Clarity Investor Information

• Summary
• About Clarity
• Board of Directors
• Annual Reports
• News
• AIM Rule 26
• Contact Investor Information

Annual Report and Financial Statements 2007

Home > Investor Information > Annual Reports > Annual Report and Financial Statements 2007

 Download Report PDF (889k) 

Financial Highlights

• Turnover increased 10% to £20.8m (2006: £18.9m)
• Recurring revenue increased by 10% to £9.1m (2006: £8.3m)
• Gross margin increased by £1.36m uplift to 62% (2006: 61%)
• Pre-tax loss of £458,000 (2006: profit £953,000)
• Basic loss per share of 3.96p (2006: earnings per share 5.81p)
• Acquisition of MATRA Systems in April 2006, expanding the Group's offering

Back to top ^

Board Statement

Overview

Clarity has a wide product portfolio covering a range of market sectors and geographies. The acquisition of MATRA (described below) in April 2006 created a stronger business that has brought considerable advantages to the combined Group. Clarity software is installed in many vertical markets, and consumers experience our products every day, whether they are buying tickets, visiting a health club or golf course, in a restaurant or bar, booking into a hotel or making a purchase from a retailer.

However, Clarity has nevertheless suffered a difficult year as a result of contract slippage and cost over-runs in a number of subsidiaries, resulting in poorer performance across the second half of the year, despite a profitable first half. Shareholders will be aware that, shortly after the year-end, a number of shareholders requisitioned an EGM in order to effect certain key changes which they felt would improve the Group's performance. Although each of the resolutions voted on at the EGM (held on 31 May 2007) was defeated, the publicity which the process generated served to dent customer confidence, with the result that several prospective contracts were lost or delayed in the process, and internal morale was also damaged.

Furthermore, the process proved expensive in terms of advisor and other costs, as well as diverting management focus from the day to day operations of the business for several months, and all of these factors will continue to have a material effect on results in 2007/8.

The Board does, however, recognise the validity of certain issues raised during the EGM process, and has actively been making moves to address these concerns.

As a direct result of this process, a number of changes were made to strengthen the Clarity Board, with the appointment of a new Chairman, new Deputy Chairman and a Chief Financial Officer, each of whom has strong experience of improving under-performing businesses, thus increasing the Board to four members, inclusive of two non-Executives. On 27 September 2007 Ken Smith was appointed as Group Managing Director. Brief biographies of each appointee are shown on the facing page.

John O'Hara
Chairman

John O'Hara, Chairman, brings with him a wealth of relevant experience. John led the negotiations for Total Hospitality Solutions Limited and Total Hospitality Solutions (UK) Limited, which were acquired by Clarity on 22 May 2007. He has had over 20 years experience across the technology sector in the UK, New Zealand and the US. During that time he has founded, grown and successfully exited three technology companies; one was sold privately, one listed in the US on NASDAQ and one was publicly listed in New Zealand. In 2005 John released a book titled Commercialising Innovation and he holds an honorary Master of Business Innovation and Entrepreneurship degree.

Sir Colin Chandler
Deputy Chairman

Sir Colin Chandler, Deputy Chairman, has many years of valuable experience in the public company arena. He joined easyJet plc in April 2002 and was appointed Chairman in 2002. Until November 2004, he was Non-Executive Deputy Chairman of Smiths Group plc, having been a Non-Executive Director of TI Group since 1992. Sir Colin has been variously Managing Director, Chief Executive and then Chairman of Vickers plc. Earlier in his career, Sir Colin was seconded from British Aerospace to the role of Head of Defence Export Services, Ministry of Defence. He was Chairman of Racal Electronics plc. He is Chairman of TI Automotive Limited, Chairman of Automotive Technik Limited, and is Pro-Chancellor of Cranfield University. He was Knighted in June 1988 for services to export.

Ken Smith
Group Managing Director

Ken Smith, Group Managing Director, is a member of the Institute of Chartered Accountants of Scotland. Qualifying with Deloittes in Glasgow he spent four years with the firm's Nairobi practice as Senior Manager. Following his return to the UK in 1986, as Group Finance Director of Alphameric plc, he was instrumental in that company's turnaround and return to profitable growth. Since leaving Alphameric in 1996, he has been part-time financial director, or consultant, to a variety of companies in the IT sector, with particular emphasis on fundraising and turnarounds. He was closely involved in the acquisition of Cyntergy Services Limited, which Clarity acquired in 2003.

Since its formation on 26 June 2007, the newly-constituted Board has been reviewing the Group's structure, people and processes, as well as its product and marketing strategies. The Board expect to release an announcement as a result of this review shortly.

The Board has also begun to review strategy and focus on reducing costs and improving the accountability of individual business units within the Group. The Group is in the process of implementing the selection of suitable business unit managers who are strongly motivated and incentivised to achieve profit and cash generation in their respective market sectors.

Financial highlights

After several years of improving financial performance the past financial year saw a dip in Clarity's fortunes, with a loss before tax of £458,000 (2006 profit: £953,000). The loss resulted from delays in the completion of new product development, a slippage of several anticipated contracts and increased costs in a number of divisions.

Revenues increased from £18.9m to £20.8m, and gross margin improved slightly to 62% (2006: 61%). Gross margins were adversely impacted as a direct result of low margin hardware supplied in terms of roll-out business to a key client; the adjusted gross margin for the Group, excluding this supply, would have been 63.5%.

Operating costs increased from £10.4m to £13.0m which gave rise to an Operating Loss of £148,000 (2006 Operating Profit: £1.1m). This increase was almost exclusively due to the inclusion of MATRA within the Group from May 2006 onwards. MATRA added £3.55m to Operating Costs and the Group therefore, on a like for like basis, reduced costs by £950,000 across its continuing operations.

However, primarily as a result of trading underperformance and revenue slippage, this meant there was no commensurate increase in turnover in tandem with the increased cost base, and hence the Group recorded a Loss before Tax of £458,000.

MATRA acquisition

MATRA, a global software and solutions provider was acquired on 28 April 2006 for an initial consideration of £2.5m, and a further £500,000 which has been satisfied by the issue of Clarity shares. In addition, a further £500,000 of Clarity shares were issued during the year in relation to the three year earn out arrangement.

MATRA brings to the Group an up to date product range that spans many aspects of the retail sector.

MATRA's FREEDOM products, which include point of sale (POS) and related software, have been successfully deployed in Europe, North America, Asia and South Africa. The acquisition therefore strengthens Clarity's international presence, and will help build Clarity's critical mass as a solutions provider in the POS market.

MATRA clients operate in the grocery, department store, general merchandising and entertainment chains. Customers include Coop Denmark, Six Flags, Somerfield, Compagnie des Alpe, MoviePark, The John Lewis Partnership, The HMV and Waterstones Group, Focus and Woolworths in South Africa. Their software is a true "multi-channel" offering, allowing transactions to take place through a variety of devices and technologies.

The combination of Clarity and MATRA strengthens the Group's senior management and has added considerable technical expertise.

Total Hospitality Solutions acquisition

Shortly after the year end, Clarity acquired Total Hospitality Solutions (THS) for an initial consideration of £2.2m, satisfied by the issue of Clarity shares. In addition there is a two year earn out, and the total consideration will not exceed £4m.

THS comprises an established New Zealand business, and relatively new UK business, both operating in the provision of property management systems to the hospitality, hotel and events management industry.

The Board recognises obvious synergies between THS and its existing leisure and hospitality businesses. This has already been evidenced by a combined sale of the Group's Baron product offering with the THS product offering. It is the intention to fully investigate and exploit the opportunities that this represents.

Products and services

Clarity's new .Net ticketing software has recently been accepted in live trading environments in the US, and interest from other outlets in the US is developing rapidly. The Group believes that its product is ideal for this market, and is currently building its sales strategy whilst in close discussion with a number of prospects.

The integration of golf, spa, hotels and our food and beverage software into a single division will not only offer cross market sales, but a more integrated product range. This is evidenced by the recent combined Baron/THS sale referred to above. Although the hospitality market has recently been quiet, we are now seeing evidence of interest in replacement solutions.

In the leisure sector, our customer base awaits our new leisure solution based on the Microsoft .Net platform. Elements of this software are now working in a live trading environment with a private sector customer, and we have received initial orders from public sector clients.

In the retail arena, the integration of Clarity Central with MATRA's software is progressing according to plan with the imminent implementation of the first release with an existing customer. Feedback from our customer base is positive and is helping to prioritise our road map for the further integration work planned.

Dividend Policy

In view of the loss incurred during the year, no dividend is proposed. Once financial performance has improved it remains the Board's intention to pursue a progressive dividend policy. This is unlikely to occur in the 2007/8 financial year, but remains under constant review.

Outlook

Clarity has experienced a difficult year. The EGM was inevitably a distraction to the business, diverting management focus from operations for a number of months. It also had the effect of adding costs, and having an adverse impact on revenues and trading during the first half of the current year, mainly due to heightened uncertainty during and immediately after the process.

Having due acknowledgement for the concerns raised by the requisitionists, and by implementing our own strategy, confidence is slowly returning and the Board anticipates that the cost-reduction programme commenced in July 2007, together with the revised strategy being introduced, will result in an enhanced Group performance in the medium term.

Despite concerns as a result of the adverse publicity surrounding the EGM, discussions are currently under way with a number of key prospects.

With the appointment of Grant Thornton as Nominated Advisor and SVS Securities as stockbroker, and the empowerment of some highly talented individuals within the Group, the Directors believe that a strong core team is in place, with the requisite skills and experience to achieve a significant improvement in the Group's financial performance and subsequent results.

The Board would particularly like to take the opportunity to thank Clarity's staff for their patience and commitment during a difficult period.

AGM

The Annual General Meeting will be held on 29 November 2007. The Notice of AGM will be sent to shareholders in due course.

Back to top ^

Director's Report

The Directors present their report together with the financial statements for the year ended 31 March 2007.

Principal activities, review of business and future development

The principal activities of the Group are the provision of software solutions for ticketing, leisure, hospitality, retail, business intelligence and support services, with offices in the UK, US, France, Germany and New Zealand.

A review of the business of the Group and its future development is contained in the Group Chairman's Statement and the Group Chief Executive's Statement on pages 2 to 8 (the Board Statement).

On 28 April 2006 the entire share capital of MATRA Systems (Holdings) Limited, MATRA Systems (UK) Limited and MATRA Systems Inc was acquired. MATRA provides IT solutions to the retail marketplace. Following the year end, the entire share capital of Total Hospitality Solutions Limited and Total Hospitality (NZ) Limited was acquired, companies that provide Property Management Systems (PMS) to the hotel sector. This acquisition further complements the Clarity product offering and also provides the Group with a presence in New Zealand.

Key performance indicators

Financial

In its day to day management of the business the Board monitors key financial performance indicators, such as; sales mix, turnover, gross profit margin, operating costs and profitability through the provision of regular monthly management information.

Support and maintenance annuity revenues contribute significantly to the Group and are closely monitored. Cash resources are closely managed and cash flows are frequently reviewed, both in the short and medium term.

Share price monitoring and management via effective investor relations work continues to be an important focus for the Board. The focus in this area has recently heightened with the appointment of new brokers, SVS Securities plc.

Non-financial

The Board also considers certain non-financial key performance indicators to be important in the day to day management of the Group. The quality of the Group's software products is of paramount importance and the Group runs dedicated Software Development and Quality Assurance teams to closely monitor and control the production and releases of product into the marketplace.

High quality and responsive customer after care, provided by the Group's Services Division is also key to the Group's continued success. Volumes of support calls and clear up rates are closely monitored with a view to optimising the service provided to the end user. To this end Service Level Agreements are entered into which contractually cover the responsibilities of both customer and supplier, most importantly, in areas such as response times and escalation.

The Group's personnel are its key resource and the Board are constantly looking at mechanisms and initiatives that address and improve staff retention levels. These type of Human Resource issues will have increasing importance in an expanding and progressive Group.

Certain key performance indicator analysis is commented on in the Board Statement.

Principal risks and uncertainties

The principal risks and uncertainties that the business faces are identified by the Board as being:

• The continued consolidation within the markets in which Clarity operates creates both potential risks and rewards. Contracts can be lost as a result, and this is a situation that is beyond the Group's control. For precisely the same reason, contracts can be secured as a result of consolidation, in the event of a customer acquiring further outlets or businesses.
• The business is in the process of recovering from the recent EGM which had an adverse effect on many aspects of performance and, whilst recognising some important issues were raised, the Board and senior management are focussing on reducing and eliminating the business risk that this event created.

Dividends

No interim dividend was proposed and the Directors do not recommend the payment of a final dividend (2006: nil).

Research and development

At the year end the Group employed 48 (2006: 29) full time software developers. In the financial year ended 31 March 2007 the Group incurred approximately £1,200,000 (2006: £1,600,000) in research and development expenditure, which has been written off to the profit and loss account. The Company continues to operate with a dedicated product centre in Basingstoke, incorporating both product development and quality assurance teams. However, as discussed in recent market announcements, the development function will, in future, be a devolved department with its activities determined by divisional customer facing management.

The Company has continued to progress its .Net development programme and sales are now beginning to materialise as a result of this strategy.

Research and Development work of an innovative nature combined with existing product support provides a platform to ensure that the Group's product offering remains attractive to both existing and prospective customers alike.

Notifiable shareholdings – Compliant with AIM Rule 26

In addition to the interests described above, the Company is aware of the following interests of 3% or more in the issued share capital of the Company notifiable as at 24 September 2007:

	Number of ordinary shares	Percentage of issued share capital
Groundlinks Limited	1,796,408	7.21
Prism Nominees Limited	1,540,385	6.18
Chase Nominees Limited	1,440,600	5.78
BNY (OCS) Nominees Limited	1,165,956	4.68
Pershing Keen Nominees Limited	1,076,927	4.32
Mrs Christine Reeve	997,691	4.00
State Street Nominees Limited	821,000	3.30
Mr Anthony Houldsworth	757,576	3.04
Mr Andrew Jacobs	757,576	3.04

In accordance with AIM Rule 26, in so far as the Company is aware, the percentage of the Company's issued share capital that is not in public hands is 36.09%.

Directors and their interests

The Directors of the Company during the year and their interests in the ordinary share capital of the Company, were as follows:

	At 31 March 2007	At 31 March 2006
JA O'Connell (retired 30 November 2006)	-	112,500
T Bittleston (appointed 30 November 2006, retired 26 June 2007)	42,000	-
G York	3,527,839	3,527,839
PJ Walker (retired 30 June 2007)	15,443	5,443

JA O'Connell retired as Non-Executive Chairman on 30 November 2006 and T Bittleston was appointed as Non-Executive Chairman on the same date.

At the end of the year PJ Walker held options over 150,375 ordinary shares at an exercise price of 66.5p per share. The market price of the shares at 31 March 2007 was 53.5p. The maximum share price during the year was 68.5p and the minimum share price was 50.0p.

Following the year end there were further Board changes as follows:

• On 26 April 2007 Sir Colin Chandler was appointed as a Non-Executive Director.
• T Bittleston retired as Non-Executive Chairman on 26 June 2007 and J O'Hara was appointed as Non-Executive Chairman on the same date.
• On 26 June 2007 KR Smith was appointed as Chief Financial Officer.
• On 30 June 2007 PJ Walker retired from the Board.

Corporate governance

The Board recognises the importance of sound corporate governance and endorses, has adopted, and intends to comply with the main provisions of the principles of good corporate governance and code of best practice prepared by the Committee on Corporate Governance and adopted by the UK Listing Authority (the "Combined Code") to the extent that the Directors consider practical and appropriate for an AIM listed company of the size and nature of Clarity.

The Board meets regularly to discuss operational and strategic matters relating to the Group's activities. The Board has established Audit and Remuneration Committees, each having formally delegated duties and responsibilities. Both committees comprise the Group's Non-Executive Chairman and Deputy Chairman and will continue to meet at least twice a year.

Internal control

The Directors acknowledge their responsibilities for the Group's system of internal control. The Board considers major business and financial risks. Accepting that no system of control can provide absolute assurance against material misstatement or loss, the Directors believe that the established systems of internal control within the business are appropriate to the business. Further improvements in respect of internal controls are constantly being considered and further improvements have been implemented across the Group during the year.

Going concern

The Directors acknowledge that, in the recent past, the Group has incurred significant losses, with a resultant net current liabilities position in the balance sheet.

Since its appointment in June 2007, the new Board has considered the Group's difficult financial position and strengthened the Group's management. The Group's structure has been reorganised into divisions targeted with delivering short term profits and driving down costs, along with a key focus on improving the Group's working capital position. In addition the Board is exploring strategic opportunities with a number of parties in respect of the disposal of certain assets, with a view to raising further funds as a result. The Board has considered the matter fully and remains confident that sufficient steps are underway to materially improve the Company's short term cash position.

After making enquiries and having due regard to the above the Directors are confident that the Group has sufficient working capital and access to working capital for the foreseeable future and therefore remains a going concern. The financial statements have been prepared on this basis.

Directors' remuneration

The remuneration of the individual Directors was as follows:

	Salary and fees £	Benefits in kind £	As at 31 March 2007 Total £	As at 31 March 2006 Total £
Executive Directors:
G York	182,280	7,000	189,280	195,989
PJ Walker (retired 30 June 2007)	115,000	2,465	117,465	122,540
DFJ Shearmon (retired 25 August 2005)	-	-	-	39,118
Non-Executive Directors:
T Bittleston (appointed 30 November 2006, retired 26 June 2007)	8,000	-	8,000	-
JA O'Connell (retired 30 November 2006)	16,000	-	16,000	23,786
	321,280	9,465	330,745	381,433

Salary and fees are inclusive of car allowances and bonuses attributable to the year.

In addition to the above the Group made contributions to personal pension plans for G York of £27,500 and PJ Walker of £17,143.

Service contracts

G York has and PJ Walker had service agreements with the Company which they entered into on 18 July 2000.

A salary review, effective from 1 April 2005, resulted in revised salary levels of £165,000 and £100,000 for G York and PJ Walker respectively. PJ Walker left the employment of the Company on 30 June 2007.

G York's salary was amended with an effective date of 1 November 2006 to £185,000, although during the year ended 31 March 2007 G York was remunerated at the historic salary level of £165,000 per annum.

JA O'Connell retired from his position as Non-Executive Chairman on 30 November 2006 and T Bittleston was appointed on the same date. T Bittleston entered into a service agreement with remuneration in respect of services of £24,000 per annum plus disbursements. T Bittleston retired from his position as Non-Executive Chairman on 26 June 2007 and J O'Hara was appointed as Non-Executive Chairman on the same date.

Creditor payment policy

The Group seeks to maintain good relations with all of its trading partners. It is the Group's policy to comply with the terms of trade agreed with each of its suppliers. As at 31 March 2007, the Group's outstanding trade creditors represented 59 days purchases (2006: 49 days).

European monetary union

The introduction of the Euro continues to have minimal impact on the Group and has been handled adequately by its systems.

Disclosure to auditors

In the case of each person who is a Director at the time when the report is approved, the following applies:

• So far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
• The Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Financial risk management

The Group's financial instruments comprise cash at bank, overdraft and bank loans. The main purpose of these financial instruments is to raise adequate finance for the Group's operations.

The main risks arising from the Group's financial instruments are interest rate fluctuations and liquidity risk. It is the Company's policy to finance its operations through a mixture of cash and borrowings and to periodically review the mix of these instruments with regard to the projected cash flow requirements of the Company and an acceptable level of risk exposure.

The Group has overseas subsidiaries where transactions, assets and liabilities are denominated in foreign currencies. At present the Group is therefore exposed to currency fluctuations arising from these sources.

Details on the exposure to risks are referred to in note 31.

Auditors

On 2 April 2007 Solomon Hare Audit LLP changed its name to Smith & Williamson Solomon Hare Audit LLP. In accordance with section 385 of the Companies Act 1985, a resolution to reappoint Smith & Williamson Solomon Hare Audit LLP as auditors will be put to the Annual General Meeting on 29 November 2007.

On behalf of the Board
G York: Group Chief Executive

Date: 27 September 2007

Back to top ^

Statement of Directors' Responsibilites

The Directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for that period. The financial statements have been prepared on a going concern basis.

The Directors consider that in preparing the financial statements on pages 18 to 41 the Company and the Group have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards, which they consider to be applicable, have been followed.

The Directors have responsibility for ensuring that the Company and the Group keep accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and which enable them to ensure that the financial statements comply with the Companies Act 1985. The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's web site. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.

G York
Group Chief Executive

Date: 27 September 2007

Back to top ^

Independent Auditors' Report

Independent auditors' report to the shareholders of Clarity Commerce Solutions plc

We have audited the Group and parent company financial statements ('the financial statements') of Clarity Commerce Solutions plc for the year ended 31 March 2007 which comprise the Consolidated Profit and Loss Account, the Consolidated and Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Total Recognised Gains and Losses and the related notes 1 to 31. These financial statements have been prepared under the accounting policies set out therein.

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 auditors' 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 financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the 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 financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We report to you whether in our opinion the information given in the Directors' Report is consistent with the accounts.

We also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if the information specified by law regarding directors' remuneration and transactions with the Company is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors' Report and Board Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the 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 financial statements.

It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the 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 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 financial statements.

Opinion

In our opinion the financial statements:

• Give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of affairs of the Company and the Group as at 31 March 2007 and of the loss of the Group for the year then ended; and have been properly prepared in accordance with the Companies Act 1985.
• The information given in the Directors' Report is consistent with the accounts.

Emphasis of matter – Going concern

In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Group's ability to continue as a going concern. The Group incurred a net loss of £458,000 during the year ended 31 March 2007 and, at that date, the Group had current liabilities of £1,109,000. These conditions, along with the other matters explained in note 1 to the financial statements, indicates the existence of a material uncertainty which may cast doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Smith & Williamson Solomon Hare Audit LLP
Registered Auditors, Chartered Accountants, Oakfield House, Oakfield Grove, Clifton, Bristol BS8 2BN

Date: 27 September 2007

The maintenance and integrity of the Clarity Commerce Solutions plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the accounts since they were initially presented on the web site.

Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

Back to top ^

Consolidated Profit and Loss Account for the Year Ended 31 March 2007

	Notes	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
Turnover	2
- continuing operations		16,401	18,884
- acquisitions		4,402	-
		20,803	18,884
Cost of sales		(7,919)	(7,361)
Gross profit		12,884	11,523
Operating costs		(13,032)	(10,414)
Operating (loss) / profit	3	(148)	1,109
Operating (loss) / profit from continuing operations before impairment of goodwill		(581)	1,358
Continuing operations - impairment of goodwill	8	-	(249)
Operating profit from acquired operations		433	(249)
Operating (loss) / profit after impairment of goodwill		(148)	1,109
Interest receivable		560	506
Interest payable	5	(870)	(662)
		(310)	(156)
(Loss) / profit on ordinary activities before taxation		(458)	953
Taxation on profit on ordinary activities	6	(332)	(3)
Retained (loss) / profit for the year	24	(790)	950
Profit per ordinary share	7
- basic		(3.96)p	5.81p
- diluted		(3.96)p	5.80p
Dividends per share		-	-

Back to top ^

Statement of Total Recognised Gains and Losses for the Year Ended 31 March 2007

	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
(Loss) / profit for the financial year	(790)	950
Foreign exchange adjustment	(230)	(117)
Total (losses) and gains recognised since the last annual report	(1,020)	833

Back to top ^

Consolidated Balance Sheet as at 31 March 2007

	Notes	As at 31 March 2007 £'000		As at 31 March 2006 £'000
Fixed assets
Intangible assets	8	16,496		11,352
Tangible assets	9	583		563
			17,079		11,915
Current assets
Stocks	11	711		600
Debtors	12	5,731		6,778
Cash at bank and in hand	13	351		852
		6,793		8,230
Creditors: amounts falling due within one year	14	(7,902)		(8,100)
Net current (liabilities) / assets			(1,109)		130
Total assets less current liabilities			15,970		12,045
Creditors: amounts falling due after more than one year	15		(3,674)		(1,691)
Provisions for liabilities and charges			(41)		(34)
			12,255		10,320
Capital and reserves
Called up share capital	21		5,271		4,084
Share premium account	23		7,742		5,974
Profit and loss account	24		(758)		262
Equity shareholders' funds	24		12,255		10,320

Approved by the Board of Directors

G York
Group Chief Executive

Date: 27 September 2007

Back to top ^

Company Balance Sheet as at 31 March 2007

	Notes	As at 31 March 2007 £'000		As at 31 March 2006 £'000
Fixed assets
Investment in subsidiary undertakings	10		14,530		12,107
Current assets
Debtors	12	942		4,908
Cash at bank and in hand	13	5,008		-
		5,950		4,908
Creditors: amounts falling due within one year	14	(2,055)		(11,439)
Net current assets / (liabilities)			3,895		(6,531)
Total assets less current liabilities			18,425		5,576
Creditors: amounts falling due after more than one year	15		(3,645)		(1,671)
Net assets			14,780		3,905
Capital and reserves
Called up share capital	21		5,271		4,084
Share premium account	23		7,742		5,974
Profit and loss account	24		1,767		(6,153)
Equity shareholders' funds	24		14,780		3,905

Approved by the Board of Directors

G York
Group Chief Executive

Date: 27 September 2007

Back to top ^

Consolidated Cash Flow Statement for the Year Ended 31 March 2007

	Notes	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
Net cash inflow from operating activities	27	508	884
Returns on investments and servicing of finance
Interest received		528	506
Interest paid		(772)	(595)
Interest element of hire purchase and finance leases		(4)	(2)
Net cash outflow from returns on investments and servicing of finance		(248)	(91)
Taxation		(51)	(10)
Capital expenditure and financial investment
Purchase of tangible fixed assets		(138)	(200)
Sale of tangible fixed assets		8	-
Net cash outflow from capital expenditure and financial investment		(130)	(200)
Acquisitions
Purchase of subsidiary undertakings		(3,151)	(110)
Cash at bank acquired with subsidiaries		374	-
Net cash outflow from acquisitions		(2,777)	(110)
Net cash (outflow) / inflow before management of liquid resources and financing		(2,698)	473
Management of liquid resources
Movement in blocked cash collateral account		582	75
Financing
Issue of share capital (net of costs)		1,817	-
New secured loan		2,425	-
Repayment of loan notes		(699)	(646)
Capital element of finance leases		(7)	(5)
Bank loan repayments		(1,339)	(304)
Net cash inflow / (outflow) from financing		2,197	(955)
Increase / (decrease) in cash	28	81	(407)

Back to top ^

Notes to the Financial Statements

1. Accounting policies

   The following accounting policies have been consistently applied in arriving at the consolidated financial information set out in this report.

   1. Basis of accounting

      The consolidated financial information has been prepared under the historical cost convention, in accordance with applicable UK accounting standards.

   2. Basis of consolidation

      The Group financial statements consolidate the audited financial statements of the Company and all its subsidiaries made up to 31 March 2007. The acquisition method of accounting is used and the results of subsidiary undertakings are included from the date of acquisition.

   3. Going concern

      The Directors acknowledge that, in the recent past, the Group has incurred significant losses, with a resultant net current liabilities position in the balance sheet.

      Since its appointment in June 2007, the new Board has considered the Group’s difficult financial position and strengthened the Group’s management. The Group’s structure has been reorganised into divisions targeted with delivering short term profits and driving down costs, along with a key focus on improving the Group’s working capital position. In addition the Board is exploring strategic opportunities with a number of parties in respect of the disposal of certain assets, with a view to raising further funds as a result. The Group currently operates with limited cashflow headroom and whilst the Board is confident that these measures will succeed in improving the working capital position, inevitably there can be no certainty to their outcome. The Board has considered the matter fully and remains confident that sufficient steps are underway to materially improve the Company's short term cash position.

      After making enquiries and having due regard to the above, the Directors are confident that the Group has sufficient working capital and access to working capital for the foreseeable future and therefore remains a going concern. The financial statements have been prepared on this basis.

   4. Turnover and revenue recognition

      Turnover, which excludes value added tax and sales between Group companies, represents amounts derived from the provision of goods and services which fall within the Group's ordinary activities.

      The Group derives its income from the following revenue streams; the sale of software licences, bespoke development projects for clients and fees derived from support services, installation and training. Each sales stream is separately identifiable and treated in the following manner:

      Software licences
      Licence fees are recognised following delivery of software to the client.

      Software development
      Revenue is recognised upon completion of the software project.

      Services
      Revenue streams from installation, consultancy and training are recognised at the point at which the service or product is delivered.

      Maintenance income
      Income is recognised evenly across the duration of the contractual period.

   5. Tangible fixed assets and depreciation

      The cost of tangible fixed assets less estimated residual value is written off using the reducing balance method at the following annual rates:

      Motor vehicles
      25% on reducing balance

      Office equipment
      20 - 25% on reducing balance

      Leasehold properties
      25% reducing balance

      Freehold property is depreciated on a straight line basis over 50 years.

   6. Software rights

      Costs incurred in respect of software rights are capitalised and amortised over the estimated useful life of the software, which is considered to be five years.

   7. Goodwill

      Goodwill represents the difference between the fair value of the net assets of subsidiary undertakings at the date of acquisition and their purchase price.

      Goodwill is assumed to have an indefinite life and the financial statements therefore depart from the specific requirements of the Companies Act 1985 schedule 4: 21 to amortise goodwill over a finite life in order to give a true and fair value. The departure is in compliance with FRS10 - Goodwill and Intangible Assets.

      In arriving at this policy the Directors consider a number of areas inclusive of the nature of the business, the durability of the product range and the continued expansive nature of the Group. Each acquisition is assessed with reference to the quality and sustainability of the product range, the quality of the customer base and the potential for development and continuation of long-term relationships and the ability to develop value for the Group across the product portfolio and network of offices.

      Goodwill is subject to an annual impairment review and whenever events or changes in circumstances indicate that the carrying value may not be recoverable an impairment charge is reflected in the profit and loss account.

      Impairment of goodwill is evaluated by comparing the present value of the expected future cash flows, excluding finance and tax (the "value in use"), to the carrying value of the underlying net assets and goodwill. If the net assets and goodwill were to exceed the value in use, an impairment would have deemed to have occurred and the resultant write down in the goodwill would be charged to the profit and loss account immediately.

      The Directors have undertaken a detailed review of each area of the business and have as a result of this review concluded that an impairment of goodwill has not taken place. As a result, there is no charge applied to the profit and loss account for the year ended 31 March 2007 (2006: £249,000).

   8. Investments

      Investments held as fixed assets are carried at cost less any provision required for impairment.

   9. Stocks

      Stocks are valued at lower of cost and net realisable value, after due allowances for obsolete and slow moving items.

   10. Deferred taxation

       Full provision is made, under the liability method, to take account of timing differences between the treatment of certain items for financial statements purposes and their treatment for tax purposes. Deferred tax assets are recognised to the extent that it is more likely than not that they will be recovered. The deferred tax balance is not discounted.

   11. Hire purchase agreements

       Assets held under hire purchase agreements are capitalised and disclosed under tangible fixed assets at their fair value. The capital element of the future payments is treated as a liability and the interest is charged to the profit and loss account in equal proportions over the period of the lease.

   12. Finance lease agreements

       Where the Group enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a finance lease. The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated in accordance with the above depreciation policies. Future instalments under such leases, net of finance charges, are included with creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account in equal proportions over the period of the lease, and the capital element which reduces the outstanding obligation for future instalments.

   13. Operating lease agreements

       Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against the profit and loss account as incurred.

   14. Capital instruments

       Capital instruments are recorded at the fair value of the consideration received less issue costs in accordance Financial Reporting Standard 4 - Capital Instruments. The difference between the net proceeds of the issue and the total amount of payments that the issuer may be required to make is recorded as a finance cost of the instrument. Finance costs are written off to the profit and loss account over the period of the relevant instrument in proportion to the remaining debt outstanding.

   15. Research and development

       Research and development costs are written off as incurred.

   16. Liquid resources

       Liquid resources are current asset investments held as readily disposable stores of value which are readily convertible into known amounts of cash at or close to their carrying amounts.

   17. Foreign currencies

       Assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating profit.

       For the purposes of the consolidation, assets and liabilities of overseas subsidiary undertakings are translated at exchange rates ruling at the balance sheet date. Trading results are translated at the rates of exchange ruling at the end of each month. Differences arising on the retranslation of opening assets are dealt with through reserves.

2. Segmental information

   The turnover and profit before tax are attributable to the principal activities of the Group. £13,947,000 (2006: £14,801,000) of turnover is attributable to customers within the UK and approximately £3,898,000 (2006: £2,646,000) is attributable to customers in Europe, with £2,620,000 (2006: £1,314,000) attributable to the United States and £338,000 (2006: £123,000) attributable to other countries. Turnover by destination and origin are not materially different. Losses arise in the UK of £1,293,000 (2006: profit £1,008,000), with profits in Europe of £413,000 (2006: £697,000) and in the US of £90,000 (2006: £752,000). As at 31 March 2007 the net assets attributable to the UK, Europe and US were £10,798,000 (2006: £10,783,000), £2,963,000 (2006: £1,477,000), net liabilities £1,506,000 (2006: £1,940,000) respectively.

3. Operating (loss) / profit

   This is stated after charging:	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
   Depreciation of tangible fixed assets - owned assets	175	101
   Depreciation of tangible fixed assets - leased assets	19	26
   Impairment of goodwill	-	249
   Amortisation of software rights	43	64
   Auditors' remuneration:
   Fees payable to the Group's auditor for the audit of the Group's annual accounts	25	24
   Fees payable to the Company's auditors and its associates for other services:
   - audit of the Company's subsidiaries, pursuant to legislation	68	66
   - tax services	47	48
   - corporate finance services	10	-
   - all other services	5	-
   Directors' remuneration	331	381
   Rentals payable under operating leases - property	425	198
   Rentals payable under operating leases - other	203	192
   Profit on sale of fixed assets	-	(2)

   Non-audit services provided by the auditors are reviewed by the Board of Directors to ensure that the independence of the auditors is not compromised.

   Remuneration of the highest paid Director for the year ended 31 March 2007 was £189,280 (2006: £195,989).

   Research and development expenditure incurred during the year was approximately £1,200,000 (2006: £1,600,000).

   The proportion of cost of sales, gross profit and operating costs for MATRA in the period post acquisition were £420,000, £3,982,000 and £3,549,000 respectively.

4. Employment costs

   Employment costs (including Executive Directors) were as follows:

   	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
   Wages and salaries	9,370	7,554
   Social security costs	1,098	872
   	10,468	8,426
   The average number of persons employed (including Executive Directors) was:	Number	Number
   Production	51	35
   Sales	14	12
   Administration	36	33
   Installation and support	147	137
   	248	217

   Details of Directors' remuneration are given on page 13 and in note 3.

5. Interest payable and similar charges

   	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
   Bank loans and overdrafts wholly repayable within five years	771	589
   Finance leases and hire purchase interest	4	2
   Loan note interest	95	71
   	870	622

6. Taxation on profit on ordinary activities

   1. UK Corporation tax on profit for the year

      	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
      Current tax
      UK corporation tax on profit in year	-	15
      Overseas taxation	332	89
      Adjustments in respect of previous periods	-	(128)
      Tax on profit on ordinary activities	332	(24)
      Deferred tax charge	-	27
      Total tax charge for the year	332	3

   2. Factors affecting tax charge for the year

      The tax rate for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:

      	Year ended 31 March 2007 %	Year ended 31 March 2006 %
      Standard rate of corporation tax in the UK	30	30
      Effects of:
      Difference between depreciation and capital allowances	5	(2)
      Income not taxable	15	-
      Expenditure not deductible	(24)	-
      Lower corporation rates available	(5)	(2)
      Adjustments in respect of previous periods	1	(10)
      Utilisation of losses	(76)	(6)
      R&D tax credit claimed	-	(12)
      Current tax rate for the year	(54)	(2)

   3. Factors that may affect future tax charges

      The Group has unused tax losses carried forward of £3,618,000 (2006: £505,000) available to be set off against future taxable profits.

7. Loss per ordinary share

   Basic loss per share for the year ended 31 March 2007 is calculated by dividing the loss for the year of £790,000 (2006 profit: £950,000) by 19,955,595 (2006: 16,338,086) being the weighted average number of shares in issue during the year.

   As a result of the loss for the year there is no difference between the basic and diluted loss per share.

   Options in respect of 487,512 shares have been excluded from the calculations of EPS because they are anti-dilutive for the period presented.

8. Intangible assets

   	Group
   	Software rights £'000	Goodwill £'000	Total £'000
   Cost:
   At 1 April 2006	364	12,814	13,178
   Additions during the year (note 30)	-	5,187	5,187
   At 31 March 2007	364	18,001	18,365
   Amortisation and impairment:
   At 1 April 2006	280	1,546	1,826
   Amortisation charge for the year	43	-	43
   At 31 March 2007	323	1,546	1,869
   Net book value:
   At 31 March 2007	41	16,455	16,496
   At 31 March 2006	84	11,268	11,352

   Details of goodwill and software rights acquired during the year are given in note 30.

9. Tangible assets

   	Group
   	Freehold property £'000	Leasehold property £'000	Office equipment £'000	Motor vehicles £'000	Total £'000
   Cost:
   At 1 April 2006	177	44	973	33	1,227
   On acquisition of subsidiary	-	-	67	-	67
   Additions	-	-	119	39	158
   Disposals	-	-	-	(33)	(33)
   Foreign exchange movement	-	-	(2)	-	(2)
   At 31 March 2007	177	44	1,157	39	1,417
   Depreciation:
   At 1 April 2006	14	6	631	13	664
   Charge for year	3	15	157	19	194
   Disposals	-	-	-	(24)	(24)
   At 31 March 2007	17	21	788	8	834
   Net book value:
   At 31 March 2007	160	23	369	31	583
   At 31 March 2006	163	38	342	20	563

   Included within the net book value of £583,000 is £31,000 (2006: £20,000) relating to assets held under hire purchase and finance lease agreements, relating to motor vehicles. Depreciation charged in the period in respect of these assets amounted to £19,000 (2006: £11,000).

   Agreements in respect of leasehold properties are short leaseholds.

10. Investment in subsidiary undertakings

    	Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    At 1 April 2006	12,107	12,373
    Additions in the year (note 30)	5,612	360
    Provision in the year	-	(626)
    Intercompany transfer adjustment	14,530	-
    At 31 March 2007	14,530	12,107

    The subsidiaries included in the consolidated financial statements for the whole year are:

    • Clarity Retail Systems plc - provider of IT solutions to the hospitality sector
    • Microtrain Limited - non-trading
    • Flex Systems Limited - provider of IT solutions to the leisure sector
    • Formative Systems Limited - non-trading
    • Vision Solutions Limited - provider of IT solutions to the leisure sector
    • Romulus Enterprises Limited (Scotland) - provider of business intelligence software
    • Pacer Cats (UK) Limited - provider of IT solutions to the cinema and stadia markets
    • Clarity Commerce Solutions Inc. (US) - provider of IT solutions to the cinema and stadia markets
    • CCS SARL (Pacer Cats - France) - provider of IT solutions to the cinema and stadia markets
    • CCS GmbH & Co OHG (Pacer Cats - Germany) - provider of IT solutions to the cinema and stadia markets
    • Cyntergy Services Limited - provider of IT helpdesk and training services
    • Baron LRMS Limited - provider of IT solutions to the golf and leisure spa markets
    • MATRA Systems (Holdings) Limited - part year from 27 April 2006 - holding company
    • MATRA Systems (UK) Limited - part year from 27 April 2006 - provider of IT solutions to the retail sector
    • MATRA Systems Inc (US) - part year from 27 April 2006 - provider of IT solutions to the retail sector

    All subsidiary companies are wholly owned and registered in England unless otherwise stated.

11. Stocks

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Goods for resale	711	600	-	-

12. Debtors

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Trade debtors	4,473	5,529	-	-
    Amounts owed by subsidiary undertakings	-	-	785	4,654
    Other debtors	400	441	91	89
    Prepayments and accrued income	858	808	66	165
    	5,731	6,778	942	4,908

13. Cash and Bank

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Cash at bank and in hand	7,784	2,919	4,581	-
    Overdraft	(8,149)	(3,365)	-	(3,143)
    Blocked cash collateral account	716	1,298	427	938
    	351	852	5,008	(2,205)

    The blocked cash collateral account represents ring fenced funds to cover the future redemption of loan notes in respect of the acquisition of Flex Systems Limited in 2001.

14. Creditors: amounts falling due within one year

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Bank loans and overdrafts (note 16)	485	918	485	3,123
    Loan notes (note 17)	300	654	300	654
    Trade creditors	2,238	1,901	123	113
    Amounts due to subsidiary undertakings	-	-	385	7,259
    Other creditors	37	64	5	-
    Other taxes and social security	1,302	1,531	-	-
    Corporation tax	484	214	-	-
    Obligations under finance leases and hire purchase contracts (note 18)	14	12	-	-
    Accruals and deferred income	2,539	2,806	254	290
    Deferred consideration	503	2,806	503	290
    	7,902	8,100	2,055	11,439

    The deferred earn out in respect of Romulus totalling £503,000 is convertible to shares with the agreement of the vendors and the Group with immediate effect.

15. Creditors: amounts falling due after more than one year

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Bank loans and overdrafts (note 16)	1,519	-	1,519	-
    Loan notes (note 17)	326	671	326	671
    Obligations under finance leases and hire purchase contracts (note 18)	29	20	-	-
    Deferred consideration	1,800	1,000	1,800	1,000
    	3,674	1,691	3,645	1,671

16. Bank loans and overdrafts

    	Group		Company
    The borrowings are repayable as follows:	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    In one year or less	485	936	485	3,141
    Between one and two years	485	-	485	-
    Between two and five years	1,092	-	1,092	-
    Associated finance costs	(58)	(18)	(58)	(18)
    	2,004	918	2,004	3,123

    Bank borrowings are secured by charges over the assets and by cross guarantees.

17. Creditors: capital instruments

    Creditors include finance capital which is due for repayment as follows:

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    In one year or less, or on demand	300	654	300	654
    Between one and two years	326	671	326	671
    	626	1,325	626	1,325

    As at 31 March 2007 loan notes still to be redeemed in respect of the consideration payable to the vendors of Flex Systems Limited amounted to £626,000 (2006: £1,025,000). In the year ended 31 March 2007, £399,000 of loan notes were redeemed. As at 31 March 2007 loan notes to be redeemed in respect of the consideration payable to the vendors of Baron LRMS Limited amounted to nil (2006: £300,000). In the year ended 31 March 2007, £300,000 of loan notes were redeemed.

    The Company has adopted a prudent policy by recognising that loan notes issued could be redeemed early and have therefore disclosed £300,000 (2006: £654,000) as due within one year and £326,000 (2006: £671,000) as being due for repayment between one and two years.

    The loan notes in respect of the acquisition of Flex Systems Limited bear interest at base rate. The loan notes in respect of the acquisition of Baron LRMS Limited did not bear interest.

18. Finance lease and hire purchase contracts

    Future commitments under hire purchase and finance lease agreements are as follows:

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Due within one year or less	14	12	-	-
    Due between one and two years	8	20	-	-
    Due between two and five years	21	-	-	-
    	43	32	-	-

    The hire purchase and finance lease liabilities are secured over the assets to which they relate.

19. Commitments under operating leases

    At 31 March 2006, the Group had annual commitments under non-cancellable operating leases as set out below:

    	Group		Company
    	As at 31 March 2007 £'000	As at 31 March 2006 £'000	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Expiring within one year: other	37	27	15	-
    Expiring between two and five years: other	105	115	-	15
    Expiring within one year: land and buildings	15	-	-	-
    Expiring between two and five years: land and buildings	48	25	-	-
    Expiring after five years: land and buildings	220	202	105	-
    	425	369	120	15

20. Deferred taxation

    No provision has been made in the financial statements for a deferred tax asset and the amounts unprovided at the end of the year are as follows:

    	As at 31 March 2007 Unprovided £'000	As at 31 March 2006 Unprovided £'000
    Accelerated capital allowances	23	48
    Short term timing differences	(64)	(97)
    Tax losses available	(1,085)	(505)
    	(1,126)	(554)

21. Share capital

    	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    Authorised share capital:
    25,000,000 ordinary shares of £0.25 each	6,250	5,000
    Allotted, called up and fully paid:
    At beginning of year	4,084	4,084
    Issue of ordinary shares	1,187	-
    	5,271	4,084

    During the year, a total of 4,743,758 ordinary shares were issued, representing a nominal share value of £1,185,940. Of these shares, 3,000,000 ordinary shares representing a nominal share value of £750,000 were issued in a placing on 27th April 2006 for which consideration of £1,950,000 (65p per share) was raised before fees; 228,606 ordinary shares representing a nominal share value of £57,152 were issued in relation to the Romulus acquisition at a consideration of £138,306 (60.5p per share); and a total of 1,515,152 ordinary shares representing a nominal share value of £378,788 were issued in relation to the MATRA acquisition at a consideration of £1,000,000 (66p per share).

    Following the year end, 3,829,838 shares representing a nominal share value of £957,460 were issued, being 655,038 shares in respect of the final share allocation in relation to the Romulus acquisition, and 3,174,800 shares in respect of the acquisition of Total Hospitality Solutions Limited and Total Hospitality Solutions (NZ) Limited on 29 May 2007.

22. Share option scheme

    On 5 May 2004 an Approved EMI Share Option Scheme was established. 537,375 options were issued on 24 May 2004 to Directors and senior managers within the Group. All option holders under the original unapproved share option scheme waived their rights over the original options held, which were transferred into the new scheme. All the options are exercisable between 24 May 2007 and 24 May 2014 and have an exercise price of 66.5p. No further options were issued in the year.

    During the year option holders left the employment of the Company and in accordance with the rules of the scheme the share options were no longer valid, reducing in number to 427,375. Following the year end there was a further leaver with the result that the options in issue were further reduced to 277,000.

    Following a review of the share option scheme it has been determined that the valuation is not material for the purposes of these accounts.

23. Share premium account

    	As at 31 March 2007 £'000	As at 31 March 2006 £'000
    At beginning of year	5,974	5,974
    Issue of ordinary shares	1,902	-
    Issue costs	(134)	-
    	7,742	5,974

24. Reconciliation of movements in shareholders' funds

    	Group
    	Share capital £'000	Share premium £'000	Profit and loss account £'000	2007 Total £'000	2006 Total £'000
    Balance at 1 April 2006	4,084	5,974	262	10,320	9,487
    Shares issued	1,187	1,768	-	2,955	-
    (Loss) / profit for the year	-	-	(790)	(790)	950
    Foreign exchange movement	-	-	(230)	(230)	(117)
    Balance at 31 March 2007	5,271	7,742	(758)	12,255	10,320
    	Company
    	Share capital £'000	Share premium £'000	Profit and loss account £'000	2007 Total £'000	2006 Total £'000
    Balance at 1 April 2006	4,084	5,974	(6,153)	3,905	5,984
    Shares issued	1,187	1,768	-	2,955	-
    Profit / (loss) for the year	-	-	7,920	7,920	(2,079)
    Balance at 31 March 2007	5,271	7,742	1,767	14,780	3,905

25. Related party transactions

    During the year the Group purchased air charter services to the value of nil (2006: £36,000) from Direct Air Executive Limited, a company of which G York is a Director and principal shareholder.

    At 31 March 2007 no balances were due to the Company (2006: £nil).

26. Profit of parent company

    As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company's retained profit for the year amounted to £7,920,000 (2006 loss: £2,079,000).

27. Reconciliation of operating profit to net cash inflow from operating activities

    	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
    Operating (loss) / profit	(148)	1,109
    Depreciation of fixed assets	194	127
    Impairment of goodwill	-	249
    Amortisation of intangible fixed assets	43	64
    Loss on sale of fixed assets	-	(2)
    (Increase) / decrease in stocks	(75)	28
    Decrease / (increase) in debtors	1,984	(2,011)
    (Decrease) / increase in creditors	(1,260)	1,437
    Loss on exchange in respect of overseas subsidiaries	(230)	(117)
    Net cash inflow from operating activities	884	884

28. Reconciliation of net cash flow to movement in debt

    	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
    Increase / (decrease) in cash in the year	81	(407)
    Cash (inflow) / outflow from debt and lease financing	(380)	955
    Cash inflow from increase in liquid resources	(582)	(75)
    Changes in net funds resulting from cash flows	(881)	473
    Non cash movements	(19)	16
    Movement in net debt in the year	(900)	489
    Net debt at 1 April 2006	(1,423)	(1,912)
    Net debt at 31 March 2007	(2,323)	(1,423)

    The cash flow movements of the acquired subsidiaries are as follows:

    	Year ended 31 March 2007 £'000	Year ended 31 March 2006 £'000
    Net cash outflow from operating activites	(181)	-
    Decrease in cash in period	(181)	-

29. Analysis of net debt

    	As at 1 April 2006 £'000	Cash flows £'000	Non-cash movements £'000