29th Sep 2005 07:00
UMECO PLC29 September 2005 29 September 2005 PRESS RELEASE UMECO plc Adoption of International Financial Reporting Standards ('IFRS') UMECO plc, the leading international provider of value-added services andcomposite materials to the aerospace, defence and other industries, todayprovides an unaudited summary of the restatement to IFRS on its reported resultsfor the six months ended 30 September 2004 and the year ended 31 March 2005, andon its balance sheets as at 31 March 2004, 30 September 2004 and 31 March 2005.Also outlined are the Group's accounting policies to be adopted under IFRS. The Group's first interim report under IFRS will be for the six months ending 30September 2005, anticipated to be published on 1 November 2005. The Group'sfirst annual report under IFRS will be for the year ending 31 March 2006.For further information, please contact: UMECO plc 01926 331800John Beaumont, Group Finance Director Hogarth Partnership Ltd 020 7357 9477John Olsen Notes to editors UMECO plc is a leading international provider of value-added distributionservices and composite materials primarily to the aerospace & defence,automotive, motorsport, and wind turbine industries. Listed on the London Stock Exchange, UMECO had revenue of £242.4 million in theyear to 31 March 2005. UMECO is managed through three divisions:- UMECO Components - a leading international provider of value-added distributionand supply chain outsourcing services to customers in the aerospace & defencemarket. With its specialisation in the supply of small components andsophisticated IT systems, its growing global customer base can enjoy significantoperational, cost and working capital benefits. Customers include Rolls-Royce plc, BAE SYSTEMS, Snecma Groupe, Parker Aerospace,Goodrich Aerospace, Bombardier, Lockheed Martin and the US Department ofDefense. UMECO Composites - a provider of a complete range of advanced compositematerials and specialist chemical products principally to the aerospace,motorsport, automotive and wind energy markets. A growing range of value-addedoutsourcing services is provided to major customers. Customers include Boeing, Airbus, BAE SYSTEMS, Goodrich Aerostructures, BritishAirways, Lufthansa Technik, a number of manufacturers of high performance supercars and all the Formula 1 teams. UMECO Repair and Overhaul - a provider of a comprehensive accessory repair andinstallation service to operators of fixed and rotary wing aircraft ranging insize from executive jets through to a Boeing 747. Customers include British Airways, KLM, Swiss, Alitalia Express, BristowHelicopters, BAE SYSTEMS, Saab Aircraft and Pratt & Whitney. UMECO plc RESTATEMENT OF FINANCIAL INFORMATION TO IFRS Executive summary UMECO plc and its subsidiary companies ('UMECO' or 'the Group') havehistorically prepared consolidated financial statements in accordance with UKGenerally Accepted Accounting Practice ('UK GAAP'). With effect from 1 April2005, the Group is required to prepare its consolidated financial statementsunder International Financial Reporting Standards ('IFRS'). The Group's first interim report under IFRS will therefore be for the six monthsending 30 September 2005, and this is anticipated to be published on 1 November2005. The Group's first annual report under IFRS will be for the year ending 31March 2006. Prior period comparatives will be restated to comply with IFRS. This document sets out the changes in accounting policies arising from theadoption of IFRS. It presents restated information for the Group's balance sheetas at 31 March 2004, 30 September 2004 and 31 March 2005, together with theeffects on the Group's reported results for the six months ended 30 September2004 and the year ended 31 March 2005. The adoption of IFRS represents anaccounting change only and does not affect the Group's trading operations or itscash flows. This document also explains how the adoption of IFRS may affect the Group'sIncome Statement and balance sheet in the future. The financial informationpresented in this document is unaudited. The main changes resulting from the restatement of results from UK GAAP to IFRSare: • profit before taxation for the year ended 31 March 2005 increased from £9.3m to £12.6m; • basic earnings per share for the year ended 31 March 2005 increased from 15.4p to 25.3p; • net assets at 31 March 2005 increased from £84.1m to £86.1m. In previous disclosures, the Group has highlighted adjusted profit and earningsper share values, with these being before goodwill amortisation and exceptionalitems. Under IFRS, the Group will continue to highlight adjusted values, withthese being based on profits before amortisation of intangible assets,significant (formerly exceptional) operating costs and, from 1 April 2005, themarking to market of foreign currency forward contracts. The effect of the restatement to IFRS on these adjusted values for the yearended 31 March 2005 is: • adjusted profit before taxation reduced by £0.5m from £14.0m to £13.5m; • adjusted earnings per share decreased by 1.0p from 28.8p to 27.8p. The effect of the adoption of IFRS on adjusted profits after taxation andminority interests is as follows: Six months ended Year ended 30 September 2004 31 March 2005 £m £m Per UK GAAP 3.6 9.2 Employee benefits (0.1) (0.2)Share based payments (0.1) (0.1) -------------- -------------Net impact of transition (0.2) (0.3) -------------- ------------- -------------- -------------Per IFRS 3.4 8.9 -------------- ------------- A detailed analysis of the effects of the adoption of IFRS is set out on thefollowing pages. 1. Introduction & basis of preparation Historically, UMECO has prepared its consolidated financial statements inaccordance with UK GAAP. The main impacts for the Group of the adoption of IFRSare: •goodwill is no longer amortised, but is subject to annual impairment reviews; •on acquisition of a business, certain intangible assets (such as order books) have to be identified separately from goodwill and their fair value amortised over their useful lives; •all financial instruments held by the Group will be marked to market at the end of each period and recorded in the Group balance sheet. This treatment will only apply from 1 April 2005. Where financial instruments are held for hedging purposes, changes in fair value will be taken directly to reserves; •pension deficits are included in the Group balance sheet and the costs of providing pension benefits are calculated on an actuarial basis; •final dividends are recorded as a liability only when approved, and interim dividends are recorded only when declared; •a charge is made for all share based payments, derived by determining the fair value of such payments; •provision for deferred taxation will be made on capital gains rolled over into the base cost of fixed assets and on goodwill amortisation for which overseas tax relief is obtained. More generally, IFRS will lead to a revised layout for the financial statements.The financial information provided in this document has been presented in amanner consistent with the requirements of IFRS and thus the format of theprimary statements such as the Income Statement and the balance sheet differfrom those under UK GAAP. Generally, the presentational rules of IFRS are lessprescriptive than those under UK GAAP. For example, IAS1 does not providedefinitive guidance on the format of the Income Statement, but does state keylines that should be disclosed. It also requires additional line items andheadings to be presented on the face of the Income Statement where suchpresentation is relevant to an understanding of an entity's financialperformance. The Group believes that items that were previously referred to as'exceptional items' under UK GAAP should still be separately identified toassist in understanding the financial performance of the Group. Such items willbe included within 'significant items' under IFRS. Significant items are thosewhich, because of their size or incidence, require separate disclosure to enableunderlying trading performance to be assessed. In the year ended 31 March 2005,these comprised re-organisation costs and aborted acquisition costs. The unaudited financial information presented in this document has been preparedon the basis of all IFRS that are expected to be applicable for the Group'sreporting for the year ending 31 March 2006, together with interpretationsissued by the International Financial Reporting Interpretation Committee. Theseare subject to ongoing review and possible amendment. Further standards, orinterpretations of standards, may be issued that could apply to these 2006results and which may require the bases on which the Group's first IFRSfinancial statements are compiled to differ from those set out in this document. The Group will also continue to review its accounting practice in the light ofemerging industry concensus on the practical application of IFRS. Consequently,the financial information provided in this document may require modificationuntil the first complete set of audited IFRS financial statements is completedfor the year ending 31 March 2006. The Group has endeavoured to interpret the requirements of IFRS in a manner thatprovides users with clear and concise information. These formats may howeverrequire modification in the event that further guidance is issued and as bestpractice develops. The Group has reviewed the basis of segmentation andconcluded that no amendment is necessary on the adoption of IFRS, since thesegmentation reported under UK GAAP was consistent with the Group's internalreporting structure. When a company first adopts IFRS it is generally required that prior yearcomparative data is restated as though IFRS have always been applicable. IFRS1'First time adoption of International Financial Reporting Standards' covers theinitial transition to IFRS. This standard allows a company to take advantage ofa number of exemptions from restating historical data in order to simplify thetransition process. These exemptions are explained in section 2 to the extentthat the Group has applied them. 2. Review of the main changes arising from the transition from UK GAAP to IFRS This section explains the major adjustments arising from the transition to IFRS.It does not attempt to explain all adjustments, only those having a significanteffect on the Group's financial position. a. IAS19 'Employee benefits' Requirements of IFRS IAS19 prescribes a similar valuation approach to FRS17, although the range ofschemes that are subject to the standard is wider under the IAS. Allpost-retirement benefits where the actuarial and investment risk falls on UMECOmust be provided for in the Group balance sheet. Under IFRS, the fair value ofthe pension scheme assets is determined using the bid price, as opposed tomid-market price used under UK GAAP. In accordance with the transitional provisions of IFRS1, pension schemesurpluses and deficits have been recognised in the 1 April 2004 transitionalbalance sheet. In addition, following the amendment to IAS19 issued by the IASBin December 2004, movements in the actuarial gains and losses since transitionhave been recognised immediately in equity by adjustments in the Statement ofRecognised Income and Expense. Impact on UMECO A net additional pension liability of £2.1m has been provided in thetransitional 1 April 2004 balance sheet. Post transition, all actuarial gainsand losses have been recognised in the Statement of Recognised Income andExpenses. For the year ended 31 March 2005, the additional charge in the IncomeStatement for pensions under IFRS, including related finance expense, is £0.3m.For the six months ended 30 September 2004, the additional charge is £0.1m. Theoverall IAS19 pension deficit at 31 March 2005 is £4.8m, with an associateddeferred tax asset of £1.4m. Six months ended Year ended 30 September 2004 31 March 2005 £m £m Change in service cost (0.1) (0.2)Net finance costs - (0.1) -------------- -------------Impact on profit before taxation (0.1) (0.3) Taxation - 0.1 -------------- -------------Impact on profit for the period (0.1) (0.2) Deficit at 31 March 2004, net of taxation (2.1) (2.1)Deficit in Advanced Composites Group('ACG') scheme at acquisition (0.8) (0.8)Actuarial loss - year ended 31 March 2005 - (0.3) -------------- -------------Total impact on retained earnings and netassets (3.0) (3.4) -------------- ------------- b. IAS10 'Events after the balance sheet date' Requirements of IFRS Under UK GAAP proposed dividends were shown as a liability at the balance sheetdate, even if the dividends in question were not approved until after thebalance sheet date. Under IAS10 the declaration of a dividend is only recognisedas a liability at the date it is approved. Additionally, dividends no longerappear on the face of the Income Statement but are shown within reserves. Impact on UMECO The impact for the Group is to increase net assets at 30 September 2004 and 31March 2005 due to the elimination of the proposed interim and final dividendsrespectively. Six months ended Year ended 30 September 2004 31 March 2005 £m £m Account for 2004 interim dividend whendeclared 1.5 -Account for 2005 final dividend whenapproved - 2.8 -------------- -------------Total impact on retained earnings and netassets 1.5 2.8 -------------- ------------- c. IFRS2 'Share based payment' Requirements of IFRS IFRS2 requires an expense to be recorded in the Income Statement for all formsof share based payment. The expense is based on the fair value of the shareaward at the date the award is granted. The expense is recorded over the periodfor which the employee provides services in respect of the share scheme. IFRS2 applies to all share based payments granted after 7 November 2002 andwhich have not fully vested as at 1 January 2005. Awards made prior to 7November 2002 are only accounted for under IFRS2 if the fair value of the awardshas previously been publicly disclosed. As the Group has not provided suchinformation publicly in the past, IFRS2 will not be applied to such awards. Impact on UMECO The main impact for the Group is that awards of options made under the SAYEshare option scheme and UMECO 2001 Share Option Plan are now recorded as anexpense in the Income Statement whereas under UK GAAP there was no such charge.The fair value of the options has been calculated using the Black-Scholes optionpricing model. The expense is recognised over the period from the date of awardto the date of vesting. A compensating credit entry is made to the retainedearnings reserve. As referred to above, IFRS2 has only been applied to options awarded after 7November 2002. Options awarded prior to this date but which have not vested at31 March 2004 do not result in any expense. The charge recorded under IFRS2 forthe year ended 31 March 2005 is thus not reflective of the full charge that willbe recorded once all options that have not vested are recognised as an expense. Six months ended Year ended 30 September 2004 31 March 2005 £m £m Fair value of share awards (0.1) (0.2) -------------- -------------Impact on profit before taxation (0.1) (0.2) Taxation - 0.1 -------------- -------------Impact on profit for the period (0.1) (0.1) -------------- ------------- As set out in the 2005 Directors' Remuneration Report, no further grants areexpected to be made under the UMECO 2001 Share Option Plan for the time being. d. IFRS3 'Business combinations' Requirements of IFRS i. Under IFRS3 goodwill is no longer amortised but is instead subject to annual impairment testing. ii. IFRS3 requires intangible assets to be identified separately from goodwill provided they meet the IFRS definition of an intangible asset and provided their fair value can be measured reliably. IFRS gives examples of intangible assets that would typically be identified separately from goodwill including order backlogs, customer relationships, technology and tradenames. IFRS requires any intangibles identified separately to be amortised over their useful lives. Impact on UMECO i. The Group has reversed the goodwill amortisation charged in the UK GAAP accounts for the year ended 31 March 2005. The goodwill balance disclosed on the balance sheet at 31 March 2004 is frozen and treated as the cost of goodwill for IFRS purposes. Goodwill balances have been tested for impairment and no adjustments to carrying values have been required. Note the impact on profit and net equity are not identical due to the impact of foreign exchange on the eliminated goodwill amortisation. ii. The Group has chosen to apply IFRS3 prospectively. Accordingly acquisitions announced prior to 31 March 2004 have not been restated for the effects of IFRS3. This includes the acquisition of ACG, which was announced on 19 March 2004. The intangible asset identified separately from goodwill as part of theacquisition of Avionics Mobile Services ('AMS') is an order backlog which had agross profit value of £0.3m. The amortisation charges in respect of AMS relateto the fulfillment of this order book in the period since the acquisition dateof 8 July 2004. Goodwill arising on the acquisition of AMS has been increased by£0.1m to reflect deferred taxation on the value of the order backlog, with thisdeferred taxation provision being credited to the Income Statement as thegoodwill is amortised. Six months ended Year ended 30 September 2004 31 March 2005 £m £m Amortisation of intangible assets - AMSacquisition (0.2) (0.3)Reversal of goodwill amortisation 1.9 4.1 -------------- -------------Impact on profit before taxation 1.7 3.8 Taxation 0.1 0.1 -------------- -------------Impact on profit for the period, retainedearnings and net assets 1.8 3.9 -------------- ------------- e. IAS12 'Income taxes' Requirements of IFRS Under IAS12 deferred taxation is provided on all taxable temporary differencesat the balance sheet date which could give rise to an obligation to pay more orless taxation in the future. In general this means deferred taxation is morelikely to be recognised under IFRS than it was under UK GAAP. Impact on UMECO The impact of adopting IAS12 on accounting for pensions, business combinationsand share based payments is already explained above. IAS12 has also resulted indeferred taxation liabilities being recognised where the tax base cost of assetsheld by the Group has been reduced by the rolling over of capital gains arisingon previous sales of assets. Deferred taxation liabilities are also recognisedwhere goodwill amortisation is treated as a deductible expense in the taxcomputations of overseas companies within the Group. The effects of thesechanges are shown in the table below. Six months ended Year ended 30 September 2004 31 March 2005 £m £m Taxation (0.2) (0.4) Additional deferred taxation at 31 March2004 (1.0) (1.0) -------------- -------------Total impact on retained earnings and netassets (1.2) (1.4) -------------- ------------- f. IAS32 & IAS39 Financial instruments Requirements of IFRS The requirements of IFRS differ significantly from those of UK GAAP. Under UKGAAP where foreign exchange forward contracts were taken out to mitigate foreignexchange risks, operating profit was recorded at the exchange rates achieved.This would be a combination of spot rate for uncovered transactions and forwardcontract rates for covered transactions. Unrealised gains and losses on openforward contracts were disclosed in the financial statements. Under IFRS a similar accounting result can only be obtained if extensivedocumentation requirements are met. If a Group decides that it is impractical tocomply with these requirements then operating profits are reported at spot rateirrespective of whether any forward hedging contract exists. Open forwardcontracts will be marked to market at each balance sheet date to determine theirfair value, with these fair values being recognised as assets or liabilities. Inthe Income Statement net finance costs will record the net gain or loss on bothrealised and open forward foreign exchange contracts. Impact on UMECO IFRS will not impact the way the Group manages its exchange risk and interestrisk exposure and the Group will continue to utilise forward foreign exchangecontracts, interest rate swaps and other financial derivatives as part of thatrisk management strategy. It will, however, change the way the Group accountsfor such activities. Where the Group uses foreign currency forward contracts to hedge trading cashflows, these will be marked to market at each balance sheet date. Whilst therewere no such instruments in place at 31 March 2005, the Group has entered intosuch contracts since that date, and these will be marked to market in theGroup's results for the six months ending 30 September 2005. The Group will continue its current policy of hedge accounting for specifictransaction-related foreign currency borrowings and will adopt a similartreatment for its interest rate swap contracts. The Group has in place thedocumentation required for this treatment to be adopted under IFRS. The Group has chosen to apply IAS39 & IAS32 from 1 April 2005 as permitted bythe transitional rules set out in IFRS1. Accordingly, these standards have noimpact on the restatement of the financial information shown in this document,which treats financial instruments in accordance with UK GAAP. When IAS39 &IAS32 are adopted, on 1 April 2005, the Group will recognise the cumulativeeffect of the difference between UK GAAP and IFRS as an opening balance sheetadjustment. It is not possible at this stage to determine the effects on thebalance sheet or the Income Statement for 2005/06 as they are dependent on anumber of unknowns such as future exchange rates. It is generally believed,however, that complying with IAS32 & IAS39 will result in some additionalvolatility in the Income Statement. The Group intends to show the impact of thisvolatility, caused by the marking to market of such contracts, separately in itsfinancial reports. g. IAS38 'Intangible assets' Requirements of IFRS Research and development costs, in common with other intangible assets, may onlybe capitalised if the asset can be separately identified, it if is consideredprobable that the expected future economic benefits that are attributable to theasset will accrue to the entity and if the cost of the asset can be measuredwith reliability. Impact on UMECO Research expenditure will continue to be charged against income in the year inwhich it is incurred, other than where research costs are to be re-imbursedthrough grants. Development expenditure will be capitalised where it meets thecriteria set out above, although it is not currently anticipated that any of theGroup's planned development expenditure will meet these criteria. h. IAS21 'The effect of changes in foreign exchange rates' Requirements of IFRS IAS21 requires the cumulative foreign exchange differences that arise on theretranslation of overseas subsidiaries to be separately disclosed withinshareholders' equity and, in the event that an overseas subsidiary is disposedof, for the cumulative foreign exchange differences to be recycled through theIncome Statement as part of the profit or loss on disposal. Impact on UMECO The Group has elected to take advantage of the option to apply IAS21 only toexchange differences arising after 1 April 2004. Cumulative translationdifferences on foreign operations are deemed to be nil at 1 April 2004.Subsequent translation differences arising on the retranslation of overseassubsidiaries will be separately disclosed within shareholders' equity. 3. Summary Income Statements a. Six months ended 30 September 2004 Reversal Amorti- of sation Effect of Restated Restated Share goodwill of IFRS under under UK GAAP UK GAAP based Employee amorti- intan- Deferred trans IFRS IFRS Adjusted* Total payment benefits sation gibles Taxation -ition Adjusted** Total IFRS 2 IAS 19 IFRS 3 IFRS 3 IAS 12 £m £m £m £m £m £m £m £m £m £m Revenue 108.7 108.7 - - - - - - 108.7 108.7 -------- -------- -------- -------- --------- --------- -------- -------- -------- -------- Profit fromoperations 6.3 4.0 (0.1) (0.1) 1.9 (0.2) - 1.5 6.1 5.5 Financial income - - - - - - - - - -Financialexpenses (0.9) (0.9) - - - - - - (0.9) (0.9) -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profitbefore taxation 5.4 3.1 (0.1) (0.1) 1.9 (0.2) - 1.5 5.2 4.6 Taxationexpense (1.8) (1.6) - - - 0.1 (0.2) (0.1) (1.8) (1.7) -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profitafter taxation 3.6 1.5 (0.1) (0.1) 1.9 (0.1) (0.2) 1.4 3.4 2.9 Minority interests - - - - - - - - - - -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profit forthe period 3.6 1.5 (0.1) (0.1) 1.9 (0.1) (0.2) 1.4 3.4 2.9 ======== ======== ======== ======== ========= ========= ======== ======== ======== ======= Earningsper share 11.2p 4.7p 10.8p 9.2p -------- -------- ------- ------- * before goodwill amortisation and exceptional items. ** before amortisation of intangible assets, tax effects of goodwillamortisation and significant (formerly exceptional) operating costs. Only the IFRS transitional adjustments relating to share based payments andemployee benefits affect the adjusted values shown in the table. b. Year ended 31 March 2005 Reversal Amorti- of sation Effect of Restated Restated Share goodwill of IFRS under under UK GAAP UK GAAP based Employee amorti- intan- Deferred trans IFRS IFRS Adjusted* Total payment benefits sation gibles Taxation -ition Adjusted** Total IFRS 2 IAS 19 IFRS 3 IFRS 3 IAS 12 £m £m £m £m £m £m £m £m £m £m Revenue 242.4 242.4 - - - - - - 242.4 242.4 -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profitfrom operations 16.4 11.7 (0.2) (0.2) 4.1 (0.3) - 3.4 16.0 15.1 Financial income - - - - - - - - - -Financialexpenses (2.4) (2.4) - (0.1) - - - (0.1) (2.5) (2.5) -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profitbefore taxation 14.0 9.3 (0.2) (0.3) 4.1 (0.3) - 3.3 13.5 12.6 Taxationexpense (4.7) (4.3) 0.1 0.1 - 0.1 (0.4) (0.1) (4.5) (4.4) -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profitafter taxation 9.3 5.0 (0.1) (0.2) 4.1 (0.2) (0.4) 3.2 9.0 8.2 Minorityinterests (0.1) (0.1) - - - - - - (0.1) (0.1) -------- -------- -------- -------- --------- --------- -------- -------- -------- --------Profit forthe year 9.2 4.9 (0.1) (0.2) 4.1 (0.2) (0.4) 3.2 8.9 8.1 ======== ======== ======== ======== ========= ========= ======== ======== ======== =======Earningsper 28.8p 15.4p 27.8p 25.3pshare -------- -------- -------- ------- * before goodwill amortisation and exceptional items. ** before amortisation of intangible assets, tax effects of goodwillamortisation and significant (formerly exceptional) operating costs. Only the IFRS transitional adjustments relating to share based payments andemployee benefits affect the adjusted values shown in the table. 4. Balance sheets and reconciliation of movements in shareholders' equity a. As at 31 March 2004 Reversal Amorti- Effect of sation Def- of Rest- Share goodwill of erred IFRS ated based Employee amorti- intang- tax- trans- under payment benefits sation ibles ation Dividend ition IFRS UK GAAP IFRS 2 IAS 19 IFRS 3 IFRS 3 IAS 12 IAS 10 £m £m £m £m £m £m £m £m £m Non-currentassetsProperty,plant & equipment 9.8 - - - - - - - 9.8Intangible assets 36.2 - - - - - - - 36.2Deferredtaxation assets 2.4 - 0.8 - - - - 0.8 3.2 ------- ------- -------- -------- --------- ------- -------- -------- -------- 48.4 - 0.8 - - - - 0.8 49.2CurrentassetsInventories 48.0 - - - - - - - 48.0Trade & otherreceivables 39.3 - - - - - - - 39.3Current taxation 0.2 - - - - - - - 0.2Cash & cashequivalents 3.6 - - - - - - - 3.6 ------- ------- -------- -------- --------- ------- -------- -------- -------- 91.1 - - - - - - - 91.1 ------- ------- -------- -------- --------- ------- -------- -------- --------Total assets 139.5 - 0.8 - - - - 0.8 140.3 ------- ------- -------- -------- --------- ------- -------- -------- -------- CurrentliabilitiesTrade & otherpayables (48.6) - - - - - 2.1 2.1 (46.5)Currenttaxation liabilities (2.0) - - - - - - - (2.0)Loans andborrowings (4.2) - - - - - - - (4.2) ------- ------- -------- -------- --------- ------- -------- -------- -------- (54.8) - - - - - 2.1 2.1 (52.7)Non-currentliabilitiesDeferredtaxation liabilities (0.4) - - - - (1.0) - (1.0) (1.4)Retirementbenefit obligation - - (2.9) - - - - (2.9) (2.9)Loans andborrowings (21.1) - - - - - - - (21.1)Provisions - - - - - - - - - ------- ------- -------- -------- --------- ------- -------- -------- -------- (21.5) - (2.9) - - (1.0) - (3.9) (25.4) ------- ------- -------- -------- --------- ------- -------- -------- --------Total liabilities (76.3) - (2.9) - - (1.0) 2.1 (1.8) (78.1) ------- ------- -------- -------- --------- ------- -------- -------- --------Net assets 63.2 - (2.1) - - (1.0) 2.1 (1.0) 62.2 ------- ------- -------- -------- --------- ------- -------- -------- -------- EquityShare capital 6.1 - - - - - - - 6.1Share premium 49.6 - - - - - - - 49.6Translation reserve - - - - - - - - -Retained earnings 7.2 - (2.1) - - (1.0) 2.1 (1.0) 6.2 ------- ------- -------- -------- --------- ------- -------- -------- -------- 62.9 - (2.1) - - (1.0) 2.1 (1.0) 61.9Minority interest 0.3 - - - - - - - 0.3 ------- ------- -------- -------- --------- ------- -------- -------- --------Total equity 63.2 - (2.1) - - (1.0) 2.1 (1.0) 62.2 ------- ------- -------- -------- --------- ------- -------- -------- -------- b. As at 30 September 2004 Reversal Amorti- Recla- Empl- of sation ssify Effect Share oyee goodwill of trans- of based bene- amorti- intan- Deferred Div- lation IFRS Restated payment fits sation gibles taxation idend diffe- trans- under UK GAAP IFRS 2 IAS 19 IFRS 3 IFRS 3 IAS 12 IAS 10 rence ition IFRS £m £m £m £m £m £m £m £m £m £m Non-currentassetsProperty,plant &equipment 17.5 - - - - - - - - 17.5Intangibleassets 73.4 - - 2.0 (0.2) - - - 1.8 75.2Deferredtaxationassets 2.4 - 1.3 - - - - - 1.3 3.7 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 93.3 - 1.3 2.0 (0.2) - - - 3.1 96.4CurrentassetsInventories 58.9 - - - - - - - - 58.9Trade & otherreceivables 46.7 - - - - - - - - 46.7Currenttaxation 0.2 - - - - - - - - 0.2Cash & cashequivalents 2.9 - - - - - - - - 2.9 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 108.7 - - - - - - - - 108.7 ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Total assets 202.0 - 1.3 2.0 (0.2) - - - 3.1 205.1 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- CurrentliabilitiesTrade & otherpayables (57.5) - - - - - 1.5 - 1.5 (56.0)Currenttaxationliabilities (1.8) - - - - - - - - (1.8)Loans andborrowings (29.0) - - - - - - - - (29.0) ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- (88.3) - - - - - 1.5 - 1.5 (86.8)Non-currentliabilitiesDeferredtaxationliabilities (0.8) - - (0.1) 0.1 (1.2) - - (1.2) (2.0)Retirementbenefitobligation - - (4.3) - - - - - (4.3) (4.3)Loans andborrowings (29.7) - - - - - - - - (29.7)Provisions - - - - - - - - - - ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- (30.5) - (4.3) (0.1) 0.1 (1.2) - - (5.5) (36.0) ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Totalliabilities (118.8) - (4.3) (0.1) 0.1 (1.2) 1.5 - (4.0) (122.8) ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Net assets 83.2 - (3.0) 1.9 (0.1) (1.2) 1.5 - (0.9) 82.3 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- EquityShare capital 8.1 - - - - - - - - 8.1Share premium 68.3 - - - - - - - - 68.3Translationreserve Retained - - - - - - - (0.1) (0.1) (0.1)earnings 6.4 - (3.0) 1.9 (0.1) (1.2) 1.5 0.1 (0.8) 5.6 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 82.8 - (3.0) 1.9 (0.1) (1.2) 1.5 - (0.9) 81.9Minorityinterest 0.4 - - - - - - - - 0.4 ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Total equity 83.2 - (3.0) 1.9 (0.1) (1.2) 1.5 - (0.9) 82.3 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- c. As at 31 March 2005 Reversal Amorti- Recla- Empl- of sation ssify Effect Share oyee goodwill of trans- of based bene- amorti- intan- Deferred Div- lation IFRS Restated payment fits sation gibles taxation idend diffe- trans- under UK GAAP IFRS 2 IAS 19 IFRS 3 IFRS 3 IAS 12 IAS 10 rence ition IFRS £m £m £m £m £m £m £m £m £m £m Non-currentassetsProperty,plant &equipment 18.8 - - - - - - - - 18.8Intangibleassets 73.9 - - 4.2 (0.3) - - - 3.9 77.8Deferredtaxationassets 1.7 0.1 1.4 - - - - - 1.5 3.2 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 94.4 0.1 1.4 4.2 (0.3) - - - 5.4 99.8CurrentassetsInventories 56.6 - - - - - - - - 56.6Trade & otherreceivables 54.7 - - - - - - - - 54.7Currenttaxation 0.5 - - - - - - - - 0.5Cash & cashequivalents 6.9 - - - - - - - - 6.9 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 118.7 - - - - - - - - 118.7 ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Total assets 213.1 0.1 1.4 4.2 (0.3) - - - 5.4 218.5 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- CurrentliabilitiesTrade & otherpayables (64.0) - - - - - 2.8 - 2.8 (61.2)Currenttaxationliabilities (2.7) - - - - - - - - (2.7)Loans andborrowings (30.8) - - - - - - - - (30.8) ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- (97.5) - - - - - 2.8 - 2.8 (94.7)Non-currentliabilitiesDeferredtaxationliabilities (0.7) - - (0.1) 0.1 (1.4) - - (1.4) (2.1)Retirementbenefitobligation - - (4.8) - - - - - (4.8) (4.8)Loans andborrowings (27.4) - - - - - - - - (27.4)Othercreditors (3.4) - - - - - - - - (3.4)Provisions - - - - - - - - - - ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- (31.5) - (4.8) (0.1) 0.1 (1.4) - - (6.2) (37.7) ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Totalliabilities (129.0) - (4.8) (0.1) 0.1 (1.4) 2.8 - (3.4) (132.4) ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Net assets 84.1 0.1 (3.4) 4.1 (0.2) (1.4) 2.8 - 2.0 86.1 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- EquityShare capital 8.1 - - - - - - - - 8.1Share premium 68.3 - - - - - - - - 68.3Translationreserve - - - - - - - 0.2 0.2 0.2Retainedearnings 7.3 0.1 (3.4) 4.1 (0.2) (1.4) 2.8 (0.2) 1.8 9.1 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- 83.7 0.1 (3.4) 4.1 (0.2) (1.4) 2.8 - 2.0 85.7Minorityinterest 0.4 - - - - - - - - 0.4 ------- ------- ------- -------- -------- -------- ------- ------- -------- --------Total equity 84.1 0.1 (3.4) 4.1 (0.2) (1.4) 2.8 - 2.0 86.1 ------- ------- ------- -------- -------- -------- ------- ------- -------- -------- d. Reconciliation of movements in shareholders' equity Transl- Share Share ation Hedging Retained Minority capital premium reserve reserve earnings Total interests Total £m £m £m £m £m £m £m £m At 31 March 2004 under UKGAAPActuarialloss in pension scheme - - - - (2.1) (2.1) - (2.1)Add back 2004 finaldividend - - - - 2.1 2.1 - 2.1Recognise deferredtaxation - - - - (1.0) (1.0) - (1.0) -------- -------- -------- -------- -------- -------- -------- --------At 31 March 2004 under IFRS 6.1 49.6 - - 6.2 61.9 0.3 62.2 -------- -------- -------- -------- -------- -------- -------- -------- Six monthsended 30September2004At 31 March 2004 underIFRS 6.1 49.6 - - 6.2 61.9 0.3 62.2Profit for the period - - - - 2.9 2.9 0.1 3.0Actuarialloss in ACG pensionscheme - - - - (0.8) (0.8) - (0.8)Translation differences - - (0.1) - - (0.1) (0.1)Share capital issued 2.0 18.7 - - - 20.7 - 20.7Cost of share basedpayments - - - - 0.1 0.1 - 0.1Dividends declared/paid - - - - (2.8) (2.8) - (2.8) -------- -------- -------- -------- -------- -------- -------- --------At 30September 2004 under IFRS 8.1 68.3 (0.1) - 5.6 81.9 0.4 82.3 -------- -------- -------- -------- -------- -------- -------- -------- Year ended31 March2005At 31 March 2004 underIFRS 6.1 49.6 - - 6.2 61.9 0.3 62.2Profit for the period - - - - 8.1 8.1 0.1 8.2Actuarialloss in ACG pensionscheme - - - - (0.8) (0.8) - (0.8)Actuarialloss in pensionscheme - - - - (0.3) (0.3) (0.3)Translation differences - - 0.2 - - 0.2 0.2Share capitalissued 2.0 18.7 - - - 20.7 - 20.7Cost of share basedpayments - - - - 0.2 0.2 - 0.2Dividends declared/paid - - - - (4.3) (4.3) - (4.3) -------- -------- -------- -------- -------- -------- -------- --------At 31 March 2005 under IFRS 8.1 68.3 0.2 - 9.1 85.7 0.4 86.1 -------- -------- -------- -------- -------- -------- -------- -------- 5. Accounting policies The principal accounting policies of the Group following the adoption of IFRSare set out below. These policies will be applied in the announcement containingthe Group's results for the six months ending 30 September 2005. Basis of preparation The financial statements have been prepared in accordance with applicableaccounting standards and under historical cost accounting rules. Consolidation The consolidated financial statements incorporate the financial statements ofthe Company and all of its subsidiaries. Acquisitions are accounted for usingacquisition accounting rules. The Group treats investments in undertakings thatare jointly controlled as joint ventures. Joint ventures are accounted for usingthe gross equity method. An associate is an undertaking in which the Group has along term interest, and is able to exercise significant influence. Prior tobecoming a subsidiary undertaking, Pattonair SAS was accounted for as anassociated undertaking. In order to give a true and fair view, purchasedgoodwill has been calculated as the sum of the goodwill arising on each purchaseof shares in Pattonair SAS, being the difference at the date of each purchasebetween the fair value of the consideration given and the fair value of theidentifiable assets and liabilities attributable to the interest purchased. Thisrepresents a departure from the statutory method, under which goodwill iscalculated as the difference between cost and fair value on the date thatPattonair SAS became a subsidiary undertaking. The statutory method would notgive a true and fair view because it would result in the Group's share ofPattonair SAS's retained reserves, during the period that it was an associatedundertaking, being recharacterised as goodwill. The effect of this departure isto decrease retained profits by £0.3 million and to decrease purchased goodwillrecognised on the acquisition by £0.3 million. Intangible assets Goodwill arising on acquisition is initially measured at cost, being the excessof the cost of the acquisition over the Group's interest in the fair value ofthe acquired entity's identifiable assets and liabilities at the date ofacquisition. Fair value adjustments are considered to be provisional at thefirst balance sheet date after acquisition to allow time to elapse for anyadjustments to be accurately quantified. Goodwill is not amortised, but is reviewed for impairment at least annually; anyimpairment is recognised immediately in the Income Statement and is notsubsequently reversed. On disposal of a subsidiary undertaking, the attributableamount of goodwill is included in the determination of the profit or loss ondisposal. Other intangible assets that are acquired by the Group are stated at cost lessaccumulated amortisation. Amortisation is charged to the Income Statement overthe estimated useful life of the asset. Impairment The carrying values of the Groups assets, including goodwill, are reviewed ateach balance sheet date to determine whether there is any indication ofimpairment. If any such indication exists, the asset's recoverable amount isestimated. An impairment loss is recognised whenever the carrying amount of anasset or its cash-generating unit exceeds its recoverable amount. Impairmentlosses are recognised in the Income Statement. All goodwill values were tested for impairment as at the IFRS transition date. Revenue Revenue represents the amounts (excluding value added tax) derived from theprovision of goods and services to customers during the year. Employee benefits The Group operates pension schemes providing benefits based on final pensionablesalaries and on contributions made by members. The assets of the schemes are held separately from those of the Group.Contributions to the defined contribution schemes are charged to the IncomeStatement as incurred. The cost of providing benefits under the defined benefit schemes are determinedseparately using the projected unit credit method, with actuarial valuationsbeing carried out annually. The retirement benefit obligation recognised in thebalance sheet represents the present value of the liabilities of the definedbenefit schemes as reduced by the fair value of the assets of these schemes.Actuarial gains and losses are recognised in full in the period in which theyoccur. They are recognised directly in equity and are presented in the Statementof Recognised Income and Expenses. Other income and expenses associated with thedefined benefit schemes are recognised in the Income Statement. Share based payments The fair value of share options granted on or after 7 November 2002 iscalculated using the Black-Scholes model. The resulting cost is charged in theIncome Statement over the vesting period of the option, and is adjusted for theexpected number of shares vesting. Depreciation Depreciation is provided so as to write off the cost or valuation of tangiblefixed assets over their estimated useful economic lives on a straight line basisas follows: - Freehold buildings and long leasehold property 50 years - Short leasehold property period of lease - Plant, machinery, fixtures & IT equipment 3-10 years - Motor vehicles 3-4 years No depreciation is charged on freehold land. Dividends Dividends are recognised as an expense in the period in which they are declaredor approved by shareholders. Stocks and work in progress Stocks and work in progress are valued at the lower of cost and net realisablevalue. Included within work in progress are certain grant funded projects. Tothe extent that costs on these projects are recoverable from the grantproviders, the costs are included within work in progress. Where progresspayments exceed the cost of the related work included in work in progress, thebalance is recorded in creditors as payments on account. Research and development Expenditure on research is written off against profits as incurred, except tothe extent that it is recoverable from grant funding. Where developmentexpenditure meets the criteria of IAS38, such expenditure will be capitalisedand amortised over its useful life. Where the research and development is grantfunded, the grant and the related expenditure is accounted for as describedabove. Taxation The charge for taxation is based on income and takes into account taxationdeferred because of timing differences between the treatment of certain itemsfor taxation and accounting purposes. Current taxation is the expected taxpayable on taxable income, using tax rates enacted or substantially enacted atthe balance sheet date, and any adjustment to taxation payable in respect ofprevious periods. Deferred taxation is provided using the balance sheetliability method, providing for temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and theamounts used for taxation purposes. A deferred taxation asset is recognised onlyto the extent that it is probable that future taxable profits will be availableagainst which the asset can be utilised. Leases Where the Company enters into a lease which entails taking substantially all therisks and rewards of ownership of an asset, the lease is treated as a financelease. The asset is recorded in the balance sheet as a tangible fixed asset andis depreciated over the shorter of its estimated useful life and the lease term.Future instalments under such leases, net of finance charges, are includedwithin creditors. Rentals payable are apportioned between the finance element,which is charged to the Income Statement as interest, and the capital element,which reduces the outstanding obligation for further instalments. All otherleases are operating leases and the rental charges are taken to the IncomeStatement on a straight line basis over the life of the lease. Foreign currencies Transactions in foreign currencies are recorded using the rate of exchangeruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated using the rate of exchangeruling at the balance sheet date and the gains or losses on translation areincluded in the Income Statement. Income Statements of overseas subsidiaries areconsolidated at the average rate of exchange for the year. Foreign exchangedifferences arising from the translation into sterling of equity interests inoverseas subsidiary undertakings are recognised as a separate equity reserve.Foreign exchange differences arising on borrowings considered to finance, orprovide a hedge against, foreign equity investments are taken directly toreserves. Cash balances The Group defines liquid resources as cash to which access cannot be obtainedwithin 24 hours. Financial instruments and hedging The Group uses financial instruments to manage financial risks associated withthe Group's business activities and the financing of those activities. The Groupdoes not undertake any trading in financial instruments. Forward foreigncurrency contracts are 'marked to market' at each balance sheet date and anychange in the market value of such instruments is recognised in the IncomeStatement. Where a derivative financial instrument is designated as a hedge of thevariability of cash flows of a recognised asset or liability, the effective partof the gain or loss on the derivative financial instrument is recogniseddirectly in equity. The portion of a net investment used to hedge the gain or loss on an instrumentused to hedge a net investment in a foreign operation that is determined to bean effective hedge is recognised directly in equity. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ubsetfusmca