt from/(repayment of)
shareholders loans (40,000) 7,270 7,270
Receipt from former director's loan 25,000 - -
Expenses paid in connection with
share issue (413,737) (228,820) (242,459)
--------------------------------------------------------------------------------
Net cash used in financing
activities 2,617,307 517,337 788,932
--------------------------------------------------------------------------------
Net increase in cash 95,295 284,605 208,708
Cash and bank overdrafts at
beginning of period 162,991 (45,717) (45,717)
--------------------------------------------------------------------------------
Cash and bank overdrafts at end
of period 258,286 238,888 162,991
--------------------------------------------------------------------------------
Cash and bank overdrafts comprise
Cash and cash equivalents 311,966 274,842 211,160
Bank overdrafts (53,680) (35,954) (48,169)
--------------------------------------------------------------------------------
258,286 238,888 162,991
--------------------------------------------------------------------------------
Analysis of changes in net funds
At 30th September At 31st March
2005 Cash Flows 2006
£ £ £
Cash 211,160 100,806 311,966
Bank overdraft (48,169) (5,511) (53,680)
--------------------------------------------------------------------------------
162,991 95,295 258,286
--------------------------------------------------------------------------------
Debt (118,516) (25,312) (143,828)
--------------------------------------------------------------------------------
Net funds 44,475 69,983 114,458
--------------------------------------------------------------------------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Accounting Policies
a) Basis of preparation
The interim financial statements and all the comparative information is
unaudited but has been reviewed by the auditors.
These interim financial statements have been prepared in accordance with IAS 34
'Interim Financial Reporting' and the requirements of IFRS 1 'First Time
Adoption of International Financial Reporting Standards' relevant to interim
reports and were approved by the Directors on 13th June 2006.
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that are expected to
be effective at 30th September 2006, the Group's first annual reporting date at
which the Board has chosen to adopt IFRS. Based on IFRS, the directors have made
assumptions about the accounting policies expected to be applied when the first
annual IFRS financial statements are prepared for the year ending 30th September
2006.
The financial statements have been prepared under the historical cost
convention. The measurement bases and principal accounting policies of the group
are set out below.
The policies have changed from the previous year when the financial statements
were prepared under applicable UK GAAP. The comparative information has been
restated to reflect the changes arising from the adoption of IAS 34. The changes
to accounting policies are explained in notes 7 and 8, together with the
reconciliation of opening balances. The date of transition to IFRS was 30th
September 2004.
The accounting policies that have been applied in the opening balance sheet have
also been applied throughout all periods presented in these interim financial
statements.
b) Basis of consolidation
The group interim financial statements consolidate those of the company and all
of its subsidiary undertakings drawn up to 31st March 2006. Subsidiaries are
entities over which the group has the power to control the financial and
operating policies so as to obtain benefits from its activities. The group
obtains and exercises control through voting rights.
Unrealised gains on transactions between the group and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Amounts reported in
the financial statements of subsidiaries have been adjusted where necessary to
ensure consistency with the accounting policies adopted by the group.
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase
method involves the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the
bases for subsequent measurement in accordance with the group accounting
policies. Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition cost over the fair value
of the group's share of the identifiable net assets of the acquired subsidiary
at the date of acquisition.
c) Goodwill
Goodwill representing the excess of the cost of acquisition over the fair value
of the group's share of the identifiable net assets acquired is capitalised and
reviewed annually for impairment. Goodwill is carried at cost less accumulated
impairment losses. Negative goodwill is recognised immediately after acquisition
in the income statement.
d) Revenue
Revenue is the total amount receivable by the company in the ordinary course of
business with outside customers for goods supplied as principal and for services
provided, excluding VAT and trade discounts. Turnover from mobile commissions is
recognised when the customers are connected to the relevant network. Turnover
from information technology services are billed to clients in accordance with
agreed terms, in line with performance of the contract.
e) Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. When exchange differences result from the translation of foreign currency
borrowings raised to acquire foreign assets they are taken to reserves and
offset
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
against the differences arising from the translation of those assets. All other
exchange differences are dealt with through the profit and loss account.
f) Property, plant and equipment
Property, plant and equipment, which include motor vehicles, are stated at cost,
net of depreciation and any provision for impairment.
g) Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the
difference between the disposal proceeds and the carrying amount of the asset
and is recognised in the income statement. The gain or loss arising from the
sale or revaluation of held for sale assets is included in 'other income' or
'other expense' in the income statement. Any revaluation surplus remaining in
equity on disposal of the asset is transferred to the profit and loss reserve.
h) Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Plant and equipment - over 3 years
Material residual value estimates are updated as required, but at least
annually, whether or not the asset is revalued.
i) Impairment testing of goodwill, other intangible assets and property, plant
and equipment
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and some
are tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the group at which
management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include
goodwill, other intangible assets with an indefinite useful life, and those
intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the other assets
in the cash generating unit. With the exception of goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist.
j) Leased assets
In accordance with IAS 17, the economic ownership of a leased asset is
transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the leased asset. The related asset is
recognised at the time of inception of the lease at the fair value of the leased
asset or, if lower, the present value of the minimum lease payments plus
incidental payments, if any, to be borne by the lessee. A corresponding amount
is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the
capital balance outstanding and is charged to the income statement over the
period of the lease.
All other leases are regarded as operating leases and the payments made under
them are charged to the income statement on a straight line basis over the lease
term. Lease incentives are spread over the term of the lease.
k) Inventories
Inventories are stated at the lower of cost and net realisable value, after
making due allowance for obsolete and slow moving items and the cost is
calculated using the FIFO basis.
l) Taxation
Current tax is the tax currently payable based on taxable profit for the year.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on the
initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. Temporary differences
include those associated with shares in subsidiaries and joint ventures if
reversal of these temporary differences can be controlled by the group and it is
probable that reversal will not occur in the foreseeable future. In addition,
tax losses available to be carried forward as well as other income tax credits
to the group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax
assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax is
also charged or credited directly to equity.
m) Financial assets
Financial assets, other than hedging instruments, are divided into the following
categories: loans and receivables; financial assets at fair value through the
profit or loss; available-for-sale financial assets; and held-to-maturity
investments. Financial assets are assigned to the different categories by
management on initial recognition, depending on the purpose for which the
investments were acquired. The designation of financial assets is re-evaluated
at every reporting date at which a choice of classification or accounting
treatment is available.
All financial assets are recognised when the group becomes a party to the
contractual provisions of the instrument. All financial assets are initially
recognised at fair value, plus transaction costs, unless they are classified as
at fair value through profit or loss. Financial assets classified as at fair
value through profit or loss are initially recognised at fair value.
Derecognition of financial assets occurs when the rights to receive cash flows
from the investments expire or are transferred and substantially all of the
risks and rewards of ownership have been transferred. An assessment for
impairment is undertaken at least at each balance sheet date.
Interest and other cash flows resulting from holding financial assets are
recognised in the income statement when receivable, regardless of how the
related carrying amount of financial assets is measured.
Financial assets at fair value through profit or loss include financial assets
that are either classified as held for trading or are designated by the entity
as at fair value through profit or loss upon initial recognition. Subsequent to
initial recognition, the financial assets included in this category are measured
at fair value with changes in fair value recognised in the income statement.
Financial assets originally designated as financial assets at fair value through
profit or loss may not subsequently be re-classified.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise when
the group provides money, goods or services directly to a debtor with no
intention of trading the receivables. Loans and receivables are subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. Any change in their value through impairment or reversal of
impairment is recognised in the income statement.
Provision against trade receivables is made when objective evidence is received that
the group will not be able to collect all amounts due to it in accordance with the
original terms of those receivables. The amount of the write-down is determined as
the difference between the asset's carrying amount and the present value of estimated
future cash flows. n) Cash and cash equivalents Cash and cash equivalents comprise cash, and cash available at less than 24 hours
notice at no penalty. o) Financial liabilities Financial liabilities are obligations to pay cash or other financial instruments and
are recognised when the group becomes a party to the contractual provisions of
the instrument. All interest-related charges are recognised as an expense in
'finance cost' in the income statement. Bank loans are raised for support of
long term funding of the group's operations. They are recognised at proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption, and direct issue costs are charged to the income
statement on an accruals basis using the effective interest 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.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
Dividend distributions payable to equity shareholders are included in
'other short term financial liabilities' when the dividends are approved in general
meeting prior to the balance sheet date. p) Equity Equity comprises the following: 'Share capital' represents the nominal value of equity shares. 'Share premium' represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
'Shares to be issued' represents the maximum value of shares to be issued
in respect of the earn out consideration payment due to the former shareholders
of Eclectic Holdings Limited 'Other reserve' represents equity-settled share-based
employee remuneration until such share options are exercised.
'Profit and loss reserve' represents retained profits and accumulated losses. q) Employee benefits • Defined Contribution Pension Scheme The pension costs charged against operating profits are the contributions payable
to the scheme in respect of the accounting period. • Share-Based Payment All material share-based payment arrangements are recognised in the financial statements.
All goods and services received in exchange for the grant of any share-based remuneration
are measured at their fair values. Fair values of employee services are indirectly determined
by reference to the fair value of the share options awarded. Their value is appraised at the
grant date and excludes the impact of non-market vesting conditions (for example, profitability
and sales growth targets). All share-based remuneration is ultimately recognised as an expense in the income statement
with a corresponding credit to 'other reserve'. If vesting periods or other non-market vesting conditions apply, the expense is allocated
over the vesting period, based on the best available estimate of the number of share
options expected to vest. Estimates are subsequently revised if there is any indication
that the number of share options expected to vest differs from previous estimates.
Any cumulative adjustment prior to vesting is recognised in the current period.
No adjustment is made to any expense recognised in prior periods if share
options ultimately exercised are different to that estimated on vesting. Upon exercise of share options the proceeds received net of attributable
transaction costs are credited to share capital.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
2. Analysis of revenue
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
£ £ £
--------------------------------------------------------------------------------
By business sector
Mobile services 244,372 79,086 321,154
Information technology 709,146 63,930 143,675
Phone cards 22,519 39,405 71,447
Other communication services 900 0 2,121
--------------------------------------------------------------------------------
Total revenue 976,937 182,421 538,397
--------------------------------------------------------------------------------
By destination
United Kingdom 976,937 182,421 538,397
--------------------------------------------------------------------------------
Total revenue 976,937 182,421 538,397
--------------------------------------------------------------------------------
By origin
Glen Communications 388,081 182,421 538,397
Eclectic 588,856 - -
--------------------------------------------------------------------------------
Total revenue 976,937 182,421 538,397
--------------------------------------------------------------------------------
The interim results for 2006 include the initial contribution from Eclectic
acquired on 15th February 2006.
3. Analysis of operating loss
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
£ £ £
--------------------------------------------------------------------------------
By business sector
Mobile services (284,095) (98,486) (338,904)
Information technology (62,780) (78,480) (150,050)
Phone cards (25,719) (48,374) (74,617)
Other communication services (1,029) 0 (2,215)
--------------------------------------------------------------------------------
Operating loss (373,623) (225,340) (565,786)
--------------------------------------------------------------------------------
By destination
United Kingdom (373,623) (225,340) (565,786)
--------------------------------------------------------------------------------
Operating loss (373,623) (225,340) (565,786)
--------------------------------------------------------------------------------
By origin
Glen Group (159,413) (76,784) (226,066)
Glen Communications (289,287)* (148,556) (339,720)
Eclectic 75,077 - -
--------------------------------------------------------------------------------
Operating loss (373,623) (225,340) (565,786)
--------------------------------------------------------------------------------
* includes reorganisation costs of £49,867
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
4. Loss per share
6 months to 6 months to 12 months to
31st March 1st March 30th September
2006 2005 2005
Pence Pence Pence
--------------------------------------------------------------------------------
Loss per share
Basic (0.34) (0.54) (1.19)
Fully diluted (0.33) (0.54) (1.18)
--------------------------------------------------------------------------------
The loss per share has been calculated by dividing the loss attributable to
shareholders by the weighted average number of shares in issue during the period.
The numbers used in calculating basic and fully diluted loss per share are reconciled below.
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
£ £ £
--------------------------------------------------------------------------------
Loss for the period attributable to shareholders:
--------------------------------------------------------------------------------
Losses basic and fully diluted (380,391) (226,453) (575,179)
--------------------------------------------------------------------------------
Weighted average number of shares in issue
Basic 111,280,513 41,666,667 48,333,333
Adjustment for share
options 4,833,334 444,444 555,556
--------------------------------------------------------------------------------
Fully diluted 116,113,847 42,111,111 48,888,889
--------------------------------------------------------------------------------
5. Profit and loss reserve
6 months to 6 months to 12 months to
31st March 31st March 30th September
2006 2005 2005
£ £ £
Opening reserve / (deficit) (552,732) 22,447 22,447
Loss for the period (380,391) (226,453) (575,179)
--------------------------------------------------------------------------------
Closing reserve / (deficit) (933,123) (204,006) (552,732)
--------------------------------------------------------------------------------
6. Acquisition
On 15th February 2006 the group acquired the entire share capital of Eclectic Holdings
Limited and its subsidiaries, a provider of business intelligence consultancy and other
IT services to the corporate market. The maximum purchase consideration is
£3,000,000 of which £2,212,500 was paid at completion and the balance of up to £787,500
(the second consideration) payable when the group issues its preliminary announcement for
the year ending 30th September 2006. The second consideration payment is dependent on
Eclectic's profit before interest, taxation and amortisation ('PBITA') for the twelve month
period ending 31st July 2006 in accordance with the following formula: PBITA of between £250,000 and £299,999, the second consideration is £196,875 PBITA of
between £300,000 and £349,999, the second consideration is £393,750 PBITA of between
£350,000 and £399,999, the second consideration is £590,625 PBITA of £400,000 and
above, the second consideration is £787,500
The entire second consideration is payable in shares in Glen Group plc subject to a maximum of 78,750,000 shares. The Directors have felt it appropriate to accrue the full amount of the second consideration, totalling £787,500, in the half year ended 31st March 2006.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
The book values of the net assets of Eclectic Holdings Limited and its subsidiaries on
acquisition were £1,089,270 and have been fair valued at the same amount.
This can be analysed as follows: Assets £ Non-current assets Goodwill 1,023,241 Property, plant and equipment 40,211 -------------------------------------------------------------------------------- Total non-current assets 1,063,452 -------------------------------------------------------------------------------- Current assets Inventories 4,495 Trade and other receivables 1,116,475 Cash and cash equivalents 28,626 -------------------------------------------------------------------------------- Total current assets 1,149,596 -------------------------------------------------------------------------------- Total assets 2,213,048 -------------------------------------------------------------------------------- Liabilities Current liabilities Short term borrowings 144,028 Trade and other payables 534,415 Accruals and deferred income 370,335 Other creditors 50,000 -------------------------------------------------------------------------------- Total current liabilities 1,098,778 -------------------------------------------------------------------------------- Non-current liabilities Long-term borrowings 25,000 -------------------------------------------------------------------------------- Total non-current liabilities 25,000 -------------------------------------------------------------------------------- Total liabilities 1,123,778 -------------------------------------------------------------------------------- Net assets 1,089,270 -------------------------------------------------------------------------------- Turnover and operating profit of the companies acquired for the post acquisition period
were £588,856 and £75,077 respectively. Due to confidentiality clauses contained in the
sale and purchase agreement between Glen Group plc and the vendors of Eclectic Holdings
Limited, the results for the period 1st October 2005 to 31st March 2006 have not been disclosed. The directors are satisfied that there are no intangible assets that should be recognised on
the acquisition of Eclectic Holdings Ltd as the inherent value of the company is represented
by the skill and knowledge of the employees who provide consultancy and training services.
7. Reconciliation of equity under UK GAAP to equity under IFRS
6 months to 12 months to 12 Months to
31st March 30th September 30th September
2005 2005 2004
£ £ £
--------------------------------------------------------------------------------
Shareholders equity under
UK GAAP 152,235 91,970 (143,892)
Adjustment to goodwill relating
to reversal of merger accounting 916,339 916,339 -
--------------------------------------------------------------------------------
Shareholders equity under IFRS 1,068,574 1,008,309 (143,892)
--------------------------------------------------------------------------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued)
8. Reconciliation of loss under UK GAAP to loss under IFRS
6 months to 12 months to 12 months to
31st March 30th September 30th September
2005 2005 2004
£ £ £
--------------------------------------------------------------------------------
Loss attributable to shareholders
under UK GAAP (225,053) (571,679) (205,049)
Share options expensed through
income statement (1,400) (3,500) -
--------------------------------------------------------------------------------
Loss attributable to shareholders
under IFRS (226,453) (575,179) (205,049)
--------------------------------------------------------------------------------
9. Dividend
In view of the deficit on reserves the directors cannot recommend a dividend and the loss
for the period has therefore been transferred to reserves. 10. Statutory accounts These financial statements do not constitute statutory accounts. Although the information
has been reviewed by the auditors, it is unaudited. The comparative figures for the year
ended 30th September 2005 which are now presented under IFRS are not the statutory
accounts for that year. The statutory accounts for the year ended 30th September 2005 were prepared under UK GAAP, contained an
unqualified audit report and are filed with the Registrar of Companies.
This information is provided by RNS
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