RNS announcement



LEO INSURANCE SERVICES PLC

13 May 2008

Leo Insurance Services plc ("LEO", the "Company" or the "Group")

Preliminary results for the year ended 31 January 2008

Chairman's Statement

In the year ended January 31 2008 the Group made a consolidated loss of £30,799 (2007: loss £174,989 including an exceptional administrative expense of £169,912).

Leo's only investment continues to be a 50% share of Grafton Insurance Services Ltd, a brokerage specialising in property insurance. It was announced during the year that one of Grafton's long term contracts with Bizspace Plc had been terminated. This leaves Safeland Plc as its principle customer with whom it is contracted for the next five years and whose portfolio continues to grow.

The board continues to search for growth both organically and via acquisitions.

LG Lipman

Chairman

CONSOLIDATED INCOME STATEMENT for the year ended 31 January 2008

The operating loss for the year arises from the group's continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 January 2008

CONSOLIDATED BALANCE SHEET 31 January 2008

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 January 2008

NOTES TO THE PRELIMINARY ANNOUNCEMENT for the year ended 31 January 2008

STANDARDS ISSUED BUT NOT YET EFFECTIVE

At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group when the relevant standards and interpretations come into effect.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

In preparing these financial statements, the group has elected to apply the transitional arrangements permitted by IFRS 1 "First-time adoption of International Financial Reporting Standards" as detailed below:

• business combinations prior to 1 February 2006 have not been restated   to comply with IFRS 3 "Business Combinations";

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of Leo Insurance Services plc, its subsidiary undertaking and the Group's share of profits and losses and net assets of its joint venture made up to 31 January each year.

JOINT VENTURES

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control.

Jointly controlled entities are accounted for using the equity method. Investments in joint ventures are carried in the balance sheet at the Group's share of the net assets of the joint venture.

OPERATING PROFIT

Operating profit is stated before share of results of joint ventures, interest and tax.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group has become a party to the contractual priorities of the instrument.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances and deposits held at call with banks. 

BORROWINGS

All borrowing costs are recognised in the income statement in the period in which they are incurred.

FINANCIAL LIABILITIES AND EQUITY

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

EQUITY INSTRUMENTS

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

TRADE RECEIVABLES

Trade receivables are classified as 'loans and receivables', are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired.

TRADE PAYABLES

Trade payables are classified as 'other financial liabilities', are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method.

DEFERRED TAXATION

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

SHARE BASED PAYMENT

The Group has applied the requirements of IFRS 2 Share based payment. The Group issues equity settled share based payments to certain employees and third parties. Equity settled share based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects on non-transferability, exercise restrictions and behavioural considerations.

SEGMENTAL REPORTING

A business segment is a group of assets and operations that provide a product or service and that is subject to risks and returns that are different from other business segments. A geographic segment is a group of assets and operations that provide a product or service within a particular economic environment and that is subject to risks and returns that are different from segments operating in different economic environments.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINITY

There are no critical accounting judgements or key sources of estimation and uncertainty.

Share rights

The redeemable preference shares provide for a fixed cumulative dividend at a rate of 6% per annum which accrued on a daily basis. The preference shares can be redeemed by the Company at any time on seven days written notice. The preference shares can be redeemed by the holder if the dividend is in arrears for at least 12 months or, in any event the shares are redeemable, upon the second anniversary of issue. If the preference shares are not redeemed by the appropriate date, the dividend rate will increase to 9% per annum. The preference shares do not confer a right to attend, speak or vote at any general meeting of the Company.  

Share options:

On 3 February 2005 L Lipman, E Lipman and P Davis were each conditionally granted options over 911,458 ordinary shares worth £175,000 as valued by reference to the average closing middle market quotation for an ordinary share for the three dealing days following admission. Each option is exercisable at the market value at the date of the grant, being the par value of 1p per share, at any time after 18 months and before 10 years following the date of grant. 

The Company has also granted options to subscribe for ordinary shares in the Company equivalent to 1% of the issued share capital on completion of an acquisition which exceeds 75% in any class test within the AIM rules. These options are only exercisable during the period from date of acquisition to the period ending 18 months after that date at a price equivalent to the issue price in connection with the acquisition.

As at 31 January 2008, the Company had 2,734,374 (2007: 2,734,374) outstanding unexpired options that are exercisable at 1p per ordinary share.

 6    INVESTMENT IN JOINT VENTURE

On 5 January 2006, the Company acquired 50 £1 "B" ordinary shares in Grafton Insurance Services Limited at par. The Company owns 100% of the "B" ordinary shares which represents 50% of the issued ordinary shares.

The principal activity of Grafton Insurance Services Limited is to trade as a property insurance broker.

The Group's share of the joint venture results and net assets are set out below.

This is the first year that the Group has presented its financial statements under IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 31 January 2008 and the date of transition to IFRSs was therefore 1 February 2007. 

i  IAS 31 - Change in presentation within the Income Statement regarding accounting for Joint Ventures.