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Business Serve PLC(Formerly Network Directions plc)Group AccountsFor the period ended 31st March 2001 DIRECTORS AND OFFICERSDIRECTORS S Cleaver SECRETARY C Baron COMPANY NUMBER 3923166 (England and Wales) REGISTERED OFFICE Suite Two AUDITORS Baker Tilly DIRECTOR’S REPORTThe directors submit their report and financial statements of Business Serve plc and its subsidiary companies for the period ended 31 March 2001. PRINCIPAL ACTIVITIES The principal activities of the group in the period under review were those of providing internet and e-commerce services. INCORPORATION AND CHANGE OF NAME The company was incorporated on 10 February 2000 as Network Directions Plc and changed its name to Business Serve plc on 17 March 2000. REVIEW OF THE BUSINESS The company commenced trading on 13 March 2000. On 1 April 2000, the assets and liabilities of its subsidiaries, Not in Use Limited, V.NET UK Limited and Network Directions Company Limited, were transferred to Business Serve plc. Since incorporation the company has undergone complete restructuring. Whilst this has lead to considerable losses for the period, it has also put Business Serve plc onto a much surer footing moving forward. The restructuring work is now largely complete and the directors consider the financial position and the trading situation to be satisfactory. During the last 12 months the company has substantially increased its customer base and the board forecasts that the company will be trading profitably in the year 2001-2002. RESULTS AND DIVIDENDS The group trading loss for the period, after taxation, was £1,060,800. The directors are unable to recommend payment of a dividend. FUTURE DEVELOPMENTS In January 2001, as part of the restructuring, the directors made changes to the Company’s terms and conditions so that all sales are now based on a minimum two year contract. The business is therefore constantly driving future value into the business and this will be reflected in improved results in future years. DIRECTORSThe following directors have held office since 10 February 2000:
Directors’ interest in the ordinary share capital of the company, excluding options and including family interests, were as follows:
The interest of the directors in the shares of the subsidiary companies can be seen in those companies’ financial statements. The company has granted warrants to the directors and others to subscribe for ordinary shares of 1 pence each as follows:
The warrants granted to John Ashwell lapsed during the period, on the date of his resignation from the company. POLICY ON PAYMENT OF CREDITORS The company’s policy, which is also applied by the group, is to ensure that all suppliers are dealt with in accordance with its standard payment practice whereby all outstanding trade accounts are settled within the settlement terms advised by the supplier at the time of the supply. The average period of credit taken from the suppliers was 44 days. AUDITORS Baker Tilly, Chartered Accountants, were appointed as auditors during the period. A resolution for reappointment will be put to the members at the Annual General Meeting. Approved by the Board on 20 June 2001. Insert signature S Cleaver Director
DIRECTORS’ RESPONSIBILITIESCompany law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing those financial statements, the directors are required to: The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the requirements of the Companies Act 1985. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. AUDITORS’ REPORT TO THE MEMBERS OF BUSINESS SERVE PLCRespective responsibilities of directors and auditors As described on page 5 the company’s directors are responsible for the preparation of financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurances that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the company and the group at 31 March 2001 and of the group loss for the period then ended and have been properly prepared in accordance with the Companies Act 1985. Signature Baker Tilly 20 June 2001 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the period ended 31 March 2001
The operating loss for the year arises from the group’s continuing operations. No separate Statement of Total Recognized Gains and Losses has been presented as all such gains and losses have been dealt with in the Profit and Loss Account.
GROUP BALANCE SHEET31 March 2001
Approved by the Board on 20 June 2001 Signature Signature COMPANY BALANCE SHEET31 March 2001
Approved by the Board on 20 June 2001 Signatures Rt. Hon Lord Baker of Dorking GROUP CASH FLOW STATEMENTFor the period ended 31 March 2001
ACCOUNTING POLICIESBASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention in accordance with applicable accounting standards. BASIS OF CONSOLIDATION The group financial statements consolidate the financial statements of Business Serve plc and its subsidiary undertakings drawn up to 31 March 2001. No profit and loss account is presented for Business Serve plc as provided by S230(3) of the Companies Act 1985. TURNOVER Turnover represents the invoiced value, net of Value Added Tax, of goods sold and services provided to customers outside the group. It consists of subscription fees covering, as standard, a twelve month period and it is recognised in the financial statements at the point of invoicing. An assessment of the direct costs for that part of the sales relating to months outside of the financial period is made and, where necessary, provision made accordingly. TANGIBLE FIXED ASSETS Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the costs of each asset over its estimated useful life. The rates of depreciation used were as follows:
INVESTMENTS Unlisted investments are stated at cost. Provision is made for any permanent diminution in the value of fixed asset investments. DEFERRED TAXATION Provision is made for taxation deferred or accelerated by the effect of timing differences, to the extent that it is probable that a liability will crystallize, at the rate expected to be ruling at that date. GOODWILL Goodwill, representing the excess of the purchase price compared with the fair value of assets acquired is capitalized and written off over twenty years as in the opinion of the directors this represents the period over which the goodwill is effective. STOCK Stock is valued at the lower of cost and net realisable value. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. Provisions are made for obsolete and slow moving items. LEASED ASSETS AND OBLIGATIONS Where assets are financed by leasing agreements that give rights approximating to ownership (‘finance lease’) the assets are treated as if they have been purchased outright. The amount capitalized is the present value of the minimum lease payments payable during the lease term. The corresponding leasing commitments are shown as obligations to the lessor. Lease payments are treated as consisting of capital and interest elements and the interest is charged to the profit and loss account in proportion to the remaining balance outstanding. All other leases are ‘operating leases’ and the annual rentals are charged to the profit and loss account on a straight line basis over the lease term. PENSION CONTRIBUTIONS The pension costs charged to the financial statements represents the contributions payable by the company during the year in accordance with SSAP24.
NOTES TO THE FINANCIAL STATEMENTSFor the period ended 31 March 2001 1 TURNOVER AND LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION The group’s turnover and loss before taxation are attributable to the principle activities of the group, wholly undertaken in the United Kingdom
The company owns more than 20% of the issued ordinary shared capital of the following undertakings:
During the period the group acquired 100% of the issued share capital of Not In Use Limited, V.NET UK Limited and The Network Direction Company Limited, along with 90% of The Search Engineers Limited. The assets and liabilities at acquisition were:
(i) The Network Direction Company Limited Note (a) The consideration and goodwill shown for V.NET UK Limited also relates to Not In Use Limited. The amounts were not split between the companies. The Network Directions Company was acquired on 13 March 2000. Not In Use Limited and V.NET UK Limited were acquired on 15 March 2000. The Search Engineers Limited was acquired on 16 March 2000.
On 13 March 2000, 52, 542 ordinary shares of £1 were issued for consideration of %100 of the issued share capital of Network Directions Company Limited. This is treated as an acquisition and the results of the company have been incorporated in these financial statements. On 14 march 2000, 8,396 ordinary shares of £1 were issued for consideration of £108, 308, giving rise to a premium of £99, 912. On 14 March 2000, a special resolution was passed in which it was resolved to subdivide each authorized and issued £1 ordinary share into 100 1p shares. A special resolution was then passed to redesignate 2,770,000 1p ordinary shares 1p ordinary shares as 1p "A" Ordinary shares on 15 March 2000. On 15 March 2000, 2,399,928 "A" Ordinary shares of 1p were issued for consideration of £2,245,920 giving rise to a premium of £2,401,921 On 15 March 2000, 2,216,000 ordinary shares of 1p were issued for consideration of 100% of the issued share capitals of Business Serve Limited and V.NET UK Limited. This has been treated as an acquisition and the results of these companies have been incorporated in these financial statements. On 16 March 2000, 370,072 "A" Ordinary shares of 1- each were issued for consideration of £374,080, giving rise to a premium of £370,379 On 9 November 2001, 221,600 ordinary shares of 1p and 865,348 "A" ordinary shares of 1p were issued for consideration of £781,000 cash and the capitalization of loans to the value of £200,000, giving rise to a premium of £970,130 On 20 November 2001, 27,700 "A" Ordinary shares of 1p each were issued for consideration of £25,000, giving rise to a premium of £24,723 On 25 December 2001, 214,952 "A" Ordinary shares of 1p each were issued for consideration of £194,000, giving rise to a premium of £191,850. Ordinary shares and "A" ordinary shares rnak pari pasu in all matters except that "A" ordinary shareholders have the following additional rights;
17 CASH FLOWS
20 PENSION COSTS The group operates a number of defined contribution pension schemes for hte benefit of qualifying employees the assets of which are held seperately from those of the group in independently administered funds. The pension cost charge includes £30,403, representing contributions payable by the group during the year. 21 RELATED PARTY TRANSACTIONS At 31 March 2001, M Hallam and S Forrest , both directors of the company, had loan notes outstanding with the company and were owed £337,428 and £342,328 respectively. Interest amounting to £55,724 has been accrued in the accounts in relation to these loans. The company has traded during the period with Response Direct Publishing Limited (RDP), a compnay in which S Cleaver is a director and a material sharholder of Acegrid Limited, its parent company. Business Serve Plc made purchases of £45,055 from the company and was also charged £56,400 for the costs incurred by RDP regarding the initial set up of the group. At the year end £4,817 was owed to RDP.
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