Robotic Technology Systems PLC

Preliminary results for the year ended 31 December 2009

 

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 2009.

	2009 H1 £M	2009 H2 £M	2009 TOTAL £M	2008 TOTAL £M
Revenue	5.5	6.3	11.8	10.5
Operating (loss)/profit before 'exceptional' items	(0.2)	0.0	(0.2)*	(0.7)
'Exceptional' costs	(0.1)	(0.5)	(0.6)**	(5.6)
Net finance income	0.2	0.3	0.5*	1.6
Loss before taxation	(0.1)	(0.3)	(0.4)	(4.8)
Profit/(loss) after taxation	0.0	0.0	0.0	(4.5)
Profit/(Loss) per share	0.0p	0.0p	0.0p	(7.2)p
Net cash	3.0	2.1	2.1	2.8

*  see notes 3 & 5 for the exchange movement effect

** See note 4 to the financial statements

KEY POINTS

 

·              The Group's operational improvement continued, led by the Life Science business, resulting in a return to profitability in the second half

 

·              US acquisition of Hatch Science LLC ("Hatch Science" or "Hatch") in February 2010 strengthens Life Science's presence in its key market

 

·              The closing cash position of £2.1m (2008: £2.8m) does not contain £0.3m of restricted cash included in other receivables and is after the payment of an interim dividend of £0.6m in October 2009

 

·              Gary Walsh is appointed to Chief Executive, with Chris Brown reverting to his former role as Non-Executive Chairman

 

·              The operational performance is anticipated to continue to improve in 2010 although, due to project timing, this will be weighted towards the second half

 

 

Chris Brown, Non-Executive Chairman of RTS, said:

 

"We have continued to focus on cost reductions and developing our capabilities to fit the various niche markets we serve. This, in conjunction with the competitive sterling exchange rate, means our business is well positioned to continue operational improvement in 2010.

 

During the year we acquired the US company, Hatch Science, whose complementary products and skills will help us accelerate our expansion in this key market.

 

The Company has invested significantly in new products over the last few years and with its superior after-sales service is continuing to win business in a difficult market."

 

 

30 March 2010

 

 

 

 

 

Enquiries:

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

 

 

Chairman's statement

 

 

Business Results

 

Overall Group turnover increased by 13% to £11.8m (2008: £10.5m), with the growth attributable to RTS Life Science, which more than made up for the decline in the Flexible Systems business.

 

The underlying Group operating performance (before "exceptional" items) returned to profitability in the second half of the year, reducing the pre-exceptional operating loss for the year to £0.2m (2008: loss of £0.7m).

 

The Group generated a small profit after tax in the year (2008: loss £4.5m), and a resulting earnings per share of 0.02 pence (2008: loss per share of 7.20 pence). The significant turnaround was attributable to a reduction in "exceptional" costs (noted below) and an improvement in operational performance.

 

Life Science

 

Life Science continued to see strong sales in the second half of the year, resulting in the full year sales increasing by 35% to £9.3m (2008: £6.9m).  The higher sales led to an improved operating profit before "exceptional" items of £0.5m (2008: loss of £0.2m).

 

The business benefited significantly in 2009 from a major store order booked in 2008 that contributed £2.4m to revenues in the year.  In 2009 we have taken positive steps to address this reliance on large projects by increasing the competitiveness of our smaller storage product and expanding our product offerings.  We believe we have accelerated this process with the acquisition in February 2010 of Hatch Science LLC, a Boston-based company with complementary products and skills.

 

Therefore, despite a reduction in the year end order book to £4.6m (2008: £5.9m), we enter the year with a more diversified prospect list, and are anticipating an increasing order book through 2010.

 

Flexible Systems

 

In a difficult market, Flexible Systems sales fell to £2.5m (2008: £3.5m).  This reduced volume, together with further cost overruns to complete a major project, led to a pre-exceptional operating loss of £0.3m (2008: loss of £0.7m) 

 

Following the departure of the division's Managing Director in October 2009, we have simplified the operating structure and the strategy of the business while at the same time reducing its cost base and realigning its focus. 

 

Despite a lower opening order book of £0.3m (2008: £0.6m), we are anticipating that these changes will help to return the business to profitability in 2010, based on a similar level of sales.

 

"Exceptional" Items

 

The Group recorded "exceptional" operating costs in the year of £0.6m, based on certain restructuring and legal costs and goodwill impairment charges as further 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 Industries Inc ("Doerfer") loan notes in the period led to a cash inflow of $745k (£480k) from capital and interest payments.  The contractual value of the notes at the end of the year was $7.2m (£4.5m), but consistent with prior periods we have maintained a full provision against these loan notes.

The overall net cash balance reduced to £2.1m (2008: £2.8m). This does not include £0.3m included in other receivables in note 9 that is used to 'cash cover' two bank guarantees due to expire in the first half of 2010. The reduction in cash balances is largely accounted for by the payment of the special interim dividend of £0.6m in October 2009

 

 

Board changes

 

In September 2009, John Mowinckel resigned as non-executive Director, Chris Heminway was appointed to replace him on the Board.

 

In October 2009 David Bradford, the Managing Director of RTS Flexible Systems and an executive member of the Board resigned to pursue other interests.  The management of both businesses has been consolidated under the leadership of Gary Walsh.

 

In March 2010, the Board appointed Gary into the position of Chief Executive and I have reverted to my former role as non-executive Chairman.

 

Outlook

 

We have continued to focus on cost reductions and developing our capabilities to fit the various niche markets we serve. This, in conjunction with the competitive sterling exchange rate, means our business is well positioned to continue operational improvement in 2010.

 

The Company has invested significantly in new products over the last few years and with its superior after sales service is continuing to win business in a difficult market.

 

It remains the Board's strategy to return surplus funds to shareholders, whilst retaining sufficient cash to support the operating businesses. The interim dividend paid in the year takes the total cash returned to shareholders to eleven pence per share since November 2005.

 

 

Chris Brown

Non-executive Chairman

 

30 March 2010

 

Life Science

 

Performance in 2009

 

We entered the year with a strong opening order book and this provided a platform to increase turnover to £9.3m (2008: £6.9m).  The higher volumes and improved operational performance resulted in an operating profit before "exceptional" items of £0.5m (2008: loss of £0.2m).

 

Our realignment strategy, initiated during 2008, placed emphasis on our core competence in sample management with selective diversification into niche adjacent markets. This strategy has allowed us to widen our customer base and reduce our reliance on large one-off projects.

 

We continue to invest in product development and successfully secured early adopter customer orders for our new Tube Auditor product launched in the year.  These sales will serve as a foundation and reference points for sales growth in 2010.

 

Our return to profitability has been achieved by the dedication and commitment of our highly skilled and loyal staff who have delivered on their objectives and created an excellent basis from which to build.

 

Markets and technologies

 

We continue to see a shift in our customer base with an increasing proportion of our new sales being generated from academia and publicly funded research institutes. This has helped to offset a reduction in opportunities from large pharmaceutical companies, where consolidation and reduced research and development budgets have depressed demand for new capital equipment. Our large pharmaceutical customer base remains the foundation of our business and our after-sales team work in partnership with our customers to upgrade and support existing capital equipment ensuring that they maximise the value from their original investment.

 

We have been reviewing our options to serve the US market more effectively for some time, and at the beginning of 2009 we entered into a relationship with Hatch Science LLC, at both a sales and operating level. This arrangement has served both organisations well, and has culminated in RTS acquiring a 65% controlling interest in Hatch during February 2010. Hatch is a leading edge developer and manufacturer of scientific instruments for the pharmaceutical and medical industries and is located close to Boston, Massachusetts. This acquisition provides complementary products and skills to RTS and simultaneously increases our presence in the important US market.

 

We continue to strengthen our position in the premium sample storage market. With improvements in our offering and a more competitive position from the strength of the dollar, we have regained market share against US competitors.  Further sales of the entry level SmaRTStore and recently updated Sample-Store provide evidence that our customers are starting to appreciate the benefits of the additional levels of service we bring in our offering. 

 

New business in sample processing and storage of biological specimens is encouraging. In the biobanking market we secured several new customers for our ABF500 blood fractionation instrument and other related products. Although this emerging market suffers from lengthy sales cycles and the rigours of public procurement procedure we are optimistic that our investment in this sector will continue to deliver results.

 

In the drug delivery automation business, we successfully generated repeat sales of the "Walkaway Specialist" inhaler testing system range. This product is based on a standard platform that requires minimal modification and configuration for new devices and is now successfully serving an expanding customer base.

 

 

Outlook

 

Sample management, sample preparation and pharmaceutical testing applications in the Life Science sector remain our focus. With dedicated teams serving several related business lines and with an increasing range of products we expect to deliver improved operational performance. We anticipate that our investment in additional sales personnel, combined with our increased presence in the US through the acquisition of Hatch will lead to a growing order book in 2010.

 

 

Flexible Systems

 

Performance in 2009

 

Flexible Systems continued to operate in difficult market conditions with turnover reducing to £2.5m (2008: £3.5m) and an operating loss before "exceptional" items of £340k (2008: loss of £760k).

 

At the end of October David Bradford left the Company to pursue other interests. Following this the business and its prospects were reviewed within the multiple markets that it serves. In the final quarter of 2009 we realigned Flexible Systems' strategy and forged closer links with the Life Science division, which has allowed us to remove cost and provide improved focus.

 

Markets and Technologies

 

Flexible Systems continues to serve the UK automation market with high technology solutions requiring a multi-disciplinary approach. Its core competences are in robotics, vision and high integrity software development.

 

The defence sector continues to play an important role in the future of Flexible Systems with strategically important orders being won from a major new customer in 2009.

 

In 2010 we intend to use our unique skill sets to provide more consultancy and development services, an approach which will allow our customers to regulate their budgets and minimise risk within a collaborative relationship. 

 

The after-sales business continues to perform well. We provide support, service and spare parts to our installed base and have added control system upgrades to this unit. We have good relationships with the large control equipment OEMs who use third parties for integration services.

 

Outlook

 

With a realigned strategy, a lower cost base and a clearer definition of our targeted markets, we anticipate an improvement in operating performance from a similar level of sales. We will continue to assess opportunities for efficiency gains within the RTS Group by exploiting synergies between Flexible Systems and Life Science.

 

 

Gary Walsh

Chief Executive

 

30 March 2010

 

 

 

Consolidated statement of comprehensive income
for the year ended 31 December 2009

 

 

		2009	2008
	Notes	£'000	£'000
Revenue	3	11,812	10,475
Cost of sales		(7,933)	(7,919)
Gross profit		3,879	2,556
Distribution costs		(1,163)	(1,256)
Administrative expenses		(3,692)	(7,725)
Other operating income		134	102
Operating loss		(842)	(6,323)
Operating loss before exceptional items		(216)	(743)
Exceptional items included in administrative expenses above	4	(626)	(5,580)
Operating loss		(842)	(6,323)
Finance income	5	481	1,620
Finance expense	6	(8)	(74)
Net finance income		473	1,546
Loss before taxation		(369)	(4,777)
Taxation		379	286
Profit/(loss) for the year, attributable to equity shareholders of the parent		10	(4,491)
Other comprehensive income
Other comprehensive income for the year		-	-
Total comprehensive income/(loss) for the year, all attributable to equity shareholders of the parent		10	(4,491)
Earnings/(loss) per share
Total basic and diluted earnings/(loss) per share attributable to equity shareholders of the parent	7	0.02p	(7.20)p

 

 

 

 

Statement of changes in equity
for the year ended 31 December 2009

 

 

			Currency
	Share	Share	translation	Retained	Minority
	capital	premium	reserve	earnings	interest	Total
Group 2009	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2009	623	680	(126)	2,634	15	3,826
Share options	-	-	-	27	-	27
Dividend paid	-	-	-	(623)	-	(623)
Transactions with owners recognised directly in equity	-	-	-	(596)	-	(596)
Profit for the year	-	-	-	10	-	10
	-	-	-	(586)	-	(586)
Balance at 31 December 2009	623	680	(126)	2,048	15	3,240
Group 2008
Balance at 1 January 2008	623	680	(126)	8,320	15	9,512
Share options	-	-	-	52	-	52
Dividend paid	-	-	-	(1,247)	-	(1,247)
Transactions with owners recognised directly in equity	-	-	-	(1,195)	-	(1,195)
Loss for the year	-	-	-	(4,491)	-	(4,491)
	-	-	-	(5,686)	-	(5,686)
Balance 31 December 2008	623	680	(126)	2,634	15	3,826

 

 

 

 

Consolidated statement of financial position
at 31 December 2009

 

		2009	2008
	Notes	£'000	£'000
Non-current assets
Property, plant and equipment		640	680
Intangible assets	8	1,019	1,284
Deferred tax asset		543	371
Total non-current assets		2,202	2,335
Current assets
Inventories		111	179
Current tax receivable		-	283
Trade and other receivables	9	4,864	5,718
Cash and cash equivalents		2,092	2,824
Total current assets		7,067	9,004
Total assets		9,269	11,339
Current liabilities
Trade and other payables		(5,169)	(6,291)
Total current liabilities		(5,169)	(6,291)
Non-current liabilities
Other liabilities		(494)	(750)
Provisions		(366)	(472)
Total non-current liabilities		(860)	(1,222)
Total liabilities		(6,029)	(7,513)
Net assets		3,240	3,826
Equity
Share capital		623	623
Share premium		680	680
Currency translation reserve		(126)	(126)
Retained earnings		2,048	2,634
Total equity attributable to equity shareholders		3,225	3,811
Equity minority interest		15	15
Total equity attributable to equity shareholders of the Group		3,240	3,826

 

 

 

 

Consolidated cash flow statement
for the year ended 31 December 2009

 

	2009	2008
	£'000	£'000
Profit/(loss) for the year	10	(4,491)
Adjusted for:
Taxation	(379)	(286)
Depreciation charge	182	158
Amortisation	79	78
Loss on sale of non-current assets	-	23
Impairment of intangible assets	189	-
Provision against loan notes	-	3,418
Foreign exchange losses/(gains)	34	(601)
Equity-settled share-based payment charges	27	52
Finance income	(481)	(1,620)
Finance expense	8	74
	(331)	(3,195)
Changes in working capital
Decrease/(increase) in inventories	68	(13)
Decrease/(increase) in receivables	854	(1,022)
(Decrease)/increase in payables	(1,387)	2,453
(Decrease)/increase in provisions	(102)	69
Cash used in operating activities	(898)	(1,708)
Finance expense paid	-	(74)
Finance income received	434	982
Taxation received	489	24
Net cash generated from/(used in) operating activities	25	(776)
Cash flows from investing activities
Payments to acquire property, plant and equipment	(142)	(45)
Payments to acquire intangible non-current assets	(3)	(3)
Receipt from sale of land	-	448
Receipt in respect of loan notes	47	297
Net cash (used in)/generated from investing activities	(98)	697
Cash flows from financing activities
Dividend paid	(623)	(1,247)
Net cash used in financing activities	(623)	(1,247)
Net decrease in cash and cash equivalents	(696)	(1,326)
Cash and cash equivalents at beginning of year	2,824	3,708
Exchange (losses)/gains on cash and cash equivalents	(36)	442
Cash and cash equivalents at end of year	2,092	2,824

 

 

1. Basis of preparation

The Group financial statements are authorised for issue by the Board of Directors on 30 March 2010.  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 2009.

The financial information does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 2008 (but is derived from those accounts).  Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 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 498 (2) and (3) of the Companies Act of 2006.

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. Operating segments

 

Information about reportable segments

 

The Group has two operating segments as detailed below, which are the Group's strategic business units.  The strategic business units offer different products and services, and are managed separately.  The Group's Board reviews internal management reports on a monthly basis.  The following summary describes the operations of each of the Group's operating business segments:

 

·   RTS Life Science. A major supplier of automated products and solutions for drug discovery, delivery and quality control applications with pharmaceutical, biotech, biobanking and academic institutes.

 

·   RTS Flexible Systems. A provider of automation systems in-depth consultancy, service and support to a wide range of industries from consumer goods, packaging, food manufacture and bakery to nuclear and defence.

 

'All other segments' includes non-trading subsidiaries, holding companies and the parent Company.  These are not reported separately to the Board.

 

Information regarding the results of each operating segment is included below.  Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Board.  Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating segment results.

 

 

Information about reportable segments

Statement of comprehensive income

	Flexible Systems		Life Science		Total reportable segments		All other segments		Total as per consolidated accounts
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue (external)	2,444	3,506	9,291	6,908	11,735	10,414	77	61	11,812	10,475
Revenue (inter-segmental)	64	-	-	-	64	-	(64)	-	-	-
Depreciation	(13)	(10)	(87)	(69)	(100)	(79)	(82)	(79)	(182)	(158)
Amortisation	(40)	(39)	(37)	(36)	(77)	(75)	(2)	(3)	(79)	(78)
Grant income	-	-	-	-	-	-	40	40	40	40
Inter-segment transactions	(57)	(83)	33	40	(24)	(43)	24	43	-	-
Operating (loss)/profit before exceptional items and exchange (losses)/gains	(337)	(699)	491	(220)	154	(919)	(336)	(425)	(182)	(1,344)
Exchange (losses)/gains	(2)	(1)	(2)	439	(4)	438	(30)	163	(34)	601
Exceptional items included in administrative expenses	(398)	(1,207)	-	(1,155)	(398)	(2,362)	(228)	(3,218)	(626)	(5,580)
(Loss)/profit before interest and taxation	(737)	(1,907)	489	(936)	(248)	(2,843)	(594)	(3,480)	(842)	(6,323)
Finance income	2	-	-	56	2	56	479	632	481	688
Foreign exchange gains/(losses) included in finance income/(expenses)	-	-	272	(649)	272	(649)	(280)	1,581	(8)	932
Finance expenses	-	-	-	(21)	-	(21)	-	(53)	-	(74)
Total finance income/(expense)	2	-	272	(614)	274	(614)	199	2,160	473	1,546
Segment result: (loss)/profit before taxation	(735)	(1,907)	761	(1,550)	26	(3,457)	(395)	(1,320)	(369)	(4,777)
Taxation									379	286
Profit/(loss) for period attributable to equity shareholders of the parent									10	(4,491)

 

 

 

 

Statement of financial position

	Flexible Systems		Life Science		Total reportable segments		All other segments		Total as per consolidated accounts
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment assets excluding inter-company balances	1,417	2,025	4,373	4,910	5,790	6,935	1,387	1,580	7,177	8,515
Cash/(overdraft)	(3,769)	(2,480)	(596)	1,790	(4,365)	(690)	6,457	3,514	2,092	2,824
Segment liabilities excluding inter-company balances	(588)	(958)	(4,115)	(5,260)	(4,703)	(6,218)	(1,326)	(1,295)	(6,029)	(7,513)
Net segment assets/(liabilities)	(2,940)	(1,413)	(338)	1,440	(3,278)	27	6,518	3,799	3,240	3,826

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

Cash Flow

	Flexible Systems		Life Science		Total reportable segments		All other segments		Total as per consolidated accounts
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cash (used in)/generated from operating activities	(1,353)	(2,127)	(2,665)	948	(4,018)	(1,179)	3,120	(529)	(898)	(1,708)
Add back inter-company movements	880	75	2,595	(116)	3,475	(41)	(3,475)	41	-	-
Net finance income	2	-	-	35	2	35	432	873	434	908
Taxation received/(paid)	79	-	391	28	470	28	19	(4)	489	24
Net cash (used in)/generated from operating activities	(392)	(2,052)	321	895	(71)	(1,157)	96	381	25	(776)
Payments to acquire property, plant and equipment	(13)	(6)	(111)	(13)	(124)	(19)	(18)	(26)	(142)	(45)
Payments to acquire intangible non-current assets	(1)	(3)	(2)	-	(3)	(3)	-	-	(3)	(3)
Cash flows from other investing activities	-	-	-	-	-	-	47	745	47	745
Cash flows from financing activities	-	-	-	-	-	-	(623)	(1,247)	(623)	(1,247)
Less inter-company movements	(880)	(75)	(2,595)	116	(3,475)	41	3,475	(41)	-	-
Net cash (outflow)/inflow	(1,286)	(2,136)	(2,387)	998	(3,673)	(1,138)	2,977	(188)	(696)	(1,326)

 

 

 

 

4. Exceptional administrative expenses

	Year ended	Year ended
	31 December	31 December
	2009	2008
	£'000	£'000
Impairment of intangible non-current assets	189	-
Restructuring costs	236	93
Legal costs	201	950
Provision against loan notes	-	3,418
One-off project completion costs	-	1,119
	626	5,580

The exceptional administrative expenses consist of the following:

·    restructuring costs of £236,000 consist of £88,000 in RTS PLC and £148,000 in Flexible Systems (2008: £93,000 consisted of £37,000 in Life Science and £56,000 in Flexible Systems);

·    the exceptional legal expense of £0.2m (2008: £1.0m) relates to a dispute with a former customer in our Flexible Systems business. 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 impairment of intangible assets of £189,000 consists of two items, £49,000 relating to a write down in the carrying value of capitalised research and development costs in the Flexible Systems business. The remaining impairment of £140,000 represents the write down of goodwill relating to Flexible Systems;

·    the provision against loan notes of £3.4m in 2008 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. The unprovided amount at 31 December 2009 is £nil (2008: £nil); and

·    the one-off project completion costs in 2008 of £1.1m are costs associated with concluding a project in the Life Science business. This contract is now completed and the Company has no further liabilities.

 

5. Finance income

	Year ended	Year ended
	31 December	31 December
	2009	2008
	£'000	£'000
Bank interest	3	48
Loan note interest	476	609
Other interest	2	31
Net currency movements on foreign currency denominated assets and liabilities	-	932
	481	1,620

 

 

6. Finance expenses

	Year ended	Year ended
	31 December	31 December
	2009	2008
	£'000	£'000
Bank loans and overdrafts	-	4
Other interest	-	70
Net currency movements on foreign currency denominated assets and liabilities	8	-
	8	74

 

 

7. Earnings/(loss)per share

Earnings/(loss) 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 earnings/(loss) per share for the year are based upon a profit after tax and minority interests of £10,000 (2008: loss of £4,491,000). The weighted average number of equity shares used in the basic calculation is 62,335,374 (2008: 62,335,374).

The calculation for diluted earnings/loss per ordinary share is identical to that used for the basic earnings/(loss) per share. This is because there were no share options outstanding with an exercise price lower than the average share price for the year and for the year ending 31 December 2008 the exercise of share options would have had 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
	2009	2008
Profit/(loss)for the year (£'000)	10	(4,491)
Exceptional items in administrative expenses (£'000)	626	5,580
Profit after taxation before "exceptional" items (£'000)	636	1,089
Weighted average ordinary shares in issue	62,335,374	62,335,374

 

 

 

	Year ended	Year ended
	31 December	31 December
	2009	2008
	Pence	Pence
Basic/diluted earning/(loss) per share	0.02	(7.20)
Earnings per share before "exceptional" items	1.02	1.75

 

 

8. Intangible assets

		Software and
	Acquisition	development
	goodwill	costs	Total
Group	£'000	£'000	£'000
Cost
At 1 January 2008	2,735	4,203	6,938
Additions	-	3	3
At 31 December 2008 and 1 January 2009	2,735	4,206	6,941
Additions	-	3	3
At 31 December 2009	2,735	4,209	6,944
Amortisation and impairment losses
At 1 January 2008	1,621	3,958	5,579
Charge for the year	-	78	78
At 31 December 2008 and 1 January 2009	1,621	4,036	5,657
Charge for the year	-	79	79
Impairment	140	49	189
At 31 December 2009	1,761	4,164	5,925
Net book value
At 1 January 2008	1,114	245	1,359
At 31 December 2008	1,114	170	1,284
At 31 December 2009	974	45	1,019

 

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 intangible assets allocated to each unit are as follows:

	RTS Life	RTS Flexible
	Science	Systems	Others	Total
2009	£'000	£'000	£'000	£'000
Acquisition goodwill	974	-	-	974
Software and development costs	38	-	7	45
	1,012	-	7	1,019

 

	RTS Life	RTS Flexible
	Science	Systems	Others	Total
2008	£'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 ten 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.

The recoverable amount of £2,112,000 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 one and then 3% inflationary increase), future margins (based on a detailed forecast in year one and then constant) and cost management (based on a detailed forecast in year one and then 3% inflationary increase year on year). Detailed 2010 budgets were used to forecast cash flows applying a 3% annual inflationary increase. A risk adjusted pre-tax discount rate of 13.73% (2008: 13.72%) was applied to the projections.

The recoverable amount in respect of the RTS Life Science unit, assessed by the Directors using the above assumptions, is £2,112,000 which is £1,100,000 greater than the carrying amount of intangible assets and therefore no impairment charge has been booked in 2009. Management considers that it is not reasonably possible for the assumptions to change so significantly as to eliminate this excess.

 

RTS Flexible Systems

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 fifteen 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 2010 projections and an inflationary increase of 3% has been used for subsequent periods. A risk adjusted pre-tax discount rate of 13.73% (2008: 13.72%) has been applied to the projections.

The impairment test determined that the carrying value of this goodwill and intangible assets was not supportable and therefore an impairment charge of £189,000 has been made in the year.

9. Trade and other receivables

	Year ended 31 December 2009		Year ended 31 December 2008
	Group	Company	Group	Company
	£'000	£'000	£'000	£'000
Trade receivables	2,286	24	3,735	-
Amounts receivable on long-term contracts	1,709	-	1,434	-
Other receivables	537	-	273	7
Amounts falling due from Group undertakings	-	38	-	6,586
Prepayments and accrued income	332	16	276	16
	4,864	78	5,718	6,609

At 31 December 2009 the Group and the Company had two bank guarantees in place for the value of £323,000 (2008: £nil). Cash covering the value of the guarantees is held by the Group bankers and included in other receivables. 

10. Contingent liabilities

 

RTS Flexible Systems is engaged in an ongoing dispute with a former customer. This fact has been disclosed in these financial statements since 2006. The information usually required by IAS 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.

11. Subsequent events

On 10 February 2010 the Group acquired a 65% controlling interest in Hatch Science LLC.  Hatch Science LLC is a US based leading developer and manufacturer of scientific instruments for the pharmaceutical and medical industries.  An initial consideration of $325,000 was paid in cash from Group resources with an additional earn out based on a payment of 32.5% of the profits after tax generated from Hatch for each of the first three years.  The remaining shareholding is held by the existing management who have the option to sell their 35% holding to the Group at the end of three, four or five years based on the greater of $175,000 or the aggregate net profits generated from Hatch Science LLC in the preceding two to three years.