Green Compliance PLC : Preliminary Results

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27 September 2013                                                                                              

Green Compliance plc

("Green Compliance" or the "Group")

Preliminary Results for the 12 months ended 31 March 2013

Green Compliance provides compliance services across the water hygiene, pest prevention and fire protection segments to a wide range of clients in both the UK public and private sectors.  The Group is pleased to announce its preliminary results for the 12 months ended 31 March 2013.

Financial Highlights

?       Revenue of £16.1m from continuing operations  (2012: £21.2m)

?       Operating loss (before exceptional items, share based payments and amortisation of intangibles) from continuing operations of £1.0m (2012: profit of £2.0m)

?       The group made a loss after tax of £12.0m (2012: £3.3m loss).  This was after charging £6.1m (2012: £3.2m) of amortisation, £3.9m (£2012: £nil) impairment of goodwill in relation to the sale of the Fire division and £0.1m (2012: £0.2m) of share based payment expense to the income statement, all of which are non-cash.

September 2013 re-financing

?       Net bank debt at 26 September 2013 of £7.4m

?       EGM on 26 September 2013 approved £3.5m placing

?       £2.75m of placing proceeds will be paid to bank in full and final settlement of all outstanding bank debt

?       Post settlement of bank debt Company will have no credit facilities with the Bank

?       Available working capital subsequent to settlement with the bank will be a minimum of £1m made up of net placing proceeds and a £650,000 shareholder working capital loan

Operational highlights

?       Intensive and productive turnaround activity since January re-financing

?       Sales effort refocused and sales strategy simplified resulting in significant new contracts won, significant contracts renewed, and cross selling success.

?       'Salesforce' fully rolled out as opportunity to invoice cloud based operational platform

?       New website launched

?       Costs reduced: £1m of annualised cost taken out, full impact yet to be felt

?       Loss making fire division sold for £1.5m cash (plus £0.5m deferred) representing 67p to £1 revenue on cash consideration

Commenting on the results, Bob Holt, Chairman & CEO of Green Compliance, said:

"We have made good progress across the Group during the last nine months in our turnaround strategy.

This strategy so far has concentrated on three areas.  First was sales focus and this has begun to show great results with new contracts won and existing contracts renewed, stabilising the annuity revenue of the business.  Secondly we have taken £1m of annualised cost out whilst improving our operating structure with the arrival of new staff and systems.  Thirdly we sold part of a division with the obvious positive impact on net debt.

Most recently we are very pleased to have completed the placing of £3.5m and are extremely grateful for the continuing support of our major shareholders that have made this possible.  Part of the proceeds of this placing will be used for full and final settlement of the outstanding debt with the Bank and the remainder will be used for working capital.  We also have signed a £650,000 shareholder working capital facility.

Due to all of this activity we continue to be entirely confident of the Group's prospects and our strategy to grow organically. The group is now well placed to take advantage of opportunities that exist in the sectors in which it operates. 

We would like to thank all of our employees for their efforts in moving the business forward. We remain motivated and determined to continue to look to consolidate and strengthen our business."

The Company's annual report and accounts for the year ended 31 March 2013will be posted to shareholders on 27 September 2013 and will shortly be available from the Company's website at www.greencomplianceplc.com

About Green Compliance	www.greencomplianceplc.com			ticker: GCO.L  GCO.LN
Enquiries:
Green Compliance plc
Bob Holt, Chief Executive Officer			Tel: [phone]
Richard Hodgson, Finance Director			Tel: [phone]
N+1 Singer
Andrew Craig / Ben Wright		Tel: [phone]
Gable Communications Limited
John Bick/Justine James			Tel : [phone] or [phone] Email: [e-mail]

CHAIRMAN'S AND CHIEF EXECUTIVE STATEMENT
For the year ended 31 March 2013

Green Compliance made an operating loss, before exceptional items, share based payments and amortisation, from continuing operations of £1m (2012: profit of £2.0m) on revenue of £16.1m (2012: £21.2m) during the 12 months to 31 March 2013. 

SALES FOCUS

In the year we have changed our sales personnel, leadership and methods. We have re launched the Green Compliance brand through smart marketing initiatives including a new website.

We have completed the full roll out of 'salesforce' both as our CRM system but also as our service delivery platform.  This gives us and our customers' unrivalled real time access to operational, sales and opportunity data.

Due to this activity the group has secured significant new contracts with clients who will provide excellent long term contract lines of income.  Very little of this revenue is yet to be reflected in the results.

In addition the group has managed to renew major contracts with existing customers. Our integration and innovative new systems mean that we can achieve the highest levels of service and therefore compliance for our customers.  These existing customers then provide a fantastic platform for growth. 

COST REDUCTION

We have reduced annualised costs by £1m including a significantly reduced head office structure.  The full impact of this is to significantly reduce our operating leverage and has not been fully felt due to notice periods.

We now have a scalable structure into which significant revenue can be sold.  Due to the fixed cost of this structure this additional revenue has a very positive impact on margin.

SALE OF FIRE PROTECTION DIVISION

Following a strategic review of the services that the group provided we concluded that the provision of fire extinguisher and fire alarm service and maintenance did not form a core part of the future service provision.  In addition we recognised that to achieve sensible margins in this field would require further investment.

As a result of this we sold that business for total consideration of £2m (£1.5m in cash and £0.5m in deferred consideration).  This represented a gross consideration of 88p per £1 of revenue (or 67p per £1 on initial consideration).

The purpose of this has been to reduce net bank debt.

GOING CONCERN

The group incurred a loss of £12 million (after intangibles amortisation of £6.1m in respect of continuing operations and a goodwill impairment of £3.9m in respect of the fire division) and reported cash outflows of £1.8 million before financing activities.

Whilst the directors recognise the positive progress that has been made as a result of the turnaround plan put in place at the beginning of 2013 pressure continues to be placed upon the group's cash flow and working capital.

This has required the Director's, along with key stakeholders, to re-evaluate the group's strategy and seek additional funding to support the immediate working capital needs of the group. On 11 September 2013 the board announced a conditional Placing of 350,000,000 new Ordinary Shares at 1 pence each to raise £3.5 million before expenses. These funds were received by the Group on 27 September 2013.

As part of the turnaround plan, discussions were held with HSBC to renegotiate the bank debt. At 31 March 2013, this comprised a bank loan of £7.4m and an overdraft of £1.6m. As announced on 11 September 2013, HSBC have agreed to accept £3.0m in settlement of the outstanding debt, which at 30 September 2013 stood at £7.4m.

The settlement amount comprises £2.75m in cash which has been raised from the Placing (see above) and the assignment of £250k deferred consideration potentially recoverable from the sale of the Fire Division.

Subsequent to the repayment made to HSBC, the Group has secured a working capital facility from a shareholder  of £650,000. This facility expires in September 2014 and has a coupon of 7.5% pa. The Group has also agreed a term sheet to secure a further working capital facility from an unrelated party of up to £750k. In addition and after the settlement to HSBC, the Group has £350,000 of net proceeds from the Placing to apply to the Group's working capital needs. These facilities, coupled with the residual proceeds from the Placing are sufficient based on cashflow forecasts to enable the Group to continue as a going concern for at least a period of 12 months from the date the financial statements are signed.

The debt waiver accepted by HSBC may give rise to a corporation tax charge. Whilst the payment of this corporation tax liability falls beyond 12 months from the signing of these financial statements, the Directors are aware that this could place a significant strain on the Group's on-going working capital needs. However, as a result of the operational improvements having been made throughout the Group, the expectation that sales will increase (partly on the back of new contracts already having been secured) and a de-geared balance sheet, the Directors are confident that this potential liability can be managed.

LOSS OF CAPITAL

Green Compliance plc's results show that the company's net assets are less than half of its paid up share capital. This is largely a result of the write off and impairment of investments in subsidiary undertakings. In these circumstances, the directors are obliged by section 656 of the Companies Act 2006 to convene a general meeting for the purpose of considering whether any, and if so, what steps should be taken to deal with the Company's current financial position. Management have sought to address with the restructuring of the debt and the refinancing of the business discussed above. Management also propose to consider this matter at the Company's annual general meeting.

OUTLOOK

Subject to the completion of the re financing and following a period of significant reorganisation the group is well placed to take advantage of opportunities that exist in the sectors in which it operates.

Bob Holt

27 September 2013

FINANCIAL REVIEW
For the year ended 31 March 2013

STATEMENT OF COMPREHENSIVE INCOME

Revenue from continuing operations for the period was £16.1m (2012: £21.2m).

The group made a loss after tax of £12.0m (2012: £3.3m loss).  This was, however, after charging £6.1m (2012: £3.2m) of amortisation, £3.9m (£2012: £nil) impairment of goodwill in relation to the sale of the Fire division and £0.1m (2012: £0.2m) of share based payment expense to the income statement, all of which are non-cash.

Operating loss before amortisation, share based payments and exceptional items was £1m (2012: profit of £2.0m). 

In the year ended 31 March 2013 we charged £6.1m (2012: £3.2m) of non-cash amortisation to the income statement, relating to the amortisation of the intangible assets acquired with the acquisitions.  The intangible assets mainly relate to customer lists and are being amortised over the average life of the customer base for each acquisition.

Also in this period we have charged £0.1m (2012: £0.2m) to the income statement in respect of share based payments in relation to the share options granted to senior management in prior years.

Finance costs are predominantly in relation to the bank facilities with HSBC and rolled up interest on loan notes settled in the period.  There was a non cash tax credit in the year ended 31 March 2013 of £1,750k (2012: £720k), mainly relating to the amortisation of the deferred tax liability created on acquisition of the customer lists and the release of this liability following the impairment of the customer list asset.

In the year ended 31 March 2013 discontinued items relate to the Fire businesses sold on 5 July 2013.

STATEMENT OF FINANCIAL POSITION

Net assets at 31 March 2013 were £1.4m (2012: £11.7m).  This includes goodwill of £9.7m (2012:£13.5m) and other intangible assets of £1.5m (2012: £9.2m).

Cash and cash equivalents totalled £1.6m (2012: £0.04m), trade receivables were £2.8m (2012: £5.5m) and trade payables were £2.2m (2012: £2.3m). 

We have deferred consideration payable over the next 12 months of £670k.  This will be satisfied through cash generation and the working capital facilities referred to above.

STATEMENT OF CASH FLOWS

Cash generated by continuing operations before finance costs and exceptional costs during the year was £1.1m (2012: loss of £1.0m).  Significant progress has been made throughout the last 12 months in driving down debtor days.

LOSS PER SHARE

Normalised basic loss per share ('LPS') for the year ended 31 March 2013 of 2.00p (2012: 1.40p earnings per share restated as per note 5) is stated before amortisation of intangible assets and exceptional items but after expensing a normalised tax charge. We believe that this normalised basic LPS measure better allows the assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future performance.

Richard Hodgson

27 September 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2013

		Year ended 31 March 2013 Total	Year ended 31 March 2012 Total
	Note	£000	£000
Continuing operations:
Revenue		16,060	21,232
Cost of sales		(10,485)	(13,082)
Gross profit		5,575	8,150
Administrative expenses		(12,908)	(11,251)
Operating (loss)/profit before exceptional items, share based payments and amortisation of intangibles		(1,005)	1,989
Exceptional items		(120)	(1,681)
Share based payments		(78)	(214)
Amortisation of intangibles		(6,130)	(3,195)
Operating loss		(7,333)	(3,101)
Finance costs		(381)	(561)
Loss from continuing operations before taxation		(7,714)	(3,662)
Income tax credit	4	1,750	720
Loss after taxation		(5,964)	(2,942)
Discontinued operations:
Loss for the period from discontinued operations		(6,008)	(353)
Loss for the year attributable to equity holders		(11,972)	(3,295)
Other comprehensive income		-	-
Total comprehensive expense for the year		(11,972)	(3,295)
Basic and diluted loss per share on discontinued activities (pence)	5	(6.50)	(0.48)
Basic and diluted loss per share on continuing activities (pence)	5	(6.45)	(4.04)
Basic and diluted loss per share on all activities (pence)	5	(12.95)	(4.53)
Prior year loss per share before share reorganisation
Basic and diluted loss per share on discontinued activities (pence)			(0.97)
Basic and diluted loss per share on continuing activities (pence)			(8.08)
Basic and diluted loss per share on all activities (pence)			(9.05)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 March 2013

	Note	At 31 March 2013	At 31 March 2013
		£000	£000
ASSETS
Non-current assets
Intangible assets	8	11,144	22,751
Property, plant and equipment		245	351
		11,389	23,102
Current assets
Inventories		255	377
Trade and other receivables		3,630	5,808
Cash and cash equivalents		1,584	41
Total current assets		5,469	6,226
Assets held for sale		1,680	-
Total assets		18,538	29,328
LIABILITIES
Current liabilities
Trade and other payables		(5,028)	(5,142)
Deferred consideration		(670)	(1,088)
Bank and other loans		(887)	(1,313)
Total current liabilities		(6,585)	(7,543)
Liabilities held for sale		(180)	-
Non-current liabilities
Bank and other loans		(9,743)	(7,459)
Deferred consideration		-	(250)
Deferred tax		(633)	(2,383)
Total non-current liabilities		(10,376)	(10,092)
Total liabilities		(17,141)	(17,635)
Net assets		1,397	11,693
Shareholders' equity
Called up share capital	6	19,099	18,204
Share premium account		4,773	4,070
Capital contribution		900	900
Merger reserve		898	898
Share based payment reserve		509	431
Profit and loss reserve		(26,162)	(14,190)
Capital redemption reserve		1,380	1,380
Attributable to equity holders of the company		1,397	11,693

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2013

	Share capital	Share premium	Profit and loss reserve	Capital redemption reserve	Share based payment reserve	Capital contri-bution	Merger reserve	Equity
	£000	£000	£000	£000	£000	£000	£000	£000
Balance as at 1 April 2011	19,574	4,070	(10,895)	-	217	900	898	14,764
Share based payment	-	-	-	-	214	-	-	214
Deferred consideration settled in shares	10	-	-	-	-	-	-	10
Share buy back	(1,380)	-	-	1,380	-	-	-	-
Transactions with owners	(1,370)	-	-	1,380	214	-	-	224
Loss for the period	-	-	(3,295)	-	-	-	-	(3,295)
Total comprehensive expenditure for the period	-	-	(3,295)	-	-	-	-	(3,295)
Balance as at 31 March 2012	18,204	4,070	(14,190)	1,380	431	900	898	11,693
Share based payment	-	-	-	-	78	-	-	78
Share issue	895	894	-	-	-	-	-	1,789
Share issue costs	-	(191)	-	-	-	-	-	(191)
Transactions with owners	895	703	-	-	78	-	-	1,676
Loss for the period	-	-	(11,972)	-	-	-	-	(11,972)
Total comprehensive expenditure for the period	-	-	(11,972)	-	-	-	-	(11,972)
Balance as at 31 March 2013	19,099	4,773	(26,162)	1,380	509	900	898	1,397

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2013

	31 March 2013 £000	31 March 2012 £000
Cash flows from operating activities
Loss for the period before taxation	(7,714)	(3,662)
Depreciation of property, plant and equipment	71	66
Amortisation of intangible assets	6,130	3,195
Share-based payment charge	78	214
Net finance costs	381	561
Decrease/(increase) in trade and other receivables	2,182	(607)
Decrease/(increase) in inventories	122	(60)
Increase/(decrease) in trade and other payables	81	(739)
Net cash generated from /(used by) continuing operations	1,331	(1,032)
Discontinued operations
Loss for the period	(6,008)	(353)
Depreciation of property, plant and equipment	-	-
Amortisation of intangible assets	690	-
Impairment of intangible assets	3,949	73
Working capital movement re disposal group	(616)	1
Net cash used by discontinued operations	(1,985)	(279)
Net cash used by operations	(654)	(1,311)
Finance costs paid	(381)	(561)
Income taxes received/(paid)	(178)	(188)
Net cash used by operating activities	(1,213)	(2,060)
Cash flows from investing activities
Acquisition of subsidiaries	-	(787)
Deferred consideration paid	(598)	(2,325)
Bank balance acquired with subsidiaries	-	373
Purchase of property, plant and equipment	(1)	(113)
Purchase of software	(11)	(24)
Purchase of property, plant and equipment by disposal group	(20)	-
Net cash used in investing activities	(630)	(2,876)
Cash flows from financing activities
Gross proceeds from issue of ordinary shares	1,789	-
Share placing costs	(191)	-
Increase in borrowings	1,828	3,865
Repayment of hire purchase	(40)	(94)
Net cash generated from financing activities	3,386	3,771
Net increase/(decrease) in cash and cash equivalents	1,543	(1,165)
Cash and cash equivalents at beginning of the period	41	1,206
Cash and cash equivalents at end of the period	1,584	41

1          Basis Of PrepARATION

The Group financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).The Company's shares are listed on the AIM market of the London Stock Exchange. 

The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

2          FUNDING AND GOING CONCERN

During the year the bank facility was increased to include a new £9m revolving credit facility and a £0.5m overdraft facility. The group has operated within its facility throughout the year. On 11 September 2013 the board announced a conditional Placing of 350,000,000 new Ordinary Shares at 1 pence each to raise £3.5 million before expenses. These funds were received by the Group on 27 September 2013.

As part of the turnaround plan, discussions were held with HSBC to renegotiate the bank debt. At 31 March 2013, this comprised a bank loan of £7.4m and an overdraft of £1.6m. As announced on 11 September 2013, HSBC have agreed to accept £3.0m in settlement of the outstanding debt, which at 30 September 2013 stood at £7.4m. The settlement amount comprises £2.75m in cash which has been raised from the Placing (see above) and the assignment of £250k deferred consideration potentially recoverable from the sale of the Fire Division (see note 7).

Subsequent to the repayment made to HSBC, the Group has secured a working capital facility from a shareholder  of £650,000. This facility expires in September 2014 and has a coupon of 7.5% pa. The Group has also agreed a term sheet to secure a further working capital facility from an unrelated party of up to £750k. In addition and after the settlement to HSBC, the Group has £350,000 of net proceeds from the Placing to apply to the Group's working capital needs. These facilities, coupled with the residual proceeds from the Placing are sufficient enable the Group to continue as a going concern for at least a period of 12 months from the date the financial statements are signed.

The debt waiver accepted by HSBC may give rise to a corporation tax charge. Whilst the payment of this corporation tax liability falls beyond 12 months from the signing of these financial statements, the Directors are aware that this could place a significant strain on the Group's on-going working capital needs. However, as a result of the operational improvements having been made throughout the Group, the expectation that sales will increase (partly on the back of new contracts already having been secured) and a de-geared balance sheet, the Directors are confident that this potential liability can be managed.

3          segmental reporting

With effect from 1 April 2009, the group adopted IFRS 8, 'Operating Segments'. This accounting standard, which replaced IAS 14 'Segment Reporting', requires a 'through the eyes of management' approach to the reporting of segmental information; consequently segmental information is presented on the same basis as for internal reporting purposes. Given the changes in the group's activities over the last year, it is to be expected that the approach to segmental reporting is evolving to be fully aligned with the group's activities; however, the group's chief operating decision makers ('CODM'), comprising the three executive directors, review the internal financial reports highlighting the current performance of the operating subsidiaries and the level of central costs in order to make decisions about the allocation of resources. Performance is evaluated on actual operating results.

Discontinued operations as reported for the year ended 31 March 2013 and 2012 represent operating activities in respect of the protection portion of the fire division which were sold on 5 July 2013. 

Following the acquisitions made in the 2010/11 financial year, the segments of the group now comprise water compliance, fire compliance and pest compliance. The group is managed on this segmental basis with each segment having its own managing director.

The revenue analysis below is net of intersegment sales which are not considered significant. No single customer accounted for more than 10% of external revenue in 2012 or 2013.

Geographical segments

Predominantly all of the group's operations are located in the United Kingdom. The group considers all operations form part of that single reportable geographical segment.

Segmental information is analysed as follows for the year ended 31 March 2013:

	Fire (contin-uing)	Pest	Water	Central	Total	Fire	Pest	Water	Central	Total
	2013	2013	2013	2013	2013	2012	2012	2012	2012	2012
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Revenue from external customers	1,161	5,011	9,880	8	16,060	3,112	5,772	12,291	57	21,232
Expenses	(728)	(5,596)	(9,726)	(1,015)	(17,065)	(2,792)	(5,340)	(9,761)	(1,350)	(19,243)
Operating profit/(loss) before exceptional costs, share based payments and amortisation	433	(585)	154	(1,007)	(1,005)	320	432	2,530	(1,293)	1,989
Exceptional costs	(1)	(75)	-	(44)	(120)	-	-	-	(1,681)	(1,681)
Amortisation	-	-	-	(6,130)	(6,130)	(1,538)	(908)	(728)	(21)	(3,195)
Share based payments	-	-	-	(78)	(78)	-	-	-	(214)	(214)
Operating profit/(loss)	432	(660)	154	(7,259)	(7,333)	(1,218)	(476)	1,802	(3,209)	(3,101)
Finance costs	(1)	-	-	(380)	(381)	(9)	(6)	(39)	(507)	(561)
Profit/(loss) for the period before tax	431	(660)	154	(7,639)	(7,714)	(1,227)	(482)	1,763	(3,716)	(3,662)

The 2012 results and segment assets in respect of the Fire division mainly relate to discontinued operations. The contribution of the continuing Fire Operations in 2012 are not material to this disclosure. 

	2013	2012
	£000	£000
Segment assets (excluding discontinued operations in 2013)
Fire division	494	2,244
Pest division	1,679	1,396
Water division	3,478	6,373
Central	11,207	19,315
	16,858	29,328

4          income tax credit

	2013	2012
	£000	£000
The tax credit represents:
United Kingdom corporation tax at 24% (2012: 26%)	-	77
Adjustments in respect of prior periods	-	7
Total current tax charge	-	84
Total deferred tax (credit)	(1,750)	(804)
Total tax (credit)	(1,750)	(720)

5          Earnings PER SHARE

A normalised EPS is disclosed in order to show performance undistorted by amortisation of intangibles, share based payments  and non-recurring exceptional operating items. Due to the share reorganisation in January 2013 (see note 17) numbers have been restated as if the share issue had happened on 1 April 2011. The loss per share before and after adjustments for basic and diluted is as follows:

	2013	2012
		(restated)
	£000	£000
Attributable to the owners of the Company
- Continuing activities	(5,964)	(2,942)
- Discontinued activities	(6,008)	(353)
(Loss) used for continuing and discontinued EPS	(11,972)	(3,295)
Normalised EPS
- Loss on continuing activities before taxation	(7,714)	(3,662)
- Amortisation of intangible assets	6,130	3,195
- Exceptional Finance costs	-	168
- Exceptional items	120	1,681
Normalised tax credit	(381)	(359)
Normalised (loss)/profit for the year	(1,845)	1,023
Weighted Average number of shares	92,425,381	72,816,000
Loss per share (basic and diluted)
- On continuing activities	(6.45)	(4.04)
- On discontinued activities	(6.50)	(0.48)
- On all activities	(12.95)	(4.53)
Normalised (loss)/earnings per share (basic)	(2.00)	1.40

6          share capital

Ordinary shares
Allotted, called up and fully paid	Number (million)		£000
	2013	2012	2013	2012
Ordinary shares of 50p each	-	36.41	-	18,204
Ordinary shares of 1p each	125.88	-	1,259	-
Deferred shares of 49p each	36.41	-	17,840	-
	162.29	36.41	19,099	18,204

The movement in ordinary and deferred shares during the year was as follows:

	Number (million)	Nominal amount	Share premium
		£000	£000
As at 1 April 2011	1,957.4	19,574	4,070
Payment of deferred consideration	1	10	-
Share consolidation Aug 2011	(1,783.99)	-	-
Share buy back	(138)	(1,380)	-
As at 31 March 2012	36.41	18,204	4,070
Share issue	89.47	895	894
Share reorganisation Jan 2013	36.41	-	-
Share issue costs	-	-	(191)
As at 31 March 2013	162.29	19,099	4,773

On 26 January 2013 the group reorganised its share capital so that each existing 50p Ordinary share became subdivided into one 1p Ordinary share and one 49p deferred share.

The Ordinary Shares  have the same rights (including voting and dividend rights) as each existing Ordinary Share had.

The Deferred Shares carry minimal rights. The rights attaching to the Deferred Shares can be summarised as follows:

(i) the holders thereof do not have any right to participate in the profits or income or reserves of the Company;

(ii) on a return of capital on a winding up the holders thereof will only be entitled to an amount equal to the nominal value of the Deferred Shares but only after the holders of Ordinary Shares have received £10,000 in respect of each Ordinary Share;

(iii) the holders thereof have no right to receive notice of or attend or vote at any general meeting of the Company; and

(iv) the Company may acquire the Deferred Shares for a nominal consideration at any time.

No application will be made to the London Stock Exchange for the Deferred Shares to be admitted to trading on AIM or any other stock exchange. There are no immediate plans to purchase or to cancel the Deferred Shares.

On 10 January 2013 the company announced the placing of 78,823,328 ordinary shares at 2 pence per share raising proceeds of £1,789k before share issue costs of £191k. Placees also received a warrant to subscribe for 2 new ordinary shares of 1p each for every share for which they had subscribed pursuant to the placing, and an open offer of ordinary shares on the basis of 7 new ordinary shares for every 10 existing ordinary shares at 2p. 10,644,563 shares were placed in respect of the open offer. The total shares placed was 89,467,891.

7          Discontinued operations

At 31 March 2013, management were actively marketing certain trade and assets within the Fire Division for sale. Consequently, these assets and liabilities have been classified as a disposal group. Revenue and expenses and gains and losses associated with this group have been removed from the continuing operations shown in the Group Statement of Comprehensive Income and are shown in a single line at the bottom of the statement as discontinued operations.

On 5 July 2013 the majority of the trade and assets of the Fire Division were sold to London Securities Limited for total consideration of £2m (£1.5m in cash and £0.5m in deferred consideration). Of the deferred consideration, up to £250k has been assigned to HSBC as further settlement on net debt with the remaining £250k attributable to the Group providing certain performance conditions are met. The directors have considered the fair value of this deferred consideration in accordance with IAS 39 and consider that it is not material to the Group Financial Statements.

		31 March 2013
		£000
Revenue		2,285
Cost of sales		(1,607)
Gross profit		678
Amortisation of intangibles		(690)
Impairment of goodwill		(3,949)
Administrative expenses		(2,047)
Operating loss		(6,008)
Finance costs		-
Loss before taxation		(6,008)

The fair value of assets and liabilities in this disposal group are as follows:

		31 March 2013
		£000
Non - Current assets
Goodwill		-
Intangible assets Property, plant and equipment		849 56
Current assets
Inventories		80
Trade and other receivables		695
Cash and cash equivalents		-
Assets classified as held for sale		1,680
Current liabilities
Trade and other payables		(180)
Liabilities classified as held for sale		(180)

In line with accounting standards, management have compared the carrying value of the assets and liabilities held for sale in the disposal group to their fair values less costs to sell. This has resulted in the impairment of the goodwill associated with the fire businesses, held in the disposal group, of £3,901k and the impairment of intangible assets of £48k. All other assets and liabilities in the disposal group are stated at carrying value.

Cash outflows from operating activities relating to discontinued operations were £1,985k. There were no investment or financing cash flows in respect of discontinued operations.

8          Intangible assets

	Goodwill on consolidation	Purchased goodwill	Acquired customer lists	Customer contracts	Capitalised software costs	Total
	£000	£000	£000	£000	£000	£000
Cost
At 1 April 2011	13,542	237	12,967	290	45	27,081
Arising on acquisition of subsidiaries	995	596	874	-	24	2,489
Adjustments to prior year acquisitions	59	-	545	-	-	604
At 31 March 2012	14,596	833	14,386	290	69	30,174
Additions	-	-	-	-	11	11
Transferred to assets held for sale	(3,044)	(833)	(2,659)	-	(24)	(6,560)
At 31 March 2013	11,552	-	11,727	290	56	23,625
Amortisation/ Impairment
At 1 April 2011	1,810	-	2,181	140	24	4,155
Charge for the year	-	-	3,173	-	22	3,195
Impairment charge	73	-	-	-	-	73
At 1 April 2012	1,883	-	5,354	140	46	7,423
Charge for the year	-	-	6,670	150	-	6,820
Transferred to assets held for sale	-	-	(1,762)	-	-	(1,762)
At 31 March 2013	1,883	-	10,262	290	46	12,481
Net book amount at 31 March 2013	9,669	-	1,465	-	10	11,144
Net book amount at 31 March 2012	12,713	833	9,032	150	23	22,751

Purchased goodwill relates to acquisitions in which the group has acquired the trade and assets.

Goodwill is not amortised but is reviewed for impairment on an annual basis or more frequently if there are any indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated to groups of CGUs according to the level at which management monitors that goodwill. Goodwill is carried at cost less accumulated impairment losses. The CGUs monitored by management have been defined in the table below:

	2013	2012
	£000	£000
Water	5,737	5,737
Pest	3,692	3,692
Fire Detection and Suppression	240	240
Fire Protection	-	3,877
Total	9,669	13,546

An asset is impaired if its carrying value exceeds the unit's recoverable amount. At 31 March 2013 impairment reviews were performed by comparing the carrying value of the CGUs with the recoverable amount of the CGUs

to which goodwill has been allocated. The value in use is calculated based upon the discounted cash flow projections of the latest one-year budget forecast.  Thereafter, forecasts are extrapolated for five years using a growth rate applicable to each unit and an appropriate terminal value based on sale of the CGU for a multiple of final year EBITA. For the water division, no growth has been forecast in the first year budgets and a growth rate of 5.2% has been used thereafter in the extrapolated forecast for revenue and 3% for costs. For both the fire and pest division no growth rate has been forecast in the first year budget and a growth rate of 7.5% has been forecast thereafter in the extrapolated forecast for revenue and 3% for costs. A final year sale multiple of 5 times EBITA was used for all segments. In assessing an appropriate growth rate, management have also considered the investments made in new sales resource, the recent history of the acquired entities and the general market opportunity. The terminal multiple is within the range applicable in the business sectors in which the CGUs operate.

All three sectors operate in similar markets with similar customers and risk profiles.

The forecasts have been discounted at a rate of 9.4% which management consider to be an appropriate discount rate for the business at 31 March 2013 based on the Group's borrowing adjusted for the risks to the market in which the CGU's operate.

The Fire Protection division was disposed of on 5 July 2013 for initial cash proceeds of £1.5m and performance related deferred consideration of £0.5m. It is uncertain as to whether the deferred consideration of £0.5m will be received in respect of this disposal. Consequently, the goodwill relating to the portion of the fire division disposed of has been impaired to nil.

Customer contracts relate to Simon West and have been fully impaired in the year, following a review by management.

The intangible asset recognised as customer lists represents the expected value to be derived from expected cash inflows generated from existing customer relationships at the date of acquisition. Cash flows have been discounted at a weighted average cost of capital of 9.4%, a level which the directors consider is commensurate with the risks associated with capturing returns from the customer relationships. The valuation models have assumed a growth rate of 0% for the acquired customers and customer churn has been calculated based on the top 75% of customers historic relationship length.

At 31 March 2013, management have reviewed the amortisation periods of the customer lists.  In respect of the pest division, the customer lists have been reviewed during the year and management consider that the customer lists are no longer generating future benefits to the group. Consequently, these customer lists have been fully amortised during the year resulting in a charge of £2.7m.

In respect of the water division, the customer lists have been reviewed during the year and management consider that purchased customer lists will generate £1m of future value to the business over the next 2 years. Consequently £3.2m amortisation has been charged in the year and the remaining £1m will be amortised over the next 2 years.

Management consider the remaining amortisation period of the intangible assets in the fire detection business to be appropriate and amortisation of £92k has been charged in the year.

Details of impairment relating to the fire protection business intangible assets are included in note 7.

As a result of this review no impairment has been recognised in respect of the goodwill of the continuing operations.

9          publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The consolidated statement of financial position at 31 March 2013 and the consolidated statement of comprehensive income,  consolidated statement of changes in equity,  consolidated statement of cash flows and associated notes for the year then ended have been extracted from the Group's 2013 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

The accounts for the year ended 31 March 2013 will be posted to shareholders and laid before the company at the Annual General Meeting on 29 October 2013 at 9.00am at the offices of N+1 Singer, One Bartholomew Lane, London, EC2N 2AX. Copies will also be available on the Company's website (www.greencompliance.com) in accordance with AIM Rule 26.

This information is provided by RNS

The company news service from the London Stock Exchange

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