18th Aug 2005 15:53
Fisher (James) & Sons PLC18 August 2005 JAMES FISHER AND SONS PUBLIC LIMITED COMPANY Adoption of International Financial Reporting Standards 1. Key Points • No impact on trading cash flows • Reported pre tax profit for 2004 increases by £1.023m to £14.114m • Reported net assets at 31 December 2004 decreases to £83.331m from £91.041m • Gearing increased from 40% to 44% as a result of reduction in total equity due primarily to inclusion of Pension Fund deficit. 2. Introduction In accordance with European Regulations for listed entities, James Fisher & SonsPLC is required to adopt International Financial Reporting Standards ("IFRS")for its consolidated accounts for accounting periods commencing 1 January 2005.The Group's first published interim statements under IFRS will be the resultsfor the six months to 30 June 2005. As already announced these will be publishedon 23 August 2005. In advance of the publication of future results on an IFRS basis, we set outbelow an unaudited restatement of financial statements which were previouslyreported under UK Generally Accepted Accounting Practice ("UK GAAP"), togetherwith a summary and explanations of the major changes. These adjustments areexplained in detail in later sections of this document. The major accounting changes which are required by the introduction of IFRS are: • Pensions - The Group's obligations in respect of deficits arising in the Group's Shore Staff and Dockworkers defined benefit pension schemes are recognised on the balance sheet from 1 January 2004. • Goodwill will no longer be amortised through the income statement and is instead included at cost and is subject to an annual impairment review. The amortisation for the year ended 31 December 2004 is reversed as part of the IFRS restatement. • The fair value of share-based payments is recorded as an expense in the income statement. There are also significant changes in the presentation of the financialstatements including the presentation of the results of equity accounted jointventures. The Group has decided not to adopt retrospectively IAS 32 and IAS 39 in respectof financial instruments and will apply these from 1 January 2005. The principaleffects of applying these standards are as follows: The 3.5% cumulative preference shares will be reclassified as long term debt.Changes in the fair value of certain types of hedging instruments will be heldon the balance sheet and recorded in a hedging reserve until the relatedtransaction occurs or ceases to be expected to take place at which point theyare transferred to the income statement. The accounts of our 25% owned joint venture, Foreland Holdings Limited, havebeen restated using equity accounting on an IFRS basis. There have been nochanges to the results of the joint venture arising from the restatement. 3. Basis of preparation The unaudited financial information in the statements set out below has beenprepared in accordance with the International Accounting Standards ("IAS") andInternational Financial Reporting Standards ("IFRS") expected to apply to theGroup at 31 December 2005. Certain standards are still subject to change. Inparticular the European Commission has not yet endorsed the amendment to IAS 19- Employee Benefits, which the Group has adopted in respect of the treatment ofactuarial gains and losses. As a result there may be further changes when theGroup prepares its first full year IFRS financial statements. A document containing a more detailed reconciliation of the restatement of thefinancial statements referred to in this document together with the Group'saccounting policies which have been fully revised in accordance with IFRS, canbe found on the Group's website at www.james-fisher.co.uk in the investorrelations section. 4. Overall impact of changes The tables below summarise the major impacts of IFRS. Further details are givenin section 6. In order to comply with the requirements on adoption of IFRS for the comparativeperiod to be restated onto the same basis as the current year, the transitionalnet assets at 1 January 2004 have been restated in addition to the financialinformation for the period ended 30 June 2004 and the year ended 31 December2004. 4.1 Income Statement Unaudited Unaudited Ref 30 June 2004 31 December 2004 £'000 £'000Profit before tax - UK GAAP 6,608 13,091 Goodwill (IFRS3) 6.2 457 915Share-based payments (IFRS2) 6.6 162 169Tax on investment in jointventures (IAS 31) 6.7 (27) (61) -------- --------Profit before tax - IFRSbasis 7,200 14,114 ======== ======== The IFRS adjustments result in related tax adjustments, which together with furtheradjustments to the tax charge arising under the provisions of IAS 12 areshown in section 6.5. 4.2 Earnings per share Six months to 30 June 2004 Year ended 31 December 2004 earnings shares EPS earnings shares EPS £'000 No £'000 NoBasic EPS UK GAAP basis 5,727 48,079,850 11.91p 11,196 48,261,182 23.20p Adjustments Goodwill 457 915share-basedpayments 162 169Taxation (235) (300) -------- -------IFRS basis 6,111 12.71p 11,980 24.82p Diluted*UK GAAP 5,727 49,465,777 11.58p 11,196 48,866,810 22.91pbasis Adjustments Goodwill 457 915share-basedpayments 162 169Taxation (235) (300) -------- -------IFRS basis 6,111 12.35p 11,980 24.52p * Dilution arises from the exercise of shareoptions and LTIP awards. 4.3 Net assets Unaudited Unaudited Unaudited Ref 1 January 2004 30 June 2004 31 December 2004 £'000 £'000 £'000Net Assets -UK GAAP 83,254 87,449 91,041 Pensions (IAS19) 6.1 (13,200) (12,100) (12,800)Goodwill (IFRS3) 6.2 - 457 915Goodwill (IAS21) 6.3 - - 24Dividendrecognition(IAS 10) 6.4 2,068 1,333 2,408Taxation (IAS12) 6.5 2,163 1,867 1,743 ---------- --------- -----------Net Assets -IFRS basis 74,285 79,006 83,331 ========== ========= =========== 4.4 Cash Flow IFRS accounting adjustments have no impact on the group's actual cash flows.Under IAS cash equivalents are defined as including short term deposits maturingwithin 3 months. Consequently the Group's short term cash deposits will nolonger be shown separately in the cash flow statement. 5.Transitional arrangements In general a company is required to determine its IFRS accounting policies andapply them retrospectively as if they had always been in place. There arehowever certain exemptions to this general transition requirement, some of whichare optional, which are set out in IFRS 1. The Group has adopted the followingexemptions in preparing its transitional IFRS statements: • Business combinations (IFRS 3), the Group has elected not to restate business combinations which took place prior to 1 January 2004, the transition date to IFRS. • IAS 19 - Employee Benefits, requires surpluses and deficits in defined benefit pension schemes to be recognised on the balance sheet with separate recognition of the operating and financing costs of the schemes within the income statement. Of the various options available the Group has chosen to recognise the deficit arising in the pension schemes at the date of transition directly in reserves. Future actuarial gains and losses which arise in the schemes will be recognised in the statement of recognised income and expense. The option is permitted by an amendment to IAS 19 which has yet to be endorsed by the European Commission and hence this policy may be subject to change. • In applying the provisions of IFRS 2 - Share based payments, the group has adopted the exemption to apply this standard only to awards granted after 7 November 2002 and vesting after 31 December 2003. No charge is recognised in respect of awards granted prior to that date. • The Group has taken advantage of the exemption available under IFRS to "zero" the foreign currency translation reserve at transition date. • IAS 32 and IAS 39 in respect of financial instruments will be applied prospectively from 1 January 2005. The group will not therefore recognise the fair value of hedging derivatives and financial instruments in its IFRS comparatives and will reclassify the 3.5% cumulative preference shares from equity to long term debt on 1 January 2005. 6.Impact of changes in accounting policies 6.1 Pensions IAS 19 - Employee benefits, requires that the Group's obligations to fund itsdefined benefit pension schemes be recognised in the financial statements. Thisrequires the inclusion of the pension deficits arising in respect of the ShoreStaff and Dockworkers defined benefit schemes on the balance sheet and separaterecognition of the operating and financing costs of the scheme within the incomestatement. There are several options available for the recognition of actuarialgains and losses. The Group has adopted the method permitted by the recentamendment to IAS 19 and will recognise any further variations arising in aparticular period in full in the statement of recognised income and expense. Asnoted above this amendment has yet to be endorsed by the European Commission andso this policy may be subject to change. These accounting treatments do not affect the cash funding of the schemes. The impact of the changes can be summarised as follows: Income statement Unaudited Unaudited 30 June 2004 31 December 2004 £'000 £'000 Pension chargeunder UK GAAP 400 800 Current servicecosts (200) (500)Interest costs (950) (1,900)Expected returnon assets 750 1,600 -------- --------Impact on Profit - -before tax ======== ======== Balance sheet Unaudited Unaudited Unaudited 1 January 2004 30 June 2004 31 December 2004 £'000 £'000 £'000Deficits atdate oftransition (13,200) (13,200) (13,200) Pension costsunder IFRS - (400) (800)Contributionspaid - 400 800Actuarial gains& losses - 1,100 400 --------- -------- ---------Deficitreported inbalance sheet (13,200) (12,100) (12,800) ========= ======== ========= 6.2 Goodwill and business combinations Under IFRS 3 - Business Combinations - goodwill is not amortised but must betested annually for impairment. Following the requirements of IFRS 1 - Firsttime adoption of IFRS - goodwill amortisation ceased from 1 January 2004 withthe value at that date being adopted as the fair value of goodwill. The Grouphas also elected to apply the exemption available under IFRS 1 to apply IFRS 3prospectively from the transition date. The impact on the Group's financialstatements of this policy is that all goodwill previously amortised in the yearended 31 December 2004 has been written back to the balance sheet and incomestatement. 6.3 Goodwill and accounting for foreign currencies. Under IAS 21 - The Effects of Changes in Foreign Exchange Rates - where anentity has previously accounted for goodwill arising on the acquisition of aforeign operation as being an asset of the entity and therefore denominated inthe currency of the entity, such goodwill must now be treated as being the assetof the acquired foreign operation. As a result this goodwill must be treated asbeing denominated in a foreign currency and translated into the Group'sfunctional currency; Sterling. As noted above the Group has decided to adopt theexemptions under IFRS in respect of applying IFRS 3 prospectively. IFRS 1 alsoallows this aspect of IAS 21 to be applied prospectively and as a result therestatement made only relates to the acquisition of Reanco Team AS on 7 December2004. 6.4 Dividend recognition Under IAS10 - Events After the Balance Sheet Date - dividends are not recogniseduntil they are declared. The final and interim dividends declared after the endof the relevant accounting period have therefore been reversed, resulting in anincrease in net assets at the end of each accounting period. Dividends will no longer be shown as appropriations on the face of the incomestatement but instead will be shown within the analysis of movements onreserves. 6.5 Taxation The changes to the Group's tax position can be summarised as follows: Unaudited Unaudited Unaudited 1 January 2004 30 June 2004 31 December 2004 £'000 £'000 £'000Deferredtaxation 2,163 1,969 1,743Corporation tax - (102) - --------- ------- ------------Decrease ingroup taxposition 2,163 1,867 1,743 ========= ======= ============ The adjustment to the corporation tax charge arises from the use of estimates ofthe full year tax rate used at the interim stage. As a result of the application of IAS 12 in relation to deferred tax, there hasbeen a significant change in the deferred tax provision arising partly fromchanges in calculation rules applied to assets and liabilities previouslyrecognised under UK GAAP, and partly from the recognition of items under IFRSnot previously recognised under UK GAAP. These include share-based payments andthe deficits on the Group's defined benefit schemes which were reported under UKGAAP under FRS 17 for disclosure purposes only. The impact of the changes outlined above are as follows: Unaudited Unaudited Unaudited 1 January 2004 30 June 2004 31 December 2004 £'000 £'000 £'000Deferred taxliability underUK GAAP (200) (261) (287) Impact of IAS 12 on assets andliabilitiesrecognisedunder UK GAAP 103 130 (184) Relating to fair value adjustmentson theacquisition ofRemote MarineSystems Limited - - (65) Relating to recognition of pensionschemesdeficits 2,002 1,823 1,882 Relating to recognition ofshare-basedpayments 58 16 45 -------- -------- ------------Deferred taxasset underIFRS 1,963 1,708 1,391 ======== ======== ============ Deferred tax assets and liabilities are presented net as they relate to the sametax authority. The adjustment in relation to the acquisition of Remote MarineSystems relates to the fair value adjustment made to the carrying value offreehold land and buildings at acquisition. This adjustment is included ingoodwill. Deferred tax is calculated on the difference between the carryingvalue of an asset or liability in the accounts of the Group and its taxablevalue ( tax base). Application of IFRS has resulted in changes in the value ofthe tax base of some items from its UK GAAP basis resulting in adjustments tothe deferred tax liability in respect of certain assets and liabilities alreadyrecognised under UK GAAP. 6.6 Share-based payments IFRS 2 - Share-Based Payments, requires that the Group calculate the fair valueat the date of grant of awards of share options made to directors and employees.The fair value is then amortised in the income statement over the vesting periodof the options with a corresponding credit to equity. These requirements apply to all grants of shares made after 7 November 2002 andvesting after 31 December 2003. IFRS does not contain any equivalent of UITF 38- Accounting for ESOP Trusts. Amounts in relation to options over shares held inthe Group's employee share ownership trust previously expensed to the incomestatement under UITF 17 - Employee Share Schemes, have therefore been removedfrom the income statement with an equivalent restatement of reserves. The impact of the changes can be summarised as follows: Income Statement Unaudited Unaudited 30 June 2004 31 December 2004 £'000 £'000Share based payments under UKGAAP 264 458 Share based payment cost underIFRS 2 (102) (289) -------- --------Adjustments to income statement 162 169 ======== ======== The amounts charged to the Income statement are reinstated in the Group'sreserves 6.7 Results of joint ventures The requirements of IFRS relating to the disclosure of the results of jointventures on the face of the income statement are substantially different to UKGAAP. The results for joint ventures are now shown as a single entry whichrepresents the post tax result. Further analysis is available in the notes tothe accounts. There has not been any change to the results of the joint ventureswhich are attributable to the Group. 7.1 Restated Income Statement Unaudited Unaudited 30 June 2004 31 December 2004 £'000 £'000Group revenue 39,058 78,753Cost of sales (28,916) (59,433) -------- ---------Gross profit 10,142 19,320 Administrative expensesGeneral (2,380) (4,874) -------- --------- --------Profit from operations beforeship disposals 7,762 14,446(Loss)/profit on ship disposals (52) 475 -------- --------- ---------Profit from operations 7,710 14,921 Finance costs -------- ---------Finance income (revenue) 153 330Finance costs (1,254) (2,511)Exchange gain on loan conversion 8 155 -------- --------- (1,093) (2,026) Share of results of jointventure 583 1,219 -------- ---------Profit on continuing activitiesbefore taxation 7,200 14,114Taxation (1,087) (2,130) -------- ---------Profit attributable to equityholders 6,113 11,984 ======== ========= 7.2 Consolidated statement of recognised income and expense Unaudited Unaudited 30 June 2004 31 December 2004 £'000 £'000Exchange Differences on translation of foreignoperations Currency translation differences 578 (126) Net investment hedge (759) 303 Actuarial gains on definedbenefit schemes 1,100 400 Tax on items taken directly toequity* (61) (120) -------- --------Net income recognised directlyin equity 858 457 Profit for the period 6,113 11,984 -------- -------- Total recognised income for theperiod 6,971 12,441 ======== ======== * relates to defined benefit schemes 7.3 Restated Balance Sheet Unaudited Unaudited Unaudited 1 January 30 June 31 December 2004 2004 2004 £'000 £'000 £'000ASSETSNon current assetsGoodwill 17,397 17,466 21,254Property, plantand equipment 114,455 106,630 103,091Investment injoint venture 1,591 2,175 1,810OtherInvestments 1,157 1,157 1,157Deferred incometax assets 1,963 1,708 1,391 -------- -------- ------------ 136,563 129,136 128,703 Current assetsInventories 2,377 1,872 4,028Trade & otherreceivables 18,895 11,520 14,901Cash and shortterm deposits 5,455 8,410 10,045 -------- -------- ------------ 26,727 21,802 28,974 -------- -------- ------------ -------- -------- ------------TOTAL ASSETS 163,290 150,938 157,677 ======== ======== ============ EQUITY AND LIABILITIES Capital andreservesCalled up sharecapital 12,211 12,267 12,305Non equity -cumulativepreferenceshares 100 100 100Share premium 23,558 23,750 23,810Treasury Shares (971) (1,501) (1,212)Other reserves - (181) 177Profit and lossreserves 39,387 44,571 48,151 -------- -------- ------------Total equity 74,285 79,006 83,331 -------- -------- ------------ Non current liabilitiesTrade and otherpayables - - 14Retirementbenefitobligations 13,200 12,100 12,800Interest-bearingloans andborrowings 51,633 36,449 38,472 -------- -------- ------------ 64,833 48,549 51,286 -------- -------- ------------ Current liabilitiesTrade and otherpayables 13,221 12,277 13,280Corporate taxpayable 1,277 1,419 1,601Interest-bearingloans andborrowings 9,674 9,687 8,179 -------- -------- ------------ 24,172 23,383 23,060 -------- -------- ------------ -------- -------- ------------TOTALLIABILITIES 89,005 71,932 74,346 -------- -------- ------------ -------- -------- ------------TOTAL EQUITYAND LIABILITIES 163,290 150,938 157,677 ======== ======== ============ 7.4 Restated Cash Flow Statement Unaudited Unaudited 30 June 2004 31 December 2004 £'000 £'000 Operating activitiesProfit from Operations 7,710 14,921Adjustments for:Depreciation 4,110 8,259Profit on sale of fixed assets (72) (59)Loss/(profit) on ship disposals 52 (475)Income tax expense (751) (1,583)Increase in trade and otherreceivables (680) (2,697)Decrease/(Increase) in stocks 393 (150)Decrease in trade and otherpayables (421) (790)Share based compensation 102 289 ----------- ----------Cash flows from operatingactivities 10,443 17,715 =========== ========== Investing activitiesDividends from joint ventureundertakings - 1,000Proceeds from the sale of plantand equipment 1,568 4,966Interest received 124 314Acquisition of subsidiaries, netof cash acquired (69) (6,250)Acquisition of property, plantand equipment (1,463) (3,649)Loans to joint ventures repaid - 225Refund of payment to acquiretangible fixed asset 3,851 3,851Sale of shipbuilding contracts 7,293 7,293 ----------- ----------Cash flows from investingactivities 11,304 7,750 =========== ========== Financing activitiesProceeds from the issue of sharecapital 248 346Preference dividend paid (2) (4)Interest paid (1,255) (2,482)Proceeds from other non-currentborrowings 1,206 12,574Purchase less sales of ownshares by ESOP (530) (616)Repayment of borrowings (16,377) (27,409)Dividends paid (2,090) (3,410) ----------- ----------Cash flows from financingactivities (18,800) (21,001) =========== ========== Net increase in cash and cashequivalents 2,947 4,464 Cash and cash equivalents at 1January 2004 5,455 5,455Net foreign exchange difference 8 126 ----------- ----------Cash and cash equivalents atperiod end 8,410 10,045 =========== ========== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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