14th Jul 2005 07:00
Lavendon Group PLC14 July 2005 14 July 2005 LAVENDON GROUP PLC ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS In 2002, a European Union Regulation was issued requiring all EU listedcompanies to prepare consolidated financial statements under InternationalFinancial Reporting Standards ("IFRS") for financial years beginning on or after1 January 2005. As part of the transition to IFRS, Lavendon Group plc ("the Group") is todayreleasing financial information relating to the six months ended 30 June 2004and the year ended 31 December 2004 prepared in accordance with IFRS. The Group will apply IFRS in its consolidated financial statements for the yearended 31 December 2005, with the first results to be reported under IFRS beingthe Group's interim results for the six months ended 30 June 2005. As theGroup's published results for 2005 will also contain comparisons against theprior year, the results for 2004 will be restated to comply with IFRS, subjectto the exemptions available under IFRS 1 "First Time Adoption of InternationalFinancial Reporting Standards". The results of the conversion of the financialinformation for 2004 are summarised below:- 30 June 2004 31 December 2004 ------------ ---------------- UK Unaudited UK Unaudited GAAP IFRS Difference GAAP IFRS Difference ----------------------------- -----------------------------Turnover (£m) 50.0 50.0 0.0 108.0 108.0 0.0 Operating Profit before exceptionals (£m) 0.2 (0.5) (0.7) 5.8 5.7 (0.1) Profit before tax & exceptionals (£m) (2.6) (3.4) (0.8) 0.0 (0.1) (0.1) Basic EPS (pence) (3.77) (5.75) (1.98) (3.29) (3.54) (0.25) Net assets (£m) 86.0 86.1 0.1 75.4 75.4 0.0 Key Points---------- • No effect on the Group's cash flows. • No impact on Group debt covenants, as they can remain based on UK GAAP. • Impact on profit before tax and earnings per share for the year ended 31 December 2004 limited to a charge of £0.1 million relating to share based payments. • No impact on Group net assets as at 31 December 2004. • Provision of £0.7 million required at 30 June 2004 to reflect employee holidays earned but not taken. Provision reverses during the second half of the year to have no impact at year-end. Basis of Preparation-------------------- The conversion of the 2004 results has been prepared on the basis of all IFRSissued up to 30 June 2005, including International Accounting Standards (IAS)and interpretations issued by the International Financial ReportingInterpretations Committee (IFRIC). These are subject to ongoing amendment and/orinterpretation and therefore subject to possible change. Consequently,information contained in this announcement may need updating for any subsequentamendment to IFRS required for first time adoption, or for any new standardsthat the Group may elect to adopt early. IFRS 1 Exemptions----------------- IFRS 1 "First Time Adoption of International Financial Reporting Standards",sets out the procedures that the Group must follow when it adopts IFRS for thefirst time. The Group is required to establish its IFRS accounting policies forthe 12 months to 31 December 2005 and, in general, apply these retrospectivelyto determine the IFRS opening balance sheet at its date of transition, being 1January 2004. Under the standard, there are a number of optional exemptions to the generalprinciple of retrospectively applying the adopted accounting policies. The Grouphas applied the following exemptions:- a) Business combinations - the Group has chosen not to restate business combinations prior to the transition date. b) Cumulative translation differences - the Group has chosen to deem that all cumulative translation differences are zero as at 1 January 2004. c) Financial Instruments - the Group has taken the exemption not to restate comparatives for IAS 32 "Financial Instruments: Disclosure and Presentation" and IAS 39 "Financial Instruments: Recognition and Measurement". Comparative information for 2004 will be presented using UK GAAP. d) Share-Based Payments - the Group has chosen not to apply IFRS 2 "Share-Based Payments" to awards made before 7 November 2002. Balance Sheet and Profit and Loss Account----------------------------------------- Reconciliations between UK GAAP and IFRS of the Group's balance sheet as at 31December 2004 and of its profit and loss account for the year to 31 December2004 are attached to this release. Any adjustments are stated net of anytaxation impact and are unaudited. The adjustments are detailed below:- a) Share-Based Payments -------------------- IFRS 2 "Share-Based Payments" requires that an expense be recorded in the profit and loss account for any share-based remuneration arrangements. The Group has both approved and unapproved share option plans in place, and for 2005, a share match plan has been introduced. Under IFRS 1, the Group has taken the option not to apply IFRS 2 to share options granted prior to 7 November 2002. The share options granted after 7 November 2002 have been valued at fair value at the grant date, using the Black Scholes Model, and the resulting expense is being charged to the profit and loss account over the period between the grant dates and the vesting dates (vesting periods). The charge for the six months to 30 June 2004 amounts to £30,000 and £74,000 for the 12 months to 31 December 2004. Deferred taxation has been provided based upon the expected future tax deductions relating to these share-based transactions, and is being recognised over the vesting periods. b) Provision for Untaken Holidays ------------------------------ In the past, the Group made no provisions during the year for untaken holidays. Under IAS 19 "Employee Benefits", the expected cost of compensated short-term absences (for example, holidays) should be recognised when employees render the service that increases their entitlement. Consequently, an accrual for untaken holidays will now be made. At 30 June each year, it is expected that a significant number of holidays will be earned, but not yet taken by employees, resulting in a sizeable accrual being required at the half year. This accrual will then reverse during the second half of the year, with no material impact at the year-end. The accrual required at 30 June 2004, under IAS 19, was £0.7 million. c) Proposed Dividends ------------------ Previously, under UK GAAP, dividends were recognised in the period to which they related. IAS 10 "Events after the Balance Sheet Date" requires that dividends declared after the balance sheet date should not be recognised as a liability at that balance sheet date, as the liability does not represent a present obligation as defined by IAS 37 "Provisions, Contingent Liabilities and Contingent Assets". Accordingly, the final dividend for the year ended 31 December 2003 of £1.7 million has not been recognised in the balance sheet at 1 January 2004. d) Computer Software ----------------- Under UK GAAP, all capitalised computer software was included within tangible fixed assets on the balance sheet. Under IAS 38 "Intangible Assets", computer software should be recorded as an intangible asset, unless the software is an integral part of hardware; in which case, it can remain within tangible fixed assets. Accordingly, a reclassification has been made between tangible fixed assets and intangible fixed assets to reflect the transfer of computer software amounting to £1.3 million as at 30 June 2004 and £1.1 million at 31 December 2004. Cash Flow--------- Whilst the adoption of IFRS by the Group does not affect the cash flows of thebusiness, the IFRS cash flow statement will explain the change in cash and cashequivalents rather than just cash as under UK GAAP. The Group does not expectany material change in the cash flows reported by the IFRS cash flow statementfrom the cash flows reported under UK GAAP. The format of the cash flowstatement will change, with cash flows being categorised under the headings of"operating", "investing" and "funding". Financial Instruments--------------------- The Group has taken the exemption not to restate comparatives for both IAS 32"Financial Instruments: Disclosure and Presentation" and IAS 39 "FinancialInstruments: Recognition and Measurement". In accordance with guidance issued bythe UK Accounting Standards Board, IAS 39, as issued by the IASB, will beadopted in the preparation of financial statements from 1 January 2005, ratherthan the amended version as endorsed by the European Commission. In 2005, under IAS 39, the Group's interest rate swap arrangements will bereflected on the balance sheet. It is expected that there will be littlevolatility in the profit and loss account from fair valuing these arrangements,as the hedge effectiveness tests are expected to be achieved, allowing hedgeaccounting to be applied. Likewise, the use of Euro-denominated loans to hedgeinvestments in foreign subsidiaries is expected to remain effective. Consolidated income statement (unaudited under IFRS)For the six months ended 30 June 2004 UK GAAP Conversion effects IFRS 2004 2004 2004 -------------------------------- -------------------------------- --------------------------------- Ordinary Exceptional Ordinary Exceptional Ordinary Exceptional activities items Total activities items Total activities items Total £000 £000 £000 £000 £000 £000 £000 £000 £000 -------------------------------- -------------------------------- ---------------------------------Revenue 50,035 - 50,035 - - - 50,035 - 50,035Cost of sales (30,498) - (30,498) (368) - (368) (30,866) - (30,866) -------------------------------- -------------------------------- ---------------------------------Gross profit/(loss) 19,537 - 19,537 (368) - (368) 19,169 - 19,169 -------------------------------- -------------------------------- ---------------------------------Operating expenses (19,298) (1,523) (20,821) (374) - (374) (19,672) (1,523) (21,195) -------------------------------- -------------------------------- ---------------------------------Operating profit/ (loss) before interest 239 (1,523) (1,284) (742) - (742) (503) (1,523) (2,026) -------------------------------- -------------------------------- ---------------------------------Investment income 15 - 15 - - - 15 - 15Interest payable (2,896) - (2,896) - - - (2,896) - (2,896) -------------------------------- -------------------------------- ---------------------------------(Loss) before taxation (2,642) (1,523) (4,165) (742) - (742) (3,384) (1,523) (4,907) -------------------------------- -------------------------------- ---------------------------------Taxation on (loss) 1,246 344 1,590 10 - 10 1,256 344 1,600 -------------------------------- -------------------------------- ---------------------------------(Loss) for the year (1,396) (1,179) (2,575) (732) - (732) (2,128) (1,179) (3,307) -------------------------------- -------------------------------- --------------------------------- (Loss) per ordinary share - basic (3.77) (3.19) (6.96) (1.98) 0.00 (1.98) (5.75) (3.19) (8.94) - diluted (3.77) (3.19) (6.96) (1.98) 0.00 (1.98) (5.75) (3.19) (8.94) -------------------------------- -------------------------------- --------------------------------- Conversion effects comprise: £000 EPS(p) ------------------IAS 19 - Employee benefits: holiday accrual (charge) (712) (1.93) ------------------IFRS 2 - Share based payments: employee option schemes (charge) (30) (0.08) ------------------(Loss) before taxation (742) (2.01) ------------------Tax on share based payments (credit) 10 0.03 ------------------(Loss) for the year (732) (1.98) ------------------ Consolidated balance sheets (unaudited under IFRS)At 30 June 2004 Conversion UK GAAP effects IFRS £000 £000 £000 --------- ---------- --------- AssetsNon-current assetsIntangible assets 711 1,288 1,999Property, plant and equipment 182,736 (1,288) 181,448 --------- ---------- --------- 183,447 - 183,447 --------- ---------- --------- Current assetsInventories 910 - 910Trade and other receivables 27,330 - 27,330Current tax assets 1,422 - 1,422Cash and cash equivalents 3,575 - 3,575 --------- ---------- --------- 33,237 - 33,237 --------- ---------- --------- LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings (15,644) - (15,644)Trade and other payables (14,011) 121 (13,890) --------- ---------- --------- (29,655) 121 (29,534) --------- ---------- --------- Net current assets 3,582 121 3,703 --------- ---------- --------- Total assets less current liabilities 187,029 121 187,150 --------- ---------- --------- Non-current liabilitiesFinancial liabilities - Borrowings (86,675) - (86,675)Deferred tax liabilities (14,282) - (14,282)Other non-current liabilities (47) - (47) --------- ---------- --------- (101,004) - (101,004) --------- ---------- --------- Net assets 86,025 121 86,146 --------- ---------- --------- Shareholders' equityOrdinary shares 370 - 370Share premium 70,412 - 70,412Capital redemption 4 - 4Retained earnings 15,239 524 15,763Other reserves - (403) (403) --------- ---------- --------- Total equity 86,025 121 86,146 --------- ---------- --------- Trade and Non-current other Retained Other assets payables earnings reservesConversion effects comprise: £000 £000 £000 £000 ----------- --------- -------- --------IAS 38 - Intangible assets: reclassification of software from tangible to intangible fixed assets 1,288 IAS 38 - Intangible assets: reclassification of software from tangible to intangible fixed assets (1,288) IAS 10 - Events after the balance sheet: deferral of dividend until date of declaration. 833 833 IAS 19 - Employee benefits: holiday accrual (712) (712) IAS 21 - Foreign currency translation: reclassification from retained earnings to other reserves 403 (403) ----------- --------- -------- --------Net movement - 121 524 (403) ----------- --------- -------- -------- Consolidated income statement (unaudited under IFRS)For the year ended 31 December 2004 UK GAAP Conversion effects IFRS 2004 2004 2004 -------------------------------- -------------------------------- --------------------------------- Ordinary Exceptional Ordinary Exceptional Ordinary Exceptional activities items Total activities items Total activities items Total £000 £000 £000 £000 £000 £000 £000 £000 £000 -------------------------------- -------------------------------- ---------------------------------Revenue 108,013 - 108,013 - - - 108,013 - 108,013Cost of sales (63,946) - (63,946) (14) (8,118) (8,132) (63,960) (8,118) (72,078) -------------------------------- -------------------------------- ---------------------------------Gross profit/ (loss) 44,067 - 44,067 (14) (8,118) (8,132) 44,053 (8,118) 35,935 -------------------------------- -------------------------------- ---------------------------------Operating expenses (38,266) (6,148) (44,414) (60) (248) (308) (38,326) (6,396) (44,722) -------------------------------- -------------------------------- ---------------------------------Operating profit/ (loss) before interest 5,801 (6,148) (347) (74) (8,366) (8,440) 5,727 (14,514) (8,787) -------------------------------- -------------------------------- ---------------------------------Investment income 30 - 30 - - - 30 - 30Non-operating expenses - (8,366) (8,366) - 8,366 8,366 - - -Interest payable (5,810) - (5,810) - - - (5,810) - (5,810) -------------------------------- -------------------------------- ---------------------------------Profit /(loss) before taxation 21 (14,514) (14,493) (74) - (74) (53) (14,514) (14,567)Taxation on profit/ (loss) (1,237) 2,968 1,731 22 - 22 (1,215) 2,968 1,753 -------------------------------- -------------------------------- ---------------------------------(Loss) for the year (1,216) (11,546) (12,762) (52) - (52) (1,268) (11,546) (12,814) -------------------------------- -------------------------------- --------------------------------- (Loss) per ordinary share - basic (3.29) (31.20) (34.49) (0.14) 0.00 (0.14) (3.43) (31.20) (34.63) - diluted (3.29) (31.20) (34.49) (0.14) 0.00 (0.14) (3.43) (31.20) (34.63) -------------------------------- -------------------------------- --------------------------------- Conversion effects comprise: £000 EPS(p) --------------------IAS 1 - Reclassification of exceptional non-operating costs to cost of sales 8,118 --------------------IAS 1 - Reclassification of exceptional non-operating costs to administration costs 248 -------------------IAS 1 - Reclassification from exceptional non-operating costs to operating and administration costs (8,366) ------------------- - - -------------------IFRS 2 - Share based payments: employee option schemes (charge) (74) (0.20) -------------------(Loss) before taxation (74) (0.20) -------------------Tax on share based payments (credit) 22 0.06 -------------------(Loss) for the year (52) (0.14) ------------------- Consolidated balance sheets (unaudited under IFRS)At 31 December 2004 Conversion UK GAAP effects IFRS £000 £000 £000 --------- ---------- --------- AssetsNon-current assetsIntangible assets 119 1,099 1,218Property, plant and equipment 167,256 (1,099) 166,157 --------- ---------- --------- 167,375 - 167,375 --------- ---------- --------- Current assetsInventories 873 - 873Trade and other receivables 26,024 - 26,024Cash and cash equivalents 7,534 - 7,534 --------- ---------- --------- 34,431 - 34,431 --------- ---------- --------- LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings (15,673) - (15,673)Trade and other payables (16,782) - (16,782)Current tax liabilities (250) - (250) --------- ---------- --------- (32,705) - (32,705) --------- ---------- --------- Net current assets 1,726 - 1,726 --------- ---------- --------- Total assets less current liabilities 169,101 - 169,101 --------- ---------- --------- Non-current liabilitiesFinancial liabilities- Borrowings (80,870) - (80,870)Deferred tax liabilities (12,831) - (12,831) --------- ---------- --------- (93,701) - (93,701) --------- ---------- --------- Net assets 75,400 - 75,400 --------- ---------- --------- Shareholders' equityOrdinary shares 370 - 370Share premium 70,412 - 70,412Capital redemption 4 - 4Retained earnings 4,614 841 5,455Other reserves - (841) (841) --------- ---------- --------- Total equity 75,400 - 75,400 --------- ---------- --------- Non-current Retained Other assets earnings reservesConversion effects comprise: £000 £000 £000 ----------- -------- --------IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets 1,099 IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets (1,099) IAS 21 - Foreign currency translation: reclassification from retained earnings to other reserves 841 (841) ----------- -------- --------Net movement - 841 (841) ----------- -------- -------- - ends - For further information:- Lavendon Group plc Tel: 01455 206750Kevin Appleton, Chief ExecutiveAlan Merrell, Group Finance Director Weber Shandwick Square Mile Tel: 020 7067 0700Terry Garrett/ Nick Dibden / Yvonne Alexander This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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