REG-Matchtech Group PLC Final Results - Part 2

Released : 14/10/08 06:00

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Part 2 : For preceding part double click [nRn1N7516F]  
  Merger reserve                                                 224        224        0       0      
  Share based payment reserve                                    794        386        0       0      
  Profit and loss account                                        12,771     7,154      59      48     
  SHAREHOLDERS' FUNDS                                            17,066     10,823     3,336   3,107  
                                                                                                      
                                                                                                      
  
  
These financial statements were approved by the directors on the 14th October 
2008, and signed on its behalf by:  
  
Tony Dyer   
  
Finance Director  
  
CONSOLIDATED CASH FLOW STATEMENT   
  
for the year ended 31st July 2008  
  
 
                                                       GROUP                COMPANY            
                                                       2008       2007      2008      2007     
                                                       £'000      £'000     £'000     £'000    
  CASH FLOWS FROM OPERATING ACTIVITIES                                                         
  Profit after taxation                                9,092      6,776     3,321     6,765    
                                                                                               
  Adjustments for:                                                                             
                                                                                               
  Depreciation                                         643        499       0         0        
  Profit on disposal of discontinued operation         0          (59)      0         0        
  Foreign exchange gain on disposal of discontinued    0          (3)       0         0        
      operation                                                                                
  Loss on disposal of property, plant and equipment    27         0         0         0        
  Interest income                                      (79)       (20)      (16)      (8)      
  Interest expense                                     1,074      831       0         0        
  Taxation expense recognised in profit and loss       3,705      3,162     5         3        
  Increase in trade and other receivables              (6,385)    (7,514)   (678)     (996)    
  Increase in trade and other payables                 6,313      4,119     0         (652)    
  Share based payment charge                           540        321       0         0        
  Investment income                                    0          0         (3,309)   (5,428)  
  Cash generated from operations                       14,930     8,112     (677)     (316)    
                                                                                               
  Interest paid                                        (1,074)    (831)     0         0        
  Income taxes paid                                    (3,241)    (2,205)   (2)       (1)      
  NET CASH FROM OPERATING ACTIVITIES                   10,615     5,076     (679)     (317)    
                                                                                               
  CASH FLOWS FROM INVESTING ACTIVITIES                                                         
  Proceeds from sale of Matchtech Inc                  0          105       0         0        
  Purchase of plant and equipment                      (880)      (960)     0         0        
  Proceeds from sale of plant                          62         28        0         0        
  Interest received                                    79         20        16        8        
  Dividend received                                    0          0         3,309     5,428    
  NET CASH USED IN INVESTING ACTIVITIES                (739)      (807)     3,325     5,436    
                                                                                               
  CASH FLOWS FROM FINANCING ACTIVITIES                                                         
  Proceeds from issue of share capital                 218        829       218       829      
  (Repayments to)/proceeds from long-term borrowings   (7,257)    699       0         0        
  Dividends paid                                       (3,309)    (5,428)   (3,309)   (5,428)  
  NET CASH USED IN FINANCING                           (10,348)   (3,900)   (3,091)   (4,599)  
                                                                                               
                                                                                               
  NET INCREASE IN CASH AND CASH EQUIVALENTS            (472)      369       (445)     520      
  CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     659        290       656       136      
  CASH AND CASH EQUIVALENTS AT END OF PERIOD           187        659       211       656      
                                                                                               
                                                                                               
                                                       GROUP                COMPANY            
  ANALYSIS OF CASH AND CASH EQUIVALENTS                2008       2007      2008      2007     
                                                       £'000      £'000     £'000     £'000    
  Cash and cash equivalents                            297        836       211       656      
  Bank Overdraft                                       (110)      (177)     0         0        
                                                       187        659       211       656      
                                                                                               
  
  
NOTES   
  
forming part of the financial statements  
  
1    THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES  
  
i    The business and address of the Group  
  
Matchtech Group plc is a human capital resources business dealing with contract 
and permanent recruitment in the Private and Public sector. The Group is 
organised in three sectors, Engineering, Built Environment and Support Services, 
with niche activities within each sector. The Group's address is: Matchtech 
Group plc, 1450 Parkway, Whiteley, Fareham PO15 7AF.  
  
ii    Basis of preparation of the financial statements  
  
The financial statements have been prepared in accordance with applicable 
International Financial Reporting Standards as adopted by the European Union 
(EU) and which are effective at 31 July 2008, our first annual reporting date at 
which we are required to use IFRS accounting standards as adopted by the EU.  
  
Matchtech Group plc's consolidated and company financial statements were 
prepared in accordance with United Kingdom Accounting Standards (United Kingdom 
Generally Accepted Accounting Practice) until 31 July 2007. The date of 
transition to IFRS was 1 August 2006. The comparative figures in respect of 2007 
have been restated to reflect changes in accounting policies as a result of 
adoption of IFRS. The disclosures required by IFRS 1 concerning the transition 
from UK GAAP to IFRS are given in the reconciliation schedules, presented and 
explained in note 2.   
  
These financial statements have been prepared under the historical cost 
convention. The accounting policies have been applied consistently throughout 
both the Group and the Company for the purposes of preparation of these 
financial statements. A summary of the principal accounting policies of the 
group are set out below.  
  
IFRS 1 permits companies adopting IFRS for the first time to take certain 
exemptions from the full requirements of IFRS in the transition period. These 
financial statements have been prepared on the basis of taking the following 
exemptions:  
  
 
 * business combinations prior to 1 August 2006, the Group's date of transition 
to IFRS, have not been restated to comply with IFRS 3 "Business Combinations".  
  
 
 * cumulative translation differences on foreign operations are deemed to be nil 
at 1 August 2006. Any gains and losses recognised in the consolidated income 
statement on subsequent disposal of foreign operations will exclude translation 
differences arising prior to the transition date.  
  
 
 * the transitional arrangements of IFRS 2 Share Based Payments have been 
applied. In accordance with transitional arrangements, IFRS has been applied to 
all grants of equity instruments after 7 November 2002 that were unvested at 1 
August 2006.  
  
iii    Basis of consolidation  
  
The group financial statements consolidate those of the company and all of its 
subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are 
entities over which the group has 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.  
  
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 group accounting policies.  
  
Intra-group transactions are eliminated on consolidation  
  
iv    Revenue  
  
Revenue is measured by reference to the fair value of consideration received or 
receivable by the group for services provided, excluding VAT and trade 
discounts. Revenue on temporary placements is recognised upon receipt of a 
client approved timesheet or equivalent. Revenue from permanent placements, 
which is based on a percentage of the candidate's remuneration package, is 
recognised when candidates commence employment at which point it is probable 
that the economic benefits associated with the transaction will be transferred.  
  
v    Property, plant and equipment  
  
Property, plant and equipment is stated at cost, net of depreciation and any 
provision for impairment.  
  
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:  
  
 
  Motor Vehicles       25.00%   Reducing balance  
  Computer equipment   25.00%   Straight line     
  Equipment            12.50%   Straight line     
  
  
Residual value estimates are updated as required, but at least annually, whether 
or not the asset is revalued.  
  
vi    Intangible assets  
  
Separately acquired software licences are included at cost and amortised on a 
straight-line basis over the useful economic life of that asset at 20%-33%. 
Provision is made against the carrying value of intangible assets where an 
impairment in value is deemed to have occurred. Amortisation is recognised in 
the income statement under administrative expenses.  
  
vii    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.  
  
viii    Operating lease agreements  
  
Rentals applicable to operating leases are charged against profits on a straight 
line basis over the lease term. Lease incentives are spread over the term of the 
lease.  
  
ix    Taxation  
  
Current tax is the tax currently payable based on taxable profit for the year.  
  
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.  
  
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 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.  
  
Deferred tax on temporary differences associated with shares in subsidiaries is 
not provided if these temporary differences can be controlled by the Group and 
it is probable that reversal will not occur in the foreseeable future.  
  
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 (such as share based payments) in which 
case the related deferred tax is also charged or credited directly to equity.  
  
x    Pension costs  
  
The company operates a defined contribution pension scheme for employees. The 
assets of the scheme are held separately from those of the company. The annual 
contributions payable are charged to the income statement as they accrue.  
  
xi    Share based payment  
  
The transitional arrangements of IFRS 2 have been applied to all grants of 
equity instruments after 7 November 2002 that were unvested at 1 August 2006. 
All share-based remuneration is ultimately recognised as an expense in the 
income statement with a corresponding credit to "share-based payment reserve". 
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).  
  
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, proceeds received 
net of attributable transaction costs are credited to share capital and share 
premium.  
  
The Group operates a share incentive plan (SIP) which is HMRC approved, and 
enables employees to purchase company shares out of pre-tax salary. For each 
share purchased the company grants an additional share at no cost to the 
employee. The expense in relation to these 'free' shares is recorded as employee 
remuneration and measured at fair value of the shares issued as at the date of 
the grant.   
  
xii    Exceptional items  
  
Non-recurring items which are sufficiently material are presented separately 
within their relevant consolidated income statement category. This helps to 
provide a better understanding of the group's financial performance.  
  
xiii    Business combinations completed prior to date of transition to IFRS  
  
The group has elected not to apply IFRS 3 Business Combinations retrospectively 
to business combinations prior to 1 August 2006.  
  
Accordingly the classification of the combination (merger) remains unchanged 
from that used under UK GAAP. Assets and liabilities are recognised at date of 
transition if they would be recognised under IFRS, and are measured using their 
UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, 
unless IFRS requires fair value measurement. Deferred tax is adjusted for the 
impact of any consequential adjustments after taking advantage of the 
transitional provisions.  
  
xiv    Discontinued operations  
  
A discontinued operation is a cash-generating unit, or a group of cash 
-generating units, that either has been disposed of, or is classified as held 
for sale, and:  
  
 
 * represents a separate line of business or geographic area of operations 
 * is part of a single coordinated plan to dispose of a separate major line of 
business or geographical area of operations or 
 * is a subsidiary acquired exclusively with a view to resale.  
  
The disclosures for discontinued operations in the prior period relate to all 
operations that have been discontinued by the balance sheets date for the latest 
period presented.  
  
xv Financial assets  
  
All financial assets are recognised when the group becomes a party to the 
contractual provisions of the instrument. Financial assets are recognised at 
fair value plus transaction costs.  
  
In the company financial statements, investment in the subsidiary company is 
measured at cost.  
  
Loans and receivables are non-derivative financial assets with fixed or 
determinable payments that are not quoted in an active market. Trade receivables 
are classified as loans and receivables. Loans and receivables are measured 
subsequent to initial recognition at amortised cost using 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 there is objective evidence 
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.  
  
A financial asset is derecognised only where the contractual rights to cash 
flows from the asset expire or the financial asset is transferred and that 
transfer qualifies for derecognition. A financial asset is transferred if the 
contractual rights to receive the cash flows of the asset have been transferred 
or the group retains the contractual rights to receive the cash flows of the 
asset but assumes a contractual obligation to pay the cash flows to one or more 
recipients. A financial asset that is transferred qualifies for derecognition if 
the group transfers substantially all the risks and rewards of ownership of the 
asset, or if the group neither retains nor transfers substantially all the risks 
and rewards of ownership but does transfer control of that asset.  
  
Trade receivables subject to the invoice discounting facility are recognised in 
the balance sheet until they are settled by the customer.  
  
xvi Financial liabilities  
  
Financial liabilities are obligations to pay cash or other financial assets and 
are recognised when the group becomes a party to the contractual provisions of 
the instrument and comprise trade and other payables and bank loans. Financial 
liabilities are recorded initially at fair value, net of direct issue costs and 
are subsequently measured at amortised cost using the effective interest rate 
method.  
  
A financial liability is derecognised only when the obligation is extinguished, 
that is, when the obligation is discharged or cancelled or expires.  
  
xvii Cash and cash equivalents  
  
Cash and cash equivalents comprise cash on hand, on demand deposits and bank 
overdrafts.  
  
xviii Dividends  
  
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.  
  
xix 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. 
 * "Share based payment reserve" represents equity-settled share-based employee 
remuneration until such share options are exercised. 
 * "Merger reserve" represents the equity balance arising on the merger of 
Matchtech Engineering and Matchmaker Personnel. 
 * "Foreign currency reserve" represents the foreign exchange difference arising 
on retranslation of the assets of Matchtech Inc. 
 * "Profit and loss reserve" represents retained profits.  
  
xx 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. Non-monetary items that are measured at historical cost in a foreign 
currency are translated at the exchange rate at the date of the transaction. 
Non-monetary items that are measured at fair value in a foreign currency are 
translated using the exchange rates at the date when the fair value was 
determined.  
  
Any exchange differences arising on the settlement of monetary items or on 
translating monetary items at rates different from those at which they were 
initially recorded are recognised in the profit or loss in the period in which 
they arise.    
  
The assets and liabilities in the financial statements of foreign subsidiaries 
are translated at the rate of exchange ruling at the balance sheet date. Income 
and expenses are translated at the actual rate. The exchange differences arising 
from the retranslation of the opening net investment in subsidiaries are taken 
directly to the "Foreign currency reserve" in equity. On disposal of a foreign 
operation the cumulative translation differences are transferred to the income 
statement as part of the gain or loss on disposal.  
  
As permitted by IFRS 1, the balance on the cumulative translation adjustment on 
retranslation of subsidiaries' net assets has been set to zero at the date of 
transition to IFRS.  
  
xxi Employee Benefit Trust  
  
The assets and liabilities of the Employee Benefit Trust (EBT) have been 
included in the group accounts. Any assets held by the EBT cease to be 
recognised on the group balance sheet when the assets vest unconditionally in 
identified beneficiaries.  
  
The costs of purchasing own shares held by the EBT are shown as a deduction 
against equity. The proceeds from the sale of own shares held increase equity. 
Neither the purchase nor sale of own shares leads to a gain or loss being 
recognised in the group income statement.  
  
xxii  Financial risk management  
  
Details of the Group's financial risk management policies and objectives as they 
relate to financial instruments, comprising discussion of the risks the Group 
faces, including liquidity risk, and its responses to them, are included within 
the Group Finance Director's Review under the heading Group Financial Risk 
Management.  
  
xxiii Significant accounting estimates and judgments  
  
Estimates, assumptions concerning the future and judgments are made in the 
preparation of the financial statements. They affect the application of the 
Group's accounting policies, reported amounts of assets, liabilities, income and 
expenses, and disclosures made. They are assessed on an on-going basis and are 
based on experience and relevant factors, including expectations of future 
events that are believed to be reasonable under the circumstances.  
  
Critical judgements  
  
The judgments made which, in the opinion of the Directors, are critical in 
drawing up the financial statements are as follows:  
  
Invoice discounting facility:  
  
The terms of this arrangement are judged to be such that the risk and rewards of 
ownership of the trade receivables do not pass to the finance provider. As such 
the receivables are not derecognised on draw-down of funds against this 
facility.  
  
Key sources of estimation uncertainty  
  
The key assumptions concerning the future and other key sources of estimation 
uncertainty at the balance sheet date are discussed below. These are included 
for completeness, although it is the Directors' view that none of these have 
significant risk of causing a material adjustment to the carrying amounts of 
assets and liabilities within the next financial year.  
  
Estimated useful lives of property, plant and equipment  
  
The cost of equipment is depreciated on a straight line basis and the cost of 
motor vehicles is depreciated on a reducing balance basis over their useful 
lives. Management estimates the useful lives of property, plant and equipment to 
be within 2 to 4 years. These are common life expectances applied in the 
industry in which the Group operates. Changes in the expected level of usage and 
technological development could impact the economic useful lives and the 
residual values of these assets, therefore future depreciation charges could be 
revised.  
  
Impairment loss of trade and other receivables  
  
The Group's policy for doubtful receivables is based on the on-going evaluation 
of the collectability and aging analysis of the trade and other receivables and 
on management's judgments. Considerable judgment is required in assessing the 
ultimate realisation of these receivables, including the current 
creditworthiness and the past collection history of each debtor. If the 
financial conditions of the Group's debtors were to deteriorate, resulting in an 
impairment of their ability to make payments, additional impairment loss of 
trade and other receivables may be required. The carrying amounts of these 
assets are shown in note 16.  
  
Share based payments  
  
The key assumptions used in estimating the fair values of options granted to 
employees under IFRS 2 are detailed under Note 21.  
  
xxiv Employee benefits  
  
The financial liability arising in relation to outstanding holiday pay is 
recognised on the balance sheet with the expense being charged as a payroll 
cost.  
  
2    TRANSITIONAL ARRANGEMENTS  
  
These are the Group's first annual consolidated financial statements prepared in 
accordance with IFRS.   
  
An explanation of how the transition from UK GAAP to IFRS has affected the 
Group's financial position, financial performance and cash flows is set out 
below. There were no changes to the Company's financial statements resulting 
from the transition therefore no transition statement has been presented for the 
Company.  
  
Reconciliation of equity at 1 August 2006  
  
 
                                   UK GAAP      IAS 12         IAS 17   IAS 19              IFRS         
                                                Income Taxes   Leases   Employee Benefits   as restated  
                                   £'000        £'000          £'000    £'000               £'000        
  EQUITY                                                                                                 
  Called-up equity share capital   221          0              0        0                   221          
  Share premium account            2,009        0              0        0                   2,009        
  Other reserves                   567          0              0        0                   567          
  Retained earnings                4,454        566            (64)     (72)                4,884        
  TOTAL EQUITY                     7,251        566            (64)     (72)                7,681        
  
  
Reconciliation of consolidated balance sheet and equity at 31 July 2007  
  
 
                                   UK GAAP    IAS 1                                  IAS 12         IAS 17   IAS 19              IFRS         
                                              Presentation of financial statements   Income Taxes   Leases   Employee Benefits   as restated  
                                   £'000      £'000                                  £'000          £'000    £'000               £'000        
  NON-CURRENT ASSETS                                                                                                                          
  Intangible assets                133        0                                      0              0        0                   133          
  Property, plant and equipment    1,699      0                                      0              0        0                   1,699        
  Deferred tax assets              0          124                                    405            0        0                   529          
                                                                                                                                              
  CURRENT ASSETS                                                                                                                              
  Trade and other receivables      32,108     (124)                                  0              0        0                   31,984       
  Cash and cash equivalents        836        0                                      0              0        0                   836          
                                              0                                                                                               
  CURRENT LIABILITIES                                                                                                                         
  Trade and other payables         (12,474)   0                                      0              (67)     (76)                (12,617)     
  Tax liability                    (1,068)    0                                      0              0        0                   (1,068)      
  Bank loans and overdrafts        (8,590)    0                                      0              0        0                   (8,590)      
                                                                                                                                              
  NON-CURRENT LIABILITIES                                                                                                                     
  Bank loan                        (2,083)    0                                      0              0        0                   (2,083)      
                                                                                                                                              
  NET ASSETS                       10,561     0                                      405            (67)     (76)                10,823       
                                                                                                                                              
  EQUITY                                                                                                                                      
  Called-up equity share capital   230        0                                      0              0        0                   230          
  Share premium account            2,829      0                                      0              0        0                   2,829        
  Other reserves                   610        0                                      0              0        0                   610          
  Retained earnings                6,892      0                                      405            (67)     (76)                7,154        
  TOTAL EQUITY                     10,561     0                                      405            (67)     (76)                10,823       
  
  
Reconciliation of consolidated income statement for year ended 31 July 2007  
  
 
                                                UK GAAP     IAS 1                                  IAS 12 (1)     IAS 17   IAS 19              IAS 21                   IFRS         
                                                            Presentation of financial statements   Income Taxes   Leases   Employee Benefits   Foreign Exchange Rates   as restated  
                                                £'000       £'000                                  £'000          £'000    £'000               £'000                    £'000        
                                                                                                                                                                                     
  Revenue                                       202,914     (135)                                  0              0        0                   0                        202,779      
  Cost of sales                                 (176,019)   117                                    0              0        0                   0                        (175,902)    
  Gross profit                                  26,895      (18)                                   0              0        0                   0                        26,877       
                                                                                                                                                                                     
  Administration Costs                          (15,627)    10                                     0              (2)      (4)                 0                        (15,623)     
  Cost of admission to AIM                      (572)       0                                      0              0        0                   0                        (572)        
  Profit on sale of discontinued operation      59          (59)                                                  0        0                   0                        0            
                                                                                                   0                                                                                 
  Finance Income                                19          0                                      0              0        0                   0                        19           
  Finance Cost                                  (830)       0                                      0              0        0                   0                        (830)        
  Profit before tax                             9,944       (67)                                   0              (2)      (4)                 0                        9,871        
                                                                                                                                                                                     
  Taxation                                      (2,359)     3                                      (806)          0        0                   0                        (3,162)      
  Profit for the period                         7,585       (64)                                   (806)          (2)      (4)                 0                        6,709        
                                                                                                                                                                                     
  Profit from discontinued operations           0           64                                                    0        0                   3                        67           
                                                                                                   0                                                                                 
  Profit for the period from total operations   7,585       0                                                     (2)      (4)                 3                        6,776        
                                                                                                   (806)                                                                             
                                                                                                                                                                                     
  
  
Notes to the reconciliations  
  
IAS 1 Presentation of financial statements  
  
Under UK GAAP, the deferred tax asset was classified as a current asset. Under 
IFRS the deferred tax asset is classified as a non-current asset.  
  
Under UK GAAP, the income statement provided full disclosure of each line item 
relating to discontinued operations. Under IFRS, only the profit from the 
discontinued operation is disclosed on the income statement.  
  
IAS 12 Income Taxes  
  
Under FRS 19, deferred tax was recognised only on timing differences; in 
contrast IAS 12 "Income Taxes" requires the recognition of deferred tax on all 
temporary differences which specifically impacts the recognition of deferred tax 
in relation to share based payments.  
  
Under FRS 19, the deferred tax asset on the cost of options recognised was 
restricted to the amount calculated by applying the prevailing corporation tax 
rate to the total cost in the year calculated under FRS20. Under IFRS the 
deferred tax asset recognised is the cost of options outstanding based on the 
fair value at the period end date multiplied by the prevailing rate of 
corporation tax. The deferred tax asset has been adjusted in line with IFRS 
requirements.  
  
The tax effect of gains and losses on exercise of share options in the period is 
recognised through the income statement only to the extent that a corresponding 
charge has been recorded as remuneration expense under the requirements of 
IFRS2, Share Based Payments. The excess of the tax effect over the cumulative 
IFRS2 charge is recognised directly in equity.  
  
(1) This adjustment was not reflected in the transition statements presented in 
the interim financial statements for the period to 31 January 2008. The impact 
of this adjustment is an increase of £806,000 to the tax charge and a 
corresponding decrease in profit for the year ended 31 July 2007.  
  
IAS 17 Leases  
  
Under UK GAAP, the rent-free period lease incentive was spread over the period 
from the start of the lease to the first break clause. Under IFRS, the incentive 
is spread over the non-cancellable contracted period of the lease term.   
  
IAS 19 Employee benefits  
  
Under UK GAAP, the company chose not to accrue for outstanding staff holiday pay 
at the balance sheet date. IFRS requires that the accrual be calculated at each 
balance sheet date.  
  
IAS 21 The Effects of Changes in Foreign Exchange Rates  
  
On the disposal of Matchtech Inc the cumulative translation differences are 
transferred to the income statement as part of the gain or loss on disposal. 
Under UK GAAP the difference was shown as a movement in reserves.  
  
Cash Flow statement  
  
Application of IFRS has resulted in reclassification of certain items in the 
cash flow statement as follows:  
  
Profit after taxation has been adjusted as per the reconciliation above. 
(Operating profit was used in the Annual Report for 2007 in the reconciliation 
to net cash inflow from operating activities).  
  
Movements in trade and other receivables and trade and other payables have been 
adjusted to account for the IFRS adjustments to the provisions on the balance 
sheet as shown in the reconciliations of consolidated balance sheets and income 
statements above. These relate to the reclassification of the deferred tax asset 
between trade and other receivables and non current assets and the adjustments 
to the rent free period and staff holiday reserves.  
  
3    SEGMENTAL INFORMATION  
  
The revenue, gross profit and profit before tax are attributable to the one 
principal activity of the group.  
  
 
                                                             2008      2007     
                                                             £'000     £'000    
  A segmental analysis of revenue is given below:                               
  Engineering                                                147,977   129,299  
  Built Environment                                          69,186    40,046   
  Support Services                                           41,667    33,434   
  Continuing operations                                      258,830   202,779  
  Discontinued Operations                                    0         135      
  Total                                                      258,830   202,914  
                                                                                
                                                                                
                                                             2008      2007     
                                                             £'000     £'000    
  A segmental analysis of gross profit is given below:                          
  Engineering                                                16,786    14,833   
  Built Environment                                          9,039     6,000    
  Support Services                                           7,409     6,044    
  Continuing operations                                      33,234    26,877   
  Discontinued Operations                                    0         18       
  Total                                                      33,234    26,895   
                                                                                
                                                                                
                                                             2008      2007     
                                                             £'000     £'000    
  A segmental analysis of operating profit is given below:                      
  Engineering                                                7,562     5,896    
  Built Environment                                          3,977     2,384    
  Support Services                                           2,253     2,402    
  Continuing operations                                      13,792    10,682   
  Discontinued Operations                                    0         8        
  Total                                                      13,792    10,690   
                                                                                
  
  
The Group operates from a single site with assets being centrally held. For this 
reason a segmental analysis of assets and liabilities has not been presented.  
  
The Directors consider that the group does not generate material profits from 
overseas operations and have therefore not presented geographic information.   
  
4    OPERATING PROFIT  
  
 
                                                                                   2008    2007   
                                                                                   £'000   £'000  
  Operating profit is stated after charging:                                                      
  Depreciation                                                                     643     499    
  Loss on disposal of property, plant and equipment                                31      0      
  Auditors' remuneration     - fees payable for the audit of the annual accounts   39      30     
                             - tax services                                        4       11     
                             - other services pursuant to legislation              14      119    
                                                                                                  
  Operating lease costs:     - Plant and machinery                                 12      8      
                             - Land and buildings                                  536     424    
  Net (profit)/loss on foreign currency translation                                (6)     4      
                                                                                                  
  
  
5     DISCONTINUED OPERATIONS  
  
On 31st August 2006 Matchtech Group UK Ltd sold the shares of Matchtech Inc for 
consideration of £105,000, giving a profit on disposal of £59,000. The profit 
from Matchtech Inc has been included under discontinued operations in the 
consolidated income statement. The income statement of Matchtech Inc is set out 
below.  
  
 
                                                 2008    2007   
                                                 £'000   £'000  
                                                                
  Revenue                                        0       135    
  Cost of Sales                                  0       (117)  
  GROSS PROFIT                                   0       18     
                                                                
  Administrative Expenses                        0       (10)   
  OPERATING PROFIT                               0       8      
                                                                
  Finance income                                 0       0      
  Finance cost                                   0       0      
  PROFIT BEFORE TAX                              0       8      
                                                                
  Profit on disposal of discontinued operation   0       59     
  Income tax expense                             0       (3)    
  Foreign exchange gain                          0       3      
  PROFIT FROM DISCONTINUED OPERATIONS            0       67     
                                                                
  
  
6    PARTICULARS OF EMPLOYEES  
  
The average number of staff employed by the group during the financial year 
amounted to:  
  
 
                   2008   2007  
                   No.    No.   
                                
  Selling          215    148   
  Administration   60     66    
  Directors        7      7     
  Total            282    221   
  
  
The aggregate payroll costs of the above were:  
  
 
                          2008     2007     
  
  
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