24th Jan 2008 07:00
Colefax Group PLC24 January 2008 COLEFAX GROUP PLC ("Colefax" or "the Group") Statement on the Impact of Adoption of International Financial Reporting Standards Colefax Group Plc currently prepares its financial statements in accordance withUK Generally Accepted Accounting Principles (UK GAAP). From 1st May 2007 Colefax Group Plc will be required to report its results inaccordance with International Accounting Standards and International FinancialReporting Standards (collectively 'IFRS') as adopted by the European Union (EU). The Group's first accounting period under IFRS will be for the financial yearended 30th April 2008, and its first interim results will be for the six monthsended 31st October 2007. The transition date to IFRS for the Group is 1st May2006 (the Transition Date), being the start of the period of comparativeinformation. This statement presents and explains how the Group's financial performance andposition under IFRS differs from that reported under UK GAAP. Restatedinformation is presented for: • The consolidated balance sheet as at 1st May 2006 (the transition date) • The consolidated income statement for the six month period ending 31st October 2006 • The consolidated balance sheet as at 31st October 2006 • The consolidated income statement for the year ended 30th April 2007 • The consolidated balance sheet as at 30th April 2007 The adoption of IFRS is a change to the accounting standards used by the Groupand does not affect the Group's strategy, underlying business performance or itscash flows. A full restatement of these policies and reconciliation of the resultant changeswill be disclosed in the financial statements for the year ended 30th April2008. The financial information presented in this document is unaudited. The effect of the adoption of IFRS on the financial assets of the Group isminimal as can be seen from the table below: Six months to 31 October Year to 30 April 2007 2006 UK GAAP IFRS UK GAAP IFRS £'000 £'000 £'000 £'000-----------------------------------------------------------------------------Profit from operations 2,493 2,453 5,946 5,842Profit before taxation 2,536 2,477 5,926 5,806Profit for the year 1,661 1,626 3,971 3,899 Net assets 15,504 15,107 15,691 15,269 BASIS OF PREPARATION The key differences between UK GAAP and IFRS affecting the Group's accountingpolicies are set out below. It is important to note that the IFRS position as stated is the Group'sinterpretation based on the financial reporting standards currently in issue andchanges may arise as new accounting pronouncements are developed and issued.Emerging industry consensus on the practical application of IFRS and furthertechnical opinions may also result in amendments to the current views containedin this statement. As a result of this, the Group's first IFRS financialstatements may be prepared on a different basis to that presented herein. DIFFERENCES BETWEEN UK GAAP AND IFRS The following represent the differences relevant to the Group of moving from UKGAAP to IFRS. Their financial effect on the results is set out in the Appendix. (a) Employee Benefits - Short-term benefits (IAS 19) IAS 19 'Employee Benefits' requires holiday pay to be accrued recognising theemployee benefits to be paid in exchange for that service during the accountingperiod. This results in the recognition of a provision of £105,000 and deferredtaxation of £31,000 on transition to IFRS and a reduction in pre-tax profit of£10,000 for the year ended 30th April 2007. Net assets at 1st May 2006 are reduced by £74,000, at 31st of October 2006 arereduced by £73,000 and at 30th April 2007 are reduced by £76,000. (b) Employee Benefits - Post-employment benefits (IAS 19) IAS 19 'Employee Benefits' requires retirement benefits to be accruedrecognising the employee benefits to be paid on retirement. This results in therecognition of a provision of £149,000 and deferred taxation of £52,000 ontransition to IFRS and an increase in pre-tax profit of £2,000 in the year ended30th April 2007. Net assets at 1st May 2006 are reduced by £97,000, at 31st October 2006 arereduced by £94,000 and at 30th April 2007 are reduced by £94,000. (c) Leases (IAS 17) IAS 17 'Leases' requires operating lease payments to be recognised as an expenseon a straight-line basis over the full length of the lease. This results in therecognition of a provision of £346,000 and deferred taxation of £141,000 ontransition to IFRS and a reduction of £59,000 in pre-tax profit in the sixmonths ending 31st October 2006 and reduction of £112,000 for the year ended30th April 2007. Net assets at 1st May 2006 are reduced by £205,000, at 31st October 2006 arereduced by £230,000 and at 30th April 2007 are reduced by £252,000. (d) Deferred Tax Asset (IAS 12) Unlike FRS 17 'Retirement Benefits', IAS 19 'Employee Benefits' requires thepension deficit to be shown gross under long term liabilities rather than net ofdeferred tax. We will continue to recognise a deferred tax asset of £93,000 at1st May 2006 and 31st October 2006 and £83,000 at 30th April 2007 but it willnow be reported within current deferred tax assets. (e) Foreign Exchange Reserve (IAS 21) IAS 21 'The Effects of Changes in Foreign Exchange Rates' requires the exchangedifferences arising on consolidation on the translation of overseas subsidiariesto be recognised as a separate equity reserve. This results in an increase inthe foreign exchange reserve of £392,000 at 1st May 2006, a reduction in theforeign exchange reserve of £370,000 at 31st October 2006 and a reduction in theforeign exchange reserve of £539,000 at 30th April 2007. (f) Reclass of profit/loss on disposal of property, plant and equipment (FRS 3) FRS 3 'Reporting Financial Performance' requires that profit or loss on disposalof property, plant and equipment be reported as part of the profit fromoperations. This results in an increase in profit from operations of £19,000 at31st October 2006 and £16,000 at 30th April 2007. APPENDIX I Reconciliation of Group Balance Sheet at 1st May 2006 Short-term Long-term Lease Deferred Foreign employee employee payments tax a exchange benefits benefits sset reserve UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRSNote (a) (b) (c) (d) (e) £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 5,403 - - - - - 5,403Current assets:Inventories and contracts in progress 10,942 - - - - - 10,942Trade and other receivables 11,498 31 52 141 93 - 11,815Cash and cash equivalents 2,347 - - - - - 2,347 ------------------------------------------------------------------ 24,787 31 52 141 93 - 25,104 Trade and other payables: amountsfalling due within oneyear 14,493 105 149 346 - - 15,093 ------------------------------------------------------------------Net current assets 10,294 (74) (97) (205) 93 - 10,011 ------------------------------------------------------------------Total assets less current liabilities 15,697 (74) (97) (205) 93 - 15,414Non-currentliabilities:Deferred taxation 57 - - - - - 57Pension liability 134 - - - 93 - 227 ------------------------------------------------------------------ 191 - - - 93 - 284 ==================================================================Net assets 15,506 (74) (97) (205) - - 15,130 ================================================================== Capital and reserves:Called up share capital 1,709 - - - - - 1,709Share premium account 11,087 - - - - - 11,087Capital redemption reserve 1,157 - - - - - 1,157ESOP share reserve (287) - - - - - (287)ESOP capital reserve 228 - - - - - 228Foreign exchange reserve - - - - - 392 392Profit and loss account 1,612 (74) (97) (205) - (392) 844 ------------------------------------------------------------------Total equity 15,506 (74) (97) (205) - - 15,130 ================================================================== Total equity reported Note under UK GAAP 15,506Holiday pay accrual (a) (74)Retirement benefits (b) accrual (97)Straight-line lease (c) adjustment (205) --------Total adjustment to equity (376) --------Total equity reported under IFRS 15,130 ======== APPENDIX II Reconciliation of Group Income Statement for the six months ended 31st October2006 Lease Reclass payments profit on disposal of property, plant & equipment UK GAAP IAS 17 FRS 3 IFRSNote (c) (f) £'000 £'000 £'000s £'000 Revenue 33,764 - - 33,764Cost of sales 14,870 - - 14,870 -----------------------------------------------Gross profit 18,894 - - 18,894Operating expenses 16,401 59 (19) 16,441 -----------------------------------------------Profit from operations 2,493 (59) 19 2,453Profit/loss on disposal of property, plant andequipment 19 - (19) - -----------------------------------------------Profit on ordinary activities beforeinterest and taxation 2,512 (59) - 2,453Finance income 24 - - 24 -----------------------------------------------Profit on ordinary activities beforetaxation 2,536 (59) - 2,477Tax on profit on ordinary activities 875 (24) - 851 -----------------------------------------------Profit for the period 1,661 (35) - 1,626 =============================================== Profit reported under UK Note GAAP 1,661Straight-line lease (c) adjustment (35) --------Profit reported under IFRS 1,626 ======== Basic earnings per share 10.31p 10.09pDiluted earnings per share 9.95p 9.74p APPENDIX III Reconciliation of Group Balance Sheet at 31st October 2006 Short-term Long-term Lease Deferred Foreign employee employee payments tax exchange benefits benefits asset reserve UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRSNote (a) (b) (c) (d) (e) £'000 £'000 £'000 £'000 £'000 £'000s £'000Non-currentassets:Property, plant and equipment 5,402 - - - - - 5,402Current assets:Inventories and contracts inprogress 11,878 - - - - - 11,878Trade and other receivables 10,288 31 50 158 93 - 10,620Cash and cash equivalents 4,366 - - - - 4,366 --------------------------------------------------------------- 26,532 31 50 158 93 - 26,864 Trade and other payables:amounts fallingdue within oneyear 16,263 104 144 388 - - 16,899 ---------------------------------------------------------------Net current assets 10,269 (73) (94) (230) 93 - 9,965 ---------------------------------------------------------------Total assets less currentliabilities 15,671 (73) (94) (230) 93 - 15,367Provision forliabilities:Deferred taxation 33 - - - - - 33Pension liability 134 - - - 93 - 227 --------------------------------------------------------------- 167 - - - 93 - 260 ---------------------------------------------------------------Net assets 15,504 (73) (94) (230) - - 15,107 ===============================================================Capital andreserves:Called up share capital 1,664 - - - - - 1,664Share premium account 11,087 - - - - - 11,087Capital redemptionreserve 1,202 - - - - - 1,202ESOP share reserve (287) - - - - - (287)ESOP capital reserve 228 - - - - - 228Foreign exchange reserve - 1 3 10 - (384) (370)Profit and loss account 1,610 (74) (97) (240) - 384 1,583 ---------------------------------------------------------------Total equity 15,504 (73) (94) (230) - 15,107 =============================================================== Total equity reported Note under IFRS 15,504Holiday pay (a) accrual (73)Retirement benefits (b) accrual (94)Straight-line lease (c) adjustment (230) -------Total adjustment to equity (397) -------Total equity reported under IFRS 15,107 ======= APPENDIX IV Reconciliation of Group Income Statement for the year ended 30th April 2007 Short-term Long-term Lease Reclass employee employee payments profit in benefits benefits disposal of property, plant & equipment UK GAAP IAS 19 IAS 19 IAS 17 FRS 3 IFRSNote (a) (b) (c) (f) £'000 £'000 £'000 £'000 £'000s £'000 Revenue 71,013 - - - - 71,013Cost of sales 31,602 - - - - 31,602 ----------------------------------------------------------Gross profit 39,411 - - - - 39,411Operating expenses 33,465 10 (2) 112 (16) 33,569 ----------------------------------------------------------Profit from operations 5,946 (10) 2 (112) 16 5,842Profit/loss on disposal ofproperty, plantand equipment 16 - - - (16) - ----------------------------------------------------------Profit on ordinary activities beforeinterest andtaxation 5,962 (10) 2 (112) - 5,842Finance charge (36) - - - - (36) ----------------------------------------------------------Profit on ordinary activities beforetaxation 5,926 (10) 2 (112) - 5,806Tax on profit on ordinaryactivities 1,955 (4) 1 (45) - 1,907 ----------------------------------------------------------Profit for the period 3,971 (6) 1 (67) - 3,899 ========================================================== Profit reported under UK Note GAAP 3,971Holiday pay (a) accrual (6)Retirement (b) benefits accrual 1Straight-line lease (c) adjustment (67) -------Total adjustments to profit (72) -------Profit reported under IFRS 3,899 ======= Basic earnings per share 25.3p 24.8pDiluted earnings per share 24.3p 23.9p APPENDIX V Reconciliation of Group Balance Sheet at 30th April 2007 Short-term Long-term Lease Deferred Foreign employee employee payments tax exchange benefits benefits asset reserve UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRSNote (a) (b) (c) (d) (e) £'000 £'000 £'000 £'000 £'000 £'000s £'000Non-current assets:Property, plant and equipment 5,135 - - - - - 5,135Current assets:Inventories and contracts in progress 12,045 - - - - - 12,045Trade and other receivables 11,384 33 50 172 83 - 11,722Cash and cash equivalents 4,113 - - - - - 4,113 ------------------------------------------------------------------ 27,542 33 50 172 83 - 27,880 Trade and other payables: amountsfalling due within oneyear 16,831 109 144 424 - - 17,508 ------------------------------------------------------------------Net current assets 10,711 (76) (94) (252) 83 - 10,372 ------------------------------------------------------------------Total assets less current liabilities 15,846 (76) (94) (252) 83 - 15,507Provision forliabilities:Deferred taxation 35 - - - - - 35Pension liability 120 - - - 83 - 203 ------------------------------------------------------------------ 155 - - - 83 - 238 ------------------------------------------------------------------Net assets 15,691 (76) (94) (252) - - 15,269 ================================================================== Capital and reserves:Called up share capital 1,565 - - - - - 1,565Share premium account 11,141 - - - - - 11,141Capital redemption reserve 1,308 - - - - - 1,308ESOP share reserve (157) - - - - - (157)ESOP capital reserve 508 - - - - - 508Foreign exchange reserve - 4 2 20 - (565) (539)Profit and loss account 1,326 (80) (96) (272) - 565 1,443 ------------------------------------------------------------------Total equity 15,691 (76) (94) (252) - - 15,269 ================================================================== Total equity reported Note under UK GAAP 15,691Holiday pay accrual (a) (76)Retirement benefits (b) accrual (94)Straight-line lease (c) adjustment (252) --------Total adjustment to equity (422) --------Profit reported under IFRS 15,269 ======== Enquiries: Colefax Group Plc Rob Barker, Finance Director and Company Secretary 020 7318 6000 KBC Peel Hunt David Anderson and Alina Savych 020 7418 8900 Biddicks Katie Tzouliadis 020 7448 1000 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Colefax Grp.