Murgitroyd & Company Ltd.Liquidiert

Murgitroyd & Company Limited

Münster

Jahresabschluss zum Geschäftsjahr vom 01.06.2008 bis zum 31.05.2009

Directors' report and financial statements 31 May 2009

Contents

Directors' report

The directors present their report and the audited financial statements for the year ended 31 May 2009. Principal activities

The principal activities of the company are that of European Patent and Trade Mark Attorneys and the provision of technical support services.

Business review

Turnover increased 13% to £28.7 million (2008: £25.5 million). Operating profit rose by 5% to £2.9 million (2008: £2.8 million). Operating margin was reduced by the effect of a property devaluation of £0.4 million in the current year and an onerous lease provision of £0.2 million in the prior year.

Profit before tax increased by 3% to £2.5 million (2008: £2.4 million).

The gross margin of 63.5% (2008: 66.6%) fell due to pricing pressure in a highly competitive environment.

The Company trades within its trading and cash flow banking covenants, and the Company has headroom across all facilities. Competitively priced new facilities were secured with Clydesdale Bank to acquire Raworth Moss & Cook ("Raworth") in January 2009. These additional facilities are priced at LIBOR plus 2% and add to the other term loan debt priced at LIBOR plus 1%. The review of the Company's overdraft facility (annually in November) saw the pre-existing facility of £1.5 million renewed. Net debt as at 31 May 2009 was £7.0 million (2008: £8.2 million). The Company has benefitted from falling interest rates resulting in earnings and cash flow benefits to the Company. Net cash flow in the period was positive. The Board believes the Company's banking facilities are sufficient for current, and anticipated future, purposes. The Company will continue to closely manage cash flows as well as monitor interest rates.

Patent applications at the European Patent Office ("EPO") in the calendar year 2008 showed a 1.8% increase year-on-year as compared to 2007 despite the worsening global recession. Community Trade Mark applications year-on-year, between 2007 and 2008, were virtually unchanged, falling by 0.6%. The EPO has not yet published the statistics for Patents for 2009, but Community Trade Marks show a 5% fall in new applications in the six months to 30 June 2009. However the Group continues to see a robust number of opportunities to tender for portfolios of work, although clients are exerting increased price pressure.

Principal risks and uncertainties

The principal risks and uncertainties affecting the company include the following:

Key areas of strategic development and performance of the business include:

Key financial performance indicators, including the management of profitability and working capital, monitored on an ongoing basis by management are set out below.

Financial instruments

It is the company's policy not to enter into complex financial instruments.

Dividends

An interim dividend of £0.96 per share was paid during the year. The directors have proposed a final ordinary dividend in respect of the current financial year of £2.08, giving a total dividend of £3.04 per share (2008: £3.03). This has not been included within creditors as it was not approved before the year end.

Directors

The directors who held office during the year were as follows:

Charitable and political donations

The company made charitable donations during the year of £28,733 (2008: £27,168). There were no political donations.

Disclosure of information to auditors

The directors who held office at the date of approval of this directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware; and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Auditors

In accordance with Section 487 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc as auditors of the company is to be proposed at the forthcoming Annual General Meeting.

Statement of directors' responsibilities in respect of the directors' report and the financial statements

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

Report of the independent auditors to the members of Murgitroyd & Company Limited

We have audited the financial statements of Murgitroyd & Company Limited for the year ended 31 May 2009 set out on pages 6 to 20. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/UKNP.

Opinion on financial statements

In our opinion the financial statements:

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

Profit and loss account for the year ended 31 May 2009

A statement of movements on reserves is given in note 19.

There were no discontinued operations in the current or previous year (also refer to note 11).

Balance sheet at 31 May 2009

These financial statements were approved by the board of directors on 12 February 2010 and were signed on its behalf by:

Statement of total recognised gains and losses for the year ended 31 May 2009

Reconciliation of movement in shareholders' funds for the year ended 31 May 2009

Note of historical cost profits and losses for the year ended 31 May 2009

Notes (forming part of the financial statements)

1 Accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the company's financial statements.

Basis of preparation

The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules, modified to include the revaluation of buildings.

The company is exempt by virtue of s400 of the Companies Act 2006 from the requirement to prepare group accounts. These financial statements present information about the company as an individual undertaking and not about its group.

Fixed assets and depreciation

Depreciation is provided to write off the cost or valuation less the estimated residual value of tangible fixed assets by equal annual instalments over their estimated useful economic lives as follows:

Goodwill

Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) is capitalised. Goodwill is amortised to nil by equal annual instalments over its estimated useful life.

On subsequent disposal or termination of a business, the profit or loss on disposal or termination is calculated after charging the unamortised amount of any related goodwill.

The trade, assets and liabilities of subsidiary undertakings acquired in the current and prior year was subsequently transferred to the Company for their book value, which was less than their fair value. The cost of the Company's investment in these subsidiary undertakings reflected the underlying fair value of their net assets and goodwill at the time the subsidiary undertakings were acquired by the Company. As a result of the trade, assets and liabilities having been transferred to the Company, the underlying value of the Company's investment in the subsidiary undertakings fell below the amount at which it was being carried in the Company's accounting records. The Companies Act 2006 requires that such investments be written down accordingly, and that the amount of the write down be charged as a loss in the Company's profit and loss account. However, the directors consider that, as there has been no overall loss to the Company, it would fail to give a true and fair view to charge such diminution to the Company's profit and loss account and that the amount of such diminution should instead be reallocated to goodwill and the identifiable net assets now held directly by the Company. The effect of such treatment is to recognise in the Company's balance sheet the effective cost of the net assets and associated goodwill. The goodwill is shown in the Company's balance sheet as an intangible asset and amortised over its expected useful economic life. The effect of this departure from the Companies Act is to reduce the Company's profit for the year ended 31 May 2009 by £422,279 (2008: £282,680) and to increase the value of the goodwill in the Company's balance sheet by £7,665,172 (2008: £7,428,154).

Intangible fixed assets and amortisation

Intangible fixed assets purchased separately from a business are capitalised at their cost. Intangible assets acquired as part of an acquisition are capitalised at their fair value where this can be measured reliably and are amortised on a straight line basis over their useful economic lives.

Foreign currencies

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account.

Investments

Investments are included at cost less amounts written off.

Taxation

The charge for taxation is based on the profit for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.

Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19. A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not there will be suitable taxable profits from which the future reversal of the identifying timing differences can be deducted.

Turnover

Turnover represents the amounts (excluding value added tax) derived from the provision of goods and services to customers.

Cash flow statement

No statement of cash flows is presented as the company is a wholly owned subsidiary and a consolidated statement of cash flows is presented in the financial statements of its parent undertaking.

Work in progress

Work in progress represents costs incurred on specific client assignments prior to reaching a specific act which results in revenue being recognised. Work in progress is stated at the lower of direct cost and net realisable value. Cost comprises direct salary costs and a proportion of attributable overhead costs. Net realisable value represents estimated selling price less all estimated costs to complete.

Hire purchase contracts and leases

Assets acquired under hire purchase contracts are capitalised and the capital element of outstanding future hire purchase obligations are shown in creditors.

Costs in respect of operating lease rentals are charged to the profit and loss account on a straight line basis over the term of the lease.

Post retirement benefits

The company operates defined contribution pension schemes. The assets of the schemes are held separately from those of the company in an independently administered fund. The amount charged against profits represents the contributions payable to the schemes in respect of the accounting period.

Dividends on shares presented within shareholders' funds

Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements.

Financial instruments

The Company's financial assets and liabilities are recorded at historical cost except for foreign currency assets and liabilities as described above. Income and expenditure arising on financial instruments is recognised on an accruals basis and taken to the profit and loss account in the financial period in which it arises.

Share based payments

The share option scheme allows employees to acquire shares of the company's ultimate parent company. The fair value of options granted after 7 November 2002 and those not yet vested as at 1 June 2008 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.

Provisions

The company recognises a provision when the directors believe that the economic benefits of agreements it has entered into fall short of meeting the unavoidable costs of performing its obligations under such agreements.

2 Turnover

All turnover and profits before taxation are derived from the company's principal activities.

3 Profit on ordinary activities before taxation

4 Remuneration of directors

The emoluments of the highest paid director were £245,925 (2008: £244,866), and company pension contributions of £10,150 (2008: £10, 000) were made to a money purchase scheme on his behalf.

5 Staff numbers and costs

The average number of persons employed by the company (including directors) during the year, analysed by category, was as follows:

6 Other interest receivable and similar income

7 Interest payable and similar charges

8 Tax on profit on ordinary activities

The effective tax rate for the year is higher (2008: higher) than the standard rate of UK corporation tax (28%) (2008: 30%). The differences are explained below:

Reconciliation of tax charge

9 Dividends

The directors recommend that a final dividend of £2.081 per share (2008: £2.081 per share) be paid, a total dividend of £805,908 (2008: £805,908).

10 Tangible fixed assets

Included in the total net book value is £9,163 (2008: £34,272) in respect of assets purchased under hire purchase contracts. Depreciation for the year on these assets was £25,109 (2008: £26,812).

The company's interest in its freehold property at Scotland House, 165-169 Scotland Street, Glasgow was valued as at 31 May 2009 at £1,500,000 on the basis of open market value for existing use by Colliers CRE, independent chartered surveyors, in accordance with the Appraisal and Valuation Standards issued by the Royal Institute of Chartered Surveyors.

10 Tangible fixed assets (continued)

Particulars relating to revalued assets are given below.

11 Fixed asset investments

During the year the trade, assets and liabilities of Raworth Moss & Cook were acquired by the company. The book value and fair value of the net assets acquired is analysed below:

The profit before taxation of Raworth Moss & Cook for the period 1 May 2008 to 16 January 2009 was £178,000. As the company is managed on an office and functional basis, the post acquisition results of the previous Raworth Moss & Cook business have not been separately identified and disclosures under the requirements of FRS 3 are not available.

12 Intangible fixed assets

Goodwill arising on significant additions is reviewed separately and amortised over its useful economic life as appropriate. The useful economic life of acquisitions completed to date is twenty years. Website development costs are amortised over an estimated economic useful life of two years.

Goodwill recognised in the year related to the acquisition of Raworth Moss & Cook (note 11) and additional consideration paid in respect of prior year acquisitions (£48,000).

13 Work in progress

14 Debtors

15 Creditors: amounts falling due within one year

16 Creditors: amounts falling due after more than one year

The company has granted a standard security to Clydesdale Bank PLC over its freehold property in respect of outstanding bank borrowings. Clydesdale Bank PLC also has a bond and floating charge over the assets of the company.

Interest is paid on the term loans at a rate of 1% and 2% above LIBOR and are repayable in quarterly instalments with period repayment dates from 2012-2020. Details of the interest rates and terms for repayment of all of the loans are disclosed within the group financial statements.

Clydesdale Bank PLC has also provided a guarantee to the Loan Note holders in respect of the outstanding Loan Notes.

17 Provision for liabilities

The elements of the deferred taxation provision are:

A provision was created during the prior year to account for the onerous lease on a property acquired through the Fitzpatricks acquisition.

18 Called up share capital

19 Reserves

20 Commitments

21 Pensions

As explained in the accounting polices set out in note 1, the company operates defined contribution pension schemes. Contributions are charged to the profit and loss account as they are payable. The contributions of the company are equal to the contributions of the employee that are 3% or 5% of earnings, with a maximum of 5% being paid by the company where the employee's contribution is higher than 5%. Amounts payable by the company to the schemes were £418,806 (2008: £426,714) during the year. Contributions amounting to £Nil (2008: £Nil) were payable to the scheme.

22 Related party disclosures

During the year ended 31 May 2009 the company made sales of £134,000 (2008: £73,642) to Gizmo Packaging Limited, a company in which one of the directors has an interest. As at 31 May 2009 the outstanding amount owed by Gizmo Packaging Limited amounted to £66,000 (2008: £25,000).

Ian Murgitroyd and Edward Murgitroyd are directors and shareholders of both Artroyd Securities Limited and Murgitroyd & Company Limited. During the year Murgitroyd & Company Limited entered into an agreement with MTBW Nominees Limited (a nominee company holding shares on behalf of Artroyd Securities limited) whereby Murgitroyd & Company Limited was granted an option to buy MTBW Nominees Limited's 40% shareholding (which can increase to 50% on conversion of loan notes) in a joint venture company, Envoy International Limited ("Envoy") for a sum equal to 25% of the valuation subject to a minimum of £400,000. The option is available for six years; for the first four years of the agreement Murgitroyd & Company Limited will only be able to exercise the option if there is either (a) a sale or (b) a list of Envoy. For the remaining two year period, Murgitroyd & Company Limited will be able to exercise the option at any point in time. No premium was paid on execution of the option agreement.

Exemption has been taken from disclosing transactions with other group undertakings under paragraph 17 of Financial Reporting Standard 8.

23 Share options

Staff participate in an unapproved share option scheme of Murgitroyd Group PLC under which options over shares in Murgitroyd Group PLC have been granted to staff and directors of the company. The options exercised, granted and either forfeited or lapsed during the year, and those outstanding at 31 May 2009, were as follows:

^* exercisable at 31 May 2009

The weighted average share price at the date of exercise of share options exercised during the year was 333p (2008: 355p). The options outstanding at the year end have an exercise price in the range of 121p to 255p and a weighted average contractual life of 6.9 years.

The share options granted on 20 November 2001 and 23 May 2002 have no performance criteria attached to them as they were granted as part of the group flotation arrangements. Subsequent grants of share options have, as a performance criteria, the necessity that there is a greater than inflationary improvement in the Group's earnings per share between the date of grant and the first date of exercise.

The fair value of the services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of the fair value is measured using a Black Scholes model. The main assumptions used in the model for options issued in 2009 are the expected volatility (27.1%), expected option life (5 years), expected dividend yield (1.8%) and risk-free rate (2.8%). The main assumptions used in the model for options issued before 2009 were expected volatility (20.9%), expected option life (6.5 years), expected dividend yield (1.8%) and risk-free rate (4.4%). Volatility was determined by reference to daily share prices from 30 November 2001, the risk-free rate approximated to the yield on government gilt-edged stock in the month options were granted. Details of the amounts recognised in the income statement in respect of share based payments are disclosed in note 5.

24 Immediate parent undertaking

The company's immediate parent company, and the largest group in which the results of the company are consolidated, is Murgitroyd Group PLC, a company incorporated in the UK and registered in Scotland. Copies of its financial statements are available from Scotland House, 165-169 Scotland Street, Glasgow, G5 8PL.