7th Jul 2005 07:00
Johnson Service Group PLC07 July 2005 JOHNSON SERVICE GROUP PLC 7 JULY 2005 IMPACT ON 2004 COMPARATIVE FINANCIAL INFORMATION FROM THE ADOPTION OFINTERNATIONAL FINANCIAL REPORTING STANDARDS Overview of impact The introduction of IFRS has little impact on the Group's results, excluding theeffect of goodwill amortisation, and there is no impact on the Group's cash flowor underlying business processes. The impact of IFRS adoption on the consolidated Income Statement and BalanceSheet of Johnson Service Group PLC is summarised below. For further information, please contact: Johnson Service Group PLC Hudson Sandler Stuart Graham, CEO Michael SandlerJim Wilkinson, CFO Sandrine GallienTelephone: 020 7290 0390 Telephone: 020 7796 4133Website: johnsonplc.com Income statementFor the 52 weeks to 25th December 2004 52 weeks to 52 weeks to 25th Dec 2004 IFRS 25th Dec 2004 Note (UK GAAP) Adjustments (IFRS) £m £m £m OPERATING PROFIT BEFORE RESTRUCTURING COSTS & 3,4 29.6 0.3 29.9GOODWILL AMORTISATION (see below)Restructuring costs (2.0) (2.0)Amortisation of goodwill 5 (7.0) 7.0 0.0Amortisation of intangible assets 5 (0.2) (0.4) (0.6) OPERATING PROFIT 20.4 6.9 27.3 Net interest 4,6 (4.7) (0.8) (5.5) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 15.7 6.1 21.8 Tax on profit on ordinary activities 1,3,4,5,6 (6.2) 0.6 (5.6) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 9.5 6.7 16.2 ADJUSTED PROFIT ON ORDINARY ACTIVITIES BEFORE 24.9 (0.5) 24.4TAXATION ADJUSTED BASIC EARNINGS PER SHARE 31.4p 31.5pADJUSTED EARNINGS PER SHARE (Fully diluted) 30.9p 30.9p Note: adjusted profit before tax and adjusted EPS exclude restructuring costs,goodwill amortisation (UK GAAP) and intangible amortisation (IFRS). Income statementFor the 26 weeks to 26th June 2004 26 weeks to 26 weeks to 26th June 2004 IFRS 26th June 2004 (UK GAAP) Adjustments (IFRS) Note £m £m £m OPERATING PROFIT BEFORE GOODWILL AMORTISATION (see 3,4 14.0 0.3 14.3below)Amortisation of goodwill 5 (3.1) 3.1 0.0Amortisation of intangible assets 5 (0.1) (0.1) OPERATING PROFIT 10.8 3.4 14.2 Net interest 4,6 (1.9) (0.4) (2.3) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 8.9 3.0 11.9 Tax on profit on ordinary activities 1,3,4,5,6 (3.6) (0.1) (3.7) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 5.3 2.9 8.2 ADJUSTED PROFIT ON ORDINARY ACTIVITIES BEFORE 12.1 (0.1) 12.0TAXATION ADJUSTED BASIC EARNINGS PER SHARE 14.8p 14.5pADJUSTED EARNINGS PER SHARE (Fully diluted) 14.6p 14.3p Note: adjusted profit before tax and adjusted EPS exclude goodwill amortisation(UK GAAP) and intangible amortisation (IFRS). Summary of adjustments to operating profit 26th June 2004 25th Dec 2004 £m £m Share based payments (0.1) (0.2)Employee benefits 0.5. 0.7.Other (0.1) (0.2) 0.3. 0.3 Balance Sheet 26th June 2004 25th Dec 2004 £m £m £m £m Note Net Assets as previously reported under UK GAAP 108.4 105.5 2 Dividends 2.4 8.2 3 Share Options 0.3 0.4 4 Pensions & Healthcare Benefits (25.5) (25.5) 5 Goodwill Amortisation 3.1 7.0 5 Recognition of Intangibles - (0.4) 6 Other (4.1) (3.4) (23.8) (13.7) Revised Net Assets as restated under IFRS 84.6 91.8 Background Johnson Service Group PLC (the Group) has historically prepared its financialstatements under UK Generally Accepted Accounting Practice (UK GAAP). From 2005onwards the Group will be required to prepare its consolidated financialstatements in accordance with International Accounting Standards (IAS) andInternational Financial Reporting Standards (IFRS)* as adopted by the EuropeanUnion (EU). This change applies to all financial reporting for accountingperiods beginning on or after 1 January 2005 and the Group's first publishedIFRS results will be its interim results for the six months to 25 June 2005.The Group's first Annual Report under IFRS will be for the year ended 31December 2005. The date for transition to IFRS is 28 December 2003, this beingthe start of the earliest period of comparative information. To explain how the Group's reported performance and financial position areaffected by this change, information previously published under UK GAAP isrestated, in summary format, under IFRS within this document. As noted below, the unaudited financial information has been prepared on thebasis of IFRS's expected to be adopted by the EU at 31 December 2005. These aresubject to ongoing review and endorsement by the EU or possible amendment byinterpretative guidance from the IASB and are therefore still subject to change. We will update our restated information for any such changes when they aremade and therefore the full financial effect of reporting under IFRS, as it willbe applied and reported upon in the Group's first IFRS financial statements, maybe subject to change. Transitional arrangements The rules for first time adoption of IFRS are set out in IFRS 1 "First-timeAdoption of International Financial Reporting Standards". In summary, the keyprinciple of IFRS is a full retrospective application of all IFRS's in force atthe closing balance sheet date for the first IFRS financial statements. Thereare, however, a number of optional and mandatory exemptions that reduce theburden of retrospective application, in order to assist companies in thetransition to reporting under IFRS. Where the Group has taken advantage ofthese exemptions they are noted below. Basis of preparation The financial information has been prepared in accordance with IFRS. The basisof preparation assumes that all existing standards issued by the InternationalAccounting Standards Board (IASB) will be fully endorsed by the EU. * References to IFRS throughout this document refer to the application ofInternational Accounting Standards and International Financial ReportingStandards Subject to EU endorsement of outstanding standards, and no further changes fromthe IASB, this information is expected to form the basis for comparatives whenreporting financial results for 2005, and for subsequent reporting periods. Principal accounting policy changes and adjustments 1. IFRS transitional arrangements The Group has complied with IFRS 1 'First Time Adoption of IFRS'. The followingoptional exemptions from full retrospective application of IFRS accountingpolicies have been adopted: • Business combinations - The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before the date of transition. As a result, in the opening balance sheet, the net book value of goodwill arising from past business combinations remains as stated under UK GAAP at 27 December 2003. The provisions of IFRS 3 have been applied prospectively from 28 December 2003. • Valuation of properties - The Group has previously not adopted a policy of revaluation but, as permitted by the transitional provisions of FRS15, the carrying amounts of freehold and long leasehold properties reflected previous valuations. As allowed by IFRS 1, the Group has now elected to treat the revalued amount of properties at 28 December 2003 as deemed cost as at that date and will not revalue for accounts purposes in future. The revised 2004 financial statements have been prepared under the historicalcost convention, as detailed in the policies disclosed below. 2. IAS 10 Events after the balance sheet date In accordance with IAS 10, dividends proposed after the balance sheet date donot meet the definition of a liability as at the year end and are therefore notaccrued. Consequently, proposed dividends previously reported under UK GAAPhave been reversed under IFRS. 3. IFRS 2 Share based payments In accordance with the transitional rules of IFRS 1, IFRS 2 has been applied toshare based payments granted after 7 November 2002 that have not vested by thedate of transition. The fair value of employee share options (under the Unapproved Share OptionScheme and the SAYE scheme) have been calculated using a suitable valuationmodel in accordance with the rules set out in IFRS 2 'Share Based Payments'.The costs of the share options have been charged to the Income Statement overthe period in which the options vest, and are adjusted to reflect the expectedand actual levels of vesting. Under UK GAAP the charge for share based paymentsonly applied to grants made at a discount to their market value and was based onintrinsic value. 4. IAS 19 Employee benefits The Group has applied the requirements of IAS 19 to defined benefit pensionschemes, post-retirement healthcare and life insurance benefits. The standardrequires the actuarial assets and liabilities of these schemes to be shown onthe balance sheet and the movement thereon to be reflected in the incomestatement and/or statement of recognised income and expense. As a result,obligations are measured at discounted present value and plan assets arerecorded at fair value. The operating and financing costs are recognised separately in the IncomeStatement; service costs are spread over the service lives of employees (in openschemes) and financing costs are recognised in periods as they arise. The transitional adjustment of £25.5m to net assets at December 2004 alsoincludes the reversal of the SSAP 24 asset, net of deferred taxation. The IAS19 liability is broadly similar to the FRS 17 liability disclosed in the 2004annual report, the difference being due to the variation in the method ofvaluing scheme assets as prescribed by IAS 19. The Group has elected to disclose current and past service costs as a chargeagainst operating profit whilst the net return on pension assets and interestexpense on pension liabilities is charged to interest. Whilst total pensioncosts under SSAP 24 and IAS 19 are broadly similar, the difference in therelative split between operating costs and finance costs results in animprovement of £0.7 million to the 2004 operating profit. 5. IAS 38 Goodwill Under IFRS, goodwill arising on acquisition is capitalised and subject to anannual impairment review. Under UK GAAP, goodwill was amortised over itsestimated useful life. In the year to 25 December 2004, goodwill amortisationof £7.0 million was expensed to the profit and loss account in accordance withUK GAAP. Under IFRS, this charge has been reversed from the Group's incomestatement and added back to the net book value of goodwill. For acquisitions made during 2004, £13.9 million of previously identifiedgoodwill has been reclassified as separately identifiable intangible assets.The identification of these intangible assets on business combinations hasresulted in the recognition of a £4.2 million deferred tax liability, togetherwith a corresponding further increase to goodwill. The useful economic life ofthe intangible assets identified ranges between 5 and 10 years and,consequently, amortisation of £0.4 million has been charged to profit before taxunder IFRS. 6. Other adjustments The 2004 income statement and balance sheet have been further affected by otherminor changes to accounting treatment as a result of IFRS adoption. The neteffect of these adjustments to profit after tax and net assets is an increase of£0.4 million (reduction of adjusted PBT and adjusted operating profit of £0.2million) and a decrease of £3.4 million, respectively. These changes have arisen as a result of the reclassification of certainproperty leases from operating to finance, the revision of residual values onfreehold properties, deferred taxation treatment and changes to deferred revenueand employee benefit balances. 7. IAS 14 Segment reporting The disclosure requirements of IAS14 are more extensive than in SSAP25. IAS14provides that one basis of segmentation is primary and the other is secondary.Extensive disclosure is required for primary segments, with less informationrequired to be disclosed for secondary segments. IAS 14 is based onmanagement's approach to organising the business. Historically, the Group has reported under three segments (Textile & HospitalityServices, Drycleaning and Facilities Management & Supplies). It is expectedthat four segments will be reported under IFRS (Corporatewear, Textiles,Drycleaning and Facilities Management & Supplies). Disclaimer The unaudited financial information contained within this statement has beenprepared on the basis of IFRS's expected to be adopted by the EU at 31 December2005. These are subject to ongoing review and endorsement by the EU or possibleamendment by interpretative guidance from the IASB and are therefore stillsubject to change. We will update our restated information for any such changeswhen they are made and therefore the full financial effect of reporting underIFRS, as it will be applied and reported upon in the Group's first IFRSfinancial statements, may be subject to change. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Johnson Service