6th Mar 2007 07:03
Galiform PLC06 March 2007 GALIFORM Plc PRELIMINARY RESULTS FOR THE 53 WEEKS ENDED 30 DECEMBER 2006 HIGHLIGHTS • Revenue from continuing operations £733.0m (2005: £621.8m). • Howden Joinery up 9.5% (5.9% on same depot basis) to £676.3m (2005: £617.8m). • Howden Joinery operating profit before exceptional items up £9.2m to £132.6m. • Gross margin up 110 basis points. • Cost of Supply, our sourcing and manufacturing business, before exceptional items down £9.2m to £39.6m. • Group operating profit before exceptional items up £11.6m to £65.7m. • Profit before tax and exceptional items from continuing operations rose £14.7m to £57.2m. • Profit before tax after exceptional items from continuing operations £25.0m (2005: £29.8m). • Basic earnings per share before exceptional items from continuing operations 6.1p (2005: 4.7p). • Basic earnings per share from continuing and discontinued operations (28.7)p (2005: (21.3)p). • Net cash inflow of £51.4m meant the Group had net borrowings of £4.1m at 30 December 2006. • Disposal of MFI Retail business completed - transitional arrangements performing satisfactorily. • Loss on disposal and associated provisions of £187.4m. • 40 new Howden Joinery depots opened in 2006. Galiform's Chief Executive, Matthew Ingle said: "2006 was a year of major transformation for the Group. With the disposal of MFIRetail, we are now focused on the successful Howdens business which continues toenjoy a strong position in a rapidly changing market. Going forward, we havegreat opportunities to grow Howdens, capitalising on its unique strengths." Enquiries Investors/analysts: Gary RawlinsonHead of Investor Relations +44 (0)207 404 5959 (6 March only) +44 (0)207 535 1127 +44 (0)7989 397527 Media: Brunswick +44 (0)207 404 5959Susan GilchristFiona LaffanAnna Jones SUMMARY OF GROUP RESULTS-------------------------------------------------------------------------------- The information presented below relates to the 53 weeks to 30 December 2006 andthe 52 weeks to 24 December 2005, unless otherwise stated. £m unless stated 2006 2005Continuing operations (before exceptional items unlessstated):Revenue 733.0 621.8Gross profit 362.5 322.5Operating profit 65.7 54.1Profit before tax- excluding exceptional items 57.2 42.5- including exceptional items (2) 25.0 29.8 Earnings per share from continuing operations- basic excluding exceptional items 6.1p 4.7p- basic including exceptional items 1.0p 1.1p Loss before tax from discontinued operations- excluding exceptional items (44.8) (67.4)- including exceptional items (2) (179.6) (144.4) Earnings per share from continuing and discontinuedoperations- basic excluding exceptional items (0.6)p (4.9)p- basic including exceptional items (28.7)p (21.3)p Net debt at end of period 4.1 55.5 1 Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expect to publish full financial statements that comply with IFRSs in April 2007. The 2005 Preliminary Results were published under UK GAAP. As a result, figures for 2005 have been restated. Detailed reconciliations to assist in understanding the nature and value of the differences between UK GAAP and IFRS were given in the appendix to MFI's Interim Results for the 24 weeks to 10 June 2006 published on 20 July 2006. This statement can be found on www.galiform.com. 2 Details of exceptional items relating to continuing operations are given in Note 3 and for discontinued operations in Note 5. GROUP DEVELOPMENTS-------------------------------------------------------------------------------- GROUP STRUCTURE The sale of the MFI Retail business (MFI) to MEP was announced in September 2006and completed on 18 October 2006. Subsequent to this, the name of the Group waschanged to Galiform Plc. Also in October, the sale of Sofa Workshop Limited was completed. GROUP STRATEGY The sale of Retail followed a number of significant developments in the firsthalf of the year, that included arranging new banking facilities, exitingperipheral activities including Hygena Cuisines, switching from manufacturing tobuying-in fascias and appliances, and agreement of new pension arrangements andfunding of the deficit of the Group's pension schemes. This leaves a group thathas fundamentally changed and is now focused on the substantial growthopportunities that exist for Howden Joinery. Supply, which provides criticalsupport for the Howden Joinery business model will be simplified when it ceasesto procure goods on behalf of MFI and Hygena Cuisines. GROUP RESULTS The following discussion relates to continuing operations, unless otherwise stated.-------------------------------------------------------------------------------- Revenue rose by £111.2m to £733.0m, reflecting the increased sales of HowdenJoinery (£58.5m) and third party sales of Supply (£47.7m). Excluding exceptional items, gross profit increased by £40.0m to £362.5m.Selling and distribution costs and administrative expenses rose by £28.8m. Netinterest paid fell by £3.1m, an increase in net finance expenses being offset bya lower pension interest charge. The net result was profit before tax andexceptional items from continuing operations of £57.2m (2005: £42.5m). Exceptional items for continuing businesses before tax totalled £32.2m. Theseincluded: • costs of restructuring the Group of £30.2m; • factory closure costs of £36.5m; and • a gain from lower pension liabilities of £38.0m, arising from changes to the schemes' benefits. Loss before tax from discontinued operations was £179.6m. This included: • £44.8m loss from operations prior to disposal, primarily MFI, which was sold in October; • £62.5m profit on disposal of Hygena Cuisines; • £155.7m loss on disposal of MFI; and • £31.7m provision for other costs arising as a result of the disposal of Retail. Basic earnings per share from continuing operations was 1.0p (2005: 1.1p), withpre exceptional earnings per share of 6.1p (2005: 4.7p). Basic loss per share from continuing and discontinued operations was 28.7p(2005: 21.3p loss), with pre exceptional loss per share of 0.6p (2005: 4.9ploss). Net cash flows from operating activities were £70.0m, including a payment of£21.8m received in relation to settlement of a VAT dispute. The sale of HygenaCuisines generated net proceeds of £74.6m. The disposal of MFI entailed cashpayments of £78.9m, including fees. Net capital expenditure was £18.3m (2005:£9.5m net receipts). Payments to acquire fixed and intangible assets totalled£30.3m (2005: £47.9 m), while the sale of fixed and intangible assets generated£12.0m (2005: £57.4m). In 2006, there was a cash inflow of £51.4m (2005: £6.7m).Compared with a year earlier, net borrowings fell from £55.5m to £4.1m. DIVIDEND As with the interim dividend, the final dividend for 2006 will be 0p (2005: 2pinterim, 0p final). OPERATIONAL REVIEW-------------------------------------------------------------------------------- HOWDEN JOINERY Howden Joinery sells kitchens and joinery products to the building trade,predominantly small local builders, via a nationwide network of depots. 2006 2005 £m £mRevenue 676.3 617.8Operating profit before exceptional items 132.6 123.4 Howden Joinery continued to encounter favourable market conditions. Revenueincreased by 9.5% to £676.3m, same depot revenue rising by 5.9%. This reflecteda continuing increase in the turnover of mature depots, which have typicallybeen operating for six years or more, the benefit of the maturing profile ofsales from newer depots and new depot openings. Gross margin rose by 110 basispoints. Taken together, the rise in sales and gross margin, after allowing forsales-related cost increases, contributed £32.3m Excluding the impact of higher sales in 2006 on costs, operating costs rose by£23.1m. This was primarily because of employee costs increasing by £9.4m andrent and rates rising by £5.2m, of which £4.2m of the former and £2.1m of thelatter related to depots opened in 2006 and increased costs of depots opened in2005. Operating profit before exceptional items rose by £9.2m to £132.6m. Business developments As planned, 40 new depots were opened during 2006, nationwide, bringing thetotal number to 382 at the end of the year. In addition, one existing depot wasrelocated and 11 were extended. A more extensive range of doors was introduced during the autumn, which wasshowcased in a new joinery catalogue, and the introduction of a range of Boschcooking appliances has been completed. The business also introduced a range of'Inclusive' kitchens for people with specific physical needs, at the beginningof 2007. To help builders who may be unfamiliar with such kitchens, an assemblyand installation guide has also been produced. SUPPLY Supply primarily sources products for Howden Joinery. The products are eithermanufactured, in the case of kitchen cabinets and worktops, or sourced fromthird parties by Supply. As part of the transitional arrangements following thedisposal of Hygena Cuisines and MFI, Supply also sources product for thesebusinesses on an interim basis. External turnover of Supply was £50.8m (2005: £3.1m), reflecting sales to MFIand Hygena Cuisines since their disposal. The net cost of Supply before exceptional items decreased to £39.6m in 2006(2005: £48.8m). This reflected the move from manufacturing to buying-in fasciasand own-brand appliances that was instigated in the first half of 2006 as partof the drive to bring a new commercial focus to Supply and the benefit of theresulting lower cost of these products. TRANSITIONAL ARRANGEMENTS WITH MFI The transitional arrangements agreed as part of the disposal of MFI, includingthe supply of goods, are proceeding satisfactorily. We continue to be focused on the development of an efficient, cost-effective andappropriately scaled business that provides critical support to Howden Joinery.The transition away from MFI will remove a large degree of the complexity thatcurrently exists within the Group. Corporate The cost of what is now the corporate centre was broadly unchanged, except forthe IFRS charge for share plans. As a result, the cost of Corporate beforeexceptional items was £24.2m (2005: £18.0m). CURRENT TRADING AND OUTLOOK-------------------------------------------------------------------------------- In the first two periods of 2007, Howden Joinery continued to trade well, inline with our expectations. Sales increased by 8.2% compared with thecomparative period last year, 4.4% up on a same depot basis. Gross margin wassimilar to that seen in 2006. The trend from 'do it yourself' to 'done for you' continues to be reflected inthe favourable market conditions that Howden Joinery is experiencing. Thepositive effect of the maturing of depots opened since around 2000 will beconstrained by the planned opening of around 60 new depots. There is also arelatively low number of depots going through the rapid growth that is typicallyseen in years 3 and 4 of a depots life. Supply should see the full-year benefit of the move to greater outsourcing in2006, although its overall performance will be strongly influenced by the levelof demand from its contract to supply MFI. Consolidated income statement 53 weeks to 30 December 2006 52 weeks to 24 December 2005 Before Exceptional Before exceptional items exceptional Exceptional items (note 3 & 5) Total items items Total Notes £m £m £m £m £m £m------------------------------------- ----- ------- ------- ------- ------- ------- -------Continuing operations:Revenue 733.0 - 733.0 621.8 - 621.8Cost of sales (370.5) (12.8) (383.3) (299.3) (34.0) (333.3)------------------------------------- ----- ------- ------- ------- ------- ------- -------Gross profit 362.5 (12.8) 349.7 322.5 (34.0) 288.5Other operating expenses - (14.5) (14.5) - (0.2) (0.2)Selling & distribution costs (241.6) (12.7) (254.3) (210.9) (16.8) (227.7)Administrative expenses (56.2) 7.8 (48.4) (58.1) 38.3 (19.8)Share of joint venture profits 1.0 - 1.0 0.6 - 0.6------------------------------------- ----- ------- ------- ------- ------- ------- -------Operating profit 65.7 (32.2) 33.5 54.1 (12.7) 41.4Finance income 3.5 - 3.5 3.9 - 3.9Finance expense (7.0) - (7.0) (6.3) - (6.3)Other finance charges - pensions (5.0) - (5.0) (9.2) - (9.2)------------------------------------- ----- ------- ------- ------- ------- ------- -------Profit before tax 57.2 (32.2) 25.0 42.5 (12.7) 29.8Tax on profit 4 (20.9) 2.0 (18.9) (14.6) (8.9) (23.5)------------------------------------- ----- ------- ------- ------- ------- ------- -------Profit after tax from continuingoperations 36.3 (30.2) 6.1 27.9 (21.6) 6.3 Discontinued operations:Loss before tax 5 (44.8) (134.8) (179.6) (67.4) (77.0) (144.4)Tax on loss 5 5.1 (2.3) 2.8 10.6 2.1 12.7------------------------------------- ----- ------- ------- ------- ------- ------- -------Loss after tax from discontinuedoperations 5 (39.7) (137.1) (176.8) (56.8) (74.9) (131.7)------------------------------------- ----- ------- ------- ------- ------- ------- ------- ===================================== ===== ======= ======= ======= ======= ======= =======Loss for the period (3.4) (167.3) (170.7) (28.9) (96.5) (125.4)===================================== ===== ======= ======= ======= ======= ======= ======= Earnings per share:From continuing operationsBasic earnings per 10p share 1.0p 1.1pDiluted earning per 10p share 1.0p 1.1p From continuing and discontinued operationsBasic earnings per 10p share (28.7)p (21.3)pDiluted earnings per 10p share (28.7)p (21.3)p Consolidated balance sheet As at As at 30 December 24 December 2006 2005 Notes £m £m----------------------------- ----- -------- --------Non current assetsIntangible assets 1.9 4.2Property, plant and equipment 97.1 247.5Investments 9.7 8.8Deferred tax asset 60.6 96.7----------------------------- ----- -------- -------- 169.3 357.2----------------------------- ----- -------- --------Current assetsInventories 126.1 173.5Trade and other receivables 102.4 134.5Other assets 3.1 5.5Cash at bank and in hand 53.2 89.0----------------------------- ----- -------- -------- 284.8 402.5----------------------------- ----- -------- -------- ----------------------------- ----- -------- --------Total assets 454.1 759.7----------------------------- ----- -------- -------- Current liabilitiesTrade and other payables (249.6) (259.0) Non current liabilitiesBorrowings (58.2) (150.0)Other payables due in more than one year (10.8) -Pension liability (189.2) (297.1)Provisions 8 (23.8) (12.4)----------------------------- ----- -------- -------- (282.0) (459.5)----------------------------- ----- -------- -------- ----------------------------- ----- -------- --------Total liabilities (531.6) (718.5)----------------------------- ----- -------- -------- ----------------------------- ----- -------- --------Net (liabilities)/assets (77.5) 41.2============================= ===== ======== ======== EquityCalled up share capital 63.2 62.7Share premium account 83.7 81.3ESOP reserve (43.2) (48.6)Other reserves 28.1 28.1Retained earnings (209.3) (82.3)----------------------------- ----- -------- --------Total equity (77.5) 41.2============================= ===== ======== ======== Consolidated cash flow statement 53 weeks to 52 weeks to 30 December 24 December 2006 2005 Notes £m £m-------------------------------------- ----- ------------ -----------Net cash flows from operatingactivities 10 70.0 19.6 Cash flows from investing activitiesInterest received 3.5 4.1Sale of subsidiary undertaking 5 (2.1) -Payments to acquire property, plantand equipment and intangible assets (30.3) (47.9)Investment in joint ventures - (1.2)Receipts from sale of property, plantand equipment and intangible assets 12.0 57.4-------------------------------------- ----- ------------ -----------Net cash (used in)/from investingactivities (16.9) 12.4-------------------------------------- ----- ------------ -----------Cash flows from financing activitiesInterest paid (6.3) (6.4)Receipts from issue of share capital 2.9 3.7Receipts from release of shares fromshare trust 1.6 1.0(Decrease)/increase in loans (89.6) 50.0Decrease in other assets 2.4 3.9Dividends paid to Group shareholders - (23.4)-------------------------------------- ----- ------------ -----------Net cash (used in)/from financingactivities (89.0) 28.8-------------------------------------- ----- ------------ -----------Net (decrease)/increase in cash andcash equivalents (35.9) 60.8 Cash and cash equivalents atbeginning of period 89.0 28.4Currency translation differences 0.1 (0.2)-------------------------------------- ----- ------------ -----------Cash and cash equivalents at end ofperiod 10 53.2 89.0====================================== ===== ============ =========== For the purposes of the cash flow statement, cash and cash equivalents areincluded net of overdrafts payable on demand. These overdrafts are excluded fromthe definition of cash and cash equivalents disclosed on the balance sheet. Cash flows from discontinued operations are detailed in Note 5. Consolidated statement of recognised income and expense 53 weeks to 52 weeks to 30 December 24 December 2006 2005 £m £m-------------------------------------- ------------ -----------Actuarial gains/(losses) on definedbenefit schemes 64.2 (43.7)Deferred tax on actuarial gain/(loss)on pension schemes (19.2) 13.1Currency translation differences (0.3) 0.1Revaluation reserve - 8.2Impact of adoption of IAS 39 - (0.9)-------------------------------------- ------------ -----------Net income/(loss) recognised directlyin equity 44.7 (23.2)Loss for the financial period (170.7) (125.4)-------------------------------------- ------------ -----------Total recognised income and expensefor the period (126.0) (148.6)====================================== ===== ============ =========== Notes to the Preliminary Results for the 53 weeks ended 30 December 2006 1. Basis of preparation The Group's accounting period covers the 53 week period to 30 December 2006. Thecomparative period covered the 52 weeks to 24 December 2005. The financial information set out in this announcement does not constitute thestatutory accounts for the Group within the meaning of Section 240 of theCompanies Act 1985. The statutory accounts for the 52 weeks to 24 December 2005,which were prepared under UK GAAP, have been filed with the Registrar ofCompanies. The statutory accounts for the 53 weeks ended 30 December 2006 willbe filed in due course. The auditors' reports on these accounts were unqualifiedand did not contain any statement under sections 237(2) or (3) of the CompaniesAct 1985. The preliminary results for the 53 weeks to 30 December 2006 have been preparedin accordance with the International Financial Reporting Standards (IFRS)adopted for use in the European Union and International Financial ReportingInterpretations Committee interpretations and with those parts of the CompaniesAct 1985 mandatory for companies with our accounting reference date reportingunder IFRS. The Group is complying with IFRS for the first time for the 53 week period ended30 December 2006. This preliminary results announcement has been has prepared onthe basis of the Group's accounting policies set out in appendix 1. 2. Segmental analysis The following information relates to continuing operations only. The results fordiscontinued operations are shown in note 5. The following tables show the segmental analysis of turnover and operatingprofit by business segment. This is based on the commercial and legal structureof the Group, in which Howden Joinery, Supply and Corporate are separateentities. a) External revenue 53 weeks 52 weeks to 30 Dec to 24 Dec 2006 2005 £m £mBusiness segmentsHowden Joinery 676.3 617.8Supply 50.8 3.1Other 5.9 0.9------------- --------- ---------Group revenue 733.0 621.8------------- --------- --------- Supply's revenue in 2006 includes revenue from MFI Retail and Hygena Cuisines sincetheir disposal. b) Operating profit/(loss) Before exceptional Exceptional items After exceptional items items 53 weeks 52 weeks 53 weeks 52 weeks 53 weeks 52 weeks to 30 Dec to 24 Dec to 30 Dec to 24 Dec to 30 Dec to 24 Dec 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £mBusiness segmentsHowden Joinery 132.6 123.4 - - 132.6 123.4Supply (39.6) (48.8) (42.5) - (82.1) (48.8)Corporate (24.2) (18.0) 10.3 (12.7) (13.9) (30.7)Other (4.1) (3.1) - - (4.1) (3.1)Share of jointventure 1.0 0.6 - - 1.0 0.6-------------- --------- --------- --------- --------- --------- ---------Groupoperatingprofit/(loss) 65.7 54.1 (32.2) (12.7) 33.5 41.4------------- --------- --------- --------- --------- --------- --------- 3. Exceptional items - continuing operations Exceptional items related to continuing operations charged to operating profitin the 53 weeks to 30 December 2006 are analysed as follows: Other Selling and Cost of operating distribution Administration sales income costs expenses Total £m £m £m £m £m Restructuring (a) - - - (30.2) (30.2)Factoryclosures (b) (6.8) (17.0) (12.7) - (36.5)Retirementbenefitexceptionalgain - - - 38.0 38.0Exceptionalinventoryprovision (6.0) - - - (6.0)Other profiton disposal - 2.5 - - 2.5 -------- ------- -------- --------- ------Total chargedto operatingprofit (12.8) (14.5) (12.7) 7.8 (32.2) -------- ------- -------- ---------Tax credit onexceptionalitems 2.0 ------Netexceptionalitems (30.2) ====== (a) Restructuring As announced in our 2005 Preliminary Results statement, released on 28 February2006, the Group intended to reorganise into three distinct trading businesses.This process was completed before the disposal of MFI Retail. The costs of restructuring comprise the following items: £mBusiness separation (18.8)Redundancy costs (5.4)Property costs (2.9)Refinancing costs (3.1) ------Total restructuring costs before tax (30.2)Tax credit on restructuring costs 8.2 ------Total restructuring costs after tax (22.0) ====== (b) Factory closures In the same statement, the Group announced the closure of two of its factoriesat Stockton and Scunthorpe. These closures were completed in 2006. The costs of closure comprise the following items: £mRedundancy costs (9.8)Inventories write-offs (6.8)Loss on disposal of assets (17.0)Other costs of exit (2.9) --------Total factory closure costs before tax (36.5)Tax credit on factory closure costs 5.2 --------Total factory closure costs after tax (31.3) ======== The tax credit associated with the exceptional costs is lower than 30% as somecosts are not tax deductible. (c) Retirement benefit exceptional gain During 2006, the Group's defined benefit retirement benefit plan was altered sothat the benefits payable were changed from a final salary basis to a careeraverage revalued basis. The change gave rise to a reduction in the past serviceliability in respect of active members, which has been treated as an exceptionalgain during the year, as set out in IAS 19 "Employee Benefits". The amount of the gain was £38.0m, on which £11.4m of deferred tax has beenprovided. 4. Tax The effective rate of tax for pre-exceptional continuing activities reflects thehigh level of disallowable depreciation on assets not qualifying for capitalallowances. It is expected that the Group's effective rate of tax for continuing operationswill be around 35% for 2007. The losses associated with discontinued activities mostly relate to losses ondisposal of the MFI retail business. No capital losses are available on thistransaction. 5. Discontinued operations Exceptional items Exceptional items relating to discontinued operations in the 53 weeks to 30December 2006 are analysed as follows: Before tax Tax After tax £m £m £m Loss on sale of MFI Retail (155.7) (5.9) (161.6)Exceptional provision on disposal of MFI Retail (31.7) - (31.7) -------- ------- -------- (187.4) (5.9) (193.3)Profit on sale of Hygena Cuisines SA 62.5 - 62.5Profit on sale of Sofa Workshop Limited 0.2 - 0.2Closure of Sofa Workshop Direct (9.4) 1.8 (7.6)Restructuring 0.2 1.8 2.0Other profit and loss on disposal (0.9) - (0.9) -------- ------- --------Total discontinued exceptional items (134.8) (2.3) (137.1) ======== ======= ======== (a) Sale of Retail On October 18 2006, the Group completed the sale of MFI Retail to MEP MayflowerLimited. A loss arose on this disposal of £155.7m, with associated provisions of£31.7m. An analysis of the disposal is shown below. Net assets disposed of: £m £mProperty plant and Cash paid (75.8)equipment 77.9 Cash sold with business (3.1)Inventories 36.4 -------Cash 3.1 Net cash flow on disposal (78.9)Receivables 60.8 =======Payables and provisions (161.9) -------Total net assets 16.3 £mLoss on disposal (155.7) -------Amounts paid and payable ondisposal (139.4) Loss on disposal (155.7) ======= Exceptional provision on disposal (31.7) --------Amounts paid and payable on Total costs recognised on disposal: disposal (187.4) ========Cash paid to purchaser, andfees of disposal paid (75.8)Accrued expenses of disposal (1.3)Deferred consideration (62.3) -------- (139.4) ======== (b) Sale of Hygena Cuisines SA On 14 February 2006, the Group completed the sale of its French retail business,Hygena Cuisines SA, to Nobia AB for total gross cash proceeds (before expenses)of €135m (approximately £92m). A profit arose on the disposal of £62.5m. An analysis of the disposal is shown below: Net assets and proceeds £m Cash flow £mFixed assets 29.8 Cash received (net of expenses) 87.9Inventories 12.7 Cash sold with business (13.3) ------Receivables 5.5 Net cash flow on disposal 74.6 ======Payables (35.9) ------Total net assets 12.1Profit on disposal 62.5 ------Net proceeds 74.6 ====== Substantial shareholding exemption was obtained from HM Revenue & Customs beforethe disposal, resulting in no tax being payable on the sale of the company. (c) Sale of Sofa Workshop Ltd As announced on 5 October 2006, the Group announced that it had completed thesale of Sofa Workshop Limited to New Heights Limited for gross cash proceeds(before expenses) of £1.8m. A profit arose on the disposal of £0.2m. An analysis of the disposal is shown below. Net assets and proceeds £m Cash flow £mProperty, plant and equipment 1.9 Cash received (net of expenses) 0.2Inventories 1.8 Cash sold with business (1.0) ------Receivables 2.6 Net cash flow on disposal (0.8) ======Payables (7.3) ------Total net assets (1.0)Profit on disposal 0.2 ------Net proceeds (0.8) ====== (d) Closure of Sofa Workshop Direct factory The Group's sofa manufacturing facility at Llantrisant in South Wales ceasedproduction on 22 August 2006 and the factory was decommissioned at the end ofNovember. The costs associated with the closure are shown below. £mRedundancy costs (1.6)Inventory (2.3)Property, plant and equipment (3.3)Other costs of exit (2.2) -------Total factory closure costs before tax (9.4)Tax credit on factory closure costs 1.8 -------Total factory closure costs after tax (7.6) ======= (e) Restructuring As announced in our 2005 Preliminary Results statement, released on 28 February2006, the Group undertook a review of the store portfolio prior to the disposalof the MFI Retail business. Between the start of the period and the disposal,MFI Retail had ceased trading in 13 locations and three regional home deliverycentres had closed. The restructuring comprised the following items. £mRedundancies (3.8)Other restructuring costs (2.2)Profit on disposal of properties 6.2 -------Total restructuring before tax 0.2Tax credit on restructuring costs 1.8 -------Total restructuring after tax 2.0 ======= Results and cash flow The results, which have been included in the consolidated income statement, andcash flow of the discontinued operations for 2006 were as follows: Hygena Sofa Workshop Sofa Workshop MFI Cuisines Direct Ltd Retail Total £m £m £m £m £mOperating loss:Revenue 11.1 0.7 15.9 519.1 546.8Cost of sales (6.2) (6.3) (8.8) (248.5) (269.8) ------- ------- ------- ------- -------Gross profit 4.9 (5.6) 7.1 270.6 277.0Expenses (9.5) (0.1) (9.0) (303.2) (321.8) ------- ------- ------- ------- -------Loss before tax (4.6) (5.7) (1.9) (32.6) (44.8)Attributabletax - - (3.6) 8.7 5.1(charge)/credit ------- ------- ------- ------- ------ Loss after tax (4.6) (5.7) (5.5) (23.9) (39.7) Exceptional items:Exceptionalitems beforetax (134.8)Attributabletax credit (2.3) -------Net lossattributabletodiscontinuedoperations (176.8) ------- Cash flows:Contributionto Group netoperating cashflows (10.7) (2.1) (2.8) (51.9) (67.5)Payments inrespect ofinvestingactivities - (0.3) - (13.0) (13.3) 6. Earnings per share 53 weeks to 30 December 2006 52 weeks to 24 December 2006 --------------------------------- ---------------------------------- Weighted Weighted average average number Earnings per number Earnings Earnings of shares share Earnings of shares per share £m m p £m m p----------------------------- -------- -------- ------- -------- ------- -------Earnings per shareFrom continuing operations:Basic earnings per share 6.1 594.4 1.0 6.3 588.4 1.1Effect of dilutive shareoptions - 7.2 - - 11.4 ------------------------------ -------- -------- ------- -------- ------- -------Diluted earnings per share 6.1 601.6 1.0 6.3 599.8 1.1----------------------------- -------- -------- ------- -------- ------- -------From discontinued operations:Basic earnings per share (176.8) 594.4 (29.7) (131.7) 588.4 (22.4)Effect of dilutive share options - - - - - ----------------------------- -------- -------- ------- -------- ------- -------Diluted earnings per share (176.8) 594.4 (29.7) (131.7) 588.4 (22.4)---------------------------- -------- -------- ------- -------- ------- -------From continuing anddiscontinued operations:Basic earnings per share (170.7) 594.4 (28.7) (125.4) 588.4 (21.3)Effect of dilutive share options - - - - - ----------------------------- -------- -------- ------- -------- ------- -------Diluted earnings per share (170.7) 594.4 (28.7) (125.4) 588.4 (21.3)---------------------------- -------- -------- ------- -------- ------- ------- In accordance with IAS 33 "Earnings per share", potential ordinary shares areonly treated as dilutive if their conversion to ordinary shares would decreaseearnings per share or increase loss per share. Therefore, where there is a loss,no adjustment is made in respect of potential ordinary shares, and dilutedearnings per share is equal to basic earnings per share. 7. Dividends Amounts recognised as distributions to equity holders in the period 53 weeks to 30 52 weeks to 24 December 2006 December 2005 £m £mFinal dividend for the 52 weeks to 24 December 2005 - nil (52weeks to 25 December 2004 - 2.0p per share) - 11.6Interim dividend for the 53 weeks to 30 December 2006 - nil (52weeks to 24 December 2005 - 2.0p per share) - 11.8 ----------- ----------- - 23.4 =========== ===========No final dividend for 2006 will be paid (2005: nil). 8. Provisions Deferred tax Property liability provision Total £m £m £m At 25 December 2005 11.2 1.2 12.4Additional provision inthe period 0.3 18.6 18.9Transferred on disposalof subsidiary (1.8) - (1.8)Utilisation of provision (5.7) - (5.7) --------- --------- ---------At 30 December 2006 4.0 19.8 23.8 ========= ========= ========= The property provision covers onerous leases. For any such leases, the Groupprovides for any shortfall between rent payable and rent receivable on anynon-trading leased properties. The provision is based on the period until theend of the lease, or until the Group can cover the shortfall by subletting,assigning or surrendering the lease. None of the provisions are short term. 9. Reconciliation of movement in reserves Called up Share share premium ESOP Other Retained capital account reserve reserves earnings Total £m £m £m £m £m £m------------------------------- ------- ------- ------- ------- ------- ------As at 26 December 2004 62.3 77.2 (49.1) 28.1 98.8 217.3Net actuarial loss on definedbenefit scheme - - - - (30.6) (30.6)Foreign exchange - - - - 0.1 0.1Accumulated loss for the period - - - - (125.4) (125.4)Issue of new shares 0.4 4.1 - - (1.8) 2.7Net movement in ESOP - - 0.5 - - 0.5Dividends declared and paid - - - - (23.4) (23.4) ------- ------- ------- ------- ------- ------As at 24 December 2005 62.7 81.3 (48.6) 28.1 (82.3) 41.2First time adoption of IAS 32 and 39 - - - - (0.9) (0.9) ------- ------- ------- ------- ------- ------Opening equity at 24 December2005, restated 62.7 81.3 (48.6) 28.1 (83.2) 40.3Net actuarial gain on definedbenefit scheme (net of tax) - - - - 44.9 44.9Foreign exchange - - - - (0.3) (0.3)Accumulated loss for the period - - - - (170.7) (170.7)Issue of new shares 0.5 2.4 - - - 2.9Net movement in ESOP - - 5.4 - - 5.4 ------- ------- ------- ------- ------- ------At 30 December 2006 63.2 83.7 (43.2) 28.1 (209.3) (77.5) ======= ======= ======= ======= ======= ====== 10. Notes to the cash flow statement (a) Net cash flows from operating activities 53 weeks to 52 weeks to 30 December 24 December 2006 2005 £m £m----------------------------------------------- --------- ---------Group operating profit - continuing operations 33.5 41.4Group operating loss - discontinued operations (note 5) (179.6) (144.4)----------------------------------------------- --------- ---------Group operating loss (146.1) (103.0) Adjustments for:Depreciation and amortisation 40.9 65.4Share based payments charge/(credit) 3.8 (1.0)Share of joint venture (profits)/losses (1.0) 1.5Loss/(profit) on disposal of property, plant and equipment and intangible assets 14.5 (17.4)Other exceptional items (before tax) 152.5 128.2----------------------------------------------- --------- ---------Operating cash flows before movements in working capital 64.6 73.7 Movements in working capital(Increase)/decrease in stock (18.6) 21.3(Increase)/decrease in trade and other receivables (59.6) 43.7Increase/(decrease) in trade and other payables 115.4 (91.4)Difference between pensions operating charge and cash paid (10.7) (5.1)HMRC refund re structural guarantee 21.8 -Net cash flow - exceptional items (44.5) (19.2)----------------------------------------------- --------- --------- 3.8 (50.7)----------------------------------------------- --------- ---------Cash generated from operations 68.4 23.0Tax recovered/(paid) 1.6 (3.4)----------------------------------------------- --------- ---------Net cash flows from operating activities 70.0 19.6----------------------------------------------- --------- ---------Net cash flow from operating activities comprises:Continuing operating activities 154.5 60.2Discontinued operating activities (84.5) (40.6)----------------------------------------------- --------- --------- 70.0 19.6----------------------------------------------- --------- --------- b) Reconciliation of net debt 30 December 24 December 2006 2005 £m £m----------------------------------------------- --------- ---------Net debt at start of period (55.5) (62.2)Net (decrease)/increase in cash and cashequivalents (35.9) 56.9Increase in investments (2.4) -Decrease/(increase) in debt financing 89.6 (50.0)Currency translation differences 0.1 (0.2)----------------------------------------------- --------- ---------Net debt at end of period (4.1) (55.5)----------------------------------------------- --------- ---------Represented by :Cash and cash equivalents 53.2 89.0Investments 3.1 5.5Borrowings (60.4) (150.0)----------------------------------------------- --------- --------- (4.1) (55.5)----------------------------------------------- --------- --------- c) Analysis of net funds Cash and cash Current asset Bank loans Net borrowings equivalents investments £m £m £m £mAs at 24December 2005 89.0 5.5 (150.0) (55.5)Cash flow (35.9) (2.4) 89.6 51.3Exchangedifference 0.1 - - 0.1 --------- --------- --------- ---------As at 30December 2006 53.2 3.1 (60.4) (4.1) ========= ========= ========= =========Analysed as:Short-term 53.2 3.1 (2.2) 54.1Long-term - - (58.2) (58.2) 11. Contingent liabilities (a) Relating to the disposal of the UK Retail operations As disclosed at the time of the transaction with MEP Mayflower Limited ("MEP"),the Group is the ultimate guarantor on leases in relation to 56 properties whichare occupied by the MFI Retail operations. If MEP suffers financial distress anddefaults on its obligations under the relevant leases the Group's guarantees aretriggered. For the year ended 25 December 2005 the net rentals payable by theGroup in respect of these properties totalled £15.8m. Remaining lease termsrange between 6 months and 15 years from 30 December 2006. The Group is not aware of any signs which indicate that the purchaser is infinancial distress. There is uncertainty whether the purchaser will ever sufferfinancial distress and thereby trigger the guarantee, and as to whether therewould be any actual net liability if the Group ever did have to meet the leaseobligations, given that the Group could mitigate any liabilities by surrenderingor assigning the leases, or by subletting them to third parties. Because of the nature of the uncertainties, as described above, the Group isunable to give an estimate of the financial effect of this contingent liability. The Group is also exposed to potential costs in respect of certain warrantiesand indemnities in relation to the disposal agreement in favour of thepurchaser. The Group has made such provision as is considered necessary in thisrespect. (b) Other guarantees The Group has guaranteed a US$ 10.0m (2005: US$ 10.0m) letter of credit facilityfrom Standard Chartered Bank in favour of MFI Asia Limited's suppliers. Thiscontingency would only trigger in the event that MFI Asia Limited fails tohonour its obligations under the terms of the facility. Members of the Group have assigned UK property leases in the normal course ofbusiness. Should the assignees fail to fulfil any obligations in respect ofthese leases, members of the Group will be liable for those defaults. The numberof claims arising to date has been small and the cost, which is charged toincome as it arises, has not been material. There is a Group VAT registration cross-guarantee under which if one Groupcompany fails to pay its VAT then the other Group companies are jointly andseverally liable. The amount outstanding on this guarantee at the period end is£19.0m (2005: £19.0m). (c) Other Aon have made a claim of £11.5m against the Group in respect of termination ofan extended warranty agreement. On the basis of information available, the Grouphas been advised that there is little merit in the claim. APPENDIX 1 SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The Group's accounting period covers the 53 weeks to 30 December 2006. Thecomparative period covered the 52 weeks ended 24 December 2005. Statement of compliance and basis of accounting The Group's financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRSs") for the first time in thecurrent period. The financial statements have been prepared in accordance withthe IFRSs adopted for use in the European Union and International FinancialReporting Interpretations Committee ("IFRIC") interpretations and with thoseparts of the Companies Act 1985 applicable to companies reporting under IFRS.They therefore comply with Article 4 of the EU IAS Regulation. These are the Group's first consolidated financial statements prepared underIFRS and therefore IFRS1 "First time adoption of International FinancialReporting Standards" has been applied. The last consolidated financialstatements under UK GAAP were for the 52 weeks to 24 December 2005. The Group has elected to apply the exemption available within IFRS 1 thatpermits the hedge accounting applied under the previous GAAP to be used as acomparative for IAS 39 "Financial Instruments: Recognition and Measurement".Hence the change in the accounting policy has had no impact on the results orthe financial position of the prior period. The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of financial instruments. The principal accounting policiesare set out below. At the date of authorisation of these financial statements, the followingstandards and interpretations, which have not been applied in these financialstatements, were in issue but not yet effective: IFRS 6 "Exploration for and Evaluation of Mineral Resources" IFRS 7 "Financial Instruments: Disclosures", and the relevant amendment to IAS 1on capital disclosures IFRIC 4 "Determining whether an arrangement contains a lease" IFRIC 5 "Rights to Interests Arising from Decommissioning, Restoration, andEnvironmental Rehabilitation Funds" IFRIC 6 "Liabilities arising from Participating in a specific market - WasteElectrical and Electronic Equipment" IFRIC 7 "Applying the Restatement Approach under IAS 29 Financial Reporting inHyperinflationary Economies" IFRIC 8 "Scope of IFRS 2" IFRIC 9 "Reassessment of Embedded Derivatives" IFRIC 10 "Interim reporting and impairments" IFRIC 11 "IFRS2 - Group and Treasury Share transactions" The directors anticipate that the adoption of these standards andinterpretations in future periods will have no material impact on the Group'sfinancial statements except for the additional disclosures on capital andfinancial instruments when the relevant standards come into effect for periodscommencing on or after 1 January 2007. Basis of consolidation Subsidiaries Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies so as to obtain benefits from its activities.Subsidiaries are fully consolidated from the date on which control istransferred until the date that control ceases. The purchase method of accounting is used to account for acquisition ofsubsidiaries by the Group. Intercompany transactions, balances and unrealised gains on transactions betweenGroup companies are eliminated. Joint Ventures Joint ventures are accounted for in the financial statements of the Group underthe equity method of accounting. Any losses in joint ventures in excess of theGroup's interest in those joint ventures are not recognised. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. Thecost of the acquisition is measured at the aggregate of fair values, at the dateof exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquired company,plus any costs directly attributable to the business combination. The acquiredcompany's identifiable assets, liabilities and contingent liabilities that meetthe conditions for recognition under IFRS 3 are recognised at their fair valuesat the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measuredat cost, being the excess of the cost of the business combination over theGroup's interest in the net fair value of the identifiable assets, liabilitiesand contingent liabilities recognised. If after reassessment, the Group'sinterest in the net fair value of the acquired identifiable assets, liabilitiesand contingent liabilities exceeds the cost of the business combination, theexcess is immediately recognised in the income statement. Foreign currencies Foreign currency transactions Transactions in foreign currency are translated at the foreign exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated atthe exchange rate ruling at the date. Foreign exchange gains and losses arerecognised in the income statement. Foreign operations The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated into sterling atforeign exchange rates ruling at the balance sheet date. The results and cashflows of overseas subsidiaries and the results of joint ventures are translatedinto sterling on an average exchange rate basis, weighted by the actual resultsof each month. Exchange differences arising from the translation of the results and net assetsof overseas subsidiaries are taken to equity via the statement of recognisedincome and expense. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services, based ondespatch of goods or services provided to customers outside the Group, excludingsales taxes and discounts. Interest income is recognised in the income statementas it accrues, using the effective interest method. Dividend income frominvestments is recognised when the right to receive payment has beenestablished. Exceptional items Certain items do not reflect the Group's underlying trading performance and, dueto their significance in terms of size or nature, have been classified asexceptional. The gains and losses on these discrete items, such as profits ondisposal of property interests, reorganisation costs and other non-operatingitems can have a material impact on the absolute amount of and trend in profitfrom operations and the result for the period. Therefore any gains and losses onsuch items are analysed as exceptional on the face of the income statement. Tax The tax expense represents the sum of the taxation currently payable anddeferred taxation. The tax currently payable is based on taxable profit for the financial period.Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible inother financial years and it further excludes items that are never taxable ordeductible. The Group's liability for current tax is calculated using tax ratesthat have been enacted or substantively enacted by the balance sheet date. Additional income taxes that arise from the distribution of dividends arerecognised at the same time as the liability to pay the related dividend. Deferred taxation Deferred taxation is provided in full using the balance sheet liability method.It is the tax expected to be payable or recoverable on the temporary differencebetween the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. The following temporarydifferences are not provided for: goodwill not deductible for tax purposes; theinitial recognition of assets and liabilities other than in a businesscombination that affect neither accounting nor taxable profit; and differencesrelating to investments in subsidiaries, to the extent that they will notreverse in the foreseeable future. The amount of deferred taxation provided isbased on the expected manner of realisation or settlement of the carrying amountof assets and liabilities, using tax rates enacted or substantively enacted atthe balance sheet date. A deferred taxation asset is recognised only to the extent that it is probablethat future taxable profits will be available against which the asset can beutilised. The carrying amounts of deferred taxation assets are reviewed at eachbalance sheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the asset tobe recovered. Deferred tax is charged or credited to the income statement except when itrelates to items charged or credited directly to equity, in which case thedeferred tax is also dealt with in equity. Leased assets Payments made under operating leases are recognised in the income statement on astraight-line basis over the term of the lease. Benefits received as anincentive to sign a lease, whatever form they may take, are credited to theincome statement on a straight-line basis over the lease term. Investments Investments are stated at cost less any provision for impairment. Intangible assets - software Where computer software is not an integral part of a related item of computerhardware, the software is classified as an intangible asset. The capitalisedcosts of software for internal use include external direct costs of materialsand services consumed in developing or obtaining the software and payroll andpayroll-related costs for employees who are directly associated with and whodevote substantial time to the project. Capitalisation of these costs ceases nolater than the point at which the software is substantially complete and readyfor its intended internal use. These costs are amortised over their expecteduseful lives, which are reviewed annually. The expected useful life is fouryears. Property, plant and equipment The Group has adopted the transitional provisions of IFRS1 to use previousrevaluations of freehold properties as the new deemed cost at the date oftransition to IFRSs. All property, plant and equipment is stated at cost (or deemed cost, asapplicable) less accumulated depreciation, and less any provision forimpairment. Depreciation of property, plant and equipment is provided to write off thedifference between the cost, excluding freehold land, and their residual valueover their estimated lives on a straight-line basis. The current range of usefullives is as follows: Freehold property 50 yearsLong leasehold property over period of leaseShort leasehold property over period of leaseFixture and fittings 2-10 yearsPlant and machinery 3-10 years Residual values, remaining useful economic lives and depreciation periods andmethods are reviewed annually and adjusted if appropriate Gains and losses on disposals are determined by comparing proceeds with carryingamount. These are included in the income statement. Impairment of assets The carrying amount of the Group's assets is reviewed at each balance sheet dateto determine whether there is an indication of impairment. If such an indicationexists, the asset's recoverable amount is estimated. For goodwill assets that have an indefinite life and intangible assets not yetavailable for use, the recoverable amounts are estimated at each balance sheetdate. An impairment loss is recognised for the amount by which the asset's carryingamount exceeds its recoverable amount. Impairment losses are recognised in theincome statement. Inventories Inventories are stated at the lower of cost and net realisable value. Costincludes an attributable proportion of manufacturing overheads based on budgetedlevels of activity. Cost is calculated using a standard cost which is regularlyupdated to reflect average actual costs. Provision is made for obsolete,slow-moving or defective items where appropriate. Non current assets held for sale Non current assets (and disposal groups) classified as held for sale aremeasured at the lower of fair value, less costs to sell, and carrying amount. Impairment losses on initial classification as held for sale are included in theincome statement. Gains or losses on subsequent re-measurements are alsoincluded in the income statement. Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the directors' best estimate of theexpenditure required to settle the obligation at the balance sheet date, and arediscounted to present value where the effect is material. Pensions Payments to defined contribution retirement benefit schemes are charged to theincome statement as they fall due. The Group operates two defined benefit pension schemes. The Group's netobligation in respect of the defined benefit pension schemes is calculated byestimating the amount of future benefit that employees have earned in return fortheir service in the current and prior periods; that benefit is discounted todetermine its present value and the fair value of any scheme assets is deducted.The discount rate is the yield at the balance sheet date on AA rated bonds thathave maturity dates approximating to the terms of the Group's obligations. Thecalculation is performed by a qualified actuary using the projected unit method.Scheme assets are valued at bid price. Current and past service costs are recognised in operating profit and netfinancing costs include interest on pension scheme liabilities and expectedreturn on assets. All actuarial gains and losses as at 25 December 2004, the date of transition toIFRSs, were recognised. Actuarial gains and losses that arise subsequent to 25December 2004 in calculating the Group's obligation in respect of a scheme arerecognised immediately in reserves and reported in the statement of recognisedincome and expense. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue, as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and othershort term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the income statement using effective interest method and areadded to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Adoption of IAS 32 and IAS 39 As permitted by IFRS 1, the Group has elected to apply IAS 32 'FinancialInstruments: Disclosure and Presentation' and IAS 39 'Financial Instruments:Recognition and Measurement' prospectively from 25 December 2005. Consequently,the relevant comparative information for the 52 weeks ended 24 December 2005does not reflect the impact of these standards. Derivative financial instruments The Group does not currently use derivative financial instruments to reduce itsexposure to interest or exchange rate movements. The Group does not hold orissue derivatives for speculative or trading purposes. Under UK GAAP, as usedfor the 2005 comparatives, such derivative contracts are not recognised asassets and liabilities on the balance sheet and gains and losses arising on themare not recognised until the hedged item is itself recognised in the financialstatements. From 25 December 2005 onwards, derivative financial instruments are recognisedas assets and liabilities measured at their fair values at the balance sheetdate. Changes in their fair values are recognised in the income statement andthis is likely to cause volatility in situations where the carrying value of thehedged item is either not adjusted to reflect the fair value changes arisingfrom the hedged risk or is so adjusted but that adjustment is not recognised inthis income statement. Provided the conditions specified by IAS 39 are met,hedge accounting may be used to mitigate this income statement volatility. The Company expects that hedge accounting will not generally be applied totransactional hedging relationships, such as hedges of forecast or committedtransactions. Where the hedging relationship is classified as a cash flow hedge, to the extentthe hedge is effective, changes in the fair value of the hedging instrument willbe recognised directly in equity rather than in the income statement. When thehedged item is recognised in the financial statements, the accumulated gains andlosses recognised in equity will be either recycled to the income statement or,if the hedged item results in a non-financial asset, will be recognised asadjustments to its initial carrying amount. Share-based payments The Group has applied the requirements of IFRS 2 Share-based payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 26December 2004 The Group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of the equity-settled sharebased payments is expensed on a straight-line basis over the vesting period,based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a binomial model. The expected life used in themodel has been adjusted, based on management's best estimate, for the effects ofnon-transferability, exercise restrictions, and behavioural considerations. APPENDIX 2 FINANCIAL CALENDAR 2007 Trading update and Annual General Meeting 18 May 2007 2007 Interim results 6 September 2007 Trading update 22 November 2007 (provisional) End of financial year 29 December 2007 2008 2006 Preliminary results 6 March 2008 (provisional) 2008 Interim results 31 July 2008 (provisional) End of financial year 27 December 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Howden Joinery