![](/cdn/assets/images/search/clock.png)
We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Real Office | LSE:REAL | London | Ordinary Share | GB00B23FXY03 | ORD 0.1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.625 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMREAL RNS Number : 4108G Real Office Group PLC 01 February 2010 ? Real Office Group plc Final Results The financial statements of Real Office Group plc for the period ended 31 July 2009 are set out below. The financial statements are available on the company's website at www.realofficegroup.com and will be printed and posted to shareholders. 2009 Highlights Financial performance in line with expectations Multi-jurisdictional mergers completed Three new geographies opened and trading New service lines coming on stream Debt free business Solid platform for growth Order book and letters of intent at 31 December 2009 of GBP20.6m underpinning forecast sales Chairman's Statement Roger Smee MBE It has been an excellent year for the Real Office Group. Having regard to the significant set up costs of creating the Group and expanding our global network against a backdrop of challenging economic circumstances, I am pleased to be reporting that group turnover for the year to 31 July 2009 reached GBP45.01 million with profits before tax of GBP1.250m million, after writing off non recurring or exceptional one off costs, including, formation and start up costs of overseas subsidiaries, acquisition of subsidiaries professional fees and bad debts of some GBP1.48 million. Over the last twelve months we have made significant progress towards fulfilling our strategic objective, namely to create a global office design and build group capable of providing a 'one stop shop' to major national and international companies. Our integrated offering allows occupants to focus on their core business knowing that their office requirements are being managed centrally to ensure a consistently high standard wherever they are in the world. In April we re-listed on AIM and acquired three companies, Pacific Interiors Limited and ISIS Projects Limited (formerly CFC Group Limited), two established UK businesses, and Pacific Middle East Limited, a two year old Qatari based business with an active presence throughout the Middle East. The integration process for the individual businesses is underway with significant knowledge-sharing already occurring across the group. Further plans are in place to develop group procurement and treasury management systems to ensure that both best practice and best price operate across the group. Meanwhile the 'engine room' of the group, Pacific Interiors in the UK has delivered strong performance in a difficult marketplace. Its top tier design expertise has acted as a unique selling point for other parts of the group and been instrumental in helping to win business in other locations around the globe. The Real Office Group global network now includes London, Reading and Birmingham in the UK, Doha in Qatar, Dubai and Abu Dhabi in the United Arab Emirates and Bangalore, Delhi and Mumbai in India. This expanded platform allows us to deliver office fit out solutions at a consistently high level of quality across multiple locations. Going forward, we will look to further expand our international network so that national and international companies can call on our expertise for projects from San Fransisco to Sydney. As ever, our strategic growth plans focus on countries where significant GDP growth remains and the next geographic focus will be further penetration into the Asian and Far Eastern markets. Our diversified global base has helped us to cope with the challenging economic climate. Whilst trading has been slow to develop in Qatar, we have established a new strategic alliance with Rumaillah Group which will allow Pacific Middle East to accelerate its growth in the region. As the burgeoning office space of Doha comes on stream, the country is increasingly in need of quality design and finishes to match other financial capitals of the world. Rumaillah Group is an established market-leading construction services group in Doha, which has been operating at the heart of the Qatari business world. Pacific Middle East had worked with Rumaillah for two years before a mutual decision was made to combine our complimentary capabilities into one vehicle. This expands the level of quality and scope of service of the separate companies. In the United Arab Emirates the team have been further strengthened by the arrival of a number of experienced design and build professionals and there is a strong pipeline of work in both Abu Dhabi and Dubai. Having gained real momentum over the last 12 months, Pacific India is poised for significant growth over the next year. Further strategic alliances with key players in the Indian commercial property market are currently being explored to ensure that Real Office Group is the first design and build outfit to achieve truly national coverage of the country. Across India we are seeing increasing demand from international corporates who want the same level of reliability, quality and high-end design that they have seen in Western markets. We plan to rapidly build up a powerful national presence and target the untapped end of the market whose needs are often not met by the larger property players and architects. The newly rebranded ISIS Projects has taken over the fit-out and build business of the recently collapsed Welconstruct Group. This enabled it to establish a Birmingham office staffed by eight project specialists and to expand its London operation by a further eight Welconstruct staff. In the current difficult market conditions and intense competition margins have fallen and ISIS has struggled to win new business. The sector ISIS operates in is more competitive, margins are lower, working capital requirements are higher and growth prospects lower than for design and build. For all those reasons the Board decided to divest this business in the short term, to focus efforts on Pacific's winning formula. To aid that process I agreed that ISIS could be sold back to my company Leander Group Ltd ("Leander") at cost so that no loss was incurred by the Company. Leander has also waived its entitlement to GBP1.5m of deferred consideration. The management team has expressed interest in buying the company. Selling to Leander in the short term will allow time to deal with an orderly disposal of the business. In addition to geographic growth, we have worked hard to broaden out the range of fit-out services offered to clients. As part of this strategy we have launched Incotec Global, a specialist IT consultancy capable of delivering bespoke data and telecommunications solutions for our clients. The launch of other complimentary service lines such as furniture and environmental services will be considered as the year progresses. This year we have also been delighted to welcome Andrew Huntley to the Board as a non-executive director. He brings over forty years experience in the commercial property sector, both in the UK and internationally and his insight will be invaluable as the group expands. Given the economic backdrop, we are pleased to have made such major strides over a very short period of time towards realising our core strategic objectives of creating a global office design and build group. The group has a long track record of running debt free. However, the Board considers it prudent that the Group should put in place bank facilities and raise fresh capital to allow it to withstand fluctuations in the volume of business and enable it to finance acquisitions should they arise. Negotiations on both counts are under way. The philosophy of running debt free remains a core focus. An impressive international platform is now in place and our projections for 2010 are underpinned by an order book of GBP12.8 million. This is an extremely exciting and formative time for the Group and I look forward to the future with confidence. Board of Directors Roger Guy Smee (61) Executive Chairman and Chief Executive Officer Roger has over 30 years of experience in the real estate sector including international construction and project management contracts throughout the UK and globally. More recently, he has successfully undertaken and realised substantial sale and leaseback transactions of 85 Natwest buildings throughout England and Wales and, jointly with Merrill Lynch, the European headquarters of Nortel. The Chairman of Real Office Group Plc, Roger Smee, has been involved with many charitable interests, most notably the Berkshire Association of Clubs for Young People (BACYP) for the last 26 years and is currently President of the Association. He was awarded the MBE by Her Majesty Queen Elizabeth in this summer's Birthday Honours List for services to young people. Patrick (Paddy) John Aberneithy Greenwood fca (59) Non-Executive Director Paddy qualified as a chartered accountant in 1974 and was in professional practice for 20 years,post qualification with Coopers and Lybrand (now PriceWaterhouseCoopers). In 1983 he became an audit partner and subsequently became a corporate finance partner in 1991. In 1994 he formed his own consulting business and took up non-executive board positions with a number of companies. Paddy is deputy chairman of the Integrated Technologies group of companies and is non executive director of Vivacta Limited. Philip Dominic Brady fca (37) Group Finance Director and Company Secretary Philip Brady is a member of the Institute of Chartered Accountants in England and Wales. He has spent the last eight years in corporate finance at BDO in the lead advisory department. He has extensive experience of structuring transactions in both the public and private arenas. Philip joined the Company recently with the view to assisting in implementing the strategic vision of the enlarged Group. He has responsibility for the finance function of the Company and, following completion, has taken over the entire finance function of the enlarged Group including treasury, purchasing and tax planning and will also be key to delivering acquisitions to the enlarged Group. Mike Linforth is a graduate of Aston University, Birmingham attaining a degree in Business Administration and has used his business skills to create, own and run a number of specialist interior businesses since 1984. Two of these businesses, Total Office Group in London and Tangram Interiors in Southern California, USA, were sizeable operations employing in excess of 350 people in each case. Mike was headhunted by Pacific in February 2003 and has helped to transform the business into a significant player in the design and build industry. As a result of implementations by Mike, Pacific's turnover between 2006 and 2008 has doubled and profit before tax has increased fourfold. Mike has been the driving force in setting up our operation in India, working with major Indian corporates to deliver services both in India and the United Kingdom. Andrew HuntLEy (70) Non-Executive Director Andrew Huntley has over forty years' experience in the international real estate sector in the UK and overseas. He joined Richard Ellis in 1965 and retired as Chairman of Insignia Richard Ellis (now part of CB Richard Ellis Group Inc.) in 2002, having chaired the merger process with Insignia Financial Group of the USA. He was a non-executive director of Pillar Property plc from 2000 until its acquisition by British Land plc in 2005. Andrew was appointed a non executive director of Liberty International (a FTSE 100 company) in June 2009 and is a non-executive director of the Miller Group Limited (a private UK house builder) as well as previously being a member of the board of the Charities Official Investment Fund. Real Office Group At a glance Our Objective Create a global design and build group capable of providing a 'one stop shop' to major national and international companies Allow occupants to focus on their core business knowing that their office requirements are being managed centrally to ensure a consistently high standard anywhere in the world Real Office Group network now includes London, Reading, Birmingham in the UK, Doha in Qatar, Dubai and Abu Dhabi in the United Arab Emirates and Bangalore, Delhi and Mumbai in India. The Real Office Group currently consists of the following businesses: Pacific Interiors Founded in 1984, Pacific Interiors is one of the UK's leading providers of quality design, project management and commercial office fit-out services. It is the 'engine room' of the Real Office Group. Pacific Middle East Established in 2007, Pacific Middle East now delivers some of the best commercial interior solutions to the region from its offices in Doha, Dubai and Abu Dhabi. A recently announced strategic alliance with Rumaillah Group will further accelerate its expansion plans. Pacific India With offices in Bangalore, Dehli and Mumbai, Pacific India aims to be the first commercial design and fit-out business to achieve truly national coverage of the country. With increasing demand from international corporates seeking high-end fit-out solutions the company is poised for rapid growth. ISIS Projects Established in 1979, ISIS Projects acts as principal contractor for commercial property owners and occupiers. A newly opened Birmingham office will provide a platform for growth within a key regional market. Pacific Interiors Limited Pacific Interiors Limited (Pacific) was incorporated in 1984, and has grown from a small niche player into one of the UK's leading interior design and build consultancies. Pacific predominantly provides support for businesses that have few internal facilities personnel, and require a 'one stop' solution to their office refurbishment and fit-out needs. Pacific specialises in providing a fast and hassle-free service which allows businesses to create bespoke and unique office environments to best suit their individual needs. With our roots as a specialist consultancy to the financial sector, Pacific has been instrumental in helping many international corporates develop office space and create a presence in London, as the city continues to reassert its position as a thriving global business hub. As the economic climate has shifted, the business has moved away from pure financial institutions and has successfully expanded into new markets. Large-scale projects for PepsiCo, Detica, Baker Tilly, Springer Publishing and Swatch Group have been completed, amongst many others. Pacific has also made new strides into advising on the environmental impact and requirements of offices, ranging from guidance on environmentally friendly products to consulting on energy savings within the office environment. Pacific is close to achieving its own ISO14001 Environmental Management System accreditation in early 2010. While Pacific continues to grow as a business, even in the most challenging of economic times, all of our offices in the UK and abroad have one overriding consistency: the high quality service that is provided to clients. This has meant that Pacific has been invited to follow existing clients to locations further afield, including New York, Chicago and Amsterdam. Pacific Interiors celebrated its 25th Birthday on the 2nd of October this year - a fitting milestone for an exciting year. Long standing financial services clients include: Canyon Capital Cenkos Securities Centaurus Capital Cerberus Capital Management Fleming Family partners Gazprombank Louis Capital Marshall Wace ASSET MANAGEMENT NewSmith Capital Schneider Trading Tristone Capital TT International Pacific Middle East Limited Pacific Middle East Limited (Pacific ME) was incorporated in February 2008 to take advantage of the vast growth potential of the Middle East property and interiors market. With the Pacific ME regional headquarters in Doha, Real Office Group has now set up separate companies in both Dubai and Abu Dhabi to increase our presence in these key areas and to strengthen our hold on this developing market. Our expansion into this region is further proof of the overall Real Office Group ambition to provide unique high-end design and build services to global clients. A number of Pacific Interiors' blue-chip clients in London had requested our services in the Middle East and suggested we set up an operation in Qatar to provide the same level of design and build quality that we offer clients based in the UK. Our market research showed that such a service simply did not exist in the Middle East at that time. Recognised as a company offering clients sophisticated and cutting edge western designs, we are winning mandates from global companies looking to enter the region whilst maintaining their brand image, as well as local companies who want to bring their workplace environment to an international standard. Our resulting success in winning new work from both local and international clients has been exponential - and characteristic of all our achievements in other locations across the globe. In 2009 Pacific ME executed two of the largest design and build projects for the region: for Vodafone and Al Khaliji Bank. The project for Vodafone involved fitting out their retail stores in all the major shopping malls across Doha. We were also instructed by Al Khaliji Bank to design and fit out seven floors of their tower office in the prestigious West Bay of Doha, including the lobby, canteen and executive offices. In the UAE, we have quickly established ourselves as a leading provider to the professional services sector, and are working on a number of projects with law firms including Berwin Leighton Paisner, Herbert Smith and Latham & Watkins. Pacific ME has also been able to capitalise on the thriving hospitality and service sector markets in the area, and we have recently won contracts with big names including Holiday Inn Express. In addition we recently completed the fit out of the IHG headquarters and the prestigious refurbishment of the Corniche beach front in Abu Dhabi. Our sponsor in Doha aligns us with one of the region's leading contractors, Rumaillah Services Group. This means that we are now perfectly positioned to further streamline and simplify the design and build process to provide efficiencies, of both time and money-for all of our clients in the Middle East. Top quality staff is key in overseas markets. After early challenges we now have the quality to meet the targets set. Pacific Interiors India PVT Limited Real Office Group bolstered its global footprint by launching an operation in India in November 2008. Pacific Interiors India Private Ltd (Pacific India) is now perfectly positioned to take advantage of the rapid growth in the Indian domestic market. Pacific India now has offices in Delhi, Bangalore and Mumbai. It is a remarkable fact that in Bangalore alone, over the last three years, more office space has been developed than in any other city in the world. Despite a slowdown in India's economy at the beginning of 2009, GDP is still forecasted to be 7% in 2009 and 8% in 2010. In August 2009, industrial output grew by 10.4%. The move into India fits perfectly with Real Office Group's strategic plans to expand into countries where significant GDP growth remains. Pacific India has identified increasing demand from international corporates based in India who want the same level of reliability, quality and high-end design that they have seen in Western markets. Office rents across the major cities in India have dropped by up to 37%, and companies are looking to take advantage of this reduction by reorganising their office space to expand or consolidate accordingly. We have seen increasing demand for our services from international businesses that have a base in India or are looking for new office space there. They are all looking for reliability, punctual delivery, and a high-quality and sophisticated office fit-out. Pacific India is bringing a new concept to the Indian market with our 'one-stop' design and build offering. We are rapidly building up a powerful local presence and have completed a number of projects, including large-scale design and fit-outs for Hays Recruitment in Mumbai and for multi-brand skincare manufacturer Urban Shore in Delhi. We are currently on site for the Fiit Jee Institute, Höegh and CMS. As we continue to rapidly expand our client and prospect base across both international and domestic clients based in India, the scale and scope of projects are growing too. We look forward to completing many more successful projects in the coming months, and plan to use our local team and extensive international network to ultimately add new locations to our existing offices. In our experience, key buying factors for Indian clients have been: - High quality interior finishes - Western interior design and products to create a modern office environment - Speed! Most projects can be completed by Pacific's 'one stop' approach in 8-10 weeks, as opposed to 12-16 weeks of many projects in India - Co-ordinated project management where a client can focus on their own business and let Pacific run the project - Detailed and accurate financial reporting pre and post contract ISIS Projects Limited ISIS has been a leading figure in the commercial fit-out and refurbishment market across a number of key sectors since 1979. Our primary business is to provide construction management and contracting services for complex fit-out and refurbishment projects alongside our clients' existing professional teams (architects, engineers and quantity surveyors). Formerly named CFC Group Limited, we completed a rebranding process to become ISIS in December 2008. ISIS offers a unique combination of skills, from estimating, surveying, procurement, project management and technical services (M&E / IT Coordination), to site management and Health & Safety resources, taking a single point responsibility for the delivery of commercial property fit-out and refurbishment projects nationally throughout the UK. ISIS has historically operated across southern England from headquarters in Thames Valley. In 2008 we created a specialist team based in the City of London to focus on the Central London market. In October this year we established a Birmingham office staffed with highly experienced regional specialists to manage projects across the Midlands and Northern region. Through this network ISIS has carved out a name as a trusted and established industry player, known for successfully implementing complex, technical projects across the banking, technology, leisure, Government, education, medical and corporate sectors. The ISIS management team offers clients considerable national and international experience in fit-out and refurbishment, having installed in excess of 10,000 trading positions for financial sector clients and completed more than 2 million sq ft of Datacentre / Business-Critical space for market-leading international clients. We plan to use this management experience to further develop the ISIS delivery model both in the UK and overseas. Through a nationwide network of pre-qualified suppliers and specialist local subcontractors ISIS delivers fast-track, complex projects ranging from 5,000 to 250,000 sq ft, under a variety of contract formats including Guaranteed Lump Sum, 2-Stage Open-Book Procurement, Management Form, and Detail & Build. ISIS also works closely with our clients' architectural and engineering teams responsible for the overall concept. This allows us to detail the design schemes, ensure coordination and feasibility, and ultimately deliver the works on site - all under a single-point of contact, accountable for programme delivery, quality, safety and price. +------------------+---+------------+-------------+------------+-------------------------+ | Clients include: | | | | +----------------------+--------------------------+------------+-------------------------+ | Aberdeen Asset Management | Microsoft | | +-------------------------------------------------+------------+-------------------------+ | Berkshire NHS Trust | | Och Ziff | | +-----------------------------------+-------------+------------+-------------------------+ | Coal Pension Nominees | | Prospect Park Hospital | +-----------------------------------+-------------+--------------------------------------+ | Dell Computers | | Renault FI | +-----------------------------------+-------------+--------------------------------------+ | Deutsche Bank | | Royal London Properties | +-----------------------------------+-------------+--------------------------------------+ | IBM | | | Shell Pensions Trust | +------------------+----------------+-------------+--------------------------------------+ | JPMChase | | | Sofitel Hotels | +------------------+----------------+-------------+--------------------------------------+ | BBC | | | The Harris Academy | +------------------+----------------+-------------+--------------------------------------+ | | | | | | | +------------------+---+------------+-------------+------------+-------------------------+ CERTIFICATION ISIS is proud to have been ISO9001 certified since 1993 and is in the process of undertaking ISO14001 accreditation. We are members of the AIS trade association (Association of Interior Specialists) are CHAS compliant, Exxor accredited and Constructionline certified. Case study Dixon Wilson London : leading City accountants' headquarters In May 2009, Pacific Interiors was instructed to design and build from scratch a new London office for Dixon Wilson, a leading accountancy firm. Dixon Wilson chose 22 Chancery Lane as their new central London headquarters: a more accessible location for clients and colleagues than their previous Tower Hill offices. Dixon Wilson set the team at Pacific the challenge of retaining the atmosphere and feel of their old offices in a new and modern environment in order to allow them to maintain their brand values and established image with their core clients. Dixon Wilson's new office spans floors 4 to 6 of the building, with the 4th and 5th floors designated as the working hub for fee-earners and support staff. Our two key design challenges for these floors were to ensure that the acoustics of the office were at a level to maintain privacy; and to create an atmospheric office environment for junior and support staff. All 13 London-based partners required an interior office. To ensure that the design would provide unrestricted views, while maintaining the levels of natural light, we situated the majority of the partners' offices against internal walls, leaving the windows unobstructed, while affording partners the privacy they were used to. We chose furnishings and colours which maintained links with the classic feel of the previous building. We used traditional materials, and, by using a number of browns and creams in the carpets and upholstery, created an elegant and classic feel. Our innovative design for the building, paired with Dixon Wilson's vision, enabled us to deliver a workspace that met their criteria to maintain their brand while creating a contemporary high-quality working environment, and meant that our client's objective to represent both past and future resonated throughout the entire project, from conception to realisation Case study Sofitel Spa London : 5-star landmark hotel spa In early 2009 ISIS Projects (ISIS) won a competitive tender against seven other specialist refurbishment companies, including some of the biggest names in construction in the UK, to convert a listed building into a luxury spa for the five star Sofitel Hotel in London. The site for the new GBP2.7 million spa was the old Bank of Nigeria headquarters in Pall Mall, London. Our brief was to convert the Grade II listed historic site into a luxury spa - an extension to the current five star Sofitel hotel. The project encompassed three floors of an incredibly complex and congested site. The building works involved the intricate removal of Victorian banking vaults and an excavation of underground wells, as well as the installation of a new central core and services infrastructure. Our detailed planning and use of complex management techniques meant that we were able to break through into the hotel banqueting suites while the hotel remained in full occupation, allowing our client to continue operating as usual. Concurrently, we completed a GBP0.5m structural refurbishment of the existing hotel gym, bringing into play a highly contemporary and sophisticated style. The spa now includes a full-scale hammam, steam rooms, holistic and light therapy treatment rooms, Japanese baths, male and female saunas and reflexology areas, as well as private treatment rooms and aromatherapy suites. ISIS was also responsible for the construction and fit-out of the spa's retail area where specialist products are now sold. The design of the spa included sophisticated mechanical and electrical systems, a GBP1million specialist joinery package, and state of the art lighting and display systems. As this was a listed building a great deal of specialist refurbishment was required for the building's historic cornices, architraves, stonework and timber. Throughout the project we co-ordinated and maintained open dialogue with the listed building authorities to ensure that the building was restored to its former glory and the damage caused by previous occupants was rectified. The entire project was completed in a total of just twenty-two weeks, and included accelerated building and demolition works over the Christmas and New Year period. Sofitel chose ISIS for this innovative scheme because of the quality of our team, our realistic attitude to programme & logistical constraints and our competitive pricing model. We were delighted to have delivered this project to the exceptional standards that Sofitel demand of their landmark hotels. Case study International Trading Company Amsterdam : European expansion facility Pacific Interiors were appointed by an international high-volume trading company at the start of 2009 to undertake a GBP1m project to design and fit-out a brand new office in Amsterdam. The selected building was located in Singel in the heart of Amsterdam's business district, overlooking one of the picturesque canals. This building, their first office in Amsterdam, was part of an expansion plan to their existing office network, which includes prime locations in London and Chicago. The site was an old-fashioned six-story building which was originally two dilapidated houses that had been bombed during the war and re-joined using a new concrete frame structure. The team at Pacific were briefed to develop this 5,000 square foot shell into an attractive and inspiring office environment for new staff to work at. The company attempts to attract a high volume of graduates, therefore requiring their offices to be cutting edge in design and to reflect their brand, reputation and outlook. The building was originally the home of a famous Dutch artist. The client chose to keep intact some of the original artistry and graffiti on the walls and floors of the building. This maintained a link with the artist and created a trendy and unique image throughout the offices. The project in Amsterdam took four months to complete from start to finish, and was completed in June this year. Due to their trading needs the client had extensive data power requirements and the team had to build an eight cabinet central equipment room (CER) - an unusual and challenging brief for a design firm. High quality finishes and solid wood floors were used throughout the offices, and specialist lighting was installed in order to minimise strain on traders' eyes. The project was highly successful. As a result Pacific has received an instruction to complete the second phase of the client's existing London office redevelopment - a GBP2million extension that we originally designed and built in November 2008. Case study PepsiCo Leicester: state-of-the-art technology centre PepsiCo International (UK & Ireland) hired us to create a state of the art technology centre in Leicester that was a creative, inspiring workplace and would foster collaboration, communication and interaction amongst staff. Our brief was to ensure the building would look and feel "technical", while at the same time maximise the feeling of space and natural light. It was an essential part of PepsiCo's brief that the new building would help attract and retain high calibre talent with contemporary but timeless styling. Furthermore, the building had to embody PepsiCo's corporate goal of "performance with purpose" to meet their environmental sustainability levels. News of the newly completed centre's positive cultural impact spread quickly across PepsiCo's group of companies, attracting visitors and becoming the standard for similar projects being undertaken in India and China. One executive commented that the building "reflected the goals and values of the global company in which we work." Most importantly, the centre's success has been acknowledged by its working teams, who have been enthused and motivated by the design of the new facility. The workspace increases the flow of information, which is viewed as fostering more efficient decision-making processes. It provides flexibility and key areas that enable productive working. Offices had previously been on the outside walls, but in the new construction were moved to the interior, maximising the flow of light into the area. To foster collaboration and interaction varied styles of workspace were implemented, from formal desks and meeting rooms to informal breakout areas. PepsiCo's existing facilities had already been scheduled for demolition, which meant that the new office design, construction and engineering solutions had to be completed in eight weeks, with the site works in twelve weeks. The success of the project, and the approach to design targets, both functional and behavioural, has become a new benchmark for the company. Corporate and Social Responsibility Committed to environmental best practice At Real Office Group we recognise the importance of reducing the impact of our business on the environment. Through adjusting our internal business practices and influencing clients', sub-contractors and suppliers we can make a real difference to climate change. As part of our commitment to reducing negative environmental impacts we are creating a new Environmental Management System (EMS) to meet the ISO 14001 industry standard. A dedicated, in-house environmental manager is currently overseeing the implementation of the EMS and completion is scheduled for April 2010. In addition, in January 2010 we will have the in-house expertise to conduct Level 4 Non Domestic Energy Assessments, an essential part of assessing the energy performance of commercial buildings. In 2008 we partnered with one of the UK's leading carbon foot printing consultancies to tackle the task of carbon foot printing an office fit-out. This was a first for the fit-out industry. The tools we developed now allow clients to make informed, sustainable decisions early in the design process. As a group we have set ourselves a range of key objectives relating to environmental performance: - Understand and comply with all current relative legislation - Prepare Site Waste Management Plans for all fit-out projects with targets that exceed current UK legislation - Reduce Energy and Water consumption, use alternative sustainable materials where possible and encourage our clients and contractors to do the same - Ensure that all employees behave in an environmentally responsible manner - Monitor and manage continuous improvement of our environmental principles Our environmental management system The launch of our new Environmental Management System early next year will further enhance our ability to deal with essential environmental issues. The system will ensure that we work through a set of key environmental issues on each of our projects including: - Discussing energy saving options with clients during key stages of the planning process - Assessing fit-out requirements against the latest legislation and best practice - Making energy savings recommendations to improve best practice targets - Using innovative design to make maximum use of natural light and ventilation - Where recycling and the use of sustainable resources is a feature of the client company, suggest ways of using design to raise awareness among employees and demonstrate the company's commitment to reducing its environmental impact - Sourcing materials from companies which can demonstrate an environmentally-friendly track record. Running a responsible business At Real Office Group our people are central to everything we do. We strive to provide a creative working environment which supports human health, safety and well-being. As an equal employment opportunity employer, we are committed to equality of opportunity in recruiting, selecting, promoting, training and providing benefits to our employees. It is the Company's policy to ensure safe working conditions for all its employees and abide by all relevant legislation. As well as supporting our own employees, interacting and supporting the broader community is also an integral part of our culture. Real Office Group and its subsidiaries have been involved with a broad range of community support initiatives. The group makes annual charitable donations to organisations including Saint Margaret's Hospice, Jeans for Genes and the NSPCC. In addition to group-wide initiatives, our Chairman, Roger Smee has been involved with the Berkshire Association of Clubs for Young People (BACYP) for the last 27 years and has been President for more than 20 years. He was awarded the MBE by Her Majesty Queen Elizabeth in this summer's Birthday Honours List for services to young people. The BACYP works within a framework that is sensitive to local community agendas throughout Berkshire to support clubs and projects so that they can deliver the best service for young people in Berkshire. The Association provides a platform for work relating to drug and alcohol abuse, crime and other social issues that impinge on the lives of many young people. The BACYP provides training, personal development activity programmes for young people and works diligently to improve social inclusion for the young and to give financial independence to young people. In addition to the work of our Chairman, this year a number of employees took part in the Great City Race which raised funds for 'Seeing is Believing' (SiB) a charity aimed at tackling avoidable blindness on a global scale. Employees also took part in a sponsored walk to raise funds for Breast Cancer UK and significant time was committed to a volunteer programme run by the Forestry Commission which involved clearing land, planting trees and restoring animal habitats at the Alice Holt Forest. Looking forward, 2010 will see a Real Office Group team involved in the '100 miles in One Day' cycle event to raise awareness for The Lennox Children's Cancer Fund. Finally in addition to our efforts in the broader community, we also believe that the overall health and well-being of employees is a key element to running a successful business. With this in mind, we take part in the Green Transport Plan and Ride2Work schemes where employees are able to 'lease to buy' a bike over a 12 month period for commuting to work, delivering the dual benefit of improving health whilst lowering our overall carbon footprint. +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+ | Business Review | | Forward Looking Statements | | The business review on pages 17 to 23 has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. It should not be relied upon by any other party or for any other purposes. | | The business review contains certain forward looking statements. These statements have been made by the directors in good faith based on information available to them up until the day they approved the report of the directors. Forward looking statements should be regarded with caution because of the inherent uncertainties in economic trends and inherent business risks. | | Composition of the Group | | Real Office Group is the holding company for companies operating as main contractors in the fitting out of office interiors and supply of related products, including furniture in the following jurisdictions:- | | Services Company Jurisdiction | | Design and Build Pacific Interiors Limited UK & Europe | | Pacific Middle East LLC ("PME") Qatar | | Pacific Middle East (Turnkey) (Abu Dhabi) LLC Abu Dhabi | | Pacific Middle East (Turnkey) (Dubai) LLC Dubai | | Pacific Interiors India Pvt Limited India | | Fit out services | | excluding design Isis Projects Limited UK& Europe | | | | Background, Turnover and Profitability|
| | | Following its formation on 2 April 2007 and flotation on AIM the Company pursued its acquisition strategy and incurred significant costs undertaking due diligence on target companies, including the subsidiaries of Leander Group Limited ("Leander") and Rock New Providence Limited ("RNP"), both of which were under the control of their principal shareholder, Roger Smee. Because of the credit crisis and turmoil in capital markets it proved impossible to proceed with the acquisitions at that time. In October 2008, the Board of Leander resolved to make a cash offer for the shares in the Company at 16p per share, which on 10 November 2008 was accepted by a majority of shareholders and the company became a subsidiary of Leander. Having obtained control of the Company on 28 April 2009, Leander and RNP sold their subsidiaries to the Company for shares and debt (see note1 to the Financial Statements). | | The Group results for 2009 set out below, and in the Income Statement on page 32, include the results of the trading subsidiaries for the year ended 31 July 2009 plus the results of the Company from the date of acquisition on 11 November 2008 to 31 July 2009. For 2008 the Group results are those of the trading subsidiaries excluding the Company for the year ended 31 July 2008. The results of the Company for 2009 are for the fifteen month period from 1 May 2008 to 31 July 2009 and for 2008 are for the thirteen month period from incorporation on 2 April 2007 to 30 April 2008. | | | | | | | | Background, Turnover and Profitability -continued | | | | Turnover Gross Profit Profit Cash|
| before tax | | GBPm GBPm GBPm GBPm | | | | 2009 45.01 8.18 * 1.25 1.66 | | 2008 37.84 5.59 *1.36 5.46 | | | | * After writing off one off exceptional non recurring set up of overseas subsidiaries and professional costs in 2009 of GBP1.48m (2008 GBP0.5m) | | The results above and in the Income Statement on page 32 for 2009 exclude the results of the Company for the period prior to its acquisition from 1 May 2008 to 10 November 2008, which was a loss of GBP 50,100. The Group comparative figures for 2008 also exclude the results of the parent company for the 13 month period from incorporation on 7 April 2007 to 30 April 2008, which are separately stated in the Company Income Statement on page 32. (See note 1 to the Financial Statements). | | Financial Position|
| Because all of the companies acquired were under common control as at 11 November 2008, the method of accounting adopted for presentation of the Group Financial Statements is the "Pooling of Interests" (widely referred to as Merger Accounting) method of accounting, rather than Acquisition Accounting. Under the Pooling of Interests method the difference between the fair value of the consideration paid and the paid up issued share capital and share premium account of the companies acquired, which was GBP21.36m, is credited to a Unity of Interest ( or Merger) reserve. Under acquisition accounting the difference between the fair value of the net assets acquired and the fair value of the consideration paid would be reflected as Goodwill. Under merger accounting no account is taken of goodwill, which, less any reserves of the companies acquired that continue to be available for distribution following formation of the merged group, is written off to the Unity of interest reserve at the date of merger. More details of the reasons for this treatment are set out at note 1 to the Financial Statements -General Information. | | | | Net Liabilities and net Current Liabilities | | | | As at 31 July 2009 the Group financial statements show that on a consolidated basis the Group had net liabilities of GBP2.09m and net current liabilities of GBP2.55m. (Company GBP2.974m). The Company has net assets of GBP18.9m, net current liabilities of GBP2.90m and non current liabilities of GBP1.997m. Net liabilities arise in the Group accounts partly because, as explained above, under the pooling of interest method of accounting no account is taken of goodwill on consolidation. Net current liabilities and non current liabilities include the following liabilities:- | | Current liabilities Non -current | | liabilities | | Group Company Group Company | | GBP GBP GBP GBP|
| '000 '000 '000 '000 | | Deferred consideration for investment in 501.8 501.8 - - | | subsidiary | | Amounts due to subsidiaries - 2,110.8 - 1,997.7 | | Amount due to related party 159.2 - - | | Non refundable advance payments under 728.1 - - - | | contracts | | Uninvoiced cost accruals on contracts 878.6 - | | 2,108.5 2,771.8 - 1,997.7|
| | +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+ | The key performance indicators by which the Group will in future monitor and measures its success are as follows: | | Key Performance Indicators ("KPIs") | | KPIs Commentary Performance 2009 | | | | Revenue Revenue illustrates growth or reduction in The financial statements for 2009 | | volume of business in value terms across represent the first trading period | | the group and on an individual business for the enlarged combined group for|
| basis. Turnover provides a useful measure the year to 31 July 2009. Turnover | | of the scale and impact of acquisitions on was GBP45.01m and, on a comparable | | size of an enlarged group basis, GBP37.85 m for 2008. Turnover | | in 2009 included GBP14.46m from | | overseas subsidiaries (2008 | | GBP0.837m) | | | | Gross Profit As explained above the Group uses Margins for the twelve months ended | | gross profit as the principal yardstick 31 July 2009 were GBP8.18m (18.17% of|
| for monitoring the success or otherwise sales) compared to GBP5.59m for the | | of its strategies. Gross profit represents trading businesses for 2008 (14.77% | | he difference between turnover and direct of sales). This was achieved despite | | costs and is expressed as a percentage challenging economic circumstances. | | | | | | Order Book and The forward order book together with The forward order book for the Group, | | Prospects traffic letters of intent and firm prospects from including letters of intent, at 31 | | sheets the prospects traffic sheets provides an December 2009 was GBP20.51.m with|
| indicator of the likely level of future firm prospects of a further GBP9.84m. | | activity. Using the order book This represents a sound position in | | representing legally committed contracts, challenging economic circumstances. | | letters of intent and carefully considered | | firm prospects from the traffic sheets, | | such as prospective work from existing | | customers the Group is able to adjust | | resources to ensure effective delivery of | | services and continuity of its business.|
| | | | | | | | | | | Key Performance Indicators ("KPIs") continued | | | | | | Cash Balances Cash is critical to the delivery of Cash balances at 31 July 2009 were|
| and facilities services and for the future development of GBP1.66m. Historically, apart from | | the Group's business. Cash is also obligations arising under finance | | required to fund acquisitions including leases the Group has operated on a | | the costs associated therewith debt free basis. The Group is | | currently negotiating with its | | bankers and capital providers for | | facilities to assist with both | | working capital and acquisition | | requirements|
| | | Dividends Dividends represent the return to The pooling of interests method of | | shareholders from the business, are accounting has resulted in the | | reflected in the share price and therefore Company's distributable reserves | | a key component for delivery of being unaffected by the consequences | | shareholder value. A key focus of the of impairment of the carrying value | | Group will be to pay dividends to its of the investment in subsidiaries. | | shareholders. The businesses have a stong track | | record of paying dividends to|
| previous owners with GBP2.9m paid the | | year to 31 July 2009 and GBP2.145m | | paid in the year to 31 July 2008 | | | +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+ | | +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+ KEY RISKS Real Office Group has identified and actively manages a number of key risks to achieving the Group's strategy and objectives. The principal risks and the way that they are managed are as follows: Creating a Global fit out business The Group's strategy of creating a presence in every major financial centre of the World and to broaden the range of its service offering will involve further acquisitions. The Group's ability to grow and create value for its investors through such acquisitions will depend upon:- · the availability of suitable acquisition candidates at an acceptable cost · the ability to compete effectively for these acquisition candidates · the availability of capital and debt to complete such acquisitions · the ability to successfully integrate any businesses acquired. KEY RISKS- Creating a Global fit out business continued Any acquisitions undertaken by the Group will be subject to rigorous commercial, financial and legal due diligence focused on identifying the risks and uncertainties associated with the proposed acquisitions and determining the fair value of the business to be acquired. The Group will only proceed with acquisitions on the basis of binding legal agreements that provide adequate and appropriate warranties and indemnities or deferred consideration to offset risk of loss. For the most part, consideration will be in the form of shares in the Company. Cash consideration will only be paid in exceptional circumstances, where appropriate funding is in place and it is considered prudent to do so. Where appropriate, vendors would retain minority stakes in the business acquired with the Group taking options to acquire at a later date on the achievement of certain pre- agreed criteria. By these and other similar means the board considers that it can effectively manage any financial exposure from the acquisition of new businesses. Risks associated with post-acquisition integration of acquired businesses are mitigated by developing integration plans and closely managing the process. This ensures that the value of any goodwill acquired is preserved and that anticipated synergies are delivered for the benefit of enhanced shareholder value. Legal Structures and Ownership in Overseas Jurisdictions The Group presently operates in a number of countries including Qatar, the UAE and India and intends in future to operate in jurisdictions where local laws require the participation of a local national as a controlling or minority shareholder. In certain of these jurisdictions the Group has entered into pre-established arrangements whereby the local national, as either a controlling or minority shareholder, declares a trust in favour of the Group for the benefits associated with that ownership. Such arrangements are not necessarily recognized under the laws of the relevant countries and may not be legally enforceable. The Group offsets this risk by thinly capitalizing its ownership and by entering into contractual relationships within the legal framework applicable to the company involved for the provisions of services from other jurisdictions where group ownership is secure. Through this means the Group limits its exposure to profits and assets that might otherwise be jeopardized by legal challenges to ownership. Legal Structures and Ownership in Overseas Jurisdictions- continued The Group believes that it has more to gain in terms of achieving its Global and growth objectives by working with local commercial partners that can contribute more to the Group by their participation in the ownership of the local business than would otherwise be the case if they did not have any beneficial ownership. Wherever appropriate, practicable and consistent with local laws, the Group will seek to obtain rights to buy out the interests of such partners at a later date. Developing and retaining talent Without talented people the Group will not be able to improve the quality of its delivery, grow or sustain and increase its financial performance. Nationally and internationally as the Group expands and grows it is crucial that talented individuals are attracted developed and retained at every operating level. The Group believes that by extending its sphere of operations onto a global platform it has created outstanding career development opportunities and challenges for talented people that will give it a competitive edge for recruiting and retaining key staff. In addition the Group operates various training programmes, mentoring and life coaching services to its staff to enhance and monitor individual performance. Directors' Report The directors present their report and the financial statements of the Group and the Company for the year ended 31 July 2009. Principal Activities The Group provides design and build office fit out services. The principal subsidiary companies providing these services are set out at note 10. The Company is registered in England and Wales and its principal activity is as a holding company for the creation of a global group of office design and fit out businesses. Review of the business and future developments The Companies Act 2006 requires the Company to set out in this report a fair review of the business of the Group for the financial year ended 31 July 2009 and the position of the Group at the end of the year (" Business Review"). A review of the business of the Group and a description of the risks and uncertainties facing it, including an analysis using key performance indicators and other relevant information necessary for fulfilling the requirements of a business review can be found either in this report or in the Business Review at pages 17 to 23. The processes and procedures used by management to identify, assess and manage financial risks is dealt with at note 23. Political and charitable donations During the period the Group made charitable contributions of GBP4,701 (2008 - NIL). There were no political donations. Supplier payment practice It is the Company's policy to settle suppliers' invoice as they fall due unless disputed. However, the Company reserves the right to use its cash resources in the manner best fitting its shareholders. It maintains an open discourse with suppliers where payments are likely to be beyond the date upon which the supplier deems them to fall due. Results and Dividends The results for the year are set out in the attached financial statements. The Company is not proposing to pay a final dividend. Prior to their acquisition by the Company on 28 April 2009, but after they became under common control on 11 November 2009, the subsidiary companies paid dividends to their shareholders of GBP2.145m (GBP 2.9m 2008) ( see Statement of Changes in Equity- page 34). Directors The directors, who served throughout the year, and subsequently, were as follows: +--------------------+--------------------------+----------------------+ | | Title | Date of appointment | +--------------------+--------------------------+----------------------+ | Roger Smee | Chairman/Chief executive | 2 April 2007 | +--------------------+--------------------------+----------------------+ | Michael Linforth | Chief Operating Officer | 11 November 2008 | +--------------------+--------------------------+----------------------+ | Philip Brady | Chief Financial Officer | 11 November 2008 | +--------------------+--------------------------+----------------------+ | Andrew Huntley | Non-executive Director | 5 May 2009 | +--------------------+--------------------------+----------------------+ | Paddy Greenwood | Non-executive Director | 2 April 2007 | +--------------------+--------------------------+----------------------+ Simon Godwin, Lord St. John Bletso and Mark Laurence, all of whom were appointed on 2 April 2007 resigned on 11 November 2008 Directors Interests The interests of the directors in the shares of the Company as at 31 July 2009 were: +--------------------+------------------+-----------------+ | | Number of | Percentage of | | | Ordinary Shares | issued share | +--------------------+------------------+-----------------+ | Roger Smee* | 113,218,737 | 78.8% | +--------------------+------------------+-----------------+ | Michael Linforth** | 20,102,563 | 14.0% | +--------------------+------------------+-----------------+ | | 133,321,300 | 92.8% | +--------------------+------------------+-----------------+ Directors' interests are stated above are unchanged as at 31 December 2009. *Includes 3,600,000 held by the RG Smee Pension Fund, 62,468,150 ordinary shares held by Leander Group Limited and 48,250,577 held by Rock New Providence Limited. Roger Smee is a director of, and majority shareholder in, both companies. ** includes 8,777,263 ordinary shares held by Seawind Global Inc. Directors share options and remuneration The objective of the Group's remuneration policy is to pay salaries and benefits in line with other companies of a similar size and complexity so as to attract, retain and incentivize high calibre staff. Consistent with this policy, benefits packages awarded to directors are intended to be competitive and comprise a mix of performance-related and non-performance related remuneration. Remuneration for the executive directors comprises annual salaries, bonuses, benefits, including pension contributions, and in due course share options. Substantial Shareholdings The Company has been notified of shareholders, other than directors, holding 3% or more of the ordinary shares as follows: Ordinary shares of 10 pence +------------------------------------+------------------+ | Name of holder | Number held | +------------------------------------+------------------+ | | | +------------------------------------+------------------+ | Seawind Global Inc. | 8,777,263 | +------------------------------------+------------------+ | Rock New Providence Limited | 48,250,577 | +------------------------------------+------------------+ | Leander Group Limited | 62,468,150 | +------------------------------------+------------------+ Substantial shareholders, all of which are entities controlled by directors, are stated as at 24 January 2010. Statement of Directors' responsibilities in relation to the Group financial statements The directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare financial statements for each financial year. The AIM Rules require the directors to prepare the Group financial statements in accordance with those International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Directors have elected to prepare the Company financial statements on the same basis. Statement of Directors' responsibilities in relation to the Group financial statements- continued 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 Company and of the Group and of the profit or loss of the Group for that period. In preparing these Group and Company financial statements the directors are required to: ? select suitable accounting policies in accordance with IAS 8: Accounting policies, Changes in Accounting Estimates and Errors and then apply them consistently; ? present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; ? provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance; and ? state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Directors' statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the directors' report are listed on page 25. Having made enquiries of fellow directors and of the Company's auditors, each of these directors confirms that: · to the best of each director's knowledge and belief, there is no information (that is, information needed by the group's auditors in connection with preparing their report) of which the Company's auditors are unaware; and · each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company's auditors are aware of that information. Auditors BDO Stoy Hayward LLP resigned as auditors on 6 July 2009 and Ernst & Young LLP were appointed in their stead. Ernst &Young LLP have expressed their willingness to continue in office and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. By Order of the Board, Philip Dominic Brady 29 January 2010 Corporate Governance Combined Code As an AIM company incorporated in England & Wales, there is no requirement for the Company to comply with the Combined Code on Corporate Governance (the "Combined Code"), issued by the Financial Reporting Council. However, the Board has determined that it should be the Company's policy to ensure that the Company complies with the spirit of the Combined Code to the extent appropriate, taking into account the size and nature of its business. The company has complied with the provisions set out in the Combined Code, to the extent considered appropriate by the Board, with the exception that for practical reasons in the formative stages of the Group, Philip Brady, the Finance Director, has been permitted to be a member of the Audit Committee on the basis that he will be excluded from any discussions relating to direction of the annual audit and his own performance in his capacity as Finance Director. The Board and Board Committees he Chairman is Roger Smee. The Board considers the Non-executive directors (excluding the Chairman) to be independent for the purposes of the Combined Code. Paddy Greenwood is considered independent for the purposes of the Combined Code due to his decreasing level of involvement in Rogers Smee's private affairs and his involvement as a director on boards of other companies unconnected with Mr Smee. The full Board meets monthly to consider general matters affecting the Company and otherwise as required. Committee meetings comprising two or more directors (not for the time being situated in the UK) meet on an ad hoc basis to consider transactional and related matters concerning the Company's business. The Board has appointed an Audit Committee which is responsible for ensuring that the financial performance of the Group is properly reported on and monitored. The Audit Committee reviews the annual and interim financial statements, results, announcements, internal control systems and procedures, accounting policies of the Group and the continuing appointment of the auditors. The Audit Committee comprises Philip Brady, Andrew Huntley and Paddy Greenwood, who is Chairman. The Audit committee meets at least three times a year. The Board has appointed a Remuneration Committee comprising Roger Smee, Paddy Greenwood,and Andrew Huntley, who is chairman The Remuneration Committee will meet at least twice a year to review the performance of executive directors, to recommend their remuneration and other benefit packages. The fees of the Non-executive directors are determined by the executive directors. The number of meetings of the full Board and the Audit Committee attended by each director since the acquisitions were completed is set out below: +--------------------------+------+----------+------+----------+------+----------+ | | Full Board | Audit Committee | Remuneration | | | | | Committee | +--------------------------+-----------------+-----------------+-----------------+ | | Held | Attended | Held | Attended | Held | Attended | | | | | | | | | +--------------------------+------+----------+------+----------+------+----------+ | R G Smee | 4 | 4 | n/a | n/a | 1 | 1 | +--------------------------+------+----------+------+----------+------+----------+ | M G Linforth | 4 | 4 | n/a | n/a | n/a | n/a | +--------------------------+------+----------+------+----------+------+----------+ | P D Brady | 4 | 4 | 2 | 2 | n/a | n/a | +--------------------------+------+----------+------+----------+------+----------+ | A J Huntley | 4 | 3 | 2 | 2 | 1 | 1 | +--------------------------+------+----------+------+----------+------+----------+ | P J A Greenwood | 4 | 4 | 2 | 2 | 1 | 1 | +--------------------------+------+----------+------+----------+------+----------+ All the directors are entitled to have access to independent professional advice at the Company's expense where they deem it necessary to discharge their responsibilities as directors. The Board and Board Committees-continued The directors receive advice from the Company's financial and other professional advisers on appointment as to the affairs of the Company and their responsibilities and will receive such other training as may from time to time be appropriate. Since the acquisitions and the expansion of the Company's Board of directors, the Board has been developing and implementing appropriate protocols to ensure appropriate principles of corporate governance continue to be maintained. Performance of the Board The performance of each director will be appraised by the Board, led by the Chairman, prior to the holding of the Annual General Meeting for each year. The performance of the Chairman will be appraised by his fellow directors led by the chairman of the Audit Committee. Remuneration of Board As an AIM listed Company, the Group is not required to comply with the Schedule 5 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 but is doing so on a voluntary basis. Details of directors' service contract and appointments as at the date of this report are as follows: +-------------------+--------------+---------------+------------+-----------+--------------------------+ | Executive | Salary/Fee | Appointment | Unexpired | Notice | Contractual termination | | (Contracts) | GBP'000 | date | term | period | payment | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | R G Smee | 250 | 02/04/07 | Rolling | 12 months | (Payment of 12 months' | | | | | Contract | | salary and benefits on | | | | | | | termination) | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | M G Linforth | 150 | 11/11/08 | Rolling | 6 months | (Payment of 6 months' | | | | | Contract | | salary and benefits on | | | | | | | termination) | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | P D Brady | 125 | 11/11/08 | Rolling | 3 months | (Payment of 3 months' | | | | | Contract | | salary and benefits on | | | | | | | termination) | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | Non-executive | Salary/Fee | Appointment | Unexpired | Notice | Contractual termination | | (appointment | GBP'000 | date | term | period | payment | | letters) | | | | | | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | P J A Greenwood | 30 | 02/04/07 | 3 years | 3 months | (No Provision for | | | | | | | payment of compensation) | +-------------------+--------------+---------------+------------+-----------+--------------------------+ | A J Huntley | 30 | 05/05/09 | 3 years | 3 months | (No Provision for | | | | | | | payment of compensation) | +-------------------+--------------+---------------+------------+-----------+--------------------------+ The non executive directors Mark Laurence and Lord Anthony St John Bletso, who resigned on 11 November 2008 were not remunerated for their services to the Company. Simon Godwin received a fee of GBP26,000(2008 GBP94,900). Investor relations The Board welcomes correspondence from shareholders, addressed to the Companies registered office. All shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The Board hopes that as many shareholders as possible will be able to attend the meeting. The Board believes that sustainable financial performance and delivering on the objectives of the Company are indispensable measures in order to build trust with the Company's shareholders. To promote a clear understanding of the Company, its objectives and financial results the Board aims to ensure that information relating to the Company is disclosed in a timely manner and in a format suitable to the shareholders of the Company. Internal Control Statement The Board recognises that it has overall responsibility for the Group's system of internal control and for reviewing its effectiveness. The internal control system is designed to manage rather than eliminate risks of failure to achieve certain business objectives. It can only provide reasonable, but not absolute assurance against material misstatements or loss. The system of internal control, which includes financial operational and compliance controls, is based upon a process of identifying, evaluating and managing risks. The system was in place for the year under review and up to the date of approval of the annual financial statements. Key features of the Group's system of internal control are as follows:- Group Structure The group comprises the parent company and six subsidiary companies, two in the UK and four overseas. Each subsidiary is autonomous and has its own board of directors which is given authority and responsibility for managing its company within a framework of Group policies, reporting lines and delegated authorities which ensure that decisions are made at the appropriate level. Whilst responsibility for managing each subsidiary is delegated, certain key functions such management incentives, cash management or commitment to long term obligations is retained at Group Level. Financial Information The Directors recognise that an essential part of the responsibility for running a business is the effective safeguarding of assets, the proper recognition of liabilities and the accurate reporting of results. The Group has a budgeting and forecasting system in place which is regularly reviewed and updated, together with a management reporting system established by each company for reporting to the Board. Investment and capital expenditure There are procedures for and defined levels of authority in relation to investment, capital expenditure, significant cost commitments and asset disposals with approval required from the Board, executive directors, or the boards of subsidiaries depending upon the value or nature of the investment or contract. Proposals, tenders and project selection Wherever possible subsidiaries operate within the framework of pre approved standard forms of contract. Individual contract proposals or "pitches" and, if applicable, tenders are subject to detailed reviews, with approvals required at appropriate levels at various stages from commencement of the bidding process through to award of the contract. As part of this process, the financial standing of the clients and key subcontractors to be used on the assignments is assessed. Contract controls/ project management During the currency of operational contracts robust procedures are in place to manage ongoing risks with monthly reviews at an appropriate level of each contract's performance covering operational, health and safety and financial issues. Working capital management The Group continually monitors current and forecast cash and working capital balances through a regime of daily weekly and monthly reporting. Health safety and environment Monthly reporting to the Board includes a report from each subsidiary on their performance in relation to health and safety matters and environmental compliance. Risk Management The Boards of each subsidiary are responsible for the formulation of risk management strategies. The Board reserves for itself specific responsibility for reviewing the risk strategies of each subsidiary and putting in place overarching risk management strategies, including internal controls, early warning mechanisms and actions required to ensure as far as practicable, having regard to different business practices and legal systems applicable to overseas companies, that there is consistency and a high standard of of risk management across the Group. The principal risks identified as facing the Group are highlighted in the business review at pages 22 and 23 and in the financial risks note 23 to the Financial Statements Audit & Assurance Independent Auditors' Report INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF REAL OFFICE GROUP PLC We have audited the group and company financial statements of Real Office Group plc for the year ended 31 July 2009 which comprise the Group and Parent Company Income Statements, Group and Parent Company Balance Sheets, Group and Parent Company Statements of Changes in Equity and Group and Parent Company Cash Flow Statements, and the related notes 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors' Responsibilities Statement set out on page 26, 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 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. Qualified Opinion on group financial statements arising from limitation of audit scope, disagreement about accounting treatment and non compliance with disclosures required under IAS 14: Segment Reporting Included in the Unity of Interest Reserve shown on the balance sheet at 31 July 2009, is an amount of GBP763,417 which represents costs of reorganising the Group incurred during the period. Independent Auditors' Report After considering the guidance in IAS 8 for a transaction that is not explicitly addressed in IFRS, the Directors have adopted FRS 6 issued by the UK Accounting Standards Board as the basis for the pooling of interest accounting applied in the Group financial statements. This standard requires that reorganisation costs are expensed to the Income Statement. Accordingly, in our opinion, this amount of GBP763,417 should have been recorded in the Group Income Statement for the year ended 31 July 2009, consistent with the requirements of FRS 6. The Unity of Interest Reserve at 31 July 2009 should therefore be reduced by GBP763,417 and the profit for the year ended 31 July 2009 should be reduced by GBP763,417. The Earnings per Share calculation would be correspondingly modified. Management have not fully complied with the disclosure requirements of IAS 14: Segment Reporting by not disclosing segment results, segment assets, segment liabilities, depreciation expense of segment assets and capital expenditures. The non disclosure of these items has no impact upon the reported losses of the group or the balance sheet of the group at 31 July 2009. With respect to the Group Cash Flow Statement and certain notes to the financial statements set out below, the audit evidence available to us was limited as management were unable to provide us with schedules that adequately reconciled the subsidiary accounting records to the amounts disclosed . Management did not supply us with the necessary evidence to verify the following information contained the notes to the Group Financial Statements: Note 13 Details supporting the disclosed ageing of trade receivables Note 14 Details to supporting the analysis of construction contracts note Note 22 Details to support related party transactions Except for the financial effect of not expensing the reorganisation costs referred to in the preceding paragraphs and except for the non compliance with disclosures required under IAS 14: Segment Reporting; and except for the financial effects of such adjustments, if any, as might have been necessary had we been able to satisfy ourselves as to the appropriateness of the information contained in the Cash Flow Statement and certain notes to the financial statements as set out above; in our opinion: · the financial statements give a true and fair view of the state of the Group's affairs as at 31 July 2009 and of the Group's profit for the year then ended; · the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; · the Group financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion: Company financial statements In our opinion: · the financial statements give a true and fair view of the state of the company's affairs as at 31 July 2009 and of the company's loss for the year then ended; · the company financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; · the company financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter 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 In respect solely of the limitation on our work, relating to the exceptions described above: · We have not obtained all the information and explanations that we considered necessary for thepurpose of our audit;
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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. Emphasis of matter - going concern In forming our opinion on the Group's financial statements, which is not qualified in respect of going concern, we have considered the adequacy of the disclosures made in Note 2 to the financial statements concerning the Group's ability to continue as a going concern. The matters explained in Note 2 indicate the existence of material uncertainties which may cast significant doubt about Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if Group was unable to continue as a going concern. David Wilson (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 29 January 2010 For the year ended 31 July 2009 +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | | | 2009 | 2008 | 2009 | 2008 | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | | Notes | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | | | | | | | | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Continuing operations | | | | | | | | | | | | | | | | | | | | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Revenue | 4 | 45,011.0 | 37,846.4 | 255.0 | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Cost of Sales | | (36,828.6) | (32,254.3) | - | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Gross Profit | | 8,182.4 | 5,592.1 | 255.0 | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Administrative expenses | 5 | (7,144.4) | (4,295.9) | (1,162.4) | (1,004.9) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Other income | 4 | 139.9 | - | 139.9 | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Operating Profit ( Loss) | | 1,177.9 | 1,296.2 | (767.5) | (1,004.9) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Finance revenue | 4,6 | 73.6 | 68.6 | 75.1 | 99.3 | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Finance costs | 6 | (1.0) | (4.1) | - | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Profit (Loss) before tax | | 1,250.5 | 1,360.7 | (692.4) | (905.6) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Tax | 8 | (349.4) | (527.4) | 72.1 | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Profits ( Loss) after tax | | 901.1 | 833.3 | (620.3) | (905.6) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Attributable to:- | | | | | | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Equity holders of the parent | | 763.1 | 530.3 | (620.3) | (905.6) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Minority Interests | | 138.0 | 303.0 | - | - | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | | | | | | | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Earnings per share - basic (pence) | 9 | 1.79 | 5.05 | (1.45) | (8.62) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ | Earnings per share - diluted (pence) | | 1.30 | 5.05 | (1.06) | (8.62) | +----------------------------------------------------+-------+-------------+------------+--------------+-----------+ All items in the above statement derive from continuing operations. The Group results for 2009 comprise the results for the subsidiaries for the year to 31 July 2009 and the results of Company from the 11 November 2008, the date at which all companies forming the Group came under common control. The results for 2008 comprise results of the trading subsidiaries for the year ended 31 July 2008. The results of the Company for 2009 are for the fifteen month period from 1 May 2008 to 31 July 2009, and for 2008 from the date of its incorporation on 7 April 2007 to 30 April 2008. The accompanying notes are an integral part of this statement. As at 31 July 2009 +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | 2009 | 2008 | 2009 | 2008 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | Notes | Group | Group | Company | Company | | | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Non-current assets | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Investments | | | 10 | - | - | 23,807.4 | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Property, plant and equipment | | | 11 | 473.2 | 412.0 | 6.3 | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | 473.2 | 412.0 | 23,813.7 | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Current assets | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Inventories | | | 12 | - | 6.0 | - | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Trade and other receivables | | | 13 | 6,342.3 | 7,816.0 | 112.4 | 47.0 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Cash and short term deposits | | | 15 | 1,654.5 | 5,463.7 | 100.6 | 2,807.6 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | 7,996.8 | 13,285.7 | 213.0 | 2,854.6 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Total assets | | | | 8,470.0 | 13,697.7 | 24,026.7 | 2,854.6 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Current liabilities | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Trade and other payables | | | 16 | (10,535.0) | (12,376.8) | (3,115.3) | (363.6) | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Finance Lease obligations | | | 18 | (9.6) | (30.0) | - | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | (10,544.6) | (12,406.8) | (3,115.3) | (363.6) | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Net current (liabilities)/assets | | | | (2,547.8) | 878.9 | (2,902.3) | 2,491.0 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Non current liabilities | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Other payables | | | 17 | - | - | (1,997.7) | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Finance lease obligations | | | 17 | (12.6) | (6.0) | - | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | (12.6) | (6.0) | (1,997.7) | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Total liabilities | | | | (10,557.2) | (12,412.8) | (5,113.0) | (363.6) | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Net (liabilities)/assets | | | | (2,087.2) | 1,284.9 | 18,913.7 | 2,491.0 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | | | | | | Equity | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Share capital | | | 19 | 14,366.9 | 29.7 | 14,366.9 | 1,750.0 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Share Premium | | | | 1,646.6 | 66.0 | 1,646.6 | 1,646.6 | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Convertible loan | | | 20 | 1,902.7 | - | 1,902.7 | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Unity of interest reserve | | | | (18,840.8) | - | 2,523.4 | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Foreign exchange reserve | | | | (152.4) | (0.1) | - | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Retained earnings | | | | (1,010.2) | 1,040.9 | (1,525.9) | (905.6) | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Equity attributable to equity | | | 21 | (2,087.2) | 1,136.5 | 18,913.7 | 2,491.0 | | holders of the parent | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | Minority Interest | | | | - | 148.4 | - | - | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ | | | | | (2,087.2) | 1,284.9 | 18,913.7 | 2,491. 0 | | | | | | | | | | +----------------------------------+----------+----------+------------+------------+------------+---------------+-----------+ The financial statements were approved by the Board of Directors on and signed on its behalf by. Director The accompanying notes are an integral part of this statement. Company +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Upon | | - | - | - | - | - | - | - | - | | incorporation | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Issue | 19 | 1,800.0 | 1,750.0 | - | - | - | - | - | 3,550.0 | | of | | | | | | | | | | | shares | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Loss | | - | - | - | - | - | (905.6) | - | (905.6) | | for | | | | | | | | | | | the | | | | | | | | | | | period | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Share | | - | (103.4) | - | - | - | - | - | (103.4) | | issue | | | | | | | | | | | costs | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Redemption | | (50.0) | | - | - | - | - | - | (50.0) | | of shares | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Foreign | | | - | - | - | - | - | - | - | | currency | | | | | | | | | | | translation | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | At 30 | | 1,750.0 | 1,646.6 | - | - | - | (905.6) | - | 2,491.0 | | April | | | | | | | | | | | 2008 | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Period ended 31 | | | | | | | | | | July 2009 | | | | | | | | | +-------------------------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Convertible | - | - | 2,000 | - | - | - | - | 2000.0 | | loan | | | | | | | | | +-------------------------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Issue | | | | | | | | | | | of | 19 | 12,616.9 | - | - | 2,523.4 | - | - | - | 15,140.3 | | shares | | | | | | | | | | | for | | | | | | | | | | | non-cash | | | | | | | | | | | consideration | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Profit/ Loss | - | - | - | - | - | (620.3) | - | (620.3) | | for the year | | | | | | | | | +-------------------------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Foreign | | - | - | - | - | - | - | - | - | | currency | | | | | | | | | | | translation | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Dividends | | - | - | - | - | - | - | - | - | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | Repayment | | - | - | (97.3) | - | - | - | - | (97.3) | | convertible | | | | | | | | | | | loan | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ | At 31 | | 14,366.9 | 1,646.6 | 1902.7 | 2,523.4 | - | (1,525.9) | - | 18,913.7 | | July | | | | | | | | | | | 2009 | | | | | | | | | | +----------------+--------+----------+---------+--------+----------+--------+-----------+--------+----------+ The accompanying notes are an integral part of this statement. Cash Flow Statements For the period ended 31 July 2009 +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | 2009 | 2008 | 2009 | 2008 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | Notes | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Cash flows from operating activities | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Profit/ (Loss) before tax | | 1,250.5 | 1,360.7 | (629.9) | (905.6) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Adjustments for: | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Finance income | | (73.6) | (68.6) | (75.1) | (99.3) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Finance expense | | 1.0 | 4.1 | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Bad debt | | 104.3 | - | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Depreciation | | 159.2 | 133.4 | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Loss on disposal of fixed assets | | 3.5 | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | 1,444.9 | 1,429.6 | (705.0) | (1,004.9) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Decrease/ ( increase) in inventories | | 6.0 | (3.0) | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Decrease / (increase) in operating receivables | | 308.1 | 3,909.4 | (40.3) | (47.0) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | (Decrease)/Increase in operating payables | | (2,297.6) | 301.8 | (77.0) | 363.6 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | (538.6) | 5,637.8 | (822.5) | (688.3) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Dividends paid | | (153.7) | (2,900.0) | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Tax paid | | (492.0) | (739.0) | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Net cash flow from operating activities | | (1,184.3) | 1,998.8 | (822.5) | (688.3) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | | | | | | Cash flows from investing activities | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Capital expenditure | | (220.1) | (159.3) | (6.3) | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Proceeds of sale of fixed assets | | 26.9 | 30.0 | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Acquisitions | | (2,764.3) | - | (1,953.5) | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | | | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | | | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Investment income received | | 73.6 | 68.6 | 75.1 | 99.3 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Net cash used in investing activities | | (2,883.9) | (60.70) | (1,884.7) | 99.3 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Cash flows from financing activities | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Issue of shares for cash (net of issue costs) | | 23.4 | 27.7 | - | 3,396.6 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Issue of preference shares | | - | - | - | 12.5 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Redemption of preference shares | | - | - | - | (12.5) | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Capital element of finance lease repayments | | (37.5) | (56.0) | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Interest paid | | (1.0) | (4.1) | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Net cash flows from financing activities | | (15.1) | (32.4) | - | 3,396.6 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | | | | | | | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Net Increase (decrease) in cash and cash equivalents | | (4,083.3) | 1,905.7 | (2,707.0) | 2,807.6 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Effect of foreign exchange rate changes | | 274.1 | - | - | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Cash and cash equivalents at 1 August 2008 | 15 | 5,463.7 | 3,558.0 | 2,807.6 | - | | | | | | | - | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ | Cash and cash equivalents at the end of the year | | 1,654.5 | 5,463.7 | 100.6 | 2,807.6 | +---------------------------------------------------------+-------+-----------+-----------+------------+---------------+ The accompanying notes are an integral part of this statement. Notes to the Accounts - For the year ended 31 July 2009 1. General information Real Office Group plc (the "Company") and its subsidiaries (together the "Group") is a global office design and fit out group specialising in commercial real estate. The Company is incorporated and domiciled in the United Kingdom under the provisions of The Companies Act 2006 with the registered number 06195939. The Company's registered office is Thavies Inn House, 3 - 4 Holborn Circus, London EC1N 2HA. On 10 November 2008, Roger Smee acquired control of the Company following an unconditional offer for up to 74.90 per cent of the share capital of the Company made through Leander Group Limited. The offer closed on 28 November 2008 with Leander having acquired 73.03 % of the share capital of the Company. Roger Smee held 14.27% of the share capital of the Company through various vehicles prior to this transaction, therefore his total interest in the share capital of the Company following this transaction was 87.30%. At 10 November 2008, Roger Smee also controlled Pacific Interiors Limited, ISIS Projects Limited and Pacific Middle East LLC ("the subsidiaries"). These subsidiaries were acquired in a simultaneous transaction by the Company, on an arms length basis, on 28 April 2009. The fair value of the consideration paid for the subsidiaries is GBP21.48 million details of which are set out in note 10. This includes deferred consideration which is based upon the future performance of the subsidiaries for each of the financial years ending in 2009, 2010 and 2011. The fair value of the deferred consideration accrued due at the balance sheet date was GBP2,006.8k based upon the forecast earnings of the individual entities to which the deferred consideration applies. Leander Group Limited has waived its entitlement to deferred consideration of GBP1,505.0k and therefore the fair value of deferred consideration included in the accounts is GBP501.8k . Deferred consideration is settled by the issue of shares in the Company based upon the middle market quotation for each of the five business days preceeding the payment date. Following the acquisition of the subsidiaries, the accounting reference date of the Company was changed to 31 July in each year. The acquisitions of the subsidiaries are deemed to be 'combinations under common control' as ultimate control before and after the acquisition was the same. As a result, these acquisitions are outside the scope of IFRS 3 "Business combinations" and have been consolidated under the principals of the pooling of interest method of accounting from 10 November 2008, the date common control was established by the acquisition of the Company. Accordingly the results for 2009 comprise the results of the subsidiary companies for the year ended 31 July 2009 and the results of the Company from the date of its acquisition on 10 November 2008 to 31 July 2009. This approach has been adopted because the trading subsidiaries are considered to be the controlling entity and for pooling purposes the consolidated financial statements should therefore reflect the group's financial performance and position from that perspective. The prior year comparatives are for the trading subsidiaries for the year ended 31 July 2008 and exclude the results of the Company for the 13 month period from 2 April 2007 (the date of incorporation) to its year end, which was 30 April 2008. Following its acquisition by Leander on 10 November 2008 the year end of the Company was changed to 31 July 2009and for every year thereafter to bring it into line with the rest of the Group. The audited consolidated financial statements of the Group for the period ended 31 July 2009 were authorised by the Board for issue on 29 January 2010. Notes to the Accounts - For the year ended 31 July 2009 2. Accounting policies Basis of preparation The financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due for at least 12 months following the date of approval of these financial statements. The Directors have considered the going concern assumption in the preparation of the financial statements. The Group made a net profit of GBP1.25 million for the year ended 31 July 2009 and at that date, the Group was in a net current liability position of GBP2.55 million and net liability position of GBP2.08 million. The Company was in a net current liability position of GBP2.9 million and net asset position of GBP18.9 million. The Directors have produced cash flow forecasts which indicate that the Group can continue as a going concern. In preparing those forecasts, the Directors have taken into account the following material uncertainties: · The achievability of the operational cash flows in the forecasts, which include assumptions around sales growth, profitability of contracts, reduction in expenditure and improved working capital management; · Securing an overdraft facility with a lending institution; · Sale of a subsidiary, ISIS Projects Limited. The Directors have concluded that these circumstances represent a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern. Nevertheless, after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will have adequate financial resources to continue in operational existence for the at least 12 months following the date of approval of these financial statements. The Directors have based their view on their assessment of each of the material risks and uncertainties as follows: - The Directors have entered into open dialogue with their suppliers and have had positive talks with regards to extending the credit terms offered or entering into managed payment plans. - The Directors are in discussions with lending institutions regarding a GBP1 million overdraft facility; - The Directors are seeking to appoint an advisor in relation to raising additional equity of GBP3-4 million in India; - The ROG Chairman expects to invest GBP1 million in the near future. For these reasons, the Directors continue to adopt the going concern basis in preparing the financial statements. Failure to successfully implement one or more of the strategies outlined above, may result in the Group no longer being able to continue its operations in their current form and/ or meet its liabilities as they fall dueand therefore not being able to continue as a going concern. Having taken these uncertainties into account the Directors believe, that based on the Group's order book, firm prospects, the measures taken to reduce expenditure, the measures taken to improve working capital management, the negotiations in respect of the GBP1 million overdraft facility and the opportunities to raise additional equity in India, that it is appropriate to prepare the accounts on a going concern basis. These financial statements do not include any adjustments that might arise if the going concern basis for the preparation of the financial statements was not appropriate. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. Notes to the Accounts - For the year ended 31 July 2009 continued Statement of compliance The consolidated financial statements of the Group and Company have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union ("IFRS") and The Companies Act, 2006. Because the Company was acquired part way through the year ended 31 July 2009 and the method of accounting adopted ( note 1) the Company has waived the exemption from presentation of a separate Income Statement for the Company afforded by Section 408 of the Companies Act 2006 and presented its profit and loss account for the 15 months ended 31 July 2009 and 13 months ended 30 April 2008. Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year: Certain new standards, amendments and interpretations to existing standards which may be relevant to the Group have been published that are mandatory for later accounting periods and which have not been adopted early. These are: +---------------------+-------------------------------------------------------------------------+---------------+ | | | +-----------------------------------------------------------------------------------------------+---------------+ | New standards | | Effective | | | | date | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 8 | Operating Segments | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 23 | Borrowing costs (revised) | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 1 | Presentation of financial statements (revised) | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 3 | Business combinations (revised) | 1/7/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 1 | First time adoption of IFRS (revised) | 1/7/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | | | +-----------------------------------------------------------------------------------------------+---------------+ | Amendments to standards | Effective | | | date | +-----------------------------------------------------------------------------------------------+---------------+ | | | | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 1 | Amendments to IFRS 1 - additional exemptions for first time adopters | 1/1/10 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 1 & IAS 27 | Cost of an Investment in a Subsidiary, Jointly Controlled Entity or | 1/1/09 | | | Associate (Amendment) | | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 2 | Amendments to IFRS 2 - vesting conditions and cancellations | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | | Amendments to IFRS 2 - group cash-settled share-based payment | 1/1/10 | | | transactions | | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 27 | Consolidated and Separate Financial Statements (Amendment) | 1/7/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 32 & IAS 1 | Putable financial instruments and obligations arising on liquidation | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 39 | Amendment to IAS 39 Financial Instruments; recognition and measurement | 1/1/09 | | | - eligible hedged items | | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 39 & IFRS 7 | Amendment to IAS 39/IFRS 7 reclassification of financial instruments | 1/7/08 | +---------------------+-------------------------------------------------------------------------+---------------+ | IAS 39 | Amendment to IAS 39 reclassification of financial assets: effective | 1/7/08 | | | date and transition | | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRS 7 | Amendment to IFRS 7 - improving disclosures about financial instruments | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 9 & IAS 39 | Amendments to IFRIC 9 and IAS 39 embedded derivatives | 30/6/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | | | | +---------------------+-------------------------------------------------------------------------+---------------+ | New interpretations | Effective | | | date | +-----------------------------------------------------------------------------------------------+---------------+ | | | | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 13 | Customer loyalty programmes | 1/7/08 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 15 | Agreements for the construction of real estate | 1/1/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 16 | Hedges of a net investment in a foreign operation | 1/10/08 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 17 | Distribution of non-cash assets to owners | 1/7/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | IFRIC 18 | Transfer of assets from customers | 1/7/09 | +---------------------+-------------------------------------------------------------------------+---------------+ | | | | +---------------------+-------------------------------------------------------------------------+---------------+ | | | | +---------------------+-------------------------------------------------------------------------+---------------+ These pronouncements will either result in changes to presentation and disclosure, or are not expected to have a material impact on the financial statements. In May 2009 the IASB issued its first omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The Group has decided not to adopt early any of these amendments as they are not anticipated to have a significant impact on the reported results of the Group. Notes to the Accounts - For the year ended 31 July 2009 continued 2. Accounting policies-continued Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries drawn up to 31 July each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities. The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of entities acquired to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Business combinations Subsidiaries acquired from entities under common control, such that the ultimate controlling party has not changed as a result of the transaction, are fully consolidated from the earliest period presented, but not before the date they came under common control, and are accounted for using the pooling of interest method of accounting. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes, the following criteria must also be met: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on despatch of the goods. Rendering of services Revenue from office fit out and related services is recognised by reference to the stage of completion. Stage of completion is measured by reference to the time taken to date as a percentage of the total time to completion of the contract. Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Interest income Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount. Investments Investments held as fixed assets are stated at cost less any provision for impairment. Interest bearing loans and borrowings Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at fair value of consideration received less directly attributable transaction costs. After initial recognition , interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses arising on the repurchase settlement or otherwise cancellation of liabilities are recognised respectively in finance revenue and finance cost. Notes to the Accounts - For the year ended 31 July 2009 continued 2. Accounting policies- continued Convertible loans and preference shares.("convertible instruments") The component of the convertible instrument that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs. The corresponding interest or dividends are charged as an expense in the income statement. On issuance of the convertible instrument the fair value of the liability component is determined using a market rate for an equivalent non convertible bond; and this amount is classified as a financial liability measured at amortised cost until it is extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders equity, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the convertible instruments based on the allocation of proceeds to the liability and equity components when the instruments are first recognised. Long term contracts When the outcome of individual contracts can be foreseen with reasonable certainty and can be measured reliably, margin is recognised by reference to the stage of completion, based on the percentage margin forecast at completion. The stage of completion is measured by the proportion of contracts costs incurred for work performed to date to the estimated total contract costs or the proportion of the value of work done to the total value of work under contract. Full provision is made for all known expected losses on individual contracts immediately once such losses are foreseen. Margin in respect of variations in contract work and claims is recognised if it is probable they will result in revenue. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such costs includes costs directly attributable to making an asset capable of operating as intended. Depreciation is provided on all property plant and equipment at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, on each asset evenly over its expected useful life as follows: Plant, machinery and equipment - 33% straight line Leasehold improvements - over the life of the lease Motor vehicles - 25% straight line The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continuing use of the asset. Any gain or loss arising on derecognising the asset is included in the income statement during the period of derecognisation. Foreign currency translation a) Functional and presentation currency Items included in the financial statements of each Group entity are measured in the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the Company, which is also the presentation currency for the Group, is Sterling. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of their historical cost in a foreign currency are translated using exchange rates as at the date of the initial transactions. Notes to the Accounts - For the year ended 31 July 2009 continued 2. Accounting policies- continued c) On consolidation The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) Assets and liabilities for each balance sheet are translated at the closing rate at the date of the balance sheet; (ii)Income and expenses for each income statement are translated at the average exchange rate prevailing in the period; and (iii)All resulting exchange differences are recognised as a separate component of equity. On consolidation, the exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders' equity. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale. Taxation a) Current Income tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expenditure that are taxable or deductible in other years and it further excludes items that 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. b) Deferred tax Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding tax bases used in tax computations. Deferred tax is not recognised for the initial recognition of assets or liabilities in a transaction that is not a business combination and affects neither accounting nor taxable profit, or differences relating to investments in subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is not recognised for tax temporary differences arising on the initial recognition of goodwill. Deferred tax is recognised on temporary differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at the tax rates expected to apply when they reversed based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets are recognised to the extent that it is regarded more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted and are only offset where there is a legally enforceable right to offset current tax assets and liabilities Financial assets The Group classifies its financial assets into one of the categories discussed below, depending upon the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity or as assets available-for-sale. Unless otherwise indicated, the carrying amounts of the Groups financial assets are a reasonable approximation of their fair values. a) Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised and carried at the lower of their original original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. b) Cash and short term deposits Cash and short term deposits include cash in hand, deposits held at call with banks. Financial liabilities The Group classifies its financial liabilities into one of the categories listed below. Unless otherwise indicated in the notes to the accounts, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values. Notes to the Accounts- For the year ended 31 July 2009 continued 2. Accounting policies- Financial liabilities continued Other financial liabilities Other financial liabilities include non-interest bearing loans, trade payables (including rent deposits and retentions under construction contracts) and other short-term monetary liabilities. Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Leased assets Assets held under finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items, are capitalised at the inception of the lease at the fair value of the leased items, or if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is recognised in the balance sheet as a finance lease obligation. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Assets held under finance leases are depreciated over the shorter of the estimated useful economic life of the asset and the lease term. Leases where the lessor retains a significant portion of the risks and benefits of ownership of the asset are classified as classified as operating leases and rentals payable are charged to the income statement on a straight-line basis over the term of the lease. Lease incentives are recognised over the shorter of the lease term and the date of the next rent review. Pensions The Group makes contributions to defined contribution pensions schemes operated by third parties on behalf of employees. Dividends Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at an AGM. 3. Critical accounting estimates and judgements The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. a) Accounting for contracts Recognition of revenue and margins involves making estimates of the costs and value of work performed to date and to be performed in bringing contracts to completion, including satisfaction of post completion maintenance responsibilities. These estimates are made by reference to recovery of pre contract costs, surveys of progress against the construction programme, changes in scope of the works, the contractual terms under which the work is being performed, costs incurred, and external certification of the work performed. The Group has appropriate control procedures to ensure that its estimates are determined on a consistent basis and subject to appropriate review and authorisation. b) Impairment of stocks and work in progress In assessing whether stocks or work in progress is impaired, estimates are made of realisable values or in the case of work in progress, future revenue timing and build costs. The Group has in place appropriate controls to ensure that estimates of sales revenue are consistent, and external valuations are used whenever considered appropriate. c) Financial receivables In assessing the fair value of certain financial receivables, including trade receivables, estimates are made of future cash flows and where appropriate suitable discount rates to be applied. Notes to the Accounts- For the year ended 31 July 2009 continued 3. Critical accounting estimates and judgements- continued d) Income tax As part of the process of preparing its financial statements, the Group is required to estimate the provision for income tax in each of the jurisdictions in which it operates. This process involves an estimation of the actual current tax exposure, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. Significant judgement is required in determining the provision for income tax and the recognition of deferred tax assets and liabilities. e) Acquisitions The contingent deferred consideration payable in respect of the acquisition of ISIS Projects Limited and Pacific Middle East LLC is dependent upon the average financial performance of these entities in the audited accounts for each of the financial years ended 31 July 2009, 31 July 2010 and 31 July 2011. In the case of ISIS Projects Limited deferred consideration is settled by issuing shares in the Company at the middle market quotation for each of the five business days preceding the payment date. In the case of Pacific Middle East LLC deferred consideration is settled at the Company's option either by issuing shares in the Company at 12 pence per share or by payment in cash on the payment date. The Company has accrued an amount based upon the results of ISIS Projects Limited for the year ended 31 July 2009. In calculating the provision for future payments of deferred consideration the Company has assessed the most probable outcome at the balance sheet date based upon the latest projections of the future performance of these entities. These amounts are reconsidered annually at each year end. The actual amounts payable may differ significantly from such estimates. f) Impairment of non- financial assets The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. 4. Revenue +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP '000 | | GBP '000 | GBP '000 | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | | | | | | | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | Fit out contract revenue | 45,011.0 | 37,846.4 | | 255.0 | - | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | Other income | 139.9 | - | | 139.9 | - | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | Finance revenue | 73.6 | 68.6 | | 75.1 | 99.3 | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ | Total revenue | 45,224.5 | 37,915.0 | | 470.0 | 99.3 | +------------------------------------------------------------+----------+----------+----------+-----------+-----------+ The Group's revenue derived from contract fit out services arose in the following geographic areas: +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP '000 | | GBP '000 | GBP '000 | +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ | United Kingdom and Europe | 44,996.3 | 37,845.6 | | 255.0 | - | +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ | Middle East | 14.6 | 0.8 | | - | - | +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ | India | 0.1 | - | | - | - | +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ | | 45,011.0 | 37,846.4 | | 255.0 | - | +-----------------------------------------------------------+----------+----------+----------+-----------+-----------+ Notes to the Accounts- For the year ended 31 July 2009 continued 5. Profit for the year The profit after tax attributable to the Group for the year ended 31 July 2009 and loss attributable to the Company for the period from I May 2008 to 31 July 2009 is stated after charging:- +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | | | 2009 | 2008 | | 2009 | 2008 | | | | Group | Group | | Company | Company | | | | GBP '000 | GBP '000 | | GBP '000 | GBP '000 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Included in cost of sales: | | | | | | | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Staff costs | | 3,333.9 | 2,661.8 | | - | - | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | | | | | | | | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Included in Administrative expenses: | | | | | | | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Legal and professional | | 508.6 | 441.8 | | 290.3 | 580.3 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Directors remuneration | | 1,906.7 | 1,321.0 | | 213.2 | 94.9 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Staff costs | | 1,038.8 | 1,016.5 | | 27.9 | 17.2 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Audit of the financial statements (see below) | | 115.9 | 48.0 | | 39.7 | 10.0 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Operating leases ( note 27.) | | 243.2 | 127.0 | | - | 30.0 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Depreciation | | 125.9 | 133.4 | | - | - | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Impairment of trade receivables | | 104.3 | - | | - | - | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | Administration, registrar & other operating | | 3,101.0 | 1,208.2 | | 591.3 | 272.5 | | expenditure | | | | | | | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ | - | | 7,144.4 | 4,295.9 | | 1,162.4 | 1,004.9 | +------------------------------------------------------+----+----------+----------+----------+-----------+-----------+ The remuneration of the auditors is further analysed as follows: +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | Ernst & | BDO Stoy Hayward: | | Young LLP: | | +-----------------------------------------------------------------------+----------------------------------------+ | | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | | Group | Group | Company | Company | Group | Group | Company | Company | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | Audit of the financial | 114.2 | - | 39.7 | - | 1.7 | 48.0 | - | 10.0 | | statements | | | | | | | | | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | Other fees to auditors | | | | | | | | | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | - Tax fees | - | - | - | - | 4.0 | 8.0 | - | - | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | - Corporate finance | 38.4 | - | 5.0 | - | 202.6 | - | 23.2 | 366.1 | | services | | | | | | | | | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | | | | | | | | | | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | | 152.6 | - | 44.7 | - | 208.3 | 56.0 | 23.2 | 376.1 | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ | | | | | | | | +-----------------------------+---------+--------------------+----------+---------+---------+--------------------+ | | +-----------------------------+---------+---------+----------+----------+---------+---------+----------+---------+ 6. Finance income and expense +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+----------+ | | 2009 | 2008 | | 2009 | 2008 | | | Finance income | Group | Group | | Company | Company | | | | GBP '000 | GBP | | GBP '000 | GBP '000 | | | | | '000 | | | | | | | | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+----------+ | Income from cash and short term deposits | 73.6 | 68.6 | | 75.1 | 99.3 | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | Total interest income | 73.6 | 68.6 | | 75.1 | 99.3 | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | Finance expense | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | Interest expense on financial liabilities measured at | | | | | | | amortised cost | (1.0) | (4.1) | | - | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+----------------------+ | | (1.0) | (4.1) | | - | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+----------+ Notes to the Accounts - For the year ended 31 July 2009 continued 5. Profit for the year- continued 7. Staff costs +-----------------------------------------------------------+-----------+----------+----------+-------------+----------+------------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP '000 | | GBP '000 | GBP '000 | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | | | | | | | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | Wages and salaries (including directors) | 5,752.2 | 4,400.3 | | 241.2 | 112.1 | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | Social security payments | 401.8 | 501.0 | | - | - | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | Share based payments | - | - | | - | - | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | Pension costs | 125.4 | 98.0 | | - | - | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | | | | | | | +-----------------------------------------------------------+-----------+----------+----------+-------------+-----------------------+ | Total | 6,279.4 | 4,999.3 | | 241.2 | 112.1 | +-----------------------------------------------------------+-----------+----------+----------+------------------------+------------+ | | | | | | | +-----------------------------------------------------------+-----------+----------+----------+------------------------+------------+ | | | | | | | | +-----------------------------------------------------------+-----------+----------+----------+-------------+----------+------------+ The average monthly number of employees of the Group during the period was as follows: +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP | | GBP '000 | GBP '000 | | | | '000 | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | Directors | 18 | 10 | | 5 | 5 | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | Finance and administration Check company | 12 | 11 | | 1 | 1 | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | Sales and marketing | 16 | 10 | | - | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | Project staff | 44 | 57 | | - | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | Total | 90 | 88 | | 6 | 6 | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+-----------+ Directors' emoluments The remuneration of the directors, who are the key management personnel of the Group, is set out below: +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | | 2009 | 2008 | | 2009 | 2008 | | | | Group | Group | | Company | Company | | | | GBP '000 | GBP | | GBP '000 | GBP '000 | | | | | '000 | | | | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | | | | | | | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | Compensation | 1,824.9 | 1,253.0 | | 213.2 | 94.9 | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | Contribution to pension scheme | 81.8 | 68.0 | | - | - | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | | 1,906.7 | 1,321.0 | | 213.2 | 94.9 | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | | | | | | | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | The number of directors accruing retirement benefits were | Nil | Nil | | | Nil | | | | | | | Nil | | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | The emoluments of the highest paid director | GBP170,396 | GBP94,900 | | GBP83,300 | GBP94,900 | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+------------+-----------+----------+-----------+-----------+-----------+ Notes to the Accounts - For the year ended 31 July 2009 continued 8. Tax +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP | | GBP '000 | GBP '000 | | | | '000 | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | (a) Tax on profit on ordinary activities: | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | Current taxation: | | | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | Corporation tax | 342.9 | 527.4 | | (72.1) | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | Adjustments in respect of prior periods | 6.5 | - | | - | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | Tax (credit)/ charge | 349.4 | 527.4 | | (72.1) | - | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ - b (b) Reconciliation of total tax charge: The tax charge on the profits for the year differs from the notional tax charge on those profits calculated at the UK corporation tax rate of 28% (2008 29.33%). The differences are explained as follows: +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP | GBP | | GBP '000 | GBP '000 | | | '000 | '000 | | | | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Profit/(loss) before tax | 1,250.5 | 1,360.7 | | (692.4) | (905.6) | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Profit/(loss) multiplied by UK tax rate of 28% ( 2008 | 350.1 | 399.1 | | (193.9) | (265.6) | | 29.33%) | | | | | | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Permanent differences | 42.7 | (36.9) | | 12.2 | - | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Utilisation of losses | (185.9) | (15.2) | | - | - | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Benefit of tax losses not recognised | 131.2 | 180.4 | | 109.6 | 265.6 | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Adjustments in respect of prior period | 11.3 | - | | - | - | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ | Total tax charge/ (credit) | 349.4 | 527.4 | | (72.1) | - | +-------------------------------------------------------------+---------+---------+----------+-----------+------------+ c) Deferred tax A deferred tax asset of GBP306.4k (2008 - GBP172.0) has not been recognised, for group purposes, on tax losses of GBP1,094.2k (2008 - GBP614.3k) as future group taxable profits are considered uncertain. A deferred tax asset of GBP286.4k (2008 - GBP176.8k) has not been recognised, for company purposes, on tax losses of GBP1,022.8k (2008 - GBP631.6k) as future company taxable profits are considered uncertain. The group has unutilised UK capital losses of GBP46.9k (2008 - GBP46.9k). These losses can be carried forward indefinitely and offset against future UK chargeable gains that may arise. No deferred tax asset of GBP13.1k (2008 - GBP13.1k) has been recognised in respect of these capital losses as their utilisation is not currently anticipated. 9. Earnings per share +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | The calculation of basic and diluted earnings per share | 2009 | 2008 | | 2009 | 2008 | | is based on the following data: | Group | Group | | Company | Company | | Earnings | GBP '000 | GBP | | GBP '000 | GBP '000 | | | | '000 | | | | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ | Earnings for the purposes of basic and diluted earnings | | | | | | | per share being net profit (loss) for the year ( periods) | 763.1 | 530..3 | | (620.3) | (905.6) | +-----------------------------------------------------------+-----------+---------+----------+-----------+------------+ +------------------------------------------------------------+----------+-----------+----------+----------+----------------+----------+-------------+----------+ | | | 2009 | | 2008 | | Number of shares | | Number | | Number | +------------------------------------------------------------+---------------------------------+---------------------------+----------+------------------------+ | Weighted average number of ordinary shares for the purposes of basic EPS | 42,733,837 | | 10,500,018 | +----------------------------------------------------------------------------------------------+---------------------------+----------+------------------------+ | Dilution on conversion of loan note | 15,855,833 | | - | +----------------------------------------------------------------------------------------------+---------------------------+----------+------------------------+ | Weighted average number of ordinary shares for the purposes of diluted EPS | 58,589,670 | | 10,500,018 | +----------------------------------------------------------------------------------------------+---------------------------+----------+------------------------+ | | | | | +----------------------------------------------------------------------------------------------+---------------------------+----------+------------------------+ | | 2009 | 2008 | | 2009 | 2008 | | | Group | Group | | Company | Company | | | GBP '000 | GBP '000 | | GBP '000 | GBP '000 | +-----------------------------------------------------------------------+-----------+----------+----------+----------------+-----------------------------------+ | EPS basic (pence) | 1.79 | 5.05 | | (1.45) | (8.62) | | +------------------------------------------------------------+----------------------+----------+----------+----------------+------------------------+----------+ | Diluted EPS (pence) | 1.30 | 5.05 | | (1.06) | (8.62) | | +------------------------------------------------------------+----------------------+----------+----------+----------------+------------------------+----------+ | | | | | | | | | | +------------------------------------------------------------+----------+-----------+----------+----------+----------------+----------+-------------+----------+ Notes to the Accounts - For the year ended 31 July 2009 continued 10. Investment in subsidiary undertakings +------------------------------------------------------------+-----------+--+--------------+-----------------+ | | | | 2009 | 2008 | | | | | Company | Company | | | | | GBP '000 | GBP '000 | +------------------------------------------------------------+-----------+--+--------------+-----------------+ | Balance as at May 1 2008 | | | - | - | +------------------------------------------------------------+-----------+--+--------------+-----------------+ | Acquired/ formed during the year | | | 23,807.4 | - | +------------------------------------------------------------+-----------+--+--------------+-----------------+ | Balance as at 31 July 2009 | | | 23,807.4 | - | +------------------------------------------------------------+-----------+--+--------------+-----------------+ The companies acquired and consideration paid is set out in the table below: +-------------------------------------------------------------------+------------+-+------------+--------------+--------------+ | | Pacific | ISIS | Pacific | Total | | | Interiors | Projects | Middle | | | | Ltd | Ltd | East LLC | | +-------------------------------------------------------------------+--------------+------------+--------------+--------------+ | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Investments in subsidiaries merged:- | | | | | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Fair value of 126,169,083 ordinary shares issued at 12p each | 7,521.9 | 95.0 | 7,523.3 | 15,140.2 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Cash | - | - | 1,000.0 | 1,000.0 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Fair value of vendor loan note | - | - | 2,000.0 | 2,000.0 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Fair value of deferred consideration | - | 501.9 | | 501.9 | | | | | - | | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Fair value of liabilities assumed | 1,266.3 | 115.0 | 696.3 | 2,077.6 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Acquisition costs settled in cash | 335.7 | 156.2 | 271.8 | 763.7 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | | | | | | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Consideration applicable to merged entities | 9,123.9 | 868.1 | 11,491.4 | 21,483.4 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Investments in subsidiaries formed by the Company:- | | | | | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Pacific Interiors India Pvt Limited | | | | 248.7 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Pacific Middle East (Turnkey) (Abu Dhabi) LLC | | | | 25.9 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Pacific Middle East (Turnkey) (Dubai) LLC | | | | 51.7 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Shares issued post merger | | | | 1,997.7 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | Total investments | | | | 23,807.4 | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | | | | | | +-------------------------------------------------------------------+------------+--------------+--------------+--------------+ | | | | | | | +-------------------------------------------------------------------+------------+-+------------+--------------+--------------+ The cost of investment in the Company's balance sheet includes acquisition costs of GBP763.7k. These costs arise as a result of the acquisition of the Company the acquisition of three subsidiaries and readmission of the Company on AIM. Under acquisition accounting such costs would always be added to the cost of investment as above. The convention under the pooling of interests method adopted by the Group which generally applies to transactions involving common control transactions is that these costs should be charged to the profit and loss account as incurred. The rational for this is that generally speaking such costs amount to reorganisation costs rather than acquisition costs. The pooling of interests method of accounting is not currently addressed by IFRS. However IAS 8- Accounting policies , Changes in Accounting Estimates and Errors requires that in the absence of specific guidance in IFRS, management shall use its judgement in developing and applying accounting policy that is relevant and reliable. The test of relevance is whether the end result of an application of a policy makes sense. The test of reliability is whether the policy is robust and applied consistently. The nature of the transaction was the reverse takeover of three companies by an AIM listed company. The costs incurred included long form reports, admission document for re admission of the company to AIM and comprehensive sale and purchase agreements with warranties and indemnities. The directors consider that these are not costs that would ordinarily be incurred in a group reorganisation of companies under common control but rather flotation and acquisition costs that should be capitalised. The consequence of this treatment is that under the pooling of interest method the costs get written off to the unity of interest reserve rather than through the profit and loss account. Notes to the Accounts - For the year ended 31 July 2009 continued 10. Investment in subsidiary undertakings- continued The auditors propose that these costs should remain in the cost of investment in the company but be written off through the profit and loss account on consolidation. Under both methods the Company's Balance Sheet and profit and loss are unaffected. Impact on the Group profit and loss and balance sheet of the alternative treatments is as follows:- Method adopted Method proposed by the directors by the Auditors GBP '000GBP '000 Profit before tax 1,250.5 487.1 Tax (349.4) (349.4) Profits after tax 901.1 137.7 Consolidated retained earnings (1,010.2) (1,857.4) Unity of interest reserve (18,840.8) (17,993.6) Exercising their judgement under IAS 8, having regard to tests relevance and reliability referred to above the directors have concluded that their approach presents the group results in a way that is consistent with prior periods, likely to be more consistent withy subsequent periods and therefore more relevant to users of the accounts. The alternative proposed by the Auditors results in a non tax deductible consolidation adjustment , a tax charge disproportionate to profits before tax and results that are not easily comparable with other periods. For those reasons and the nature of the expenditure which is not akin to group reorganisation costs the Board has concluded that the accounting policy should not write off the costs of the investment on consolidation. The principal subsidiary undertakings of Real Office Group plc, all of which have been included in these consolidated financial statements, are as follows: +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Name | Country of | % of | Profit/(loss) | Capital & | | | incorporation | ownership | | Reserves | | | | interest | | | +--------------------------------------------------+---------------+---------------+---------------+-----------+ | | | 2009 | 2008 | 2009 | 2009 | | | | | | GBP '000 | GBP '000 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Pacific Interiors Limited | England | 100% | - | 825.3 | 1,599.4 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | ISIS Projects Limited | England | 100% | - | 304.2 | 1,276.6 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Pacific Interiors India Pvt Limited | India | 99% | - | (71.9) | 159.8 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Pacific Middle East LLC* | Qatar | 49% | - | (315.5) | (281.0) | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Pacific Middle East (Turnkey) (Abu Dhabi) LLC* | Abu Dhabi | 49% | - | - | 25.9 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ | Pacific Middle East (Turnkey) (Dubai) LLC* | Dubai | 49% | - | - | 51.7 | +--------------------------------------------------+---------------+-------+-------+---------------+-----------+ * In accordance with laws in the Middle East the remaining 51 % interest in these companies are held under legal agreements with local parties ("Sponsors"), which, notwithstanding their percentage shareholding, restrict the Sponsor to receiving the lower of 3% of the profits or a fixed fee of US$ 35,000 per annum. Under these agreements and the articles, the Company has control of the board and appoints the general manager. Under the Commercial Codes in the Middle East the general Manager has wide powers delegated to him by the board. Sponsors are not obliged to make any contribution beyond the initial subscription for shares. The Company is entitled to at least 97% of the profits, has the beneficial ownership of substantially all of the value of the shares in its Middle East subsidiaries but has the responsibility ( but not the obligation) for contributing all of the losses, if any, unless or until the subsidiary is liquidated (see note 24 ). Notes to the Accounts - For the year ended 31 July 2009 continued 11. Property, plant and equipment +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Group - 2009 | Leasehold | Motor | Plant and | Total | | | | Improvements | vehicles | equipment | | | | | GBP '000 | GBP '000 | GBP '000 | GBP'000 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Cost: | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 1 August 2007 | 77.0 | 100.0 | 1,002.0 | 1,179.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Additions | - | 32.0 | 159.0 | 191.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | (59.0) | (75.0) | (134.0) | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2008 | 77.0 | 73.0 | 1,086.0 | 1,236.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 1 August 2008 | 77.0 | 73.0 | 1,086.0 | 1,236.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Additions; On acquisition of Parent | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Other | 110.6 | 9.2 | 124.0 | 243.8 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | (47.1) | (8.0) | (55.1) | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2009 | 187.6 | 35.1 | 1,202.0 | 1,424.7 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Depreciation | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 1 August 2007 | 20.0 | 45.0 | 731.0 | 796.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Charge for the year | 9.0 | 20.0 | 103.0 | 132.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | (30.0) | (74.0) | (104.0) | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2008 | 29.0 | 35.0 | 760.0 | 824.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 1 August 2008 | 29.0 | 35.0 | 760.0 | 824.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | On acquisition of parent | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Charge for the year | 28.0 | 4.2 | 127.0 | 159.2 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | (23.6) | (8.1) | (31.7) | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2009 | 57.0 | 15.6 | 878.9 | 951.5 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Net book value 31 July 2008 | 48.0 | 38.0 | 326.0 | 412.0 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Net Book Value 31 July 2009 | 130.6 | 19.5 | 323.1 | 473.2 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | +------------------------------------------------------------------------------------------+-----------+------------+----------+ | | | | | | | | | leasehold | Motor | Plant and | Total | | | Company - 2009 | improvements | vehicles | equipment | | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | | +--------------------------------------------------------------+ + + + +----------+ | | | | | | | + +---------------+-----------+-----------+------------+---------------+ | | | | | | | +--------------------------------------------------------------+--------------------------------------------------------------+---------------+-----------+-----------+------------+ | Cost: | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 2 April 2007 and 1 May 2008 | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Additions | - | - | 6.3 | 6.3 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2009 | - | - | 6.3 | 6.3 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | | | | Depreciation | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 2 April 2007 and 1 May 2008 | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Charge for the year | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Disposals | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2009 | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Net Book Value | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 30 April 2008 | - | - | - | - | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | Balance at 31 July 2009 | - | - | 6.3 | 6.3 | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ | | | | | | | +--------------------------------------------------------------+---------------+-----------+-----------+------------+----------+ Net book value of the Group includes GBP19,500 (2008 nil) of assets held under finance leases. The Company had no assets held under finance leases in either 2009 or 2008. Notes to the Accounts - For the year ended 31 July 2009 continued 12. Inventories +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP | GBP '000 | GBP '000 | | | | | '000 | | | +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ | Inventory: | | | | | | +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ | Finised goods | | - | 6.0 | - | - | +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ | | | - | 6.0 | - | - | +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ | | | | | | | +-----------------------------------------------------------+----+--------------+---------+-----------+----------+ 13 Trade and other receivables +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP | GBP '000 | GBP '000 | | | | | '000 | | | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Trade receivables | | 3,791.4 | 3,150.6 | - | - | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Unbilled amounts due on customer contracts | | 2,317.5 | 3,369.0 | - | - | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Prepayments | | 233.4 | 130.8 | 40.3 | - | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Due by related party | | - | 1,074.0 | | 47.0 | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Other receivables | | - | 91.6 | - | - | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | Tax debtor | | - | - | 72.1 | - | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ | | | 6,342.3 | 7,816.0 | 112.4 | 47.0 | +-----------------------------------------------------------+-----+------------+---------+-----------+-----------+ All trade and other receivables are recoverable within one year. There is no significant difference between the fair value and the carrying value of the Company's financial assets. The ageing of trade receivables at the reporting date was: +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP | GBP | GBP '000 | GBP '000 | | | | '000 | '000 | | | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | Not past due | | 3,357.0 | 2,532.6 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | Past due 1 to 3 months | | 242.4 | 216.0 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | Past due 3 to 6 months | | 161.4 | 375.0 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | More than 6 months | | 30.6 | 27.0 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | 3,791.4 | 3,150.6 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ At 31 July 2009, trade receivables of GBP104,300 were impaired as a result of insolvency of the debtors concerned. (2008: GBPnil). +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP | GBP | GBP '000 | GBP '000 | | | | '000 | '000 | | | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | | | | | | | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ | Retentions on construction contracts amounted to | | 708.0 | 1,174.8 | - | - | +-----------------------------------------------------------+---------+---------+---------+-----------+-----------+ Notes to the Accounts - For the year ended 31 July 2009 continued 14. Construction contracts +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Contracts in progress at the balance sheet date: | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Amounts due from contract customers included in trade and | | 923.7 | 3,369.0 | - | - | | other receivables | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Amounts due on construction contracts included in trade | | | | | | | and other payables | | (1,588.4) | (3,910.5) | - | - | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | (664.7) | (541.5) | - | - | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Represented by: | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Contract costs incurred plus recognised profits less recognised | | | | | | losses to date | 5,800.0 | 29,906.0 | - | - | +-----------------------------------------------------------------+-----------+------------+-----------+------------+ | Less: Progress billings and instalments paid in advance | | (5,756.7) | (30,447.5) | - | - | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | Retentions | | (708.0) | (1,174.8) | - | - | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | (664.7) | (541.5) | - | - | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ | | | | | | | +------------------------------------------------------------+----+-----------+------------+-----------+------------+ 15. Cash and short term deposits +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | Cash at bank and on call | | 1,654.5 | 5,463.7 | 100.6 | 77.5 | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | Short term deposits | | - | - | - | 2,730.1 | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | 1,654.5 | 5,463.7 | 100.6 | 2,807.6 | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ Cash at bank and on call attract variable interest rates, whilst short term deposits attract fixed rates but mature and re-price over a short period of time. The weighted average interest rate at the balance sheet date was 2.96% (2008: 5.23%). 16. Trade and other payables +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Trade payables | | 7,281.3 | 6,824.2 | 269.0 | 363.6 | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Amount owed to related parties | | 159.2 | 62.6 | 159.2 | - | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Amount owed to subsidiary undertakings | | - | - | 2,110.8 | - | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Deferred consideration | | 501.8 | - | 501.8 | - | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Amounts due on construction contracts | | 1,606.6 | 4,514.0 | - | | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | Other payables | | 986.1 | 976.0 | 74.5 | - | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ | | | 10,535.0 | 12,376.8. | 3,115.3 | 363.6 | +-----------------------------------------------------------+-----+----------+-----------+-----------+------------+ The deferred consideration is the amount due to the vendors of ISIS Projects Limited on the basis of audited profits for the year ended 31 July 2009 under the terms of the acquisition agreement dated 2 April 2009. Leander Group Limited has waived deferred consideration in respect of 2009 amounting to GBP1,505.0 accordingly no provision has been made for this sum. The deferred consideration is due to be settled by the issue of shares in the company based upon the middle market quotation on the ordinary shares in the company for each of the five business days preceding the payment date to two vendors, Scott Cable and Steve Smith, both of whom are directors of ISIS Projects Limited. Provision for deferred consideration is included as a liability until such time as the price per share and therefore number of shares to settle the liability has been determined. The liability will be settled under the contract when the shares are issued. Other payables include balances owed to the tax authorities in each jurisdiction and general accrued expenses. Notes to the Accounts - For the year ended 31 July 2009 continued 17 Non current liabilities -Other payables +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | Amounts owed to subsidiary undertakings | | - | - | 1,997.7 | - | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | Finance lease obligations | | 12.6 | 6.0 | - | - | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | | | | | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ | | | 12.6 | 6.0 | 1,997.7 | - | +-----------------------------------------------------------+-----+----------+----------+-----------+------------+ The amounts owed to subsidiary companies are interest free and have no fixed date for repayment. 18 Finance lease obligations +------------------------------------------------------------------+----------+----------+-----------+------------+ | | 2009 | 2008 | 2009 | 2008 | | | Group | Group | Company | Company | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Finance lease liabilities - minimum lease payments | | | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ | No later than 1 year | 10.7 | 34.0 | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Later than 1 year and no later than 5 years | 15.7 | 7.0 | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Sub-total | 26.4 | 41.0 | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Future finance charges on agreement | (4.2) | (5.0) | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Present value of finance lease liabilities | 22.2 | 36.0 | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | | | | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Shown as: | | | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Current liabilities - no later than 1 year | 9.6 | 30.0 | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Non-current liabilities - later than 1 year and no later than 5 | 12.6 | 6.0 | - | - | | years | | | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ | Financial liabilities measured at amortised cost | 22.2 | 36.0 | - | - | +------------------------------------------------------------------+----------+----------+-----------+------------+ | | | | | | +------------------------------------------------------------------+----------+----------+-----------+------------+ There is no material difference between the total of the future minimum lease payments at the balance sheet date and their present values. 19. Share capital +--------------------------------------------------------+---------------------------+-----------------+--------------+ | | | 2009 | 2008 | | Authorised share capital: | | GBP '000 | GBP '000 | | | | | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | 473,474,580 ordinary shares of 10p each: | | 47,347.5 | 45,000.0 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | | | | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Issued share capital: | | No | GBP'000 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Ordinary shares of 10p each: | | | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Upon incorporation | | 2 | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Sub-division shares | | 18 | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Issued for cash during the period | | 17,500,000 | 1,750.0 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Balance at 30 April 2008 | | 17,500,020 | 1,750.0 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Issued for non-cash consideration during the period | | 126,169,083 | 12,619.9 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | Balance at 31 July 2009 | | 143,669,103 | 14,366.9 | +--------------------------------------------------------+---------------------------+-----------------+--------------+ | | +--------------------------------------------------------+---------------------------+-----------------+--------------+ The Company was incorporated on 2 April 2007 when it issued (at par) 2 ordinary shares of GBP1 each. These shares were unpaid. On 20 July 2007, each of the ordinary shares were sub-divided into 10 ordinary shares of 10 pence each and were fully paid up. On the same day, the Company's authorised share capital was increased to 450,000,000 ordinary shares of 10 pence each and 50,000 redeemable preference shares of GBP1 each and all of the Redeemable Preference Shares were issued, paid up as to 25%. No coupon was payable of the preference shares which were classified as equity. Notes to the Accounts - For the year ended 31 July 2009 continued 19. Share capital - continued On 7 September 2007, 17,500,000 fully paid up ordinary shares were issued for a consideration of 20 pence cash per share. An amount of GBP1,750,000 was credited to the share premium account less share issue costs of GBP103,400. On 24 September 2007, the 50,000 Redeemable Preference Shares of GBP1 each were redeemed at par out of the proceeds of the issue of ordinary shares. ( see also Note 1) On 28 April 2009 126,169,083 fully paid ordinary shares of 10p each were issued at 12p each as consideration for the acquisition of the subsidiaries referred to in note 1. The share premium arising of GBP2..52m has been transferred to the uniting of interest reserve in accordance with the merger relief provisions of Sec 612 of the Companies Act 2006. 20 Convertible Loan The loan note is interest free and will only be repaid when and if the independent members of the board of the Company determine that there is sufficient working capital within the Group to do so. To the extent that the loan note has not been redeemed by 30 September 2011 the Company has the right to redeem any unpaid balance by issuing shares in the Company at 12p per share.The convertible loan has been classified as equity in the balance sheet in accordance with the accounting policy for convertible loans and preference shares at note 2. 21. Reserves The following describes the nature and purpose of each reserve within equity: Reserve Description and purpose Share capital Amount subscribed for share capital at nominal value. Share premium Amount subscribed for share capital in excess of nominal value less any costs of issue. Translation reserve Amount of any gains or losses arising on the retranslation of net assets of overseas operations into Sterling. Retained earnings Amount of any profit or loss for the year after the payment of dividends, together with the amount of any equity-settled share-based payments, and the transfer of capital items described above. Unity of Interest reserve Represents the difference between the fair value of the consideration paid and the issued share capital and share premium of the subsidiaries acquired less the share premium of the Company by virtue of section 612 of the Companies Act 2006, "Merger Relief". 22. Related party transactions +------------------------------------+----------------------------------------------+--------------------------------+ | | 2009 | 2008 | | | Group and | Group and | | | Company | Company | | | GBP '000 | GBP '000 | +------------------------------------+----------------------------------------------+--------------------------------+ | | | | +------------------------------------+----------------------------------------------+--------------------------------+ | Subsidiaries | Pacific Interiors Limited | - | +------------------------------------+----------------------------------------------+--------------------------------+ | | ISIS Projects Limited | - | +------------------------------------+----------------------------------------------+--------------------------------+ | | Pacific Interiors India Pvt Limited | - | +------------------------------------+----------------------------------------------+--------------------------------+ | | Pacific Middle East LLC | - | +------------------------------------+----------------------------------------------+--------------------------------+ | | Pacific Middle East (Turnkey) (Abu Dhabi) | - | | | LLC | | +------------------------------------+----------------------------------------------+--------------------------------+ | | Pacific Middle East (Turnkey) (Dubai) LLC | - | +------------------------------------+----------------------------------------------+--------------------------------+ | | | | +------------------------------------+----------------------------------------------+--------------------------------+ | Key management personnel | Roger Smee | Roger Smee | +------------------------------------+----------------------------------------------+--------------------------------+ | | Mike Linforth | Simon Godwin | +------------------------------------+----------------------------------------------+--------------------------------+ | | Philip Brady | Paddy Greenwood | +------------------------------------+----------------------------------------------+--------------------------------+ | | | | +------------------------------------+----------------------------------------------+--------------------------------+ | | | | +------------------------------------+----------------------------------------------+--------------------------------+ | Other related parties | Smee Family Interests Limited | Smee Family Interests Limited | +------------------------------------+----------------------------------------------+--------------------------------+ | | Leander Group Limited | Leander Group Limited | +------------------------------------+----------------------------------------------+--------------------------------+ | | Rock New Providence Limited | Rock Capital Group Limited | +------------------------------------+----------------------------------------------+--------------------------------+ Notes to the Accounts - For the year ended 31 July 2009 continued 22. Related party transactions- continued Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Further disclosures concerning transactions with the Company's directors are made in the Directors' Report and Corporate Governance Statement. There are no loan balances with directors. The table below sets out all of the transactions with the related parties during the year and then the balances remaining outstanding at the year-end. +-----------------------------------------------------------------+----+------------+-----------+--------------+----------+--------------+ | Transactions | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | (Expense ) Income | | | | | | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | Smee Family Interests Limited | | 157.2 | .- | 157.2 | 40.0 | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | Leander Group Limited | | 402.6 | (80.0) | 17.5 | - | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | Rock Capital Group Limited | | 25.0 | 22.0 | 25.0 | 39.0 | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | Rock New Providence Limited | | 465.6 | - | - | - | +-----------------------------------------------------------------+----+------------+-----------+--------------+-------------------------+ | | | 1,050.4 | (58.0) | 199.7 | 79.0 | +-----------------------------------------------------------------+----+------------+-----------+-------------------------+--------------+ | | | | | | | | +-----------------------------------------------------------------+----+------------+-----------+--------------+----------+--------------+ +-+-----------------------------------------------+-------------+-------+------+------+-------------+-----+--------+-+----------+----------+ | | | | | | | | | | +-+-----------------------------------------------+-------------+--------------+--------------------+-----+----------+----------+----------+ | Balances outstanding | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | Due to (by) | | | | | | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | Smee Family Interests Limited | | 5.6 | 82.6 | 5.6 | - | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | Leander Group Limited | | 153.7 | (1,074.0) | 153.7 | - | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | Rock New Providence Limited-Convertible loan note | | 1,902.8 | - | 1,902.8 | - | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | | | 2,062.1 | 991.4 | 2,062.1 | - | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | | | | | | | +---------------------------------------------------------------+-------+-------------+-------------+--------------+-----------------------+ | | | | | | | | | | | | | +-+-----------------------------------------------+-------------+-------+------+------+-------------+-----+--------+-+----------+----------+ Remuneration of key management personnel The remuneration of the directors, who are key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 "Related Party Disclosures". Further information about remuneration of the directors is included in note 7and in the directors remuneration report at page 28. +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | | | | | 2009 | 2008 | 2009 | 2008 | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | | | | | Group | Group | Company | Company | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | | | | | GBP '000 | GBP '000 | GBP '000 | GBP '000 | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Short-term employee benefits | | | | 192.9 | 41.2 | 52.4 | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Post employment benefits | | | | 94.4 | 67.9 | 6.3 | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Other long term benefits | | | | - | - | - | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Share based payments | | | | - | - | - | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Long term | | | | - | - | - | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | Termination benefits | | | | -- | - | - | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | | | | | 287.3 | 109.1 | 58.7 | - | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ | | | | | | | | | +----------------------------------+----------+-------------+--------+------------+----------+-----------+-----------+ Notes to the Accounts - For the year ended 31 July 2009 continued Directors' transactions The interests of the directors of the company and of its subsidiaries in the deferred consideration at note 16 is as follows:- +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ | Name | | Director of | | | | Percentage | Value of | +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ | | | | | | | interest in | Interest | | | | | | | | deferred | | +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ | | | | | | | consideration | | +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ | | | | | | | % | GBP '000 | +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ | Scott Cable | Isis Projects Limited | | | 60.00 | 301.0 | +-----------------+--------------------------+---------------------------+----------+------------------+-----------+ | Steven Smith | Isis Projects Limited | | | 40.00 | 200.8 | +--------+--------+------------------+-------+---------------------------+----------+------------------+-----------+ Roger Smee is a director of, and controlling shareholder in Rock New Providence Limited, the owner of the interest free convertible loan note of GBP1,902.8 ( see note 20). There were no transactions between the Group and the directors beyond those disclosed above and in the remuneration report, or other related party transactions with the directors during the period to 31 July 2009 or in the subsequent period to the date of signature of these accounts. Directors' material interest in contracts with the Company No director held any material interest in any contract with the Company or any Group company in the period to 31 July 2009 or in the subsequent period to the date of signature of these accounts. 23. Financial instruments - risk management Cash and cash equivalents Cash and cash equivalents comprise cash in hand, demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. The carrying value of these assets approximates to their fair value. General risk management principles The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. This is applied to assessing monitoring and managing the strategic operational and financial risks of the Group to ensure appropriate risk management of Group operations. Internal controls and management reporting are embedded in the operations of Company and its operating subsidiaries. Key business risks identified are dealt with in the business review under Key risks at pages 22 and 23 and in the Internal Control Statement of the Corporate Governance report at pages 29 and 30. Financial risks and management The Group has exposure to a range of financial risks through the normal conduct of it's business. Risk management is governed by operational policies and internal controls which are subject to periodic internal review by the management, subsidiary company and the Group Boards and external review by the auditors who report to the Audit Committee at least twice each year. The key financial risks arising from the Group's use of financial instruments are: · Credit risk · Liquidity risk · Market risk Notes to the Accounts - For the year ended 31 July 2009 continued 23. Financial instruments - risk management continued (a) Credit risk. Credit risk is the risk of financial loss to the Group that could arise if a customer (or counterparty to a financial instrument if any) fails to meet its contractual obligations and arises principally from the Group's trade receivables , including retentions and amounts recoverable on contracts in progress. The degree to which the Group is exposed to credit risks depends upon the characteristics of the contract counterparty and on the nature of the project. The Group's credit risk is also influenced by general macroeconomic conditions. The Group presently operates principally in the United Kingdom, however it is building operations in the Middle East and in India. The Group strategy over time is to further develop its business overseas and by doing so overcome concentration of risk in any one economy. The Group does not have any significant concentration of risk in any of the amounts due on customer contracts or trade receivable balances at the reporting date with receivables spread across a range of customers. Due to the nature of the business it is normal practice for customers to hold retentions in respect of completed contracts. Retentions held at 31 July 2009 were GBP 708.0k. The Group manages its exposure to credit risk by routinely checking the credit worthiness of its potential customers, assessed where appropriate with reports from credit agencies and by monitoring the timing and extent of progress payments on contracts. Where appropriate external security such as parent company guarantees which in the event of default could result in the Group still having a secure claim. Where appropriate the Group also mitigates credit risk by agreeing contract terms that require advance deposits and agreeing payment terms that at least match or exceed progress of the contract. The Group manages the collection of retentions through its post completion project monitoring procedures and by maintaining contact with clients during the retention period to ensure that any circumstances that could lead to non payment of retentions are dealt with promptly. Exposure to retentions is minimised by matching retentions held by customers with retentions against subcontractors. The Group assesses amounts due from customers on construction contracts and trade receivables for impairment and establishes a provision for impairment that represents its estimate of losses that could be incurred. (b) Liquidity risks Liquidity risk is the risk that the Group will not be able to meet its financial obligations when they fall due. The responsibility for liquidity risk lies with the Boards of subsidiary companies in the first instance but ultimately with the Group Board. The Group's objective is to manage liquidity by ensuring that it has sufficient liquidity to meet its liabilities in the ordinary course of business under normal conditions, without incurring unacceptable losses or damaging the Group's reputation. The Group actively manages its liquidity performance whilst ensuring that the return on surplus cash is managed to maximise returns so far as possible having regard to the working capital demands of the business. At 31 July 2009 the Group and throughout the period then ended the group had no current debt facilities which could make the Group vulnerable to liquidity risks under stress conditions. The Board is acting to address this situation by putting in place appropriate facilities which are under negotiation. The Group does not have any derivative or non derivative financial liabilities apart from finance lease obligations, which are interest bearing, trade and other payables and current taxation liabilities (current liabilities) that are not interest bearing. Finance lease liabilities are carried at the present value of the minimum lease payments plus the future value of finance charges (note 18). Finance leases Non interest bearing current liabilities have no weighted average effective interest rates. The subsidiaries report cash balances daily and surplus cash is invested when appropriate to maximise interest income consistent with the needs of the business. The Group prepares weekly short term and monthly long term forecasts that are used to assess the Group's cash performance. Notes to the Accounts - For the year ended 31 July 2009 continued 23. Financial instruments - risk management continued (b) Liquidity risks-continued Key risks to liquidity are a downturn in contracting volumes, a decrease in the value of open market sales, deterioration in credit terms obtainable in the market from suppliers and subcontractors, a downturn in the profitability of work, delayed payments from customers and the risk that clients or suppliers suffer financial distress. Various measures are taken at Group level to quickly identify risks as they arise, enabling the Group to address them without delay. Key amongst this is continual monitoring of the forward order book, including the status of orders and likely timescales to for realisation, reviews of pitching and tender levels from the prospects pipeline from traffic sheets, monitoring of overheads to ensure they are appropriate to the volume of business, continual monitoring of pricing and margins and matters that have an impact on working capital such as overdue debts, delayed billings or certification of works on contracts. Monitoring of profitability on contracts, and the review of client and supplier references, approval of credit terms given and taken to ensure they are appropriate. The ageing of trade payables at the reporting date, (including for overseas entities) was as follows:- +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | | | | | | 2009 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | | | | | | GBP000 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | Not past due | | | | | 2,281.2 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | Past 1 to 30 days | | | | | 1,062.7 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | 31 to 120 days | | | | | 281.9 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | 121-365 days | | | | | 3,352.5 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | Greater than one year | | | | | 303.1 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | | | | | | | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | Total | | | | | 7,281.3 | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ | | | | | | | | +-------------------------------------+--------+--------+--------------+--------+------------------+--------+ (c ) Market Risks Market risks are those that result in changes in market prices such as foreign exchange rates, interest rates and values of shares that could have an impact on the Group's income or on its holdings of financial instruments. The Group's objective is to achieve a level of market risk that is appropriate for prudent management of the business. (d) Interest rate risk The Group is currently not exposed to significant interest rate risk because it has no interest bearing borrowings apart from finance leases of GBP22.2k (2008 nil) (note 18) and its only interest bearing assets are short term cash deposits. Whilst the focus remains to run the Group on a debt free basis the Group is in the process of negotiating bank facilities for working capital and acquisition purposes and if appropriate will take measures to fix interest rates on any term borrowings by means interest rate swaps, caps or collars. There is presently no material impact of interest rate volatility on the Group's equity. If the Group were subject to interest rate risk sensitivity tables would be presented to illustrate the impact of reasonably possible changes in interest rates with all other variables held constant, of the Group's profit before tax ( through the impact on floating rate borrowings). Notes to the Accounts - For the year ended 31 July 2009 continued 23. Financial instruments - risk management continued (e) Foreign Currency risks The Group operates through subsidiaries in different jurisdictions and so is exposed to exchange rate movements ,however there is only minimal cross border trading with each subsidiary being a self contained operating unit. within its jurisdiction. Wherever possible revenue and costs from trading transactions are matched in the same currency thereby mitigating any exposure. The exchange rates used during the period are set out below: +------------------------------------------------------------------------+----------------+----------------------+ | Currency | Rate at 31 | Rate used during the | | | July 2009 | period | +------------------------------------------------------------------------+----------------+----------------------+ | | | | +------------------------------------------------------------------------+----------------+----------------------+ | Qatari Riyal | 5.995 | 5.9467 | +------------------------------------------------------------------------+----------------+----------------------+ | UAE Dirham | 6.136 | n/a | +------------------------------------------------------------------------+----------------+----------------------+ | Indian Rupee | 80.050 | 75.288 | +------------------------------------------------------------------------+----------------+----------------------+ | Euro | 1.171 | n/a | +------------------------------------------------------------------------+----------------+----------------------+ When it is appropriate, and a material currency exposure is identified appropriate hedging instruments will be put in place to offset the effects of currency fluctuations. When the need arises for the Group to purchase a currency or hedging instruments then it does so through specialist foreign exchange brokers. The table set out below demonstrates the sensitivity to a reasonable possible change in Sterling in relation to the Qatari Rial and Indian Rupee with all other variables held constant, of the group's profit before tax ( due to foreign exchange translation of monetary assets and liabilities). There is no impact on the Group's equity since there were no forward currency hedges or net investment hedges at 31 July 2009. The impact in 2008 was not material. +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | Foreign currency risk assesment | Increase/(Decrease) | | Effect on PBT | Effect on | | | in Sterling vs. | | | equity | +---------------------------------+-----------------------+--+---------------------------+-----------------+ | |INR/QAR exchange rate | | | | +---------------------------------+-----------------------+--+---------------------------+-----------------+ | 2009 | | | | | | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | | | | | | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | Sterling/INR | (15%) | | (12,606) | | 28,702 | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | (10%) | | (7,937) | | 18,072 | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | 10% | | 6,494 | | (14,786) | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | 15% | | 9,318 | | (21,215) | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | | | | | | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | Sterling/QAR | (15%) | | 78,134 | | (49,589) | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | (10%) | | 49,196 | | (31,223) | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | 10% | | (40,251) | | 25,546 | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ | | 15% | | (57,751) | | 36,653 | +---------------------------------+-----------------------+--+----------------+----------+-----------------+ (f) Capital Management At present the Company is under the common ownership of one major shareholder and narrowly held which reduces the risk of wide fluctuations in the value of the shares. The Group's objective is dilute this interest over time to broaden the number and range of investors so as to build a strong capital base. The capital structure of the Group consists of equity attributable to the equity holders of the company comprising issued share capital, reserves and, once past losses have been offset by profits, retained earnings. At 31 July 2009 the Group had accumulated losses of GBP792.9k. Subject to the availability of distributable reserves and provided that there is a sufficiency of working capital and cash to sustain the business, the Group is focussed on generating returns to its investors by paying dividends. The capital position of the Group and Company is set out in the Statement of Changes in Equity at page 34. Apart from Qatar where the subsidiary is required to set aside a statutory reserve of QAR 100,000, equivalent to GBP16,6k, the Group is not subject to any capital requirements set by regulatory authorities. Notes to the Accounts - For the year ended 31 July 2009 continued 24. Subsequent events On 20 August 2009 the 51% shareholder in the subsidiary company Pacific Middle East LLC, Links Commercial Brokers LLC ("Links") transferred their shares in the company to Rumaillah Group LLC ("Rumailla") under an agreement in the same terms as the previous agreement with Links. Under the new agreement the Company remains entitled to at least 97% of the profits Pacific Middle East LLC and has the beneficial ownership of substantially all of the value of the shares. Unlike Links who operate as professional sponsors, Rumaillah is involved in construction of interiors and has worked alongside Pacific Middle East LLC in delivery of services to clients. The Board believes that Rumaillah's involvement adds value to Pacific's brand in the Middle East. On 28 January 2010 the Company sold its investment in ISIS Projects Limited ("ISIS") to Leander Group Limited ("Leander") a company controlled by Roger Smee. Prior to this transaction Leander agreed to waive GBP1.5m of deferred consideration due by the Company under the original share purchase agreement under which the company bought ISIS from Leander. The consideration payable by Leander for ISIS of GBP484.1 has been offset against the indebtedness that the Company has to ISIS of GBP1,007k, which has been assumed by Leander, and the net amount due to Leander of GBP522.9k will be settled in full by the issue of shares in the Company at 10p each. The company will continue to provide ISIS with a temporary working capital facility of GBP100k to be secured against specific book debts for a limited period of not more than six months. 25 Pensions The pension charge represents contributions payable by the company into personal defined contribution pension funds and amounted to GBP125,472 (2008 GBP99,797). At 31 July 2009 the pension contributions unpaid were GBP4,559.(2008 -GBP 3,514). The assets are held separately from those of the company in independently administered funds. The Group has no obligations by way of unfunded pension liabilities.. 26. Contingent liability A former employee of an overseas subsidiary company has brought a claim against the subsidiary. The board of Real Office Group plc and their advisers monitor the situation closely but do not currently believe the claim to have any substance, however the outcome of litigation in overseas jurisdictions is uncertain. The Company has given Parent Company performance guarantees in support of obligations of its subsidiaries under fit out contracts. Such guarantees can only be called in the event that the subsidiary fails to meet its obligations and all reasonable measures have been taken by the claimant to recover its claim from the subsidiary. Exposure under guarantees reduces at completion of the works to the value of the retention and expires at the end of the defects period. Guarantees at 31 July 2009 are as follows: 2009 2008 Company Company GBP '000 GBP '000 Expiring within 12 months 120.0 - Expiring after more than 12 months 730.0 - +---------------------------------------+ | 850.0 - | +---------------------------------------+ | | +---------------------------------------+ Notes to the Accounts - For the year ended 31 July 2009 continued 27. Operating lease arrangements At the balance sheet date the Group had contracted with suppliers for the following future minimum lease payments:- +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | 2009 | 2008 | 2009 | 2008 | | | | Group | Group | Company | Company | | | | GBP | GBP | GBP '000 | GBP '000 | | | | '000 | '000 | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | At the balance sheet date there were the following commitments | | | | | | under non-cancellable operating leases, and the minimum rentals, | | | | | | exclusive of any escalation clauses, are: | | | | | +--------------------------------------------------------------------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | Land and buildings | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due not later than 1 year | | 205.6 | 197.2 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due after 1 year and not later than 5 years | | 353.5 | 217.0 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due after 5 years | | - | 9.0 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | 559.1 | 423.2 | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | Other | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due not later than 1 year | | - | 3.0 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due after 1 year and not more than 5 years | | 37.0 | 4.0 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | - due after 5 years | | 116.3 | - | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | 153.3 | 7.0 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | 712.4 | 430.2 | - | - | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ | | | | | | | +-------------------------------------------------------------+------+---------+-------+-----------+-----------+ REAL OFFICE GROUP PLC Advisers Registered Office: 5th Floor, Thavies Inn House 3 - 4 Holborn Circus London EC1N 2HA Solicitors: Forsters LLP 31 Hill Street London W1J 5LS Registrars: Capita Registrars The Registry, 34 Beckenham Road Beckenham Kent BR3 4TU Independent Auditors: Ernst & Young LLP 1 More London Place London SE1 2AF Bankers HSBC Bank Plc 60 Queen Victoria Street London EC4N 4TR Royal Bank of Scotland 127-128 High Holborn London WC1V 6PQ This information is provided by RNS The company news service from the London Stock Exchange END FR BBMMTMBBJBTM
1 Year Real Office Chart |
1 Month Real Office Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions