21st Mar 2006 09:54
ITE Group PLC21 March 2006 21 March 2006 ITE GROUP PLC UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ITE Group plc is preparing its financial statements in accordance withInternational Financial Reporting Standards ('IFRS') with effect from the yearended 30 September 2006. The following analysis has been prepared substantially on the basis of allInternational Accounting Standards ('IAS') and IFRS, and related interpretationspublished by the International Accounting Standards Board ('IASB'), andsubsequently approved by the European Commission, and are therefore subject topossible change. As a result, information contained within these statements mayrequire updating for any subsequent amendments to IFRS. This analysis explains how the Group's previously reported UK GAAP financialperformance and position are reported under IFRS. It provides, on an IFRSbasis, reconciliations from UK GAAP to IFRS for the following: • the Group's unaudited consolidated income statement for the year ended 30 September 2005; • the Group's unaudited consolidated balance sheet as at 30 September 2005; • the Group's unaudited consolidated cash flow statement for the year ended 30 September 2005; and • the Group's unaudited consolidated balance sheet as at 1 October 2004. Attention is drawn to the fact that under IFRSs, only a complete set offinancial statements comprising a balance sheet, income statement, statement ofchanges in equity, cash flow statement, together with comparative informationand explanatory notes, can provide a fair presentation of the company'sfinancial position, results of operations and cash flows. The financial information contained on pages 8 to 11 has been prepared bymanagement using their best knowledge and judgement of the expected standardsand interpretations of the IASB, facts and circumstances, and accountingpolicies that will be applied when the company prepares its first complete setof IFRS financial statements as at 30 September 2006. The Group's financialresults for the six month period ending 31 March 2006 will be prepared underIFRS. Therefore, until such time the possibility cannot be excluded that thecomparative information included in that first complete set of IFRS financialstatements may not be consistent with disclosure below. The financial information presented is unaudited. Enquiries: Russell Taylor, Finance Director Tim Spratt/Charlie PalmerITE Group plc Tel: 0207 596 5000 Financial Dynamics Tel: 020 7831 3113 BASIS OF PREPARATION The financial information presented in this document has been prepared on thebasis of all International Financial Reporting Standards ('IFRS'), includingInternational Accounting Standards ('IAS') and interpretations published by theInternational Accounting Standards Board ('IASB') and it committees, and asinterpreted by any regulatory bodies applicable to the Group. These are subjectto ongoing amendment by the IASB and subsequent endorsement by the EuropeanCommission, and are therefore subject to possible change. As a result,information contained within these statements may require updating for anysubsequent amendments to IFRS required for first time adoption or those newstandards that the Group may elect to adopt early. 1. IFRS 1 exemptions IFRS1, "First time adoption of International Financial Reporting Standards" setsout the procedures that the Group must follow when it adopts IFRS for the firsttime as the basis for preparing its consolidated financial statements. TheGroup is required to establish its IFRS accounting policies as at 30 September2005 and, in general, apply these retrospectively to determine the IFRS openingbalance sheet at its date of transition, 1 October 2004. The standard provides a number of optional exceptions to this general principle. The most significant of these are set out below, together with a descriptionin each case of the exception adopted by the Group. a) Business combinations that occurred before the opening IFRS balance sheetdate (IFRS 3, "Business combinations"). The Group has elected not to apply IFRS 3 retrospectively to businesscombinations that took place before the date of transition, 1 October 2004. All other business combinations since 1 October 2004 have been accounted forunder IFRS 3. b) Share-based payments (IFRS 2, "Share-based payment"). The Group has elected to apply IFRS 2 to all relevant share based paymenttransactions granted after 7 November 2002 but not fully vested at 1 January2005. c) Financial Instruments (IAS 32, "Financial Instruments: Disclosure andPresentation" and IAS 39, "Financial Instruments: Recognition and Measurement"). The Group has not applied IAS 32 and IAS 39 for the period presented and hastherefore taken advantage of the exemption in IFRS 1 that enables the Group toapply these standards from 1 October 2005. d) Foreign currency translation differences (IAS 21, "The effects of changesin foreign exchange rates"). The Group has taken advantage of the IFRS 1 exemption allowing the cumulativetranslation differences on retranslation of subsidiaries' net assets to bedeemed to be zero (for all subsidiaries) at the date of transition to IFRS. Anygains and losses subsequent to disposals of foreign operations will excludetranslation differences arising prior to the transition date. 2. Presentation of financial information The primary statements within the financial information combined in thisdocument have been presented in accordance with IAS 1, "Presentation ofFinancial Statements". However, this format and presentation may requiremodification in the event that further guidance is issued and as practicedevelops. KEY IMPACT ANALYSIS The analysis below sets out the most significant adjustments arising from thetransition to IFRS. 1. Presentation of Financial StatementsThe format of the Group's primary financial statements has been presented inaccordance with IAS 1, "Presentation of Financial Statements". The IFRS cash flow statement explains the change in cash and cash equivalentsrather than just cash as under UK GAAP. Cash and cash equivalents under IFRScomprise cash and certain short-term liquid investments. The format of the cashflow statement changes with cash flows being categorised under the headings of "operating", "investing" and "financing". 2. Intangible assets a) Goodwill and acquired intangible assets amortisationIAS 38, "Intangible assets" states that goodwill is not amortised. Insteadgoodwill is subject to an annual impairment review. As the Group has electednot to apply IFRS 3 retrospectively to business combinations prior to 1 October2004, the original UK GAAP goodwill balance at 1 October 2004 (£29.3m) has beenincluded in the opening IFRS consolidated balance sheet and is no longeramortised, but continues to be subject to impairment reviews. b) Intangible assets acquiredBusiness combinations since 1 October 2004 have been accounted for in accordancewith IFRS 3, "Business combinations", with intangible assets recognised andamortised over their useful economic lives where they are separable or arisefrom a contractual or legal right. Intangible assets relating to customer listsand databases and brand trademarks, are being amortised over periods of up to 7years. c) Computer softwareUnder UK GAAP, capitalised computer software is included within tangible fixedassets on the balance sheet as property, plant and equipment. Under IAS 38 onlycomputer software that is integral to a related item of hardware can be includedas property, plant and equipment. All other computer software is recorded as anintangible asset. Accordingly a reclassification has been made in the openingbalance sheet of £650,000 from property, plant and equipment to intangibleassets. 3. Deferred and Current taxes IAS 12, "Income taxes" requires deferred tax to be provided on alltemporary differences rather than just timing differences under UK GAAP. IAS 12also requires deferred tax to be provided in respect of the Group's employeebenefits such as share option schemes. The overall tax impact of these andother IFRS adjustments is quantified in the relevant section of this statement. 4. Share-based payments IFRS 2, "Share-based payment" states that an expense for equityinstruments granted should be recognised in the financial statements based ontheir "fair value" at the date of grant. This expense, which is in relation toemployee option and performance share plans, is then recognised over the vestingperiod of the relevant scheme. IFRS 2 has been applied to all options granted after 7 November 2002 and notfully vested by 1 January 2005. The Group has adopted the Black Scholes modelfor the purpose of computing fair value under IFRS. 5. Post Balance Sheet Events & DividendsIAS 10, "Events after the Balance Sheet date" requires that dividends declaredafter the balance sheet date should not be recognised as a liability at thatbalance sheet date as the liability does not represent a present obligation asdefined by IAS 37, "Provisions, Contingent liabilities and Contingent assets". The final dividend declared in February 2005 in relation to the year ended 30September 2004 has been reversed in the opening balance sheet and charged toequity in the balance sheet as at 30 September 2005. An adjustment to reversethe dividend declared in February 2006 has also been made to the balance sheetas at 30 September 2005. 6. Income from associatesIAS 1, "Presentation of Financial Statements" requires the aggregated profit orloss of an associate to be disclosed as a single line item within the incomestatement. Under UK GAAP, the Group separately presented its share of operatingprofit, interest, tax and minority interest from associate undertakings. 7. Venue loans and prepaymentsIAS 32, "Financial Instruments: Disclosure and Presentation" and IAS 39, "Financial Instruments: Recognition and Measurement" require financial assets tobe initially recognised at fair value. Where the Group has advanced funds tovenue owners that can be repaid by either off-setting against future venue hireor by cash payment, the fair value is recognised based on the discounted valueof future cash receipts. The loan balance is subsequently measured at amortisedcost using the "effective interest rate method". As the Group has takenadvantage of the of the exemption in IFRS 1 that enables the Group to applythese standards from 1 October 2005, an adjustment in the income statement willbe first recognised in the year ended 30 September 2006. Advances that are prepayments of future venue hire and do not permit therepayment of the principal in cash are recognised at cost as prepayments withindebtors due within one year. 8. LeasesIAS 17, "Leases" requires that the expense is recognised on a straight linebasis over the lease term, including any rent-free or reduced rent periods givenat the inception of a lease. The income statement has been adjusted to takeinto account the amortisation of lease incentives over a longer period than theUK GAAP, which recognises incentives over the period to the first rent reviewdate. 9. Holiday pay accrual IAS 19, "Employee benefits" requires a liability to be recognised for the amountof accrued holiday pay of employees at the balance sheet date in respect of anyholiday amounts which they are still entitled to at that time. PERFORMANCE MEASUREMENT Income statement Headline profit before tax The Group has for many years presented headline profit before tax as anadditional performance measure. This is defined as profit before taxation,amortisation and impairment of goodwill and acquired intangible assets andprofits and losses arising on disposal of group undertakings. This measure willbe stated after the charge for share based payments under IFRS 2. Headline diluted earnings per share Future references to headline diluted earnings per share, within the notes tothe financial statements, will use profit before amortisation and impairment ofgoodwill (including associates) and acquired intangible assets and profits orlosses arising on disposal of group undertakings. Notes to the Consolidated IFRS statement Earnings per share Basic and diluted UK GAAP IFRS IFRS Format (unaudited) (unaudited) 2005 2005 £000 £000Profit for the financial year attributable 15,563 18,423to equity holders of the parent _________ ________ 2005 Number of shares ('000) UK GAAP and IFRS (unaudited)Weighted average number of shares:For basic earnings per share 273,134Exercise of share options 9,197 ___________For diluted earnings per share 282,331 ___________ Income statementYear ended 30September 2005 IFRS adjustments UK GAAP IFRS 2 IAS 10 IAS 17 IAS 38 IAS 38 IFRS 3 IAS 12 IAS 28 IAS 19 IFRS in IFRS Share Dividends Leases Intangible Computer Amortisation Deferred Associates Holiday adjusted format based assets software tax pay results payments Revenue 78,547 78,547Cost of sales (42,552) (42,552) Gross profit 35,995 0 0 0 0 0 0 0 0 0 35,995 Net (12,232) (531) 53 10 (12,701)administrativeexpensesbeforeamortisationOther 0operatingincomeAmortisation (3,142) 2,764 (378)Total (15,374) (531) 0 53 0 0 2,764 0 0 10 (13,079)administrativeexpenses Operating 20,621 (531) 0 53 0 0 2,764 0 0 10 22,916profit Share of 612 (236) 376associates'profit beforegoodwillamortisationAmortisation (153) 153 0Share of 459 0 0 0 0 0 153 0 (236) 0 376associates'profit Profit/ 221 221(provision orloss) ondisposal ofgroupundertakingsIncome from 2,085 2,085investmentsFinance costs (427) (427) Profit on 22,959 (531) 0 53 0 0 2,917 0 (236) 10 25,171ordinaryactivitiesbeforetaxationTax on profit (7,429) 412 236 (6,781)on ordinaryactivities Profit for the 15,530 (531) 0 53 0 0 2,917 412 0 10 18,390period fromcontinuingoperations Attributableto:Equity holders 15,563 (531) 0 53 0 0 2,917 412 0 10 18,423of the parentMinority (33) (33)interests 15,530 (531) 0 53 0 0 2,917 412 0 10 18,390 Earnings pershare (pence)Basic 5.7 (0.2) 0.0 0.0 0.0 0.0 1.1 0.2 0.0 0.0 6.7Diluted 5.5 (0.2) 0.0 0.0 0.0 0.0 1.0 0.1 0.0 0.0 6.5 Balance SheetBalance sheet position - as at 30September 2005 IFRS adjustments UK GAAP IFRS 2 IAS 10 IAS 17 IAS 38 IAS 38 IFRS 3 IAS 12 IAS 28 IAS 19 IFRS in IFRS Share Dividends Leases Intangible Computer Amortisation Deferred Associates Holiday adjusted format based assets software tax pay results payments Non-currentassetsGoodwill 33,698 (5,641) 3,139 1,575 32,771Other 109 5,641 615 (375) 5,989intangibleassetsProperty, 1,741 (615) 1,126plant andequipmentInvestments 1,257 153 1,410inassociatesVenue loans 2,216 2,216and otherloansDeferred tax 88 1,307 1,395assets 39,109 0 0 0 0 0 2,917 2,882 0 0 44,907CurrentassetsDebtors due 22,722 22,722within oneyearCash and 13,019 13,019cashequivalents 35,741 0 0 0 0 0 0 0 0 0 35,741 Total assets 74,850 0 0 0 0 0 2,917 2,882 0 0 80,649 CurrentliabilitiesTrade and (48,335) 4,603 (112) (43,844)otherpayablesBank loans (0) (0)andoverdraftsProvisions 0 (48,335) 0 4,603 0 0 0 0 0 0 (112) (43,845) Non-currentliabilitiesOther (722) (722)creditorsProvisions (2,316) (2,316)forliabilitiesand chargesDeferred tax (0) (1,671) (1,671)liabilitiesBank loans - 0due afterone year (2,316) 0 0 (722) 0 0 0 (1,671) 0 0 (4,709) Total (50,651) 0 4,603 (722) 0 0 0 (1,671) 0 (112) (48,554)liabilities Net assets 24,199 0 4,603 (722) 0 0 2,917 1,211 0 (112) 32,095 Capital andreservesCalled up 2,599 2,599sharecapitalShare 38 38premiumaccountMerger 2,746 2,746reserveESOT reserve (3,562) (3,562)Deferred tax 449 449reserveProfit and 21,432 0 4,603 (722) 0 0 2,917 762 0 (112) 28,879loss accountHedge and 751 751translationreserve Equity 24,005 0 4,603 (722) 0 0 2,917 1,211 0 (112) 31,900attributableto equityholders ofthe parent Minority 194 194interests Total equity 24,199 0 4,603 (722) 0 0 2,917 1,211 0 (112) 32,095 Cash flowstatementYear ended 30September 2005 IFRS adjustments UK GAAP IFRS 2 IAS 10 IAS 17 IAS 38 IAS 38 IFRS 3 IAS 12 IAS 28 IAS 19 IFRS in IFRS Share Dividends Leases Intangible Computer Amortisation Deferred Associates Holiday adjusted format based assets software tax pay results payments Cash flowfromoperatingactivitiesProfit from 20,621 (531) 0 53 0 0 2,764 0 10 22,916operations Adjustmentsfor:Depreciation 448 448Foreign 0exchangelossLoss on sale 79 79or writedown ofassetsAmortisation 3,142 (2,764) 378Increase/ 974 (53) 922(decrease)inprovisionsShare based 531 531payments Operating 25,264 0 0 0 0 0 0 0 0 10 25,274cash flowsbeforemovements inworkingcapital Decrease in 1,969 1,969tradereceivablesIncrease in 1,365 (10) 1,355tradepayables Cash 28,598 0 0 0 0 0 0 0 0 0 28,598generatedfromoperations Tax paid (8,378) (8,378)Interest (427) (427)paid Net cash 19,793 0 0 0 0 0 0 0 0 0 19,793fromoperatingactivities Cash flowfrominvestingactivitiesInterest 2,085 2,085receivedDividends 437 437receivedfromassociatesDisposal of 0subsidiaryAcquisition (5,785) (5,785)ofsubsidiaryVenue (828) (828)advancesLoan and 1,271 1,271venuerepaymentsPurchase of (430) (430)property,plant &equipmentPurchase of 0intangiblesNet cash (3,250) 0 0 0 0 0 0 0 0 0 (3,250)used ininvestingactivities Cash flowsfromfinancingactivitiesDividends (7,088) (7,088)paidRepayment of 0borrowingsAcquisition (30,185) (30,185)andcancellationof sharesAcquisition (869) (869)of shares byESOTProceeds 145 145fromexercise ofoptions onshares heldby ESOTProceeds 927 927from issueof sharecapitalCash flows (37,070) 0 0 0 0 0 0 0 0 0 (37,070)fromfinancingactivities Net increase (20,527) 0 0 0 0 0 0 0 0 0 (20,527)/(decrease)in cash andcashequivalents Cash and 33,546 33,546cashequivalentsat beginningof period Cash and 13,019 0 0 0 0 0 0 0 0 0 13,019cashequivalentsat end ofperiod Balance SheetOpening balance sheet position - as at 1 October 2004 IFRS adjustments UK GAAP IFRS 2 IAS 10 IAS 17 IAS 38 IAS 12 IAS 19 IFRS in IFRS Share Dividends Leases Computer Deferred Holiday adjusted format based software tax pay results payments Non-currentassetsGoodwill 29,348 29,348Other intangible 75 651 726assetsProperty, plant 1,862 (651) 1,211and equipmentInvestments in 1,377 1,377associatesVenue loans and 4,060 4,060other loansDeferred tax 137 807 944assets 36,858 0 0 0 0 807 0 37,665Current assetsDebtors due 23,289 23,289within one yearCash and cash 33,546 33,546equivalents 56,835 0 0 0 0 0 0 56,835 Total assets 93,693 0 0 0 0 807 0 94,500 CurrentliabilitiesTrade and other (47,774) 4,533 (122) (43,362)payablesBank loans and 0 0overdraftsProvisions 0 (47,773) 0 4,533 0 0 0 (122) (43,362) Non-currentliabilitiesOther creditors (774) (774)Provisions for (1,498) (1,498)liabilities andchargesDeferred tax (159) (159)liabilitiesBank loans - due 0after one year (1,498) 0 0 (774) 0 (159) 0 (2,431) Total liabilities (49,271) 0 4,533 (774) 0 (159) (122) (45,793) Net assets 44,422 0 4,533 (774) 0 648 (122) 48,707 Capital andreservesCalled up share 2,852 2,852capitalShare premium 29,036 29,036accountMerger reserve 2,746 2,746ESOT reserve (2,792) (2,792)Deferred tax 298 298reserveProfit and loss 12,352 0 4,533 (774) 0 350 (122) 16,339accountHedge and 0translationreserve Equity 44,194 0 4,533 (774) 0 648 (122) 48,479attributable toequity holders ofthe parent Minority 228 228interests Total equity 44,422 0 4,533 (774) 0 648 (122) 48,707 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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