TIDMMBE TIDMMWB
RNS Number : 5122P
MWB Business Exchange Plc
26 March 2009
FOR IMMEDIATE RELEASE
26 March 2009
MWB BUSINESS EXCHANGE PLC
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
MWB Business Exchange Plc is the UK's second largest provider of flexible office
space and meeting rooms. The organisation currently operates a total of 56
centres focused on Central London and key regional business centres.
HIGHLIGHTS
* Revenue grew 19% to GBP118.7m over the previous 12 month period.
* EBITDA rose by 4% to GBP18.1m compared to year to 31 December 2007.
* Profit before tax grew 5% to GBP14.0m against GBP13.2m for the comparable 12
month period.
* Revenue Per Available Workstation (REVPAW) advanced 3% to GBP8,700 at 31
December 2008 from GBP8,435 at 31 December 2007.
* Revenue Per Occupied Workstation (REVPOW) also up 3% to GBP9,650 at 31 December
2008 compared to GBP9,355 at 31 December 2007.
* Meeting and Conference Room revenue up by 7% to GBP11.3m.
* Occupancy maintained at 90% at 31 December 2008.
* Another new Business Exchange centre successfully opened during the year.
"We have a strong cash-generative business with a sound balance sheet and the
Board remains positive about the medium term future for the Company, both in
terms of profit and shareholder value."
Richard Balfour-Lynn, Chairman, MWB Business Exchange Plc.
+----------------------------------------------+-----------------+
| Contact: | |
+----------------------------------------------+-----------------+
| MWB Business | |
| Exchange Plc | |
+----------------------------------------------+-----------------+
| Richard | Tel: 020 7706 |
| Balfour-Lynn, | 2121 |
| Chairman | |
+----------------------------------------------+-----------------+
| John Spencer, | Tel: 020 7868 |
| Chief Executive | 7268 |
+----------------------------------------------+-----------------+
| Keval Pankhania, | Tel: 020 7868 |
| Finance Director | 7255 |
+----------------------------------------------+-----------------+
| | |
+----------------------------------------------+-----------------+
| Baron Phillips | |
| Associates | |
+----------------------------------------------+-----------------+
| Baron Phillips | Tel: 020 7920 |
| | 3161 |
+----------------------------------------------+-----------------+
| | |
+----------------------------------------------+-----------------+
| KBC Peel Hunt Ltd | Tel: 020 7418 |
| | 8900 |
+----------------------------------------------+-----------------+
| Capel Irwin | |
+----------------------------------------------+-----------------+
| Nicholas Marren | |
+----------------------------------------------+-----------------+
MWB BUSINESS EXCHANGE PLC CHAIRMAN'S REPORT
The momentum generated during 2008, together with the Board's proven strategy,
produced a further 19% advance in revenue during the year and uplifts in all our
key performance indicators. Despite the economic downturn, particularly the
crisis in the banking markets and subsequent government rescue initiatives in
September 2008, demand for our flexible office space remained strong, with
Group-wide new sales enquiries 16% ahead of 2007.
We continued to generate strong cashflow throughout the year with net cash at
the balance sheet date of GBP16.4m and net tangible fixed assets of GBP41.5m.
EBITDA for the 12 months to 31 December 2008 was GBP18.1m, a 4% uplift over the
comparable period despite the difficult business environment, while pre-tax
profits rose by 5% to GBP14.0m against GBP13.2m last time. This has resulted in
earnings per share 8% higher at 20.4p, up from 18.9p last year. Although
performance has been strong in the year under review, the directors are not
proposing a dividend at this point in time preferring to monitor developments in
the economy over the short to medium term.
Despite the pressures endured over the latter part of the year it is pleasing to
report that we maintained occupancy at 90% and generated increases in both
revenue per available workstation (REVPAW) and revenue per occupied workstation
(REVPOW). REVPAW rose by 3% to GBP8,700 from GBP8,435 and REVPOW advanced by a
similar percentage to GBP9,650 from GBP9,355.
Our Meeting and Conference Room offer produced further growth over the period.
This generated a 7% uplift in income to GBP11.3m compared to GBP10.5m during
2007. Whilst the occupancies of our meeting rooms continues to grow there has
been downward pressure on rate in the early part of 2009. Our clients continue
to value our differentiated proposition, particularly the high levels of service
they receive, which has meant our pricing has been less affected than some of
our competitors. It has been pleasing to witness continued growing demand for
this product as businesses have increasingly turned away from residential-based
conferences and meeting room facilities in their efforts to find more cost
effective solutions.
We have approximately 1,500 serviced office clients in our portfolio, spread
across a wide range of sectors, who have an average requirement of 8
workstations and stay for approximately 23 months. We continue to focus on
ensuring they receive the very best support infrastructure from our operational
teams. Our differentiated proposition and the delivery of service excellence
continue to have a positive effect on our renewal rates with over 70% renewing
at least once.
As we stated at the half year, we are not opening any new leased, and therefore
capital intensive, centres in the near future. Instead we have concentrated on
opening centres under Operating and Management Agreements (OMAs), by means of
which cash can be generated with little or no capital expenditure required from
Business Exchange.
As a result, during 2008 only one further centre was opened: St Clement's House,
London EC4, which provides a further 416 workstations together with additional
meeting and conference room facilities, held under an OMA. During the period we
did not renew our lease on the Bracknell Highview centre which was not
profitable. Since year end we are pleased to announce the opening of a further
City Executive Centre at Harrogate, taking our portfolio to 56 locations.
Our growth strategy has been to focus on London and particularly the West End
where historically occupier demand has recovered quickest as the market
recovers. However, in line with our stated strategy, we continue to review all
expansion opportunities with caution.
Demand for our centres in the City, where the effects of the banking crisis have
been the most acute, is robust as the market is becoming much more educated
about the short-term benefits of serviced offices compared to the longer-term
commitment of leased accommodation. This is particularly beneficial in the
current adverse climate to companies downsizing and in need of temporary or
short-term space, as our flexible office proposition continues to play more of
an important role in the commercial property sector. Our proposition is also
extremely attractive to new start-up businesses that either do not want, or are
unable to commit to, a long-term lease.
In terms of demand, 2009 has started more strongly than we anticipated, but
while the level of enquiries has been good there has been continued pressure on
rates and we are seeing sustained demand for flexibility, reflecting the general
uncertainty in the market. In response to this new business environment, we have
continued to rigorously manage our costs and generally lowered our overhead base
during the second half of 2008, the benefits of which are already being felt in
the current year.
We are expanding and improving the services we offer to clients, particularly in
the IT and Telecom areas that are seeing rapid and dramatic change. We are also
reviewing a number of opportunities to leverage the strength of the management
team as we explore other potential income streams.
We have a strong cash-generative business with a sound balance sheet and the
Board remains positive about the medium term future for the Company, both in
terms of profit and shareholder value.
Richard Balfour-Lynn
Chairman
MWB Business Exchange Plc
26 March 2009
KEY FINANCIAL HIGHLIGHTS
The key performance indicators for the business, its trading performance and
balance sheets for the years ended 31 December 2008 and 2007, are summarised
below:-
+----------------------------------------------+----------+---------------+--------------+
| | | Year | Year |
| | | ended | ended |
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------+----------+---------------+--------------+
| Operating statistics | | | |
| | | | |
+----------------------------------------------+----------+---------------+--------------+
| Revenue | GBP'000 | 118,708 | 100,046 |
+----------------------------------------------+----------+---------------+--------------+
| Occupancy at year end | % | 90 | 90 |
+----------------------------------------------+----------+---------------+--------------+
| Annualised revenue per available workstation | GBP | 8,700 | 8,435 |
| (REVPAW) at year end | | | |
+----------------------------------------------+----------+---------------+--------------+
| Annualised revenue per occupied workstation | GBP | 9,650 | 9,355 |
| (REVPOW) at year end | | | |
+----------------------------------------------+----------+---------------+--------------+
| EBITDA | GBP'000 | 18,106 | 17,477 |
+----------------------------------------------+----------+---------------+--------------+
| Leased centres at year end | Number | 38 | 40 |
+----------------------------------------------+----------+---------------+--------------+
| Operating and Management Agreement centres | Number | 17 | 16 |
| at year end | | | |
+----------------------------------------------+----------+---------------+--------------+
| | | | |
+----------------------------------------------+----------+---------------+--------------+
| | | Year | Year |
| | | ended | ended |
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------+----------+---------------+--------------+
| Financial performance | | | |
| | | | |
+----------------------------------------------+----------+---------------+--------------+
| Profit before tax | GBP'000 | 13,954 | 13,242 |
+----------------------------------------------+----------+---------------+--------------+
| Basic earnings per share | Pence | 20.4p | 18.9p |
+----------------------------------------------+----------+---------------+--------------+
| | | | |
+----------------------------------------------+----------+---------------+--------------+
| | | At | At |
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------+----------+---------------+--------------+
| Balance sheet composition | | | |
| | | | |
+----------------------------------------------+----------+---------------+--------------+
| Property, plant and equipment | GBP'000 | 41,535 | 42,197 |
+----------------------------------------------+----------+---------------+--------------+
| Net cash/(debt) | GBP'000 | 16,404 | (5,390) |
+----------------------------------------------+----------+---------------+--------------+
| Equity attributable to shareholders | GBP'000 | 35,623 | 22,945 |
+----------------------------------------------+----------+---------------+--------------+
BUSINESS RISKS AND UNCERTAINTIES
As part of the business review, the Directors comment below on risks surrounding
the business. These risks are not new to the business and reflect the sector in
which the Group operates. This section describes some of the specific risks that
could materially affect the Group's business. The risks outlined below should be
considered in connection with any financial information in the financial
statements. These risks could affect the Group's business, its operating
profits, net assets and capital resources.
Economic, political, social and regulatory changes adversely affecting the
Group's financial performance
The Group is exposed to the risks of global and regional adverse political,
economic and financial market developments (including recession, inflation and
currency fluctuations), that could lower the Group's revenues and operating
results in the future.
The Group's results could also be adversely affected by events that reduce
domestic or international travel, such as actual or threatened acts of terrorism
or war, epidemics, travel-related accidents or industrial action, increased
transportation and fuel costs and natural disasters. Therefore, any of these
events could have a material and adverse effect on the revenues and net
operating profits of the Group which could reduce the Group's net cash available
for distribution to shareholders.
Financial market volatility adversely affecting the Group's financial
performance
Most of the risks faced by the Group at the date of this Report emanate from the
volatility of financial markets, the resultant reduction in supply of credit and
its significant increase in cost. This has been accentuated during the fifteen
months to the date of this Report of 25 March 2009, arising from the rapid
deterioration in financial markets in the UK. For MWB Business Exchange, these
risks fall into a number of categories as set out below, all of which have been
proactively managed by the Board in the past and are even more actively being
managed in the current economic climate.
Liquidity risk affects the Group, in that this could result in it being unable
to meet its financial obligations as they fall due. The Board's approach to
managing liquidity is to ensure, as far as possible, that the Group will always
have sufficient liquidity to meet its liabilities, without incurring
unacceptable losses or risking damage to the Group's reputation and business.
The Group uses detailed cash flow reporting to assist the Board in monitoring
cash flow requirements and optimising cash returns on investments across the
whole Group. The Group typically ensures it has sufficient forecast cash and
available facilities to meet expected cash outflows for a forward period of 2
years.
The Group's variable rate borrowings are exposed to a risk of change in cash
flows due to changes in interest rates. Investments in short-term receivables
and payables are not exposed to interest rate risk. The Group adopts a policy of
managing its exposure to changes in interest rates. This is generally achieved
by the Group entering interest rate swaps or fixed rate contracts with
financially secure counter-parties denominated in Sterling, where considered
appropriate by the Board. The Group holds financial instruments mainly to hedge
financial risk on finance drawn for its operations, or for the temporary
investment of short-term funds, and to manage the interest rate risks arising
from its operations and sources of finance.
The risk to the Group arises principally from the Group's receivables from
customers. The demographics of the Group's customer base, including the general
default risk in the three principal sectors in which the Group operates, have
less of an influence on credit risk. Geographically there is a concentration of
credit risk in London, where the Group has 28 serviced offices. Total revenue in
London was approximately GBP85 million for the year ended 31 December 2008. The
Group has established credit policies for dealing with new customers, their
creditworthiness, payment and delivery terms.
The Group has confirmed dedicated bank facilities of GBP8 million available
until December 2011.
Declines in revenue
Fluctuations in revenues are driven largely by general economic and local market
conditions, as well as by other factors such as health and safety concerns,
which in turn affect levels of business. The local supply of similar businesses
and class to those operated by the Group will also affect a given property's
revenue.
Reliance in part on reputation of brand
The Group operates its core operations under the MWB Business Exchange brand.
If an event occurred that materially damaged the reputation of this brand or
there was a failure to sustain its appeal to our customers, this could have an
adverse impact on the Group's earnings and assets and resultant shareholder
value.
In addition, the value of the brand is influenced by a number of external
factors including changes in consumer preferences and perceptions. The Group is
highly focused on service delivery to ensure that product provided matches
consumer preferences. Controls are in place to ensure adherence to all
legislative aspects affecting the business and experienced executives manage
these important areas of the Group.
Loss of key management personnel
The Group is reliant in part on its team of executives. The Board undertakes
detailed succession-planning reviews and ensures that knowledge of all material
business elements and processes is known by at least two senior executives. The
future success of the Group depends on the ability of its existing management
team, the identification and appointments of suitable additional executives when
required, and on the Group's ability to motivate and retain staff with the
requisite experience. The Executive Directors and the majority of the senior
executives of the Group are incentivised to produce enhanced returns to
shareholders and all key executives of the Group have been with the Group for 5
years or more.
Reliance on key business centres and the London market
Business Exchange's portfolio is deliberately London biased as the Board
considers that this market shows the best demand characteristics for the service
provided by Business Exchange. The 28 London centres operated by the Group
account for 56% of Business Exchange's total workstations and 72% of total
revenue. Dedicated marketing and sales resources are deployed to these key
locations to ensure occupancy and revenues are maintained, and to satisfy levels
of existing and prospective client demand. The Group's buildings are well
maintained and, subject to excessive cost being incurred, are considered by the
Board to be well protected against this type of risk.
Reliance on key clients
MWB Business Exchange has concentrated on increasing the number of SMEs and
smaller corporate clients, thereby preventing a reliance on a small number of
larger clients. However, if Business Exchange were to lose one or more
significant clients which were not quickly replaced at a similar level of
REVPOW, revenue would be impacted. As a business strategy, the number of clients
who occupy more than 15% of any one business centre in the Group has been
significantly reduced in recent years. As a result, there are now only 26
clients who occupy such an amount, and no single client occupies more than 2% of
the entire portfolio.
Changes in the office market
If the conventional property market changes significantly and landlords offer
variations to existing leases such as shorter leases, more flexible lease terms,
giving significant rent reductions, or providing significant rent free periods,
the Group's business centres may become less attractive to both existing and
potential clients.
Changes in long-term growth drivers
There can be no assurance that the factors the Directors expect to drive the
long-term growth in the serviced office market in the future will in fact do so.
For example, the trends towards flexible working styles and increased
outsourcing of office and related services may not develop as expected by the
Directors. Changes in working practices could occur which would be detrimental
to MWB Business Exchange, such as more employees working from home than is
currently envisaged in the Group's Business Plan.
By focusing on developing a critical mass of SME and start-up clients, the
Directors believe that any changes to long-term growth drivers would have a
limited and controlled effect to the existing business.
Changes in competitive landscape
There are relatively few barriers to entry into the serviced office market at
the local and national level because there are not considered to be significant
legislative or regulatory barriers, although availability of finance will be a
restrictive factor for new entrants. Although it is harder to establish a
national network, this may not deter new entrants or existing competitors. In
addition, there is the potential for local operators to establish wider
networks, for example, by forming alliances amongst operators to provide scale.
If the Group is unable to respond adequately to the competitive challenges it
faces, or to maintain a sustainable competitive advantage, it may be unable to
retain its position and it may lose market share. In addition, competitive
markets produce a downward pressure on prices. This could affect the prices
that Business Exchange can charge for workstations that are occupied by clients
in its business centres, which may cause an adverse impact on its revenue and
profitability.
The Directors of MWB Business Exchange continue to leverage their property
expertise and property contacts within the industry, which enables the business
to manage buildings effectively and to acquire buildings in key business
locations. Through its economies of scale, the Group can minimise initial
set-up costs which competitors operating on a smaller scale may be unable to
achieve. These savings are available to management to deliver a more robust
proposition to Business Exchange's client base. The ongoing enhancement of its
service delivery enables the Group to provide a differentiated proposition to
existing and prospective clients, in order to maintain its competitive advantage
against other competitors. Investment in this area is also made by the Group on
a continual basis, thus maintaining and enhancing its competitive edge.
Long-term cost base does not match short-term revenue profile
MWB Business Exchange currently leases the majority of its properties. The
length of the leases and the time at which the Group may exercise any break
option in such leases is nearly always longer than the duration of the period of
occupation by our clients. If revenues decline, the Group may not be able to
reduce significantly its property related cost base throughout the remaining
period of these leases.
Most of the Group's business centres are profitable and the strong profitability
of the network largely negates this impact. Whilst Business Exchange cannot
assign a lease without landlord consent, it could sublet which would
substantially reduce the liability. Operating and Management Agreements are
also used to mitigate the risk from leases as these agreements generate a
revenue stream to the Group regardless of occupancy and market conditions.
Refurbishment and reinstatement costs
The terms of most of the property leases held by the Group require it to ensure
the properties are kept in good repair throughout the lease term and that the
properties are reinstated at the end of the lease to the condition prior to any
alterations carried out to the premises. Full reinstatement costs may be
incurred on termination of such leases causing an adverse impact on Business
Exchange's operations and financial condition.
MWB Business Exchange's buildings are kept in a good state of repair and a
significant annual budget is used to maintain buildings to an agreed standard.
This should ensure that dilapidation costs on exit are minimal, as has been the
case on leases terminated in recent years.
Technology and systems disruption adversely affecting the Group's efficiency
To varying degrees, the Group is reliant upon information technologies and
systems for the running of its businesses, particularly those which are highly
integrated with business processes. Any disruption to those technologies or
systems could adversely affect the efficiency of the business.
The Group provides its clients with access to IT and telecommunications
equipment. Significant developments in the technology which businesses use,
require the Group to make further investments in new technology and this is a
continuing area of cost incurred by the Group.
MWB Business Exchange invests considerable financial resource to ensure that its
IT infrastructure can accommodate new technologies and also to ensure it is
abreast of new ideas.
Changes in tax legislation materially changing the tax paid by the Group
Tax computations of the Group for accounting period ended 31 December 2007 have
been submitted to HMRC. The tax computations for the Group's most recent
accounting period ended 31 December 2008 are not due for submission to HMRC
until December 2009 and are therefore not finalised. Provision has been made in
the financial statements for current and deferred taxation in accordance with
the Group's accounting policy on taxation. Should the amount of tax provided
prove to be insufficient to meet agreed liabilities, further provision may be
necessary, which could reduce the net asset value of the Group.
The Group is exposed to financial risks from increases in tax rates and changes
in the basis of taxation, including corporation tax and VAT. The engagement of
experienced executives within the Group and by its parent undertaking to handle
these matters enhances the protection to the Group in this area of its
activities. The Group and its parent also maintain a regular monitoring of
legislative proposals and undertakes detailed analysis and review with external
(non-audit related) advisors to evaluate and, if possible, mitigate the impact
of changes.
Movements in share price
The trading price of the ordinary shares may be subject to fluctuations in
response to many factors, including stock market fluctuations. This may be
accentuated by market volatility, the level of which may be unusual or
excessive, and which may also be caused by restrictions in the availability of
equity or debt finance. These fluctuations can also be caused by general
economic conditions or changes in political sentiment that may adversely affect
the market price of the Company's ordinary shares, regardless of the Group's
actual performance or conditions in its key markets. Factors which may affect
the Company's share price include, but are not limited to, the Group's expected
and actual performance and the performance of the sectors in which the Group
operates.
Shareholders should be aware that past performance is not necessarily indicative
of likely future performance. Furthermore, the Company's share price may fall in
response to the market's view of the Group's current strategy or if the Group's
operating results and prospects from time to time are below the expectations of
market analysts and investors, or if market sentiment is adversely affected by
third party commentary concerning the Board's or the Group's activities.
The market price of the Company's ordinary shares may not reflect the current or
anticipated value of the Company. In addition, this may fluctuate from day to
day, depending on factors such as supply and demand, market conditions, the
performance of the Group and general market sentiment. The price of ordinary
shares is also subject to normal stock market fluctuations and other risks
inherent in investing in securities.
Loss of Executive Directors
The loss of any of the Executive Directors could harm the Group or cause delay
in the implementation of the Group's strategy due to the loss of input from
those individuals. The future success of the Group is, in part, dependent upon
the ability of its existing management team and on the Group's ability to
motivate and retain staff with the requisite experience.
The Executive Directors are committed to the Company and incentivised through
the Long-Term Incentive Scheme. The involvement of Non-Executive Directors with
many years' experience in the services sector also assists in this respect.
Potential influence of the principal shareholder
MWB Group Holdings Plc ('Holdings'), through its subsidiaries, has maintained
the 68% majority shareholding in MWB Business Exchange Plc that it held at
flotation in December 2005.The fact that Holdings did not realise its historical
investment at flotation is a demonstration of its confidence in the Group's
business. As a majority shareholder owning over 50% of the Group, Holdings
could influence the decisions of the Board. However, its goals are aligned with
other shareholders in terms of requiring growth and return from the business and
the Board continues to operate in an independent manner.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2008
+-------------------------------------------+-------+------------------+----------------+
| | | Year ended | Year ended |
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+-------------------------------------------+-------+------------------+----------------+
| |Notes | GBP'000 | GBP'000 |
+-------------------------------------------+-------+------------------+----------------+
| Revenue | 2 | 118,708 | 100,046 |
| | | | |
+-------------------------------------------+-------+------------------+----------------+
| Cost of sales | | (102,681) | (84,895) |
+-------------------------------------------+-------+------------------+----------------+
| Gross profit | | 16,027 | 15,151 |
| | | | |
+-------------------------------------------+-------+------------------+----------------+
| Administrative expenses | | (2,443) | (1,662) |
+-------------------------------------------+-------+------------------+----------------+
| Results from operating activities | | 13,584 | 13,489 |
| | | | |
+-------------------------------------------+-------+------------------+----------------+
| Finance income | | 974 | 352 |
+-------------------------------------------+-------+------------------+----------------+
| Finance expenses | | (604) | (599) |
+-------------------------------------------+-------+------------------+----------------+
| Profit before taxation | | 13,954 | 13,242 |
| | | | |
+-------------------------------------------+-------+------------------+----------------+
| Taxation | 4 | 79 | (180) |
+-------------------------------------------+-------+------------------+----------------+
| Profit for the year | 13 | 14,033 | 13,062 |
+-------------------------------------------+-------+------------------+----------------+
| Basic earnings per share | 5 | 20.4p | 18.9p |
+-------------------------------------------+-------+------------------+----------------+
| Diluted earnings per share | 5 | 20.4p | 18.8p |
+-------------------------------------------+-------+------------------+----------------+
All amounts relate to continuing operations.The notes form part of these
financial statements.
CONSOLIDATED BALANCE SHEET
at 31 December 2008
+----------------------------------------------+--------+--------------+---------------+
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------+--------+--------------+---------------+
| | Notes | GBP'000 | GBP'000 |
+----------------------------------------------+--------+--------------+---------------+
| Non-current assets | | | |
+----------------------------------------------+--------+--------------+---------------+
| Intangible asset - goodwill | 6 | 7,587 | 7,587 |
+----------------------------------------------+--------+--------------+---------------+
| Property, plant and equipment | 7 | 41,535 | 42,197 |
+----------------------------------------------+--------+--------------+---------------+
| | | 49,122 | 49,784 |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Current assets | | | |
+----------------------------------------------+--------+--------------+---------------+
| Trade and other receivables: | | | |
+----------------------------------------------+--------+--------------+---------------+
| Due after more than one year | 8 | 1,863 | 1,944 |
+----------------------------------------------+--------+--------------+---------------+
| Due within one year | 8 | 18,650 | 15,945 |
+----------------------------------------------+--------+--------------+---------------+
| Cash and cash equivalents | 9 | 23,333 | 4,512 |
+----------------------------------------------+--------+--------------+---------------+
| | | 43,846 | 22,401 |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Total assets | | 92,968 | 72,185 |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Current liabilities | | | |
+----------------------------------------------+--------+--------------+---------------+
| Loans and borrowings | 10 | (6,929) | (491) |
+----------------------------------------------+--------+--------------+---------------+
| Trade and other payables | 11 | (37,273) | (28,217) |
+----------------------------------------------+--------+--------------+---------------+
| Tax payable | | - | (180) |
+----------------------------------------------+--------+--------------+---------------+
| | | (44,202) | (28,888) |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Non-current liabilities | | | |
+----------------------------------------------+--------+--------------+---------------+
| Loans and borrowings | 10 | - | (9,411) |
+----------------------------------------------+--------+--------------+---------------+
| Other payables and accruals | 11 | (13,143) | (10,941) |
+----------------------------------------------+--------+--------------+---------------+
| | | (13,143) | (20,352) |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Total liabilities | | (57,345) | (49,240) |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Net assets | | 35,623 | 22,945 |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Equity | | | |
+----------------------------------------------+--------+--------------+---------------+
| Share capital | 13 | 69 | 69 |
+----------------------------------------------+--------+--------------+---------------+
| Share premium account | 13 | 35,459 | 35,459 |
+----------------------------------------------+--------+--------------+---------------+
| Merger reserve | 13 | 38,831 | 38,831 |
+----------------------------------------------+--------+--------------+---------------+
| Retained earnings | 13 | (38,736) | (51,414) |
+----------------------------------------------+--------+--------------+---------------+
| | | | |
+----------------------------------------------+--------+--------------+---------------+
| Total equity attributable to shareholders of | 13 | 35,623 | 22,945 |
| the Company | | | |
+----------------------------------------------+--------+--------------+---------------+
The notes form part of these financial statements.Approved by the Board of
Directors on 25 March 2009 and signed on its behalf by:-
+-------------------------------------------------------+---------------------------+
| John Spencer | Keval Pankhania |
+-------------------------------------------------------+---------------------------+
| Chief Executive | Finance Director |
+-------------------------------------------------------+---------------------------+
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2008
+-----------------------------------------------------+-------------+----------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+-------------+----------------+
| Profit for the year | 14,033 | 13,062 |
+-----------------------------------------------------+-------------+----------------+
| Adjustments | | |
+-----------------------------------------------------+-------------+----------------+
| Taxation | (79) | 180 |
+-----------------------------------------------------+-------------+----------------+
| Finance income | (974) | (352) |
+-----------------------------------------------------+-------------+----------------+
| Finance expenses | 604 | 599 |
+-----------------------------------------------------+-------------+----------------+
| Items capitalised in prior year expensed in 2008 | 240 | - |
+-----------------------------------------------------+-------------+----------------+
| Depreciation of property, plant and equipment | 4,447 | 3,988 |
+-----------------------------------------------------+-------------+----------------+
| Loss on disposal of fixed assets | 75 | - |
+-----------------------------------------------------+-------------+----------------+
| Equity settled share-based obligations | 272 | 58 |
+-----------------------------------------------------+-------------+----------------+
| Cash settled share-based obligations | 2,100 | - |
+-----------------------------------------------------+-------------+----------------+
| Cash flows from operations before changes in | 20,718 | 17,535 |
| working capital | | |
+-----------------------------------------------------+-------------+----------------+
| Change in trade and other receivables | (2,726) | (391) |
+-----------------------------------------------------+-------------+----------------+
| Change in trade and other payables | 9,152 | 2,316 |
+-----------------------------------------------------+-------------+----------------+
| Cash generated from operations | 27,144 | 19,460 |
+-----------------------------------------------------+-------------+----------------+
| Interest paid | (529) | (523) |
+-----------------------------------------------------+-------------+----------------+
| Net cash from operating activities | 26,615 | 18,937 |
+-----------------------------------------------------+-------------+----------------+
| Cash flows from investing activities | | |
+-----------------------------------------------------+-------------+----------------+
| Interest received | 920 | 352 |
+-----------------------------------------------------+-------------+----------------+
| Purchase of property, plant and equipment | (4,067) | (12,695) |
+-----------------------------------------------------+-------------+----------------+
| Acquisition of subsidiary, net of cash acquired | - | (10,199) |
+-----------------------------------------------------+-------------+----------------+
| Net cash used in investing activities | (3,147) | (22,542) |
+-----------------------------------------------------+-------------+----------------+
| Cash flows from financing activities | | |
+-----------------------------------------------------+-------------+----------------+
| Purchase of own shares, inclusive of costs | (293) | - |
+-----------------------------------------------------+-------------+----------------+
| Proceeds from drawdown of borrowings | 7,000 | 9,411 |
+-----------------------------------------------------+-------------+----------------+
| Borrowings repaid | (10,020) | (633) |
+-----------------------------------------------------+-------------+----------------+
| Dividends paid | (1,334) | (1,237) |
+-----------------------------------------------------+-------------+----------------+
| Net cash (used)/received in financing activities | (4,647) | 7,541 |
+-----------------------------------------------------+-------------+----------------+
| Net increase in cash and cash equivalents | 18,821 | 3,936 |
+-----------------------------------------------------+-------------+----------------+
| Opening cash and cash equivalents | 4,512 | 576 |
+-----------------------------------------------------+-------------+----------------+
| Closing cash and cash equivalents (note 9) | 23,333 | 4,512 |
+-----------------------------------------------------+-------------+----------------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The financial information set out in the preliminary announcement does not
constitute the company's statutory accounts for the years ended 31 December 2008
or 2007. Statutory accounts for 2007 have been delivered to the registrar of
companies, and those for 2008 will be delivered in due course. The auditors have
reported on those accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group
has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that are currently exercisable or convertible
are taken into account.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. Where necessary, accounting policies of subsidiaries are changed
on acquisition to align them with the policies adopted by the Group.
Intra-group balances and transactions and any unrealised income and expenses
arising from intra-group transactions are eliminated in preparing the
consolidated financial statements.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies that have the most
significant effect on the amount recognised in the financial statements are
described in the following notes:-
Note 1 - accounting treatment of OMA revenue recognition
Note 6 - measurement of recoverable amounts of cash-generating units containing
goodwill
Note 12 - measurement of financial instruments
Revenue recognition
Revenue principally comprises licence fees billed to clients for their office
accommodation, rentals charged and service charges invoiced to tenants. Licence
fee income is invoiced in advance, deferred and recognised on provision of the
service. Service income is recognised in the month the service is provided.
Where a rent free period is included in a licence, the rental income foregone is
allocated evenly over the period from the date of its commencement to its
earliest termination date. Management fee income from Operating and Management
Agreements (OMAs) where the company is not owned by the Group is recognised when
the services are provided to the landlord. For OMAs where the company is owned
by the Group, 'revenue' includes management fees and shares of net profit, which
are recognised in the period in which they are earned. Losses arising under OMAs
are recognised to the extent required by the underlying contract.
In all instances, revenue is shown net of discounts and VAT.Revenue is measured
at the fair value of consideration received or receivable.
Lease incentives
Lease incentives, such as rent free periods received or granted, are amortised
on a straight-line basis over the non-cancellable period of the lease.
Leased assets
The Group had no finance leases at 31 December 2008 or at the previous year end.
Assets held under operating leases are not recognised as assets of the Group.
Rentals payable and incentives received under operating leases are recognised in
the Income Statement on a straight-line basis over the non-cancellable period of
the lease.
Retirement benefits
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the Income Statement as incurred.
Dividends
Dividends which have been approved by shareholders at previous Annual General
Meetings are included within liabilities if still unpaid at the balance sheet
date. Interim and final dividends proposed at the balance sheet date that are
subject to approval by shareholders at the Annual General Meeting are not
included as a liability in the current period's financial statements.
Finance income and expense
Finance income comprises interest receivable on funds invested. Interest income
is recognised in the Income Statement as it accrues, using the effective
interest method.
Finance expense comprises interest payable and finance charges on finance leases
that are recognised in the Income Statement. Interest incurred on loans specific
to leasehold improvements in the course of development is capitalised during the
development phase but ceases to be capitalised once the improvement is completed
and ready for occupation. Where such interest is allowable in computing the
taxation liabilities of the Group, this is used to reduce the tax charge in the
Income Statement. All other interest payable is charged to the Income Statement.
Taxation
Income tax expense comprises current and deferred tax. Income tax expense is
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or
loss, and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not reverse
in the foreseeable future. In addition, deferred tax is not recognised for
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Goodwill
Goodwill is carried at cost less any recognised impairment losses which arise
from annual assessment of its carrying value.
Impairment
The carrying amounts of the Group's non-financial assets other than deferred tax
assets are reviewed at each balance sheet date to determine whether there is any
indication of impairment. If any indication exists, the asset's recoverable
amount is estimated. For goodwill and intangible assets that have an indefinite
useful life, the recoverable amount is estimated at each balance sheet date.
The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value, less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a
pre-discount rate that reflects current market assessments of the time value of
money, and the risks specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use which is largely independent of the
cash inflows of other assets or groups of assets (cash-generating unit). For the
purpose of impairment testing, the goodwill acquired in a business combination
is allocated to cash-generating units that are expected to benefit from the
synergies of the combination.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the Income Statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the units and then to reduce the carrying amount of other
assets in the unit on a pro-rata basis.
Property, plant and equipment
Leasehold improvements relating to operating leases, fixtures and equipment are
measured at cost less accumulated depreciation and any impairment losses. Cost
includes expenditure that is directly attributable to the acquisition of an
asset and includes professional fees and, for qualifying assets, capitalised
borrowing costs.
The gain or loss on disposal or derecognition of property, plant and equipment
is determined by comparing the sale proceeds with the carrying amount of the
asset at the date of disposal or derecognition, and is recognised in the Income
Statement.
Depreciation is charged so as to write off the cost of property, plant and
equipment, less residual amounts, using the straight line method, over the
following estimated useful lives:-
+-----------------------------------------+----------------------------------------+
| Operating leasehold improvements: | The shorter of 20 years and the term |
| Machinery and electrical | of the lease |
+-----------------------------------------+----------------------------------------+
| Ceilings, floors and partitions | The shorter of 15 years and the term |
| | of the lease |
+-----------------------------------------+----------------------------------------+
| Front of house | The shorter of 7 years and the term of |
| | the lease |
+-----------------------------------------+----------------------------------------+
| | |
+-----------------------------------------+----------------------------------------+
| Other plant, machinery, fixtures and | 5 to 10 years |
| equipment | |
+-----------------------------------------+----------------------------------------+
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value.
Subsequent to initial recognition, non-derivative financial instruments,
excluding cash and cash equivalents, are measured at amortised cost using the
effective interest method, less any impairment losses.
Cash and cash equivalents comprise cash balances and call or short-term
deposits. Bank overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as a component of cash and cash
equivalents for the purpose of the Cash Flow Statement.
Interest bearing bank loans and overdrafts are initially recorded at fair value.
The net amount of any premium or discount over the nominal value, less issue
costs, is amortised over the life of the instrument using the effective interest
method at a constant cost of financing over its life and charged or credited to
interest payable in the Income Statement.
The Group's activities expose it primarily to the financial risk of changes in
interest rates. The Group uses interest rate swaps, swaptions, caps, floors and
collars to hedge these exposures when considered appropriate. The Group does not
use derivative instruments for speculative purposes.
Ordinary share capital is classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised as
a deduction from equity, net of any tax effects. When share capital recognised
as equity is purchased by the Company, the amount of consideration paid
including directly attributable costs, net of any tax effects, is recognised as
a deduction from total equity.
Share-based payment transactions
The share option programme allows certain employees to acquire shares in the
Company and for such equity settled share-based payments the fair value of
options granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period in which the employees become
unconditionally entitled to the options. The fair value of the options granted
is measured using an option valuation model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest
except where forfeiture is due only to share prices not achieving the threshold
for vesting.
The fair value of the amount payable to employees in respect of the Long-Term
Incentive Scheme, which will be settled in cash, is recognised as an expense
with a corresponding increase in liabilities over the period that the employees
become entitled to payment. The liability is remeasured at each reporting date
and at settlement date. Any changes in the fair value of the liability are
recognised as personnel expense in the Income Statement.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been
issued recently but are not effective for this financial year ended 31 December
2008. Accordingly, they have not been applied in preparing these financial
statements. Their adoption is not expected to have a material affect on the
financial statements. The main standards which may affect future financial
statements of the Group are:-
Amendment to IFRS 2, Share-based payments - vesting conditions and
cancellations, clarifies the definition of vesting conditions, introduces the
concept of non-vesting conditions to be reflected in grant-date fair value and
provides the accounting treatment for non-vesting conditions and cancellations.
The amendments to IFRS 2 will become mandatory for the Group's 2009 consolidated
financial statements, with retrospective application. The Group has not yet
determined the potential effect of this standard, although the Directors do not
consider it will be material to the consolidated financial statements as a
whole.
IFRS 8, Operating segments, which introduces the management approach to segment
reporting. IFRS 8, which will be mandatory for the Group's 2009 financial
statements, will require the disclosure of segment information based on the
internal reports regularly reviewed by the Board in order to assess each
segment's performance and to allocate resources to them. There is no profit
impact from the adoption of IFRS 8.
IFRIC 13, Customer loyalty programmes, addresses the accounting by entities that
operate, or otherwise participate in, customer loyalty programmes under which
the customer can redeem credits for awards such as free or discounted goods or
services. IFRIC 13 becomes mandatory for the Group's 2009 consolidated financial
statements. The Group has not yet determined the potential effect of this
standard, although the Directors do not consider it will be material to the
consolidated financial statements as a whole.
Revised IAS 1, Presentation of financial statements (2007), introduces the term
'total comprehensive income', which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total comprehensive income may be presented in either a
single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an
income statement and a separate statement of comprehensive income. Revised IAS
1, which becomes mandatory for the Group's 2009 consolidated financial
statements, is expected to have a significant impact on the presentation of the
consolidated financial statements. The Directors plan for the Group to provide
total comprehensive income in a single statement of comprehensive income in its
2009 consolidated financial statements.
2.REVENUE
+--------------------------------------------------------+--------------+----------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
+--------------------------------------------------------+--------------+----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+--------------+----------------+
| Licence fees and related income from leased assets | 111,061 | 95,266 |
+--------------------------------------------------------+--------------+----------------+
| Licence fees and related income from Operating and | 7,647 | 4,780 |
| Management Agreements | | |
+--------------------------------------------------------+--------------+----------------+
| Revenue per Income Statement | 118,708 | 100,046 |
+--------------------------------------------------------+--------------+----------------+
All operations are carried out in the UK.
3. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION (EBITDA)
EBITDA of the Group is calculated as follows:-
+--------------------------------------------------------+--------------+----------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
+--------------------------------------------------------+--------------+----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+--------------+----------------+
| Result from operating activities | 13,584 | 13,489 |
+--------------------------------------------------------+--------------+----------------+
| Add depreciation of property, plant and equipment and | 4,522 | 3,988 |
| loss on disposal of fixed assets | | |
+--------------------------------------------------------+--------------+----------------+
| Total EBITDA for the year | 18,106 | 17,477 |
+--------------------------------------------------------+--------------+----------------+
4.TAXATION
The taxation charge for the year in the Income Statement arose as follows:-
+--------------------------------------------------------+--------------+----------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+--------------+----------------+
| Current taxation | | |
+--------------------------------------------------------+--------------+----------------+
| UK corporation tax | | |
+--------------------------------------------------------+--------------+----------------+
| Arising on profit for the year | - | 180 |
+--------------------------------------------------------+--------------+----------------+
| Adjustment in respect of prior years | (180) | - |
+--------------------------------------------------------+--------------+----------------+
| Deferred tax asset in subsidiary at acquisition in | 101 | - |
| 2007 written off | | |
+--------------------------------------------------------+--------------+----------------+
| Total corporation tax (credit)/charge for the year | (79) | 180 |
+--------------------------------------------------------+--------------+----------------+
No deferred tax was required to be recognised in the Income Statement during the
year ended 31 December 2008 or in the previous year ended 31 December 2007. No
tax was recognised directly in equity during the year ended 31 December 2008 or
during the previous year.
Taxation has been reduced from the amount that would arise from applying the
prevailing corporation tax rate to the profit before taxation in the Income
Statement, as follows:-
+---------------------------------------------------------+--------------+--------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------------+--------------+--------------+
| UK corporation tax charge at 28.5% (2007: 30%) for the | 3,977 | 3,973 |
| year on the profit | | |
| before taxation in Income Statement | | |
+---------------------------------------------------------+--------------+--------------+
| Deficit/(Excess) of capital allowances claimed over | 634 | (763) |
| depreciation charged | | |
+---------------------------------------------------------+--------------+--------------+
| Expenditure permanently disallowed for taxation | 285 | - |
| purposes and unrelieved | | |
| tax losses carried forward | | |
+---------------------------------------------------------+--------------+--------------+
| Profits not taxable and capitalised expenditure | (4,896) | (1,247) |
| deductible for taxation | | |
| purposes | | |
+---------------------------------------------------------+--------------+--------------+
| Tax losses brought forward from earlier years utilised | - | (1,783) |
| in current year | | |
+---------------------------------------------------------+--------------+--------------+
| | - | 180 |
+---------------------------------------------------------+--------------+--------------+
| Adjustment in respect of prior years | (79) | - |
+---------------------------------------------------------+--------------+--------------+
| Total corporation tax (credit)/charge for the year | (79) | 180 |
+---------------------------------------------------------+--------------+--------------+
5.EARNINGS PER SHARE
The earnings per share figures are calculated by dividing the profit
attributable to equity shareholders of the Company for the year by the weighted
average number of ordinary shares in issue during the year, as follows:-
+---------------------------------------------------------+--------------+--------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------------+--------------+--------------+
| Profit attributable to equity shareholders of the | 14,033 | 13,062 |
| Company | | |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| | Number | Number |
| | '000 | '000 |
+---------------------------------------------------------+--------------+--------------+
| Weighted average number of ordinary shares (basic) | 68,917 | 69,100 |
+---------------------------------------------------------+--------------+--------------+
| Effect of shares issuable under share option schemes | - | 545 |
| (no effect in 2008) | | |
+---------------------------------------------------------+--------------+--------------+
| Weighted average number of shares (diluted) | 68,917 | 69,645 |
+---------------------------------------------------------+--------------+--------------+
| Earnings per share | 20.4p | 18.9p |
+---------------------------------------------------------+--------------+--------------+
| Diluted earnings per share | 20.4p | 18.8p |
+---------------------------------------------------------+--------------+--------------+
6. INTANGIBLE ASSET - GOODWILL
+---------------------------------------------------------+--------------+--------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
+---------------------------------------------------------+--------------+--------------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------------+--------------+--------------+
| Cost | | |
+---------------------------------------------------------+--------------+--------------+
| At 1 January | 7,587 | - |
+---------------------------------------------------------+--------------+--------------+
| Acquisition in the year | - | 7,587 |
+---------------------------------------------------------+--------------+--------------+
| At 31 December 2008 | 7,587 | 7,587 |
+---------------------------------------------------------+--------------+--------------+
During the previous year (2007) the Group acquired Stanhope Business Centres
Limited, a serviced office business based in London. Goodwill of GBP7.6 million
arose on this acquisition and was recognised in the year ended 31 December 2007.
An impairment review of the Stanhope Business Centres goodwill was undertaken by
the Directors on 31 December 2008. This compared the carrying value of goodwill
with the anticipated recoverable amount of the two businesses centres owned by
Stanhope Business Centres which are the cash-generating unit to which the
goodwill was allocated. The recoverable amount of the cash-generating unit is
based on value in use, which is calculated from cash flow projections for the
lifetimes of the underlying leases using data from Board approved budgets
covering the period to 31 December 2010. The key assumptions for the value in
use calculations were discount rates, licence fee income, client renewals and
occupancy rates. The Directors estimate discount rates using pre-tax rates that
reflect the current market assessments of the time value of money and risks
specific to the cash-generating units, and they consider the appropriate pre-tax
risk adjusted discount rate is 11%. Changes in licence fee income, client
renewals, occupancy rates and direct costs are based on assumed compound growth
rates of 2% to 5%, as well as past experience and expectations of future changes
in the market. These assumptions are reduced from the compound growth of 6%
used at 31 December 2007 due to changes in market conditions in the course of
2008. The Directors concluded from this review that there had been no
impairment to the Stanhope Business Centres goodwill during the year ended 31
December 2008.
7. PROPERTY, PLANT AND EQUIPMENT
+----------------------------------+--------------------+---------------+----------------+
| | Operating | Plant, | Total |
| | leasehold | machinery, | |
| | improvements | fixtures & | |
| | | equipment | |
+----------------------------------+--------------------+---------------+----------------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+--------------------+---------------+----------------+
| Cost | | | |
+----------------------------------+--------------------+---------------+----------------+
| At 1 January 2008 (restated - | 41,836 | 26,453 | 68,289 |
| see below) | | | |
+----------------------------------+--------------------+---------------+----------------+
| Additions | 2,698 | 1,369 | 4,067 |
+----------------------------------+--------------------+---------------+----------------+
| Reclassification | (5,296) | 5,296 | - |
+----------------------------------+--------------------+---------------+----------------+
| Disposals | (276) | (983) | (1,259) |
+----------------------------------+--------------------+---------------+----------------+
| At 31 December 2008 | 38,962 | 32,135 | 71,097 |
+----------------------------------+--------------------+---------------+----------------+
| | | | |
+----------------------------------+--------------------+---------------+----------------+
| Depreciation | | | |
+----------------------------------+--------------------+---------------+----------------+
| At 1 January 2008 (restated - | (7,847) | (18,245) | (26,092) |
| see below) | | | |
+----------------------------------+--------------------+---------------+----------------+
| Charge for the year | (2,794) | (1,653) | (4,447) |
+----------------------------------+--------------------+---------------+----------------+
| Reclassification | 5,064 | (5,064) | - |
+----------------------------------+--------------------+---------------+----------------+
| Disposals | 1 | 976 | 977 |
+----------------------------------+--------------------+---------------+----------------+
| At 31 December 2008 | (5,576) | (23,986) | (29,562) |
+----------------------------------+--------------------+---------------+----------------+
| | | | |
+----------------------------------+--------------------+---------------+----------------+
| Net book value | 33,386 | 8,149 | 41,535 |
| At 31 December 2008 | | | |
+----------------------------------+--------------------+---------------+----------------+
The cost and depreciation figures at 1 January 2008 shown above have been
restated from those at 31 December 2007 by the elimination of GBP35,922,000 of
fully depreciated assets. Disposals includes assets reported in the Cash Flow
Statement under 'Items capitalised in prior years expensed in 2008'.
8. TRADE AND OTHER RECEIVABLES
+----------------------------------------------------+----------------+-----------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------------------------------------------------+----------------+-----------------+
| Due after more than one year | | |
+----------------------------------------------------+----------------+-----------------+
| Other receivables | 1,768 | 1,801 |
+----------------------------------------------------+----------------+-----------------+
| Prepayments and accrued income | 95 | 143 |
+----------------------------------------------------+----------------+-----------------+
| | 1,863 | 1,944 |
+----------------------------------------------------+----------------+-----------------+
| | | |
+----------------------------------------------------+----------------+-----------------+
| Due within one year | | |
+----------------------------------------------------+----------------+-----------------+
| Trade receivables | 1,400 | 1,765 |
+----------------------------------------------------+----------------+-----------------+
| Other receivables | 96 | 1,466 |
+----------------------------------------------------+----------------+-----------------+
| Amounts due from subsidiaries of MWB Group | - | 2 |
| Holdings Plc | | |
| (note 14) | | |
+----------------------------------------------------+----------------+-----------------+
| Prepayments and accrued income | 14,070 | 10,558 |
+----------------------------------------------------+----------------+-----------------+
| Retention balances | 3,084 | 2,154 |
+----------------------------------------------------+----------------+-----------------+
| | 18,650 | 15,945 |
+----------------------------------------------------+----------------+-----------------+
Retention balances predominantly comprise cash funds received from tenants as
security for lease obligations. These are retained in Group bank accounts which
are separate from the main Group facilities and are not generally available for
use in the Group's operations.
9. CASH AND CASH EQUIVALENTS
+----------------------------------------------------+----------------+-----------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+----------------------------------------------------+----------------+-----------------+
| | | |
+----------------------------------------------------+----------------+-----------------+
| Cash and current accounts at bank | 494 | (72) |
+----------------------------------------------------+----------------+-----------------+
| Short-term fixed rate deposits at bank | 22,839 | 4,584 |
+----------------------------------------------------+----------------+-----------------+
| Cash and cash equivalents per Balance Sheet and | 23,333 | 4,512 |
| Cash Flow Statement | | |
+----------------------------------------------------+----------------+-----------------+
10. LOANS AND BORROWINGS
+---------------------------------------------------+----------------+-----------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------------+-----------------+
| Current liabilities | | |
+---------------------------------------------------+----------------+-----------------+
| Secured bank loan borrowings | 6,929 | - |
+---------------------------------------------------+----------------+-----------------+
| Unsecured other loan borrowings | - | 491 |
+---------------------------------------------------+----------------+-----------------+
| | 6,929 | 491 |
+---------------------------------------------------+----------------+-----------------+
| | | |
+---------------------------------------------------+----------------+-----------------+
| Non-current liabilities | | |
+---------------------------------------------------+----------------+-----------------+
| Secured bank loan borrowings | - | 9,411 |
+---------------------------------------------------+----------------+-----------------+
Terms and debt repayment schedule
The Group's loans are denominated in Sterling; no foreign exchange risk was
incurred by the Group on its debt arrangements during the year ended 31 December
2008 or in the previous year. The Group's loans bear floating rates of interest
which are normally for periods ranging from one week to one year, set by
reference to bank base rate. The terms and conditions on the Group's outstanding
loans at 31 December 2008, inclusive of bank margin, were as follows:-
+--------------------------+------------+----------+----------+----------+----------+----------+
| | | | 31 December 2008 | 31 December 2007 |
+--------------------------+------------+----------+---------------------+---------------------+
| | Nominal | Year | Face | Carrying | Face | Carrying |
| | interest | of | value | amount | value | amount |
| | rate | maturity | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+------------+----------+----------+----------+----------+----------+
| Due within one year | | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| Other unsecured loan | 7% | 2008 | - | - | 491 | 491 |
| borrowings | | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| Secured bank loans | Base + | 2009 | 6,971 | 6,929 | - | - |
| | 1.25% | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| | | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| Due after more than one | | | | | | |
| year | | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| Secured bank loans | Base | 2009 | - | - | 9,500 | 9,411 |
| | + 1.00% | | | | | |
+--------------------------+------------+----------+----------+----------+----------+----------+
| | | | 6,971 | 6,929 | 9,991 | 9,902 |
+--------------------------+------------+----------+----------+----------+----------+----------+
The secured borrowings above are secured by charges on substantially all of the
Group's property, plant and equipment. At 31 December 2008 the Group had a
revolving bank loan facility of GBP13.0 million (of which the drawing of GBP7.0
million included in the table above forms part), which is available to the Group
until 31 December 2009. There was no commitment fee payable on the undrawn
portion.
On 25 March 2009, the Group announced that the aforementioned banking facility
provided by Bank of Scotland PLC, had been extended to 31 December 2011 with a
revised total amount available of GBP8.0 million. As a result, since 25 March
2009, no funding facilities of the Group are due to expire in 2009 and this
extension in term confirms the ongoing financial resources of the Group.
Funding financial risk
The Group's funding financial risk centres on the total interest cost incurred
on the Group's short- and medium-term loans, which at 31 December 2008 totalled
GBP7.0 million (2007: GBP10.0 million). The Board has currently chosen to retain
these funds at floating rates due to the relatively low level of current
interest rates by reference to the earnings capability of the Group's business
centres which were acquired with the funds drawn. The Board reviews this policy
on a regular basis to ensure good management of its exposure to interest rate
fluctuations.
11. TRADE AND OTHER PAYABLES
+---------------------------------------------------+----------------+-----------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------------+-----------------+
| Current liabilities | | |
+---------------------------------------------------+----------------+-----------------+
| Trade payables | 1,905 | 1,910 |
+---------------------------------------------------+----------------+-----------------+
| Amounts due to subsidiaries of MWB Group Holdings | 18 | - |
| Plc | | |
| (note 14) | | |
+---------------------------------------------------+----------------+-----------------+
| Client deposits | 14,726 | 13,203 |
+---------------------------------------------------+----------------+-----------------+
| Operating lease incentives | 609 | 1,096 |
+---------------------------------------------------+----------------+-----------------+
| Accruals | 14,688 | 8,007 |
+---------------------------------------------------+----------------+-----------------+
| PAYE, NIC and VAT | 2,267 | 1,904 |
+---------------------------------------------------+----------------+-----------------+
| Deferred income | 3,060 | 2,097 |
+---------------------------------------------------+----------------+-----------------+
| | 37,273 | 28,217 |
+---------------------------------------------------+----------------+-----------------+
| | | |
+---------------------------------------------------+----------------+-----------------+
| Non-current liabilities | | |
+---------------------------------------------------+----------------+-----------------+
| Operating lease incentives | 13,143 | 10,293 |
+---------------------------------------------------+----------------+-----------------+
| Deferred income | - | 648 |
+---------------------------------------------------+----------------+-----------------+
| | 13,143 | 10,941 |
+---------------------------------------------------+----------------+-----------------+
12. FINANCIAL INSTRUMENTS
Overall summary
The Group has exposure to the following principal risks in the operation and
management of its business:-
+-------+----------------------------------------------------------+
| (i) | Liquidity risk; |
+-------+----------------------------------------------------------+
| (ii) | Market risk; |
+-------+----------------------------------------------------------+
| (iii) | Interest rate risk; and |
+-------+----------------------------------------------------------+
| (iv) | Credit risk; |
+-------+----------------------------------------------------------+
Set out below is information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing
risk, and the Group's management of capital. Further quantitative disclosures
are included throughout these consolidated financial statements.
The Directors have overall responsibility for the establishment and oversight of
the Group's risk management framework. The Audit Committee of the Board monitors
the Group's risk management policies and reports to the Board on its activities.
The Group's risk management policies are established to identify and analyse the
risks faced by the Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management policies to provide
protection for the Group's activities are reviewed during the year to reflect
changes in market conditions. The Group, through its management standards and
procedures, aims to develop a disciplined and constructive control environment
in which employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Group's
risk management policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.
This is managed and controlled through a detailed funding policy and capital
management strategy, details of which are set out below.
Funding policy
The Group's treasury policies are designed to ensure that:-
+------+------------------------------------------------------------------------------+
| (i) | Sufficient committed loan facilities are available to support current and |
| | future business requirements. Cash and loan management is a core feature of |
| | the Board's business model and two year rolling cash flow forecasts, updated |
| | on a monthly basis, are controlled by the Executive Directors to manage |
| | these requirements. |
+------+------------------------------------------------------------------------------+
| | |
+------+------------------------------------------------------------------------------+
| (ii) | The interest cost on Group debt is supported as much as possible from |
| | maintainable income flows, with the retirement of debt matched against |
| | forecast inflows over short and medium term programmes. |
+------+------------------------------------------------------------------------------+
Capital management strategy
The Board's policy is to maintain a strong capital base within the Group so as
to maintain investor and creditor protection, and to maintain market confidence
in the Group. This strategy also sustains future development potential of the
Group. The Directors monitor return on capital achieved by the Group, which the
Board has defined as EBITDA divided by total shareholders' equity, and its
comparison to return on value, being EBITDA divided by Group enterprise value.
The Board seeks to maintain a balance between the higher returns that might be
possible with higher levels of borrowings and the advantages and security
afforded by a sound capital position.Neither the Company nor any of its
subsidiaries are subject to externally imposed capital requirements. There were
no material changes in the Group's approach to capital management during the
year ended 31 December 2008 or during the previous year.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due. The Board's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities as they fall due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the
Group's reputation.
The Group uses detailed cash flow reporting, which assists the Board in
monitoring cash flow requirements and optimising cash returns across the whole
Group. The Group typically ensures it has sufficient forecast cash and available
facilities to meet expected cash outflows for a period of two years, including
the servicing of financial obligations. These forecasts include all generally
predictable events within the Group but necessarily exclude the potential impact
of extreme circumstances such as natural disasters that cannot reliably be
modelled and forecast. In addition, the Group maintained available bank
facilities which totalled GBP13 million at 31 December 2008, of which GBP7
million was drawn down, and which were subsequently extended to 31 December 2011
at a level of GBP8 million, as set out in note 10 to the financial statements.
These provide additional liquidity protection for the Group.The contractual
maturity of the Group's financial liabilities is set out below and in note 10 to
the financial statements.
Market risk
Market risk that affects the Group is the risk that changes in market prices,
such as interest rates and equity prices, will affect the Group's income or the
value of its holdings of financial instruments. The objective of the Group's
market risk management is to manage and control market risk exposures within
acceptable parameters, while seeking to optimise returns to shareholders.
Interest rate risk
The Group's variable rate borrowings are exposed to a risk of change in cash
flows due to changes in interest rates. Investments in short-term receivables
and payables are not exposed to interest rate risk.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at 31 December 2008 would have
(decreased)/increased equity and/or the Income Statement by the amounts shown
below. This analysis assumes that all other variables remain constant.
+----------------------------------------------+----------+-----------+--------------+----------+
| | --Income Statement-- | ---------Equity-------- |
+----------------------------------------------+----------------------+-------------------------+
| | 100 bp | 100 bp | 100 bp | 100 bp |
| | Increase | Decrease | Increase | Decrease |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+--------------+----------+
| 31 December 2008 | | | | |
+----------------------------------------------+----------+-----------+--------------+----------+
| Variable rate instruments: Cash flow | (70) | 70 | - | - |
| sensitivity (net) | | | | |
+----------------------------------------------+----------+-----------+--------------+----------+
| | | | | |
+----------------------------------------------+----------+-----------+--------------+----------+
| 31 December 2007 | | | | |
+----------------------------------------------+----------+-----------+--------------+----------+
| Variable rate instruments: Cash flow | (95) | 95 | - | - |
| sensitivity (net) | | | | |
+----------------------------------------------+----------+-----------+--------------+----------+
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The risk to the Group arises principally from the Group's
receivables from customers.
The Group has established credit policies under which each new customer is
analysed individually for creditworthiness before the Group's standard payment
and delivery terms and conditions are offered. The Group's review includes
external ratings when available, and in some cases bank references. Purchase
limits are established for each customer, which represent the maximum open
amount that may be permitted in the day-to-day operations of the Group without
requiring prior approval from a member of middle or senior management. Customers
that fail to meet the Group's benchmark creditworthiness level may still
transact with the Group but on a restricted, generally only prepayment, basis.
Customers that are graded as high risk are placed on a restricted customer list,
and future sales are only made on a restricted basis. Customers are normally
required to deposit two months' licence fee at the commencement of the licence
as security for their receivables due to the Group.
Exposure to credit risk
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. The Board considers there is not a material
risk attached to the customer base of the Group's serviced office business.
This is because the customer base is intrinsically diversified and management
ensures the business has a broad spread of customers at each of the Group's
serviced offices. Geographically there is a concentration of credit risk in
London, where the Group has or operates 28 (2007: 27) serviced offices. Total
revenue in London totalled GBP84.9 million (2007: GBP69.3 million) for the year
ended 31 December 2008.
The carrying amount of financial assets represents their maximum credit
exposure to the Group, which at 31 December 2008 was as follows:-
+----------------------------------------------+-------+-----------------+---------------+
| | | 31 December | 31 December |
| | | 2008 | 2007 |
+----------------------------------------------+-------+-----------------+---------------+
| | Note | GBP'000 | GBP'000 |
+----------------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------------+-------+-----------------+---------------+
| Trade and other receivables | 8 | 20,513 | 17,889 |
+----------------------------------------------+-------+-----------------+---------------+
| Cash and cash equivalents | 9 | 23,333 | 4,512 |
+----------------------------------------------+-------+-----------------+---------------+
| | | 43,846 | 22,401 |
+----------------------------------------------+-------+-----------------+---------------+
The maximum exposure to credit risk at the reporting date is the carrying value
of each class of receivable mentioned above. Credit risk is mitigated by the use
of direct debit, which currently accounts for 45% of all trade receipts, and by
requesting deposits generally representing two months' licence fees from
licencees, which at 31 December 2008 totalled GBP14.7 million (2007: GBP13.2
million), see also note 11.The deposits are utilised, where appropriate, to
offset the charge to the Income Statement that would otherwise occur from
provisions for impairment referred to below.
The ageing of trade receivables at 31 December 2008 was as follows:-
+-------------------------------+--------------+--------------+-------------+-------------+
| | 31 December 2008 | 31 December 2007 |
+-------------------------------+-----------------------------+---------------------------+
| | Gross | Impairment | Gross | Impairment |
+-------------------------------+--------------+--------------+-------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+--------------+--------------+-------------+-------------+
| | | | | |
+-------------------------------+--------------+--------------+-------------+-------------+
| 1-30 days overdue | 1,089 | - | 666 | - |
+-------------------------------+--------------+--------------+-------------+-------------+
| 31-120 days overdue | 745 | (434) | 1,236 | (137) |
+-------------------------------+--------------+--------------+-------------+-------------+
| More than 120 days overdue | 266 | (266) | 677 | (677) |
+-------------------------------+--------------+--------------+-------------+-------------+
| | 2,100 | (700) | 2,579 | (814) |
+-------------------------------+--------------+--------------+-------------+-------------+
Based on historical default rates, the Board believes that no material amount of
impairment allowance is necessary in respect of trade receivables not past due
or past due by up to 60 days; the majority of the balance relates to customers
that have good financial track records with the Group.Factors considered when
evaluating impairment include whether the customer is still trading, the ageing
of unpaid debt, balances held as deposits, statements provided by the customer
and external debt agencies.
The movement on the impairment provision during the year was as follows:-
+--------------------------------------------------+------------------+----------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
+--------------------------------------------------+------------------+----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+------------------+----------------+
| Opening provision | 814 | 486 |
+--------------------------------------------------+------------------+----------------+
| Amounts provided | 893 | 1,101 |
+--------------------------------------------------+------------------+----------------+
| Amounts utilised | (1,007) | (773) |
+--------------------------------------------------+------------------+----------------+
| Closing provision | 700 | 814 |
+--------------------------------------------------+------------------+----------------+
Determination of fair values
The following tables show the carrying amounts and fair values of the Group's
financial instruments at 31 December 2008. The carrying amounts are included in
the Balance Sheet. The fair values of the financial instruments are the amounts
at which the instruments could be exchanged in a current transaction between
willing parties. The fair value of all other financial instruments is not
materially different from the carrying amounts because they incur interest at
variable rates. The fair values of other financial instruments reflect the
replacement values of the financial instruments used to manage the Group's
exposure to adverse interest rate movements.
The carrying amounts and fair values of financial assets and liabilities at 31
December 2008 were as follows:-
+-------------------------------------------+-----------+-----------+-----------+----------+
| | 31 December 2008 | 31 December 2007 |
+-------------------------------------------+-----------------------+----------------------+
| | Carrying | Fair | Carrying | Fair |
| | amount | value | amount | value |
+-------------------------------------------+-----------+-----------+-----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------+-----------+-----------+-----------+----------+
| | | | | |
+-------------------------------------------+-----------+-----------+-----------+----------+
| Trade and other receivables | 20,513 | 20,513 | 17,889 | 17,889 |
+-------------------------------------------+-----------+-----------+-----------+----------+
| Cash and cash equivalents | 23,333 | 23,333 | 4,512 | 4,512 |
+-------------------------------------------+-----------+-----------+-----------+----------+
| Secured bank loans | (6,929) | (6,971) | (9,411) | (9,500) |
+-------------------------------------------+-----------+-----------+-----------+----------+
| Unsecured loans | - | - | (491) | (491) |
+-------------------------------------------+-----------+-----------+-----------+----------+
| Trade and other payables excluding | (33,604) | (33,604) | (25,024) | (25,024) |
| operating | | | | |
| lease incentives and deferred income | | | | |
+-------------------------------------------+-----------+-----------+-----------+----------+
| | 3,313 | 3,271 | (12,525) | (12,614) |
+-------------------------------------------+-----------+-----------+-----------+----------+
Liquidity risk and hedge profile
The maturity profile of the Group's financial liabilities, including interest
payments, is set out below:-
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| | -----------Contractual cash | | |
| | flows--------------- | | |
+----------------------------+--------------------------------------------------------+----------+------------+
| 31 December 2008 | Within one year | Between one and two | Between two | | Total | Carrying |
| | or on demand | years | and five | | GBP'000 | amount |
| | GBP'000 | GBP'000 | years | | | GBP'000 |
| | | | GBP'000 | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| Non-derivative financial | | | | | | |
| liabilities | | | | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| Secured bank loans | 6,971 | - | - | | 6,971 | 6,929 |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| Trade and other payables | | | | | | |
| excluding | | | | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| operating lease incentives | | | | | | |
| and | | | | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| deferred income | 33,604 | | | | 33,604 | 33,604 |
| | | - | - | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
| | 40,575 | | - | | 40,575 | 40,533 |
| | | - | | | | |
+----------------------------+-----------------+---------------------+-------------+--+----------+------------+
+----------------------------+------------+-------------+-------------+--+----------+------------+
| | -----------Contractual cash | | |
| | flows--------------- | | |
+----------------------------+-------------------------------------------+----------+------------+
| 31 December 2007 | Within one | Between one | Between two | | Total | Carrying |
| | year or on | and two | and five | | GBP'000 | amount |
| | demand | years | years | | | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | | | |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| Non-derivative financial | | | | | | |
| liabilities | | | | | | |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| Secured bank loans | - | 9,500 | - | | 9,500 | 9,411 |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| Other loan borrowings | 491 | - | - | | 491 | 491 |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| Trade and other payables | | | | | | |
| excluding | | | | | | |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| operating lease incentives | | | | | | |
| and | | | | | | |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| deferred income | 25,024 | | | | 25,024 | 25,024 |
| | | - | - | | | |
+----------------------------+------------+-------------+-------------+--+----------+------------+
| | 25,515 | 9,500 | - | | 35,015 | 34,926 |
+----------------------------+------------+-------------+-------------+--+----------+------------+
13.CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the Company
+-------------------------------------+---------+----------+---------+----------+----------+
| Year to 31 December 2008 | Share | Share | Merger | Retained | Total |
| | Capital | Premium | Reserve | Earnings | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+-------------------------------------+---------+----------+---------+----------+----------+
| At 1 January 2008 | 69 | 35,459 | 38,831 | (51,414) | 22,945 |
+-------------------------------------+---------+----------+---------+----------+----------+
| Profit for the year | - | - | - | 14,033 | 14,033 |
+-------------------------------------+---------+----------+---------+----------+----------+
| Dividends paid to equity | - | - | - | (1,334) | (1,334) |
| shareholders | | | | | |
+-------------------------------------+---------+----------+---------+----------+----------+
| Shares purchased and cancelled | - | - | - | (293) | (293) |
+-------------------------------------+---------+----------+---------+----------+----------+
| Write back of share option cost | - | - | - | | 272 |
| through equity | | | | 272 | |
+-------------------------------------+---------+----------+---------+----------+----------+
| At 31 December 2008 | 69 | 35,459 | 38,831 | (38,736) | 35,623 |
+-------------------------------------+---------+----------+---------+----------+----------+
As noted above, in the year to 31 December 2008, 300,000 shares were bought in
the market and cancelled for a total cost of GBP293,000, at an average price of
97.8p per share, inclusive of fees and stamp duty. The nominal value of the
shares purchased was GBP300, for which amount a capital redemption reserve has
been established. As both of these amounts are less than GBP1,000, neither is
disclosed in the table above.
+-------------------------------------+---------+----------+---------+-----------+----------+
| Year to 31 December 2007 | Share | Share | Merger | Retained | Total |
| | Capital | Premium | Reserve | Earnings | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+-------------------------------------+---------+----------+---------+-----------+----------+
| At 1 January 2007 | 69 | 35,459 | 38,831 | (63,297) | 11,062 |
+-------------------------------------+---------+----------+---------+-----------+----------+
| Profit for the year | - | - | - | 13,062 | 13,062 |
+-------------------------------------+---------+----------+---------+-----------+----------+
| Dividends paid to equity | - | - | - | (1,237) | (1,237) |
| shareholders | | | | | |
+-------------------------------------+---------+----------+---------+-----------+----------+
| Write back of share option cost | - | - | - | 58 | 58 |
| through equity | | | | | |
+-------------------------------------+---------+----------+---------+-----------+----------+
| At 31 December 2007 | 69 | 35,459 | 38,831 | (51,414) | 22,945 |
+-------------------------------------+---------+----------+---------+-----------+----------+
The merger reserve was established on the restructuring of the Group immediately
prior to the Company's flotation in December 2005. It reflects the difference
between the previously reported reserves and the restated amounts at their
valuation at the date of the restructuring.
14. RELATED PARTY BALANCES AND TRANSACTIONS
+-----------------------------------------------------+------------------+--------------+
| | 31 December | 31 December |
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+------------------+--------------+
| Current assets | | |
+-----------------------------------------------------+------------------+--------------+
| Trade and other receivables (note 8) | | |
+-----------------------------------------------------+------------------+--------------+
| Amounts owed by subsidiaries of MWB Group | - | 2 |
| Holdings Plc | | |
+-----------------------------------------------------+------------------+--------------+
| | | |
+-----------------------------------------------------+------------------+--------------+
| Current liabilities | | |
+-----------------------------------------------------+------------------+--------------+
| Trade and other payables (note 11) | | |
+-----------------------------------------------------+------------------+--------------+
| Amounts owed to subsidiaries of MWB Group Holdings | 18 | - |
| Plc | | |
+-----------------------------------------------------+------------------+--------------+
During the year ended 31 December 2008, the Group incurred GBP1.8 million of
charges (2007: GBP1.7 million) from MWB Group Holdings Plc ('Holdings') in
respect of salary and accommodation costs in accordance with the services
agreement between the Company and Holdings dated 16 December 2005. The costs of
such services are charged to the Company proportionately to the relevant service
provided. This agreement also provides for the Group to use office space at its
head office under licence from Holdings. All costs charged to the Group in
accordance with this agreement are recharged at cost and are calculated on an
arm's length basis.
15.ACCOUNTS AND FINANCIAL INFORMATION
This announcement of the audited results for MWB Business Exchange Plc for the
year ended 31 December 2008 and the unaudited Half-Yearly Financial Report for
the six months ended 30 June 2008 are available from the Company Secretary,
Filex Services Limited, at the Company's registered office of 179 Great Portland
Street, London W1W 5LS. The Annual Report and Financial Statements for the year
ended 31 December 2008 will be posted to shareholders in April 2009 and will
also be available from the Company Secretary.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the annual report, the Report of the
Directors and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial
statements for each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs) as adopted
by the EU and applicable laws and have elected to prepare the Parent Company
financial statements in accordance with UK accounting standards and applicable
law (UK Generally Accepted Accounting Practice or UK GAAP).
The Group financial statements are required by law and IFRSs as adopted by the
EU to present fairly the financial position and the performance of the Group;
the Companies Act 1985 provides in relation to such financial statements that
references in the relevant part of that Act to financial statements giving a
true and fair view are references to their achieving a fair presentation.
The Parent Company financial statements are required by law to give a true and
fair view of the state of affairs of the Parent Company.
In preparing each of the Group and Parent Company financial statements, the
Directors are required to:-
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* for the Group financial statements, state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
* for the Parent Company financial statements, state whether applicable UK
accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the Parent Company will continue in
business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the
Companies Act 1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
We, the Directors of the Company, confirm that to the best of our knowledge:-
+------+------------------------------------------------------------------------------+
| A) | the financial statements of the Group have been prepared in accordance with |
| | IFRSs as adopted by the EU, and for the Company under UK GAAP, in accordance |
| | with applicable United Kingdom law and give a true and fair view of the |
| | assets, liabilities, financial position and profit of the Group; and |
+------+------------------------------------------------------------------------------+
| B) | the Directors' Report includes a fair review of the development and |
| | performance of the business and the position of the Group, together with a |
| | description of the principal risks and uncertainties that face the Group. |
+------+------------------------------------------------------------------------------+
By order of the Board
+-------------------------------------------------------+---------------------------+
| John Spencer | Keval Pankhania |
+-------------------------------------------------------+---------------------------+
| Chief Executive | Finance Director |
+-------------------------------------------------------+---------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JFMTTMMITMML
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