17th Oct 2005 10:03
Shanks Group PLC17 October 2005 17 October 2005 Company Announcement Shanks Group plc Adoption of International Financial Reporting Standards From 1 April 2005, the Group has adopted International Financial ReportingStandards (IFRS). Accordingly, the interim results for the six months ended 30September 2005 will be presented under IFRS. This announcement explains the key presentational changes and accounting policyadjustments that arise from the first time adoption of IFRS by the Group. Italso details how the results for the year ended 31 March 2005 would haveappeared had they been prepared under IFRS. The adoption of IFRS has no impact on the Group's cash flows, its ability to paydividends or the manner in which the Group's operations are run. The IFRS adjustments and financial information are provisional and unaudited.The UK GAAP information used in this report is based on the Group's statutoryfinancial statements for the year ended 31 March 2005, which contained anunqualified report from the Group's auditors. Ends For further information please contact: Fraser Welham, Group Finance DirectorShanks Group plc, telephone +44 (0) 1628 524523 Ginny Pulbrook, Executive DirectorCitigate Dewe Rogerson, telephone +44(0) 20 7282 2945 Shanks Group plcAdoption of International Financial Reporting Standards17 October 2005 Contents 1 Introduction 2 Overview 3 Financial Highlights for the Year Ended 31 March 2005 4 First Time Adoption of IFRS and Changes in Accounting Policies 5 Financial Statements under IFRS for the Year Ended 31 March 2005 • Consolidated Income Statement • Consolidated Balance Sheet • Consolidated Cash Flow Statement • Consolidated Statement of Recognised Income and Expense • Consolidated Statement of Changes in Equity 6 Selected Notes to the IFRS Financial Statements Appendices A Consolidated Income Statement for the Year Ended 31 March 2005 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption B Consolidated Balance Sheet at 31 March 2005 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption C Consolidated Balance Sheet at 31 March 2004 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption D UK GAAP to IFRS Reconciliation of Financial Highlights 1 Introduction From 1 April 2005, Shanks Group plc is required to prepare its consolidatedfinancial statements in accordance with International Financial ReportingStandards (IFRS). Previously, the Group had reported its results under UnitedKingdom Generally Accepted Accounting Principles (UK GAAP). Accordingly, theinterim results for the six months ended 30 September 2005 will be presentedunder IFRS. This report explains the key presentational changes and accountingpolicy adjustments that arise from the first time adoption of IFRS by the Group. Part of the move to IFRS involves the restatement of comparative figures. Thisreport details how the results for the year ended 31 March 2005 would haveappeared had they been prepared under IFRS. The Directors are responsible for the preparation of the restated financialinformation. This report was approved by the Audit Committee of the Board on 30September 2005. The IFRS adjustments and financial information are provisional and unaudited.The UK GAAP information used in this report is based on the Group's statutoryfinancial statements for the year ended 31 March 2005, which contained anunqualified report from the Group's auditors. 2 Overview The adoption of IFRS has no impact on the Group's cash flows, its ability to paydividends or the manner in which the Group's operations are run. The major impact of the adoption of IFRS on the Group's reported results are: • the presentation of the results relating to discontinued activities; • the reclassification of certain elements of goodwill to intangible assets which are subject to amortisation over their useful lives. The remaining goodwill is no longer amortised but is subject to annual impairment reviews; • the net deficit of the Group's UK pension scheme is now consolidated into the Group's balance sheet. The change in the basis for recognising future pension liabilities gives rise to an increased pension charge; • the cost of share based payments to employees is charged to profits; • the Group has various integrated waste management contracts with certain UK local authorities concluded under the Private Finance Initiative (PFI). It is also bidding for further contracts. At the financial close of a PFI contract, the price of the service is determined, inter alia, by the long term interest rate available in the market. The Group therefore protects its risk by entering into an interest rate swap to match its future cash inflows and outflows. Under IFRS we are required to revalue these swaps at current market value irrespective of the commercial reasons for entering into them. Revaluation of these swaps can lead to large accounting gains or losses but does not affect the long term profitability of the contract as the Group has matched its long term revenue and costs. Whilst IFRS does allow these gains and losses to be taken directly to reserves, it is on the proviso that onerous verification requirements are fulfilled. The Group believes it is not worth expending significant resources fulfilling these requirements in respect of an item that does not reflect the commercial reality. In future accounting for changes in the market value could therefore cause major fluctuations to our reported profits. These will be excluded from our "Headline Profit". If these swaps had been included at market value at 31 March 2005 a cumulative accounting loss of £3.7m would have been recognised under IAS39. These have not been recognised in the restated comparatives as IFRS1 exempts the Group from restating comparative information when adopting IAS39; • certain leases classified as operating under UK GAAP are now classified as finance, increasing fixed assets and net debt accordingly; • joint venture investments are proportionately consolidated resulting in our share of assets and liabilities, including debt, being consolidated on a line basis; • dividends are now only included in the accounts once approved; and • deferred tax is now provided in respect of revalued properties even if there is little likelihood of the revaluation crystallizing. Set out below is a reconciliation between UK GAAP and IFRS of selected 2004/5 financial highlights: Adjusted earnings Profit Headline per before profit share tax Net assets Net debt Year ended 31 March 2005 £m pence £m £m £m ___________________________________________________________________________________________________________ As reported under UK GAAP 33.3 9.4 64.4 194.7 (162.3)Discontinued activities (3.0) (0.8) (54.1) - -___________________________________________________________________________________________________________ UK GAAP - continuing 30.3 8.6 10.3 194.7 (162.3)Intangible/goodwill amortisation (0.2) (0.1) 9.4 9.4 -Pensions (0.7) (0.2) (0.7) (18.9) -Share based payments - - (0.1) - -Leases 0.1 - 0.1 0.1 (9.6)Joint ventures - - - - (1.5)Dividends - - - 8.9 -Deferred tax - - - (2.9) -___________________________________________________________________________________________________________ As reported under IFRS 29.5 8.3 19.0 191.3 (173.4)___________________________________________________________________________________________________________ 3 Financial Highlights for the Year Ended 31 March 2005 The table below sets out all of the Group's previously reported financialhighlights and their corresponding equivalents as if they had been presentedunder IFRS: IFRS UK GAAP Year ended 31 Year ended 31 March 2005 March 2005________________________________________________________________________________________________________ Revenues £476m £504mHeadline profit (Notes 1 and 2) £29.5m £33.3mExceptional item - restructuring costs (Note 3) £(10.5)m £(10.4)mExceptional item - disposal of operations (Note 3) - £51.5mGoodwill amortisation - £(10.0)mProfit on ordinary activities before tax £19.0m £64.4mProfit on continuing businesses before interest, exceptional items, goodwill amortisation and tax £38.6m £38.3mAdjusted basic earnings per share 8.3p 9.4pBasic earnings per share 32.9p 25.7pNet assets £191m £195mCore Business net debt (Note 4) £109m £99mPFI Companies net debt £63m £63mTotal Group net debt (Note 4) £172m £162mEBITDA (Note 5) £72m £83m________________________________________________________________________________________________________Notes: 1 UK GAAP: Profit before exceptional items, goodwill amortisation and tax (including discontinued activities). 2 IFRS: Profit from continuing activities before exceptional items, changes in fair value of financial instruments and tax. 3 IFRS does not use the term "exceptional items". Significant non-recurring operating income and expenses may be shown on the face of the income statement. The Group considers these items as exceptional for the purposes of determining Headline Profit. 4 Excluding share of net debt of joint ventures. 5 EBITDA excluding exceptional items (and discontinued activities under IFRS). To assist in the understanding of the nature and effect of specific IAS/IFRSapplications, the previously reported UK GAAP information is reconciled to theIFRS-based financial highlights in Appendix D. 4 First Time Adoption of IFRS and Changes in Accounting Policies The financial information has been prepared in accordance with IFRS, includinginterpretations issued by the International Accounting Standards Board (IASB)and its committees. These are subject to ongoing review and endorsement by theEuropean Commission and are subject to change. Consequently, information withinthis document may require updating for any subsequent amendments to IFRS and itsinterpretations. IFRS1 First-time adoption of IFRS IFRS1 sets out the rules that the Group is following for the first consolidationunder IFRS. It requires that the IFRS accounting policies to be applied for thefirst consolidation as at 31 March 2006 are determined and then appliedretrospectively to the opening balance sheet at 31 March 2004 (the transitiondate). IFRS1 contains certain optional exemptions to assist the Group in itstransition to IFRS. Significant instances where the Group has opted for theseexemptions together with other changes in accounting policy required through theadoption of IFRS are described below. IAS1 Presentation of financial statements IAS1 sets out the basis on which the Group's financial statements are to bepresented. The most significant change to presentation made to the IncomeStatement is in respect of the position of the profits of discontinuedactivities and the profit on their disposal. These are now included on an aftertax basis below profit after tax on continuing activities. For the balance sheet the most significant change is in respect of deferred taxwhere certain deferred tax assets are no longer netted from deferred taxliabilities. IFRS3 Business combinations Acquisitions that took place after the transition date must be accounted forunder IFRS. The Group has taken advantage of the exemption given in IFRS1 to notrestate acquisitions made prior to the transition date on an IFRS basis. The Group has applied the exemption given in IFRS1 to treat the net book valueof goodwill as deemed cost as at the transition date. This exemption extends toamounts written off directly to reserves. Consequently, on disposal ofoperations, there is no requirement to reinstate any associated goodwillpreviously written off to reserves. Amortisation of goodwill under UK GAAP isreplaced by an annual impairment review under IFRS3. IAS38 Intangible assets The transition to IFRS will affect the classification of costs associated withthe 25 year PFI waste management contracts won after the transition date. UnderUK GAAP costs in excess of the fair value of net assets taken over wereclassified as goodwill, recognised in the balance sheet at cost and amortisedover 25 years. Under IAS38, these costs will be re-classified as contractrights. These will be recognised at cost in the balance sheet as intangibleassets and amortised over 25 years. IAS19 Employee benefits Previously the Group has accounted for pensions under SSAP 24 - Pension Costsand had adopted the transitional arrangements of FRS 17 - Retirement Benefits.IAS19 (like FRS 17) requires the Group to consolidate its proportion of theassets, liabilities and returns of the defined benefit schemes in which theGroup participates. It also changes the basis for recognising the cost of futurepension liabilities. The net pension deficit is included within liabilities withthe corresponding deferred tax asset included in assets. Actuarial gains andlosses on the pension scheme will be taken in the year they arise through theStatement of Recognised Income and Expense from the transition date. IAS21 The effect of changes in foreign exchange rates Under IAS21 cumulative exchange rate variances on the net investment in foreignoperations are recognised in a separate equity reserve. The Group has elected toset these exchange differences to zero at the transition date, as permittedunder IFRS1. The Group intends to apply the principles of IAS39 on hedge accounting forintercompany loans denominated in euros and reported in subsidiaries that have asterling functional currency. As a result, exchange rate variances arising onthese loans will be reflected in reserves. IFRS2 Share based payments IFRS2 requires measurement of share based transactions with employees at fairvalue at the date of grant. This value forms the basis of the charge to theincome statement over the period between grant and exercise. The fair values ofthe various incentive or share plans have been calculated using appropriatevaluation models. Under a transitional exemption covering first-time adoption,this applies only to options granted after 7 November 2002. IAS39 Financial instruments - recognition and measurement; andIAS32 Financial instruments - disclosure and presentation The Group will take advantage of the IFRS1 provision that allows Companies notto restate comparative information under IAS32 and IAS39. These standards willtherefore be applied prospectively from 31 March 2005. The Group has various integrated waste management contracts with certain UKlocal authorities concluded under the Private Finance Initiative (PFI). It isalso bidding for further contracts. At the financial close of a PFI contract,the price of the service is determined, inter alia, by the long term interestrate available in the market. The Group therefore protects its risk by enteringinto an interest rate swap to match its future cash inflows and outflows. Under IFRS we are required to revalue these swaps at current market valueirrespective of the commercial reasons for entering into them. Revaluation ofthese swaps can lead to large accounting gains or losses but does not affect thelong term profitability of the contract as the Group has matched its long termrevenue and costs. Whilst IFRS does allow these gains and losses to be takendirectly to reserves, it is on the proviso that onerous verificationrequirements are fulfilled. The Group believes it is not worth expendingsignificant resources fulfilling these requirements in respect of an item thatdoes not reflect the commercial reality. In future accounting for changes in themarket value could therefore cause major fluctuations to our reported profits.These will be excluded from our "Headline Profit". If these swaps had been included at market value at 31 March 2005 a cumulativeaccounting loss of £3.7m would have been recognised under IAS39. These have notbeen recognised in the restated comparatives as IFRS1 exempts the Group fromrestating comparative information when adopting IAS39. IAS31 Interest in joint ventures IAS31 gives a choice for accounting for joint ventures under either the equitymethod or the preferred method of proportional consolidation. The Group hasopted to use proportional consolidation, which requires line by lineconsolidation of the Group's share of income and expenditure and the share ofassets and liabilities. This change has no effect on the Group's consolidatedprofits after tax and net assets. IAS17 Leases The definition of a finance lease under IAS17 differs to that under UK GAAP.Accordingly, a number of operating leases are now accounted for as financeleases under IFRS. The relevant asset is recognised as part of tangible fixedassets and a corresponding finance lease creditor included in net debt. IAS10 Events after the balance sheet date Under IAS 10 dividends declared after the period end do not represent a presentobligation under IAS37 - Provisions, Contingent Liabilities and ContingentAssets as it is subject to approval. The accrual for the final dividend under UKGAAP is reversed for IFRS purposes and accounted for in the subsequent reportingperiod. IAS12 Income taxes Provision for deferred tax has to be included where assets are held at valuesdifferent to the tax base cost. Whilst the Group does not revalue property,certain properties were held at valuation prior to acquisition by the Group.Under UK GAAP no deferred tax provision was included, as there was no intentionto dispose of the properties. IFRS requires provision irrespective of any plansfor the property's use. 5 Financial Statements under IFRS for the Year Ended 31 March 2005 Consolidated Income Statementyear ended 31 March 2005 (unaudited) Joint Group ventures Total Note £m £m £m_____________________________________________________________________________________________________________ Continuing operations:Revenue 5(a) 465.7 10.2 475.9Cost of sales - ongoing (379.1)Cost of sales - restructuring costs 5(a) (5.2) _________Cost of sales (384.3) (5.6) (389.9)_____________________________________________________________________________________________________________ Gross profit 81.4 4.6 86.0Administrative expenses - ongoing (49.9)Administrative expenses - restructuring costs 5(a) (5.3) _________Administrative expenses (55.2) (2.7) (57.9)_____________________________________________________________________________________________________________ Operating profit 5(a) 26.2 1.9 28.1Finance charges - interest (8.3) (0.2) (8.5)Finance charges - other (0.6) - (0.6)_____________________________________________________________________________________________________________ Profit before tax 17.3 1.7 19.0Tax (6.3) (0.6) (6.9)_____________________________________________________________________________________________________________ Profit for the year from continuing operations 5(a) 11.0 1.1 12.1 Discontinued operations:Profit for the year from discontinued operations 5(a) 65.0 - 65.0_____________________________________________________________________________________________________________ Profit for the year 5(a) 76.0 1.1 77.1_____________________________________________________________________________________________________________ Earnings per share 5(b)- basic 32.9p- diluted 32.9p Earnings per share from continuing operations 5(b)- basic 5.2p- diluted 5.2p_____________________________________________________________________________________________________________ Consolidated Balance Sheetat 31 March 2005 (unaudited) Share of Share of joint joint Group ventures Total Group ventures Total 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m___________________________________________________________________________________________________________________ Non-current assetsIntangible assets 160.7 - 160.7 185.8 - 185.8Property, plant and equipment 238.2 12.1 250.3 365.0 11.9 376.9Loans to joint ventures 3.2 - 3.2 3.9 - 3.9Other investments 1.0 - 1.0 1.1 - 1.1Deferred tax assets 14.2 - 14.2 9.1 - 9.1___________________________________________________________________________________________________________________ 417.3 12.1 429.4 564.9 11.9 576.8___________________________________________________________________________________________________________________ Current assetsInventories 9.1 0.2 9.3 8.1 0.1 8.2Trade and other receivables 111.4 2.4 113.8 136.2 1.7 137.9Current tax assets 3.0 - 3.0 1.2 - 1.2Cash and cash equivalents 32.1 0.4 32.5 30.3 0.5 30.8___________________________________________________________________________________________________________________ 155.6 3.0 158.6 175.8 2.3 178.1___________________________________________________________________________________________________________________ Total assets 572.9 15.1 588.0 740.7 14.2 754.9___________________________________________________________________________________________________________________ Current liabilitiesBorrowings (3.1) (0.9) (4.0) (17.7) (0.9) (18.6)Trade and other payables (123.1) (2.6) (125.7) (153.8) (2.9) (156.7)Current tax liabilities (3.7) (0.5) (4.2) (2.4) (0.2) (2.6)Provisions (11.2) - (11.2) (1.9) - (1.9)___________________________________________________________________________________________________________________ (141.1) (4.0) (145.1) (175.8) (4.0) (179.8)___________________________________________________________________________________________________________________ Non-current liabilitiesBorrowings (200.9) (1.0) (201.9) (332.3) (1.5) (333.8)Other non-current liabilities (0.1) (2.5) (2.6) (8.4) (2.5) (10.9)Deferred tax liabilities (15.4) (0.2) (15.6) (21.8) (0.1) (21.9)Provisions (12.8) (1.8) (14.6) (54.8) (1.4) (56.2)Retirement benefit obligations (16.9) - (16.9) (28.2) - (28.2)___________________________________________________________________________________________________________________ (246.1) (5.5) (251.6) (445.5) (5.5) (451.0)___________________________________________________________________________________________________________________ Total liabilities (387.2) (9.5) (396.7) (621.3) (9.5) (630.8)___________________________________________________________________________________________________________________ Net assets 185.7 5.6 191.3 119.4 4.7 124.1___________________________________________________________________________________________________________________ EquityShare capital 23.4 23.4Share premium 93.2 93.1Exchange reserve 3.1 -Retained earnings 71.6 7.6___________________________________________________________________________________________________________________ Total equity 191.3 124.1___________________________________________________________________________________________________________________ Consolidated Cash Flow Statementyear ended 31 March 2005 (unaudited) Dis- Continuing continued Total Note £m £m £m__________________________________________________________________________________________________________________ Net cash from operating activities 5(d) 29.4 28.2 57.6__________________________________________________________________________________________________________________ Investing activitiesInterest paid (13.2) (2.3) (15.5)Interest received 2.2 - 2.2Purchases of property, plant and equipment (66.9) (2.7) (69.6)Disposal of property, plant and equipment 6.8 - 6.8Acquisition of subsidiary (3.9) - (3.9)Disposal of subsidiary and other businesses 189.4 - 189.4Movements in loans and dividends received from joint ventures 0.8 - 0.8___________________________________________________________________________________________________________________ Net cash used in investing activities 115.2 (5.0) 110.2___________________________________________________________________________________________________________________ Financing activitiesProceeds from issue of shares 0.1 Dividends paid (13.3) Repayment of borrowings (151.3) Increase in obligations under finance leases 0.9 Repayments of obligations under finance leases (2.5) __________________________________________________________________________________________________________________ Net cash flow from financing activities (166.1)___________________________________________________________________________________________________________________ Net increase in cash and cash equivalents 1.7Cash and cash equivalents at beginning of year 30.8___________________________________________________________________________________________________________________ Cash and cash equivalents at end of year 32.5___________________________________________________________________________________________________________________ Consolidated Statement of Recognised Income and Expenseyear ended 31 March 2005 (unaudited) 2005 £m___________________________________________________________________________________________________________________ Exchange gain on translation of foreign operations 3.1Actuarial gain on defined benefit pension schemes 0.1 Share based payments 0.1 ___________________________________________________________________________________________________________________ Net income recognised directly in equity 3.3Profit for the period 77.1___________________________________________________________________________________________________________________ Total recognised income and expense for the period 80.4___________________________________________________________________________________________________________________ Consolidated Statement of Changes in Equityyear ended 31 March 2005 (unaudited) Share Share Exchange Retained capital premium reserve earnings Total Note £m £m £m £m £m_____________________________________________________________________________________________________________________ Balance at 31 March 2004 23.4 93.1 - 7.6 124.1Issue of share capital - 0.1 - - 0.1Exchange gain on translation of foreign operations - - 3.1 - 3.1Profit for the year - - - 77.1 77.1Actuarial gain on defined benefit pension schemes - - - 0.1 0.1Share based payments - - - 0.1 0.1Dividends 5(c) - - - (13.3) (13.3)_____________________________________________________________________________________________________________________ Balance at 31 March 2005 23.4 93.2 3.1 71.6 191.3_____________________________________________________________________________________________________________________ 6 Selected Notes to the IFRS Financial Statements (a) Segmental analysis The Group operates in one segment, Waste Management, in the United Kingdom, Belgium and the Netherlands. United Central Kingdom Belgium Netherlands Services TotalYear ended 31 March 2005 £m £m £m £m £m___________________________________________________________________________________________________________________ Continuing operations:Revenue - group 161.7 100.9 203.1 - 465.7Revenue - joint ventures 8.9 1.3 - - 10.2___________________________________________________________________________________________________________________ Revenue - total 170.6 102.2 203.1 - 475.9___________________________________________________________________________________________________________________ Trading profit - group (0.7) 16.5 24.3 (3.4) 36.7Trading profit - joint ventures 1.8 0.1 - - 1.9Restructuring costs (see below) (10.5) - - - (10.5)___________________________________________________________________________________________________________________ Operating profit - total (9.4) 16.6 24.3 (3.4) 28.1___________________________________________________________________________________________________________________ Finance charges - group interest (8.3)Finance charges - joint venture interest (0.2)Finance charges - other (0.6) ___________________________________________________________________________________________________________________ Finance charges - total (9.1) ___________________________________________________________________________________________________________________ Profit before tax 19.0Tax (6.9)___________________________________________________________________________________________________________________ Profit for the year from continuing operations 12.1___________________________________________________________________________________________________________________ Discontinued operations (United Kingdom): Revenue - group 37.9 ___________________________________________________________________________________________________________________ Operating profit 5.4Profit on disposal of operations 59.8Finance charges - group interest (2.3)Finance charges - other (0.5)___________________________________________________________________________________________________________________ Profit before tax 62.4Tax 2.6___________________________________________________________________________________________________________________ Profit for the year from discontinued operations 65.0___________________________________________________________________________________________________________________ Profit for the year 77.1___________________________________________________________________________________________________________________ The restructuring costs of £10.5m relate to the integration andreorganisation of the Group's business in the United Kingdom, followingthe sale of the landfill and power business. It includes £3.3m for theimpairment of tangible and intangible fixed assets. The remaining chargerelates to redundancies and other closure costs. This charge reduces thetax charge by £3.1m. (b) Earnings per share The calculation of the basic and diluted earnings per share for the Group is based on the following data: Continuing Discontinued Year ended 31 March 2005 operations operations Total________________________________________________________________________________________________________________________ Number of shares:Weighted average number of ordinary shares for the purposes of basic earnings per share 234.1Effect of share options in issue 0.6________________________________________________________________________________________________________________________ Weighted average number of ordinary shares for the purposes of diluted earnings per share 234.7________________________________________________________________________________________________________________________ Calculation of basic and adjusted basic earnings per share:Earnings for the purposes of basic earnings per share being profit for the year (£m) 12.1 65.0 77.1Discontinued operations (£m) - (65.0) (65.0)Restructuring costs (net of tax) (£m) 7.4 - 7.4________________________________________________________________________________________________________________________ Earnings for the purposes of adjusted basic earnings per share (£m) 19.5 - 19.5________________________________________________________________________________________________________________________ Basic earnings per share (pence) 5.2p 27.7p 32.9pAdjusted basic earnings per share (pence) 8.3p - 8.3p________________________________________________________________________________________________________________________ Calculation of diluted earnings per share:Earnings for the purposes of basic earnings per share being profit for the year (£m) 12.1 65.0 77.1Effect of dilutive potential ordinary shares (£m) - - -________________________________________________________________________________________________________________________ Earnings for the purposes of diluted earnings per share (£m) 12.1 65.0 77.1________________________________________________________________________________________________________________________ Diluted earnings per share (pence) 5.2p 27.7p 32.9p________________________________________________________________________________________________________________________ (c) Dividends Year ended 31 March 2005 £m________________________________________________________________________________________________________________________ Amounts recognised as distributions to ordinary shareholders in the year:Final dividend paid for the year ended 31 March 2004 of 3.8p per share 8.9 Interim dividend paid for the year ended 31 March 2005 of 1.9p per share 4.4 ________________________________________________________________________________________________________________________ 13.3 ________________________________________________________________________________________________________________________ Proposed final dividend for the year ended 31 March 2005 of 3.8p per share, subject to approval of shareholders at the AGM 8.9________________________________________________________________________________________________________________________ (d) Net cash from operating activities Pre- exceptional Exceptional Total Dis- continuing continuing continuing continued TotalYear ended 31 March 2005 £m £m £m £m £m________________________________________________________________________________________________________________________ Profit from continuing operations 38.6 (10.5) 28.1 - 28.1Profit from discontinued operations - - - 5.4 5.4Amortisation of intangible assets 0.6 - 0.6 - 0.6Impairment loss on intangible assets - 0.5 0.5 - 0.5Depreciation of property, plant and equipment 34.8 - 34.8 5.8 40.6Impairment loss on property, plant and equipment - 2.8 2.8 - 2.8Gain on disposal of property, plant and equipment (1.4) - (1.4) - (1.4)Increase/(decrease) in provisions (13.5) 0.6 (12.9) 6.1 (6.8)Share based payments - 0.1 0.1 - 0.1________________________________________________________________________________________________________________________ Operating cash flows before movements in working capital 59.1 (6.5) 52.6 17.3 69.9(Increase)/decrease in inventories (2.4) - (2.4) - (2.4)(Increase)/decrease in receivables (5.0) - (5.0) 1.2 (3.8)Increase/(decrease) in payables (9.1) 2.8 (6.3) 9.7 3.4________________________________________________________________________________________________________________________ Cash generated by operations 42.6 (3.7) 38.9 28.2 67.1Income taxes paid (9.5) - (9.5) - (9.5)________________________________________________________________________________________________________________________ Net cash from operating activities 33.1 (3.7) 29.4 28.2 57.6________________________________________________________________________________________________________________________ APPENDIX A Consolidated Income Statement for the year ended 31 March 2005Effect of IAS1 - Presentation of Financial Statements Discontinued ExceptionalUK GAAP balances operations items UK GAAP balancesin UK GAAP format £m £m £m £m in IFRS format________________________________________________________________________________________________________________________ Continuing operations:Turnover 503.6 (37.9) - 465.7 RevenueCost of sales (409.4) 30.5 (5.2) (384.1) Cost of sales________________________________________________________________________________________________________________________ Gross profit 94.2 (7.4) (5.2) 81.6 Gross profitAdministrative expenses (52.0) 1.6 (5.2) (55.6) Administrative expensesGoodwill amortisation (10.0) 0.4 - (9.6) Goodwill amortisationShare of operating profits ofjoint ventures 1.9 - - 1.9 Share of results of joint venturesExceptional operating costs (10.4) - 10.4 - -________________________________________________________________________________________________________________________ Total operating profit 23.7 (5.4) - 18.3 Operating profitNon-operating exceptional items - disposal of operations 51.5 (51.5) - - -________________________________________________________________________________________________________________________ Profit before finance Profit before finance charges andcharges and tax 75.2 (56.9) - 18.3 taxFinance charges - interest (9.7) 2.3 - (7.4) Finance charges - interestFinance charges - other (1.1) 0.5 - (0.6) Finance charges - other________________________________________________________________________________________________________________________ Profit on ordinary activitiesbefore tax 64.4 (54.1) - 10.3 Profit before taxTax (4.2) (2.9) - (7.1) Tax________________________________________________________________________________________________________________________ (57.0) - 3.2 Profit for the year from continuing operations Discontinued operations: 57.0 - 57.0 Profit for the year from discontinued operations________________________________________________________________________________________________________________________ Profit on ordinary activities after tax and profit for the year 60.2 - - 60.2 Profit for the year _______________________________________________________________________ Dividends (13.3)_________________________________________________ Retained profit transferred to reserves 46.9_________________________________________________ Consolidated Income Statement - adjustments arising from IFRS adoptionyear ended 31 March 2005 (unaudited) IFRS3 IAS31 IFRS2 Goodwill Share Share and of joint IAS19 IAS17 based UK GAAP intangibles ventures Pensions Leasing payments IFRS £m £m £m £m £m £m £m________________________________________________________________________________________________________________________ Continuing operations:Revenue 465.7 - 10.2 - - - 475.9Cost of sales (384.1) (0.2) (5.6) - - - (389.9)________________________________________________________________________________________________________________________ Gross profit 81.6 (0.2) 4.6 - - - 86.0Administrative expenses (55.6) - (2.7) (0.1) 0.6 (0.1) (57.9)Goodwill amortisation (9.6) 9.6 - - - - -Share of results of joint ventures 1.9 - (1.9) - - - -________________________________________________________________________________________________________________________ Operating profit before finance charges and tax 18.3 9.4 - (0.1) 0.6 (0.1) 28.1Finance charges - interest (7.4) - - (0.6) (0.5) - (8.5)Finance charges - other (0.6) - - - - - (0.6)________________________________________________________________________________________________________________________ Profit before tax 10.3 9.4 - (0.7) 0.1 (0.1) 19.0Tax (7.1) - - 0.2 - - (6.9)________________________________________________________________________________________________________________________ Profit for the year from continuing operations 3.2 9.4 - (0.5) 0.1 (0.1) 12.1 Discontinued operations:Profit for the year from discontinued operations 57.0 7.3 - 0.7 - - 65.0________________________________________________________________________________________________________________________ Profit for the year 60.2 16.7 - 0.2 0.1 (0.1) 77.1________________________________________________________________________________________________________________________ APPENDIX B Consolidated Balance Sheet at 31 March 2005 (unaudited)Effect of IAS1 - Presentation of Financial Statements Deferred Current UK GAAP balances Provisions tax tax UK GAAP balancesin UK GAAP format £m £m £m £m £m in IFRS format________________________________________________________________________________________________________________________ Fixed assets Non-current assetsIntangible assets 150.1 - - - 150.1 Intangible assetsTangible assets 229.5 - - - 229.5 Property, plant and equipmentInvestment in joint ventures 8.8 - - - 8.8 Interests in joint venturesOther unlisted investments 1.0 - - - 1.0 Other investments - 6.1 - 6.1 Deferred tax assets________________________________________________________________________________________________________________________ Total fixed assets 389.4 - 6.1 - 395.5________________________________________________________________________________________________________________________ Current assets Current assetsStocks 9.1 - - - 9.1 InventoriesDebtors 124.7 - - (3.0) 121.7 Trade and other receivables - - 3.0 3.0 Current tax assetsCash at bank and in hand 32.1 - - - 32.1 Cash and cash equivalents________________________________________________________________________________________________________________________ 165.9 - - - 165.9________________________________________________________________________________________________________________________ 561.4 Total assets________________________________________________________________________________________________________________________ Creditors: due within 1 year Current liabilitiesBorrowings (0.7) - - - (0.7) BorrowingsOther creditors (135.7) - - 3.7 (132.0) Trade and other payables - - (3.7) (3.7) Current tax liabilities (11.2) - - (11.2) Provisions________________________________________________________________________________________________________________________ (136.4) (11.2) - - (147.6)________________________________________________________________________________________________________________________ Net current assets 29.5________________________________________________________________________________________________________________________ Total assets less current liabilities 418.9________________________________________________________________________________________________________________________ Creditors: due after 1 year Non-current liabilitiesBorrowings (193.7) - - - (193.7) BorrowingsOther creditors (0.1) - - - (0.1) Other non-current liabilities - (12.5) - (12.5) Deferred tax liabilities (12.8) - - (12.8) Provisions________________________________________________________________________________________________________________________ (193.8) (12.8) (12.5) - (219.1)Provisions for liabilitiesand charges (30.4) 24.0 6.4 - -________________________________________________________________________________________________________________________ (366.7) Total liabilities________________________________________________________________________________________________________________________ Net assets 194.7 - - - 194.7 Net assets________________________________________________________________________________________________________________________ Capital and reserves EquityCalled up share capital 23.4 - - - 23.4 Share capitalShare premium account 93.2 - - - 93.2 Share premiumProfit and loss account 78.1 - - - 78.1 Retained earnings________________________________________________________________________________________________________________________ Equity shareholders' funds 194.7 - - - 194.7 Total equity________________________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2005 (unaudited)Adjustments arising from IFRS adoption IFRS3 IAS31 Goodwill Share IAS19 IAS12 UK and IAS10 of joint Employee IAS17 IAS21 Income GAAP intangibles Dividends ventures benefits Leases Exchange taxes IFRS £m £m £m £m £m £m £m £m £m________________________________________________________________________________________________________________________ Non-current assetsIntangible assets 150.1 10.6 - - - - - - 160.7Property, plant and equipment 229.5 (1.0) - 12.1 - 9.7 - - 250.3Investment in joint ventures 5.6 - - (5.6) - - - - -Loans to joint ventures 3.2 - - - - - - - 3.2Other investments 1.0 - - - - - - - 1.0Deferred tax assets 6.1 - - - 8.1 - - - 14.2________________________________________________________________________________________________________________________ 395.5 9.6 - 6.5 8.1 9.7 - - 429.4________________________________________________________________________________________________________________________ Current assetsInventories 9.1 - - 0.2 - - - - 9.3Trade and other receivables 121.7 (0.2) - 2.4 (10.1) - - - 113.8Current tax assets 3.0 - - - - - - - 3.0Cash and cash equivalents 32.1 - - 0.4 - - - - 32.5________________________________________________________________________________________________________________________ 165.9 (0.2) - 3.0 (10.1) - - - 158.6________________________________________________________________________________________________________________________ Total assets 561.4 9.4 - 9.5 (2.0) 9.7 - - 588.0________________________________________________________________________________________________________________________ Current liabilitiesBorrowings (0.7) - - (0.9) - (2.4) - - (4.0)Trade and other payables (132.0) - 8.9 (2.6) - - - - (125.7)Current tax liabilities (3.7) - - (0.5) - - - - (4.2)Provisions (11.2) - - - - - - - (11.2)________________________________________________________________________________________________________________________ (147.6) - 8.9 (4.0) - (2.4) - - (145.1)________________________________________________________________________________________________________________________ Non-current liabilitiesBorrowings (193.7) - - (1.0) - (7.2) - - (201.9)Other non-current liabilities (0.1) - - (2.5) - - - - (2.6)Deferred tax liabilities (12.5) - - (0.2) - - - (2.9) (15.6)Provisions (12.8) - - (1.8) - - - - (14.6)Retirement benefit obligations - - - (16.9) - - - (16.9)________________________________________________________________________________________________________________________ (219.1) - - (5.5) (16.9) (7.2) - (2.9) (251.6)________________________________________________________________________________________________________________________ Total liabilities (366.7) - 8.9 (9.5) (16.9) (9.6) - (2.9) (396.7)________________________________________________________________________________________________________________________ Net assets 194.7 9.4 8.9 - (18.9) 0.1 - (2.9) 191.3________________________________________________________________________________________________________________________ Equity Share capital 23.4 - - - - - - - 23.4Share premium 93.2 - - - - - - - 93.2Exchange reserve - - - - - 0.1 3.1 (0.1) 3.1Retained earnings 78.1 9.4 8.9 - (18.9) - (3.1) (2.8) 71.6________________________________________________________________________________________________________________________ Total equity 194.7 9.4 8.9 - (18.9) 0.1 - (2.9) 191.3________________________________________________________________________________________________________________________ APPENDIX C Consolidated Balance Sheet at 31 March 2004 (unaudited)Effect of IAS1 - Presentation of Financial Statements Deferred Current UK GAAP balances Provisions tax tax UK GAAP balancesin UK GAAP format £m £m £m £m £m in IFRS format_______________________________________________________________________________________________________________________ Fixed assets Non-current assetsIntangible assets 183.8 - - - 183.8 Intangible assetsTangible assets 356.2 - - - 356.2 Property, plant and equipmentInvestment in joint ventures 8.6 - - - 8.6 Interests in joint venturesOther unlisted investments 1.1 - - - 1.1 Other investments - 0.9 - 0.9 Deferred tax assets_____________________________________________________________________________________________________________________ Total fixed assets 549.7 - 0.9 - 550.6_______________________________________________________________________________________________________________________ Current assets Current assetsStocks 8.1 - - - 8.1 InventoriesDebtors 137.7 - - (1.2) 136.5 Trade and other receivables - - 1.2 1.2 Current tax assetsCash at bank and in hand 30.3 - - - 30.3 Cash and cash equivalents_______________________________________________________________________________________________________________________ 176.1 - - - 176.1_______________________________________________________________________________________________________________________ 726.7 Total assets_______________________________________________________________________________________________________________________ Creditors: due within 1 year Current liabilitiesBorrowings (15.8) - - - (15.8) BorrowingsOther creditors (165.9) - - 2.4 (163.5) Trade and other payables - - (2.4) (2.4) Current tax liabilities (1.9) - - (1.9) Provisions_______________________________________________________________________________________________________________________ (181.7) (1.9) - - (183.6)_______________________________________________________________________________________________________________________ Net current liabilities (5.6)_______________________________________________________________________________________________________________________ Total assets less current liabilities 544.1_______________________________________________________________________________________________________________________ Creditors: due after 1 year Non-current liabilitiesBorrowings (323.6) - - - (323.6) BorrowingsOther creditors (8.4) - - - (8.4) Other non-current liabilities - (19.0) - (19.0) Deferred tax liabilities (54.8) - - (54.8) Provisions_______________________________________________________________________________________________________________________ (332.0) (54.8) (19.0) - (405.8)Provisions for liabilities and charges (74.8) 56.7 18.1 - -_______________________________________________________________________________________________________________________ (589.4) Total liabilities_______________________________________________________________________________________________________________________ Net assets 137.3 - - - 137.3 Net assets_______________________________________________________________________________________________________________________ Capital and reserves EquityCalled up share capital 23.4 - - - 23.4 Share capitalShare premium account 93.1 - - - 93.1 Share premiumProfit and loss account 20.8 - - - 20.8 Retained earnings_______________________________________________________________________________________________________________________ Equity shareholders' funds 137.3 - - - 137.3 Total equity_______________________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2004 (unaudited)Adjustments arising from IFRS adoption IFRS3 IAS31 Goodwill Share IAS19 IAS12 UK and IAS10 of joint Employee IAS17 Income GAAP intangibles Dividends ventures benefits Leases taxes IFRS £m £m £m £m £m £m £m £m________________________________________________________________________________________________________________________ Non-current assetsIntangible assets 183.8 2.0 - - - - - 185.8Property, plant and equipment 356.2 (1.7) - 11.9 - 10.5 - 376.9Investment in joint ventures 4.7 - - (4.7) - - - -Loans to joint ventures 3.9 - - - - - - 3.9Other investments 1.1 - - - - - - 1.1Deferred tax assets 0.9 - - - 8.2 - - 9.1________________________________________________________________________________________________________________________ 550.6 0.3 - 7.2 8.2 10.5 - 576.8________________________________________________________________________________________________________________________ Current assetsInventories 8.1 - - 0.1 - - - 8.2Trade and other receivables 136.5 (0.3) - 1.7 - - - 137.9Current tax assets 1.2 - - - - - - 1.2Cash and cash equivalents 30.3 - - 0.5 - - - 30.8________________________________________________________________________________________________________________________ 176.1 (0.3) - 2.3 - - - 178.1________________________________________________________________________________________________________________________ Total assets 726.7 - - 9.5 8.2 10.5 - 754.9________________________________________________________________________________________________________________________ Current liabilitiesBorrowings (15.8) - - (0.9) - (1.9) - (18.6)Trade and other payables (163.5) - 8.9 (2.9) 0.8 - - (156.7)Current tax liabilities (2.4) - - (0.2) - - - (2.6)Provisions (1.9) - - - - - - (1.9)________________________________________________________________________________________________________________________ (183.6) - 8.9 (4.0) 0.8 (1.9) - (179.8)________________________________________________________________________________________________________________________ Non-current liabilitiesBorrowings (323.6) - - (1.5) - (8.7) - (333.8)Other non-current liabilities (8.4) - - (2.5) - - - (10.9)Deferred tax liabilities (19.0) - - (0.1) - - (2.8) (21.9)Provisions (54.8) - - (1.4) - - - (56.2)Retirement benefit obligations - - - - (28.2) - - (28.2)________________________________________________________________________________________________________________________ (405.8) - - (5.5) (28.2) (8.7) (2.8) (451.0)________________________________________________________________________________________________________________________ Total liabilities (589.4) - 8.9 (9.5) (27.4) (10.6) (2.8) (630.8)________________________________________________________________________________________________________________________ Net assets 137.3 - 8.9 - (19.2) (0.1) (2.8) 124.1________________________________________________________________________________________________________________________ Equity Share capital 23.4 - - - - - - 23.4Share premium 93.1 - - - - - - 93.1Retained earnings 20.8 - 8.9 - (19.2) (0.1) (2.8) 7.6________________________________________________________________________________________________________________________ Total equity 137.3 - 8.9 - (19.2) (0.1) (2.8) 124.1________________________________________________________________________________________________________________________ APPENDIX D UK GAAP to IFRS Reconciliation of Financial HighlightsFor the year ended 31 March 2005 (i) Revenues £m________________________________________________________________________________ Group turnover under UK GAAP 503.6IAS1 - Discontinued activities (37.9)________________________________________________________________________________ Group turnover on continuing activities under UK GAAP 465.7IAS31 - Share of joint ventures 10.2________________________________________________________________________________ Group revenues under IFRS 475.9________________________________________________________________________________ (ii) Headline profit £m________________________________________________________________________________ Headline profit under UK GAAP 33.3IAS1 - Discontinued activities (3.0)________________________________________________________________________________ Headline profit on continuing activities under UK GAAP 30.3Include intangible amortisation (contract rights) (0.2)IAS19 - Employee benefits (0.7)IAS17 - Leases 0.1________________________________________________________________________________ Headline profit under IFRS 29.5________________________________________________________________________________ IFRS Headline Profit represents profit from continuing activities beforeexceptional items, changes in fair value of financial instruments and tax. (iii) Exceptional items Those items separately disclosed on the face of the IFRS income statement due totheir size and incidence are considered exceptional for the purposes ofdetermining Headline Profit. £m________________________________________________________________________________ Exceptional operating costs - restructuring (10.4)Non-operating exceptional costs - disposal of business 51.5________________________________________________________________________________ Exceptional items under UK GAAP 41.1IAS1 - Discontinued activities (51.5)IFRS2 - Share based payments (0.1)________________________________________________________________________________ Restructuring costs shown on the face of the Consolidated IncomeStatement under IFRS (10.5)________________________________________________________________________________ (iv) Intangibles/goodwill amortisation £m________________________________________________________________________________ Goodwill amortisation under UK GAAP (10.0)IAS1 - Discontinued activities 0.4________________________________________________________________________________ Goodwill amortisation on continuing activities under UK GAAP (9.6)Include intangible amortisation under UK GAAP (0.4)IFRS3 - Business combinations 9.4________________________________________________________________________________ Intangibles amortisation under IFRS (0.6)________________________________________________________________________________ Intangibles amortisation is included in the IFRS based Headline Profit. (v) Profit before tax £m________________________________________________________________________________ Profit before tax under UK GAAP 64.4IAS1 - Discontinued activities (54.1)________________________________________________________________________________ Profit before tax on continuing activities under UK GAAP 10.3IFRS3 - Business combinations 9.4IAS19 - Employee benefits (0.7)IFRS2 - Share based payments (0.1)IAS17 - Leases 0.1________________________________________________________________________________ Profit before tax under IFRS 19.0________________________________________________________________________________ (vi) Profit on continuing businesses before interest, exceptional items,goodwill amortisation and tax £m________________________________________________________________________________ Profit on continuing businesses before interest, exceptional items,goodwill amortisation and tax under UK GAAP 38.3Include intangible amortisation (contract rights) (0.2)IAS19 - Employee benefits (0.1)IAS17 - Leases 0.6________________________________________________________________________________ Profit on continuing businesses before interest, exceptional items and tax under IFRS 38.6________________________________________________________________________________ (vii) Adjusted basic earnings per share Earnings Earnings £m Pence per share________________________________________________________________________________ Adjusted basic earnings under UK GAAP 21.9 9.4IAS1 - Discontinued activities (net of tax) (1.8) (0.8)________________________________________________________________________________ Adjusted basic earnings on continuingactivities under UK GAAP 20.1 8.6Include intangible amortisation of contract rightsunder UK GAAP (net of tax) (0.2) (0.1)IAS19 - Employee benefits (net of tax) (0.5) (0.2)IAS17 - Leases (net of tax) 0.1 -________________________________________________________________________________ Adjusted basic earnings under IFRS 19.5 8.3________________________________________________________________________________ (viii) Basic earnings per share Earnings Earnings £m Pence per share________________________________________________________________________________ Basic earnings under UK GAAP 60.2 25.7IFRS3 - Business combinations 16.7 7.1IAS19 - Employee benefits (net of tax) 0.2 0.1IFRS2 - Share based payments (0.1) -IAS17 - Leases (net of tax) 0.1 -________________________________________________________________________________ Basic earnings under IFRS 77.1 32.9________________________________________________________________________________ (ix) Net assets 31 March 2005 £m________________________________________________________________________________ Net assets under UK GAAP 194.7IFRS3 - Business combinations (net of tax) 9.4IAS10 - Events after the balance sheet date 8.9IAS19 - Employee benefits (net of tax) (18.9)IAS17 - Leases (net of tax) 0.1IAS12 - Deferred tax (2.9)________________________________________________________________________________ Net assets under IFRS 191.3________________________________________________________________________________ (x) Debt Share of joint Principal ventures debt PFICOs Total £m £m £m £m ________________________________________________________________________________ Net debt under UK GAAP - (99.5) (62.8) (162.3)IAS31 - Accounting for Investments (1.5) - - (1.5)IAS17 - Leases - (9.6) - (9.6)________________________________________________________________________________ Net debt under IFRS (1.5) (109.1) (62.8) (173.4)________________________________________________________________________________ (xi) Earnings before interest, tax, depreciation and amortisation (EBITDA) Pre- exceptional Exceptional Total Dis- continuing continuing continuing continued Total £m £m £m £m £m_________________________________________________________________________________________________________________ EBITDA under UK GAAP presentation 83.4 (7.1) 76.3 - 76.3IAS1 Presentation changes:Operating profits on discontinued activities (5.4) - (5.4) 5.4 -Depreciation on discontinued activities (5.8) - (5.8) 5.8 -Provisions for aftercare and site restoration (3.1) - (3.1) - (3.1)Profit on sale of fixed assets (1.4) - (1.4) - (1.4)__________________________________________________________________________________________________________________ EBITDA under UK GAAP - IFRS presentation 67.7 (7.1) 60.6 11.2 71.8IAS31 - Share of joint ventures depreciation 1.5 - 1.5 - 1.5IAS17 - Leases 2.6 - 2.6 - 2.6IAS19 - Employee benefits (0.1) - (0.1) - (0.1)IFRS2 - Share based payments - (0.1) (0.1) - (0.1)__________________________________________________________________________________________________________________ EBITDA under IFRS 71.7 (7.2) 64.5 11.2 75.7__________________________________________________________________________________________________________________ Profit from continuing operations under IFRS 38.6 (10.5) 28.1 - 28.1Profit from discontinued operations - - - 5.4 5.4Amortisation of intangible assets 0.6 - 0.6 - 0.6Impairment loss on intangible assets - 0.5 0.5 - 0.5Depreciation of property, plant and equipment 33.9 - 33.9 5.8 39.7Impairment loss on property, plant and equipment - 2.8 2.8 - 2.8Gain on disposal of property, plant and equipment (1.4) - (1.4) - (1.4)__________________________________________________________________________________________________________________ EBITDA under IFRS 71.7 (7.2) 64.5 11.2 75.7__________________________________________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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