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Robotic Technology Systems PLC

Preliminary results for the year ended 31 December 2008

RTS is a high technology business supplying products and integrated systems to automate scientific and industrial processes.  RTS today announces its preliminary results for the year ended 31 December 2008.

	2008 H1 £M	2008 H2 £M	2008 TOTAL £M	2007 TOTAL £M
Revenue	4.6	5.9	10.5	11.2
Operating (loss)/profit before 'exceptional' items	(1.1)	0.4	(0.7)*	(2.0)
'Exceptional' costs	(1.0)	(4.6)	(5.6)**	(2.8)
Net finance income	0.3	1.2	1.5*	0.7
Loss before taxation	(1.8)	(3.0)	(4.8)	(4.1)
Loss after taxation	(1.8)	(2.7)	(4.5)	(3.9)
Loss per share	(2.90)p	(4.30)p	(7.20)p	(6.24)p
Net cash	2.9	2.8	2.8	3.7

* see notes 3 & 5 for the exchange movement effect 

** See note 4 to the financial statements

KEY POINTS

• Against the current background of unprecedented financial and economic turmoil Group operating performance showed an improvement in the second half of the year, with an operating profit before 'exceptionals' of £0.4m. This reduced the full year loss to £0.7m (2007: loss of £2.0m).

• The balance sheet remains strong with closing cash position of £2.8m (2007: £3.7m), after the payment of a final dividend of £1.2m in June 2008. 

• The cash position at 29 March 2009 was £3.8m.

• The overall Group order book increased to £6.5m, a 45% increase on the mid year amount, with 85% of the value expected to be earned out in 2009.

• The Life Science business successfully launched four new products in 2008, expected to lead to sales growth in 2009.

  Chris Brown, Chairman of RTS, said:

'With a strong opening order book, and a more competitive position from the weaker pound we expect the Life Science business to continue its improved performance in 2009.

Flexible Systems enters 2009 with a reduced cost base and a more focused strategy and despite weaker market conditions we remain confident in the medium term outlook for the business. 

We anticipate the group's strong net cash position will continue in 2009, due to the improving performance of the operating businesses. The directors do not recommend the payment of a final dividend, but it continues to be the Board's intention to return surplus cash to shareholders, whilst retaining sufficient money in the business to take advantage of opportunities to enhance shareholder value.'

 

31 March 2009

  Enquiries:

Robotic Technology Systems PLC	Tel: 0161 777 2000
Chris Brown, Chairman
Jon Sharrock, Finance Director
College Hill	Tel: 020 7457 2020
Jamie Ramsay
Collins Stewart Europe Limited	Tel: 020 7523 8350
Stewart Wallace, Owen Price

Chairman's statement

Introduction

We continue to make the necessary changes to the group with a focus on cost reduction and developing our capabilities to fit with the markets we serve.

Consistent with its stated strategy it remains the Board's intention to continue to return surplus cash to shareholders, whilst maintaining sufficient cash within the Group to take advantage of opportunities to enhance shareholder value. 

Business Results

The overall group turnover for the second half of the year increased to £5.9m (H2 2007: £5.8m). This left the full year sales 6% lower at £10.5m (Full year 2007: £11.2m).

The underlying Group operating performance correspondingly improved in the second half of the year to an operating profit (before 'exceptional' items) of £0.4m (2007: loss of £0.7m). The operating profit including exchange gains of £0.6m led to a reduced operating loss for the year of £0.7m (2007: loss of £2.0m).

Despite an improving operating performance and a positive exchange movement due to the strengthening of the dollar, the exceptional costs noted below led to an overall Group loss after taxation for the year of £4.5m (2007: loss £3.9m), and a resulting loss per share of 7.20 pence (2007: loss per share of 6.24 pence).

RTS Life Science

Life Science, as anticipated, experienced stronger volumes in the second half of the year, resulting in full year sales down only £0.5m at £6.9m (2007: £7.4m). The higher sales in the second half of the year led to an improved operating profit before 'exceptional' items and exchange gains of £0.3m and consequently reduced the loss for the year to £0.2m (2007: loss of £0.8m). The loss includes £0.3m of development costs (2007: £0.3m costs) and does not reflect the full year effect of the £0.3m of estimated annualised savings made in the last quarter of the year. 

The business increased its order book in the period to £5.9m (2007: £3.5m), and with the new products launched in 2008, and a more competitive position due to the weakened value of sterling, we are expecting an improved performance in 2009. 

RTS Flexible Systems

In a weakening market Flexible Systems sales fell to £3.5m (2007: £3.8m). This reduced volume together with cost overruns to complete a major end-of-line bread packing system, highlighted in the interim statement, led to an operating loss before 'exceptionals' of £0.7m (2007: loss of £0.6m)  

Despite a lower opening order book of £0.6m (2007: £1.5m), the business enters 2009 with an increased level of enquiries, notably in the food sector, and therefore with the reductions in its cost base carried out in the last quarter of the year, we are expecting the business to show an improved performance in 2009.

 

'Exceptional' Items

The Group recorded 'exceptional' operating costs in the year of £5.6m as explained in note 4 to the financial statements.

Cash management and the realisation of non-operating assets

Further progress in the realisation of the Doerfer loan notes in the period led to cash inflow of $2.3m (£1.2m) from capital and interest payments, although this was predominantly received in the first half of the year. 

The overall net cash balance reduced to £2.8m (2007: £3.7m), following the payment of the special final dividend of £1.2m and cash used in operations of £1.7m, which includes £0.9m of legal payments relating to the dispute in Flexible Systems. These outflows were partially offset by the loan note repayments noted above and the proceeds from the sale of the final parcel of US land for £0.4m.

Outlook

With a strong opening order book, and a more competitive position from the weaker pound we expect the Life Science business to continue its improved performance in 2009.

Flexible Systems enters 2009 with a reduced cost base and a more focused strategy, and despite weaker market conditions we remain confident in the medium term outlook for the business. 

We anticipate that the group's strong net cash position will continue in 2009, due to the improving performance of the operating businesses. The directors are not recommending the payment of a final dividend, but it continues to be the Board's intention to return surplus cash to shareholders, whilst retaining sufficient money in the business to take advantage of opportunities to enhance shareholder value.

Chris Brown

Chairman

31 March 2009

RTS is structured into two market-focused businesses which are based in the UK and support their customers wherever they operate internationally. 

RTS Life Science

Performance in 2008

We continued our successful realignment of the business during 2008 with orders up on the previous year resulting in an improved year end order book of £5.9m (2007: £3.5m). 

Despite a low order intake in the first half of the year, a much improved second half resulted in full year turnover of £6.9m (2007: £7.4m), and an operating loss before exceptional costs and exchange movements of £0.2m (2007: loss of £0.8m). The loss includes £0.3m of development costs. 

We made good progress with our product development plans in both sample management and sample preparation applications, launching four new products in the year. These products combined with our systems integration and automation expertise widen our available markets. In 2009 we intend to exploit this by expanding our sales coverage in key territories. 

With improved operational performance and strong customer relationships we continued to generate increased sales from our existing pharmaceutical client base. This achievement is testament to our highly skilled and loyal staff who have played a major part in the improvements that have been made in our core business.

Markets and technologies

Our key customers, large pharmaceutical companies, are under significant pressure to reduce costs and develop alternative methods of bringing new drugs to market. We continue to work closely with them to ensure that the investments that they have made in large scale automation are developed in line with changes in demand. This provides recurring revenue and serves as a foundation to our business.

Our storage product range is targeted at the pharmaceutical, biotechnology and academic market sectors in Europe and the USA. We are optimistic that with more favourable pricing based on improving currency exchange rates for export markets, an increasing installed base and an expanding number of excellent reference sites, we are now better positioned to increase our share of the automated storage market.

The market for biobanking continues to grow with an increasing number of countries opting to sponsor initiatives for the collection, storage and data management of biological specimens for scientific and clinical research.

Our success with the worlds largest such initiative, the UK Biobank, helped our entry into this new and growing market. We completed the development of our new blood fractionation instrument, the ABF500, and launched it at two biobanking events in Europe and the US. We successfully completed and delivered the first production unit of the ABF500 to a prestigious client based in North America. Dedicated sales effort was targeted at this sector in 2008 to lay the foundations for new business as several biobanking projects around the World get underway. We anticipate further orders from leading Biobanks during 2009.

The Drug Delivery Automation business successfully delivered and commissioned the first units in its new 'Walkaway Specialist' inhaler testing system range in the year. In 2009 we intend to grow market share of the product through a series of sales and marketing initiatives.  

Investment in the development of the new tablet testing product range continued in 2008. This resulted in prototype sales and several technology evaluations of the 'benchtop' solution to a number of leading pharmaceutical organisations. We are entering an established market in which our solution has demonstrated indisputable benefit for the initial customers for these prototype systems. We therefore believe the product has substantial growth potential. In 2009, further market penetration and the development of sales channels are our key objectives. 

Outlook

Our focus will continue to be on sample management and sample preparation applications in the Life Science sector. Sales and marketing of our range of new products that have seen initial sales will be central to our strategy. We continue to assess corporate development opportunities that would assist in the long term development of the business.

Despite the difficult global economic environment we are entering 2009 with a sizeable order book and with favourable signs of the market acceptance of several new product offerings. We expect new product sales to have a positive impact on the performance of the business in the 2009 financial year.

Gary Walsh

Managing Director

31 March 2009

 

RTS Flexible Systems

Performance in 2008

RTS Flexible Systems had a difficult year in 2008, marked by a strong prospect list that failed to convert fully into orders, and higher than anticipated costs to complete on the first order for the automation of end-of-line bread packing for a major UK baker. This highly flexible solution is now in full production, but its implementation took longer than anticipated. 

We continued to expand the use of our innovative vision-based technology in the food industry, securing a major order for automating the packing of poppudums. This challenging application has been a major technical achievement, and the gripper development contributed to us winning the Salford Business Award for Innovation, with the system now in full production. In the industrial area we successfully completed the second line to automate packaging of contact lenses.

We observed a change in our customers' business priorities during the year with a reduction in new capital projects and a growing focus on maintaining and improving existing production lines. We have responded by shifting our focus towards these repair and maintenance opportunities providing upgrades and refurbishment of existing equipment.

This change has helped us to broaden our scope to cover all aspects of automation with a renewed interest in production control systems. As a result the business reliance on the successful completion of a small number of large orders, and a more robust prospect list including a number of key orders arising from the new strategy.

Markets & applications

Consultancy and solution development

With over a decade of experience in the demanding fields of automation, machine vision, robotics and remote handling we have developed many areas of expertise which we routinely use in each of the sectors we serve. Customers who are unsure about how to improve their business have been willing to place relatively small orders for feasibility studies, prototyping, simulation trials and physical tests and the excellent results from these are now leading to bigger projects in our Systems and Controls business.

Within this framework, our Advanced Robotics work has continued to provide advanced software to SIL2 standards for the MoD's next generation of Explosive Ordnance Disposal 'EOD' vehicle which is due to enter production in 2009, at which point Flexible Systems will earn royalty revenue for each unit sold.  

Our aim is to maintain and exploit our unique skill set, strengthening existing relationships and seeking new ones by promoting our expertise in providing high quality and innovative solutions.

Automation systems and controls

Although we have seen a reduction in capital project opportunities, the food and healthcare industries are generally less affected by the current economic climate. We can therefore take advantage of our existing presence in these more recession-tolerant and still largely untapped manufacturing sectors.

In particular, multiple opportunities exist in the food and consumer goods industries where flexible, cost-effective solutions for high speed end-of-line picking and packing applications remain under-exploited. Significant potential for robotic automation exists and is an excellent match for our capabilities. Also, our increased focus on small scale paid consultancy and solutions development allows customers a 'soft start' in their improvement process - allowing us to supply the skills they lack - but unlike a 'pure consultancy' we then follow through with delivery of a working system.

This initiative is helping to find additional markets to capitalise on our skills and technology as part of our ongoing strategy for growth. One notable success of this strategy has been in the mature market for industrial automation where engineering and production process expertise are critical success factors. Another new initiative has been to partner with key manufacturers of control systems and vision systems in order to utilize our core skills and deliver 'pure' control systems and 'pure' vision-based verification systems that have no robotics hardware content as such. Indeed, the vision verification area is growing fast as major supermarket demands on quality / verification increase. With further repeat contracts also expected we anticipate continued growth in vision-based work in 2009 and beyond. 

Customer service

We have made significant advances in our customer-service capability in the year, increasing our designated resource and extending our offering to support '24-7' operations. With an increasing level of orders from both existing customers, and non-RTS customers for flexible contracts to support a growing range of equipment, this has resulted in a three-fold growth in revenue in the year for our after-sales business. We anticipate further growth in 2009 from this important part of the business mix.

Outlook

Flexible Systems has initiated a turnaround strategy, reducing the cost base and redirecting our focus to make better use of our core consultancy, engineering and control system capabilities. We believe these changes have re-positioned the company to secure a broader range of automation opportunities, and as a result we expect to see an improving performance in 2009.

David Bradford

Managing Director

31 March 2009

  

Consolidated income statement

for the year ended 31 December 2008

		2008	2007
	Notes	£'000	£'000
Revenue	3	10,475	11,189
Cost of sales		(7,919)	(8,414)
Gross profit		2,556	2,775
Distribution costs		(1,256)	(1,404)
Administrative expenses		(7,725)	(6,262)
Other operating income		102	114
Operating loss		(6,323)	(4,777)
Operating loss before exceptional items		(743)	(1,962)
Exceptional items included in administrative expenses above	4	(5,580)	(2,815)
Operating loss		(6,323)	(4,777)
Finance income	5	1,620	965
Finance expense	6	(74)	(250)
Net finance income		1,546	715
Loss before taxation		(4,777)	(4,062)
Taxation		286	171
Loss for the year, attributable to equity shareholders of the parent		(4,491)	(3,891)
Loss per share
Total basic and diluted loss per share attributable to equity shareholders of the parent	7	(7.20)p	(6.24)p

  

Statements of changes in equity

year ended 31 December 2008

			Currency
	Share	Share	translation	Retained	Minority
	capital	premium	reserve	earnings	interest	Total
Group 2008	£'000	£'000	£'000	£'000	£'000	£'000
Share options	-	-	-	52	-	52
Dividend paid	-	-	-	(1,247)	-	(1,247)
Net expense recognised directly in equity	-	-	-	(1,195)	-	(1,195)
Loss for the year	-	-	-	(4,491)	-	(4,491)
Total recognised expense	-	-	-	(5,686)	-	(5,686)
Opening shareholders' funds at 1 January 2008	623	680	(126)	8,320	15	9,512
Closing shareholders' funds at 31 December 2008	623	680	(126)	2,634	15	3,826
Group 2007
Share options	-	-	-	20	-	20
Exchange differences	-	-	2	-	-	2
Dividend paid	-	-	-	(1,247)	-	(1,247)
Net income/(expense) recognised directly in equity	-	-	2	(1,227)	-	(1,225)
Loss for the year	-	-	-	(3,891)	-	(3,891)
Total recognised income and (expense)	-	-	2	(5,118)	-	(5,116)
Opening shareholders' funds at 1 January 2007	623	680	(128)	13,438	15	14,628
Closing shareholders' funds at 31 December 2007	623	680	(126)	8,320	15	9,512

  

Consolidated balance sheet

at 31 December 2008

		2008	2007
	Notes	£'000	£'000
Non-current assets
Property, plant and equipment		680	793
Intangible assets	8	1,284	1,359
Other receivables		-	1,541
Deferred tax asset		371	371
Total non-current assets		2,335	4,064
Current assets
Inventories		179	166
Current tax receivable		283	11
Trade and other receivables	9	5,718	6,275
Cash and cash equivalents		2,824	3,708
Assets classified as held for sale		-	428
Total current assets		9,004	10,588
Total assets		11,339	14,652
Current liabilities
Trade and other payables		(6,291)	(4,224)
Total current liabilities		(6,291)	(4,224)
Non-current liabilities
Other liabilities		(750)	(419)
Provisions		(472)	(497)
Total non-current liabilities		(1,222)	(916)
Total liabilities		(7,513)	(5,140)
Net assets		3,826	9,512
Equity
Share capital		623	623
Share premium		680	680
Currency translation reserve		(126)	(126)
Retained earnings		2,634	8,320
Total equity attributable to equity shareholders		3,811	9,497
Equity minority interest		15	15
Total equity attributable to equity shareholders of the Group		3,826	9,512

  Consolidated cash flow statement

for the year ended 31 December 2008

	2008	2007
	£'000	£'000
Continuing operations
Loss for the year	(4,491)	(3,891)
Adjusted for:
Taxation	(286)	(171)
Depreciation charge	158	132
Amortisation	78	335
Loss/(profit) on sale of fixed asset	23	(2)
Impairment of intangible assets	-	2,109
Impairment of asset held for sale	-	80
Provision against loan notes	3,418	-
Foreign exchange (gains)/losses	(601)	63
Equity-settled share-based payment charges	52	20
Finance income	(1,620)	(965)
Finance expense	74	250
	(3,195)	(2,040)
Changes in working capital
(Increase)/decrease in inventories	(13)	404
(Increase)/decrease in receivables	(1,022)	2,185
Increase/ (decrease) in payables	2,453	(1,061)
Increase/(decrease) in provisions	69	(55)
Cash used in operations	(1,708)	(567)

  

Consolidated cash flow statement

for the year ended 31 December 2008

	2008	2007
	£'000	£'000
Cash used in operations	(1,708)	(567)
Finance expense paid	(74)	(151)
Finance income received	982	965
Taxation received	24	553
Net cash (used in)/generated from operating activities	(776)	800
Cash flows from investing activities
Payments to acquire property, plant and equipment	(45)	(145)
Payments to acquire intangible fixed assets	(3)	(88)
Receipt from sale of tangible fixed assets	-	2
Receipt from sale land	448	-
Receipt in respect of loan notes	297	872
Net cash from investing activities	697	641
Cash flows from financing activities
Dividend paid	(1,247)	(1,247)
Net cash used in financing activities	(1,247)	(1,247)
Net (decrease)/increase in cash and cash equivalents	(1,326)	194
Cash and cash equivalents at beginning of year	3,708	3,566
Exchange gains/(losses) on cash and cash equivalents	442	(52)
Cash and cash equivalents at end of year	2,824	3,708

1. Basis of preparation 

The Group financial statements are authorised for issue by the Board of Directors on 31 March 2009.  European Union law (EULAW) (IAS Regulation EC 1606/2002) requires that the financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU (EU-IFRS).  The financial statements have been prepared on the basis of the recognition and measurement requirements of EU-IFRS that are endorsed by the EU and effective at 31 December 2008.

The financial information does not constitute the company's statutory accounts for the years ended 31 December 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 in due course.  The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 237 (2) or (3) of the Companies Act of 1985.

Going concern

The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the reasons set out below.  

The Group meets its day to day working capital requirements through cash and cash equivalents which totalled £3.9m as at 19 March 2009 and has a Group offset arrangement in place with the bank to cover its subsidiaries. The Directors have prepared projected cash flow information for a period ending more than twelve months from the date of their approval of these financial statements. Given the nature of the business, operating losses incurred to date and the one-off nature of certain circumstances which could have a significant impact on the cash flow of the business, management have sensitised these forecasts for a number of stress case scenarios, including a downturn in forecast trading, adverse effect from ongoing legal proceedings (see below) and non payment of specific trade receivables.  

RTS Flexible Systems, a subsidiary company, is engaged in an ongoing dispute with a former customer. This is referred to in note 10 as a contingent liability. In accordance with IAS 1 the Directors have considered the impact of this contingent liability on the going concern of the Group and do not consider that the outcome of this contingent liability would have a significant impact on the going concern of the Group.

Based on the information above and the projected cash flow information, including the stress case forecasts, the Directors believe they have sufficient cash to meet the Group and Company's liabilities as they fall due for payment and therefore the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

2. Exceptional items

Income or costs which are material and non-recurring, whose significance is sufficient to warrant separate disclosure in the financial statements, are referred to as exceptional items. These items are included and separately identified within their relevant Income Statement category. 

 

3 Segmental analysis

Primary reporting format - business segments

Income Statement

	Flexible Systems		Life Science		Other		Total
	2008	2007	2008	2007	2008	2007	2008	2007
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Turnover	3,506	3,825	6,908	7,364	61	-	10,475	11,189
Depreciation	(10)	(9)	(69)	(69)	(79)	(54)	(158)	(132)
Amortisation	(39)	(35)	(36)	(298)	(3)	(2)	(78)	(335)
Grant income	-	-	-	-	40	40	40	40
Inter-company transactions	(83)	(53)	40	62	43	9	-	-
Operating loss before exceptional items and  exchange (losses)/gains	(699)	(556)	(220)	(765)	(425)	(578)	(1,344)	(1,899)
Exchange (losses)/gains	(1)	(1)	439	(21)	163	(41)	601	(63)
Exceptional items included in administrative expenses	(1,207)	(308)	(1,155)	(1,919)	(3,218)	(588)	(5,580)	(2,815)
Loss before interest and taxation	(1,907)	(865)	(936)	(2,705)	(3,480)	(1,207)	(6,323)	(4,777)
Finance income							688	965
Foreign exchange gains/(losses) included in finance income							932	(99)
Finance expense							(74)	(151)
Total finance income							1,546	715
Loss before taxation							(4,777)	(4,062)
Taxation							286	171
Loss for period attributable to equity shareholders of the parent							(4,491)	(3,891)

Balance Sheet

	Flexible Systems		Life Science		Other operations			Total
	2008	2007	2008	2007	2008	2007		2008	2007
	£'000	£'000	£'000	£'000	£'000	£'000		£'000	£'000
Segment assets excluding inter-company balances	2,025	1,955	6,700	3,882	5,539	8,815		14,264	14,652
Segment liabilities excluding inter-company balances	(3,438)	(1,403)	(5,260)	(1,990)	(1,740)	(1,747)		(10,438)	(5,140)
Net segment assets	(1,413)	552	1,440	1,892	3,799	7,068		3,826	9,512

Inter-company assets and liabilities have been removed from each segment.

  3. Segmental analysis continued

Primary reporting format - business segments continued

Cash flow

								Other operations
		Flexible Systems			Life Science						Total
	2008		2007	2008		2007	2008		2007	2008		2007
	£'000		£'000	£'000		£'000	£'000		£'000	£'000		£'000
Cash (used in)/generated from operating activities	(2,127)		(574)	948		36	(529)		(29)	(1,708)		(567)
Add back inter-company movements	75		(68)	(116)		(10)	41		78	-		-
Net finance income/(expense)	-		(14)	35		32	873		796	908		814
Taxation received/(paid)	-		-	28		-	(4)		553	24		553
Net cash (used in)/  generated from operating activities	(2,052)		(656)	895		58	381		1,398	(776)		800
Payments to acquire property, plant and equipment	(6)		(10)	(13)		(27)	(26)		(108)	(45)		(145)
Payments to acquire intangible fixed assets	(3)		(12)	-		(68)	-		(8)	(3)		(88)
Receipt from sale of tangible fixed assets	-		-	-		-	-		2	-		2
Cash flows from other investing activities	-		-	-		-	745		872	745		872
Cash flows from financing activities	-		-	-		-	(1,247)		(1,247)	(1,247)		(1,247)
Less inter-company movements	(75)		68	116		10	(41)		(78)	-		-
Net cash (outflow)/inflow	(2,136)		(610)	998		(27)	(188)		831	(1,326)		194

  4. Exceptional administrative expenses

	Year ended	Year ended
	31 December	31 December
	2008	2007
	Total	Total
	£'000	£'000
Impairment of intangible fixed assets	-	2,109
Impairment of assets held for sale	-	80
Restructuring costs	93	318
Legal costs	950	308
Provision against loan notes	3,418	-
One-off project completion costs	1,119	-
	5,580	2,815

The exceptional administrative expenses consist of the following:

• Restructuring costs of £93,000 consist of £37,000 in Life Science and £56,000 in Flexible Systems (2007: £318,000 consisted of £215,000 in the Life Science business and £103,000 in Group). 
• The exceptional legal expense of £1.0m (2007: £0.3m) relates to a dispute with a former customer in our Flexible Systems business. As set out in note 10 the Company has reserved its right to not disclose further information required by IAS 37 on the grounds that it may prejudice the outcome of the claim.
• The provision against loan notes of £3.4m is a provision against US loan notes receivable from the purchaser of the trade and certain assets and liabilities of RTS Wright Industries, LLC following its sale in 2004. Given the low level of loan note receipts from Doerfer in the second half of the year, the Directors have decided to fully provide against the debt. The unprovided amount at 31 December 2008 is £nil (2007: £3,019,000).
• The one-off project completion costs of £1.1m are costs associated with concluding a project in the Life Science business.  The contract is now completed and the Company has no further liabilities.
• The impairment of intangible assets of £2.1m in 2007 consisted of two items, £1.7m relating to a write down in the carrying value of capitalised research and development costs in the Life Science business. The remaining impairment of £0.4m represented the partial write down of goodwill related to the Life Science business.
• The impairment of assets held for sale in 2007 represented a £0.08m write down in the book value of the land in Nashville, Tennessee. This land has now been sold for a consideration of £448,000 resulting in a loss on sale of £23,000.

  5. Finance income

	Year ended	Year ended
	31 December	31 December
	2008	2007
	Total	Total
	£'000	£'000
Bank interest	48	248
Loan note interest	609	717
Other interest	31	-
Net currency movements on foreign currency denominated assets and liabilities	932	-
	1,620	965

6. Finance expenses

	Year ended	Year ended
	31 December	31 December
	2008	2007
	Total	Total
	£'000	£'000
Bank loans and overdrafts	4	151
Other interest	70	-
Net currency movements on foreign currency denominated assets and liabilities	-	99
	74	250

  7. (Loss)/earnings per share

(Loss)/earnings per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial years. The calculations of both basic and diluted loss per share for the year are based upon a loss after tax and minority interests of £4,491,000 (2007: loss of £3,891,000). The weighted average number of equity shares used in the basic calculation is 62,335,374 (2007: 62,335,374).

The calculation for diluted loss per ordinary share is identical to that used for the basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33 'Earnings per Share'. 

	Year ended	Year ended
	31 December	31 December
	2008	2007
Loss for the year (£'000)	(4,491)	(3,891)
Exceptional items in administrative expenses (£'000)	5,580	2,815
Profit/(loss) after tax before 'exceptional' items (£'000)	1,089	(1,076)
Weighted average ordinary shares in issue	62,335,374	62,335,374

	Year ended	Year ended
	31 December	31 December
	2008	2007
	Pence	Pence
Basic/diluted loss per share	(7.20)	(6.24)
Earnings/(loss) per share before 'exceptional' items	1.75	(1.73)

 

8. Intangible assets

		Software and
	Acquisition	development
	goodwill	costs	Total
Group	£'000	£'000	£'000
Cost
At 1 January 2007	2,735	4,223	6,958
Additions	-	88	88
Disposal	-	(108)	(108)
At 31 December 2007 and 1 January 2008	2,735	4,203	6,938
Additions	-	3	3
At 31 December 2008	2,735	4,206	6,941
Amortisation and impairment losses
At 1 January 2007	1,216	1,919	3,135
Charge for the year	-	335	335
Impairment	405	1,704	2,109
At 31 December 2007 and 1 January 2008	1,621	3,958	5,579
Charge for the year	-	78	78
At 31 December 2008	1,621	4,036	5,657
Net book value
At 1 January 2007	1,519	2,304	3,823
At 31 December 2007	1,114	245	1,359
At 31 December 2008	1,114	170	1,284

Amortisation and impairment charges are recognised in administrative expenses within the income statement.

Goodwill, intangible assets and impairment

For the purposes of impairment testing goodwill, goodwill is allocated to the Group's operating divisions which represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

The aggregate carrying amounts of goodwill allocated to each unit are as follows:

	RTS Life	RTS Flexible
	Science	Systems	Others	Total
	£'000	£'000	£'000	£'000
Acquisition goodwill	974	140	-	1,114
Software and development costs	74	91	5	170
	1,048	231	5	1,284

RTS Life Science

The RTS Life Science unit's impairment test was based on value in use. Value in use is the present value of the cash flows expected to be generated by the business unit over a projection period of 10 years. Management believes that this forecast period is justified due to the nature of the business. Recoverable amounts are based on value in use projections of the RTS Life Science unit's performance reflecting the Directors' best estimates of cash flows. 

8. Intangible assets continued

Goodwill, intangible assets and impairment continued

In 2007 an impairment charge of £405,000 was recorded against the carrying value of goodwill relating to the RTS Life Science unit. The recoverable amount of £974,000 was determined by discounting the future cash flows expected to be generated from the RTS Life Science business. The key assumptions in these forecasts were in respect of revenue growth (based on detailed forecasts in year 1 and then 3% inflationary increase), future margins (based on a detailed forecast in year 1 and then constant) and cost management (based on a detailed forecast in year 1 and then 3% inflationary increase year on year). Detailed 2008 budgets were used to forecast cashflows applying a 3% annual inflationary increase. A risk adjusted pre-tax discount rate of 13.68% was applied to the projections. The key assumptions in these forecasts were in respect of revenue growth, future margins and cost management.  

In 2008, detailed budgets prepared for 2009 have been used in the cashflow forecast and an inflationary increase of 3% has been used for subsequent periods. A risk adjusted pre-tax discount rate of 13.72% (2007:13.68%) has been applied to the projections. The key assumptions in these forecasts are in respect of revenue growth (based on a detailed forecast in year 1 and then 3% inflationary increase), future margins (based on a detailed forecast in year 1 and then constant) and cost management (based on a detailed forecast in year 1 and then 3% inflationary increase year on year). Revenue forecasts for 2009 are in line with external sources of information and are underpinned by order book cover with 65% of forecast 2009 revenue already secured.

The recoverable amount in respect of the RTS Life Science unit assessed by the Directors using the above assumptions is £2,133,000 which is £1,085,000 greater than the carrying amount and therefore no impairment charge has been booked in 2008. Management considers that it is not reasonably possible for the assumptions to change so significantly as to eliminate this excess.

RTS Flexible Systems

The RTS Flexible System unit's impairment test was based on value in use. Value in use is the present value of the cash flows expected to be generated by the business unit over a projection period of 15 years. Management believes that this forecast period is justified due to the nature of the business. Recoverable amounts are based on value in use projections of the RTS Flexible Systems unit's performance reflecting the Directors' best estimates of cash flows. Business forecasts have been used for 2009 projections and an inflationary increase of 3% has been used for subsequent periods. A risk adjusted pre-tax discount rate of 13.72% (2007:13.68%) has been applied to the projections.

The recoverable amount assessed by the Directors using the above assumptions is £264,000 which is £33,000 greater than its carrying amount. Cash flow projections are principally sensitive to revenue growth, future margins and cost management. Revenue forecasts for 2009 are partly underpinned by an order book and 16% of forecast 2009 revenue has been secured to date.

The following summarises the value assigned to these key assumptions and by what value these key assumptions must change, after incorporating any consequential effects of that change on the other variables used to measure recoverable amount, in order for the unit's recoverable amount to be equal to its carrying value:

Sales:

 Year 1 sales are based on a detailed management budget for 2009. Subsequent years are based on year 1 plus 3% inflationary increase year on year. A 0.5% reduction in year 1 sales would result in the recoverable amount being equal to the carrying value of goodwill in respect of the RTS Flexible Systems unit.

  Gross margin:

Gross margin in Year 1 is based on a detailed management budget for 2009. A reduction in gross margin of 0.5% would lead to the recoverable amount being equal to the carrying value of goodwill in respect of the RTS Flexible Systems unit.

8. Intangible assets continued

Goodwill, intangible assets and impairment continued

Cost management:

Overheads based on a detailed management budget for 2009 in year 1 of the cashflow projections and grow at 3% year on year over the forecast period. An increase in overheads of 0.5% in year 1 would lead to the recoverable amount being equal to the carrying value of goodwill in respect of the RTS Flexible Systems unit.

Discount rate:

A 2.28% increase in the discount rate over the forecast period would lead to the recoverable amount being equal to the carrying value of goodwill in respect of the RTS Flexible Systems unit

9. Trade and other receivables

	31 December 2008	31 December 2007
	Group	Group
	£'000	£'000
Trade receivables	3,735	2,942
Amounts receivable on long-term contracts	1,434	1,416
Other receivables	273	79
Loan notes receivable	-	1,585
Prepayments and accrued income	276	253
	5,718	6,275

10. Contingent liabilities

RTS Flexible Systems is engaged in an ongoing dispute with a former customer. This fact was disclosed in the 2006 and 2007 financial statements. The information usually required by International Accounting Standard 37 is not disclosed on the grounds that it can be expected to seriously prejudice the outcome of the dispute. The Directors are of the opinion that the claim can be successfully resisted by the Company.

ENDFR EAXDEDSFNEFE