24th Apr 2006 07:01
Harvey Nash Group PLC24 April 2006 Harvey Nash Group plc ("Harvey Nash" or "the Group") Harvey Nash, the global professional recruitment and outsourcing services group,announces preliminary results for the year ended 31 January 2006, ahead ofexpectations, with a particularly strong performance in the second half. Financial Highlights (Reported under IFRS) 2006 2005 ChangeTurnover £202.3m £163.4m + 24%Net Fee Income * £42.9m £38.1m + 13%Operating Profit £5.1m £4.1m + 26%Profit Before Tax £4.0m £3.2m + 26%Earnings Per Share 5.6p 3.9p + 43%Cash Flow from Operating Activities £4.9m (£2.8m) *Net Fee Income = Gross Profit (and this will apply throughout the statement) Operational Highlights • Strong organic growth in turnover and profit • Excellent growth in Europe with profits up 61% • Higher margins and increased profits in the UK and US • Continued demand for IT and Accounting professionals across all regions • Business confidence driving growth in Executive Search and Interim Management • Two major contracts secured through investment in outsourcing and offshore services Commenting on the results, the Chief Executive Officer, Albert Ellis, said: "We are delighted with the Group's financial performance for the year and inparticular the second half, which exceeded our expectations. In the UK ourunique portfolio of services has continued to deliver improved margins andprofit growth. The US business has benefited from strong market conditions andfrom the investment made earlier in the year. In Europe, our well establishedoperations have benefited from the economic recovery which has resulted insignificant increases in revenues and profits." ENQUIRIES: Harvey Nash Tel: 020 7333 2635 Albert Ellis, Chief Executive Officer Richard Ashcroft, Group Finance Director College Hill Tel: 020 7457 2020 Mark Garraway/Matthew Gregorowski A presentation of the results will take place at 09:30 this morning at theoffices of College Hill, 78 Cannon Street, London, EC4N 6HH Notes to Editors: Harvey Nash, a global professional recruitment consultancy and IT outsourcingservice provider, is committed to delivering the very best talent and ITsolutions to a broad base of clients. Its 3,000 staff and associates, operating from 28 offices covering the USA,Europe and Asia, pursue the highest levels of integrity, professionalism andquality in providing its unique portfolio of services: executive search, interimmanagement, IT and finance recruitment and IT outsourcing. For more information please visit www.harveynash.com CHAIRMAN'S STATEMENT I am pleased to report that the strong performance reported for the six monthsto 31 July 2005 continued through the second half, exceeding our expectations.The results are impressive, with increases in profit reported across allgeographic regions and strong cash generation. We continue to see robust demand for all of the Group's services. Our three yearplan, the details of which we set out in the 2005 Annual Report, is designed toleverage this opportunity and deliver better than average growth throughinvestment in headcount, infrastructure and our new outsourcing services. Thereturns from this investment programme, particularly in the US, have helpeddrive better than expected operating profits during the second half. Financial Results These results are the first set to be prepared under International FinancialReporting Standards (IFRS). The application of IFRS had no significant impact onthe Group's results for the year ended 31 January 2006 and the results for 2005have been restated in accordance with IFRS. The Group's turnover for the year ended 31 January 2006 increased by 24% to£202.3m (2005: £163.4m). Net fee income was £42.9m (£38.1m). Profit before taxincreased 26% to £4.0m (2005: £3.2m) and earnings per share increased 43% to5.6p (2005: 3.9p). Net cash generated during the year was £2.4m (2005: outflow£4.0m) after adjusting for foreign exchange differences. The Group's borrowingsreduced to £6.4m (2005: £8.8m) at the year end. The Group has renewed itsbanking facilities, converting the one year revolving credit facility into aterm loan over three years. Dividend The Board is not recommending the payment of a dividend (2005: nil) but, asstated in October last year, the Board is considering a capital re-organisationwith the aim of placing the company in a position to pay dividends in thefuture. Acquisitions The US acquisitions of the Bluesuit Consulting group (Chicago and Florida) andSnowdogs LLC (Seattle) have been a financial success and we congratulate allconcerned. Both acquisitions have performed ahead of the Board's expectationsand their integration into the US business has been successfully completed. Board and employees On the 17 October 2005 we announced the appointment to the Board of RichardAshcroft as Group Finance Director and Simon Wassall as European ManagingDirector. On behalf of the Board, I would like to thank all of the Group's employees andassociates, who have helped deliver this outstanding financial result. This yearwould not have been such a success without the ongoing commitment and dedicationof our people. Outlook Demand for our services remains robust in all of our markets. With our Europeanbusiness continuing to perform strongly and with further expected progress inour UK and US businesses, the Board is confident of continued growth in thecoming year. Ian KirkpatrickChairman Operational Review United Kingdom Profits increased by 10% to £2.4m (2005: £2.2m) on turnover broadly flat at£79.2m (2005: £79.7m). Net fee income was up 3% to £21.4m (2005: £20.7m). Ourstrategy in the UK is to focus on higher margin opportunities and so, aspreviously reported, the Group exited a low margin, high volume managed servicescontract which had associated revenues of £7m in the year to 31 January 2005.Therefore, a "like for like" comparison of turnover reflected an increase of 9%.With below trend economic growth recorded in the UK last year, this was anexcellent performance. The market was buoyant for permanent IT positions as budgets were released andnew projects created skill shortages in key areas. We also identified andbenefited from more activity in the CIO search market, with increasing levels ofpay and candidate confidence improving. Demand for IT professionals also beganto increase during the year and improved client confidence in the final quarterresulted in a higher level of renewals than in previous years. Demand for executive search and interim management has remained resilientparticularly in the Technology sector and confidence improved across the boardover the last quarter with a strong pipeline going into the new year. As westated in April 2005, headcount was re-aligned at the beginning of 2005 toreflect macro economic trends and this resulted in profit growth when comparedto the previous year. One of the Group's key differentiators in the UK is its Offshore and OutsourcingServices division. Net fee income rose 37% on the previous year as demand forthese services continues to increase. The Group has made significant investmentin this area to take advantage of the growing global trend to outsourcingoffshore. During the year the Group secured a major three-year contract (£2.7m)with one of the UK's leading finance software groups to build an offshoredevelopment centre for their software product business. Continental Europe Our European businesses delivered an outstanding result with revenues up 61% to£95.7m (2005: £59.5m), net fee income up 25% to £13.2m (2005: £10.6m) andoperating profit up 61% to £1.8m (2005: £1.1m). Demand for IT professionals has continued to improve in Europe in line with thegeneral economic recovery in the Eurozone. As business confidence has improvedrevenue from permanent placements has also increased, up 65% on the previousyear. Growth has been strong across the board. In Switzerland overall turnover was up33% with net revenue from permanent placements up 122%. Strong demand from thefinancial services sector fuelled growth in the number of IT professionals onassignment. A new office was opened in Geneva during the fourth quarter to takeadvantage of the opportunities in this attractive market, where an increasingnumber of multinationals are relocating their European headquarters. Belgium enjoyed one of the highest improvements in contribution (348%) as grossmargins were increased through pro-active management, limiting bench downtimeand focusing on permanent placements. The number of IT professionals onassignment also increased as improved business confidence ensured high renewalrates over the last quarter. In France, the Group has invested in the expansion of its service offerings onan organic basis in response to the improving outlook for employment. SpecialistIT recruitment services were introduced at the beginning of 2005 and we arepleased with the progress so far. In the Netherlands, we have continued to grow the base of strategic partnershipswhere we provide specific consulting services in relation to workforce riskmanagement with a number of the world's largest technology and financialservices groups. As part of our portfolio approach, we provide additionalpayroll services. As a result, the business was able to secure higher margin ITassignments and in some cases Executive Search work. Although this mix ofservices reduces our gross margins in the Netherlands, the result hassubstantially increased profits with little effect on working capital. In linewith the trend across Europe, revenue from permanent placements increased by50%. In Germany, overall turnover increased 14% and revenue from permanent placementsincreased by 98%. Although there has been some margin erosion with clientpurchasing becoming more structured, the number of IT professionals onassignment has grown significantly. Skills shortages in SAP and SoftwareEngineering have driven up margins and rates. Last year saw the successfulintroduction of our Outsourcing service, partnering with IBM on small to mediumsized projects. With five offices and higher levels of fee generating headcount,the Group has an excellent platform to take advantage of the positive leadeconomic indicators in Europe's largest economy. United States Turnover in our US business was £27.4m (2005: £24.4m), an increase of 14%. Netfee income improved 17% to £8.3m (2005: £7.1m), reflecting the strength of theUS market and increased margins. Operating profit was £0.8m (2005: £0.7m), up17% reflecting the benefits of the investment made earlier in the year. Market conditions in the US continue to be favourable with candidate and skillshortages positively impacting margins. The buoyant market is creating increaseddemand for IT professionals as well as accounting and finance staff. Our newExecutive Search business is profitable and further growth is anticipated as keyhires are brought on board. The West coast offices reported the highest growth rates in the US, as theTechnology sector made a strong recovery based on increased capital spending.Denver revenues were held back as a result of reduced spending by SunMicrosystems, however the Chicago market was strong and our acquisition hasachieved budget in its first year. The additional investment in our fast growingNew Jersey office has significantly boosted the Group's presence in thisimportant market. During the year our US outsourcing division won its first significant contract,and has a strong pipeline going forward. The Group is in a unique position in terms of its broad geographic spread andthe depth and breadth of its service offering, to take full advantage of theimproving economic outlook. Albert EllisChief Executive Officer Financial Review Tight management of the Group's cost base and working capital ensured operatingprofit and cash flow grew strongly during the year. International Financial Reporting Standards (IFRS) As previously stated in the Chairman's report the results for 2006 have beenprepared under IFRS. The results for 2005 have been restated on a comparablebasis. Profit and Loss Account Turnover increased 24% to £202.3m for the year ended 31 January 2006 (2005:£163.4m) Gross profit margin was 21.2% (2005: 23.3%). The cost base for the yearwas £37.8m, resulting in an improved operating profit margin as a percentage ofnet fee income of 11.9% (2005: 10.7%). Profit before tax increased 26% to £4.0m(2005: £3.2m). Taxation The tax charge for the year was £0.5m (2005: £0.8m). This included a credit inrespect of prior years of £0.6m and a deferred tax charge of £0.4m. The overalleffective tax rate was 13.2% (2005: 25.9%). Earnings per Share Basic earnings per share rose by 43% to 5.59p (2005: 3.90p). Fully dilutedearnings per share rose by 40% to 5.05p (2005: 3.62p). Balance Sheet Tangible fixed assets rose by £0.3m during the year, as capital expenditure wasincurred to keep pace with growth in the business. Intangible assets rose by 1%during the year mainly as a result of exchange rate movements. Debtors increasedto £43.0m (2005: £30.8m), reflecting the strong trading compared to the previousyear and debtor days fell just over 10%. Creditors increased to £33.7m (2005:£22.5m), also reflecting the strong trading. Cash Flow Trading cash flow of £6.1m (2005: £5.2m) was generated from operations beforethe effects of movements in working capital. Working capital absorbed £1.2m,leaving a net £4.9m generated from operating activities. Capital expenditure inthe year of £1.1m compares to £0.8m the previous year and mainly comprisesinvestment in the Group's new offices and maintenance of its IT systems.Interest charged of £1.1m, resulted in a net cash inflow of £2.4m, reducing thenet debt to £6.4m (2005:£8.8m). Banking Facilities The Group's banking facilities now total circa £21.0m, comprising workingcapital of £12.0m in the UK and €3.5m in Germany, an overdraft of £4.2m and aresidual £3.0m term loan re-negotiated in April 2006, with three repayments of£1.0m each, beginning on 31 January 2007. Acquisitions In February 2006 the group issued 1,449,453 ordinary shares in connection withthe Group's deferred consideration for the acquisition of the business andcertain assets of Bluesuit Consulting Inc, the Group's Chicago based business.The earnout target was achieved and accordingly the deferred consideration wassettled. There was no cash element. The balance of the deferred consideration,totalling $2.25m is payable in shares over the period ending 16 December 2007dependent on the business achieving escalating targets. The final tranche of deferred consideration of up to $1.0m in relation to theacquisition of Snowdogs LLC was based on the results for the year ended 31January 2006. This was satisfied in April 2006 by the issue of 833,061 sharesfollowing the successful achievement of the earnout. Richard AshcroftGroup Finance Director Consolidated Income Statementfor the year ended 31 January 2006 Notes 2006 2005 £ '000 £ '000 Revenue 3 202,294 163,374Cost of sales (159,390) (125,269) Gross profit 42,904 38,105Administrative expenses (37,803) (34,040) Operating profit 5,101 4,065Finance costs (1,098) (896) Profit before tax 4,003 3,169Taxation 5 (527) (820) Profit for the year 7 3,476 2,349 Basic earnings per share 4 5.59p 3.90pDiluted earnings per share 4 5.05p 3.62p Consolidated Statement of Recognised Income and Expensefor the year ended 31 January 2006 2006 2005 £ '000 £ '000 Profit for the period 3,476 2,349Foreign currency translation differences (70) 163Total recognised income and expense for the year 3,406 2,512 The above results are derived from continuing activities. Consolidated Balance Sheetfor the year ended 31 January 2006 Notes 2006 2005 £ '000 £ '000 ASSETSNon-current assetsProperty, plant and equipment 1,744 1,415Intangible assets 28,463 28,140Deferred income tax assets 1,190 1,886 31,397 31,441Current assetsTrade and other receivables 43,032 30,803 43,032 30,803 Total assets 74,429 62,244 LIABILITIESCurrent liabilitiesTrade and other payables (33,713) (22,497)Current income tax liabilities (459) (318)Financial liabilities - borrowings 6 (6,392) (5,694) (40,564) (28,509)Non-current liabilitiesFinancial liabilities - borrowings - (3,112)Deferred income tax liabilities (233) (263)Provisions and other liabilities (14) (280) (247) (3,655) Total liabilities (40,811) (32,164) Net assets 33,618 30,080 EQUITYCapital and reserves attributable to equity shareholdersShare capital 3,137 3,134Share premium 19,064 19,054Shares to be issued 2,532 2,386Fair value and other reserves 13,152 13,152Own shares held (656) (1,081)Cumulative translation reserve 93 163Retained earnings (3,704) (6,728) Total equity 33,618 30,080 Consolidated Cash Flow Statementfor the year ended 31 January 2006 Notes 2006 2005 £ '000 £ '000 Profit before taxation 4,003 3,169Adjustments for:- depreciation 797 795- interest income (19) -- interest expense 1,117 896- proceeds of sale of investment - (51)- loss on disposal of fixed assets - 24- share based employee settlement and share option charge 185 333 Operating cash flows before changes in working capital 6,083 5,166 Changes in working capital (excluding the effects of acquisition and exchangedifferences on consolidation)- increase in trade and other receivables (12,477) (8,483)- increase in trade and other payables 11,479 3,328- net movements in provisions for liabilities and charges (266) (1,361) Cash flows from operating activities 4,819 (1,350)Income tax received/ (paid) 55 (1,433) Net cash generated/ (absorbed) from operating activities 4,874 (2,783) Cash flows from investing activitiesPurchases of property, plant and equipment (1,109) (796)Cash acquired with acquisitions - 278Purchase of subsidiary undertakings - (329)Proceeds from sale of investment - 51 Net cash absorbed from investing activities (1,109) (796) Cash flows from financing activitiesRepayment of borrowings (3,308) -Proceeds from issue of ordinary shares 13 228Principal payments under finance leases - (121)Net interest paid (1,098) (896) Net cash used in financing activities (4,393) (789) Decrease in cash and cash equivalents (628) (4,368)Cash and cash equivalents at the beginning of the year (2,694) 1,613Exchange (losses)/gains on cash and cash equivalents (49) 61 Cash and cash equivalents at the end of the year 6 (3,371) (2,694) Notes to the Consolidated Financial Statements 1. General Information Harvey Nash Group plc (the Company) and its subsidiaries (together "the Group")is a leading provider of specialist recruitment and outsourcing solutions. TheGroup has offices in the UK, Europe and the United States and a branch inVietnam. The Company is a public listed company incorporated in the UK. Its registeredaddress is 13 Bruton Street, London W1J 6QA and its primary listing is on theLondon Stock Exchange. 2. Accounting Policies The principle accounting policies adopted in the preparation of these financialstatements are set out in the 31 July 2005 interim report. These policies havebeen consistently applied to all years presented unless otherwise stated. Basis of preparation Harvey Nash Group plc's consolidated financial statements were prepared inaccordance with UK GAAP until 31 January 2005. UK GAAP differs in some areasfrom International Financial Reporting Standards (IFRS). In preparing theconsolidated financial statements, management has amended certain accounting,valuation and consolidation methods applied in the UK GAAP financial statementsto comply with IFRS. The comparative figures in respect of January 2005 havebeen restated to reflect these adjustments, except as described in theaccounting policies. The financial information has been prepared on the basis of the recognition andmeasurement requirements of IFRS in issue that either are endorsed by the EU andeffective (or available for early adoption) at 31 January 2006, or are expectedto be endorsed and effective (or available for early adoption) at 31 January2006, the Group's first annual reporting date at which it is required to usedadopted IFRSs. Reconciliations and descriptions of the effect of the transition from UK GAAP toIFRS on the Group's equity and its net income and cash flows are provided innote 8. During the year the Directors have reclassified certain costspreviously treated as costs of sales to administrative costs as they considerthis better reflects the nature of the business. The comparative accountingperiod has been restated. Application of IFRS 1 The Group's financial statements for the year ended 31 January 2006 are thefirst annual statements that comply with IFRS. The Group has applied IFRS 1inpreparing these consolidated financial statements. The Group's transition date is 1 February 2004. The Group prepared its openingIFRS balance sheet at that date. The reporting date of these consolidatedfinancial statements is 31 January 2006. The Group's IFRS adoption date is 1February 2005. In preparing these consolidated financial statements in accordance with IFRS 1,the Group has applied the mandatory exemptions and certain of the optionalexemptions from the full retrospective application of IFRS. Exemptions from full retrospective application elected by the Group (a) Business combination exemption Harvey Nash has applied the business combinations exemption in IFRS 1. It hasnot restated business combinations that took place prior to the 1 February 2004transition date. (b) Cumulative translation differences exemption Harvey Nash has elected to set the previous accumulated translation balances tozero at 1 February 2004. This exemption has been applied to all subsidiaries inaccordance with the available option under IFRS 1. (c) Share-based payment transaction exemption The Group has elected to apply the share-based payment exemption. It appliedIFRS 2 from 1 February 2004 to those options that were issued after 7 November2002 but that have not vested by 1 February 2005. 3. Segment Information The consolidated entity operates in one business segment being that ofrecruitment services and outsourcing services. As a result, no additionalbusiness segment information is required to be provided. The Group's secondarysegment is geography. The segment results by geography are shown belowincluding revenue by origin. The directors do not consider revenue by origin tobe materially different to revenue by destination. Revenue Segment assets Capital expenditure 2006 2005 2006 2005 2006 2005 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000United Kingdom 79,229 79,712 14,675 16,698 704 592Rest Of Europe 95,690 59,545 10,851 9,815 320 56United States 27,375 24,117 11,030 9,623 85 148Asia Pacific - - 83 56 - - 202,294 163,374 36,639 36,192 1,109 796 Unallocated liabilities - - (3,021) (6,112) - - Total 202,294 163,374 33,618 30,080 1,109 796 4. Earnings Per Share 2006 2005 Profit attributable to shareholders £'000 3,476 2,349Weighted average number of shares 62,224,342 60,213,476 Basic earnings per share 5.59p 3.90p Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year, excluding those held in the employee share trust, which aretreated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has two categories of potential ordinary shares: those shareoptions granted to employees where the exercise price is less than the averageprice of the Company's ordinary shares during the year, and deferredconsideration shares to be issued. 2006 2005 Profit attributable to shareholders £'000 3,476 2,349Weighted average number of shares 62,224,342 60,213,476Effect of dilutive securities 6,670,461 4,613,186Adjusted weighted average number of shares 68,894,803 64,826,662Diluted earnings per share 5.05p 3.62p 5. Taxation 2006 2005 £ '000 £ '000 Corporation tax on profits in the year 664 421Adjustments in respect of prior years (577) 452Total current tax 87 873Deferred tax 440 (53)Total tax charge 527 820 6. Analysis of Changes in Net Debt 1 February Cash flow Non-cash Foreign exchange 31 January 2006 2005 movements movements £'000 £'000 £'000 £'000 £'000 Cash and cash equivalents (2,694) (628) - (49) (3,371) (2,694) (628) - (49) (3,371)Debt due within one year (3,000) 3,308 (3,112) (217) (3,021)Debt due after one year (3,112) - 3,112 - (6,112) 3,308 - (217) (3,021)Total (8,806) 2,680 - (266) (6,392) The non-cash movements reflect the changes in the maturity of the debt. 7. Retained Earnings 2006 2005 £ '000 £ '000 At 1 February (6,728) (9,239)Employee share options and bonus plan (452) 162Profit for the year 3,476 2,349 At 31 January (3,704) (6,728) 8. Reconciliation of Net Asset and Profits UK GAAP to IFRS Reconciliation of equity at 1 February 2004 Notes GAAP Effects of IFRS transition to IFRS £ '000 £ '000 £ '000ASSETSNon-current assetsProperty, plant and equipment 1,413 - 1,413Goodwill (a) 30,759 (4,899) 25,860Deferred income tax assets (b) - 1,455 1,455 32,172 (3,444) 28,728Current assetsTrade and other receivables (c) 23,662 (1,209) 22,453Cash and cash equivalents 1,613 - 1,613 25,275 (1,209) 24,066 Total assets 57,447 (4,653) 52,794 LIABILITIESCurrent liabilitiesTrade and other payables (d) (19,487) (60) (19,547)Current income tax liabilities (933) - (933) (20,420) (60) (20,480) Non-current liabilitiesBorrowings (6,333) - (6,333)Deferred income tax liabilities (e) - (17) (17)Onerous lease provision (1,641) - (1,641) (7,974) (17) (7,991) Total liabilities (28,394) (77) (28,471)Net assets 29,053 (4,730) 24,323 EQUITYCapital and reserves attributable to equity holdersShare capital 2,984 - 2,984Share premium 18,023 - 18,023Shares to be issued 1,648 - 1,648Fair value and other reserves (f) 11,736 252 11,988Own shares held (1,081) - (1,081)Cumulative translation reserve - - -Retained earnings (g) (4,257) (4,982) (9,239)Total equity 29,053 (4,730) 24,323 Explanations of the effect of the transition to IFRS at 1 February 2004 The following explains the material adjustments to the balance sheet and incomestatement. £ '000(a) GoodwillImpairment of investment (4,899)Total impact - decrease in goodwill (4,899) (b) Deferred income tax assetRecognition of deferred tax asset under IFRS 2 (share based payment) 1,455Total impact - increase in deferred income tax asset 1,455 (c) Trade and other receivablesReclassification of deferred tax asset under IFRS 2 (share based payment) (1,209)Total impact - decrease in trade and other receivables (1,209) (d) Trade and other payablesRecognition of additional employee benefit costs (60)Total impact - increase in trade and other payables (60) (e) Deferred income tax liabilityRecognition of deferred tax liability under IFRS 2 (17)Total impact - increase in deferred income tax liability (17) (f) Other reservesRecognition of share options issued after 7 November 2002 and not vested at 1 February 2005 37Tax adjustment to reserves under IFRS 2 215Total impact - increase in fair value and other reserves 252 (g) Retained earningsAll above adjustments were recorded against opening retained earnings at 1 February 2005.The total net impact is a decrease in retained earnings of £4,982,000. Reconciliation of equity at 1 February 2005 Notes GAAP Effects of IFRS transition to IFRS £ '000 £ '000 £ '000ASSETSNon-current assetsProperty, plant and equipment 1,415 - 1,415Goodwill (a) 30,845 (2,705) 28,140Deferred income tax assets (b) - 1,886 1,886 32,260 (819) 31,441Current assetsTrade and other receivables (c) 32,052 (1,249) 30,803 32,052 (1,249) 30,803 Total assets 64,312 (2,068) 62,244 LIABILITIESCurrent liabilitiesTrade and other payables (d) (22,375) (122) (22,497)Current income tax liabilities (e) (373) 55 (318)Borrowings (5,694) - (5,694) (28,442) (67) (28,509)Non-current liabilitiesBorrowings (3,112) - (3,112)Deferred income tax liabilities (f) - (263) (263)Provisions (280) - (280) (3,392) (263) (3,655) Total liabilities (31,834) (330) (32,164) Net assets 32,478 (2,398) 30,080 EQUITYCapital and reserves attributable to equity holdersShare capital 3,134 - 3,134Share premium 19,054 - 19,054Shares to be issued 2,386 - 2,386Fair value and other reserves (g) 12,750 402 13,152Own shares held (1,081) - (1,081)Cumulative translation reserve (h) - 163 163Retained earnings and other reserves (i) (3,765) (2,963) (6,728)Total equity 32,478 (2,398) 30,080 Explanation of the effect of the transition to IFRS at 1 February 2005 The following explains the material adjustments to the balance sheet and incomestatement. £ '000(a) GoodwillAmortisation charge no longer made under IFRS 2,194Impairment of investment (4,899) Total impact - decrease in goodwill (2,705) (b) Deferred income tax assetRecognition of deferred tax asset under IFRS 2 (share based payment) 1,886 Total impact - increase in deferred income tax asset 1,886 (c) Trade and other receivablesReclassification of deferred tax asset under IFRS 2 (share based payment) (1,249) Total impact - decrease in trade and other receivables (1,249) (d) Trade and other payablesRecognition of additional employee benefit costs (122) Total impact - increase in trade and other payables (122) (e) Current income taxAdjustment to current tax under IFRS 2 55 Total impact - decrease in current corporation tax 55 (f) Deferred income tax liabilityRecognition of deferred tax liability under IFRS 2 (263) Total impact - increase in deferred income tax liability (263) (g) Other reservesTax adjustment to reserves under IFRS 2 402 Total impact - increase in fair value and other reserves 402 (h) Cumulative translation adjustmentAdjustments assessed on the basis of translation during the period 163 Total impact - increase in cumulative translation reserve 163 (i) Retained earnings All above adjustments were recorded against opening retained earnings at 1 February 2006.The total net impact is a decrease in retained earnings of £2,963,000. Reconciliation of profit for the year ended 31 January 2005 GAAP (1) (2) (3) (4) IFRS (as restated*)Income Statement £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 Turnover 163,374 - - - - 163,374Cost of sales (125,269) - - - - (125,269) Gross profit 38,105 - - - - 38,105Administrative expenses:- excluding goodwill amortisation (33,851) - (62) (127) - (34,040)- goodwill amortisation (2,194) 2,194 - - - - Group operating profit 2,060 2,194 (62) (127) - 4,065 Interest receivable - - - - - -Interest payable (896) - - - - (896) Profit before tax 1,164 2,194 (62) (127) - 3,169Tax (833) - - - 13 (820) Profit after tax 331 2,194 (62) (127) 13 2,349 (1) Amortisation charge no longer made under IFRS (2) Recognition of additional employee benefit costs (3) Recognition of share options issued after 7 November 2002 and not vested at 1 February 2005. (4) Tax adjustment to deferred tax under IFRS * The above GAAP figures have been restated to reclassify certain costspreviously treated as cost of sales to administration expenses (see note 2a). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Harvey Nash Group