15th Jul 2005 09:00
Spirent PLC18 July 2005 SPIRENT PLC TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS London, UK - 15 July 2005: Spirent plc (LSE: SPT; NYSE: SPM), a leadingcommunications technology company, will report its financial results inaccordance with International Financial Reporting Standards (IFRS) for financialperiods commencing from 1 January 2005. As part of this transition, Spirent istoday providing historical financial information for the full years 2003 and2004 and the first half of 2004 under IFRS. The Company's 2005 interim results, due to be announced on 11 August 2005, willbe reported in accordance with IFRS. The most significant impacts of the transition to IFRS from UK GenerallyAccepted Accounting Practice (UK GAAP) for Spirent are in relation to: • the elimination of the charge for goodwill amortisation;• the change in the profit or loss on disposal of operations; and• an increase in the charge for share-based payment. As a result, under IFRS, the profit attributable to equity shareholders for thefull year 2004 increases from £16.0 million to £26.2 million and for the fullyear 2003 a loss of £0.5 million improves to a profit of £13.6 million. Theabove items have been eliminated in presenting an adjusted earnings per sharemeasure and therefore adjusted earnings per share under IFRS does not materiallydiffer with that reported under UK GAAP. Eric Hutchinson, Finance Director, commented: "The financial information we are providing today shows the impact of IFRS onour historical results, ahead of their adoption for our 2005 interim results. "This has a net beneficial effect on our historic reported numbers, however theadoption of IFRS has no impact on the cash generation of the Group goingforward." - ends - Enquiries Eric Hutchinson, Finance Director Spirent plc +44 (0)1293 767676 Investor RelationsCatherine Nash Spirent plc +44 (0)1293 767676 MediaReg Hoare Smithfield +44 (0)20 7360 4900 About Spirent Spirent is a leading communications technology company focused on deliveringinnovative systems and services to meet the needs of customers worldwide. Weare a global provider of performance analysis and service assurance solutionsthat enable the development and deployment of next-generation networkingtechnologies such as broadband services, Internet telephony, 3G wireless and webapplications and security testing. Our Network Products business is a developerand manufacturer of innovative solutions for fastening, identification,protection and connectivity in electrical and communications networks marketedunder the global brand HellermannTyton. The Systems group comprises PG DrivesTechnology which develops power control systems for specialist electricalvehicles in the mobility and industrial markets. Further information aboutSpirent plc can be found at www.spirent.com Spirent Ordinary shares are traded on the London Stock Exchange (ticker: SPT)and on the New York Stock Exchange (ticker: SPM; CUSIP number: 84856M209) in theform of American Depositary Shares (ADS), represented by American DepositaryReceipts, with one ADS representing four Ordinary shares. Spirent and the Spirent logo are trademarks or registered trademarks of Spirentplc. All other trademarks or registered trademarks mentioned herein are held bytheir respective companies. All rights reserved. This press release may contain forward-looking statements (as that term isdefined in the United States Private Securities Litigation Reform Act of 1995)based on current expectations or beliefs, as well as assumptions about futureevents. You can sometimes, but not always, identify these statements by the useof a date in the future or such words as "will", "anticipate", "estimate","expect", "project", "intend", "plan", "should", "may", "assume" and othersimilar words. By their nature, forward-looking statements are inherentlypredictive and speculative and involve risk and uncertainty because they relateto events and depend on circumstances that will occur in the future. You shouldnot place undue reliance on these forward-looking statements, which are not aguarantee of future performance and are subject to factors that could cause ouractual results to differ materially from those expressed or implied by thesestatements. Such factors include, but are not limited to: the extent to whichcustomers continue to invest in next-generation technology and deploy advancedIP-based services; our ability to successfully expand our customer base; ourability to continue to benefit from generally improving market conditions; theprevailing market conditions and pace of economic recovery; our ability toimprove efficiency and adapt to economic changes and other changes in demand ormarket conditions; our ability to develop and commercialise new products andservices, extend our existing capabilities in IP services and expand our productoffering internationally; our ability to attract and retain qualified personnel;the effects of competition on our business; fluctuations in exchange rates andheavy exposure to a weak US dollar; changes in the business, financial conditionor prospects of one or more of our major customers; risks of doing businessinternationally; the financial burden of our pension fund deficit; risksrelating to the acquisition or sale of businesses and our subsequent ability tointegrate businesses; our reliance on proprietary technology; our exposure toliabilities for product defects; our reliance on third party manufacturers andsuppliers; and other risks described from time to time in Spirent plc'sSecurities and Exchange Commission periodic reports and filings. The Companyundertakes no obligation to update any forward-looking statements contained inthis press release, whether as a result of new information, future events orotherwise. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) Contents 1 Transitional arrangements2 Consolidated income statements restated under IFRS3 Consolidated balance sheets restated under IFRS4 Consolidated cash flow statements restated under IFRS5 Consolidated statement of changes in equity restated under IFRS6 Reconciliation of the consolidated income statements7 Reconciliation of the consolidated balance sheets8 Segmental information9 Independent auditors' report to Spirent plc on the preliminary IFRS financial statements for the years ended 31 December 2003 and 31 December 200410 Independent review report to Spirent plc on the preliminary IFRS financial statements for the period ended 4 July 2004 Appendices I) International Financial Reporting Standards accounting policiesII) Explanation of IFRS adjustments to the income statements and balance sheetsIII) Analysis of adjustments to the financial statements Consolidated income statements a) for the year to 31 December 2004 b) for the first half of 2004 c) for the year to 31 December 2003 Consolidated balance sheets d) at 31 December 2004 e) at the end of the first half of 2004 f) at 31 December 2003 Transition date consolidated balance sheet at 1 January 2003IV) Explanation of material adjustments to the consolidated cash flow statementsV) Earnings/(loss) per share Spirent is required to comply with IFRS as adopted by the European Union witheffect from 1 January 2005. Consequently the Group's 2005 interim results willbe prepared in accordance with IFRS. We present below the consolidated results for the Spirent Group as they areconverted from UK Generally Accepted Accounting Practice (UK GAAP) to IFRS inrelation to the full years 2003 and 2004 and the first half of 2004. As stated in our 2004 Annual Report, Spirent has adopted 1 January 2003 as itstransition date to IFRS which will enable two years of historical comparativedata to be provided. The adoption of IFRS will not affect our position under existing borrowingcovenants as these are calculated under UK GAAP as it existed at 31 December2002. The Group's first IFRS results will be its interim results for the first half of2005 and the first Annual Report under IFRS will be for the year to 31 December2005. Reconciliations of the Group's UK GAAP balance sheets to its IFRS balancesheets at 1 January 2003 (the transition date balance sheet), 31 December 2003,4 July 2004 and 31 December 2004 together with reconciliations of the Group's UKGAAP income statements to its IFRS income statements for the first half of 2004and for the years to 31 December 2003 and 31 December 2004 are provided in thisdocument. These IFRS financial statements will form the basis of thecomparative information in the first IFRS accounts and have been prepared on thebasis of IFRS expected to be in issue at 31 December 2005 which are stillsubject to change. We will update the restated information for any such change.The accounting policies applied in preparing these IFRS financial statementsare set out in Appendix I. The restatements have been prepared on the assumption that all IFRS statements,including International Accounting Standards (IAS), Standing InterpretationsCommittee (SIC) interpretations and International Financial ReportingInterpretations Committee (IFRIC) interpretations issued by the InternationalAccounting Standards Board (IASB) as effective for 2005 reporting will beendorsed by the European Commission. At the time of preparation of theserestated financial statements, not all standards have been endorsed by theEuropean Commission. It is possible, therefore, that future changes will berequired before the information is published as comparative information in the2005 Interim Report and 2005 Annual Report and Form 20-F. The IFRS financial statements for the years to 31 December 2003 and 31 December2004 have been audited by Ernst & Young LLP. The interim IFRS financialinformation for the first half of 2004 has been reviewed by Ernst & Young LLP.Their reports, which draw attention to the fact that there is a possibility thatthe financial statements may require adjustment before constituting final IFRSfinancial statements and that only a complete set of financial statements canprovide a fair presentation of the Group's financial position, are set out onpages 12 to 14. 1. Transitional arrangements IFRS 1 'First Time Adoption of International Financial Reporting Standards'permits companies, on adoption of IFRS, to take advantage of certain exemptionsfrom the full requirements in the transition period. Spirent has takenadvantage of the following exemptions allowed by this Standard: i) Business combinations: Spirent has elected not to restate business combinations prior to the transition date of 1 January 2003. Furthermore, Spirent has chosen not to apply IAS 21 'The Effects of Changes in Foreign Exchange Rates' retrospectively to fair value adjustments and goodwill on business combinations that occurred before the date of transition to IFRS. Therefore, goodwill and fair value adjustments which have been treated as an asset of the parent, continue to be sterling denominated. ii) Financial instruments: Spirent has chosen to implement IAS 39 'Financial Instruments: Recognition and Measurement' with effect from 1 January 2005. Comparative information is therefore presented under UK GAAP in existence at 31 December 2004. A reconciliation between the closing position at 31 December 2004 and the opening position at 1 January 2005 will be provided in the 2005 Interim Report. iii) Cumulative exchange adjustments on translation: Spirent has chosen to set the cumulative exchange adjustments on translation to zero at the transition date, 1 January 2003. Following the transition date, exchange differences on translation under IAS 21 are required to be taken to a separate translation reserve included within equity. Under IAS 21, on disposal of a foreign operation, the cumulative amount of the exchange differences previously recognised in the translation reserve for that foreign operation is required to be transferred to the income statement and included in the profit or loss on disposal. iv) Share-based payment: Spirent has elected to apply IFRS 2 'Share-based Payment' only to awards made after 7 November 2002 and not fully vested at 1 January 2005. 2. Consolidated income statements restated under IFRS £ million Year First half Year 2004 2004 2003------------------------------------------------------------------------------------------------------------Revenue 475.0 239.3 466.2Cost of sales (274.9) (139.6) (279.8)------------------------------------------------------------------------------------------------------------Gross profit 200.1 99.7 186.4Operating expenses (164.0) (79.5) (158.3)------------------------------------------------------------------------------------------------------------Operating profit 36.1 20.2 28.1 ------------------------------------------------------------------------------------------------------------Restructuring and refinancing costs 2.9 - 7.5Share-based payment 5.2 1.3 1.0Operating profit before restructuring and refinancing costs and share-based payment 44.2 21.5 36.6------------------------------------------------------------------------------------------------------------(Loss)/profit from interests in joint ventures (0.7) (0.2) 1.4Profit from interests in associates 1.8 0.7 1.1------------------------------------------------------------------------------------------------------------Operating profit of the Group, joint ventures and associates 37.2 20.7 30.6Profit on the disposal of operations 4.0 - 8.6------------------------------------------------------------------------------------------------------------Profit before interest 41.2 20.7 39.2Finance income 1.6 0.7 3.1Finance costs (9.1) (4.7) (13.7)Costs associated with the part prepayment of loan notes (0.5) - (16.1)------------------------------------------------------------------------------------------------------------Profit before tax 33.2 16.7 12.5Tax (6.7) (4.7) 1.3------------------------------------------------------------------------------------------------------------Profit for the period 26.5 12.0 13.8============================================================================================================Attributable toEquity shareholders 26.2 11.8 13.6Minority shareholders' interests 0.3 0.2 0.2------------------------------------------------------------------------------------------------------------ 26.5 12.0 13.8============================================================================================================ Basic earnings per share (pence) 2.79 1.26 1.46Diluted earnings per share (pence) 2.74 1.23 1.44 3. Consolidated balance sheets restated under IFRS £ million 31 December First half(1) 31 December 2004 2004 2003------------------------------------------------------------------------------------------------------------AssetsNon current assetsGoodwill 106.5 109.8 110.9Property, plant and equipment 86.3 85.5 90.2InvestmentsInvestment in joint venture - 0.3 0.3Investment in associates 14.3 13.0 13.1Deferred tax 11.1 10.3 13.0------------------------------------------------------------------------------------------------------------ 218.2 218.9 227.5------------------------------------------------------------------------------------------------------------Current assetsInventories 54.0 53.8 55.0Trade and other receivables 89.9 94.7 86.9Cash and cash equivalents 51.7 30.5 37.6------------------------------------------------------------------------------------------------------------ 195.6 179.0 179.5------------------------------------------------------------------------------------------------------------Total assets 413.8 397.9 407.0------------------------------------------------------------------------------------------------------------LiabilitiesCurrent liabilitiesTrade and other payables (90.8) (87.4) (87.6)Current tax (26.2) (27.4) (24.7)Short term borrowings and overdrafts (1.8) (1.6) (1.8)Provisions and other liabilities (4.2) (2.3) (4.6)------------------------------------------------------------------------------------------------------------ (123.0) (118.7) (118.7)------------------------------------------------------------------------------------------------------------Non current liabilitiesTrade and other payables (3.9) (4.3) (2.3)Long term borrowings (76.3) (82.4) (93.3)Retirement benefit obligations (38.1) (35.0) (48.2)Deferred tax (2.5) (2.4) (2.9)Provisions and other liabilities (9.6) (11.8) (13.3)------------------------------------------------------------------------------------------------------------ (130.4) (135.9) (160.0)------------------------------------------------------------------------------------------------------------Total liabilities (253.4) (254.6) (278.7)------------------------------------------------------------------------------------------------------------Net assets 160.4 143.3 128.3============================================================================================================EquityCalled up share capital 31.9 31.8 31.5Share premium account 1.3 701.9 697.5Capital reserve 10.9 14.4 17.7Capital redemption reserve - 0.7 0.7Translation reserve 1.6 (0.5) 3.0Retained earnings/(loss) 113.4 (606.6) (624.3)------------------------------------------------------------------------------------------------------------Shareholders' funds - equity 159.1 141.7 126.1Minority interests - equity 1.3 1.6 2.2------------------------------------------------------------------------------------------------------------Total equity and reserves 160.4 143.3 128.3============================================================================================================ Note(1) First half 2004 refers to the position at 4 July 2004 4. Consolidated cash flow statements restated under IFRS £ million Year First half Year 2004 2004 2003------------------------------------------------------------------------------------------------------------Cash flows from operating activitiesOperating profit 36.1 20.2 28.1Depreciation of property, plant and equipment 25.4 13.0 29.3Loss/(profit) on disposal of tangible fixed assets 0.4 0.4 (0.1)Tangible fixed asset write-downs 0.6 - 2.2Share-based payment 5.2 1.3 1.0Deferred income received 4.9 4.6 0.2(Increase)/decrease in debtors (9.1) (10.2) 3.8(Increase)/decrease in inventories (1.0) (0.2) 3.1Increase in creditors 8.5 1.4 5.7Decrease in provisions (2.9) (3.4) (5.9)Pension fund liability (7.8) (7.2) 0.8Tax (paid)/received (3.1) (1.4) 8.9------------------------------------------------------------------------------------------------------------Net cash from operating activities 57.2 18.5 77.1------------------------------------------------------------------------------------------------------------Cash flows from investing activitiesDividends received from associates 0.1 0.1 0.1Interest received 1.6 0.8 3.6Disposal of operations 2.5 - 62.0Purchase of property, plant and equipment (25.3) (11.3) (16.7)Proceeds from sale of property, plant and equipment 0.5 0.3 0.9Acquisition of subsidiaries (1.1) (0.8) (1.1)Contribution to joint venture (0.2) - (0.5)------------------------------------------------------------------------------------------------------------Net cash (used in)/from investing activities (21.9) (10.9) 48.3------------------------------------------------------------------------------------------------------------Cash flows from financing activitiesInterest paid (8.4) (4.5) (12.6)Interest element of finance lease rental payments (0.4) (0.2) (0.5)Costs associated with the part prepayment of loan notes (2.3) (1.8) (13.7)Proceeds from the issue of share capital 1.5 0.9 0.7New loans - - 9.4Repayment of loans (10.2) (8.2) (152.9)Repayment of capital element of finance lease rentals (0.8) (0.4) (0.8)------------------------------------------------------------------------------------------------------------Net cash used in financing activities (20.6) (14.2) (170.4)------------------------------------------------------------------------------------------------------------Net increase/(decrease) in cash and cash equivalents 14.7 (6.6) (45.0)Cash and cash equivalents at the beginning of the period 36.9 36.9 83.0Effect of exchange rate changes (0.6) (0.5) (1.1)------------------------------------------------------------------------------------------------------------Cash and cash equivalents at the end of the period 51.0 29.8 36.9============================================================================================================Cash and cash equivalents comprise:Cash and cash equivalents 51.7 30.5 37.6Overdrafts (0.7) (0.7) (0.7)------------------------------------------------------------------------------------------------------------ 51.0 29.8 36.9============================================================================================================ 5. Consolidated statement of changes in equity restated under IFRS £ million Called Share Capital Capital Translation Investment Retained Total up share premium reserve redemption reserve in own earnings/ equity capital account reserve shares (loss)-----------------------------------------------------------------------------------------------------------------At 1 January 2003As originally stated 31.3 696.1 17.6 0.7 - (2.1) (648.5) 95.1Changes in accounting policy relating to first timeapplication of IFRS - - - - - 2.1 (4.9) (2.8)-----------------------------------------------------------------------------------------------------------------At 1 January 2003 as restated 31.3 696.1 17.6 0.7 - - (653.4) 92.3-----------------------------------------------------------------------------------------------------------------Changes in equity for 2003Exchange differences on translating foreign operations - - - - 5.6 - - 5.6Overseas tax on exchange differences - - - - (0.2) - - (0.2)Exchange gain transferred to profit on sale - - - - (2.4) - - (2.4)Share-based payment - - - - - - 0.4 0.4Gain on lapsed options - - (1.2) - - - 1.2 -Actuarial gain recognised on pension schemes - - - - - - 0.3 0.3Tax on actuarial gain - - - - - - (0.1) (0.1)Deferred tax asset - - - - - - 12.6 12.6-----------------------------------------------------------------------------------------------------------------Net profits and losses recognised directly in equity - - (1.2) - 3.0 - 14.4 16.2Profit for the period - - - - - - 13.6 13.6-----------------------------------------------------------------------------------------------------------------Total recognised profits and losses for the period - - (1.2) - 3.0 - 28.0 29.8New shares issued 0.2 1.4 (0.9) - - - - 0.7Obligation to issue sharecapitalCaw Networks, Inc. - - 2.7 - - - - 2.7Other movements - - (0.5) - - - 1.1 0.6-----------------------------------------------------------------------------------------------------------------At 31 December 2003 31.5 697.5 17.7 0.7 3.0 - (624.3) 126.1-----------------------------------------------------------------------------------------------------------------Changes in equity for 2004Exchange differences on translating foreign operations - - - - (1.4) - - (1.4)Share-based payment - - - - - - 4.8 4.8Gain on lapsed options - - (1.2) - - - 1.2 -Actuarial gain recognised on pension schemes - - - - - - 3.0 3.0Tax on actuarial gain - - - - - - (0.9) (0.9)-----------------------------------------------------------------------------------------------------------------Net profits and losses recognised directly in equity - - (1.2) - (1.4) - 8.1 5.5Profit for the period - - - - - - 26.2 26.2-----------------------------------------------------------------------------------------------------------------Total recognised profits and losses for the period - - (1.2) - (1.4) - 34.3 31.7New shares issued 0.3 3.3 (2.1) - - - - 1.5New shares issuedCaw Networks, Inc. 0.1 3.2 (2.7) - - - - 0.6Cancellation of share premium and capital redemption reserve - (702.7) - (0.7) - - 703.4 -Other movements - - (0.8) - - - - (0.8)-----------------------------------------------------------------------------------------------------------------At 31 December 2004 31.9 1.3 10.9 - 1.6 - 113.4 159.1================================================================================================================= 6. Reconciliation of the consolidated income statements £ million Year 2004 First half 2004 Year 2003 UK GAAP Total IFRS IFRS UK GAAP Total IFRS IFRS UK GAAP Total IFRS IFRS adjustments adjustments adjustmentsAppendix III (a) (b) (c)-------------------------------------------------------------------------------------------------------------------Revenue 475.0 - 475.0 239.3 - 239.3 466.2 - 466.2Cost of sales (274.9) - (274.9) (139.6) - (139.6) (279.8) - (279.8)-------------------------------------------------------------------------------------------------------------------Gross profit 200.1 - 200.1 99.7 - 99.7 186.4 - 186.4Operating expenses (169.3) 5.3 (164.0) (82.7) 3.2 (79.5) (167.6) 9.3 (158.3)-------------------------------------------------------------------------------------------------------------------Operating profit 30.8 5.3 36.1 17.0 3.2 20.2 18.8 9.3 28.1-------------------------------------------------------------------------------------------------------------------Restructuring and refinancing costs 2.9 - 2.9 - - - 7.5 - 7.5Goodwill amortisation 9.1 (9.1) - 4.6 (4.6) - 9.7 (9.7) -Share-based payment 0.6 4.6 5.2 0.3 1.0 1.3 0.6 0.4 1.0Operating profit beforerestructuring andrefinancing costs,goodwillamortisation andshare-basedpayment 43.4 0.8 44.2 21.9 (0.4) 21.5 36.6 - 36.6-------------------------------------------------------------------------------------------------------------------(Loss)/profit from interests in jointventures (0.7) - (0.7) (0.2) - (0.2) 2.7 (1.3) 1.4Profit from interests inassociates 2.8 (1.0) 1.8 1.2 (0.5) 0.7 2.1 (1.0) 1.1-------------------------------------------------------------------------------------------------------------------Operating profit of the Group,joint ventures andassociates 32.9 4.3 37.2 18.0 2.7 20.7 23.6 7.0 30.6(Loss)/profit on the disposal ofoperations (0.9) 4.9 4.0 - - - 3.6 5.0 8.6-------------------------------------------------------------------------------------------------------------------Profit before interest 32.0 9.2 41.2 18.0 2.7 20.7 27.2 12.0 39.2Finance income 1.6 - 1.6 0.7 - 0.7 3.1 - 3.1Finance costs (8.4) (0.7) (9.1) (4.3) (0.4) (4.7) (12.4) (1.3) (13.7)Costs associated with the partprepayment of loannotes (0.5) - (0.5) - - - (16.1) - (16.1)Other finance expense (0.7) 0.7 - (0.4) 0.4 - (1.5) 1.5 --------------------------------------------------------------------------------------------------------------------Profit before tax 24.0 9.2 33.2 14.0 2.7 16.7 0.3 12.2 12.5Tax (7.7) 1.0 (6.7) (5.2) 0.5 (4.7) (0.6) 1.9 1.3-------------------------------------------------------------------------------------------------------------------Profit/(loss) for the period 16.3 10.2 26.5 8.8 3.2 12.0 (0.3) 14.1 13.8===================================================================================================================Attributable toEquity shareholders 16.0 10.2 26.2 8.6 3.2 11.8 (0.5) 14.1 13.6Minority shareholders'interests 0.3 - 0.3 0.2 - 0.2 0.2 - 0.2------------------------------------------------------------------------------------------------------------------- 16.3 10.2 26.5 8.8 3.2 12.0 (0.3) 14.1 13.8=================================================================================================================== Basic earnings/ (loss) per share(pence) 1.70 1.09 2.79 0.92 0.34 1.26 (0.05) 1.51 1.46Diluted earnings/ (loss) per share(pence) 1.67 1.07 2.74 0.90 0.33 1.23 (0.05) 1.49 1.44Adjusted earnings per share(1),(2)(pence) 3.06 0.08 3.14 1.44 (0.04) 1.40 2.38 (0.02) 2.36 Notes(1) Before restructuring and refinancing costs, goodwill amortisation and share-based payment(2) Under UK GAAP, adjusted earnings is headline earnings as previously reported before deducting the charge for share-based payment 7. Reconciliation of the consolidated balance sheets £ million 31 December 2004 First half 2004 31 December 2003 UK GAAP Total IFRS IFRS UK GAAP Total IFRS IFRS UK GAAP Total IFRS IFRS adjustments adjustments adjustmentsAppendix III (d) (e) (f)------------------------------------------------------------------------------------------------------------------AssetsNon currentassetsGoodwill 88.8 17.7 106.5 96.2 13.6 109.8 101.6 9.3 110.9Property, plant and equipment 86.3 - 86.3 85.5 - 85.5 90.2 - 90.2Investment in joint venture - - - 0.3 - 0.3 0.3 - 0.3Investment in associates 15.8 (1.5) 14.3 14.5 (1.5) 13.0 14.6 (1.5) 13.1Deferred tax - 11.1 11.1 - 10.3 10.3 - 13.0 13.0------------------------------------------------------------------------------------------------------------------ 190.9 27.3 218.2 196.5 22.4 218.9 206.7 20.8 227.5------------------------------------------------------------------------------------------------------------------Current assetsInventories 54.0 - 54.0 53.8 - 53.8 55.0 - 55.0Trade and other receivables 89.9 - 89.9 94.7 - 94.7 86.9 - 86.9Cash and cash equivalents 51.7 - 51.7 30.5 - 30.5 37.6 - 37.6------------------------------------------------------------------------------------------------------------------ 195.6 - 195.6 179.0 - 179.0 179.5 - 179.5------------------------------------------------------------------------------------------------------------------Total assets 386.5 27.3 413.8 375.5 22.4 397.9 386.2 20.8 407.0------------------------------------------------------------------------------------------------------------------LiabilitiesCurrentliabilitiesTrade and other payables (90.6) (0.2) (90.8) (86.0) (1.4) (87.4) (86.6) (1.0) (87.6)Current tax (26.2) - (26.2) (27.4) - (27.4) (24.7) - (24.7)Short term borrowings andoverdrafts (1.8) - (1.8) (1.6) - (1.6) (1.8) - (1.8)Provisions and other liabilities - (4.2) (4.2) - (2.3) (2.3) - (4.6) (4.6)------------------------------------------------------------------------------------------------------------------ (118.6) (4.4) (123.0) (115.0) (3.7) (118.7) (113.1) (5.6) (118.7)------------------------------------------------------------------------------------------------------------------Non currentliabilitiesTrade and other payables (3.9) - (3.9) (4.3) - (4.3) (2.3) - (2.3)Long term borrowings (76.3) - (76.3) (82.4) - (82.4) (93.3) - (93.3)Retirement benefitobligations (27.0) (11.1) (38.1) (24.7) (10.3) (35.0) (35.2) (13.0) (48.2)Deferred tax (1.9) (0.6) (2.5) (1.8) (0.6) (2.4) (2.3) (0.6) (2.9)Provisions and other liabilities (13.8) 4.2 (9.6) (14.1) 2.3 (11.8) (17.9) 4.6 (13.3)------------------------------------------------------------------------------------------------------------------ (122.9) (7.5) (130.4) (127.3) (8.6) (135.9) (151.0) (9.0) (160.0)------------------------------------------------------------------------------------------------------------------Total liabilities (241.5) (11.9) (253.4) (242.3) (12.3) (254.6) (264.1) (14.6) (278.7)------------------------------------------------------------------------------------------------------------------Net assets 145.0 15.4 160.4 133.2 10.1 143.3 122.1 6.2 128.3------------------------------------------------------------------------------------------------------------------EquityCalled up share capital 31.9 - 31.9 31.8 - 31.8 31.5 - 31.5Share premium account 1.3 - 1.3 701.9 - 701.9 697.5 - 697.5Capital reserve 10.9 - 10.9 14.4 - 14.4 17.7 - 17.7Capital redemptionreserve - - - 0.7 - 0.7 0.7 - 0.7Translation reserve - 1.6 1.6 - (0.5) (0.5) - 3.0 3.0Investment in own shares - - - - - - (2.6) 2.6 -Retained earnings /(loss) 99.6 13.8 113.4 (617.2) 10.6 (606.6) (624.9) 0.6 (624.3)------------------------------------------------------------------------------------------------------------------Shareholders' funds - equity 143.7 15.4 159.1 131.6 10.1 141.7 119.9 6.2 126.1Minority interests -equity 1.3 - 1.3 1.6 - 1.6 2.2 - 2.2------------------------------------------------------------------------------------------------------------------Total equity and reserves 145.0 15.4 160.4 133.2 10.1 143.3 122.1 6.2 128.3================================================================================================================== 8. Segmental information The business segments for the Group reported under IFRS are the same as thosereported under UK GAAP. However, there are stricter definitions included inIFRS regarding the allocation of corporate or central costs. Those sharedcosts, which cannot be allocated directly to individual segments, will now bereported as non segmental costs. £ million Year 2004 First half 2004 Year 2003 UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS--------------------------------------------------------------------------------------------------------RevenuePerformance Analysis 176.8 176.8 83.1 83.1 148.7 148.7Service Assurance 74.7 74.7 42.0 42.0 91.7 91.7-------------------------------------------------------------------------------------------------------- Communications 251.5 251.5 125.1 125.1 240.4 240.4Network Products 187.8 187.8 95.0 95.0 174.4 174.4Systems 35.7 35.7 19.2 19.2 51.4 51.4--------------------------------------------------------------------------------------------------------Total Group 475.0 475.0 239.3 239.3 466.2 466.2========================================================================================================Operating profit Operating profit beforerestructuring and refinancingcosts, goodwill amortisation andshare-based paymentPerformance Analysis 20.3 21.7 7.4 7.6 5.0 5.2Service Assurance 0.2 2.5 2.2 3.5 9.4 13.4--------------------------------------------------------------------------------------------------------Communications 20.5 24.2 9.6 11.1 14.4 18.6Network Products 20.4 21.3 10.7 10.8 16.7 16.9Systems 2.5 4.0 1.6 2.3 5.5 6.2Non segmental - (5.3) - (2.7) - (5.1)--------------------------------------------------------------------------------------------------------Total Group 43.4 44.2 21.9 21.5 36.6 36.6--------------------------------------------------------------------------------------------------------Restructuring and refinancingcostsPerformance Analysis 1.3 1.3 - - (5.1) (5.1)Service Assurance (1.9) (1.9) - - (0.1) (0.1)--------------------------------------------------------------------------------------------------------Communications (0.6) (0.6) - - (5.2) (5.2)Non segmental (2.3) (2.3) - - (2.3) (2.3)--------------------------------------------------------------------------------------------------------Total Group (2.9) (2.9) - - (7.5) (7.5)--------------------------------------------------------------------------------------------------------Share-based paymentPerformance Analysis (0.6) (3.2) (0.3) (0.9) (0.6) (0.8)Service Assurance - (1.4) - (0.3) - (0.1)--------------------------------------------------------------------------------------------------------Communications (0.6) (4.6) (0.3) (1.2) (0.6) (0.9)Network Products - (0.4) - (0.1) - (0.1)Systems - (0.1) - - - -Non segmental - (0.1) - - - ---------------------------------------------------------------------------------------------------------Total Group (0.6) (5.2) (0.3) (1.3) (0.6) (1.0)--------------------------------------------------------------------------------------------------------Goodwill amortisation (9.1) - (4.6) - (9.7) ---------------------------------------------------------------------------------------------------------Operating profit 30.8 36.1 17.0 20.2 18.8 28.1======================================================================================================== 9. Independent auditors' report to Spirent plc on the preliminary IFRS financial statements for the years ended 31 December 2003 and 31 December 2004 We have audited the accompanying preliminary International Financial ReportingStandards (IFRS) consolidated financial statements of Spirent plc (the Company)for the years ended 31 December 2003 and 31 December 2004 which comprise theopening IFRS consolidated balance sheet as at 1 January 2003, the consolidatedincome statement, the consolidated cash flow statement and the consolidatedstatement of changes in equity for the years ended 31 December 2003 and 31December 2004 and the consolidated balance sheet as at 31 December 2003 and 31December 2004, together with the related accounting policies note set out inAppendix I. This report is made solely to the Company in accordance with ourengagement letter dated 13 May 2005. Our audit work has been undertaken so thatwe might state to the Company those matters we are required to state to them inan auditors' report and for no other purpose. To the fullest extent permittedby law, we do not accept or assume responsibility or liability to anyone otherthan the Company for our audit work, for this report, or for the opinions wehave formed. Respective responsibilities of directors and auditors These preliminary IFRS financial statements are the responsibility of theCompany's directors and have been prepared as part of the Company's conversionto IFRS. They have been prepared in accordance with the basis set out in theaccounting policies note in Appendix I, which describes how IFRS have beenapplied under IFRS 1, including the assumptions management has made about thestandards and interpretations expected to be effective, and the policiesexpected to be adopted, when management prepares its first complete set of IFRSfinancial statements as at 31 December 2005. Our responsibility is to express an independent opinion on the preliminary IFRSfinancial statements based on our audit. We read the other informationaccompanying the preliminary IFRS financial statements and consider whether itis consistent with the preliminary IFRS financial statements. This otherinformation comprises the explanation of IFRS adjustments to the consolidatedincome statement and the explanation of IFRS adjustments to the balance sheet ontransition and at 31 December 2003 and 31 December 2004, set out in Appendix II.We consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the preliminary IFRS financialstatements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standardsissued by the Auditing Practices Board. Those Standards require that we planand perform the audit to obtain reasonable assurance about whether thepreliminary IFRS financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the preliminary IFRS financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall presentation of the preliminaryIFRS financial statements. We believe that our audit provides a reasonablebasis for our opinion. Emphasis of matter Without qualifying our opinion, we draw attention to the fact that theaccounting policies note explains why there is a possibility that thepreliminary IFRS financial statements may require adjustment before constitutingthe final IFRS financial statements. Moreover, we draw attention to the factthat, under IFRS only a complete set of financial statements with comparativefinancial information and explanatory notes can provide a fair presentation ofthe Company's financial position, results of operations and cash flows inaccordance with IFRS. Opinion In our opinion, the accompanying preliminary IFRS financial statements for theyears ended 31 December 2003 and 31 December 2004 have been prepared, in allmaterial respects, in accordance with the basis set out in the accountingpolicies note in Appendix I, which describes how IFRS have been applied underIFRS 1, including the assumptions management has made about the standards andinterpretations expected to be effective, and the policies expected to beadopted, when management prepares its first complete set of IFRS financialstatements as at 31 December 2005. Ernst & Young LLPLondon14 July 2005 10. Independent review report to Spirent plc on the preliminary IFRS financial statements for the period ended 4 July 2004 We have reviewed the accompanying preliminary International Financial ReportingStandards (IFRS) consolidated financial statements of Spirent plc (the Company)for the period ended 4 July 2004 which comprises the consolidated balance sheet,the consolidated income statement and the consolidated cash flow statement. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility or liability to anyone other than the Companyfor our work, for this report, or for the conclusions we have formed. Directors' responsibilities This preliminary IFRS financial information is the responsibility of theCompany's directors and has been prepared as part of the Company's conversion toIFRS. It has been prepared in accordance with the basis set out in theaccounting policies note in Appendix I, which describes how IFRS have beenapplied under IFRS 1, including the assumptions management has made about thestandards and interpretations expected to be effective, and the policiesexpected to be adopted, when management prepares its first complete set of IFRSfinancial statements as at 31 December 2005. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an opinion onthe preliminary IFRS financial information. Emphasis of matter Without modifying our review conclusion, we draw attention to the fact that theaccounting policies note set out in Appendix I explains why there is apossibility that the preliminary IFRS financial statements may requireadjustment before constituting the final IFRS financial statements. Moreover,we draw attention to the fact that, under IFRS only a complete set of financialstatements with comparative financial information and explanatory notes canprovide a fair presentation of the Company's financial position, results ofoperations and cash flows in accordance with IFRS. Review conclusion On the basis of our review we are not aware of any material modification thatshould be made to the preliminary IFRS financial information as presented forthe period ended 4 July 2004. Ernst & Young LLPLondon14 July 2005 Appendices I) International Financial Reporting Standards (IFRS) accounting policies Basis of presentation The consolidated financial statements have been prepared in accordance with IFRSand in accordance with the significant accounting policies set out below. Theconsolidated financial statements are presented in pounds sterling. The financial information has been prepared on the assumption that all IFRSstatements, including International Accounting Standards (IAS), StandingInterpretations Committee (SIC) interpretations and International FinancialReporting Interpretations Committee (IFRIC) interpretations issued by theInternational Accounting Standards Board (IASB) as effective for 2005 reportingRelated Shares:
Spirent