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WATERLINE GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDING 31 MARCH 2008

Chairman's Statement

I am pleased to report the Group's results for the year ended 31st March 2008.  

This has been a year of further consolidation against a back-drop of a very difficult trading environment. The highlights of a difficult year were:

• Revenue up by 1.5% to £85.0 million (2007: £83.7 million)

• Gross margin of 23.5% compared with 24.8%

• Profit before tax down from £906,625 to a loss £45,710

• Basic loss per share of 2.32p (2007: 3.32p earnings)

• Acquisition of Interchange Point property for £4.5 million

• Net assets per share down to 53.7p (2007: 55.9p)

• Net debt increased to £16.1 million from £11.6 million

• No proposed dividend

These results are being reported for the first time under International Financial Reporting Standards ('IFRS'), as required for AIM-listed companies. The most notable effects of this change are detailed in note 2.

Despite a difficult trading environment the Group has made progress on its operating targets, which in turn has maintained its position as a key player in the sector.

While the Group has grown its revenue marginally, there was significant revenue growth within the Refrigeration segment. During the year Coolectric Limited ('Coolectric') grew revenue by 17.3% with the main focus being on independent electrical retailers. The main focus of the Kitchen (Furniture & Appliances) Distribution segment continued to be at the mid to high end of the independent kitchen retailer channel. 

The Group's loss before tax was £45,710. This fall in profitability was a result of  the hardening market place, the poor performance of Sterling against the Euro, higher than budgeted fuel cost increases and gross margin coming under strong attack from the competition trying to keep market share in a declining market place. The Group has continued to focus on improving the efficiency and effectiveness of its logistics platform by investing in vehicle tracking and route planning software. The Board of Directors does not propose a dividend this year given the current climate of economic uncertainty.

Net assets per share decreased to 53.7p (2007: 55.9p) for the year ended 31 March 2008. As a consequence of the freehold acquisition the Group increased the net debt position to £16.1 million (2007: 11.6 million).

Cash flow continued to be strong with £2.6 million generated from trading operations. The Group's net debt position increased as a consequence of the purchase of Interchange Point, where the Coolectric business is located. The purchase of the Interchange Point building at the Group's Newport Pagnell headquarters, along with some expanded car parking facilities means the Group's warehousing needs are secure for the foreseeable future, with further scope for expansion when required.

The Board expects trading conditions within the housing market and the UK economy in general and in its sector in particular to be weak in the coming months and, in an effort to realign its business to the changed conditions, cost savings are being made throughout the business.  Headcount has been reduced and the Group has not acquired any new delivery vehicles in an attempt to keep costs down. The Board is constantly reviewing other potential cost savings should the need arise. 

Other factors and risks affect the Board's outlook on the next twelve months. These include the Group's insurers taking a tough stance on the risk profile of many of the Group's customers and reducing their credit rating, and therefore the amount that the Group can claim in the event that a customer fails to pay for goods received. This places an additional risk on certain transactions carried out by the Group and places it in a position of having, to an extent, self-insure risk of customer default.

Sales in the period since the end of March have been disappointing and in particular since June, down from the levels seen in the same period in the prior year. The Group has also seen a degree of margin erosion which is partly the result of a more competitive marketplace where competitors are prepared to cut margins heavily to retain market share. 

The Board is confident that it can adapt the Group's business to the changed trading conditions but turnover and profit will be at lower than previously anticipated.

David Rogers has resigned as a non-executive director of the Company with effect from 18 September 2008.  I would like to thank David for his valuable contribution to the Company during its admission to AIM and in the crucial period thereafter, and wish him well for the future.

I would like to thank all customers and suppliers for their continued support and our own dedicated teams for the way they are facing the challenging economic conditions.

Peter F Dicks

Chairman

18 September 2008

For further information please contact:

Waterline Group plc

Peter Dicks, Chairman

Michael Lawrence, Chief Executive Officer

Steven Steel, Chief Financial Officer

Tel: 01908 219 777

Nominated Adviser

Dowgate Capital Advisers Limited
James Caithie
Antony Legge

Tel: 020 7492 4777

Broker

St Helen's Capital Limited 

Ruari McGirr

Mark Anwyl

Tel: 020 7628 5582

Chief Executive's Report

INTRODUCTION

The Group imports and distributes quality kitchen furniture, branded appliances, sinks and taps throughout the UK and from Boston in the US. The main product focus of the Group is the mid to high value areas of the kitchen market place. The Group is structured into two main business segments: Kitchen (Furniture & Appliances) Distribution and Refrigeration. These two business segments are discussed in more detail below.

KITCHEN (FURNITURE & APPLIANCES) DISTRIBUTION

This business segment distributes kitchen furniture, appliances, sinks and taps to independent kitchen retailers, builders merchants and trade outlets who supply kitchens to the consumer. The key trading entity in this segment is Waterline Limited, established in 1985, with headquarters in Newport Pagnell and trading centres in Bristol, Bolton and Cumbernauld. In addition trading includes Mike Walker Distribution Limited, purchased by the Group in 2002, principally trading in the south west area of England from its trading centre in Clutton, Somerset.  Brian Donaldson Distribution Limited based in Cumbernauld, was purchased in October 2006 and is key in developing contract areas and incremental retail business in Scotland. Finally operating outside the UK, Boston Basins Inc, established in 1982, is an exclusive distributor of Franke sinks and taps in New England, US.

REFRIGERATION

The principal activity of this business segment is the exclusive importation and distribution of Liebherr freestanding, built-in and commercial refrigeration. Coolectric was acquired by the Group in September 2005, with headquarters now in Newport Pagnell.  

KEY PERFORMANCE INDICATORS

The Group focuses on various key financial performance indicators including sales growth, gross margin, net asset value per share and cash flow generation. These are discussed in more detail in the Financial Review 

Additionally the Group also uses various key operational performance indicators, including delivery volume, average daily invoice value per vehicle and average miles per delivery. These are discussed in more detail in the Future Growth and Development section below.

 

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties faced by the Group are those that are typical of a business that operates predominantly in the home improvement and refurbishment sector. These risks and uncertainties are:

• general economic trends within the UK and US economies;

• fire and flood risks for the warehousing facilities as the Group operates from several locations;

• retention and development of the existing customer base;

• maintenance of a stable IT platform and technological infrastructure;

• retention and development of relationships with its suppliers;

• maintenance of a cost efficient and effective distribution platform; and 

• obtaining the most competitive foreign exchange hedge contracts and finance rates through our strong relationships with the Group's principal lenders.

The Board believes that the Group has adequate procedures and processes in place to ensure that these risks are monitored and managed appropriately.

FREEHOLD ACQUISITION

During the final quarter of 2008, the Board negotiated and completed the purchase of Interchange Point, Renny Park Road, Newport Pagnell from the Trustees of the Jenna Pension Fund. Contracts were exchanged and completed on 8 February 2008 enabling the Group to secure the use of this site, adjacent to its own headquarters, for the remainder of its economic use, as opposed to the remaining 13 years of a lease.

As a consequence of this acquisition the Group will be able to reorganise its warehousing and distribution facilities to make the Group more cost efficient in the short term while also allowing the opportunity for expansion when the economic climate improves.

FUTURE GROWTH & DEVELOPMENT

As mentioned in the Chairman's statement, and in light of the deteriorating economic conditions and other factors mentioned, the Group is undertaking a series of cost-cutting measures in all areas in order to ensure its future stability. However, in spite of this, the Group is committed to continued organic growth of both of its key business segments. The Kitchen (Furniture & Appliances) Distribution business offers a 'one stop shop' to those independent kitchen retailers who wish to purchase quality kitchen furniture, appliances, sinks and taps with the service of home delivery, training and marketing support. Further investment continues to be made in order to widen the kitchen furniture offer in both the Group's own brand, Intuition, and a further strengthening of our German kitchen offer. The Group's focus will also continue to be placed upon the mid to high end of the kitchen appliance market with growth expected in our Franke, Bosch, Hotpoint, Rangemaster and NEFF relationships, to name but a few.

The Refrigeration segment has continued to grow since its acquisition in September 2005, with annual average compound growth in the segment of 16.4%. Considerable investment is being made into further developing the Liebherr brand by both the Group and Liebherr AG. In January 2008 the freestanding 60cm appliances were re-engineered by Liebherr AG to ensure that these offered the most up to date energy efficiency ratings. The supply and distribution of these products to the market place will be seen in the first quarter of the Group's results in 2009.  

The Group has also negotiated the exclusive UK rights to import and distribute Viking Appliances, which are manufactured in the USA. As the nature of this business is importation and distribution the financial results will be included within the Refrigeration segment in the future. 

The Group has successfully re-branded its fleet under 'Hydra Logistics' which provides trade and home delivery services for the Group. During the year Hydra has reduced the Group's dependency on sub-contracted distribution providers resulting in an improved level of service to both retail outlets and end consumers. Following the absorption of this work the Group has increased its delivery capacity through the consolidation of deliveries, improved route planning and improved driver management. In 2008 the Group has improved the average daily invoice value per vehicle by 12.2%, while delivery volume was down by 8.0% and the average miles per delivery increased by 2.4%. Based on the actual mix of products sold between kitchen furniture and appliances the average daily invoice value per vehicle is in line with the Board's expectations given the changes in the budgeted costs and reduced delivery volumes.

The Group will continue to focus on reducing the average miles per delivery while maintaining the average daily invoice value per vehicle through the introduction of vehicle tracking and route planning software.

EMPLOYEE, ENVIRONMENTAL AND SOCIAL ISSUES

During 2008 the Group maintained its commitment to managing the health and safety of its employees through an Institution of Occupational Safety and Health (IOSH) training course for the appropriate employees. The Group is constantly developing and improving the workforce's understanding of both its own systems and products through internal training from specialists and external training with its suppliers.

The introduction of the Waste Electrical and Electronic Equipment Directive (WEEE) in 2007 strained relationships with a number of existing customers. Consequently additional costs were encountered within the Group that could not be passed onto existing customers for a period of time. Costs associated with WEEE have increased during the year as the product mix has migrated towards heavier, low value items.

As required by the Restriction of the use of certain Hazardous Substances in Electrical and Electronic Equipment Directive (ROHS) all appropriate products of the Group are ROHS compliant. The procurement function maintains and audits our suppliers' compliance with this directive. 

Michael W Lawrence

Chief Executive Officer

18 September 2008

Financial Review

TRADING PERFORMANCE 

During the year the Group has achieved growth in revenue of 1.5% to £85.0 million (2007: £83.7 million) in a market place that has been both challenging and increasingly more competitive on price. 

Whilst the Group initially expected revenue to grow by approximately 11% during the year, this is still a positive performance given the well documented slowdown in the housing market, rising interest rates, rising raw material prices and escalating fuel charges. The level of revenue growth for the Group, on a quarter by quarter basis, is shown below:

	QTR 1	QTR 2	QTR 3	QTR 4
Annualised growth rate (2008)	5.5%	4.8%	1.3%	(6.5%)

 

These growth figures clearly demonstrate that while the Group had experienced solid growth in revenue in the first and second quarters, the trend slowed in the third quarter and reversed from January 2008 through to the year end at an accelerating rate. The consequences of the negative revenue growth in quarter 4 has had a significant effect on reversing the growth achieved by the Group up to and including quarter 3. In 2007 the overall increase in revenue achieved by the Group had been more consistent across individual quarters.

As a consequence of the increased competition and cost pressures experienced by the Group throughout the second half of 2008 the overall gross profit margin has dropped to 23.5% (2007: 24.8%). On review of the quarter-on-quarter performance of the Group's gross profit margin the period between quarter 1 and quarter 3 generated a consistent margin in line with previous years. However, in quarter 4 the gross margin for the Group declined by 2.7% to the lowest point in the last two years.

The loss before tax for the Group of £45,710 (2007: £906,625 profit) includes a significant number of exceptional costs. The most significant of these costs relates to the movement in the exchange rate for Euros to Sterling. The Group suffered an adverse exchange rate difference of £444,469 (2007: exchange rate loss £4,258) as a consequence of the completion of the exchange rate forward contract and the drop in the exchange rate levels leading up to the renewal of this contract.  This has been marginally offset by the gains made on the Group's financial instruments. The Group suffered legal expenses in connection with the integration of acquisitions and the purchase of a freehold property amounting to £132,437 and a refinement of the stock valuation policy has resulted in an adjustment within Coolectric of £112,986.  The Group also suffered a Health and Safety fine including legal costs of £86,835. During the year the Group's fuel costs increased by 6.3% in comparison with a general fuel increase of 12.9%. This resulted in an unbudgeted fuel cost rise of £68,198, even though operating efficiencies reduced fuel usage by 46,000 litres. The share based payment charge for the year amounted to £52,353 (2007: £75,743).

In conjunction with the reduced profitability of the Group, basic earnings per share show a loss per share of 2.32p (2007: profit 3.32p). The Group Board regrets that it is therefore unable to recommend the payment of a final dividend for the year ended 31 March 2008 due to the current climate of economic uncertainty.

BALANCE SHEET

During the year the Group agreed to acquire the freehold interest at Interchange Point, Renny Park Road, Newport Pagnell from the Trustees of the Jenna Pension Fund for the sum of £4.5 million. This property is situated on the same site as Jenna House, North Crawley Road, Newport Pagnell. The property is positioned on a 2.38 acre site and has warehousing and office space totalling 45,147 square feet. Since the acquisition and subsequent move to these premises of Coolectric in February 2006 the property has been used for their warehousing and office requirements. As both the Group and Coolectric have expanded their operations considerably over the past two years it was felt necessary to secure its future warehousing needs and potential further development opportunities under the Group's 

ownership. As a consequence of the purchase and the change in the economic conditions it will be possible to reduce the reliance on rented property by the Group going into 2009.

The Group agreed to finance the acquisition of the property with a commercial mortgage granted by the Royal Bank of Scotland (RBS). The Group secured a capital repayment mortgage for a 20 year period with an interest rate at 1.25% above the Bank's base rate.

As a result of the £4.5 million freehold acquisition the Group increased the net debt position to £16.1 million (2007: 11.6 million). In turn this has increased the Group's gearing ratio to 228% (2007: 155%).

Cash flow for the Group has continued to be strong with £2.6 million being generated from trading operations (2007: £3.2 million) even against the back drop of a tightening credit market. Whilst there was an increase in interest paid during the year this was more than offset by a decrease in the taxation paid leaving the net cash inflow from operations of £1.3 million (2007: £1.5 million). After the outflow from investing activities predominantly freehold property and the inflow from financing activities the Group's decrease in cash and cash equivalents amounted to £16,079 (2007: £282,226 decrease).

Net assets per share decreased to 53.7p (2007: 55.9p) for the year ended 31 March 2008 as a consequence of the loss for the year.

TREASURY

The Group maintains committed facilities of £13.95 million in order to manage the overall trading operations in addition to the £6.4 million mortgage with RBS. At the year end the Group had maintained a headroom of £4.65 million with respect to these facilities.

The Group holds any surplus cash in deposit accounts which have variable interest rates. If the money market deposits offer better returns, the Treasury Supervisor seeks to ensure that the Group maximises these to generate enhanced returns.

Since the acquisition of Coolectric Limited approximately 15% of the Group's purchases are made in Euros. The Group continues to have a policy of using foreign exchange forward options set between agreed exchange rate bands. This allows the Group to minimise risks arising from the fluctuating exchange rate. The responsibility for hedging is delegated to the Treasury Supervisor who is responsible for reporting directly to the Chief Financial Officer of Waterline Group Plc. Compliance with those policies is regularly monitored by the Board.

Steven J Steel FCCA

Chief Financial Officer

18 September 2008

Consolidated Income Statement for the year ended 31 March 2008

		Year ended	Year ended
		31 March 2008	31 March 2007
		£	£
Revenue		85,001,681	83,738,098
Cost of sales		(65,029,598)	(63,008,189)
Gross profit		19,972,083	20,729,909
Distribution expenses		(7,033,481)	(6,745,311)
Administrative expenses		(12,304,871)	(12,359,145)
Operating profit		633,731	1,625,453
Finance income		202,652	81,244
Finance costs		(882,093)	(800,072)
(Loss)/profit before tax		(45,710)	906,625
Tax expense for the year		(258,009)	(470,814)
(Loss)/profit for the financial period attributable to equity holders of the parent		(303,719)	435,811
Earnings per share	4
- basic (pence per share)		(2.32)	3.32
- diluted (pence per share)		(2.32)	3.28

Consolidated Statement of Changes in Equity for the year ended 31 March 2008

	Year ended	Year ended
	31 March 2008	31 March 2007
	£	£
Opening equity at 1 April	7,328,907	7,295,667
Exchange differences on translation of overseas operations	(18,100)	(140,786)
Valuation (loss)/gain on Available for Sale Investments	(21,780)	23,100
Net loss recognised directly in equity	(39,880)	(117,686)
(Loss)/profit for the period	(303,719)	435,811
Total recognised income and expense for the period	(343,599)	318,125
Share-based payments - credit to equity	52,353	75,743
Dividends	-	(360,628)
Closing equity at 31 March	7,037,661	7,328,907

Consolidated Balance Sheet at 31 March 2008

		31 March 2008	31 March 2007
		£	£
ASSETS
Non-current assets
Property, plant and equipment		11,345,077	6,558,293
Goodwill		1,324,727	1,324,727
Other intangible assets		182,262	240,104
Deferred tax asset		78,050	113,837
Financial assets - available for sale investments		16,345	38,930
		12,946,461	8,275,891
Current assets
Inventories		10,300,212	10,526,199
Trade and other receivables		12,446,146	12,910,498
Current tax assets		85,111	28,428
Other financial assets		161,495	-
Cash and cash equivalents		239,105	368,903
Assets held for sale		-	180,753
		23,232,069	24,014,781
Total assets		36,178,530	32,290,672
LIABILITIES
Current liabilities
Short-term borrowings		(10,105,948)	(9,924,983)
Other financial liabilities		-	(32,313)
Trade and other payables		(12,310,557)	(12,684,567)
Current tax liabilities		(72,765)	(243,865)
		(22,489,270)	(22,885,728)
Non-current liabilities
Long-term borrowings		(6,346,422)	(1,798,737)
Deferred tax liabilities		(146,259)	(132,207)
Provisions		(158,918)	(145,093)
		(6,651,599)	(2,076,037)
Total liabilities		(29,140,869)	(24,961,765)
Net assets		7,037,661	7,328,907
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE GROUP
Share capital		65,568	65,568
Share premium account		1,796,052	1,796,052
Other reserves		215,486	203,013
Retained earnings		4,960,555	5,264,274
Total equity		7,037,661	7,328,907

Consolidated Cash Flow Statement for the year ended 31 March 2008

		Year ended	Year ended
	Notes	31 March 2008	31 March 2007
		£	£
Cash flow from operating activities
Cash generated from operations	7	2,630,701	3,159,027
Interest received		8,844	11,178
Interest paid		(882,093)	(761,701)
Taxation paid		(436,756)	(902,256)
Net cash inflow from operating activities		1,320,696	1,506,248
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		379,815	165,577
Purchase of property, plant and equipment		(5,324,320)	(515,177)
Purchase of subsidiary net of cash acquired		-	(272,060)
Net cash outflow from investing activities		(4,944,505)	(621,660)
Cash flows from financing activities
Dividends paid		-	(360,628)
Repayment of bank borrowings		(2,209,355)	(225,710)
Finance lease principal repayments		(582,915)	(580,476)
Proceeds from bank borrowings		6,400,000	-
Net cash inflow/(outflow) from financing activities		3,607,730	(1,166,814)
Net decrease in cash and cash equivalents		(16,079)	(282,226)
Cash and cash equivalents at beginning of period		(1,347,927)	(1,065,701)
Cash and cash equivalents at end of period	7	(1,364,006)	(1,347,927)

Notes forming part of the financial statement for the year ended 31 March 2008

1. ACCOUNTING POLICIES FOR THE CONSOLIDATED ACCOUNTS 

 

Significant accounting policies

Waterline Group Plc (the 'Company') is a company incorporated in England and Wales. The consolidated financial statements of the Company for the year ended 31 March 2008 comprise the Company and its subsidiaries (together referred to as the 'Group').

Statement of compliance

The Preliminary Announcement has been prepared in accordance with International Financial Reporting Standards (IFRS's and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ('EU adopted IFRS') and with those parts of the Companies Act 1985 applicable to companies preparing their accounts in accordance with IFRS.  

This is the first time the company has prepared its financial statements in accordance with IFRS's, having previously prepared its financial statements in accordance with UK GAAP accounting standards. Details of how the transition from UK accounting standards to EU adopted IFRS has affected the Group's reported financial position, financial performance is given in note 2.

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. 

  

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented and in preparing an opening IFRS balance sheet at 1 April 2006 for the purposes of the transition to IFRS, unless otherwise stated.

Changes in accounting policies 

 

Prior to the adoption of IFRS the financial statements of the Group had been prepared in accordance with United Kingdom Accounting Standards ('UK GAAP'). UK GAAP differs in certain respects from IFRS and certain accounting, valuation and consolidation methods have been amended, when preparing these financial statements, to comply with IFRS. The comparative figures in respect of 2007 have been restated to reflect these changes.

First-time adoption

In preparing these financial statements, the Group has elected to apply the following transitional arrangements permitted by IFRS 1 'First-time Adoption of International Financial Reporting Standards':

• Business combinations effected before 1 April 2006, including those that were accounted for using the merger method of accounting under UK accounting standards have not been restated.

• The carrying amount of capitalised goodwill at 31 March 2006 that arose on business combinations accounted for using the acquisition method under UK GAAP was frozen at this amount and tested for impairment at 1 April 2006. The carrying amount was adjusted for intangible assets that would have been required to be recognised in the acquiree's separate financial statements in accordance with IAS 38 'Intangible Assets', such as development costs.

• The revalued amount of the freehold property has been treated as its deemed cost on transition to IFRS.

• Only those exchange differences arising on the retranslation of foreign operations since 1 April 2006 have been recognised as a separate component of equity.

Future accounting policies

Certain new standards and interpretations to existing standards have been published that will be mandatory in future accounting periods and relevant for the Group, but which the Group has decided not to adopt early.

IFRS 8 'Operating Segments' will be mandatory for the Group's 2010 year end results and will require the Group to provide information about its operating segments, its products, major customers and geographical area of operation, but as this is a disclosure standard it will not change the Group's result or net assets.

IAS 1 'Presentation of Financial Statements' is still to be endorsed by the EU but is also expected to be applicable for the Group's 2010 year end, and this will require significant changes to the presentation of the primary financial statements but will not change the Group's result. 

The Revised IFRS 3 'Business Combinations' and complementary Amendments to IAS 27 'Consolidated and separate financial statements' are still to be endorsed by the EU but are expected to be applicable for the Group's 2011 year end. These standards will result in very significant changes to the accounting for future business combinations, but no restatement of existing business combinations is required.

Amendment to IFRS 2 'Share-based payments: vesting conditions is still to be endorsed by the EU but is expected to be applicable for the Group's 2010 year end. The Amendment relates to employee share savings schemes and will result in an immediate acceleration of the IFRS 2 expense that would otherwise have been recognised in future periods should an employee decide to stop contributing to the savings plan, as well as a potential revision to the fair value of the awards granted to factor in the probability of employees withdrawing from such a plan. Management is currently assessing the impact of the Amendment on the accounts.

IAS 23 'Borrowing Costs (revised)' is also still to be endorsed by the EU but is expected to be applicable for the Group's 2010 year end. The main impact of the revision is that borrowing costs incurred on a qualifying asset during the period of its construction or preparation ready for use are required to be capitalised.

Improvements to IFRS (effective for accounting periods beginning on or after 1 July 2009) 

This improvements project is still to be endorsed by the EU. The amendments take various forms, including the clarification of the requirements of IFRS and the elimination of inconsistencies between Standards. Management is currently assessing the impact of the Amendment on the accounts.

The Group does not consider that any other standards or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements.

Basis of consolidation

The consolidated financial statements incorporate the accounts of Waterline Group Plc and its subsidiary undertakings. 

Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ('the Group') as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

Business combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method other than disclosed above (see 'first-time adoption'). In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the 'functional currency') are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the 'foreign exchange reserve'). 

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal.

Segmental reporting

A business segment is a distinguishable Group of assets and operations, reflected in the way that the Group manages its business, that are subject to risks and returns that are different from those of other business segments. The Group has identified the following  segments:

The primary segments in which the Group operates are Kitchen (Furniture & Appliance) Distribution (KFAD) and Refrigeration.  The principal activity of the KFAD segment continues to be that of the supply of kitchen equipment, appliances, sinks and taps and other related products predominantly to the independent kitchen specialist through out the UK and Boston in the US . The principal activity of the Refrigeration segment continues to be that of wholesaling of refrigeration and white electrical goods to distributors and retail outlets through out the UK.

The secondary segments identified reflect the geographic territories in which the Group operates namely the United Kingdom and the United States of America. These different geographical territories are subject to differing economic trends and consequently have different risk and reward profiles associated with them.

Revenue

Revenue is the amount receivable for the provision of goods and/or services from the ordinary activities of the Group. The Group excludes intra Group sales, trade and early settlement discounts, value added tax and other similar sales taxes.

Revenue from the provision of goods and/or services is recognised when the risks and rewards of ownership of goods have been transferred to the customer. The risks and rewards of ownership of goods are deemed to have been transferred on delivery.

         

Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income statement. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the income statement.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within the administrative expenses line in the income statement.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

        Intangible asset                           Useful economic life                Valuation method

        

        Franchise fee                                 Indefinite                                   Recoverable amount

        Non-contractual supplier            10 years                                     Estimated discounted

        relationship                                                                                      cash flow

        Order book                                    1 year                                        Multiple of estimated

                                                                                                                   revenues and profits

        Contractual relationships           Term of contract                     Estimated discounted

                                                                                                                  cash flow

Impairment of non-financial assets

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually as at 31 March. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (ie the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (ie the lowest Group of assets in which the asset belongs for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Impairment charges are included in the administrative expenses line item in the income statement, except to the extent they reverse gains previously recognised in the statement of recognised income and expense.

Financial Instruments

Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired.  The Group has not classified any of its financial assets as held to maturity.  The Group's accounting policy for each category is as follows:

Fair value through profit or loss:  This category comprises only in-the-money foreign currency and interest rate derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the income statement.  Other than these derivative contracts, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.  The fair value of these derivatives is based on counterparty valuation.

Loans and receivables:  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus directly attributable acquisition costs and are subsequently carried at amortised cost less any provision for impairment.  Impairment provisions are recognised when there is objective evidence that the Group will be unable to collect all the amounts due under the terms receivable.

Available-for-sale:  Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise the Group's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognised directly in equity. Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset which constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the income statement. Fair value is based on the listed market price of the security.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with a term of less than 3 months. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the statement of cash flows.

Financial liabilities

The Group classifies financial liabilities and equity according to the substance of the financial instrument's contractual obligations and depending on the purpose for which the instrument was entered into, rather than the financial instrument's legal form. The Group's accounting policy for each category is as follows:

Fair value through profit or loss:  This category comprises only out-of-the-money derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the income statement.

Other financial liabilities:  Other financial liabilities include the following items:

• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost.

• Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet. 'Interest expense' in this context includes initial transaction costs and premia payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

The Group uses derivative financial instruments in economic hedges of currency and interest rate risk, but does not hedge account for these transactions, nor does it invest in or issue derivative instruments for speculative purposes.

Share Capital: Financial instruments issued by the Company are treated as equity only to the extent they do not meet the definition of a financial liability. The Company's ordinary shares are classified as equity instruments.

Invoice discounting 

The amounts borrowed under the invoice discounting arrangements are shown within short term borrowings. The related costs are included within finance costs.  The Group bears the risk of non payment by the debtor and accordingly the associated trade receivables are shown within trade receivables.  

Retirement benefits: Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the income statement in the year to which they relate.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.

Taxation

Income taxes 

The charge for current taxation is based on the results for the year as adjusted for items which are non - assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs to its tax base, except for differences arising on:

• the initial recognition of goodwill;

• goodwill for which amortisation is not tax deductible; and

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable group company; or

• different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Dividends

Equity dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when they are paid. In the case of final dividends, this is when approved by the shareholders at the AGM.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Previously revalued freehold land and buildings are carried at deemed cost. All other items of property, plant and equipment are carried at depreciated cost.

Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates:

        Freehold buildings       -    2% per annum straight line

        Leasehold land             -    evenly over the length of the lease

        Leasehold buildings    -    evenly over the length of the lease

        Plant and machinery    -    15%-25% per annum straight line

        Fixtures and fittings    -    20% per annum straight line

        Computer equipment    -    33% per annum straight line

        Motor vehicles    -    25% per annum reducing balance or 33% per annum straight line

       

Software and web-site costs are included within intangible assets and are amortised over four years on a straight line basis.

Leased assets

Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a 'finance lease'), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the income statement over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an 'operating lease'), the total rentals payable under the lease are charged to the income statement on a straight-line basis over the lease term.

The land and buildings elements of property leases are considered separately for the purposes of lease classification.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Trade and other receivables

Trade and other receivables are stated at their cost less provision for amounts not recoverable.

Non-current assets held for sale 

Non-current assets are classified as held for sale when:

• they are available for immediate sale;

• management is committed to a plan to sell;

• it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

• an active programme to locate a buyer has been initiated;

• the asset is being marketed at a reasonable price in relation to its fair value; and

• a sale is expected to complete within 12 months from the date of classification.

Non-current assets classified as held for sale are measured at the lower of:

• their carrying amount immediately prior to being classified as held for sale in accordance with the Group's accounting policy; and

• fair value less costs to sell.

Following their classification as held for sale, non-current assets are not depreciated.

Provisions

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation as a result of a past event and it is probable that some payment will be required to settle the obligation. If significant provisions are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.

A provision for warranties is recognised when the products are sold and is based on historical warranty data.

Critical accounting judgments and key sources of estimation and uncertainty

In the process of applying the Group's accounting policies as described above, management has made the following judgments and estimations that have the most significant effect on the amounts recognised in the financial statements.

a) Impairment of goodwill

The Group determines whether goodwill is impaired on an annual basis. This requires an estimate of the value in use of the assets to which the goodwill is ascribed to. This requires the Group to make an estimate of the future cash flows from those assets using a suitable discount rate to calculate the present value of those cash flows.

b) Intangible assets

Intangible assets acquired by the Group on the acquisition of BDD Limited have required estimates to be made of the future cash flows, using a suitable discount rate to calculate the present value of those cash flows.

Critical accounting judgments and key sources of estimation and uncertainty (Cont'd)

c) Useful lives of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives.

Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated income statement in specific periods.

d) Warranty provisions

As part of the trading agreement with its suppliers the Refrigeration segment of the Group is responsible for undertaking any repair work required on units sold that default or fail within a two year warranty period. The supplier provides support for units purchased by the Group, payable in the month purchased, which is intended to cover the costs (and no more) of repairs should their product default or fail. All repair costs and revenue are charged/credited to the profit and loss account in the period they occur. The Group then makes an additional provision for warranty costs based on the number of units sold within 12 months and 24 months and their associated failure rates.  

The Group does not sell any additional extended warranties with respect to its unit sales and so does not derive a separate income stream that should be treated as deferred income. 

e) Inventory provisions

The Group constantly reviews on a month by month basis the market value and the demand for its inventories and ensures that inventory is stated at the lower of cost and net realisable value. As part of this review the Group has to make judgements as to the future demand for products and compare this with its current inventory levels.

 

2.  FIRST TIME ADOPTION OF IFRS

The 2008 accounts are the Group's first consolidated financial statements prepared under IFRS. Under IFRS1 the accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended 31 March 2008, the comparative information for the year ended 31 March 2007 and the opening balance sheet on 1 April 2006 (the Group's date of transition).

The adoption of IFRS does not alter or affect the Group's overall strategy or commercial decision making processes. However in preparing the opening balance sheet for 1 April 2006 and the income statement and consolidated balance sheets for the year ended 31 March 2007 adjustments have been made to previously reported financial statements prepared under UKGAAP.

Impact of IFRS on opening balance sheet (1 April 2006) 

• Intangible assets under IAS 38 result in computer software and web-site costs being classified as an intangible asset. The effect is to transfer the net book value from computer equipment. At 1 April 2006 this amounted to £48,346;

• Derivative financial instruments under IAS 32 result in foreign exchange contracts and interest rate swaps being recognised at fair value as either a financial asset or financial liability respectively. The effect is to introduce a financial asset at 1 April 2006 with a value of £10,962 and a financial liability with a value of £74,970; 

• Deferred tax under IAS 12 ensures that the provision for the current and deferred tax consequences of each transaction is recorded. At 1 April 2006 the effect is to increase the deferred tax asset by £3,256 and increase the deferred tax liability by £56,798; and

• The revaluation reserve has been transferred to retained earnings.

Reconciliation of equity at 1 April 2006 (date of transition to IFRS)

ASSETS		UK GAAP	Transitional impacts	IFRS
		£	£	£
Non-current assets
Property, plant and equipment		6,955,359	(48,346)	6,907,013
Goodwill		1,103,894	-	1,103,894
Other intangible assets		53,625	48,346	101,971
Deferred tax asset		35,877	3,256	39,133
Financial assets - available for sale		18,707	-	18,707
		8,167,462	3,256	8,170,718
Current assets
Stocks		9,541,907	-	9,541,907
Trade and other receivables		13,210,387	-	13,210,387
Other financial assets		-	10,962	10,962
Cash and cash equivalents		405,637	-	405,637
		23,157,931	10,962	23,168,893
Total assets		31,325,393	14,218	31,339,611
LIABILITIES
Current liabilities
Short-term borrowings		(8,061,291)	-	(8,061,291)
Other financial liabilities		-	(74,970)	(74,970)
Trade and other payables		(12,629,706)	-	(12,629,706)
Income tax liabilities		(558,962)	-	(558,962)
Provisions		-	-	-
		(21,249,959)	(74,970)	(21,324,929)
Non-current liabilities
Long-term borrowings		(1,742,751)	-	(1,742,751)
Other payables		(670,955)	-	(670,955)
Deferred tax liabilities		(120,192)	(56,798)	(176,990)
Provisions		(128,319)	-	(128,319)
		(2,662,217)	(56,798)	(2,719,015)
Total liabilities		(23,912,176)	(131,768)	(24,043,944)
Net assets		7,413,217	(117,550)	7,295,667
EQUITY
Share capital		65,568	-	65,568
Share premium		1,796,052	-	1,796,052
Share based payment reserve		183,774	-	183,774
Revaluation reserve		495,926	(495,926)	-
Other reserves		61,182	-	61,182
Retained earnings		4,810,715	378,376	5,189,091
Total equity		7,413,217	(117,550)	7,295,667

Impact of IFRS on income statement for year ending 31 March 2007 

• Deferred tax under IAS 12 ensures that the provision for the current and deferred tax consequences of each transaction is recorded. Detail of the effect on the income statement for the period ended 31 March 2007 is shown below;

• Goodwill impairment review under IAS 36 ensures that assets should not be held at more than the amount can be recovered through their use or recoverable amount. The movement in this financial asset at 31 March 2007 is reversing the amortisation charged under UK GAAP which is no longer recognised and amounted to £75,781;

• Derivative financial instruments under IAS 32 results in the Group undertaking a fair value exercise in relation to foreign exchange contracts and interest rate swap contracts held at the year end. The movement in this financial asset at 31 March 2007 being recognised in the income statement amounted to £22,186; and

• Business combination under IAS 27 requires the Group to incorporate the operations of an acquired business. The fair value exercise in relation to the acquisition of Brian Donaldson Distribution Limited resulted in an write off adjustment of £57,300. 

Reconciliation of profit under UK GAAP to profit under IFRS at 31 March 2007

		£
Profit under UK GAAP		333,040
IFRS Adjustments:
Deferred taxation - share based payments		11,104
Deferred taxation - property revaluation		51,000
Amortised goodwill reversed		75,781
Financial instrument fair value adjustments		22,186
Business combinations		(57,300)
Profit under IFRS		435,811

Impact of IFRS on balance sheet at 31 March 2007 

• Business combination under IAS 27 resulted in a fair value write off adjustment of (£57,300). 

• Goodwill impairment review under IAS 36 reverses the amortisation charged under UK GAAP which is no longer recognised and amounted to £75,781;

• Intangible assets under IAS 38 results in computer software and web site costs being reclassified as an intangible asset and amounted to £94,397;

• Non current assets held for resale under IFRS 5 requires the Group to reclassify assets of this nature whose carrying amount is to be recovered primarily through sale and not continuing use. This exercise resulted in a reclassification of £180,753; 

• Derivative financial instruments under IAS 32 results in financial liability with a value of (£22,620); 

• Deferred tax under IAS 12 results in an adjustment in the deferred tax asset of £79,645. Deferred tax on revaluation of property under IAS 12 results in an adjustment in the deferred tax liability of (£25,000).

Reconciliation of equity at 31 March 2007

ASSETS		UK GAAP	Transitional impacts	IFRS
		£	£	£
Non-current assets
Property, plant and equipment		6,833,443	(275,150)	6,558,293
Goodwill		1,436,631	(111,904)	1,324,727
Other intangible assets		52,707	187,397	240,104
Deferred tax asset		34,192	79,645	113,837
Financial assets		38,930	-	38,930
		8,395,903	(120,012)	8,275,891
Current assets
Stocks		10,526,199	-	10,526,199
Trade and other receivables		12,910,498	-	12,910,498
Income tax asset		28,428		28,428
Cash and cash equivalents		368,903	-	368,903
Assets held for sale		-	180,753	180,753
		23,834,028	180,753	24,014,781
Total assets		32,229,931	60,741	32,290,672
LIABILITIES
Current liabilities
Short-term borrowings		(9,924,983)	-	(9,924,983)
Other financial liabilities		-	(32,313)	(32,313)
Trade and other payables		(12,684,567)	-	(12,684,567)
Income tax liabilities		(243,865)	-	(243,865)
		(22,853,415)	(32,313)	(22,885,728)
Non-current liabilities
Long-term borrowings		(1,798,737)	-	(1,798,737)
Deferred tax liabilities		(89,000)	(43,207)	(132,207)
Provisions		(145,093)	-	(145,093)
		(2,032,830)	(43,207)	(2,076,037)
Total liabilities		(24,886,245)	(75,520)	(24,961,765)
Net assets		7,343,686	(14,779)	7,328,907
EQUITY
Share capital		65,568	-	65,568
Share premium		1,796,052	-	1,796,052
Foreign currency reserve		-	(140,786)	(140,786)
Share based payment reserve		259,517	-	259,517
Revaluation reserve		509,213	(509,213)	-
Other reserves		84,282	-	84,282
Retained earnings		4,629,054	635,220	5,264,274
Total equity		7,343,686	(14,779)	7,328,907

The adoption of IFRS has no impact on the cash flows derived from the business or the timing of the Group's tax liabilities.

3. SEGMENTAL ANALYSIS

The primary segments in which the Group operates are Kitchen (Furniture & Appliance) Distribution (KFAD) and Refrigeration.  The principal activity of the KFAD segment continues to be that of the supply of kitchen equipment, appliances, sinks and taps and other related products predominantly to the independent kitchen specialist through out the UK and Boston in the US . The principal activity of the Refrigeration segment continues to be that of wholesaling of refrigeration and white electrical goods to distributors and retail outlets through out the UK.

        

2008	Revenue £	Depreciation and amortisation £	Operating (loss)/profit £	(Loss)/profit after tax £
Refrigeration	12,837,711	144,475	(164,252)	(205,252)
Kitchen (Furniture & Appliances) Distribution	73,198,740	919,872	1,008,569	111,859
Total segments	86,036,451	1,064,347	844,317	(93,393)
Less inter-segment  revenue	(1,034,770)	-	-	-
Central / unallocated items	-	-	(210,586)	(210,326)
Group total	85,001,681	1,064,347	633,731	(303,719)

            

2008	Capital expenditure £	Segment assets £	Segment liabilities £
Refrigeration	66,181	4,862,483	(4,102,409)
Kitchen (Furniture and Appliances) Distribution	6,074,002	32,368,948	(26,091,361)
Total segments	6,140,183	37,231,431	(30,193,770)
Less inter-segment balances	(26,370)	(1,052,901)	1,052,901
Group total	6,113,813	36,178,530	(29,140,869)

2007	Revenue £	Depreciation and Amortisation £	Operating (loss)/profit £	(Loss)/profit after tax £
Refrigeration	10,941,895	106,426	19,409	(27,911)
Kitchen (Furniture and Appliances) Distribution	73,648,562	858,860	1,711,003	568,444
Total segments	84,590,457	965,286	1,730,412	540,533
Less inter-segment revenue	(852,359)	-	-	-
Central / unallocated items	-	-	(104,959)	(104,722)
Group total	83,738,098	965,286	1,625,453	435,811

                    

2007	Capital Expenditure £	Segment assets £	Segment liabilities £
Refrigeration	164,809	4,754,941	(3,789,614)
Kitchen (Furniture and Appliances) Distribution	897,501	28,435,456	(22,071,876)
Total segments	1,062,310	33,190,397	(25,861,490)
Less inter-segment balances	(19,940)	(899,725)	899,725
Group total	1,042,370	32,290,672	(24,961,765)

The Group manages its business segments on a global basis. The operations are based in two main geographical areas. The UK is the home country of the parent. The main operations in the principal territories are as follows:

GEOGRAPHICAL ANALYSIS	2008 £	2007 £
Sales of goods
United Kingdom	80,312,546	78,530,837
United States of America	4,689,135	5,207,261
	85,001,681	83,738,098
Capital Expenditure
United Kingdom	6,065,751	969,836
United States of America	48,062	72,534
	6,113,813	1,042,370
Segment assets
United Kingdom	34,528,944	30,236,122
United States of America	1,649,586	2,054,550
	36,178,530	32,290,672

4. EARNINGS PER SHARE

The calculations of earnings per share are based on the following profits and numbers of shares:

    

Based on (loss)/profit for the year	2008 £	2007 £	2008 £	2007 £
	Basic	Basic	Diluted	Diluted
(Loss)/profit for the financial year	(303,719)	435,811	(303,719)	435,811

The basic profit for the year does not require adjustment as there are no share options that would result in arriving at diluted earnings. The effect of the employee share options in the current year is anti-dilutive and therefore they have been disregarded when arriving at the diluted earnings per share.

Weighted average number of shares			2008	2007
			Number	Number
For basic earnings per share			13,113,752	13,113,752
Dilutive shares in respect of options			81,559	181,094
For diluted earnings per share			13,195,311	13,294,846

Certain employee options have been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted average share price during the year (i.e. they are out of the money) and therefore it would not be advantageous for the holders to exercise those options. 

5. DIVIDENDS

	2008 £	2007 £
Paid:
Final dividend in respect of prior period (2.75p per share in respect of 2006)	Nil	360,628

6. RELATED PARTY TRANSACTIONS

The Company agreed, subject to contract, to acquire the freehold interest at Interchange Point, Renny Park Road, Newport Pagnell, MK16 9TG from the Trustees of the Jenna Pension Fund for the sum of £4,500,000. The sole beneficiary of the Jenna Pension Fund is Michael Lawrence. The contracts for the acquisition were exchanged and completed on the 8 February 2008. The property is currently leased to the Group's subsidiary, Coolectric Limited, and is adjacent to Jenna House whose freehold is already owned by the Group.

During the year tangible fixed assets with a net book value of £180,753 were acquired by Michael Lawrence at no profit or loss. These related to the assets held for resale.

Included in other debtors are the following balances with directors:

	Amount outstanding at the year end		Maximum in year
	2008	2007	2008	2007
	£	£	£	£
M W Lawrence	68,774	-	79,760	-

The directors loan is non-interest bearing and is repayable on demand.

Remuneration in respect of directors and key management personnel amounted to £1,037,119 (2007 £1,171,619).

7. NOTES TO THE CASH FLOW STATEMENT

Reconciliation of (loss)/profit before tax to net cash generated from operations
	2008	2007
	£	£
(Loss)/profit before tax	(45,710)	906,625
Depreciation	979,717	886,455
Amortisation	84,630	78,831
Loss on sale of fixed assets	50,169	63,108
Finance income	(202,652)	(81,244)
Finance costs	882,093	800,072
Currency translation differences	(13,203)	(117,911)
Decrease/(increase) in inventory	225,987	(775,694)
Decrease in receivables	464,352	606,272
Increase in payables	152,965	716,770
	2,578,348	3,083,284
Share based payment charges	52,353	75,743
Net cash generated from operations	2,630,701	3,159,027
Cash and cash equivalents comprise:
Cash at bank and in hand	239,105	368,903
Overdrafts	(1,603,111)	(1,716,830)
	(1,364,006)	(1,347,927)

                

8. STATUTORY ACCOUNTS

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s. 237(2) or (3) Companies Act 1985.

9. REPORT AND ACCOUNTS

The Report and Accounts for the year to 31 March 2008 will be posted to shareholders in the near future.

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