2nd Aug 2007 16:43
Smallbone PLC02 August 2007 Smallbone plc Restatement of 2006 financial information under IFRS Smallbone plc will present consolidated financial statements prepared inaccordance with International Financial Reporting Standards, as adopted by theEuropean Union ('IFRS') for accounting periods beginning 1 January 2007,including comparative financial information. As part of its transition to IFRS,Smallbone plc today presents its comparative information for the full year ended31 December 2006 and the six months ended 30 June 2006 and the balance sheet atthe IFRS transition date (1 January 2006). Adoption of IFRS is an accounting change only, it does not reflect a change inthe operations of the Group. Apart from the elimination of goodwillamortisation, it has not had a substantial effect on the consolidated financialresults of Smallbone plc but will result in some enhanced disclosures. Thesedisclosures will be included in the financial statements for the year ended 31December 2007. The transition to IFRS will leave: Cash flows unaffectedDividend policy and ability to pay dividends unaffectedBanking arrangements unaffectedEffective tax rate (pre goodwill charges) undisturbed Apart from changes in the presentation of the main financial statements, themain changes resulting from the adoption of IFRS are as follows: The cessation of goodwill amortisation (IFRS 3) has led to an increase in 2006'sannual profits of £670,000 (£312,000 at the 2006 half year results); The requirement under IAS 17 to impute a commercial interest charge on theinterest free finance lease of Paris Ceramics USA, Inc.'s premises in Farmville,Virginia has led to an interest charge of £31,000 for 2006 (£16,000 at the 2006half year). It has also led to a reduction in the carrying value of the freeholdland and buildings and a corresponding reduction in the related lease liabilityto reflect the revised net present value of future capital payments under thelease. The deferred tax asset in the balance sheet has increased due to the differingtreatment under IAS 12 of the tax effect of share options. Whilst this has ledto a substantial increase in the net assets of the Group, the gains have largelybeen taken direct to equity reserves with no effect on the 2006 annual profits(£13,000 tax credit at the 2006 half year). For the year ended 31 December 2006, the impact on profit from the adoption ofIFRS is to improve the profit before tax by £639,000. For the six months ended30 June 2006, the impact on profit from the adoption of IFRS is to reduce theloss before tax by £296,000. 2 August 2007 Enquiries: Smallbone plc Tel: +44 (0)1380 729090Gordon Montgomery, Finance DirectorCollege Hill Tel: +44 (0)207 457 2020Kate Pope Smallbone plc("Smallbone" or "the Group") Restatement of financial information for 2006 under International FinancialReporting Standards, as adopted by the European Union (IFRS) Introduction For all accounting periods up to and including the year ended 31 December 2006Smallbone has prepared its financial statements under UK Generally AcceptedAccounting Principles (UK GAAP). For accounting periods from 1 January 2007, theGroup is required to prepare its consolidated financial statements in accordancewith IFRS. However, it will continue to prepare its parent and subsidiaries'financial statements under UK GAAP. Smallbone's first results under this basis will be its interim results for thesix months ended 30 June 2007. The Group's first annual report under IFRS willbe for the year ended 31 December 2007. As comparative figures are provided, theeffective date for transition to IFRS is 1 January 2006. This summary provides an analysis of the effects of the change from UK GAAP toIFRS on Smallbone's financial statements, including: Summary of the basis of preparation of the IFRS informationSummary of the impact of IFRS adoption on SmallboneSummary of the significant changes in accounting policiesMain accounting policies revised by adoption of IFRS which have changed, or arelikely to change, the reported profitability of the Group (Appendix 1)Restated primary statements for the 6 months ended 30 June 2006 and the yearended 31 December 2006 (Appendix 2)Reconciliations of profit and equity for those periods (Appendix 3)Special Purpose Audit Report of BDO Stoy Hayward LLP to Smallbone plc (Appendix4) The transition to IFRS will leave: Cash flows unaffectedDividend policy and ability to pay dividends unaffectedBanking arrangements unaffectedEffective tax rate (pre goodwill charges) undisturbed Basis of preparation of IFRS information The financial information as at 30 June 2006 and 31 December 2006 and for theperiods then ended, and as at 31 December 2005, are not the Company's fullstatutory accounts for those periods. A copy of the statutory accounts for theyear ended 31 December 2006, under UK GAAP, has been delivered to the Registrarof Companies. The auditors' report on those accounts was unqualified, did notinclude references to any matters to which the auditors drew attention by way ofemphasis without qualifying their report and did not contain a statement undersection 237(2)-(3) of the Companies Act 1985. The financial information presented in this document has been prepared inaccordance with the recognition and measurement requirements of IFRS that aremandatory for accounting periods beginning on or after 1 January 2007 using theaccounting policies adopted by the Group as set out in the annual report andincluding new or amended policies as set out in the summary of new or amendedaccounting policies detailed in Appendix 1. Transitional arrangements The rules for first time adoption of IFRS are set out in IFRS 1 'First TimeAdoption of International Financial Reporting Standards'. In general a companyis required to define its IFRS accounting policies and apply theseretrospectively to determine its opening balance sheet under IFRS. The standardallows a number of exceptions to this general principle to assist companies asthey transition to reporting under IFRS. Where the Group has taken advantage ofthese exemptions they are noted within the accounting policies section. No adjustments have been made for any changes in estimates made at the time ofapproval of the UK GAAP financial statements on which the preliminary IFRSfinancial statements are based, as required by IFRS 1. The financial information for the year ended 31 December 2006, as prepared onthe above basis, has been audited by BDO Stoy Hayward LLP. Their Special PurposeAudit Report to Smallbone plc is set out in Appendix 4. The half yearinformation is unaudited. Subject to no further changes from the IASB or changes in the interpretation ofthose standards, this information is expected to form the basis for comparativeswhen reporting financial results for 2007, and for subsequent reporting periods. Summary of the impact of IFRS adoption on Smallbone Based on the accounting policies detailed in Appendix 1, the impact of thetransition on the key performance indicators is as follows: 31 December 2006 30 June 2006 UK GAAP IFRS UK GAAP IFRS £'000 £'000 £'000 £'000 Operating profit / (loss) 620 1,290 32 (280)Net (loss) / profit (275) 364 (496) (187)Basic eps (1.23) 1.63 (2.22) (0.84)Diluted eps (1.15) 1.52 (2.22) (0.84)Net assets 5,545 6,462 5,341 5,924 The detailed reconciliations of the movements for the Income Statement andBalance Sheet are given in Appendix 3. The changes in policies, which have themost significant effects on the restated numbers for the year ended 31 December2006, are: The cessation of goodwill amortisation, under IFRS 3. The inclusion of an imputed interest charge on the interest-free Farmvillelease, under IAS 17. The increase in the deferred tax assets related to share options, under IAS 12. Separate reconciliations of the movements for the cash flow statement have notbeen presented as the transition to IFRS has had no impact on overall cashflows.Presentational changes have been reflected in Appendix 2. Significant changes in accounting policies and impact on the financialstatements for the year ended 31 December 2006 The following narrative covers the year to 31 December 2006 illustrating thenature of the changes and providing an analysis of their magnitude. Theappendices give full and detailed reconciliations for the six months to 30 June2006 and the year ended 31 December 2006. Business Combinations - IFRS 3 IFRS 3 requires that goodwill be capitalised at cost and then be subject to anannual impairment review. Amortisation of goodwill is prohibited. The goodwill carried by Smallbone principally relates to the acquisitions ofParis Ceramics Limited and Paris Ceramics USA, Inc. in 2002, Smallbone & Co.(Devizes) Limited in 2003 and Mark Wilkinson Furniture Limited in 2005. Smallbone has chosen the option to apply IFRS 3 prospectively from thetransition date, rather than restate previous business combinations. Goodwillhas therefore been frozen at net book value on 1 January 2006, and goodwill,which was amortised in 2006 under UK GAAP, has been written back. The operating profit impact for 2006 is the elimination of the amortisationcharge of £670,000 (£312,000 for the half year to 30 June 2006) with acorresponding increase in net assets. There is no associated tax impact. In accordance with IAS 36 (Impairment of Assets) the principal components ofgoodwill have been allocated to the following Cash Generating Units; firstly toParis Ceramics, secondly to Smallbone & Co. (Devizes) Limited, and thirdly toMark Wilkinson Furniture Limited. There is no impairment charge for 2006. Income Taxes - IAS 12 The new accounting policy adopted by the Group for deferred taxation, to complywith IAS 12, is set out in Appendix 1. In addition, erroneously, the deferredtax liabilities of the Group have been included within current tax liabilitiesin the 2005 and 2006 UK GAAP published financial statements. These have beenreclassified under 'Deferred tax liabilities' in the financial information setout in this statement. Implementation of IAS 12 has led to an increase in the recognition of a deferredtax asset arising from the future tax offset available to the Group from theultimate exercise of share options by its employees. The increase in thedeferred tax asset is £278,000 at 31 December 2006 (£287,000 at 30 June 2006 and£139,000 at 31 December 2005), however the increase has largely been crediteddirectly to the 'Retained earnings' reserve as only the portion relating to theshare-based payments charge is able to be reflected in the income statement.Therefore, the 2006 annual results have not been affected, as the relevantprovision had been made under UK GAAP. There is a £13,000 tax credit to the 2006half year results. Since the income statements have not been materially affected, there is nomaterial impact on the effective tax rate resulting from the IFRS changes. Leases - IAS 17 The Group has retrospectively adopted IAS 17. As at 1 January 2006, the onlymaterial difference between the book value and fair value of the leases held bythe Group related to the finance lease on the Paris Ceramics factory and officesin Farmville, Virginia ("the Farmville lease"). The lease has been provided byPrince Edward County in Virginia on an interest free basis with capitalrepayments in equal instalments over ten years. IAS 17 requires the Group toimpute a commercial interest rate to the lease which, therefore, divides thecontractual repayments between imputed interest payments and the balance beingcapital payments. The effect is to reduce the total amount of capital repaymentsunder the lease, thus reducing the carrying value of the lease liability andreducing the corresponding value of the property capitalized. The imputedinterest payments are then charged to the profit and loss account over the tenyears of the lease. The impact of adopting IAS 17 on the Opening Balance Sheet as at 1 January 2006is to reduce the Farmville lease liability by £213,000 and reduce fixed assetsby the same amount. Net profit of the Group for the year ended 31 December 2006is also reduced by £31,000 (£16,000 for the six months to 30 June 2006) with acorresponding decrease in net assets. Research and Development expenditure - IAS 38 Prior to the introduction of IFRS, the Group adopted the policy of expensing allresearch and development expenditure in the year in which it was incurred. As aresult, the Group's systems did not capture this information in sufficient depthto enable development expenditure to be measured reliably and, consequently, noadjustment has been made to the comparative financial information. Under IAS 38, the Group is required to capitalise development expenditure wherecriteria are met which evidence future economic benefits being derived from suchexpenditure. Therefore, the Group has established systems in effect from 1January 2007 to record such projects and their related expenditure, inparticular on the development of new products. It is expected that this newpolicy will result in some development costs in 2007 being capitalised. Foreign currency translation reserve - IAS 21 and IFRS 1 Appendix 1 sets out the foreign currency translation policy of the Group which,in most respects, has not changed from the Group's policy under UK GAAP.However, under IAS 21, foreign currency differences arising from the translationof the net investment by the Group in its overseas subsidiaries is required tobe taken to a separate equity reserve until the disposal of the net investment,at which time they are recognized as a profit or loss. The Group has takenadvantage of the transitional arrangements, set out in IFRS 1, enabling it toset all translation differences arising prior to the transition date, 1 January2006, against the profit and loss reserve. Conclusion Apart from the elimination of goodwill amortisation, the transition to IFRS hasnot had a significant effect on the consolidated financial results of Smallboneplc but will result in some enhanced disclosures. These disclosures will beincluded in the financial statements for the year ended 31 December 2007. There is no material impact on Smallbone's cash flows, effective tax rate (pregoodwill charges) and ability to pay dividends. Smallbone's banking arrangementsare unaffected. Smallbone plc - Appendix 1 A summary of Smallbone's new or amended accounting policies under IFRS whichhave changed, or are likely to change, the reported profitability of the Group Accounting Policies The consolidated financial information has been prepared in accordance withInternational Financial Reporting Standards as endorsed by the European Union ('IFRS') and mandatory for accounting periods beginning on or after 1 January2007. A summary of the more important new or amended Group accounting policies,which have or will change the reported profitability of the Group, resultingfrom the adoption of IFRS is set out below. Basis of accounting The financial statements are prepared in accordance with the historical costconvention in accordance with applicable accounting standards. Changes in accounting policy On 1 January 2007 the Company adopted International Financial ReportingStandards, as adopted by the European Union (IFRS). The financial informationhas been prepared on a consistent basis under applicable IFRS and the effects ofthis transition reported in accordance with IFRS 1 (First-time Adoption ofIFRSs). Goodwill Goodwill arising on consolidation represents the excess of the fair value of theconsideration given over the fair value of the separable identifiable net assetsacquired. Goodwill arising on acquisition of subsidiaries and businesses iscapitalised as an asset. In accordance with IFRS 3, goodwill has been frozen at its net book value as at1 January 2006 and will not be amortised. Instead, it will be subject to anannual impairment review, with any impairment losses being recognisedimmediately in the income statement. Business combinations that took placebefore 1 January 2006 have not been restated. Finance costs Finance costs are charged to the income statement over the term of the debt sothat the amount charged is at a constant rate on the carrying amount. Financecosts include issue costs, which are initially recognised as a reduction in theproceeds of the associated capital instrument. In accordance with IAS 17 and IAS 39, finance costs charged to the incomestatement include interest imputed at the current deemed commercial rate onloans and leases where the fixed rate on such liabilities is different to thecurrent commercial rate. The carrying value of the related liability has beenadjusted accordingly. Research and development Expenditure related to clearly defined and identifiable development projects isrecognized as an intangible asset only after the following criteria are met: theproject's technical feasibility and commercial viability can be demonstrated;the availability of adequate technical and financial resources and an intentionto complete the project have been confirmed; and the correlation betweendevelopment costs and future revenues has been established. The developmentcosts are then amortised on a straight line basis over the life of the project,limited to a maximum of five years, following the commencement of its commercialproduction. Development expenditure that has not been brought into use is alsoreviewed for impairment on an annual basis. All other research and developmentexpenditure is written off in the year in which it is incurred. Smallbone plc - Appendix 1 continued Foreign currency translation Transactions in foreign currencies are initially recorded in the functionalcurrency by applying the spot exchange rate ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreign currenciesare retranslated at the functional currency rate of exchange ruling at thebalance sheet date. All differences are taken to the income statement, exceptfor differences on monetary assets and liabilities that form part of the Group'snet investment in a foreign operation. These are taken directly to equity untilthe disposal of the net investment, at which time they are recognised as aprofit or loss. The assets and liabilities of foreign operations are translated into sterling atthe rate of exchange ruling at the balance sheet date. Income and expenses aretranslated at the average exchange rate for the month in which they arise. Theresulting exchange differences are taken directly to a separate equity reserve.On disposal of a foreign entity, the deferred cumulative amount recognised inequity relating to that particular foreign operation is recognised in the incomestatement. The Group has taken advantage of the transitional arrangements, setout in IFRS 1, enabling it to set all translation differences arising prior tothe transition date, 1 January 2006, against the profit and loss reserve. Non-monetary items that are measured at historical cost in a foreign currencyare translated using the exchange rates as at the dates of the initialtransactions. Non-monetary items measured at fair value in foreign currency aretranslated using the exchange rates at the dates when the fair values weredetermined. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount ofan asset or liability in the balance sheet differs to its tax base, except fordifferences arising on: the initial recognition of goodwill and goodwill for which amortisation is nottax deductible; the initial recognition of an asset or liability in a transaction which is not abusiness combination and at the time of the transaction affects neitheraccounting or taxable profit; and investments in subsidiaries and jointly controlled entities where the Group isable to control the timing of the reversal of the difference and it is probablethat the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it isprobable that taxable profit will be available against which the difference canbe utilised. The amount of the asset or liability is determined using tax rates that havebeen enacted or substantially enacted by the balance sheet date and are expectedto apply when the deferred tax assets / liabilities are recovered / settled.Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legallyenforceable right to offset current tax assets and liabilities and the deferredtax assets and liabilities relate to taxes levied by the same tax authority oneither: the same taxable group company; or different group entities which intend either to settle current tax assets andliabilities on a net basis, or to realise the assets and settle the liabilitiessimultaneously, in each future period in which significant amounts of deferredtax assets or liabilities are expected to be settled or recovered. Smallbone plc - Appendix 1 continued Exceptional items The Group classifies income and expenditure as an exceptional item if: the income or expenditure is unlikely to recur or is outside the normal courseof business; and the Directors consider that the underlying earnings of the Group will be betterunderstood by readers of the financial statements if such income and expenditureis separately identified as exceptional. Exceptional income and costs are shown on the face of the income statement toassist readers to derive the earnings before interest, taxation, depreciationand amortisation ('EBITDA') figures used in the Group's Business Review, whichare also calculated as being before exceptional items and share-based payments. Smallbone plc - Appendix 2Consolidated income statement - under IFRS Unaudited Audited Six months to Year to 30 June 31 December 2006 2006 £'000 £'000 Revenue 22,921 47,747 Cost of sales (13,231) (26,833) Gross profit 9,690 20,914 Other income 13 29 Distribution costs (6,490) (13,175) Administrative expensesShare-based payments 49 99Depreciation 667 1,543Exceptional costs of relocation and dispute settlement 140 230Other administrative expenses 2,325 4,606 Total administrative expenses (3,181) (6,478) Operating profit 32 1,290 Finance income 17 3Finance costs (240) (535) (Loss) / profit before taxation (191) 758 Tax expense 4 (394) (Loss) / profit for the period attributable to equityholders of the company (187) 364 (Loss) / Earnings per share:Basic (pence per share) (0.84) 1.63Diluted (pence per share) (0.84) 1.52 All amounts relate to continuing activities. Smallbone plc - Appendix 2 continuedConsolidated statement of recognised income and expense - under IFRS Unaudited Audited Six months to Year to 30 June 31 December 2006 2006 £'000 £'000 (Loss) / profit for the period (187) 364 Foreign exchange losses arising on translation of the Group'snet investment in overseas subsidiaries (8) (75) Total income and expense for the period (all attributable to theequity holders of the company) (195) 289 Smallbone plc - Appendix 2 continued Consolidated balance sheets - under IFRS Audited Unaudited Audited At At At 31 December 30 June 31 December 2006 2006 2005 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 8,806 8,549 6,810Goodwill 11,982 11,892 11,864Deferred tax assets 457 552 477 21,245 20,993 19,151 Current assetsInventories 5,400 4,649 4,418Trade and other receivables 3,548 3,682 3,469Current tax asset 21 - -Cash and cash equivalents 1,608 1,691 446 10,577 10,022 8,333 Current liabilitiesShort-term borrowings (1,663) (1,081) (186)Current portion of long-term borrowings (1,033) (1,486) (1,602)Trade and other payables (5,371) (5,512) (5,771)Current tax liability - - (72)Payments received on account (8,544) (9,509) (6,829)Accruals and deferred income (2,243) (852) (1,454) (18,854) (18,440) (15,914) Net current liabilities (8,277) (8,418) (7,581) Non-current liabilitiesLong-term borrowings (6,133) (6,478) (5,462)Deferred tax liabilities (373) (173) (173) (6,506) (6,651) (5,635) Total net assets 6,462 5,924 5,935 Equity (all attributable to the equity holdersof the holding company)Share capital 1,115 1,115 1,115Share premium 1,818 1,818 1,818Other reserves 3,604 3,604 3,604Foreign currency translation reserve (75) (8) -Retained earnings - (605) (602) Total equity 6,462 5,924 5,935 Smallbone plc - Appendix 2 continuedConsolidated cash flow statement - under IFRS Unaudited Audited Six months to Year to 30 June 31 December 2006 2006 £'000 £'000 £'000 £'000 Cash flow from operating activities (Loss) / profit before taxation (191) 758Finance income (17) (3)Finance costs 535 240Share-based payments 49 99Depreciation 1,543 667Profit on disposal of fixed assets (20) (26) Operating cash flow before changes in 728 2,906working capitalIncrease in inventories (231) (982)Increase in trade receivables and other (213) (297)current assetsDecrease in trade and other payables (182) (350)Increase in payments received on account 2,680 1,715(Decrease) / increase in accruals anddeferred income (579) 812 Changes in working capital 1,475 898Cash generated from operations 2,203 3,804Income taxes paid (9) (4) Net cash from operating activities 2,194 3,800 Cash flow from investing activities Further consideration paid in respect ofprior period acquisitions (23) (23)Purchase of property, plant and equipment (2,503) (3,996) Proceeds from sale of plant and equipment 20 454 Interest received 17 3 Net cash used in investing activities (2,489) (3,562) Cash flow from financing activities Proceeds from long-term loans 5,500 6,266 Repayment of long-term loans (5,429) (6,056) Payment of finance lease liabilities 814 (197)Interest paid (240) (535) Net cash from financing activities 645 (522) Net increase / (decrease) in cash and cash 350 (284)equivalents Cash and cash equivalents at 1 January 446 4462006Bank overdrafts at 1 January 2006 (186) (186) Total cash and cash equivalents at 1January 2006 260 260 Effects of exchange rate changes - (31)Cash and cash equivalents at end of period 1,691 1,608Bank overdrafts at end of period (1,081) (1,663) Total cash and cash equivalents at end ofperiod 610 (55) Smallbone plc - Appendix 3 Reconciliation of changes to the income statement for the 6 months ended 30 June2006 between the 2006 published results and the restated figures under IFRS Published IFRS 3 IAS 17 IAS 12 2006 2006 figures Business Leases Income figures under UK GAAP Combinations Taxes under IFRS £'000 £'000 £'000 £'000 £'000 Revenue 22,921 22,921 Cost of sales (13,231) (13,231) Gross Profit 9,690 0 0 0 9,690 Other operating income 13 13 Distribution costs (6,490) (6,490) Administrative expenses (3,493) 312 (3,181) Operating profit (280) 312 0 0 32 Interest receivable 17 17 Interest payable (224) (16) (240) Profit before tax (487) 312 (16) 0 (191) Income tax expense (9) 13 4 Profit for the year (496) 312 (16) 13 (187) Smallbone plc - Appendix 3 continued Reconciliation of changes to the income statement for the year ended 31 December2006 between the 2006 published results and the restated figures under IFRS Published IFRS 3 IAS 17 2006 2006 figures Business Leases figures under UK GAAP Combinations under IFRS £'000 £'000 £'000 £'000 Revenue 47,747 47,747 Cost of sales (26,833) (26,833) Gross Profit 20,914 0 0 20,914 Other operating income 29 29 Distribution costs (13,175) (13,175) Administrative expenses (7,148) 670 (6,478) Operating profit 620 670 0 1,290 Interest receivable 3 3 Interest payable (504) (31) (535) Profit before tax 119 670 (31) 758 Income tax expense (394) (394) Profit for the year (275) 670 (31) 364 Smallbone plc - Appendix 3 continued Reconciliation of changes to the opening balance sheet at 1 January 2006 betweenthe 2005 published results and the restated figures under IFRS Published Reclassification IAS 17 IAS 12 Figures at 2006 figures of balances Leases Income 1.1.06 under UK GAAP Taxes under IFRS £'000 £'000 £'000 £'000 £'000 Property, plant & equipment 7,023 (213) 6,810 Goodwill 11,864 11,864 Deferred tax assets 0 338 139 477 Inventories 4,418 4,418 Trade receivables 997 997 Other current assets 2,810 (338) 2,472 Cash & cash equivalents 446 446 Short-term borrowings (186) (186) Current portion of long-termborrowings (1,637) 35 (1,602) Trade and other payables (5,771) (5,771) Current tax liability (245) 173 (72) Payments received on account (6,829) (6,829) Accruals and deferred income (1,454) (1,454) Long-term borrowings (5,640) 178 (5,462) Deferred tax liabilities (173) (173) Net Assets 5,796 0 0 139 5,935 Equity Share capital 1,115 1,115Share premium 1,818 1,818Other reserves 3,604 3,604Foreign currency reserve 0 0Retained earnings (741) 139 (602) Total Equity 5,796 0 0 139 5,935 Smallbone plc - Appendix 3 continued Reconciliation of changes to the balance sheet at 30 June 2006 between the 2006published results and the restated figures under IFRS Published Reclassification IFRS 3 IAS 17 IAS 12 Figures at 2006 figures of balances Business Leases Income 30.6.06 under UK GAAP Combinations Taxes under IFRS £'000 £'000 £'000 £'000 £'000 £'000 Property, plant & equipment 8,747 (198) 8,549 Goodwill 11,580 312 11,892 Deferred tax assets 0 265 287 552 Inventories 4,649 4,649 Trade receivables 1,064 1,064 Other current assets 2,883 (265) 2,618 Cash & cash equivalents 1,691 1,691 Short-term borrowings (1,081) (1,081) Current portion of long-termborrowings (1,519) 33 (1,486) Trade and other payables (5,512) (5,512) Current tax liability (173) 173 0 Payments received on account (9,509) (9,509) Accruals and deferred income (836) (16) (852) Long-term borrowings (6,643) 165 (6,478) Deferred tax liabilities (173) (173) Net Assets 5,341 0 312 (16) 287 5,924 Equity Share capital 1,115 1,115Share premium 1,818 1,818Other reserves 3,604 3,604Foreign currency reserve 0 (8) (8)Retained earnings (1,196) 8 312 (16) 287 (605) Total Equity 5,341 0 312 (16) 287 5,924 Smallbone plc - Appendix 3 continued Reconciliation of changes to the closing balance sheet at 31 December 2006between the 2006 published results and the restated figures under IFRS Published Reclassification IFRS 3 IAS 17 IAS 12 Figures at 2006 figures of balances Business Leases Income 31.12.06 under UK GAAP Combinations Taxes under IFRS £'000 £'000 £'000 £'000 £'000 £'000 Property, plant & 8,993 (187) 8,806equipment Goodwill 11,312 670 11,982 Deferred tax assets 0 179 278 457 Inventories 5,400 5,400 Trade receivables 847 847 Other current assets 2,880 (179) 2,701 Current tax asset 0 21 21 Cash & cash equivalents 1,608 1,608 Short-term borrowings (1,663) (1,663) Current portion oflong-termborrowings (1,062) 29 (1,033) Trade and other payables (5,371) (5,371) Current tax liability (352) 352 0 Payments received on (8,544) (8,544)account Accruals and deferred (2,243) (2,243)income Long-term borrowings (6,260) 127 (6,133) Deferred tax liabilities (373) (373) Net Assets 5,545 0 670 (31) 278 6,462 Equity Share capital 1,115 1,115Share premium 1,818 1,818Other reserves 3,604 3,604Foreign currency reserve 0 (75) (75)Retained earnings (992) 75 670 (31) 278 0 Total Equity 5,545 0 670 (31) 278 6,462 Smallbone plc - Appendix 4 Special Purpose Audit Report of BDO Stoy Hayward LLP to Smallbone plc on itsPreliminary International Financial Reporting Standards ("IFRS") FinancialInformation In accordance with the terms of our engagement letter dated 29 June 2007, wehave audited the accompanying preliminary consolidated IFRS financialinformation of Smallbone plc ("the Company") which comprises: the basis of preparation and summary of new or amended accounting policiesunder IFRS; narrative descriptions of adjustments; and consolidated income statement for the year ended 31 December 2006; consolidated statement of recognised income and expense for the year ended 31December 2006; consolidated balance sheets as at 31 December 2005 and 2006; consolidated cashflow statement for the year ended 31 December 2006; and reconciliations of the consolidated balance sheets as at 31 December 2005 and2006 and the consolidated income statement for the year ended 31 December 2006to UK GAAP. This financial information has been prepared under the accounting policies setout therein. Respective responsibilities of directors and BDO Stoy Hayward LLP The directors of the Company have accepted responsibility for the preparation ofthe preliminary consolidated IFRS financial information which has been preparedas part of the Company's conversion to IFRS. Our responsibilities, asindependent auditors, are established in the United Kingdom by the AuditingPractices Board, our profession's ethical guidance and the terms of ourengagement. Under the terms of engagement, we are required to report to you ouropinion as to whether the preliminary consolidated IFRS financial informationhas been properly prepared, in all material respects, in accordance with thebasis of preparation note to the preliminary consolidated IFRS financialinformation. We also report to you if, in our opinion, we have not received allthe information and explanations we require for our audit. We read the other information accompanying the preliminary consolidated IFRSfinancial information and consider whether it is consistent with the preliminaryconsolidated IFRS financial information. We consider the implications for ourreport if we become aware of any apparent misstatements or materialinconsistencies with the preliminary consolidated IFRS financial information. Our report has been prepared in accordance with the terms of our engagement inconnection with the Company's conversion to IFRS and for no other purpose. Noperson is entitled to rely on this report unless such a person is a personentitled to rely upon this report by virtue of and for the purpose of our termsof engagement or has been expressly authorised to do so by our prior writtenconsent. Save as above, we do not accept responsibility for this report to anyother person or for any other purpose and we hereby expressly disclaim any andall such liability. Basis of audit opinion We conducted our audit having regard to International Standards on Auditing (UKand Ireland) issued by the UK Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the preliminary consolidated IFRS financial information. It alsoincludes an assessment of the significant estimates and judgements made by thedirectors in the preparation of the preliminary consolidated IFRS financialinformation, and of whether the accounting policies are appropriate to theCompany's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the preliminaryconsolidated IFRS financial information is free from material misstatement,whether caused by fraud or other irregularity or error. In forming our opinionwe also evaluated the overall presentation of information in the preliminaryconsolidated IFRS financial information. Opinion In our opinion, the accompanying preliminary consolidated IFRS financialinformation for the year ended 31 December 2006 has been prepared, in allmaterial respects, in accordance with the basis set out in the basis ofpreparation note, including the assumptions made by the directors of the Companyabout the standards and interpretations expected to be effective, and thepolicies expected to be adopted, when they prepare the first complete set ofconsolidated IFRS financial statements of the Company for the year ending 31December 2007. Emphasis of matters Without qualifying our opinion, we draw your attention to the following matters: The basis of preparation note to the preliminary consolidated IFRS financialinformation explains why the accompanying preliminary consolidated IFRSfinancial information may require adjustments before their inclusion ascomparative information in the IFRS financial statements for the year ending 31December 2007 when the Company prepares its first IFRS financial statements. As described in the basis of preparation note to the preliminary consolidatedIFRS financial information, as part of its conversion to IFRS, the Company hasprepared the preliminary consolidated IFRS financial information for the yearended 31 December 2006 to establish the financial position and results ofoperations of the Company necessary to provide the comparative financialinformation expected to be included in the Company's first complete set of IFRSfinancial statements as at 31 December 2007. The preliminary consolidated IFRSfinancial information does not itself include comparative financial informationfor the prior period. As explained in the basis of preparation note, no adjustments have been made forany changes in estimates made at the time of approval of the UK GAAP financialstatements on which the preliminary consolidated IFRS financial information isbased, as required by IFRS 1. BDO STOY HAYWARD LLP Chartered Accountants Gatwick 2 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Strategic Minerals