Annual Report and Financial Statements for the year ended 31 March 2013

Transcription

1 g Annual Report and Financial Statements for the year ended 31 March 2013

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3 Company Number Registered Office 2 Bartholomews Brighton BN1 1HG Telephone Directors Anthony Antoniades (Chairman) David Wood (Chief Executive) Emma Buckley (Executive) Nicholas Taylor (Non-Executive) Secretary Richard Beeforth Auditor Chantrey Vellacott DFK LLP Russell Square House Russell Square London WC1B 5LF Registrars RDF Group plc Registered office

4 Contents Directors Report 3 Independent Auditor s Report 7 Consolidated Statement of Comprehensive Income 9 Consolidated Balance Sheet 10 Consolidated Statement of Changes in Shareholders Equity 11 Consolidated Cash Flow Statement 12 Notes to the Consolidated Financial Statements 13 Parent Company Balance Sheet Parent Company Cash Flow Statement Notes to the Parent Company Financial Statements 30 Page 2

5 Directors Report The directors present their report and the audited financial statements of the Group for the year ended 31 March 2013 under International Financial Reporting Standards as adopted by the EU ( IFRS ). The financial statements of the Parent Company, RDF Group plc, continue to be prepared in accordance with UK GAAP. Principal Activities, Business Review, Results, Dividends and Outlook RDF Group plc is a public limited company, incorporated in England. The principal activities of the Group during the year were the provision of IT related managed software services through bespoke software development, the provision of IT related temporary contracts and permanent recruitment placements. Although the Group ceased to be quoted on AIM in 2009, the directors continue to adhere to the practices and procedures appropriate to a quoted company. Revenue in the Managed Services Division increased during the year whilst Revenue in the Recruitment division decreased slightly resulting in overall revenues of m (2012: m). Operating profit was 1.127m (2012: 0.770m). The profit for the year after tax was 1.769m (2012: 0.686m), the details of which are shown in the consolidated statement of comprehensive income on page 9. The directors consider that the financial key performance indicators are revenue, operating profit, earnings per share and net cash. Non financial key performance indicators are not considered material to managing the financial performance of the Group. Managed Services Overall the division generated revenues of m (2012: m) and generated a profit for the year before interest and tax of 0.983m (2012: 0.545m). The division continues to maintain its levels of business with all major clients. Recruitment Overall the division generated revenues of m (2012: m), but despite this achieved similar profits for the year before interest and tax of 0.206m (2012: 0.223m). The division continues to pursue both temporary and permanent placements and intends to increase profitability in the coming year. Dividend Dividends of 208,000 were approved in relation to the year (2012: 208,000). Page 3

6 Directors Report Risks and Uncertainties There are a number of risks and uncertainties which could have an impact on the Group s long term performance and cause actual results to differ materially from expected and historical results. The directors seek to identify material risks and put in place policies and procedures to mitigate any exposure. (i) (ii) Competitor risk The market for IT services is extremely fragmented with a large number of suppliers operating in all our markets. Very few of these suppliers have the combination of managed software services and temporary contracts and permanent recruitment placement services. However the competition may intensify through consolidation or new entrants to the market and in order to mitigate this risk and maintain our competitive position we work to build strong customer relationships and maintain and develop our services ahead of the competition. Economic risk The IT industry has a reputation for being vulnerable to the ups and downs of the economy.the directors have taken a number of steps to mitigate any perceived risk such as increasing the proportion of contracted recurring income and increasing the knowledge and skills of our staff. In addition to the above, note 2 gives detail on the Group s financial risk management. Included in note 1 is the Group s policy in relation to critical accounting estimates and judgements. Corporate Social Responsibility The directors are aware that business can have a significant impact on the community and, being a company built on its staff, the directors consider it important to continue to support local and national organisations as part of corporate social responsibility. Directors The names of the directors who held office during the year are set out below. David Wood, Emma Buckley and Nicholas Taylor held office throughout the year. Anthony Antoniades held the position of Chairman throughout the year. The Group holds qualifying indemnity insurance on behalf of the directors. Page 4

7 Directors Report Employment of Disabled Persons It is the Group s policy to offer equal opportunities to disabled persons in matters of recruitment, training, career development and promotion. Where people become disabled during the course of their employment, the Group makes every effort to retain their services and to provide retraining where necessary. Employee Involvement and Communication Information about the Group s affairs is communicated to employees through regular s, news updates and coffee mornings with a director. Suppliers The Group operates a standard payment practice to contractors and suppliers. The Group recognises the importance of maintaining good business relationships with its contractors and suppliers and settles their invoices within agreed terms unless there are good reasons not to do so. The average number of days credit taken on the outstanding balance at the year end was 32 (2012: 30). Statement of Directors Responsibilities The directors are responsible for preparing the directors 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 Group financial statements under applicable law and International Financial Reporting Standards as adopted by the European Union and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they 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 for that period. In preparing those 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 accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Page 5

8 Directors Report Charitable Donations During the year the Group made charitable donations totalling 4,319 (2012: 2,150), comprising several small donations to local charities. The Group did not make any political donations (2012: nil). Statement as to Disclosure of Information to the Auditor The directors who were in office at the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors has confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and establish that it has been communicated to the auditor. Auditor A resolution to re-appoint Chantrey Vellacott DFK LLP as auditor to the Company for the ensuing year will be proposed at the forthcoming annual general meeting. Staff Finally, the directors would like to thank the staff for their work and commitment to the Group over the last year and continuing to work to the highest levels of ability and dedication. By Order of the Board David Wood Director 19/08/2013 Page 6

9 Independent Auditor s Report to the shareholders of RDF Group plc We have audited the financial statements of RDF Group plc for the which comprise the Consolidated and Parent Company Balance sheets, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Cash Flow Statements, the Consolidated Statement of Changes in Shareholders Equity and the related notes. The financial reporting framework that has been applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 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 auditor As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2013 and of the group's profit for the period then ended; the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act Page 7

10 Independent Auditor s Report to the shareholders of RDF Group plc Opinion on other matters prescribed by the Companies Act 2006 In our opinion: the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following where under the Companies Act 2006 we are required to report to you if, in our opinion: adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors' remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. IAN STAUNTON FCA (Senior Statutory Auditor) for and on behalf of CHANTREY VELLACOTT DFK LLP Chartered Accountants and Statutory Auditor London 2013 Page 8

11 Consolidated Statement of Comprehensive Income For the Total Total Note Revenue 3 25,942 24,808 Cost of sales 22,327 21,480 Gross profit 3,615 3,328 Administrative expenses (2,635) (2,558) Other operating income Operating profit 4 1, Finance costs 7 (26) (42) Profit on ordinary activities before taxation 1, Taxation (42) Total comprehensive income 1, The above results arise entirely from the Group's continuing operations. Page 9

12 Consolidated Balance Sheet as at 31 March 2013 Note Non-current assets Goodwill Other intangible assets Property, plant and equipment Deferred tax assets , Current assets Trade and other receivables 14 6,599 4,490 Cash at bank and in hand ,617 4,548 Total assets 7,805 5,365 Equity Share capital Share premium account Equity options reserve Retained earnings 3,588 2,027 Total equity 3,968 2,407 Liabilities Non-current liabilities Deferred tax liabilities Current liabilities Trade and other payables 19 3,027 2,632 Current tax liabilities 24 - Borrowings ,837 2,958 Total liabilities 3,837 2,958 Total liabilities and equity 7,805 5,365 The financial statements on pages 9 to 27 were approved by the board of directors and authorised for issue on 19/08/2013 and are signed on its behalf by: David Wood Director Registered Co No Page 10

13 Consolidated Statement of Changes in Shareholders Equity for the Share capital Share premium account Equity options reserve Retained earnings Total 000 At 1 April ,549 1,929 Comprehensive income for the financial year Dividends paid (208) (208) At 1 April ,027 2,407 Comprehensive income for the financial year ,769 1,769 Dividends paid (208) (208) At 31 March ,588 3,968 Page 11

14 Consolidated Cash Flow Statement for the Note Cash flows from operating activities Cash generated from operations 23 (54) 2,017 Net interest paid (26) (42) Taxation received/(paid) 32 (324) Net cash (used in)/from operating activities (48) 1,651 Cash flows from investing activities Purchase of property, plant and equipment (140) (90) Net cash used in investing activities (140) (90) Cash flows from financing activities Repayment of finance leases - (13) Equity dividends paid (312) (208) Net cash used in financing activities (312) (221) (Decrease)/increase in cash and cash equivalents for the year (500) 1,340 Cash and cash equivalents at the beginning of the year (268) (1,608) Cash and cash equivalents at the end of the year (768) (268) Cash and cash equivalents consists of: Cash Invoice discounting advances 17 (786) (326) (768) (268) Page 12

15 Notes to the Consolidated 1 Accounting Policies General Information RDF Group plc is incorporated in England and operates in the United Kingdom. Its registered office is 2 Bartholomews, Brighton, BN1 1HG and its principal activities are the provision of IT related managed software services, the provision of IT related temporary contracts and permanent recruitment placements. The financial statements are prepared in pounds sterling. Basis of Preparation The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the Companies Act IFRS have only been applied to the consolidated financial statements. The Company has elected to prepare its financial statements in accordance with UK GAAP. The financial statements of the Company are presented on pages 28 to 32. The financial statements have been prepared under the historical cost convention. Standards and Interpretations Not Applied The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning 1 April New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 April 2012 are: IFRS 9 Financial Instruments (effective 1 January 2015) IFRS 10 Consolidated Financial Statements (effective 1 January 2013) IFRS 11 Joint Arrangements (effective 1 January 2013) IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013) IFRS 13 Fair Value Measurement (effective 1 January 2013) IAS 19 Employee Benefits (Revised June 2012) (effective 1 January 2013) IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013) IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013) Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2013) Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2013) As at 31 March 2013, the following standards and interpretations were in issue: IFRS 9 Financial Instruments (effective 1 January 2015) IFRS 10 Consolidated Financial Statements (effective 1 January 2013) IFRS 11 Joint Arrangements (effective 1 January 2013) IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013) IFRS 13 Fair Value Measurement (effective 1 January 2013) IAS 19 Employee Benefits (Revised June 2012) (effective 1 January 2013) IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013) IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013) IFRS 7 (amendments), Offsetting Financial assets and Financial Liabilities (effective 1 January 2013) IAS 32 (amendments), Offsetting Financial assets and Financial Liabilities (effective 1 January 2014) Disclosures - Transfers of Financial Assets - Amendments to IFRS 7 (effective 1 July 2012) Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2013) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters - Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards (effective 1 July 2012) Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2013) It is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed. Page 13

16 Notes to the Consolidated Basis of Consolidation The consolidated financial statements incorporate the financial statements of RDF Group plc and of its subsidiaries. Subsidiaries are all entities over which the Group has the power to govern financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which the Group takes control. The Group adopts the purchase method in accounting for the acquisition of subsidiaries. On acquisition the cost is measured at the fair value of the assets given, plus equity instruments issued and liabilities incurred or assumed at the date of exchange. The assets acquired, liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the date of acquisition. Any excess of the fair value of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Any deficiency of the fair value of the consideration below the fair value of identifiable net assets acquired is credited to the statement of comprehensive income in the period of the acquisition. The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements of the Parent Company and subsidiaries to bring the accounting policies used into line with those used by the Group. Inter-company transactions and balances between Group companies are eliminated. Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The directors make estimates, assumptions and judgements concerning the carrying amount of assets and liabilities. Whilst the directors believe that the estimates and assumptions used in the preparation of the financial statements are reasonable, the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities recognised in the financial statements are discussed below. i) Impairment of goodwill The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations which require the use of estimates. ii) Recoverability of disputed debts The Group seeks appropriate legal advice on the recoverability of disputed debts and makes an assessment of the likely outcome in agreeing specific provisions for bad and doubtful debts. iii) Tax credits The Group has estimated the likely value of tax credits in relation to Research and Development available for the year, based on advice from external consultants. There is potential for this figure to change pending the final calculation for taxation purposes. Revenue Recognition Revenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of the Group s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group s activities as described below. The amount is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results taking into account the type of customer, the type of transaction and the specifics of each arrangement. i) Sale of IT Managed Software Solutions and IT Personnel The Group provides IT Managed Software Solutions and IT personnel on a time spent basis. Revenue arising from the sale of these services is recognised at the time that the work is carried out provided that all the Group s obligations associated with the sale of the services have been fulfilled. ii) Permanent Placement Fee Income The Group provides permanent placement recruitment search services to clients on a contingency basis. Revenue for this service is recognised when the Group s obligations associated with the sale of the service have been Page 14

17 Notes to the Consolidated fulfilled. This is normally at the time that a candidate starts their employment with a client. iii) Interest income Interest income is recognised on a time proportion basis using the effective interest method. Segmental Reporting A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products and services within a particular economic environment in which the risks and returns are different from those operating in other economic environments. Operating Profit Operating profit represents the profit generated from operations before investment income and finance costs. Borrowing Costs All borrowing costs are recognised in the statement of comprehensive income in the period to which they relate. Property, Plant and Equipment Property, plant and equipment is initially recorded at cost. Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment by equal annual instalments over its expected useful lives. The rates generally applicable are: Leasehold property improvements over the length of the lease Computer equipment and software 33% Office equipment 10% - 20% Motor vehicles 33% Assets residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date. Intangible Assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Company s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Separately identified goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill. Goodwill is allocated to cash-generating units for the purposes of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Product development Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives at rates of 33% to 50%. Costs associated with the production of identifiable and unique software products, including the payroll costs of the development teams, are recognised as intangible assets when they meet the following criteria: i) an asset is created that can be separately identified ii) the technical and commercial feasibility of the product can be demonstrated iii) it is probable that the product will generate future economic benefit iv) the costs of the product can be reliably measured v) the Group has the necessary resources available to complete the development of the product Computer software development costs capitalised as assets are amortised over their expected useful lives of 2 years with amortisation commencing once the computer software is fully implemented and brought into use. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Customer contracts and customer relationships Customer contracts and customer relationships acquired with subsidiaries are recognised at their fair value at the date of acquisition and amortised over periods not exceeding 10 years. Impairment of Intangible Assets and Property, Plant and Equipment Intangible assets that have an indefinite life and are not subject to amortisation are tested annually for impairment. Page 15

18 Notes to the Consolidated Property, plant and equipment and intangible assets that are subject to amortisation or depreciation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. Any impairment losses are charged to the statement of comprehensive income in the period in which they are identified. Where an asset does not generate cash flows that are independent of other assets, the assets are allocated to cashgenerating units and the Group tests the recoverable amount of the cash-generating unit to which the asset belongs. Employee Benefits Pensions Pension contributions are made for a number of employees on a defined contribution basis. Contributions payable for the year are charged to the statement of comprehensive income as they fall due. The Group has no further payment obligations once the contributions have been paid. Taxation Tax expense represents the aggregate of the current tax and deferred tax charges. The current tax charge is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the statement of comprehensive income as it excludes items of income or expense that are taxable or deductible in other years or are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full using the liability method on material temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates that have been enacted at, or substantively enacted by, the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Leases Rentals payable under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease. Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term, highly liquid funds with original maturities of three months or less and invoice discounting advances. Financial Instruments Financial assets and liabilities are recognised in the balance sheet when the Group becomes party to the contractual provisions of the instrument. Trade and Other Receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade receivables is established when there is objective evidence the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset s carrying value and the present value of future cash flows discounted at the original effective interest rate, The carrying value of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income within administrative expenses. When a trade receivable is uncollectible it is written off against the allowance amount for trade receivables. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the statement of comprehensive income. Share Capital Ordinary Shares are classified as equity. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs. Trade and Other Payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised Page 16

19 Notes to the Consolidated in the statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the balance sheet date. 2 Financial risk management (a) Financial risk factors The Group s activities expose the Group to a variety of financial risks including market risk, interest rate risk, credit risk and liquidity risk. The Group manages these risks through an effective risk management programme that seeks to minimise potential adverse effects on the Group s financial performance. Risk management is carried out by the central finance department under policies approved by the board of directors. An assessment of the risks is provided to the board at board meetings on a regular basis and are discussed to ensure that risk management complies with Group policy and that any new risks are identified and appropriately managed. (b) Capital management The Group s main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade in the foreseeable future. The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates. The Group considers its capital to include share capital, share premium, and retained earnings. The Group does not have any externally imposed capital requirements. Page 17

20 Notes to the Consolidated 3 Segmental reporting Primary business segment Segmental information is presented in respect of the Group s business segments. The primary business segments are based on the Group s reporting structures. Segmental results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate and head office items, and amounts in relation to intercompany transactions eliminated on consolidation. Segmental liabilities relate to directly attributable liabilities to each primary business segment. Year ended 31 March 2013 Managed Services Recruitment Services Unallocated Total Group Revenue Sales to external customers 13,403 12,539-25,942 Results Operating profit (62) 1,127 Profit before interest and tax (62) 1,127 Net finance expense (11) (15) - (26) Profit before tax 1,101 Taxation 668 Profit for the year 1,769 Assets and liabilities Segment assets 4,446 3, ,805 Segment liabilities 1,932 2,880 (975) 3,837 Total net assets 2, ,160 3,968 Other segmental information Capital expenditure Property, plant and equipment Intangibles Depreciation Information on major customers In the the Group had three customers exceeding 10% of total revenue, being 7.34m, 4.91m and 2.64m respectively All the Group s operations are in the United Kingdom. Page 18

21 Notes to the Consolidated 3 Segmental reporting (continued) Year ended 31 March 2012 Managed Services Recruitment Services Unallocated Total Group Revenue Sales to external customers 11,377 13,431-24,808 Results Operating profit Profit before interest and tax Net finance expense (22) (20) - (42) Profit before tax 728 Taxation (42) Profit for the year 686 Assets and liabilities Segment assets 2,555 2, ,365 Segment liabilities 1,540 2,225 (807) 2,958 Total net assets 1, ,223 2,407 Other segmental information Capital expenditure Property, plant and equipment Intangibles Depreciation All the Group s operations are in the United Kingdom. Page 19

22 Notes to the Consolidated 4 Operating profit The operating profit is stated after charging: Depreciation of property, plant and equipment Loss on sale of fixed assets 1 25 Operating lease costs: Rent paid on land and buildings Other (including motor vehicles) Employee costs (see note 5) 4,601 4,618 Auditor s remuneration The total fees paid by the Group in respect of audit, tax and other services is shown below: Statutory audit of parent and consolidated accounts Other services: The auditing of the accounts of subsidiaries Tax services 6 6 Other Employees The average number of staff employed by the Group, including the executive directors, during the financial year amounted to: No No Selling and administration Consultants The aggregate payroll costs of the above were: Wages and salaries 4,048 4,044 Social security costs Employer s pension costs ,601 4,618 Page 20

23 Notes to the Consolidated 6 Directors emoluments The directors aggregate emoluments in respect of qualifying services were: Emoluments receivable Emoluments of highest paid director: Emoluments receivable No directors (2012: nil) accrued benefits under defined contribution pension arrangements during the year. No share options were granted or exercised during the year. 7 Finance income and costs Finance costs Interest on short term borrowings repayable within five years Taxation Current tax expense UK Corporation tax Prior year tax credits (329) (70) Total current tax (329) 76 Deferred tax (Credit) for the year (339) - Origination and reversal of timing differences - (34) Total taxation reported in the consolidated financial statements (668) 42 Reconciliation of effective tax rate The tax assessed for the year is lower (2012: lower) than the standard rate of corporation tax in the UK of 24% (2012: 26%). The differences are explained below: Profit on ordinary activities before taxation 1, Profit on ordinary activities multiplied by the standard rate of tax Expenses not deductible for tax purpose Income not taxable (35) - Short term timing differences (1) 2 Capital allowances in excess of depreciation 1 (7) Tax credits (256) (60) Tax at lower rate - (2) Prior year tax credits (329) (70) Total current tax (329) 76 Page 21

24 Notes to the Consolidated 9 Dividends The following dividends have been approved in respect of the year: Dividends of 0.5 pence per share and 1.5 pence per share (2012: Two dividends each of 1.0 pence per share) Goodwill 000 Cost at 1 April 2011 and 31 March 2012 and 1 April 2012 and 31 March Carrying value at 1 April 2011 and 31 March 2012 and 1 April 2012 and 31 March Goodwill is allocated to the Group s contract and permanent recruitment division which is regarded as a cash generating unit (CGU). The recoverable amount of the CGU is determined based on value in use calculations. These calculations use pre-tax cash flow projections covering a 5 year period based on the Group s business plan. Cash flows beyond the 5 year period are extrapolated using the estimated growth rates stated below. The key assumptions used for the value in use calculations are as follows: Gross margin at 10% Growth rate at 3% Discount rate at 7.50% Gross margin is based on past performance, the growth rate is based on the long term growth rate in the UK economy and the discount rate is based on the Group s weighted average cost of capital. 11 Other intangible assets Product Customer contracts and Total development relationships 000 Cost 1 April 2011 and 31 March 2012 and 1 April 2012 and 31 March Amortisation 1 April 2011 and 31 March 2012 and 1 April 2012 and 31 March Net book value 31 March Page 22

25 Notes to the Consolidated 12 Property, plant and equipment Leasehold property improvements Motor vehicles Office equipment Software Computer equipment Cost 1 April Additions Disposals - (56) (56) 31 March Additions Disposals (4) (9) (13) Total 31 March Depreciation 1 April Charge for year Disposals - (31) (31) 31 March Charge for year Disposals - - (14) - - (14) 31 March Net Book Value 31 March March Group entities Subsidiary undertakings Class of Percentage held Nature of business share at 31 March 2013 RDF Consulting Limited Ordinary 100% Provision of computer managed services RDF Resources Limited Ordinary 100% Temporary contract and permanent placement services IPS Europe Limited Ordinary 100% Dormant All of the entities are incorporated and operate in England. Page 23

26 Notes to the Consolidated 14 Trade and other receivables Trade receivables 5,397 3,826 Taxation recoverable Other receivables Prepayments and accrued income ,599 4,490 The Group utilises an invoice discounting arrangement. Amounts advanced against trade debtors are disclosed in note 17. All trade and other receivables are recoverable within one year. The average period of credit taken is 76 days (2012: 60 days). The carrying value of trade and other receivables is the same as the fair value. There are no significant concentrations of credit risk. At 31 March 2013 the Group had trade receivables of 22,945 that were passed due other than those written off in the year to the consolidated statement of comprehensive income. Movement on the Group provision for impairment of trade receivables was as follows At 1 April (15) Provision for bad and doubtful debt - 9 Receivables written off as irrecoverable - 6 At 31 March Cash Cash at bank and in hand The carrying value of cash is the same as its fair value. 16 Share capital Authorised 20,000,000 Ordinary Shares of 2 pence each Allotted, called up and fully paid 10,400,000 Ordinary Shares of 2 pence each Page 24

27 Notes to the Consolidated 17 Borrowings Current Invoice discounting The directors consider that the fair value of borrowings approximates to the carrying value. The Group utilises an invoice discounting arrangement secured on trade receivables. Interest is variable at 2.25% over the Bank of England s base rate. 18 Deferred taxation Accelerated tax depreciation Short term timing differences Tax loss carried forward Share based payments Total 000 At 1 April 2011 (24) 4-19 (1) Credit/(charge) to the statement of comprehensive income (6) 1 41 (2) 34 At 1 April 2012 (30) Credit/(charge) to the statement of comprehensive income 4 (1) 336 (1) 338 At 31 March 2013 (26) The following is the analysis of deferred tax balances for financial reporting purposes: Accelerated tax depreciation Short term timing differences Tax loss carried forward Share based payments Total Deferred tax assets Deferred tax liabilities (26) (26) (26) Deferred tax assets Deferred tax liabilities (30) (30) (30) The Group has no unrecognised deferred tax assets. 19 Trade and other payables Trade payables 1,525 1,101 Other taxes and social security Dividend payable Other payables Accruals and deferred income ,027 2,632 The directors consider that the fair value of trade and other payables approximates to their carrying value. Page 25

28 Notes to the Consolidated 20 Contingencies The Company has a potential liability for an estimated 600k compensation payment in relation to the employment contract of Mr David Wood. In the event that Mr Wood or the Company terminates the contract between them under certain conditions listed in the agreement this liability will arise. The directors do not currently foresee circumstances in which the liability would arise. 21 Related party transactions Mr Anthony Antoniades is the beneficial owner of 9,850,000 Ordinary Shares, being 94.7% of the issued share capital of the Company and is the ultimate controlling party. Mr David Wood is the beneficial owner of 5,000 Ordinary Shares, being 0.048% of the issued share capital of the Company. At the prior year end a loan was outstanding to Innovative People Solutions Australia Pty Ltd, a company ultimately owned by Mr Antoniades, amounting to 80,819. The full amount was outstanding at the year end and included in other receivables. During the year the Company entered into transactions with International Programming & Systems Inc, a company ultimately owned by Mr Antoniades, with sales to the value of 461,908 (2012: 375,419) and margin of nil (2012: nil). Subsidiary companies and directors The Company has a related party relationship with its subsidiary companies and with its directors. Transactions between the Company and its subsidiaries, a list of which is set out in note 13, have been eliminated on consolidation and are not disclosed in this note. Details of directors emoluments are set out in note 6. At the prior year end, a loan was outstanding to David Wood for 70,000. The full amount of the debt was outstanding at the balance sheet date. Mr Nicholas Taylor is a partner at Healys LLP solicitors and during the year the Company entered into transactions totalling 3,840 (2012: 10,432) with Healys Solicitors for legal advice sought in relation to employment law. There were no further material transactions or balances between the Group and the directors other than remuneration paid in accordance with the terms of each director s service contract and dividends paid to directors in respect of the equity shares they own. 22 Leases Operating lease commitments The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The Group also leases various plant and machinery under non-cancellable operating lease agreements. The total value of future minimum payments under these leases no later than one year is 64k, and later than one year and not later than five years is 50k. The lease expenditure charged to the statement of comprehensive income is disclosed in note 4. The total value of future minimum lease payments in respect of land and buildings under non cancellable operating leases for each of the following periods is: No later than one year Later than one year and not later than five years Page 26

29 Notes to the Consolidated 23 Reconciliation of net operating profit to net cash flow from operations Operating profit 1, Depreciation Loss on disposal of fixed assets 1 25 Operating cash flows before movements in working capital 1, (Increase)/decrease in receivables (1,846) 517 Increase/(decrease) in payables Cash generated (used in)/from operations (54) 2, Share based payments Employee share options All of the share options have been granted with an exercise price equal to the market price of the Company s shares at the date of grant (market price options) and the only condition with these options is that they can only be exercised after the third anniversary of the date of grant and not exercised any later the tenth anniversary for the EMI Scheme options. No options granted can be transferred, assigned, mortgaged, or charged and options can only be exercised by option holders if they are still employees or directors of the Company. At 31 March 2013, the following share options were outstanding in respect of Ordinary Shares: Date of grant Number of shares Period of option Price per share EMI Scheme 20 July , July July p The number and weighted average exercise prices of share options are as follows: Weighted average Weighted average exercise price Number of exercise price Number of options options Outstanding at the beginning of the period , ,507 Granted during the period Forfeited / lapsed during the period Outstanding at the end of the period , ,507 Exercisable at the end of the period , ,507 The options outstanding at the year end have an exercise price in the range of 33.5p to 74.5p and a weighted average contractual life of 1.5 years (2012: 2.5 years). Page 27

30 Parent Company Balance Sheet as at 31 March 2013 Notes Fixed assets Investments Tangible fixed assets Current assets Debtors Creditors Amounts falling due within one year 6 (162) (153) Net current assets Total assets less current liabilities Capital and reserves Called up equity share capital Share premium account Equity option reserve Profit and loss account Shareholders funds The financial statements on pages 28 to 32 were approved by the board of directors and authorised for issue 19/08/2013 and are signed on its behalf by: David Wood Director Company Registration Number Page 28

31 Parent Company Cash Flow Statement for the Cash flows from operating activities Operating profit Depreciation 20 - Decrease/(Increase) in receivables (37) (77) Increase/(Decrease) in payables 118 (18) Cash generated from operations Taxation paid - - Net cash from operating activities Cash flows from investing activities Purchase of software (128) - Net cash used in investing activities (128) - Cash flows from financing activities Dividends received Equity dividends paid (312) (208) Net cash used in financing activities (112) (208) (Decrease)in cash for the year - (1) Cash at the beginning of the year - 1 Cash at the end of the year - - Page 29