19th Sep 2007 07:00
Newcourt Group Plc Interim Results Newcourt Group plc ("Newcourt", the "Group" or the "Company") (LSE:NEW)(ISE:NEW), a leading Irish support and outsourced service group with businessesin the security, recruitment, student accommodation and other related sectors,today announces its results for the six months ended 30 June 2007. These interimresults are the first financial statements of the Group prepared underInternational Financial Reporting Standard (IFRS). The Group's IFRS accountingpolicies are attached as an appendix to this report. Highlights \* T Six months Six months ended ended Year ended 30 June 2007 Change 30 June 2006 31 December 2006 EUR '000 % EUR '000 EUR '000 Restated - Restated - Unaudited Unaudited Audited Revenue 65,780 +45% 45,391 116,464 Gross profit 14,835 +89% 7,843 22,170 Trading profit 7,610 +107% 3,668 10,487 Profit before tax 5,242 +108% 2,518 7,662 Adjusted EBITDA(a) 7,557 +108% 3,633 11,046 cents cents centsAdjusted diluted earnings per share 5.74 +79% 3.21 10.01\* T -- Revenue increased by EUR 20.4m (45%) on the same period in the prior year, of which EUR 0.33m relates to contributions from 2007 acquisitions. -- Trading profit has increased by EUR 4m (107%) on the same period in the prior year, of which EUR 60k relates to contributions from 2007 acquisitions. -- The following trading profit growth, by division, was achieved: Support Services and Student Accommodation: 139% Recruitment and Aviation Outsourcing : 42% -- Newcourt completed the following acquisitions during the period: Company CCM Recruitment Limited Aldborough Developments Limited Group management are pleased with the integration of these acquisitions. -- In July 2007, the Group was authorised by way of an EGM to increase the issued share capital by a further 35%. (a) adjusted for share option and warrant costs, the amortisation of intangibleassets and tender costs Newcourt | Contacts \* TDamien Murray Mark Kenny/Jonathan NeilanNewcourt Group K Capital Source Mobile: +353 86 1730417 Tel: +353 1 631 5500Email: [email protected] Email: Newcourt@kcapitalsource.com----------------------------------------------- ---------------------------------------------\* T Chairman's Statement I am very pleased to report a strong trading performance for the first sixmonths of 2007. Results Revenue in the period was EUR 66m, an increase of 45% over the same period lastyear. New acquisitions accounted for EUR 330k of turnover with existingbusinesses increasing their turnover by EUR 20m or 44%. Profit before tax of EUR 5.2m compares with profit before tax of EUR 2.5m in thesix months to June 2006, equating to a 108% increase in pre-tax profits. The group completed two acquisitions in the first half of the year to furtherdevelop existing areas of the business. The group's management are very pleasedwith the progress of the integration of these acquisitions. Extraordinary General Meeting (EGM) In July 2007, Newcourt held an EGM, the primary purpose of which was to seekshareholder approval to increase the Company's authorised share capital and itsauthority to issue and allot shares. All resolutions put to shareholders at theEGM were passed. Shareholders should note that the Board of Newcourt does notintend to exercise the full extent of those new authorities unless in thecontext of a significant acquisition. Outlook Strong organic growth, together with the successful integration of acquisitions,delivered a strong performance in the first half of the year. I am optimisticthat this performance will continue for the remainder of the year. James Osborne Chairman \* TGroup Income Statementfor the 6 month period ended 30 June 2007 6 months ended 30 June 2007 6 months ended 30 June 2006 - Restated Before Amortisation Before Amortisation amortisation and amortisation and and other other and other other costs costs Total costs costs Total EUR '000 EUR '000 EUR '000 EUR '000 EUR '000 EUR '000 Unaudited Unaudited Revenue 65,780 - 65,780 45,391 - 45,391 Cost of sales (50,945) - (50,945) (37,548) - (37,548) -------------- --------------- --------- ------------------ ------------- ------------Gross profit 14,835 - 14,835 7,843 7,843 Administration expenses (7,225) - (7,225) (4,175) - (4,175) -------------- --------------- --------- ------------------ ------------- ------------ Trading profit 7,610 - 7,610 3,668 - 3,668 Tender costs - (190) (190) - - -Share options and warrants - (150) (150) - (87) (87)Group overhead - (736) (736) - (500) (500)Amortisation of intangible assets - (452) (452) - (184) (184) -------------- --------------- --------- ------------------ ------------- ------------ Operating profit 7,610 (1,528) 6,082 3,668 (771) 2,897 Finance costs (890) (404)Finance income 50 25 --------- ------------ (840) (379) Profit before tax 5,242 2,518 Income tax expense (876) (444) --------- ------------ Profit after tax for the period 4,366 2,074 --------- ------------ All activities were in respect of continuing operations. Basic earnings per share 5.01 2.89 --------- ------------ Diluted earnings per share 4.86 2.84 --------- ------------\* T \* TGroup Balance Sheetat 30 June 2007 31 30 June 30 June December 2007 2006 2006 Restated Restated EUR '000 EUR '000 EUR '000 Unaudited Unaudited AuditedAssetsNon current assetsGoodwill 68,803 42,989 64,698Intangible assets 3,459 1,940 3,408Property, plant and equipment 5,347 5,268 5,424Investment property 800 - 800Assets under construction 10,774 - -Investment in Joint Venture - - - --------- --------- ---------Total non-current assets 89,183 50,197 74,330 --------- --------- ---------Current assetsInventories 7,717 679 6,523Trade and other receivables 29,080 23,750 29,455Corporation tax refundable - - 5Cash and cash equivalents 12,338 5,001 7,805 --------- --------- ---------Total current assets 49,135 29,430 43,788 --------- --------- ---------Total assets 138,318 79,627 118,118 --------- --------- ---------EquityShare capital 22,508 18,917 21,733Share premium 31,859 16,867 27,602Share options / warrants reserve 360 87 211Foreign exchange reserve (96) (86) (96)Retained earnings 11,194 2,152 6,828 --------- --------- ---------Total equity 65,825 37,937 56,278 --------- --------- ---------LiabilitiesNon current liabilitiesFinancial liabilities 17,755 9,317 13,166Trade and other payables 2,558 - 2,640Deferred consideration on acquisitions 2,618 3,687 4,426Deferred tax liabilities 491 667 491 --------- --------- ---------Total non-current liabilities 23,422 13,671 20,723 --------- --------- ---------Current liabilitiesFinancial liabilities 17,487 5,571 12,066Trade and other payables 26,768 14,987 23,809Deferred consideration on acquisitions 4,499 6,928 5,242Corporation tax payable 317 533 - --------- --------- ---------Total current liabilities 49,071 28,019 41,117 --------- --------- ---------Total liabilities 72,493 41,691 61,840 --------- --------- ---------Total equity and liabilities 138,318 79,627 118,118 --------- --------- ---------\* T \* TGroup Cash Flow Statementfor the period ended 30 June 2007 6 months 6 months ended ended 30 June 30 June 2007 2006 Restated EUR 000 EUR 000 Unaudited UnauditedCash flows from operating activitiesProfit for the financial year 4,366 2,074Adjustments for:Depreciation 683 465Amortisation of intangible assets 452 184Share options and warrants 150 87Profit on sale of property, plant and equipment (6) -Finance income (50) (25)Finance costs 890 404Income tax expense 876 444 --------- --------- 7,361 3,633Movement in inventories (1,194) (244)Movement in trade and other receivables 571 (2,500)Movement in trade and other payables 1,634 1,771 --------- ---------Cash generated from operations 8,372 2,660Interest paid (868) (382)Interest element of finance lease payments (22) (22)Income tax paid (573) (180) --------- ---------Net cash flows from operating activities 6,909 2,076 --------- ---------Cash flows from investing activitiesInterest received 50 25Proceeds from sale of property, plant and equipment 59 -Acquisition of subsidiaries, net of cash acquired (1,860) (11,800)Payments in respect of deferred consideration (3,687) (1,439)Acquisition of property, plant and equipment (590) (226)Payments in respect of assets under construction (38) -Acquisition of investment property - 133 --------- ---------Net cash used in investing activities (6,066) (13,307) --------- ---------Cash flows from financing activitiesProceeds from issue of share capital - 8,736Drawdown of loans / Repayment of loans 4,372 (2,375)Repayment of finance leases (22) (90) --------- ---------Net cash flows from financing activities 4,350 6,271 --------- ---------Net increase (decrease) in cash and cash equivalents 5,193 (4,960)Cash and cash equivalents at beginning of period 3,536 4,830 --------- ---------Cash and cash equivalents at end of period 8,729 (130) ========= =========\* T \* TGroup Statement of Recognised Income and Expensefor the period ended 30 June 2007 6 months 6 months ended ended 30 June 30 June 2007 2006 Restated EUR '000 EUR '000 Unaudited UnauditedItems of income / (expense) recognised directly within equity: Foreign currency translation differences for foreign operations - (86) Group profit for the period 4,366 2,074 --------- --------- Total recognised income and expense for the period 4,366 1,988 ========= =========\* T Notes to the Interim Results for the period ended 30 June 2007 1. International Financial Reporting Standards Basis of Preparation The consolidated interim financial information of the Group has been prepared inaccordance with the recognition and measurement principles of InternationalFinancial Reporting Standards (IFRS), including interpretations issued by theInternational Accounting Standards Board (IASB) and its committees and endorsedby the European Commission. The Group's first consolidated financial statementsprepared in accordance with IFRS will be prepared for the year ended 31 December2007. The accounting policies that the Group expects to use in the preparationof IFRS as adopted by the EU compliant financial statements are set out in anattachment to this document. The figures for the half year ended 30 June 2007 are unaudited. The comparativefigures for the half year ended 30 June 2006 are also unaudited. The amounts forthe year ended 31 December 2006 represent an audited abbreviated version of therestatement of the Group's statutory financial statements from Irish GAAP toIFRS, as adopted by the EU, and these will be attached to the annual return ofthe Group to be filed with the Companies Office. These statutory financialstatements were audited and the auditor issued an unqualified report thereon. The preparation of financial information in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making judgementsabout the carrying values of assets and liabilities that are not readilyapparent from other sources. 2. Segmental reporting \* T 6 months ended 6 months ended 30 June 2007 30 June 2006 EUR '000 EUR '000 Revenue by segmentSupport services & student accommodation 48,240 32,980Recruitment and aviation outsourcing 17,540 12,411 -------------- -------------- 65,780 45,391 ============== ============== Trading profit by segmentSupport services & student accommodation 5,766 2,415Recruitment and aviation outsourcing 1,844 1,253 -------------- -------------- 7,610 3,668 -------------- --------------Amortisation of intangible assets & other costs (1,528) (771) -------------- --------------Operating profit from continuing operations 6,082 2,897 ============== ==============\* T 3. Earnings per Share and Adjusted Earnings per Share \* T 6 months ended 6 months ended 30 June 2007 30 June 2006 EUR '000 EUR '000 Earnings as reported 4,366 2,074Adjustment for tender costs 190 -Adjustment for share options and warrants 150 87Adjustment for intangible asset amortisation 452 184 -------------- --------------Earnings as adjusted 5,158 2,345 ============== ============== Weighted average number of shares 87,122,473 71,659,254 Dilutive potential shares:Employee warrants to purchase shares 1,207,216 730,496Employee share options 1,506,698 714,794 Diluted weighted average number of shares 89,836,387 73,104,544 cent centBasic earnings per share Basic earnings per share 5.01 2.89 Adjusted basic earnings per share (a) 5.92 3.27 Diluted earnings per share Diluted earnings per share 4.86 2.84 Adjusted diluted earnings per share (a) 5.74 3.21\* T Basic earnings per share is calculated by dividing the profit attributable toequity shareholders of the company by the weighted average number of shares inissue during the period, excluding share options and warrants. Diluted earnings per share is calculated by adjusting for the weighted averagenumber of shares outstanding to assume conversion of all dilutive potentialordinary shares. Options and warrants granted under Employee Share OptionSchemes dilute the earnings per share by increasing the weighted average numberof shares without changing the net profit. (a) adjusted to exclude share options and warrant costs, amortisation ofintangible assets and tender costs. 4. Analysis of net debt \* T 30 June 2007 30 June 2006 EUR '000 EUR '000 Non-current assets:Cash and cash equivalents - - ------------- ------------- Current assets:Cash and cash equivalents 12,338 5,001 ------------- ------------- Non-current liabilities:Financial liabilities (17,755) (9,316) ------------- ------------- (17,755) (9,316) ------------- -------------Current liabilitiesFinancial liabilities (17,487)(a) (5,571) ------------- ------------- (17,487) (5,571) ------------- ------------- Net debt (22,904) (9,886) ============= =============\* T (a) includes an amount of EUR 10,430k (2006:EUR nil) relating to studentaccommodation and healthcare developments. These assets are secured on thedevelopments to which they relate. Appendix : Newcourt Group plc Statement of Accounting Policies The accounting policies to be applied in the preparation of the financialstatements for the financial year ended 31 December 2007 are set out below: Newcourt Group plc (the 'Company') is a company incorporated in Ireland. TheGroup's financial statements for the year ended 31 December 2007 consolidate theindividual financial statements of the Company and its subsidiaries and jointventures. First time adoption of IFRS The Group is required to determine their IFRS accounting policies and apply themretrospectively to establish their opening balance sheets under IFRS at theirdate of transition. The date of transition to IFRSs for the Group is 1 January2006. Where estimates had been made under Irish GAAP, consistent estimates(after adjustments to reflect any difference in accounting policies) have beenmade on transition to IFRS. Judgements affecting the balance sheets of thecompany and Group have not been revisited with the benefit of hindsight. IFRS 1,First Time Adoption of International Financial Reporting Standards, allows anumber of exemptions on adoption of IFRS for the first time. The Group hasapplied the following exemptions as permitted by IFRS: Business combinations Business combinations prior to the transition date of 1 January 2006 have notbeen restated. IFRS 3, "Business Combinations", has been applied with effectfrom the transition date of 1 January 2006. Consequently, goodwill at thetransition date is carried forward at its net book amount under Irish GAAP atits deemed cost. This goodwill, along with that arising on subsequentacquisitions, will no longer be amortised but will be tested annually forimpairment. Foreign currencies The cumulative currency translation difference arising at the translation datehas been reset to zero. Any movements that have arisen since 1 January 2006, thedate of transition to IFRS, are recognised in the currency translation reserveand are recycled through the income statement on disposal of the relatedbusiness. Translation differences that arose before the date of transition toIFRS in respect of all non-euro denominated operations are not presentedseparately and will not be taken into account in calculating gains and losses inthe event of future disposals of these operations. Basis of preparation The Group's financial statements are prepared on the historical cost basisexcept that investment properties and share based payments are stated at fairvalue. The financial statements are presented in euro and all values are roundedto the nearest (EUR '000) except where otherwise indicated. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. The main areas where judgements and estimates have been applied are in theannual testing of goodwill for impairment and in the valuation of intangibleassets. The estimates and underlying assumptions are reviewed on an ongoingbasis. Revisions to accounting estimates are recognised in the period in whichthe estimate is revised if the revision affects only that period or in theperiod of the revision and future periods if the revision affects both currentand future periods. Accounting for subsidiaries and joint ventures Subsidiaries Subsidiaries are those entities over which the Group has the power to controlthe operating and financial policy so as to obtain economic benefit from itsactivities. Subsidiaries are consolidated from the date on which control istransferred to the Group and are no longer consolidated from the date thatcontrol ceases. Where necessary, the accounting policies of subsidiaries havebeen changed to ensure consistency with the policies adopted by the Group.Intragroup balances and any unrealised gains and losses or income and expensesarising from intragroup transactions are eliminated in preparing the Groupfinancial statements, except to the extent they provide evidence of impairment. Joint Ventures Joint ventures are those entities over which the Group exercises controljointly, under a contractual agreement, with one or more parties. Investments injoint ventures are accounted for under the equity method of accounting. Under the equity method of accounting, the Group's share of the post-acquisitionprofits or losses of its joint ventures are recognised in the Group incomestatement. The income statement reflects in profit before tax, the Group's shareof profit after tax of its joint ventures in accordance with IAS 31, Interestsin Joint Ventures. The Group's interest in their net assets is included asinvestments in joint ventures in the Group balance sheet at an amountrepresenting the Group's share of the fair value of the identifiable net assetsat acquisition plus the Group's share of post acquisition retained income andexpenses. The Group's investment in joint ventures includes goodwill onacquisition. Where necessary, the accounting policies of joint ventures havebeen changed to ensure consistency with the policies adopted by the Group. Unrealised gains and income and expenses arising from transactions with jointlycontrolled entities are eliminated to the extent of the Group's interest in theequity. Unrealised losses are eliminated in the same way as unrealised gains,but only to the extent that they are not evidence of impairment. Revenue Recognition Support services and student accommodation Revenue represents the fair value of goods and services provided to customersand excludes Value Added Tax. Services invoiced in advance and in arrears arerecognised as deferred income and accrued income respectively. Where the Group acts as principal in the provision of these services, Revenue isrecognised together with the corresponding cost of sale. Where the Group acts asagent in the provision of these services, the Revenue recognised amounts to thenet fee earned. Revenue arising on the installation of security systems is recognised over thecontract term based on the degree of completion of the contract. Income in relation to commission on the sale of student accommodation propertiesis recognised upon the exchange of contracts. All other commission type incomederived from the sale of these properties is recognised when the related servicehas been completed and recoverability is certain. Recruitment and aviation outsourcing Revenue in respect of permanent placements is recognised when the candidatecommences employment. Revenue in respect of the Group's contractors andtemporary employees is recognised when the related hours have been worked. Share based payments The fair value of options granted under the Group's equity settled share optionscheme is recognised as an expense with a corresponding increase in equity. Thefair value is measured at grant date and spread over the period during whichemployees become unconditionally entitled to the options. The fair value of theoptions granted is measured using a binomial lattice model, taking into accountthe terms and conditions upon which the options were granted. Vesting conditionsare non-market and, consequently, the amount recognised as an expense isadjusted to reflect the actual number of share options that vest. The proceeds received net of any directly attributable transaction costs arecredited to share capital (nominal value) and share premium when exercised. The Group has no cash-settled share-based payment transactions as defined inIFRS 2. Dividends Dividends unpaid at the balance sheet date are only recognised as a liability atthat date to the extent that they are appropriately authorised and are no longerat the discretion of the Company. Property, plant and equipment Property is recognised at cost. Cost includes expenditures that are directlyattributable to the acquisition of the asset. The cost of self constructedassets includes the cost of materials and direct labour and any other costsdirectly attributable to bringing the asset to a working condition for itsintended use. Borrowing costs on funds specifically identified with theconstruction activity are capitalised as part of the cost of assets underconstruction. Plant and equipment is stated at cost less accumulated depreciation andimpairment losses. Expenditure incurred to replace a component of property,plant and equipment that is accounted for separately is capitalised. Othersubsequent expenditure is capitalised only when it increases the future economicbenefits embodied in the item of property, plant and equipment. All otherexpenditure including repairs and maintenance costs is recognised in the incomestatement as an expense as incurred. Depreciation is calculated to write off the carrying amount of property, plantand equipment, other than freehold land, to their estimated residual values, ona straight line basis, by reference to the following estimated useful lives:- \* TLand - no depreciation chargedBuildings - 2%Computer equipment - 25-33%Plant & machinery - 20-33%Motor vehicles - 20-25%Fixtures & fittings - 12.5%\* T The residual value of assets, if not insignificant, and the useful life ofassets is reassessed annually. Gains and losses on disposals are determined bycomparing the proceeds received with the carrying amount and are included inoperating profit. Property that is being constructed for future use as investment property isaccounted for as property, plant and equipment until construction or developmentis complete, at which time it is remeasured to fair value and reclassified asinvestment property. Any gain or loss arising on remeasurement is recognised inthe income statement. When the use of a property changes from owner-occupied to investment, theproperty is remeasured to fair value and reclassified as investment property.Any gain arising on remeasurement is recognised directly in equity. Any loss isrecognised immediately in the income statement. Investment property Investment property is property which is held for rental income or capitalappreciation and is not occupied by the Group. Investment property is stated atfair value. The fair value is based on market value, being the estimated amountfor which a property could be exchanged in an arms length transaction. Any gainor loss arising from a change in fair value is recognised in the incomestatement. When property is transferred to investment property following achange in its use, any differences arising at the date of transfer between thecarrying amount of the property immediately prior to transfer and its fair valueis recognised in equity if it is a gain. Upon disposal of the property, the gainis transferred to retained earnings. Any loss arising in this manner, unless itrepresents the reversal of a previously recognised gain, is recognisedimmediately in the income statement. Inventories - security equipment Inventories are stated at the lower of cost and net realisable value. In thecase of finished goods, cost is defined as the aggregate cost of raw materials,direct labour and the attributable proportion of direct production overheads.Net realisable value is based on normal selling price, less further costsexpected to be incurred to completion and disposal. Inventories - student accommodation held for sale Accommodation held for sale comprise student accommodation properties currentlybeing developed which are stated at the lower of cost and net realisable value.Cost includes direct expenditure and interest which is capitalised from the dateof commencement of the development until the development is complete. Interestis calculated by reference to specific borrowings. Leases Where the Group has entered into lease arrangements on land and buildings, thelease payments are allocated between land and buildings and each is assessedseparately to determine whether it is a finance or operating lease. Finance leases, which transfer to the Group substantially all the risks andbenefits of ownership of the leased asset, are capitalised at the inception ofthe lease at the fair value of the leased asset or, if lower, the present valueof the minimum lease payments. The corresponding liability to the lessor isincluded in the balance sheet as a finance lease obligation. Lease payments areapportioned between the finance charges and reduction of the lease obligation soas to achieve a constant rate of interest on the remaining balance of theliability. Finance charges are charged to the income statement as part offinance costs. Capitalised leased assets are depreciated over the shorter of theestimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits ofownership of the assets are classified as operating leases. Operating leasepayments are recognised as an expense in the income statement on a straight linebasis over the lease term. Intangible assets Intangible assets acquired separately are capitalised at cost and intangibleassets acquired in the course of a business combination are capitalised at fairvalue being their deemed cost as at the date of acquisition. Subsequent toinitial recognition, intangible assets which have a finite life are carried atcost less any applicable accumulated amortisation and any accumulated impairmentlosses. Where amortisation is charged on assets with finite lives, this expenseis taken to the income statement. The amortisation of intangible assets iscalculated to write-off the book value of intangible assets over their usefullives on a straight-line basis. \* TThe amortisation rates used are as follows:Customer relationships - 3 yearsCustomers contracts - 8 months to 6 yearsRental contracts - 2 to 10 years\* T Goodwill Business combinations on or after 1 January 2006 are accounted for under IFRS 3using the purchase method. Any excess of the cost of the business combinationover the group's interest in the net fair value of the identified assets,liabilities and contingent liabilities is recognised in the balance sheet asgoodwill. Goodwill recognised as an asset as at 1 January 2006 is recorded atits carrying amount under Irish GAAP and is not amortised. Goodwill arising on the Group's joint ventures is included with investments injoint ventures in the balance sheet under the equity method and is tested forimpairment as discussed below. After initial recognition, goodwill is stated at cost less any accumulatedimpairment loss, with the carrying value being tested for impairment at leastannually and whenever events or changes in circumstances indicate that thecarrying value impaired may be impaired. For the purpose of impairment testing, goodwill is allocated to the related cashgenerating units, monitored by management, usually at business segment level orstatutory company level. Where the recoverable amount of the cash generatingunit is less than its carrying amount, including goodwill, an impairment loss isrecognised in the income statement. The Group has availed of the exemption under IFRS 1, "First-time Adoption ofInternational Financial Reporting Standards", whereby business combinationsprior to the transition date of 1 January 2006 have not been restated. IFRS 3,"Business Combinations", has been applied with effect from the transition dateof 1 January 2006 and goodwill amortisation ceased from that date. Impairment of non financial assets The carrying amounts of the Group's non financial assets with the exception ofdeferred tax assets (which are recognised based on recoverability), andinvestment properties (which are carried at fair value) are reviewed todetermine whether there is any indication of impairment when an event ortransaction indicates that there may be. If any such indication exists, animpairment test is carried out and the asset is written down to its recoverableamount. In the case of goodwill, impairment testing is carried out annually. The recoverable amount of an asset is the greater of its estimated net sellingprice and its value in use. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risksspecific to the asset. For an asset that does not generate largely independentcash inflows, the recoverable amount is determined for the cash-generating unitto which the asset belongs. Goodwill and intangible assets with an indefinite useful life are tested forimpairment at each balance sheet date. Impairment losses are recognised in theincome statement. Impairment losses recognised in respect of cash generatingunits are allocated first to reduce the carrying amount of any goodwillallocated to cash generating units and then, to reduce the carrying amount ofthe other assets in the units on a pro rata basis. An impairment loss, other than in the case of goodwill, is reversed if there hasbeen a change in the estimates used to determine the recoverable amount. Animpairment loss is reversed only to the extent that the assets carrying amountdoes not exceed the carrying amount that would have been determined, net ofdepreciation or amortisation, if no impairment loss had been recognised. Finance income and costs Finance income comprises interest income and foreign currency gains arising onbank balances. Interest income is recognised as it accrues using the effectiveinterest method. Finance costs comprise interest expenses on borrowings, unwinding of discountprovisions and foreign currency losses arising in respect of financialliabilities. All finance costs, except to the extent that they are capitalised,are recognised in profit or loss using the effective interest method. Foreign currencies Transactions in foreign currencies are translated into the functional currencyof the entity at the foreign exchange rate ruling at the date of thetransaction. Non-monetary assets carried at historic cost are not subsequentlyretranslated. Monetary assets and liabilities denominated in foreign currenciesat the balance sheet date are translated into functional currencies at theforeign exchange rate ruling at that date. Foreign exchange movements arising ontranslation are recognised in the income statement. The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated to euro at theforeign exchange rates ruling at the balance sheet date. The revenues andexpenses of foreign operations are translated to euro at the average exchangerate for the financial period. Foreign exchange movements arising on translationof the net investment in a foreign operation, including those arising on longterm intra Group loans deemed to be quasi equity in nature, are recogniseddirectly in equity, in the foreign currency translation reserve. Any movements that have arisen since 1 January 2006, the date of transition toIFRS, are recognised in the currency translation reserve and are recycledthrough the income statement on disposal of the related business. Translationdifferences that rose before the date of transition to IFRS in respect of allnon-euro denominated operations are not presented separately and are deemed tobe permanently offset against retained earnings. Classification of financial instruments Financial instruments issued by the Company are treated as equity ( i.e. formingpart of the shareholders' funds ) only to the extent they meet the following twoconditions: (i) They include no contractual obligations upon the Company to deliver cash orother financial assets or to exchange financial assets or financial liabilitieswith another party under conditions that are potentially unfavourable to theCompany; and (ii) Where the instrument will or may be settled in the Company's own equityinstruments, it is either a non-derivative that includes no obligation todeliver a variable number of the Company's equity instruments or is a derivativethat will be settled by the Company exchanging a fixed amount of cash or otherfinancial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue areclassified as a financial liability. Where the instrument so classified takesthe legal form of the Company's own shares, the amounts presented in thesefinancial statements for called up share capital and share premium accountexcludes amounts in relation to those shares. Finance payments associated with financial liabilities instruments are dealtwith as part of finance costs. Finance payments associated with financialinstruments that are classified as part of equity are dealt with asappropriations of equity. Taxation Taxation on the profit or loss for the year comprises current and deferred tax.Taxation is recognised in the income statement except to the extent that itrelates to items recognised directly in equity, in which case the related tax isrecognised in equity. Current tax is the expected tax payable on the taxableincome for the year, using tax rates and laws that have been enacted orsubstantially enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years. Deferred tax is provided using the balance sheet liability method on temporarydifferences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for taxation purposes. If the temporarydifference arises from initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction does not affect accounting nor taxable profit or loss, it is notrecognised. Deferred tax is provided on temporary differences arising oninvestments in subsidiaries and joint ventures, except where the timing of thereversal of the temporary difference is controlled by the Group and it isprobable that the temporary difference will not reverse in the foreseeablefuture or where no taxation is expected to arise on any ultimate remittance. Theamount of deferred tax provided is based on the expected manner of realisationor settlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantively enacted at the balance sheet date. A deferred tax assetis recognised only to the extent that it is probable that future taxable profitswill be available against which the asset can be utilised. Deferred tax assetsare reduced to the extent that it is no longer probable that the related taxbenefit will be realised. Trade and other receivables Trade and other receivables are initially measured at fair value and arethereafter measured at amortised cost using the effective interest method lessany provision for impairment. A provision for impairment of trade receivables isrecognised when there is objective evidence that the Group will not be able tocollect all amounts due according to the original terms of the receivables. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short termdeposits with an original maturity of three months or less. Invoice discountingfacilities that are collected daily and that are repayable on demand areconsolidated by the Group to form part of the Group's cash management and areincluded as a component of cash and cash equivalents for the purpose of the cashflow statement. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect of the time value of money is material, provisions are determinedby discounting the expected future cash flows at a pre-tax rate that reflectsthe time value of money and, where appropriate, the risks specific to theliability. Where discounting is used, the increase in the provision due to thepassage of time is recognised as a finance cost. Pensions Pension benefits for employees are met by payments to external definedcontribution schemes administered by third parties. Contributions are charged tothe income statement in the period over which the employee service is received. Financial liabilities Financial liabilities are initially recorded at fair value and subsequently atamortised cost using the effective interest rate method. Segmental Reporting A segment is a distinguishable component of the Group that is engaged either inproviding products or services (business segment) or in providing products orservices within a particular economic environment (geographic segment), which issubject to risks and returns different from those of other segments. The Group'sprimary reporting segments comprise the business segments of (i) Supportservices and student accommodation and (ii) Recruitment and aviationoutsourcing. Copyright Business Wire 2007Related Shares:
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