Annual Report and Accounts 2007
Judges Capital plc
Company Information
Directors
The Hon. Alexander Robert Hambro (Non-Executive Chairman)
David Elie Cicurel (Chief Executive)
Ralph Leslie Cohen (Finance Director)
Ralph Julian Elman (Non-Executive Director)
Glynn Carl Reece (Non-Executive Director)
Company Secretary
Ralph Leslie Cohen
Registered Office
Unit 19, Charlwoods Road
East Grinstead
West Sussex RH19 2HL
Registrar
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire HD8 0LA
Nominated Adviser
Shore Capital and Corporate Ltd
Bond Street House
14 Clifford Street
London W1S 4JU
Stockbroker
Shore Capital Stockbrokers Ltd
Bond Street House
14 Clifford Street
London W1S 4JU
Auditor
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
8 West Walk
Leicester LE1 7NH
Principal Bankers
Bank of Scotland
55 Temple Row
Birmingham B2 5LS
Solicitors
Faegre & Benson LLP
7 Pilgrim Street
London EC4V 6LB
Registered in England and Wales, Company No. 4597315
Contents
Consolidated financial statements
Chairman’s statement
Directors’ report
Report of the independent auditor
Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Page
1 – 2
3 – 6
7
8
9
10
11
Notes to the consolidated financial statements
12 – 31
Parent company financial statements
Report of the independent auditor
Parent company balance sheet
32
33
Notes to the parent company financial statements
34 – 36
Notice of Annual General Meeting
Form of Proxy
Chairman’s Statement
I am delighted to report that your Company achieved record results for
2007. Revenue advanced from £5.2 million in 2006 to £6.2 million and
generated profit of £836,000 before tax, gains on the disposal of
securities and amortisation, compared with £516,000 in the previous
year. Earnings per share, similarly adjusted, rose from 8.6p to 12.9p
(fully diluted) and from 9.9p to 15.0p (basic).
After gains and amortisation, pre tax profit totalled £858,000
(2006: £281,000). This equates to fully diluted earnings per share of
13.3p (2006: 4.8p) and basic earnings per share of 15.5p (2006: 5.4p).
IFRS
With effect from 1 January 2007, the company is required to present its
consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS). The financial information in
these financial statements has been prepared in accordance with
accounting policies which are based on IFRS and comparatives
have been restated accordingly.
Constitution of the Group
All Group subsidiaries were owned throughout the financial
year to 31 December 2007. The accounts for the previous year
included a 10-month contribution from UHV Design and a
four-month contribution from Aitchee.
Trading
All our operations traded strongly during the year and
achieved increases in sales and EBIT. Activity proved
particularly buoyant towards the end of the year, a
momentum that enabled the Group to enter 2008 with
an order book almost double the level in hand at the
onset of 2007.
1
Despite the relative strength of sterling, the robust performance of the
Group in terms of sales, margins and orders is testament to our acquired
companies’ solid niche positioning in their respective world markets.
The proposed dividend will be payable on Friday 4 July 2008 to
shareholders on the register on 6 June 2008 and the shares will go ex-
dividend on 4 June 2008.
Financial Performance
Favourable trading contributed to a satisfactory increase in our year-end
cash balances which stood at £910,000 (2006: £824,000) and to the
reduction in net debt from £2.4 million to £2.0 million. A significant
proportion of our debt is denominated in foreign currency to alleviate the
impact of exchange fluctuations on export activity.
During the year our last significant investment in securities was sold: an
offer for Poole Investments became unconditional in August, a
development which resulted in cash proceeds of £342,000 and a pre-tax
gain of £142,000.
Current trading and prospects
Benefiting from a strong order book, the Group experienced a favourable
start to 2008 and, in the opinion of your Directors, enjoys good visibility
for the first half of the year. Your Directors are optimistic about the
prospects for 2008, always bearing in mind the uncertain macro-
economic climate currently pertaining in global markets and the high
proportion of the Group’s turnover which is derived from overseas.
Since the year-end, the Company has contracted to purchase a freehold
property that adjoins the FTT factory for £490,000. This will enable
Aitchee to be relocated into larger, more suitable premises and will serve
to enhance the ongoing cooperation between Aitchee and FTT.
Dividends
Your Board is pleased to recommend a final dividend of 2.2p (2006: 2p)
which, subject to approval at the forthcoming Annual General Meeting on
22 May 2008, would make a total distribution of 3.3p for the year (2006:
3p). The level of cover by adjusted basic earnings per share has risen
from 3 times to 4 times, notwithstanding the proposed 10 per cent
increase.
Your Board is progressing with the ‘whitewash’ resolution referred to in
last January’s trading statement, in order to enable the Company to
purchase its own shares without an obligation being incurred by certain
shareholders to make an offer for the entire share capital. Such a proposal
to shareholders forms part of the Board’s efforts to improve the liquidity
of the Company’s shares.
Consolidation has been the hallmark of 2007 and, in the wake of an
excellent trading performance reflected in record sales and profits, your
Board is conscious of the benefits to be derived from a significant
expansion in the scale of the Group. To this end your Directors are
working hard to convert an encouraging pipeline of prospective deals into
tangible and value enhancing transactions.
I would like to take this opportunity to convey the Board’s thanks and
appreciation to all our employees for their invaluable contributions to a
first class trading result.
Alex Hambro
Chairman
Date: 27 March 2008
2
Directors’ Report
The directors present their report and financial statements for the year
ended 31 December 2007.
Principal activities
The company is the parent of a trading group involved in the design
and manufacture of scientific instruments.
Business review
The company’s business model calls for a steady increase in the scope
of its operations, achieved through acquisitions of companies operating
in its chosen fields of activity and through the ongoing performance of
its established subsidiaries. In addition to the dilution of head office
costs that results from acquisitions, the company closely monitors the
return it derives on the capital invested in its subsidiaries. The annual
rate of return on total invested capital (“ROTIC”) is computed monthly,
both overall and in respect of each subsidiary, by comparing
attributable earnings before interest, tax and amortisation (“EBITA”) with
the investment in fixed and net current assets (excluding surplus cash).
In 2007, the overall return computed in this manner amounted to
24.6%, before taking account of parent company costs (2006: 21.5%).
• Acquisitions: although no acquisitions were made during 2007,
the directors actively investigated a number of opportunities that
came to the attention of the directors and there is a pipeline of
interesting prospects that remain under investigation. It is regarded
as paramount that acquisitions are completed only when the directors
are satisfied that the target business has sound long-term strength.
• Ongoing performance: the directors regard the trend of
adjusted diluted earnings per share and the company’s ability to pay
3
dividends to its shareholders as key indicators of overall group
performance. These indicators are monitored closely and both
showed strong gains in the year, with the former rising from 8.6p per
share in 2006 to 12.9p in 2007. Dividend cover remained constant
over the 2 years at a factor of 5, despite the dividend in 2006 being
only the maiden interim payment of 1p per share, compared with
payments totalling 3.1p per share in 2007.
In addition to these trends and the above "ROTIC" measure for the
rate of return on investments, the company measures the
performance of its individual subsidiaries in a number of ways:
Sales trends:
(a) sales at Fire Testing Technology (“FTT”) rose by 5% in 2007
compared with 2006. Order intake rose more significantly in the
closing stages of 2007, with the result that the order backlog at
the end of the year was £900,000 compared with less than
£400,000 at 31 December 2006. Sales at Aitchee Engineering
Limited, though slightly below budget, remained at a high level
compared with recent years’ averages;
(b) sales at PE.fiberoptics (“PFO”) rose by almost one third in 2007
as the company continued to establish a strong position in its
slowly re-emerging market. The year-end order backlog was 80%
up on the previous year-end;
(c) sales at UHV Design (“UHV”) were 12% above the annualised
rate for the previous accounting period, building further on the
42% gain of the previous year. The year-end order backlog was
38% up on the previous year-end.
Earnings:
Rising sales on a relatively fixed cost base enabled the group to post
a 16.9% EBITA margin (excluding the gain arising on the disposal of
available-for-sale investments), compared with 13.7% on a
comparable basis in 2006.
Cash generation and management:
Consolidated gross cash flow from operating activities amounted to
£859,000 (2006: £614,000) after a net investment in working capital
of £283,000 (2006: £142,000). The proceeds of £342,000 received
on the sale of the group’s last significant available-for-sale
investment added materially to the group’s cash flow.
• Commercial risks and uncertainties:
An important element of the group’s business model is development
through acquisition; the group is exposed to the risk of an
insufficient flow of target companies of requisite quality. As regards
the group’s existing businesses, activities are concentrated in niche
markets, serving a worldwide customer base. The principal drivers of
the individual businesses within the group are as follows:
• FTT is the world’s major producer of instruments designed to
measure the reaction of materials to fire; the long-term growth of
the business is supported by the development of related safety
regulations internationally and by the globalisation of trade. The
activity is supported through the in-house production of
engineering parts following the acquisition of Aitchee
Engineering Associates in 2006.
• PFO is a significant provider to the telecoms industry of
equipment to test the properties of fibre optic and fibre optic
networks. Trading is strongly influenced by the cyclical nature of
this sector.
• UHV designs and manufactures instruments to create motion,
heating and cooling within ultra high vacuum chambers. It is
benefiting from the buoyancy of the high-tech markets which it
serves and their requirements for ultra high vacuum products.
The directors consider that there is scope to improve the
company’s output and market share through technical innovation
and increased production capability.
Across all the group’s activities lies the exposure to human resource
shortages. This reflects the small niche-serving nature of the group’s
businesses and the impracticality at this stage of the group’s
development of providing significant back-up support in respect of
key roles.
• Financial risk management objectives and policies:
the group utilises financial instruments, other than derivatives,
comprising borrowings, cash and cash equivalents and various other
items such as trade receivables and payables that arise directly from
its operations. The main purpose of these financial instruments is to
raise finance for the group's operations. The main risks arising from
the group’s financial instruments relate to interest rates, liquidity,
credit and foreign currency exposure. The directors review and agree
policies for managing each of these risks, which are described and
evaluated in more detail in note 31 to the consolidated financial
statements and which are summarised below. The policies have
remained unchanged from previous periods.
Interest rate risk
The group finances its operations through a mixture of bank and hire
purchase borrowings (predominantly at floating rates), equity and
retained profits. With net debt of £2 million at 31 December 2007,
exposure to interest rate fluctuations is not considered to be a major
threat to the group.
Liquidity risk
The group seeks to manage liquidity risk by ensuring sufficient funds
are available to meet foreseeable needs and to invest cash assets
safely and profitably. Primarily this is achieved through loans
arranged at group level. Short term flexibility is achieved through the
availability of overdraft facilities and through the significant cash
balances available since the group adopted its new strategy as an
industrial enterprise in 2005.
Credit risk
The group reviews the credit risk relating to its customers by
ensuring wherever possible that it deals with long established trading
partners, agents and government / university backed bodies, where
the risk of default is considered low. Where considered appropriate,
the group insists on up-front payment and requires letters of credit
facilities to be provided.
Currency risk
With exports representing a significant proportion of its sales, the
main risk area to which the group is exposed is that of foreign
currencies (principally US$ and Euros). The group adopts a strategy
to hedge against this risk in whole or in part by maintaining a
proportion of its bank loans in these currencies. The directors review
the value of this hedge on a regular basis. There remains,
nevertheless, an ongoing threat to the group’s competitive position in
international markets from any sustained period of Sterling strength.
Results and dividends
The results for the financial year to 31 December 2007 are set out in
the income statement. The company paid an interim dividend of 1.1p
per Ordinary share on 2 November 2007. At the forthcoming Annual
General Meeting, the directors will recommend payment of a final
dividend for the year of 2.2p per Ordinary share to be paid on
Friday 4 July 2008 to shareholders on the register on Friday 6 June
2008. The shares will go ex-dividend on Wednesday 4 June 2008.
Directors
The following directors have held office during the year:
Hon AR Hambro1 - non-executive
Mr DE Cicurel
Mr RL Cohen
Mr RJ Elman1 - non-executive
Mr GC Reece1 - non-executive
1Member of the audit and remuneration committees
4
Directors’ interests
The directors’ interests in the Ordinary shares of the company were as
stated below:
Ordinary of 5p each
Hon AR Hambro
Mr DE Cicurel *
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
31 December 2007
Options
Shares
1 January 2007
Shares
Options
25,000
526,356
10,000
45,791
3,000
-
-
47,000
-
-
25,000
526,356
-
20,000
-
-
-
37,000
-
-
* Held through David Cicurel Securities Limited, except for 40 shares
held directly.
Details of share options are set out in note 26 to the financial statements.
In addition to the above holdings of Ordinary shares, the directors had
the following interests in the Convertible Redeemable share capital of
the company:
Convertible Redeemable of 1p each (quarter-paid)
31 December 2007
Shares
1 January 2007
Shares
Hon AR Hambro
Mr DE Cicurel *
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
416,667
4,166,667
-
208,333
208,333
416,667
4,166,667
-
208,333
208,333
* Held through David Cicurel Securities Limited.
5
The conversion terms of the Convertible Redeemable shares are
detailed in note 27 to the financial statements. Following a full
conversion of the Convertible Redeemable shares to Ordinary shares,
the directors’ interests in the enlarged share capital of the company as
at 31 December 2007 would have been as follows:
Hon AR Hambro
Mr DE Cicurel
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
Ordinary Shares
65,465
931,001
10,000
66,023
23,232
Payment policy
The group’s policy is to agree terms and conditions with suppliers
before business takes place and to pay agreed invoices in accordance
with the terms of payment. Trade creditor days of the company at the
end of the year represented 20 days (2006: 34 days).
Directors’ responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have elected to prepare
the parent company financial statements in accordance with United
Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) and the consolidated financial statements in
accordance with International Financial Reporting Standards as adopted
by the European Union. The financial statements are required by law to
give a true and fair view of the state of affairs of the group and parent
company and of the profit or loss of the group and parent company for
that period. In preparing these 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;
• state whether applicable UK Accounting Standards and International
Financial Reporting Standards as adopted by the European Union
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 group and parent company and enable them to ensure that the
financial statements comply with the Companies Act 1985. They are
also responsible for safeguarding the assets of both the group and
parent company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
In so far as the directors are aware:
• there is no relevant audit information of which the company's auditor
is unaware; and
• the directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the company's auditor is aware of that information.
head office and premises of its principal subsidiary, FTT. The activities
of FTT’s subsidiary, Aitchee Engineering Limited, will be relocated into
Unit 18.
Auditor
Grant Thornton UK LLP offer themselves for reappointment as auditor in
accordance with section 385 of the Companies Act 1985.
On behalf of the board
RL Cohen
Director and Company Secretary
27 March 2008
The maintenance and integrity of the corporate and financial information
included on the Judges Capital website is the responsibility of the
directors: the work carried out by the auditor does not involve
consideration of these matters and, accordingly, the auditor accepts no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in
other jurisdictions.
Corporate governance
The directors have established an audit committee and a remuneration
committee with formally delegated duties and responsibilities. The
members of both committees are the non-executive directors.
The audit committee determines the terms of engagement of the
company’s auditor and, in consultation with the company’s auditor, the
scope of the audit. The audit committee has unrestricted access to the
company’s auditor. The remuneration committee reviews the scale and
structure of the executive directors’ remuneration and the terms of their
service contracts. The remuneration of the non-executive directors is
determined by the board as a whole. No directors participate in setting
their own pay.
Post balance sheet event
On 20 March 2008, the parent company exchanged contracts for the
purchase for £490,000 of a freehold property at Unit 18, Charlwoods
Road, East Grinstead, West Sussex. This site comprises a factory unit
with ancillary offices and is located adjacent to the parent company’s
6
Report of the Independent Auditor
We have audited the consolidated financial statements of Judges Capital
plc for the year ended 31 December 2007 which comprise the
consolidated income statement, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash flow
statement and notes 1 to 35. These consolidated financial statements
have been prepared under the accounting policies set out therein.
We report to you our opinion as to whether the consolidated financial
statements give a true and fair view and whether the consolidated
financial statements have been properly prepared in accordance with the
Companies Act 1985. We also report to you whether in our opinion the
information given in the directors’ report is consistent with the
consolidated financial statements.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the
consolidated financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of
information in the consolidated financial statements.
We have reported separately on the parent company financial statements
of Judges Capital plc for the year ended 31 December 2007.
This report is made solely to the company’s members, as a body, in
accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the
consolidated financial statements in accordance with United Kingdom
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union are set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the consolidated financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
In addition we report to you if, in our opinion, we have not received all
the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration and
other transactions is not disclosed.
Opinion
In our opinion:
We read other information contained in the Annual Report and consider
whether it is consistent with the audited consolidated financial
statements. The other information comprises only the directors’ report
and the Chairman's statement. We consider the implications for our
report if we become aware of any apparent misstatements or material
inconsistencies with the consolidated financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the consolidated financial statements. It
also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the consolidated
financial statements, and of whether the accounting policies are
appropriate to the group's circumstances, consistently applied and
adequately disclosed.
• the consolidated financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the group's affairs as at 31 December 2007 and of its profit
for the year then ended;
• the consolidated financial statements have been properly prepared in
accordance with the Companies Act 1985; and
• the information given in the directors’ report is consistent with the
consolidated financial statements.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
Leicester
27 March 2008
7
Consolidated Income Statement
Revenue
Operating costs
Operating profit
Profit/(loss) on disposal of available-for-sale investments
Interest receivable
Interest payable
Profit before tax
Taxation
Profit for the year
Attributable to:
Equity holders of the parent company
Minority interest
Earnings per share – total and continuing
Basic
Diluted
The accompanying notes form an integral part of these consolidated financial statements.
Notes
7
8
9
10
11
11
12
14
14
2007-
£-
6,191,965-
(5,267,084)
924,881-
142,217-
32,987-
(241,772)
858,313-
(231,496)
626,817-
552,468-
74,349-
15.5p
13.3p
2006-
£-
5,195,325-
(4,712,635)
482,690-
(6,145)
32,041-
(227,418)
281,168-
(84,653)
196,515-
190,105-
6,410-
5.4p
4.8p
8
Consolidated Balance Sheet
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Available-for-sale investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current portion of long-term borrowings
Current tax payable
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium account
Merger reserve
Retained earnings
Revaluation reserve
Equity attributable to equity holders of the parent company
Minority interest
Total equity
Note
15
16
17
18
19
20
21
22
23
25
26
2007-
£-
274,626-
4,383,347-
75,909-
20,000-
4,753,882-
553,311-
1,543,011-
910,366-
3,006,688-
7,760,570-
(877,226)
(527,008)
(299,771)
(1,704,005)
(2,335,751)
(35,934)
(2,371,685)
(4,075,690)
3,684,880-
178,044-
2,501,430-
475,074-
408,452-
450-
3,563,450-
121,430-
3,684,880-
2006-
£-
295,468-
4,389,963-
195,924-
210,950-
5,092,305-
402,941-
1,249,039-
824,156-
2,476,136-
7,568,441-
(779,708)
(421,813)
(261,718)
(1,463,239)
(2,835,940)
(89,505)
(2,925,445)
(4,388,684)
3,179,757-
178,044-
2,501,430-
475,074-
(33,629)
(5,743)
3,115,176-
64,581-
3,179,757-
The accompanying notes form an integral part of these consolidated financial statements. The financial statements were approved by the board on 27 March 2008
9
D.E. Cicurel
Director
R.L. Cohen
Director
Consolidated Statement of Changes in Equity
Share capital
Share premium
Merger reserve
Retained earnings-
Revaluation reserve-
Total**-
Minority interest-
Total equity-
Note
£
£
£
£-
£-
£-
£-
£-
1 January 2006
Changes in equity for 2006
Gains/(losses) on revaluation of available-for-sale investments
Tax on revaluation gains/(losses) taken directly to equity
Transferred to profit or loss on disposal of
available-for-sale investments
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Dividends
Issue of share capital
Balance at 31 December 2006
Changes in equity for 2007
Transferred to profit or loss on disposal of
available-for-sale investments
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Dividends
Balance at 31 December 2007
13
13
173,118
2,501,430
380,000
(188,109)
(58,510)
2,807,929-
58,171-
2,866,100-
-
-
-
-
-
-
-
4,926
178,044
-
-
-
-
-
-
-
-
-
-
-
-
-
2,501,430
-
-
-
-
-
-
-
-
-
-
-
-
95,074
475,074
-
-
-
-
-
178,044
2,501,430
475,074
--
--
--
--
190,105-
190,105-
(35,625)
--
(33,629)
--
--
552,468-
552,468-
(110,387)
408,452-
19,950-
(5,985)
38,802-
52,767-
--
52,767-
--
--
19,950-
(5,985)
38,802-
52,767-
190,105-
242,872-
(35,625)
100,000-
--
--
--
--
6,410-
6,410-
--
--
19,950-
(5,985)
38,802-
52,767-
196,515-
249,282-
(35,625)
100,000-
(5,743)
3,115,176-
64,581-
3,179,757-
6,193-
6,193-
--
6,193-
--
450-
6,193-
6,193-
552,468-
558,661-
(110,387)
3,563,450-
--
--
74,349-
74,349-
(17,500)
121,430-
6,193-
6,193-
626,817-
633,010-
(127,887)
3,684,880-
** - Total represents amounts attributable to equity holders of the parent company.
The accompanying notes form an integral part of these consolidated financial statements.
10
Consolidated Cash Flow Statement
Cash flows from operating activities
Profit after tax
Adjustments for:
Depreciation
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
(Profit)/loss on disposal of available-for-sale investments
Foreign exchange losses/(gains) on foreign currency loans
Interest receivable
Interest payable
Tax expense recognised in income statement
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Proceeds from disposal of equipment
Proceeds from disposal of available-for-sale investments
Interest received
Net cash generated/(used) in investing activities
Cash flows from financing activities
Proceeds from drawdown of long-term borrowings
Repayments of borrowings (including hire purchase contracts)
Dividends paid
Net cash (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The accompanying notes form an integral part of these consolidated financial statements.
11
2007-
£-
626,817-
70,289-
120,015-
(611)
(142,217)
27,443-
(32,987)
241,772-
231,496-
(150,370)
(293,972)
161,518-
859,193-
(242,399)
(249,651)
367,143-
(57,384)
(57,032)
8,196-
342,000-
32,987-
268,767-
---
(421,813)
(127,887)
(549,700)
86,210-
824,156-
910,366-
2006-
£-
196,515-
53,644-
228,783-
(2,078)
6,145-
(7,335)
(32,041)
227,418-
84,653-
104,775-
(364,429)
117,929-
613,979-
(227,418)
(294,693)
91,868-
(1,036,223)
(31,336)
15,655-
202,611-
32,041-
(817,252)
700,000-
(263,454)
(35,625)
400,921-
(324,463)
1,148,619-
824,156-
Notes to the Consolidated Financial Statements
1. General information
Judges Capital plc is the ultimate parent company of the group,
whose principal activities comprise the design, manufacture and
sale of scientific instruments. These are used in the measurement
of the reaction of materials to fire, in the testing of the properties
of fibre optic and fibre optic networks and in the creation of
movement, heating and cooling of objects within ultra high
vacuum chambers.
2. Registered office
The address of the registered office and principal place of
business of Judges Capital plc is Unit 19, Charlwoods Road, East
Grinstead, West Sussex RH19 2HL.
3. Basis of accounting
The consolidated financial statements have been prepared under
the historical cost convention except for certain financial
instruments which are carried at fair value.
The group’s financial statements up to and including those for the
year ended 31 December 2006 were prepared in accordance with
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice). With effect from 1
January 2007, the company, being listed on the Alternative
Investment Market of the London Stock Exchange, is required to
present its consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Accordingly, these financial statements have
been prepared in accordance with the accounting policies set out
below which are based on the IFRS in issue as adopted by the
European Union (EU) and in effect at 31 December 2007.
Comparatives have been restated in compliance with the
principles of IFRS. Reconciliations of shareholders’ equity under
UK Generally Accepted Accounting Practice (UK GAAP) to that
under IFRS at 1 January and 31 December 2006 and of the profit
for the year ended 31 December 2006, together with an
explanation of material adjustments to the cash flow statement, are
given in notes 33 and 34. The disclosures required by IFRS 1
concerning the transition from UK GAAP to IFRS are given in the
reconciliation schedules presented in note 33.
4. Use of accounting estimates and judgements
Many of the amounts included in the consolidated financial
statements involve the use of judgement and/or estimation. These
judgements and estimates are based on management’s best
knowledge of the relevant facts and circumstances, having regard
to prior experience, but actual results may differ from the amounts
included in the consolidated financial statements. Information
about such judgements and estimation is contained in the
accounting policies and/or the notes to the consolidated financial
statements and the key areas are summarised below:
Judgements in applying accounting policies:
• the directors must judge whether all of the conditions required
for revenues to be recognised in the income statement of the
financial year, as set out in Note 6.4 below, have been met;
• the classification of financial assets as "available for sale"
requires judgements concerning the likelihood and timing of
realisation of sale;
• the directors must judge whether future profitability is
likely in making the decision whether or not to create a
deferred tax asset.
Sources of estimation uncertainty:
• depreciation rates are based on estimates of the useful lives and
residual values of the assets involved;
• estimates of future profitability are required for the decision
whether or not to create a deferred tax asset;
• estimates are required as to asset carrying values and
impairment charges. These are assessed by reference to
budgeted profits and cash flows for future periods for the
relevant income generating units and an estimate of their values
in use.
5. Change in accounting policies
5.1 Standards, amendments and Interpretations to
existing Standards that are not yet effective
At the date of authorisation of these consolidated financial
statements, certain new Standards, amendments and
Interpretations to existing standards have been published but are
not yet effective. The group has not early-adopted any of these
pronouncements. The new Standards, amendments and
Interpretations that are expected to be relevant to the group’s
consolidated financial statements are as follows:
Amendment to IAS 1 Presentation of Financial
Statements (effective from 1 January 2009, ie for
reporting periods beginning on or after this date)
This amendment affects the presentation of owner changes in
equity and introduces a statement of comprehensive income.
Preparers will have the option of presenting items of income and
expense and components of other comprehensive income either in
a single statement of comprehensive income with subtotals, or in
two separate statements (a separate income statement followed by
12
a statement of other comprehensive income). This amendment
does not affect the financial position or results of the group but
will give rise to additional disclosures. Management are currently
assessing the detailed impact of this amendment on the group’s
financial statements.
IFRS 8 Operating Segments (effective from
1 January 2009)
This IFRS specifies how an entity should report information about
its operating segments in its consolidated financial statements.
Generally, financial information is required to be reported on the
same basis as is used internally for evaluating operating segment
performance and deciding how to allocate resources to operating
segments. Implementation of this Standard is not expected to
increase the number of reportable segments but will alter the
manner in which these are reported to be consistent with the
internal reporting provided to the chief operating decision-maker.
All the above pronouncements will be adopted in the group’s
financial statements for the period beginning 1 January 2009.
IFRS 3 Business Combinations (revised 2008)
and IAS 27 Consolidated and Separate Financial
Statements (revised 2008) – effective from
1 July 2009
The revised Standards introduced major changes to the
accounting requirements for business combinations, transactions
with non-controlling interests (a new term for “minority interests”)
and a loss of control of a subsidiary. Management are currently
assessing the detailed impact of this amendment on the group’s
financial statements.
The revised Standards will be adopted in the group’s financial
statements for the period beginning 1 January 2010.
identifiable net assets of the acquired subsidiary at the date of
acquisition.
Other new Standards and Interpretations have been issued but are
not expected to have a material impact on the group's financial
statements.
6. Accounting policies
6.1 Basis of consolidation
The parent company is entitled to the merger relief offered by
section 131 of the Companies Act 1985 in respect of the fair value
of the consideration received in excess of the nominal value of the
equity shares issued in connection with the acquisition of Fire
Testing Technology Limited and UHV Design Limited.
The consolidated financial statements include those of the parent
company and its subsidiaries, all drawn up to 31 December 2007.
Subsidiaries are entities over which the group has the power to
control the financial and operating policies so as to obtain
benefits from their activities. The group obtains and exercises
control through voting rights. Income, expenditure, unrealised
gains and intra-group balances arising from transactions within
the group are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the group.
Acquisitions of subsidiaries are dealt with by the purchase
method. The purchase method involves the recognition at fair
value of all identifiable assets and liabilities, including contingent
liabilities of the subsidiary, at the acquisition date, regardless of
whether or not they were recorded in the financial statements of
the subsidiary prior to acquisition. In the case of acquisitions after
31 December 2005, goodwill is stated after separating out
identifiable intangible assets. Goodwill represents the excess of
acquisition cost over the fair value of the group's share of the
6.2 Business combinations completed prior to the
date of transition to IFRS
The group has elected not to apply IFRS 3 Business
Combinations retrospectively to business combinations prior to
the date of transition to IFRS on 1 January 2006. Accordingly the
classification of the combination (acquisition, reverse acquisition
or merger) remains unchanged from that used under UK GAAP.
Assets and liabilities are recognised at the date of transition if they
would be recognised under IFRS, and are measured using their
UK GAAP carrying amounts immediately post-acquisition as
deemed cost under IFRS, unless IFRS requires fair value
measurement. Amounts recorded as goodwill under UK GAAP
have not been re-assessed to identify intangible assets. Deferred
tax and minority interest are adjusted for the impact of any
consequential adjustments after taking advantage of the
transitional provisions.
6.3 Goodwill
Goodwill, representing the excess of the cost of acquisition over
the fair value of the group’s share of the identifiable net assets
acquired, is capitalised and reviewed annually for impairment.
Goodwill is carried at cost less accumulated impairment losses.
13
Negative goodwill is recognised immediately after acquisition in
the income statement.
The carrying value of negative goodwill at the date of transition
has been credited to reserves. There is no re-instatement of
goodwill or negative goodwill that was amortised prior to
transition to IFRS.
6.5 Intangible assets acquired as part of a business
combination
In accordance with IFRS 3 Business Combinations, an intangible
asset acquired in a business combination is deemed to have a
cost to the group of its fair value at the acquisition date. The fair
value of the intangible asset reflects market expectations about the
probability that the future economic benefits embodied in the
asset will flow to the group.
• Plant and machinery:
15% on written down value
to 20% straight-line on cost
• Fixtures, fittings and equipment: 15% on written down value
to 33% straight-line on cost
25% on written down value
to 25% straight-line on cost
20% straight-line on cost
• Building improvements:
• Motor vehicles:
6.4 Revenue
Revenue from the sale of goods is measured by reference to the
fair value of consideration received or receivable by the group for
goods supplied, excluding Value Added Tax, and is recognised
when all the following conditions have been satisfied:
• the group has transferred to the buyer the significant risks and
rewards of ownership of the goods and effective control over
them;
• the amount of revenue and the costs incurred or to be incurred
in respect of the transaction can be measured reliably; and
• it is probable that the economic benefits associated with the
transaction will flow to the group.
Installation revenues are deferred and held on the balance sheet
within trade and other payables pending recognition as revenue
on completion of installation. Interest income is recognised using
the effective interest method which calculates the amortised cost
of a financial asset and allocates the interest income over the
relevant period. Dividend income is recognised when the
shareholder’s right to receive payment is established.
Amortisation begins when the intangible asset is first available for
use and is provided at rates calculated to write off the cost of each
intangible asset over its expected useful life, ranging from a few
weeks in the case of sales order backlogs to five years in the case
of non-competition agreements. Amortisation charges are
included in operating costs in the income statement.
Subsequent to initial recognition, intangible assets are
stated at deemed cost less accumulated amortisation and
impairment charges.
6.6 Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation
and any provision for impairment.
Disposal of assets: the gain or loss arising on the disposal of an
asset is determined as the difference between the disposal
proceeds and the carrying amount of the asset and is recognised
in the income statement.
Depreciation: Depreciation is provided at annual rates calculated
to write off the cost less residual value of each asset over its
expected useful life, within the following ranges:
Material residual value estimates are updated as required but at
least annually.
6.7 Impairment testing of goodwill, other intangible
assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are largely independent cash
inflows (cash-generating units). As a result, some assets are
tested individually for impairment and some are tested at cash-
generating unit level. Goodwill is allocated to those cash-
generating units that are expected to benefit from synergies of the
related business combination and represent the lowest level within
the group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are
tested for impairment at least annually. All other individual
assets or cash-generating units are tested whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable.
An impairment loss is recognised for the amount by which the
asset’s or cash-generating unit’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value in
14
use based on estimated future cash flows from each cash-
generating unit, abated at a suitable discount rate in order to
calculate the present value of those cash flows. The data used for
impairment testing procedures is directly linked to the group’s
latest approved budgets, adjusted as necessary to exclude any
future restructuring to which the group is not yet committed.
Discount rates are determined individually for each cash-
generating unit and reflect their respective risk profiles as
assessed by the directors.
Impairment losses for cash-generating units reduce first the
carrying amount of any goodwill allocated to that cash-generating
unit. Any remaining impairment loss is charged pro rata to the
other assets in the cash-generating unit. With the exception of
goodwill, all assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer
exist. Impairment charges are included in operating costs in the
income statement. An impairment charge that has been
recognised is reversed if the cash-generating unit’s recoverable
amount exceeds its carrying amount.
6.8 Leases
In accordance with IAS 17, the economic ownership of a leased
asset is transferred to the lessee if the lessee bears substantially
all the risks and rewards related to the ownership of the leased
asset. The related asset is recognised as an asset in the balance
sheet at the time of inception of the lease at the fair value of the
leased asset or, if lower, the present value of the minimum lease
payments plus incidental payments, if any, to be borne by the
lessee. A corresponding amount is recognised as a finance
leasing liability.
The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to
the income statement over the period of the lease.
All other leases are regarded as operating leases and the
payments made under them are charged to the income statement
on a straight line basis over the period of the lease term. Lease
incentives are spread over the term of the lease.
6.9 Inventories
Inventories are stated at the lower of cost and net realisable value.
Costs of ordinarily interchangeable items are assigned using the
first-in, first-out cost formula. Cost includes materials, direct
labour and an attributable proportion of manufacturing overheads
based on normal levels of activity.
6.10 Taxation
Current tax is the tax currently payable based on taxable
profit for the year.
Deferred taxes are calculated using the liability method on
temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of an
asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on
temporary differences associated with shares in subsidiaries is not
provided if reversal of those temporary differences can be
controlled by the group and it is probable that reversal will not
occur in the foreseeable future. In addition, tax losses available to
be carried forward as well as other income tax credits to the group
are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting.
Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able
to be offset against future taxable income. Current and deferred
tax assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a
component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to equity
in which case the related deferred tax is also charged or credited
directly to equity.
6.11 Share-based payments
IFRS 2 has been applied, in accordance with IFRS 1 and where
the effect is material, to equity-settled share options granted on or
after 7 November 2002 and not vested prior to 1 January 2006.
All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair
values of employees’ services are determined indirectly by
reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and
excludes the impact of non-market vesting conditions.
All equity-settled share-based payments are ultimately recognised
15
as an expense in the income statement, with a corresponding
credit to “other reserve”.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to
vest. Estimates are subsequently revised if there is any indication
that the number of share options expected to vest differs from
previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. The impact of the revision of the
original estimates, if any, is recognised in the income statement
over the remaining vesting period, with a corresponding
adjustment to the appropriate reserve. No adjustment is made to
any expense recognised in prior periods if share options
ultimately exercised are different to that estimated on vesting.
Upon exercise of share options the proceeds received net of
attributable transaction costs are credited to share capital, and
where appropriate share premium.
6.12 Financial assets
Financial assets are divided into the following categories: loans
and receivables and available-for-sale financial assets. Financial
assets are assigned to the different categories by management on
initial recognition, depending on the purpose for which they were
acquired. The designation of financial assets is re-evaluated at
every reporting date at which a choice of classification or
accounting treatment is available.
All financial assets are recognised when the group becomes a
party to the contractual provisions of the instrument. Financial
assets are recognised at fair value plus transaction costs.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Trade receivables are classified as loans and receivables.
Loans and receivables are measured subsequent to initial
recognition at amortised cost using the effective interest method,
less provision for impairment. Any change in their value through
impairment or reversal of impairment is recognised in operating
costs in the income statement.
Provision against trade receivables is made when there is
objective evidence that the group will not be able to collect all
amounts due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows.
Available-for-sale financial assets include non-derivative financial
assets that are either designated as such or do not qualify for
inclusion in any of the other categories of financial assets. All
financial assets within this category are measured subsequently at
fair value, with changes in value recognised in equity, through the
statement of changes in equity. Gains and losses arising from
investments classified as available-for-sale are recognised in the
income statement when they are sold or when the investment
is impaired.
In the case of impairment of available-for-sale assets, any loss
previously recognised in equity is transferred to the income
statement. Impairment losses recognised in the income
statement on equity instruments are not reversed through the
income statement.
An assessment for impairment is undertaken at least at each
balance sheet date.
A financial asset is derecognised only where the contractual rights
to the cash flows from the asset expire or the financial asset is
transferred and that transfer qualifies for derecognition. A financial
asset is transferred if the contractual rights to receive the cash
flows of the asset have been transferred or the group retains the
contractual rights to receive the cash flows of the asset but
assumes a contractual obligation to pay the cash flows to one or
more recipients. A financial asset that is transferred qualifies for
derecognition if the group transfers substantially all the risks and
rewards of ownership of the asset, or if the group neither retains
nor transfers substantially all the risks and rewards of ownership
but does transfer control of that asset.
6.13 Financial liabilities
Financial liabilities are obligations to pay cash or other financial
assets and are recognised when the group becomes a party to the
contractual provisions of the instrument. All financial liabilities are
recorded initially at fair value net of direct issue costs.
All financial liabilities with the exception of Convertible
Redeemable shares (see paragraph 6.19) are recorded at
amortised cost using the effective interest method, with interest-
related charges recognised as an expense in finance cost in the
income statement. These financial liabilities include trade and
16
6.19 Convertible Redeemable shares
In accordance with IAS 32, the Convertible Redeemable shares
have been recorded as a liability at the net proceeds received and
the future conversion into Ordinary shares has not been taken into
account.
7. Segmental reporting
The group's primary reporting format is business segment and its
secondary format is geographical segment by origin of revenue.
Business segment analysis: all of the group’s operations
are in the field of design and manufacture of scientific
instruments. The financial performance of each of the business
segments is summarised below. There are no material sales
between business segments. All assets reside in the UK.
other payables, current tax payable and borrowings, including
bank loans, subordinated loan notes and hire purchase
commitments. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are charged to
the income statement on an accruals basis using the effective
interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in
which they arise.
A financial liability is derecognised only when the obligation is
extinguished, that is, when the obligation is discharged or
cancelled or expires.
6.14 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
6.15 Pensions
Companies in the group operate defined contribution pension
schemes for employees and directors. The assets of the schemes
are held by investment managers separately from those of the
company and group. The pension costs charged against profits
are the contributions payable to the schemes in respect of the
accounting period.
6.16 Foreign currencies
Transactions in foreign currencies are translated at the exchange
rate ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of
exchange ruling at the balance sheet date. Exchange differences
arising on the settlement of monetary items or on translating
monetary items at rates different from those at which they were
initially recorded are recognised in the income statement in the
period in which they arise.
6.17 Dividends
Dividend distributions payable to equity shareholders are included
in trade and other payables when the dividends are approved in
general meeting but not paid prior to the balance sheet date.
6.18 Equity
Equity comprises the following:
• “Share capital” represents the nominal value of
equity shares.
• “Share premium” represents the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses of the share issue.
• “Merger reserve” represents the fair value of the consideration
received in excess of the nominal value of equity shares issued
in connection with acquisitions where the company has
exercised entitlement to the merger relief offered by section 131
of the Companies Act 1985.
• “Profit and loss reserve” represents retained profits.
• “Revaluation reserve” represents gains and losses due to the
revaluation of certain financial assets.
• “Minority interest” represents retained profits and losses
attributable to minority shareholders in subsidiary companies.
17
Year ended / at 31 December 2007
Revenue
Operating profit
Assets
Liabilities
Total capital employed
Goodwill
Other intangible assets
Capital expenditure
Depreciation
Amortisation of intangible assets
Year ended / at 31 December 2006
Revenue
Operating profit
Assets
Liabilities
Total capital employed
Goodwill
Other intangible assets
Capital expenditure
Depreciation
Amortisation of intangible assets
Fire testing
equipment
Fibre optic
testing equipment
£
3,650,041
636,341
1,771,520
951,840
819,680
3,871,161
33,666
15,047
76,197
32,667
£
1,036,279
215,602
494,803
247,472
247,331
-
-
-
11,504
-
Fire testing
equipment
Fibre optic
testing equipment
£
3,247,979
495,499
2,037,890
1,141,002
896,888
3,877,777
66,333
11,742
68,837
14,667
£
787,817
95,763
278,635
172,531
106,104
-
-
-
14,397
-
Ultra high vacuum
manipulation
equipment
£
1,505,645
312,980
840,112
347,707
492,405
512,186
42,243
41,985
36,925
87,348
Ultra high vacuum
manipulation
equipment
£
1,159,529
282,839
840,355
421,143
419,212
512,186
129,591
76,144
24,746
214,116
Central costs-
and consolidation-
Group
consolidated
Geographical analysis: all the group’s design, manufacturing
and sales activities are located in the United Kingdom. Sales by
geographical destination are as follows:
United Kingdom
Europe
United States/Canada
Rest of the World
Total
8. Operating costs
Raw materials and consumables
Other external charges
Staff costs
Depreciation
Amortisation of intangible assets
2007
£
988,451
2,501,724
1,053,638
1,648,152
6,191,965
2007
£
1,703,062
1,231,289
2,142,429
70,289
120,015
5,267,084
2006
£
710,496
1,731,933
1,075,996
1,676,900
5,195,325
2006
£
1,619,220
1,138,553
1,672,435
53,644
228,783
4,712,635
£-
--
(240,042)
4,654,135-
2,528,671-
2,125,464-
--
--
--
(54,337)
--
£
6,191,965
924,881
7,760,570
4,075,690
3,684,880
4,383,347
75,909
57,032
70,289
120,015
Central costs-
and consolidation-
Group
consolidated
£-
--
(391,411)
4,411,561-
2,654,008-
1,757,553-
--
--
--
(54,336)
--
£
5,195,325
482,690
7,568,441
4,388,684
3,179,757
4,389,963
195,924
87,886
53,644
228,783
18
9. Operating profit
2007-
£-
2006-
£-
11. Interest receivable and payable
13. Dividends
2007-
£-
2006-
£-
Interest receivable – short-term bank deposits
32,987-
32,041-
Final dividend for the previous year
Interim dividend for the current year
Operating profit is stated after charging / (crediting):
Profit on disposal of property, plant and equipment
Fees payable to the company’s auditor
for the audit of the company’s annual accounts
Fees payable to the company’s auditor for other services:
(610)
(2,078)
24,353-
12,400-
for the audit of the company’s subsidiaries,
pursuant to legislation
for tax services
for all other services
Depreciation
Amortisation of intangible assets
Operating lease rentals - land and property
39,850-
7,750-
8,000-
70,289-
120,015-
164,700-
18,320-
7,450-
800-
53,644-
228,783-
162,068-
In addition fees were paid to the auditor in 2006 in respect of corporate
finance transaction work undertaken in connection with the acquisition of UHV
Design Limited. The costs of £28,727 plus VAT were charged to investments
in subsidiaries.
10. Profit/(loss) on disposal of available-for-sale
investments
During the year, the parent company disposed of its 3% holding
in Poole Investments plc, realising £342,000 in cash and a profit
before tax of £142,217. During 2006, the parent company
disposed of its holding in Dickinson Legg plc and received a final
distribution on the liquidation of Lionheart plc, realising in
aggregate £202,611 in cash and a loss before tax of £6,145.
19
Interest payable - bank and hire purchase loans
- bank overdrafts and other short-term
- borrowings
Interest payable - loan notes
Net interest payable
12. Taxation
UK corporation tax at 30% (2006: 30%) - current year
- prior years
Deferred tax - origination and reversal of
temporary differences:
Current year
Prior years
Tax on profit for the year
- current year
- prior years
Factors affecting the tax charge for the year:
Profit before tax
Profit before tax multiplied by standard rate of UK
corporation tax of 30%
Tax relief available on purchased goodwill
Provisions and expenditure not deductible for
tax purposes
Marginal relief
Variances between capital allowances and depreciation
Change in the rate of deferred tax
Tax on profit for the year
- current year
- prior years
Total net taxation charge
(202,836)
(194,219)
(1,282)
(37,654)
(241,772)
--
(33,199)
(227,418)
208,785-
195,377-
2007-
£-
288,968-
(1,264)
287,704-
(48,227)
(7,981)
(56,208)
240,741-
(9,245)
231,496-
2006-
£-
160,305-
852-
161,157-
(77,474)
970-
(76,504)
82,831-
1,822-
84,653-
858,313-
281,168-
257,494-
(19,682)
6,555-
(1,747)
679-
(2,558)
240,741-
(9,245)
231,496-
84,350-
(6,855)
8,223-
(10,559)
7,672-
--
82,831-
1,822-
84,653-
2007
£
p/share
2006
p/share
£
71,217
2.0
1.1
39,170
3.1 110,387
-
1.0
1.0
-
35,625
35,625
The directors will propose a final dividend of 2.2p per share, amounting to
£78,339, for payment on 4 July 2008. As this remains conditional on
shareholders’ approval, provision has not been made in these consolidated
financial statements.
14. Earnings per share
Options and warrants over Ordinary shares and rights of
conversion of the Convertible Redeemable shares are described in
notes 26 and 27.
Year to 31 December 2007
Earnings attributable-
to equity holders of-
the parent company-
Earnings
per share
Weighted
average
number of
shares
£-
No.
pence
552,468-
22,230-
574,698-
82,492-
(99,552)
557,638-
Profit after tax for calculation of basic
earnings per share
Notional taxed interest income accruing
on dilution
Profit after tax for calculation of diluted
earnings per share
Add-back: amortisation of intangible
assets, net of tax
Less: profit on disposal of available-
for-sale investments, net of tax
Adjusted diluted profit before
amortisation of intangible assets
Number of shares for calculation of
basic earnings per share
Dilutive effect of potential shares
Number of shares for calculation of
diluted earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
3,560,878
769,944
4,330,822
15.5
13.3
15.0
12.9
Year to 31 December 2006
Earnings attributable Weighted
average
to equity holders of
number of
the parent company
shares
Earnings
per share
£
No.
pence
Profit after tax for calculation of basic
earnings per share
Notional taxed interest income
accruing on dilution
Profit after tax for calculation of diluted
earnings per share
Add-back: amortisation of intangible
assets, net of tax
Adjusted diluted profit before
amortisation of intangible assets
190,105
16,685
206,790
160,148
366,938
Number of shares for calculation of
basic earnings per share
Dilutive effect of potential shares
Number of shares for calculation of diluted
earnings per share
3,544,953
718,852
4,263,805
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
5.4
4.8
9.9
8.6
15. Property, plant and equipment
16. Goodwill
Plant &-
machinery-
Fixtures,-
fittings &-
equipment-
Motor-
vehicles-
Building
improve-
ments
Total-
£-
£-
£-
£
£-
71,736-
Cost / deemed cost
1 January 2006
Additions through
business
181,143-
combinations
72,880-
Additions
Disposals
(26,000)
31 December 2006 299,759-
7,950-
Additions
--
Disposals
127,928-
31,739-
29,367
260,770-
18,369-
12,706-
--
159,003-
19,092-
--
19,450-
2,300-
(14,550)
38,939-
29,990-
(18,950)
25,125
-
-
54,492
-
-
244,087-
87,886-
(40,550)
552,193-
57,032-
(18,950)
31 December 2007 307,709-
178,095-
49,979-
54,492
590,275-
50,039-
Depreciation
1 January 2006
Additions through
business
61,634-
combinations
36,759-
Charge
(13,840)
Disposals
134,592-
31 December 2006
46,179-
Charge
--
Disposals
31 December 2007 180,771-
Net book value
- 31 December 2007 126,938-
Net book value
- 31 December 2006 165,167-
39,017-
28,011-
29,367
146,434-
6,805-
9,169-
--
54,991-
14,132-
--
69,123-
7,911-
3,406-
(13,133)
26,195-
5,696-
(11,365)
20,526-
7,270
4,310
-
40,947
4,282
-
45,229
83,620-
53,644-
(26,973)
256,725-
70,289-
(11,365)
315,649-
108,972-
29,453-
9,263
274,626-
104,012-
12,744-
13,545
295,468-
Included above are plant & machinery assets held under hire purchase contracts
with a net book value at 31 December 2007 of £57,378 (2006: £68,110). The
depreciation charge in the year on these assets was £10,732 (2006: £3,440).
Cost
1 January 2006
Acquisitions of subsidiary companies
31 December 2006
Adjustment in 2007 to purchase price of prior year acquisition
31 December 2007
£-
3,734,535-
655,428-
4,389,963-
(6,616)
4,383,347-
An analysis of goodwill by business segment is given in Note 7.
The adjustment in 2007 to the purchase price of a prior year acquisition
arises from the payment of an earn-out instalment in a lesser amount than had
been provided.
There have been no impairment charges in either 2006 or 2007. Goodwill is
tested annually for impairment by reference to the value in use of the relevant
cash generating units. This is calculated on the basis of projected cash flows for
the following five years derived from detailed budgets for the ensuing year, with
subsequent years including modest nominal rates of sales and cost growth
ranging from zero to 7.5% per annum and steady gross margins. These cash
flows are adjusted to present day values at a discount rate based on a weighted
average cost of capital of 10.88% per annum. The residual value at the end of
the five years, computed by reference to projected year six cash flows and
discounted, is also included. There was no requirement for any impairment
provision at 31 December 2007.
20
17. Other intangible assets
18. Available-for-sale investments
19. Inventories
Advertising Distribution
agreements
Sales Customer
order
backlog
Non-
relation- competition
agreement
ships
Total
31 December 2007 Period end value
Directors’
valuation
Market-
valuation-
Historical
cost
Total-
valuation-
Raw materials
Work in progress
Finished goods
£
£
£
£
£
£
-
5,600
-
98,000
-
91,000
-
207,602
-
-
22,505 424,707
5,600
98,000
91,000
207,602
22,505 424,707
At 31 December 2007
– unquoted investment
Net unrealised gain at
31 December 2007
-
-
-
-
-
-
3,112
81,667
91,000
49,254
3,750 228,783
31 December 2006
£
19,373
-
£-
--
--
£
£-
20,000
20,000-
627
627-
Period end value
Historical
cost
Market-
valuation-
Directors’
valuation
Total-
valuation-
£
£-
£
£-
Unquoted investments
Quoted investments
At 31 December 2006
19,373
199,782
219,155
--
190,950-
190,950-
20,000
-
20,000
20,000-
190,950-
210,950-
Net unrealised (loss) / gain at
31 December 2006
-
(8,832)
627
(8,205)
Investments held at 31 December 2007 comprise 800,100 shares (representing
1.68%) in Fortress Holdings plc (in members' voluntary liquidation – the
directors’ valuation is their estimate of the final distribution from the liquidator).
During the year, the quoted investment held on 31 December 2006, comprising
5,700,000 shares in Poole Investments plc was disposed of for a consideration
of £342,000.
Cost
1 January 2006
Acquisitions
31 December
2006 and 2007
Amortisation
1 January 2006
Charge for the
year 2006
31 December
2006
Charge for the
year 2007
31 December
2007
Net book value
31 December
2007
31 December
2006
3,112
81,667
91,000
49,254
3,750 228,783
2,488
16,333
-
96,693
4,501 120,015
5,600
98,000
91,000
145,947
8,251 348,798
-
-
2,488
16,333
-
-
61,655
14,254
75,909
158,348
18,755 195,924
An analysis of other intangible assets by business segment is given in Note 7.
21
2007
£
420,251
105,993
27,067
2006
£
288,839
100,646
13,456
553,311
402,941
In 2007, a total of £1,703,062 of inventories was included in the income
statement as an expense (2006: £1,619,220). This includes an amount of £3,352
(2006: £nil) resulting from write-downs of inventories. There were no reversals
of previous write-downs that were recognised in the income statement in either
2007 or 2006. All group inventories form part of the assets pledged as security
in respect of bank loans.
20. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
2007
£
2006
£
1,384,707
75,725
82,579
1,137,693
65,666
45,680
1,543,011
1,249,039
The carrying value of receivables, all of which are short-term, is considered a
reasonable approximation of fair value. All trade and other receivables have
been reviewed for impairment and a provision of £876 (2006: £nil) has been
made relating to the group’s fire testing equipment market.
In addition, some of the unimpaired trade receivables were past due at the
balance sheet date as follows:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
2007
£
532,734
72,507
5,727
2006
£
687,794
4,262
973
610,968
693,029
21. Trade and other payables
Trade payables
Accruals and deferred income
Social security and other taxes
Other payables
2007
£
288,134
432,486
78,196
78,410
2006
£
339,377
298,036
101,795
40,500
877,226
779,708
24. Maturity of borrowings and net debt
31 December 2007
Bank loan
Repayable in less than 6 months
Repayable in months 7 to 12
Current portion of long-term
borrowings
£
254,000
254,000
508,000
Subor-
dinated
loan notes
£
Hire
purchase
Total-
£
£-
-
-
-
9,350
9,658
263,350-
263,658-
.
19,008
527,008-
All amounts are short-term and their carrying values are considered reasonable
approximations of fair value. Other payables include £12,500 of non equity
shares classed as financial liabilities (see note 27).
22. Current portion of long-term borrowings
Repayable in years 1 to 2
Repayable in years 2 to 5
Long-term borrowings
608,000
1,210,594
1,818,594
-
500,000
500,000
17,157
625,157-
- 1,710,594-
17,157 2,335,751-
2007
£
2006
£
Total borrowings
2,326,594
500,000
36,165 2,862,759-
Bank loan
Net obligations under hire purchase contracts
508,000
19,008
404,000
17,813
Cash and cash equivalents
Total net debt
(910,366)
1,952,393-
All amounts are short-term and their carrying values are considered reasonable
approximations of fair value.
527,008
421,813
23. Long-term borrowings
Bank loan
Subordinated loan notes
Net obligations under hire purchase contracts
2007
£
2006
£
1,818,594
500,000
17,157
2,299,775
500,000
36,165
2,335,751
2,835,940
The bank loan is secured on assets of the group, is repayable in quarterly
instalments over a six year period ending 31 March 2011 and bears interest at
21/4% above LIBOR-related rates. The subordinated loan notes are unsecured,
repayable on 23 May 2010 and bear interest at Bank of Scotland base rate plus
2%. The hire purchase obligations are secured on the related assets. The
repayment profile of borrowings is as set out below.
31 December 2006
Bank loan
Repayable in less than 6 months
Repayable in months 7 to 12
Current portion of long-term
borrowings
£
202,000
202,000
404,000
Subor-
dinated
loan notes
£
-
-
-
Hire
purchase
Total-
£
£-
8,761
9,052
210,761-
211,052-
17,813
421,813-
Repayable in years 1 to 2
Repayable in years 2 to 5
Long-term borrowings
508,000
1,791,775
2,299,775
-
500,000
500,000
527,009-
19,009
17,156 2,308,931-
36,165 2,835,940-
Total borrowings
2,703,775
500,000
53,978 3,257,753-
Cash and cash equivalents
Total net debt
(824,156)
2,433,597-
A proportion of the group’s bank loans is drawn in foreign currencies to provide
a hedge against assets denominated in those currencies. The Sterling equivalent
at 31 December 2007 of loans denominated in US$ was £492,730 (2006:
£144,436) and in Euros was £529,699 (2006: £148,229). These amounts are
included in the figures above for bank loans, repayable in years 2 to 5.
The components of the hire purchase debt are as follows:
Future payments
Less: interest component of future payments
2007-
£-
38,137-
1,972-
2006-
£-
58,939-
4,961-
Carrying amount – 31 December
36,165-
53,978-
25. Deferred tax liabilities
1 January 2007
Acquisitions - inherited deferred tax balance
- deferred tax on intangible assets acquired
Credit to income statement in the year
Charge against revaluation reserve
2007-
£-
89,505-
--
--
(56,208)
2,637-
2006-
£-
7,972-
8,011-
127,412-
(76,504)
22,614-
31 December 2007
35,934-
89,505-
Deferred tax balances relate to temporary differences as follows:
Accelerated capital allowances
Provisions allowable for tax in subsequent period
Goodwill and other intangible assets
Fair value adjustment arising on acquisition of FTT
Available-for-sale investments
28,988-
(7,770)
28,732-
(14,192)
176-
43,676-
--
69,788-
(21,497)
(2,462)
35,934-
89,505-
Amounts provided in respect of deferred tax are computed at 28% (2006: 30%).
The effect of the change in the rate of tax from 30% to 28% was a reduction in
deferred tax at 31 December 2007 of £2,570, of which £2,558 was credited against
profits for the year and £12 was credited in revaluation reserve.
The group has unrelieved tax losses at 31 December 2007 of £431,000 (2006:
£325,000). The group has not recognised a deferred tax asset (2007: £120,000,
2006: £97,000) in respect of these losses as the timing and extent of recovery is
insufficiently certain. These losses are available to be offset against future
profits of the parent company.
22
26. Share capital
Authorised
10,000,000 Ordinary shares of 5p each
Allotted, called up and fully paid
3,560,878 (2006: 3,560,878)
Ordinary shares of 5p each
2007
£
2006
£
500,000
500,000
178,044
178,044
Equity share options and warrants
At 31 December 2007 and at the date of this report, options have
been granted and remain outstanding in respect of 160,000
Ordinary shares in the company, all priced by reference to the
mid-market price of the shares on the date of grant, all exercisable
between the third and tenth anniversaries of grant and none
exercisable at 31 December 2006 or 2007, as below:
2007
Number Weighted
average
exercise
price
2006
Number Weighted
average
exercise
price
p/share
p/share
2005 Approved Plan
28,000
Outstanding at 1 January
Granted in year
62,000
Outstanding at 31 December 90,000
2005 Unapproved Plan
56,000
Outstanding at 1 January
Granted in year
14,000
Outstanding at 31 December 70,000
Total
Outstanding at 1 January
84,000
76,000
Granted in year
Outstanding at 31 December 160,000
103.5
99.4
100.7
102.0
94.0
100.4
102.5
98.4
100.6
-
28,000
28,000
42,000
14,000
56,000
42,000
42,000
84,000
-
103.5
103.5
101.5
103.5
102.0
101.5
103.5
102.5
Exercise prices at 31 December 2007 ranged from 94p/share to
106.5p/share (2006: 101.5p/share to 103.5p/share), with a weighted
average remaining contractual life of 8.77 years (2006: 9.04 years).
Certain of the options were conditional upon the achievement of
earnings targets, all of which had been met by 31 December 2007.
Options have been granted to a director (Mr R.L. Cohen) amounting
to 37,000 shares at 101.5p/share on 20 October 2005 and 10,000
shares at 94p/share on 24 September 2007.
The market price of the company’s Ordinary shares on 31 December
2007 was £0.91, the highest price during 2007 was £1.08 between
23 March and 6 May, the lowest price during 2007 was £0.90
between 22 August and 20 September and the price on 20 March
2008 was £1.165.
In accordance with IFRS 2, a Black Scholes valuation model has
been used. This has indicated that no material expense is required
to be charged for the years ended 31 December 2007 and
31 December 2006. As such, no adjustment has been made to
either the consolidated or parent company financial statements.
Warrants to subscribe
Under an agreement dated 22 October 2004, Invex Capital LLP was
granted unquoted warrants to subscribe for Ordinary shares in the
company in connection with the acquisition of Fire Testing
Technology Limited. This warrant has an exercise price of £1 per
share, expires on 23 May 2010 and relates to 133,564 shares.
27. Shares classed as financial liabilities
Authorised
5,000,000 Convertible Redeemable shares of 1p each
Allotted, called up and fully paid
5,000,000 Convertible Redeemable shares
of 1p each – quarter paid
2007
£
2006
£
50,000
50,000
12,500
12,500
In accordance with IAS 32, Financial Instruments: Presentation,
the Convertible Redeemable shares are classified as financial
liabilities and included in other payables – less than one year
(see note 21).
The principal terms of the Convertible Redeemable shares
are as follows:
• There is no right to participate in the profits of the company.
• On a winding up or other return of capital the surplus assets
remaining after payment of liabilities shall be applied:
i)
First in repaying the capital paid up on the Ordinary
shares;
ii) Secondly in repaying the capital paid up on the
Convertible Redeemable shares; and
iii) Thirdly distributed amongst the holders of the Ordinary
shares according to the amounts paid up.
Convertible Redeemable shares
The conversion rights set out in note 27 would have resulted in the
issue of 485,574 Ordinary shares if conversion of all the Convertible
Redeemable shares had taken place on 31 December 2007.
• The holders of the Convertible Redeemable shares are not
entitled to attend or vote at General Meetings of the company
unless the meeting considers a resolution for winding up
the company.
23
• On payment to the company of the aggregate of (i) a sum equal
to any amount which has not been called or which is otherwise
unpaid in respect of all of the Convertible Redeemable shares to
be converted and (ii) a further sum equal to 95 pence multiplied
by the number of Ordinary shares to be issued as a result of the
conversion less the amount paid up or deemed paid up
(including the amount referred to in (i) above) in respect of the
Convertible Redeemable shares to be converted ("Conversion
Price"), each holder of Convertible Redeemable shares shall be
entitled to convert all or any of his Convertible Redeemable
shares into such number of fully paid Ordinary shares which
represents 0.24 per cent of the number of Ordinary shares in
issue, assuming that all the Convertible Redeemable shares
remaining capable of being convertible into Ordinary shares at
the date of which the conversion takes place had been
converted at the time, for every 100,000 Convertible
Redeemable shares so converted and in proportion for any
greater or lesser number of Convertible Redeemable shares
(“Conversion Rate”).
The holders of Convertible Redeemable shares shall (subject to
the provisions of the Companies Act) be entitled at any time to
redeem all or any of the Convertible Redeemable shares
outstanding out of any profits or monies of the company which
may lawfully be applied for that purpose.
28. Emoluments of directors and key
management personnel
Total directors’ emoluments:
Emoluments
Defined contribution pension scheme contributions
Emoluments of the highest paid director:
Emoluments
Defined contribution pension scheme contributions
During the year one director participated in a defined
contribution pension scheme (2006: one)
Compensation of key management personnel
2007
£
2006
£
201,601
3,708
178,660
3,792
205,309
182,452
92,443
3,708
96,151
73,898
3,792
77,690
Short-term benefits
437,239
373,090
Key management personnel comprise directors of the parent company and the
managing directors of the principal operating companies. The compensation of
the non-executive directors of the parent company is determined by the Board of
directors as a whole, that of the executive directors of the parent company is
determined by the Remuneration Committee of the Board (comprising the non-
executive directors) and that of the managing directors of the principal operating
companies is determined by the group Chief Executive.
29. Employees
Number of employees
By function
- manufacturing
- sales and administration
By business segment
- fire testing equipment
- fibre optic test equipment
- ultra high vacuum
manipulation equipment
- head office
Employment costs
Wages and salaries
Social security costs
Pension costs
2007
no.
2006
no.
35
25
60
31
8
15
6
60
25
26
51
26
8
12
5
51
2007
£
2006
£
1,900,379
194,719
47,331
1,471,845
166,021
34,569
2,142,429
1,672,435
30. Financial instruments
The group’s policies on treasury management and financial
instruments are given in the directors’ report.
Financial assets
The group’s financial assets (which are summarised in note
31 – credit risk) comprise available-for-sale investments, cash
and cash equivalents and trade and other receivables.
• The amounts derived from these assets and included as interest
income in the income statement are £32,987 (2006: £32,041).
24
• Cash and cash equivalents are principally denominated in
• A proportion of the bank loans are denominated in foreign
sterling and earn interest at floating rates.
• There is no difference between the book and fair values of the
currencies to provide a hedge against currency risk on group
assets, as described in note 24.
financial assets.
• At 31 December 2007 the group had trade receivables
denominated in foreign currency as follows:
Euros - £236,708 (2006: £197,558) and US Dollars - £357,779
(2006: £294,228).
Financial liabilities
The group's principal financial liabilities are bank loans,
subordinated loan notes issued in connection with the acquisition
of Fire Testing Technology Limited in 2005, net obligations under
hire purchase contracts, trade and other payables and Convertible
Redeemable shares classed as financial liabilities, as follows:
Bank loans
Subordinated loan notes
Net obligations under hire purchase contracts
Trade and other payables
Convertible Redeemable shares classed as
financial liabilities
2007
£
2006
£
2,326,594
500,000
36,165
877,226
2,703,775
500,000
53,978
779,708
12,500
12,500
3,752,485
4,049,961
• The costs attributable to these liabilities and included as
interest expense in the income statement amounted to £241,772
(2006: £227,418), as analysed in note 11. Foreign exchange
losses attributable to bank loans (see below) and included as
operating costs in the income statement amounted to £27,443
(2006: £7,335 gain).
Fair value of financial instruments
Financial instruments include the borrowings above. All financial
instruments denominated in foreign currencies are translated into
sterling at market prices at balance sheet dates. The directors
believe that there is no material difference between the book value
and fair value of such financial instruments.
Borrowing facilities
The group had an undrawn committed overdraft facility of
£500,000 at 31 December 2007 (2006: £500,000).
31. Risk management objectives and policies
The group is exposed to market risks, arising predominantly from
currency exposure resulting from its export activities, interest rate
fluctuation on its loans and deposits and credit and liquidity risks.
Risk management strategies are co-ordinated by the board of
directors of the parent company.
Foreign currency sensitivity
The group exports a substantial proportion of its sales, frequently
denominated in foreign currencies (principally in US$ and Euros).
Exposure to currency rate fluctuations exists from the moment a
sales order is confirmed through to the time when the related
remittance is converted into Sterling. This exposure is computed
monthly (along with offsetting exposure on purchases, generally
of minimal amounts) and counter-balanced by the conversion of a
proportion of the group’s bank loans into equivalent foreign
currencies. The net exposure to risk is therefore substantially
reduced. Residual exposure is the difference between the net
exposure and the converted bank loans, both translated into
Sterling at each date of measurement.
31 December 2007
Sterling
equivalent
of US$
£
Sterling
equivalent
of €
£
Sterling loans denominated in foreign currencies
at year-end
Residual exposure at year-end
Impact on pre-tax profits of a 5% variation in exchange
rate on year-end residual exposure
Impact on equity of a 5% variation in exchange rate on
year-end residual exposure
493,000
89,000
530,000
82,000
4,453
3,117
4,114
2,880
31 December 2006
Sterling
equivalent
of US$
£
Sterling
equivalent
of €
£
Sterling loans denominated in foreign currencies
at year-end
Residual exposure at year-end
Impact on pre-tax profits of a 5% variation in
exchange rate on year-end residual exposure
Impact on equity of a 5% variation in exchange rate on
year-end residual exposure
144,436
340,000
17,000
11,900
148,229
184,000
92,000
64,400
Interest rate sensitivity
The group’s interest rate exposure arises in respect of its bank
loans, which are LIBOR-linked for interest rate purposes, its
subordinated loan notes and its surplus funds, both of which are
bank base-rate-linked. The group’s sensitivity to interest rate
changes is as follows:
25
2007
£
2006
£
2,326,594
Bank loans outstanding at year-end
23,266
Impact on pre-tax profits of a 1% change in LIBOR
Impact on equity of a 1% change in LIBOR
16,286
Surplus funds less subordinated loan notes at year-end 410,366
Impact on pre-tax profits of a 1% change in
bank base rates
Impact on equity of a 1% change in bank base rates
4,104
2,873
2,703,775
27,038
18,927
324,156
3,242
2,269
Credit risk
The group’s exposure to credit risk is limited to the carrying
amounts of financial assets recognised at the balance sheet date,
as follows:
Available-for-sale investments
Cash and cash equivalents
Trade and other receivables
2007
£
2006
£
20,000
910,366
1,543,011
210,950
824,156
1,249,039
2,473,377
2,284,145
The group reviews the credit risk relating to its customers by
ensuring wherever possible that it deals with long established trading
partners, and agents and government / university backed bodies,
where the risk of default is considered low. Where considered
appropriate, the group insists on up-front payment and requires
letters of credit facilities to be provided. The directors consider that all
the group’s financial assets that are not impaired at each of the
reporting dates under review are of good credit quality, including
those that are past due (see note 20). None of the financial assets are
secured by collateral or other credit enhancements.
Group companies generally trade through overseas agents and credit
exposure to an individual agent can be significant at times. No single
counterparty owed more than 10% of the group’s total trade and other
receivables at 31 December 2007. At 31 December 2006, the USA and
China agents of Fire Testing Technology Limited owed 15% and 11%
respectively of the group’s total trade and other receivables at that date.
The credit risk for liquid funds and other short-term financial assets is
considered negligible since the counterparties are reputable banks
with high-quality external credit ratings.
Liquidity risk
The group’s longer-term financing needs, principally in respect of
business acquisitions, are satisfied by bank loans, with the objective
of servicing repayments from the cash flow arising from the
businesses acquired. For short and medium term financial needs, the
group regularly compares its projected requirements with available
cash and borrowing facilities; the directors continue to augment
existing cash surpluses with a £500,000 borrowing facility from the
group’s bank to provide an additional margin of liquidity.
The periods of maturity of the group’s borrowings are set out
in note 24.
32. Operating lease commitments
Operating lease payments expensed during the year:
Land and property
Minimum operating lease commitments falling due:
Within 1 year
Between 1 and 5 years
Total commitment
2007
£
2006
£
164,700
162,068
152,750
164,208
316,958
153,450
298,008
451,458
33. Explanation of transition to IFRS
The consolidated financial statements for the year ended 31
December 2007 are the first full year figures to be presented under
IFRS. In accordance with the provisions of IFRS 1, “First time
adoption of International Financial Reporting Standards”, the
group’s transition date for adoption of IFRS was 1 January 2006.
Comparative figures in respect of 2006 have been restated in
these consolidated financial statements to reflect changes in
accounting policies as a result of the adoption of IFRS. The last
consolidated financial statements to be prepared under UK GAAP
were those for the year ended 31 December 2006.
IFRS 1 permits companies adopting IFRS for the first time to take
certain exemptions from the full requirements of IFRS in the
transition period. These consolidated financial statements have
been prepared on the basis of taking the following exemptions:
• business combinations prior to 1 January 2006, the group’s
date of transition to IFRS, have not been restated to comply
with IFRS 3 Business Combinations. Goodwill arising from
these business combinations of £3,762,324 (net of amortisation
to 31 December 2005) has not been restated other than as set
out in note d below.
• negative goodwill arising on business combinations prior to
1 January 2006 of £124,265 (net of amortisation to
31 December 2005) has been transferred to reserves as at the
date of transition.
• IFRS 2 has been applied, in accordance with IFRS 1, to
equity-settled share options granted on or after 7 November
2002 and not vested at 1 January 2006.
26
Reconciliation of equity at 1 January 2006
Note
Non-current assets
Property, plant and equipment
Goodwill
Negative goodwill
Available-for-sale investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Current portion of long-term borrowings
Current tax payable
Non-current liabilities
Long-term borrowings
Deferred tax
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings
Revaluation reserve
Minority interests
Total equity
27
UK-
GAAP-
£-
114,336-
3,762,324-
(124,265)
427,911-
413,130-
692,350-
1,148,619-
(472,466)
(256,000)
(315,798)
(2,528,959)
(23,557)
2,837,625-
(173,118)
(2,501,430)
(380,000)
232,471-
--
(15,548)
(2,837,625)
Eliminate-
negative-
goodwill-
adjustment-
33a-
£-
124,265-
(37,280)
86,985-
(44,362)
(42,623)
(86,985)
IFRS adjustments – 1 January 2006
State equity-
investments-
at market value-
Deferred tax-
on FTT-
fair value-
33e-
£-
(83,586)
33f-
£-
(27,789)
25,076-
(58,510)
27,789-
--
58,510-
58,510-
--
IFRS-
£-
114,336-
3,734,535-
--
344,325-
413,130-
692,350-
1,148,619-
(472,466)
(256,000)
(315,798)
(2,528,959)
(7,972)
2,866,100-
(173,118)
(2,501,430)
(380,000)
188,109-
58,510-
(58,171)
(2,866,100)
Reconciliation of equity at 31 December 2006
Note
Non-current assets
Property, plant and equipment
Goodwill
Negative goodwill
Other intangible assets
Available-for-sale investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Current portion of long-term borrowings
Current tax payable
Non-current liabilities
Long-term borrowings
Deferred tax
Net assets
Equity
Share capital
Share premium
Merger reserve
Retained earnings
Revaluation reserve
Minority interests
Total equity
UK-
GAAP-
33a-
£-
295,468-
4,467,528-
(36,702)
--
219,155-
402,941-
1,249,039-
824,156-
(779,708)
(421,813)
(261,718)
(2,835,940)
(43,676)
3,078,730-
(178,044)
(2,501,430)
(475,074)
127,810-
--
(51,992)
(3,078,730)
Eliminate-
negative-
goodwill-
33d (iii)-
£-
36,702-
(11,011)
25,691-
(13,102)
(12,589)
(25,691)
IFRS adjustments – 31 December 2006
Business-
combinations-
Amortisation-
of intangibles-
Eliminate-
goodwill-
amortisation-
33d (i)-
£-
33d (iii)-
£-
33e-
£-
State equity-
investments-
at market-
values-
33f-
£-
IFRS-
Deferred-
tax on-
FTT fair-
value adj-
£-
£-
247,519-
(297,295)
(27,789)
424,707-
(228,783)
(8,205)
(127,412)
68,635-
247,519-
--
(160,148)
2,462-
(5,743)
21,497-
(6,292)
(247,519)
160,148-
6,292-
5,743-
295,468-
4,389,963-
--
195,924-
210,950-
402,941-
1,249,039-
824,156-
(779,708)
(421,813)
(261,718)
(2,835,940)
(89,505)
3,179,757-
(178,044)
(2,501,430)
(475,074)
33,629-
5,743-
(64,581)
(247,519)
--
160,148-
5,743-
6,292-
(3,179,757)
28
GAAP-
UK- IFRS adjustments – 31 December 2006
Eliminate-
goodwill-
amortisation-
Amortisation-
of-
intangibles-
Eliminate-
negative-
goodwill-
33b-
£-
33d (iii)-
£-
33d (iii)-
£-
State equity-
investments-
at market-
values-
33e-
£-
Deferred
tax on
FTT fair
value adj
33f
£
(87,563)
(87,563)
(87,563)
(87,563)
26,269-
(61,294)
30,030-
(31,264)
247,519-
247,519-
247,519-
(228,783)
(228,783)
(228,783)
247,519-
247,519-
(228,783)
68,635-
(160,148)
(6,292)
(6,292)
247,519-
(160,148)
--
(6,292)
Reconciliation of profit for the year ended 31 December 2006
Note
Revenue (continuing and acquisitions)
Operating costs
Goodwill amortisation - positive(
Goodwill amortisation - negative
Amortisation of intangibles
Total operating costs
Operating profit/(loss)
Profit/(loss) on disposal and changes in market values of investments
Interest receivable
Interest (payable)
Profit on ordinary activities before taxation
Tax on profit on ordinary activities
Profit on ordinary activities after taxation
Minority interests
Profit attributable to equity holders of the parent company
£-
5,195,325-
(4,483,852)
247,519)
87,563-
-
(4,643,808)
551,517-
(6,145)
32,041-
(227,418)
349,995-
(173,265)
176,730-
(36,440)
140,290-
29
IFRS-
£-
5,195,325-
(4,483,852)
--
--
(228,783)
(4,712,635)
482,690-
(6,145)
32,041-
(227,418)
281,168-
(84,653)
196,515-
(6,410)
190,105-
Notes to the reconciliations
a) The group acquired 51% of the issued share capital of
PE.fiberoptics Limited (“PFO”) on 2 September 2005. PFO
acquired the goodwill and certain assets of a business
previously carried on by PerkinElmer (UK) Limited. Under UK
GAAP, negative goodwill arising in connection with this
acquisition was capitalised within the accounts of PFO. Under
IFRS, the amount of negative goodwill as at the date of
transition was transferred to reserves. The result of this
adjustment is to decrease negative goodwill by £124,265 as at
the date of transition to IFRS and to increase deferred tax,
minority interest and reserves by the same amount in
aggregate. The value of the reduction in negative goodwill at 31
December 2006 was £36,702.
b) Negative goodwill recognised by the group on the above
acquisition under UK GAAP was written back to profit and loss
to match the consumption of the non-monetary assets acquired.
Under IFRS, with the balance of negative goodwill as at the date
of transition having been transferred to reserves, no
amortisation or write-back is required. The result of these
adjustments is to eliminate the amortisation credit of £87,563
in the income statement for the year ended 31 December 2006.
After 30% corporation tax and 49% minority interest, the net
profit reduction in that year is £31,264.
c) The group acquired UHV Design Limited on 21 February 2006
and the goodwill and certain trading assets of Aitchee
Engineering Associates on 4 September 2006. Goodwill
recognised by the group on these acquisitions under UK GAAP
was amortised over a period of 20 years in the case of UHV
Design Limited and 3 years in the case of the Aitchee business.
Under IFRS goodwill is not amortised but tested annually for
impairment and therefore the amortisation charge recognised in
accordance with UK GAAP in 2006 has been written back.
However, intangible assets identified on business combinations
in accordance with IFRS as described above are amortised in
accordance with the accounting policy explained above.
Application of IFRS 3 to these business combinations resulted
in identification of a number of intangible assets, including
customer relationships, distribution agreements and sales order
backlogs. Under IFRS these have been recognised separately
in the balance sheet at their fair values at the dates of the
combinations, along with the associated deferred tax. Under
UK GAAP these intangible assets were subsumed within
goodwill and amortised in accordance with the group’s
accounting policy above.
d) The result of these changes is:
(i) To decrease goodwill by £240,595 and increase
intangible assets by £343,707 (with deferred tax of
£103,112) as at the date of the combination in the
case of UHV Design Limited and to decrease
goodwill by £56,700 and increase intangible assets
by £81,000 (with deferred tax of £24,300) in the case
of Aitchee Engineering Associates.
(ii) At 31 December 2006 the value of these intangible
assets, net of amortisation, was £195,924.
(iii) The goodwill amortisation charge in respect of these
acquisitions and that of Fire Testing Technology
Limited ("FTT" – acquired prior to the date of
transition to IFRS) in the year ended 31 December
2006 was reduced in aggregate by £247,519. The
equivalent intangible assets amortisation charge was
increased by £228,783, stated prior to a 30%
reduction to reflect the release of deferred taxation.
e) Under UK GAAP, available-for-sale investments were stated at
the lower of cost and the directors’ estimates of near-term net
realisable value. Under IFRS, such investments are stated at
open market values, with changes in value being transferred
directly into equity, net of applicable taxation. Amounts
accumulated in equity are transferred to the income statement
when an available-for-sale investment is sold. This has had the
effect of reducing the carrying value of such investments by
£83,586 to £344,325 at 31 December 2005 and by £8,205 to
£210,950 at 31 December 2006, with consequential changes to
deferred tax and in equity.
f) Under UK GAAP, no deferred tax was recognised in respect of
fair value adjustments arising on the acquisition of FTT.
Notwithstanding that the date of the FTT acquisition was prior
to the group’s IFRS transition date, IFRS requires that deferred
tax be recognised in respect of such fair value adjustments.
Accordingly a deferred tax liability of £27,789 has been
recognised at the transition date, with a reversal of the
provision of £6,292 in the year ended 31 December 2006.
30
34. Explanation of material adjustments to the cash
35. Post balance sheet event
On 20 March 2008, the parent company exchanged contracts for
the purchase for £490,000 of a freehold property at Unit 18,
Charlwoods Road, East Grinstead, West Sussex. This site
comprises a factory unit with ancillary offices and is located
adjacent to the parent company’s head office and premises of its
principal subsidiary, FTT. The activities of FTT’s subsidiary,
Aitchee Engineering Limited, will be relocated into Unit 18.
flow statement
Application of IFRS has resulted in the reclassification of certain
items in the cash flow statement as follows:
(i) Under UK GAAP, payments to acquire property, plant and
equipment were classified as part of 'Capital expenditure and
financial investment'. Under IFRS, payments to acquire
property, plant and equipment have been classified as part of
'Investing activities'.
Income taxes are classified as operating cash flows under
IFRS, but were included in a separate category of tax cash
flows under UK GAAP.
Interest paid and interest received are classified as cash
flows from investing activities under IFRS, but were included
in the 'Returns on investments and servicing of finance'
category in cash flows under UK GAAP.
(ii)
(iii)
(iv) Equity dividends paid are classified as financing cash flows
under IFRS, but were included in a separate category of
dividend cash flows under UK GAAP.
There are no other material differences between the cash flow
statement presented under IFRS and that presented under
UK GAAP.
31
Report of the Independent Auditor
We have audited the parent company financial statements of
Judges Capital plc for the year ended 31 December 2007 which
comprise the company balance sheet and notes 1 to 12. These
parent company financial statements have been prepared under
the accounting policies set out therein.
We have reported separately on the consolidated financial
statements of Judges Capital plc for the year ended
31 December 2007.
This report is made solely to the company’s members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors
and auditors
The directors’ responsibilities for preparing the Annual Report and
the parent company financial statements in accordance with
United Kingdom law and Accounting Standards (United Kingdom
Generally Accepted Accounting Practice) are set out in the
Statement of Directors’ Responsibilities.
Our responsibility is to audit the parent company financial statements
in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company
financial statements give a true and fair view and whether the
parent company financial statements have been properly prepared
in accordance with the Companies Act 1985. We also report to
you whether in our opinion the information given in the directors’
report is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the parent company
has not kept proper accounting records, if we have not received all
the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration
and other transactions is not disclosed.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited parent company
financial statements. The other information comprises only the
directors' report and the Chairman's statement. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the parent
company financial statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the parent
company financial statements. It also includes an assessment of
the significant estimates and judgements made by the directors in
the preparation of the parent company financial statements, and of
whether the accounting policies are appropriate to the parent
company's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the parent company financial statements are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the parent
company financial statements.
Opinion
In our opinion:
• the parent company financial statements give a true and fair
view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the company’s affairs as at
31 December 2007;
• the parent company financial statements have been properly
prepared in accordance with the Companies Act 1985; and
• the information given in the directors’ report is consistent with
the parent company financial statements.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
Leicester
27 March 2008
32
Parent Company Balance Sheet
Fixed assets
Investments in subsidiaries
Current assets
Debtors
Investments
Cash in hand and at bank
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Total net assets
Capital and reserves
Called up share capital
Share premium
Profit and loss account
Shareholders' funds
Notes
3
4
5
6
7
8
9
9
9
2007-
£-
5,620,080-
374,343-
19,373-
335,919-
729,635-
(592,231)
137,404-
5,757,484-
(2,318,594)
3,438,890-
178,044-
2,501,430-
759,416-
3,438,890-
2006-
£-
5,620,080-
384,878-
219,155-
218,514-
822,547-
(513,838)
308,709-
5,928,789-
(2,799,775)
3,129,014-
178,044-
2,501,430-
449,540-
3,129,014-
In accordance with the exemptions permitted by s230 of the Companies Act 1985, the profit and loss account of the parent company has not been presented.
These parent company financial statements were approved by the board on 27 March 2008
D.E. Cicurel
Director
R.L. Cohen
Director
33
Notes to the Parent Company Financial Statements
1. General information
2.3 Pensions
These separate financial statements of the parent company have
been prepared under the historical cost convention and in
accordance with applicable United Kingdom Accounting Standards.
2. Accounting policies
2.1 Investments
Fixed asset investments in subsidiaries are stated at cost less
provision for impairment. Other investments are treated as current
assets, reflecting the parent company’s strategic investment policy
actively to pursue appropriate exit routes on all such investments.
Current asset investments are stated at the lower of cost and the
directors’ estimate of near-term net realisable value.
2.2 Taxation
Current tax is provided at amounts expected to be paid or
recovered either directly or through group relief arrangements.
Deferred tax is the taxation attributable to timing differences
between the results computed for tax purposes and those stated in
the parent company financial statements. It is recognised on all
timing differences where the transaction or event which gives the
company an obligation to pay more tax or the right to pay less tax
in the future has occurred by the balance sheet date. Deferred tax
assets are recognised when it is more likely than not that they will
be recovered.
Current and deferred tax assets and liabilities are calculated at
rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Companies in the group operate defined contribution pension
schemes for employees and directors. The assets of the schemes
are held by investment managers separately from those of the
company and group. The pension costs charged against operating
profits represent the amount of the contributions payable to the
schemes in respect of the accounting period.
2.4 Share-based payments
FRS 20 has been applied, where the effect is material, to equity-
settled share options granted on or after 7 November 2002 and
not vested prior to 1 January 2006. The Black Scholes valuation
model is used and, up to 31 December 2007, has indicated that
no material adjustment to profits
is required.
All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the fair
values of employees’ services are determined indirectly by
reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and
excludes the impact of non-market vesting conditions.
All equity-settled share-based payments are ultimately recognised
as an expense in the profit and loss account, with a corresponding
credit to “other reserve”.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to
vest. Estimates are subsequently revised if there is any indication
that the number of share options expected to vest differs from
previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. The impact of the revision of the
original estimates, if any, is recognised in the profit and loss
account over the remaining vesting period, with a corresponding
adjustment to the appropriate reserve. No adjustment is made to
any expense recognised in prior periods if share options
ultimately exercised are different to that estimated on vesting.
Upon exercise of share options the proceeds received net of
attributable transaction costs are credited to share capital, and
where appropriate share premium.
2.5 Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of exchange
prevailing at the balance sheet date. Transactions in foreign
currencies are recorded at the rate of exchange prevailing at the
date of transaction. All differences are taken to the profit and
loss account.
2.6 Convertible redeemable shares
In accordance with FRS 25, the convertible redeemable shares
have been recorded as a current liability at the net proceeds
received and any future conversion into Ordinary shares has not
been taken into account.
34
3.
Investments in subsidiaries
Cost
1 January
Acquisition in year
Adjustment in respect of prior year acquisition
31 December
2007-
£-
2006-
£-
5,620,080-
--
--
4,579,564-
1,046,214-
(5,698)
5,620,080-
5,620,080-
The parent company’s trading subsidiaries at 31 December 2007,
all of which were incorporated and operate in the United Kingdom,
were as follows:
Company
Fire Testing
Technology
Limited
PE.fiberoptics
Limited
Principal activity
Design and assembly
of fire testing instruments
Class of shares % held
100%
Ordinary £1
Design and assembly
of fibre-optic testing
instruments
“A” Ordinary
£1
UHV Design
Limited
Aitchee
Engineering
Limited
Design and manufacture Ordinary £1
of instruments used to
manipulate objects in ultra
high vacuum chambers
Manufacture of
engineering parts and
finished products
Ordinary £1
100% of
“A” class;
being 51%
of total
equity
100%
100%
4. Debtors
2007
£
Amounts owed by group companies
274,844
Corporation tax - group relief owed by group companies 96,554
2,945
Prepayments and accrued income
2006
£
275,125
106,857
2,896
374,343
384,878
Included in amounts owed by group companies is the sum of £203,853 (2006:
£nil) which is repayable on demand at any time after 30 June 2009 provided that
all liabilities to third parties falling due on or before that date have been met.
5. Current asset investments
At 31 December 2007 Period end value
Historical
cost
£
Market-
valuation-
£-
Directors'
valuation
£
Total
valuation
£
At 31 December 2007 – unquoted
investment
19,373
Net unrealised gain at
31 December 2007
-
--
--
20,000
20,000
627
627
At 31 December 2006 Period end value
Directors'
valuation
£
Market-
valuation-
£-
Historical
cost
£
Unquoted investments
Quoted investments
At 31 December 2006
19,373
199,782
219,155
--
190,950-
190,950-
45,500
-
45,500
Total
valuation
£
45,500
190,950
236,450
The unquoted investment held at 31 December 2007 is 800,100
shares (representing 1.68%) in Fortress Holdings plc (in
members’ voluntary liquidation – the directors’ valuation is their
estimate of the final distribution from the liquidator). The
company’s quoted investment in Poole Investments PLC, being
5,700,000 shares (representing 3.08%, part of a 13% concert
party), was sold during the year, realising £342,000 in cash and a
gain before tax of £142,217.
6. Creditors: amounts falling due within one year
Trade creditors
Accruals and deferred income
Social security and other taxes
Bank loan
Other creditors
2007
£
-
61,884
9,847
508,000
12,500
2006
£
43,000
39,970
14,368
404,000
12,500
592,231
513,838
Other creditors comprise £12,500 of non equity shares classed as financial
liabilities (see note 27 to the consolidated financial statements).
7. Creditors: amounts falling due after
more than one year
Bank loan
Subordinated loan notes
2007
£
2006
£
1,818,594
500,000
2,299,775
500,000
2,318,594
2,799,775
All of the above companies are owned directly by Judges Capital
plc, with the exception of Aitchee Engineering Limited, which is
owned directly by Fire Testing Technology Limited.
Net unrealised (loss) / gain at
31 December 2006
-
(8,832)
26,127
17,295
35
The bank loan is secured on assets of the group, is repayable in quarterly
instalments over a six year period ending 31 March 2011 and bears interest at
21/4% above LIBOR-related rates. The subordinated loan notes are unsecured,
repayable on 23 May 2010 and bear interest at Bank of Scotland base rate plus
2%. The repayment profile of borrowings is as follows:
Bank loan Subordinated
loan notes
£
£
Total
£
Repayable in less than 1 year
Repayable in years 1 to 2
Repayable in years 2 to 5
508,000
608,000
1,210,594
-
-
500,000
508,000
608,000
1,710,594
2,326,594
500,000
2,826,594
A proportion of the company’s bank loans is drawn in foreign currencies to
provide a hedge against assets within the group that are denominated in those
currencies. The Sterling equivalent at 31 December 2007 of loans denominated
in US$ was £492,730 (2006: £144,436) and in Euros was £529,699 (2006:
£148,229). These amounts are included in the figures above for bank loans,
repayable in years 2 to 5.
8. Share capital
Details relating to the parent company’s share capital are set out in
notes 26 and 27 to the consolidated financial statements.
9. Statement of movements in shareholders’ funds
Share
capital
£
Share
Total-
Profit and-
premium loss account- shareholders’-
funds-
account
£-
£
£-
1 January 2007
178,044
2,501,430
449,540-
3,129,014-
Profit for the year
Dividends paid in the year
-
-
-
-
420,263-
(110,387)
420,263-
(110,387)
31 December 2007
178,044
2,501,430
759,416-
3,438,890-
The profit for the financial year in the accounts of the parent
company amounted to £420,263 (2006: £99,398).
11. Directors and employees
10. Related party transactions
The parent company entered into the following transactions during
the year with its 51%-owned subsidiary, PE.fiberoptics Limited
(“PFO”):
(a) the parent company continued to make available to PFO a
loan facility originally granted in the sum of £250,000 in
September 2005 but reducing annually by £62,500. There
were no amounts drawn or outstanding at any time during the
year. Any amounts outstanding from time to time under this
loan facility are secured by way of a first charge over the
assets and undertaking of PFO and bear interest at the rate of
7% per annum.
(b) an additional loan to PFO amounting to £40,800 was
outstanding on 1 January and 31 December 2007. This loan is
unsecured and repayable at the discretion of the directors of
PFO. It was interest-free until 1 January 2007, since which date
interest has been charged at the rate of 71/2% per annum (2007:
£3,060; 2006: £nil).
Total directors’ emoluments
Emoluments
Defined contribution pension scheme contributions
Emoluments of the highest paid director
Emoluments
Defined contribution pension scheme contributions
2007
£
2006
£
201,601
3,708
178,660
3,792
205,309
182,452
92,443
3,708
96,151
73,898
3,792
77,690
During the year one director participated in a defined contribution pension
scheme (2006: one)
Employees
Number of directors
Administrative staff
Total
no.
5
1
6
no.
5
-
5
12. Post balance sheet event
On 20 March 2008, the parent company exchanged contracts for
the purchase for £490,000 of a freehold property at Unit 18,
Charlwoods Road, East Grinstead, West Sussex. This site
comprises a factory unit with ancillary offices and is located
adjacent to the parent company’s head office and premises of its
principal subsidiary, FTT. The activities of FTT’s subsidiary,
Aitchee Engineering Limited, will be relocated into Unit 18.
36
Notice of Annual General Meeting
Notice is hereby given that the fifth Annual General Meeting of Judges Capital plc
(“the Company”) will be held at 8 - 10 Grosvenor Gardens, London SW1W 0DH on
Thursday 22 May 2008 at 12.00 noon for the purpose of dealing with the following
business of which items 6, 7 and 8 are special business.
Ordinary Business
1
To receive the reports of the directors and the auditor and the audited financial
statements of the Company for the year ended 31 December 2007.
That:
Special Resolutions
7
(a) subject to and conditional upon the passing of resolution 6 above, the directors of
the Company be and they are hereby empowered pursuant to section 95(1) of the
Act to allot equity securities (as defined for the purposes of section 95 of the Act) for
cash, pursuant to the authority granted by resolution 6 above, as if section 89(1) of
the Act did not apply to any such allotment, provided that such power shall be
limited to:
2
To re-appoint Glynn Reece, who retires by rotation, as a director.
(i)
3
To re-appoint Ralph Cohen, who retires by rotation, as a director.
4
To approve a final dividend of 2.2 pence per Ordinary share.
5
To re-appoint Grant Thornton UK LLP as auditor to hold office from the conclusion
of this meeting until the conclusion of the next general meeting at which financial
statements are laid before the Company and to authorise the directors to fix the
remuneration of the auditor.
Special Business
To consider and, if thought fit, to pass the following resolutions, as to the resolution
numbered 6 as an Ordinary Resolution and as to the resolutions numbered 7 and 8 (see
note 5 below) as Special Resolutions:
Ordinary Resolution
6
That the directors of the Company be and are hereby generally and unconditionally
authorised to exercise all the powers of the Company to allot relevant securities (as
defined for the purposes of section 80 of the Companies Act 1985 (“the Act”)) up to
an aggregate nominal amount of £178,043 provided that this authority unless
renewed shall expire at the close of the next Annual General Meeting of the
Company, save that the Company may before such expiry make any offer,
agreement or other arrangement which would or might require relevant securities to
be allotted after such expiry and the directors of the Company may allot the relevant
securities in pursuance of such offer, agreement or other arrangements as if the
authority conferred hereby had not expired, this authority to replace any previous
authority under section 80 of the Act which is hereby revoked with immediate effect.
37
the allotment of equity securities in connection with a relevant rights issue or open
offer in favour of Ordinary shareholders where the equity securities attributable to
the respective interests of all Ordinary shareholders are proportionate to the
respective numbers of Ordinary Shares held by them on the record date for such
allotment, but subject to such exclusions as the directors may deem fit to deal with
fractional entitlements or problems arising under the laws of any overseas territory
or the requirements of any regulatory body or stock exchange; and
(ii)
the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity
securities for cash up to an aggregate nominal amount of £178,043.
and, unless previously renewed, revoked or varied, such power shall expire at the
close of the next Annual General Meeting of the Company, save that the Company
may before such expiry make an offer, agreement or other arrangement which would
or might require equity securities to be allotted after such expiry and the directors of
the Company may allot equity securities in pursuance of such offer, agreement or
other arrangement as if the power conferred hereby had not expired;
(b) For the purposes of this resolution:
(i)
“relevant rights issue” means an offer of equity securities open for acceptance for a
period fixed by the directors of the Company to holders on the register on a fixed
record date of Ordinary shares in the Company in proportion (or as nearly as may
be practicable) to their respective holdings but subject in any case to such
exclusions or other arrangements as the directors of the Company may deem
necessary or desirable to deal with fractional entitlements or legal or practical
problems under the laws of, or the requirements of, any recognised regulatory body
or any stock exchange in any territory; and
(ii)
the nominal amount of any securities shall be taken to be, in the case of rights to
subscribe for or convert any securities into shares of the Company, the nominal
amount of such shares, which may be allotted pursuant to such rights.
8
That the Company be generally and unconditionally authorised pursuant to Article
15 of the Company’s Articles of Association and for the purpose of Section 166 of
the Act to make one or more market purchases (within the meaning of Section
163(3) of the Act) of Ordinary shares of 5 pence each in the capital of the Company
on such terms and in such manner as the Directors of the Company may from time
to time determine, provided that:
(a)
(b)
the maximum aggregate number of Ordinary shares hereby authorised to be
purchased is 533,775 (representing approximately 14.99 per cent. of the Company’s
issued share capital);
the minimum price which may be paid for such shares is the nominal value of 5
pence per Ordinary share (exclusive of expenses);
(c) unless the Company makes market purchases of its own Ordinary shares by way of
a tender or partial offer made to all holders of Ordinary shares on the same terms,
the maximum price (exclusive of expenses) which may be paid for an Ordinary
share shall not be more than five per cent. above the average of the market values
for an Ordinary share as derived from the AIM Appendix to the London Stock
Exchange Official List for the five business days immediately preceding the date on
which the Ordinary share is purchased;
(d) unless previously renewed, varied or revoked, the authority hereby conferred shall
expire at the conclusion of the next Annual General Meeting of the Company to be
held in 2009 or 15 months from the date of passing of this resolution, whichever
shall be the earlier; and
the Company may validly make a contract or contracts to purchase Ordinary shares
under the authority hereby conferred prior to the expiry of such authority which will
or may be executed wholly or partly after the expiry of such authority and may make
a purchase of Ordinary shares in pursuance of any such contract or contracts.
(e)
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By Order of the Board
RL Cohen
Company Secretary
25 April 2008
Registered Office:
Unit 19, Charlwoods Road, East Grinstead
West Sussex RH19 2HL
Notes:
1
A member entitled to attend and vote at the meeting convened by the notice
set out above is entitled to appoint one or more proxies to attend and, on a
poll, vote in his/her place. A proxy need not be a member of the Company.
2
To be valid, the instrument appointing a proxy together with any power of
attorney or other authority under which it is signed or a notarially certified
copy of such power or authority, must be deposited at the registered office of
the Company not less that 48 hours before the time fixed for holding the
meeting or any adjournment thereof.
3
The completion and return of a form of proxy will not preclude a member
from attending and voting in person at the meeting should he/she so wish.
4. Pursuant to Regulation 41 of The Uncertificated Securities Regulations 2001
only those members registered in the Register of Members of the Company
as at 12.00 noon on 20 May 2008 (being not more than 48 hours prior to
the time fixed for the Meeting) or, if the Meeting is adjourned, such time
being not more than 48 hours prior to the time fixed for the adjourned
meeting are entitled to attend or vote at the meeting in respect of the number
of Ordinary shares registered in their name at that time. Changes to entries
in the Register after 12.00 noon on 20 May 2008 shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
5. The directors note that Resolution 8, if passed by shareholders, cannot be
implemented until either the Concert Party’s shareholding in the Company is
appropriately diluted by an issue of new shares or shareholders pass a
resolution to approve a “Rule 9” waiver from the Panel on Takeovers and
Mergers, which is being sought at the time of printing this Notice. The
Concert Party comprises David Cicurel Securities Limited; David Cicurel;
Dawnay Day Corporate Finance Limited; ForwardIssue Limited; Totalassist
Company Limited; Guy Naggar and the Naggar Family Pension Scheme.
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Judges Capital plc
Judges Capital plc, Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL
Tel: 01342 323600 Fax: 01342 323608 E-mail: enquiries@judges.uk.com
Website: www.judges.uk.com