CRITICAL INFORMATION GROUP PLC
FINAL RESULTS FOR THE PERIOD FROM 18 MAY 2009 to 20 JUNE 2010
CHAIRMAN'S STATEMENT
Operating review for period from incorporation on 18 May 2009 to 30 June 2010.
Chairman’s statement
It continues to be an interesting period for Critical Information Group plc (“CIG” or “the Company”). The primary focus has been to acquire a business or businesses of sufficient size to act as a platform from which to profitably develop and integrate further acquisitions.
Review of operations
CIG was established to acquire public or private business to business (B2B) media companies and businesses which in our Board’s opinion have the potential for operational improvement and would benefit from consolidation. The positive response to our flotation combined with the calibre of CIG’s financial backers has opened a number of potential opportunities for the Company.As previously stated in our half year report we approached three businesses and made conditional offers or non binding approaches on two of them.Since then we have made non-binding indicative approaches to two further targets but were unable to take these further. CIG continues to be active and is in early stage discussions regarding three additional businesses.
CIG offers a clear strategy and an experienced management team to implement this strategy. Our experience includes restructuring target companies, buying and building businesses and delivering the benefits associated with integrating assets into a larger entity. All targets are financially assessed using two cashflow based evaluation methods; NPV of future cashflows and simple payback. Our first acquisitions will ideally offer good market positions, brand franchise and a spread of operations to provide broad market access together with the necessary infrastructure to allow timely integration of acquisitions and scale to support strong organic growth.
Although we have been very active over the period we have continued to maintain a strong focus on cost control. This has kept our administrative expenses, before exceptional costs, to less than £100,000 in the period, the bulk of which relate to professional and compliance costs. The executive directors will not draw a salary until completion of our first acquisition, and they are not entitled to any benefits in kind. The approach to Centaur Media plc in 2009 is shown separately, cost £119,500 and is disclosed in note 3. The direct costs on issues of shares were £155,200 and were charged against the Share Premium Account.
As reported in the 31 December 2009 half yearly financial report whilst many companies are reporting that conditions have stabilised in our target markets in recent months, they still face many of the same concerns we identified at the time of our IPO last June; challenging market conditions, over leverage, lack of liquidity for smaller listed companies, limited M&A activity and restricted access to debt finance. The biggest change that this stabilisation has presented us has been potential targets factoring a return to growth into their price expectations for their businesses. In many cases this forecast return to growth has not yet been demonstrated. We are still confident that a number of opportunities remain and will continue to pursue them with the support of our shareholders. As demonstrated by our actions during this period, we will not overpay for assets and we will invest only where we see an opportunity for value creation for all of our shareholders.
The future
At the time of our IPO we undertook to consult with shareholdersand to seek their consent to continue with our investment policy if we have not invested in a business or have not substantially implemented that investment policy within 18 months of our IPO.As CIG has not, at the date of this report, implemented its stated investing policy we will therefore commence this consultation process with our shareholders beginning next month with the objective of tabling a suitable ordinary resolution at theAnnual General Meeting to be convened on 18 November 2010.
As reported above, we continue to be active and are currently working on three projects, howeveras they are at an early state there can be no certainty that these may lead to formal acceptable offers or indeed successful outcomes. We continue to believe there are opportunities available to the Company with many B2B businesses still reporting an uncertain economic outlook for 2010/11. We have ample cash to support our business activities,(with an net asset balance of £2.6m at the end of June equivalent to 87.8p per share),a supportive investor base, potential access to debt finance and a low underlying operational cost base.
David J Smith, Chairman
STATEMENT OF COMPREHENSIVE INCOME
Period 18 May 2009 to 30 June 2010
Note / Period from 18 May 2009 to 30 June 2010£000
Administrative expenses
Exceptional costs / 3 / 119.5
Other administration expenses / 99.5
OPERATING LOSS / (219.0)
Finance income / 4 / 9.9
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION / 2 / (209.1)
Tax on loss on ordinary activities / 6 / -
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL PERIOD / 12 / (209.1)
EARNINGS PER SHARE
Basic loss per share / 7 / (7p)
All results derive from continuing operations.
STATEMENT OF CHANGES IN EQUITY
Period 18 May 2009 to 30 June 2010
Share Capital£’000 / Share Premium Account
£’000 / Accumulat-ed Deficit
£’000 / Total
£’000
Balance at 18 May 2009 / - / - / - / -
Issues of shares / 1,502.5 / 1,502.5 / - / 3,005.0
Loss for the period / - / - / (209.1) / (209.1)
Direct costs on issues of shares / - / (155.2) / - / (155.2)
Balance at 30 June 2010 / 1,502.5 / 1,347.3 / (209.1) / 2,640.7
STATEMENT OF FINANCIAL POSITION
30 June 2010
Note / 30 June 2010£’000
CURRENT ASSETS
Other receivables / 8 / 17.9
Cash and cash equivalents / 2,646.1
TOTAL ASSETS / 2,664.0
CURRENT LIABILITIES
Trade creditors and accruals / 9 / (23.3)
NET CURRENT ASSETS AND NET ASSETS / 2,640.7
EQUITY
Share capital / 10,11 / 1,502.5
Share premium account / 11 / 1,347.3
Accumulated deficit / 11 / (209.1)
Total equity / 2,640.7
The financial statements of Critical Information Group plc (registration number 06908911) were approved and authorised for issue by the Board of Directors on 24th September 2010
David Smith
Director
STATEMENT OF CASH FLOWS
Period 18 May 2009 to 30 June 2010
Period from 18 May 2009 to 30 June 2010£000
Operating activities
Loss before tax for the period / (209.1)
Adjusting for:
Finance income / (9.9)
Operating cash flows before movements in working capital / (219.0)
Increase in receivables / (17.9)
Increase in payables / 23.3
Cash used by operations / (213.6)
Interest received / 9.9
Net cash used in operating activities / (203.7)
Financing activities
Proceeds on issue of shares / 3,005.0
Direct cost on issue of shares / (155.2)
Net cash from financing activities / 2,849.8
Net increase in cash and cash equivalents / 2,646.1
Cash and cash equivalents comprise bank balances with an original maturity of three months or less. The carrying amount of these assets is approximately equal to their fair value.
NOTES TO THE FINANCIAL STATEMENTS
Period 18 May 2009 to 30 June 2010
1.ACCOUNTING POLICIES
General information
Critical information Group plc is a public limited company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is One Hanover Street, London, W1S 1YZ. The nature of the company’s operations and its principal activities are the identification, acquisition and integration of B2B media companies.
The company has its primary listing on the Alternative Investment Market (‘AIM’) of the London Stock Exchange.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the company operates.
The financial information set out above does not constitute the company's statutory accounts for the period from incorporation on 18 May 2009 to 30 June 2010, but is derived from those accounts. Statutory accounts for 2010 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their report was unqualified, drew attention to going concern by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
Adoption of new and revised standards
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
Effective dateIFRS 2* Share Based Payment (amendments) / 1 January 2010
IFRS 5 Non-current Assets held for Sale and Discontinued Operations (amendments) / 1 July 2010
IFRS 7 Financial Instrument Disclosures (amendments)
IAS 1* Presentation of financial statements (amendments) / 1 January 2011
1 January 2011
IAS 24 Related Parties Disclosures (revision) / 1 January 2011
IAS 27 Consolidated and Separate Financial Statements (amendments)
IAS 34 Interim Financial Reporting (amendments) / 1 July 2010
1 January 2011
IFRIC13 Customer Loyalty Programmes (amendments)
IFRIC14 Amendment – Prepayments of a minimum Funding Requirement / 1 January 2011
1 January 2011
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments / 1 July 2010
IFRS 9 Financial Instruments / 1 January 2013
*endorsed by the EU
The directors do not expect that the adoption of these Standards and Interpretations in future periods will have a material impact on the financial statements of the company except for treatment of acquisition of subsidiaries and associates when IFRS 3 (revised 2008), IAS 27 (revised 2008) and IAS 28 (revised 2008) comes into effect for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 July 2009.
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below.
Going concern
The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis in preparing these financial statements. The company on its admission to AIM undertook to convene a meeting of shareholders if no acquisition or investment had been made within 18 months of Admission. At this meeting should it be called, the shareholders will be asked to consider whether or not to continue with the company’s stated investment policy. The outcome of this meeting may result in a process to wind up the company and distribute any residual cash to shareholders or the sale of the company as a going concern.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and are subject to an insignificant risk of changes in value.
Receivables
Other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘receivables’. Receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement
Financial liabilities are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Taxation
The tax expense represents the sum of the tax currently payable and deferred 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 or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each period end and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
Critical accounting judgements and key sources of estimation uncertainty
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 company’s accounting policies. The directors currently believe that at the period end there are no areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant.
2.LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Loss on ordinary activities before taxation is shown after charging: / Period from 18 May 2009 30 June 2010£’000
Auditors' remuneration / 12.5
Staff costs (see note 5) / 20.7
Fees payable to the company’s auditor in respect of the Admission to AIM were £20,000, and were charged to Share Premium.
3.Exceptional costs
Loss on ordinary activities before taxation is shown after charging: / Period from 18 May 2009 30 June 2010£’000
Professional fees and other costs / 119.5
The above represents costs incurred in the approach to Centaur Media plc.
4.finance income
Period from 18 May 2009 30 June 2010£’000
Bank interest / 9.9
5.INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Period from 18 May 2009 30 June 2010£’000
Staff costs during the period (including directors):
Wages and salaries including National Insurance Contributions / 20.7
Directors’ emoluments / 20.0
The payments above relate to non-executive directors as the executive directors currently are not entitled to any remuneration.
Average monthly number of persons employed (including directors) / 46.Tax charge on loss on ordinary activities
a) Analysis for the tax for the period / Period from 18 May 2009 30 June 2010£’000
UK Corporation tax:
Current tax on loss for the period / -
b) Factors affecting current period tax: / Period from 18 May 2009 30 June 2010
£’000
Loss on activities before tax / (209.1)
Loss on ordinary activities multiplied by standard rate of corporation tax in UK of 28% / (58.5)
Tax losses carried forward – not recognised / 58.5
Total current tax / -
The unprovided deferred tax asset was £58,500. The deferred tax asset has not been recognised as the directors consider that it is not probable that these losses will be utilised in the foreseeable future.
7.earnings per share
The calculation of the basic earnings per share is based on the following data: / Period from 18 May 2009 30 June 2010£’000
Earnings for the purpose of basic earnings per share being net loss attributable to shareholders - based on the average number of shares in issue during the period / (209.1)
No.
Weighted average number of ordinary shares during the period for the purposes of basic earnings per share / 3,005
8.other receivables
30 June 2010£’000
Other receivables / 2.7
Prepayments / 15.2
17.9
The directors consider that the carrying amount of other receivables is approximately equal to their fair value. There are no past due or impaired receivable balances within the company.
9.Trade CREDITORS and ACCRUALS
30 June 2010£’000
Trade creditors and accruals / 23.3
Trade creditors and accruals principally comprise amounts outstanding for trade purchases, and ongoing costs. The directors consider that the carrying amount of trade payables approximates to their fair value.
10.CALLED UP SHARE CAPITAL
Share capital as at 31 December 2009 amounted to £1,502,500. During the period, the company issued 3,005,000 shares of £0.50 each for £3,005,000.
30 June 2010£’000
Authorised
5,000,000 ordinary shares of £0.50 each / 2,500.0
Called up, allotted and fully paid
3,005,000 ordinary shares of £0.50 each / 1,502.5
The company has one class of ordinary shares which carries no fixed income.
11.share premium
30 June 2010£’000
Balance at 18 May 2009 / -
Issues of shares / 1,502.5
Direct costs on issues of shares / (155.2)
Balance at 30 June 2010 / 1,347.3
12.accumulated deficit