5th Sep 2005 11:52
GROUP 4 SECURICOR plc IFRS financial information For the year ended 31 December 2004 Group 4 Securicor, the international security solutions group, todayre-presents its results for the year ended 31 December 2004 restated underInternational Financial Reporting Standards.INTRODUCTIONGroup 4 Securicor plc prepared its financial statements for the year ended 31December 2004 under UK Generally Accepted Accounting Principles ("UK GAAP").For financial periods commencing on or after 1 January 2005, the group will berequired by European law to prepare its consolidated financial statements inaccordance with International Financial Reporting Standards ("IFRS") whichincorporates International Accounting Standards ("IAS"). The application ofthese collective standards is referred to throughout this document as "IFRS".The adoption of IFRS will result in changes to the presentation of thefinancial statements and to the amount and timing of recognition of certainassets, liabilities, profits and losses. As the 2005 financial statementsinclude comparatives for 2004, the group's reported results for 2004 will berestated under IFRS. The group's date of transition to IFRS, under IFRS 1"First-time Adoption of International Financial Reporting Standards", will be 1January 2004. The group has therefore prepared financial information on thebasis of IFRS together with quantitative reconciliations of equity and netprofit and explanations of differences to the corresponding UK GAAP reporting.The following pages present certain unaudited financial information for theyear ended 31 December 2004 restated for IFRS as expected to be applicable for2005 reporting.BASIS OF PREPARATIONThe financial information presented below has been prepared based on theadoption of IFRS expected to be applicable as at 31 December 2005 and theinterpretation of these standards. It is important to note that these standardsare subject to ongoing review and endorsement by the European Commission andpossible amendment via interpretative guidance by the International AccountingStandards Board (IASB), and are therefore still subject to change. Thefinancial information presented may therefore be updated for any auditadjustments or for subsequent amendment to IFRS and interpretative guidanceprior to inclusion in the group's first full set of IFRS financial statementsfor the year to 31 December 2005. Moreover, attention is drawn to the fact thatunder IFRS only a complete set of financial statements, comprising a balancesheet, income statement, statement of changes in equity and cash flowstatement, together with financial information and explanatory notes, canprovide a fair presentation of the company's financial position, results ofoperations and cash flow.FIRST TIME ADOPTIONIFRS 1 establishes the transitional requirements for the first time preparationof financial statements in accordance with IFRS. In general, a company isrequired to determine its IFRS accounting policies effective at the reportingdate and apply these retrospectively to the balance sheet at the date oftransition, and to all financial statements for the comparative period and thereporting period.To assist in the transition process, there are a number of exemptions to thisretrospective application. The following significant exemptions have beenadopted by the group: * Business combinations: The group has elected not to account for business combinations retrospectively in accordance with IFRS 3 "Business Combinations". Those combinations recognised prior to the date of transition have not been restated. FIRST TIME ADOPTION (continued) * Employee benefits: The group has elected to adopt the proposed amendments to IAS 19 "Employee Benefits" which provide the group with the option of recognising all cumulative actuarial gains and losses in equity at the date of transition, with subsequent actuarial gains and losses being taken directly to equity via the Statement of Recognised Income and Expense. This is consistent with the treatment under UK GAAP, required by FRS 17 "Retirement benefits". * Cumulative translation differences: In accordance with IAS 21 "The Effects of Changes in Foreign Exchange Rates", on translation of a foreign operation certain exchange differences are recognised as a separate component of equity, which must be disclosed, and on subsequent disposal accumulated differences form part of the calculation of profit or loss on disposal. The group has elected not to calculate these translation differences retrospectively. Cumulative translation differences recognised separately in equity under IFRS are taken to be nil at the date of transition. * Share-based payment: In accordance with IFRS 2 "Share-based Payment", the group is recognising a charge to income representing the fair value of outstanding employee share options over the relevant option vesting periods, adjusted to reflect the actual and expected levels of vesting. However, the group has elected not to apply IFRS 2 retrospectively to equity instruments either granted on or before 7 November 2002 and/or vesting prior to 1 January 2005. * Financial instruments: The group has elected to apply the requirements of IAS 32 "Financial Instruments: Disclosures and Presentation" and IAS 39 "Financial Instruments: Recognition and Measurement" prospectively from 1 January 2005 and consequently the restated figures for 2004 do not reflect the impact of these standards. OVERVIEW OF IMPACTThe adoption of IFRS requires the following significant changes:Measurement * The cessation of goodwill amortisation, and an annual test for impairment * The recognition of a wider range of intangible fixed assets on acquisitions * The recognition, on balance sheet, of pension liabilities together with associated pension fund assets, and of other employee benefit liabilities * The inclusion in the income statement of a fair value charge in respect of outstanding employee share options * The recognition of certain financial instruments at fair value * The recognition of deferred tax in respect of all taxable temporary timing differences arising between the tax base and the accounting base of balance sheet items * Amounts of proposed dividends are not provided for. Dividends are accounted for when declared * The reclassification of certain leases as finance leases rather than operating leases Presentation * The proportionate consolidation of joint ventures on a line-by-line basis * The disclosure of results from discontinued operations as a single line item * The reclassification of capitalised software from tangible fixed assets to intangible assets OVERVIEW OF IMPACT (continued)The effect that the transition from UK GAAP to IFRS would have on the group'sfinancial position and performance for 2004 is summarised below: 2004 2004 UK GAAP IFRS ‚£m ‚£m Pro forma results for the combined business Turnover from continuing operations 3,807.5 3,826.2 PBITA from continuing operations 216.5 214.1 Statutory results Turnover from continuing operations 3,110.3 3,119.6 PBITA from continuing operations 166.4 164.7 Loss for the year (94.9) (65.4) Shareholder funds 918.0 909.9 Net Debt 595.8 586.4The net effect of presenting the 2004 financial statements under IFRS is todecrease the reported PBITA by ‚£1.7m or 1.0% compared with the amounts reportedunder UK GAAP, and reduce shareholders' funds as at 31 December 2004 by ‚£8.1m.These are accounting effects only and have no bearing on the underlyingeconomics of the business and only a minor bearing on the reported cash flows.Further explanation of the effect of this change on the group, andreconciliations between key figures under UK GAAP and restated results underIFRS, are presented on pages 4 to 13. The financial information presented inthis announcement is unaudited.5 September 2005For further enquiries, please contact:Trevor Dighton +44 (0) 1293 554400Chris AbrahamsMedia Enquiries:Patrick Toyne-Sewell +44 (0) 7973 672649Sarah GestetnerNotes to Editors:Group 4 Securicor is an international security solutions group, operating inover 100 countries throughout the world and employing over 360,000 people.Group 4 Securicor is a market leader in the provision of manned security,security systems and cash services in many of the countries in which itoperates. For more information on Group 4 Securicor, visit www.g4s.com.Reconciliation of combined pro forma revenue and PBITA from UK GAAP to IFRSFor the year ended 31 December 2004 2004 IFRS 2004 UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Continuing operations Group Revenue 3,807.5 18.7 3,826.2 Group profit from operations before 207.3 4.4 211.7interest, taxation, amortisation and one-off items (PBITA) Share of profit from associates 9.2 (6.8) 2.4 Total PBITA 216.5 (2.4) 214.1 Turnover Group Total PBITA PBITA ‚£m ‚£m ‚£m Notes Pro forma turnover and PBITA for 3,807.5 207.3 216.5the financial year under UK GAAP Adjustments to conform to IFRS Employee benefits d - (1.7) (1.7) Share-based payment e - (1.5) (1.5) Joint ventures f 18.7 6.8 - Leases k - 0.8 0.8 Total adjustment to turnover and PBITA 18.7 4.4 (2.4) Pro forma turnover and PBITA 3,826.2 211.7 214.1for the financial year under IFRS Reconciliation of combined pro forma business sector and geographical analysisfrom UK GAAP to IFRSFor the year ended 31 December 2004 2004 IFRS 2004 UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Revenue Manned Security Europe 1,315.9 - 1,315.9 North America 1,002.6 - 1,002.6 New Markets 380.1 3.7 383.8 Total Manned Security 2,698.6 3.7 2,702.3 Security Systems Europe 317.9 - 317.9 North America 1.8 - 1.8 New Markets 29.5 - 29.5 Total Security Systems 349.2 - 349.2 Cash Services Europe 635.1 - 635.1 North America 64.3 - 64.3 New Markets 68.5 6.8 75.3 Total Cash Services 767.9 6.8 774.7 Total turnover Europe 2,268.9 - 2,268.9 North America 1,068.7 - 1,068.7 New Markets 478.1 10.5 488.6 3,815.7 10.5 Less Manned Security joint venture (8.2) 8.2 (Europe) 3,807.5 18.7 Discontinued operations 81.9 (81.9) Group Revenue 3,889.4 (63.2) 3,826.2 PBITA Manned Security Europe 75.4 (1.4) 74.0 North America 53.1 - 53.1 New Markets 26.0 - 26.0 Total Manned Security 154.5 (1.4) 153.1 Security Systems Europe 25.5 - 25.5 North America 0.2 - 0.2 New Markets 2.9 - 2.9 Total Security Systems 28.6 - 28.6 Cash Services Europe 44.7 - 44.7 North America 3.9 - 3.9 New Markets 11.0 - 11.0 Total Cash Services 59.6 - 59.6 Total PBITA Europe 145.6 (1.4) 144.2 North America 57.2 - 57.2 New Markets 39.9 - 39.9 242.7 (1.4) 241.3 Head office costs (26.2) (1.0) (27.2) 216.5 (2.4) Discontinued operations 2.4 (2.4) PBITA 218.9 (4.8) 214.1Reconciliation of consolidated income statement from UK GAAP to IFRSFor the year ended 31 December 2004 2004 IFRS 2004 Notes UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Continuing operations Revenue f 3,110.3 9.3 3,119.6 Profit from operations Before amortisation and one-off items d,e,f,k 160.7 1.6 162.3 Share of profit from associates f 5.7 (3.3) 2.4 Profit from operations before 166.4 (1.7) 164.7amortisation and one-off items Amortisation of acquisition-related b,c (48.8) 35.4 (13.4)intangibles One-off items b (146.3) (4.7) (151.0) (Loss)/profit from operations (28.7) 29.0 0.3before interest and taxation Investment income d 4.6 35.0 39.6 Finance costs d,k (22.0) (36.9) (58.9) Loss before taxation (46.1) 27.1 (19.0) Taxation: Before one-off items d (48.9) 0.9 (48.0) On amortisation of acquisition- c - 4.0 4.0related intangibles One-off items 36.5 - 36.5 (12.4) 4.9 (7.5) Loss from operations (58.5) 32.0 (26.5) Loss from discontinued operations b,d (36.4) (2.5) (38.9) Loss for the year (94.9) 29.5 (65.4) Attributable to: Equity holders of the parent (101.8) 29.5 (72.3) Minority interest 6.9 - 6.9 (94.9) 29.5 (65.4) Notes Operating Loss Loss for profit before the year before taxation amortisation and one-off items ‚£m ‚£m ‚£m Profit/(loss) for the financial 166.4 (46.1) (94.9)year under UK GAAP Adjustments to conform to IFRS Goodwill amortisation b - 48.8 49.8 Goodwill impairment b - (4.7) (7.2) Amortisation of acquisition- c - (13.4) (9.4)related intangibles Employee benefits d (1.6) (2.9) (3.0) Share-based payment e (0.7) (0.7) (0.7) Reclassification of leases k 0.6 - - Total adjustment to profit/(loss) (1.7) 27.1 29.5 Profit/(loss) for the financial 164.7 (19.0) (65.4)year under IFRS Reconciliation of consolidated balance sheet from UK GAAP to IFRSAt 31 December 2004 2004 IFRS 2004 Notes UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Non-current assets Goodwill b,c,d,f 1,117.9 (40.0) 1,077.9 Other intangible assets c,f,j - 282.1 282.1 Property, plant and equipment f,j,k 341.7 (1.5) 340.2 Interests in associates f 27.4 (17.3) 10.1 Trade and other receivables d,f 14.5 26.0 40.5 Deferred tax asset d 41.9 66.1 108.0 1,543.4 315.4 1,858.8 Current assets Inventories f 34.1 0.1 34.2 Construction contracts 10.0 - 10.0 Trade and other receivables f 688.6 5.7 694.3 Trading investments 60.7 - 60.7 Cash and cash equivalents f 184.1 7.5 191.6 977.5 13.3 990.8 Non current assets held for sale d 36.3 (6.4) 29.9 Total assets 2,557.2 322.3 2,879.5 Current liabilities Bank overdrafts and loans (106.2) - (106.2) Obligations under finance leases f,k (15.4) (5.1) (20.5) Tax liabilities f (21.6) (0.8) (22.4) Dividends declared i (23.5) 23.5 - Trade and other payables f (687.6) (3.8) (691.4) Retirement benefit obligation (1.0) - (1.0) Short-term provisions (5.0) - (5.0) (860.3) 13.8 (846.5) Non-current liabilities Bank loans f (655.9) (39.2) (695.1) Obligations under finance leases f,k (9.5) (7.4) (16.9) Trade and other payables (16.0) - (16.0) Long-term provisions d (68.7) (4.0) (72.7) Retirement benefit obligation d (17.3) (215.9) (233.2) Deferred tax liabilities c,d,f, (11.5) (77.7) (89.2) (778.9) (344.2) (1,123.1) Total Liabilities (1,639.2) (330.4) (1,969.6) Net assets 918.0 (8.1) 909.9 Equity Share capital 316.1 - 316.1 Reserves 571.4 (8.1) 563.3 Equity attributable to equity 887.5 (8.1) 879.4holders of the parent Minority interests 30.5 - 30.5 Total Equity 918.0 (8.1) 909.9Reconciliation of equity from UK GAAP to IFRSAt 1 January 2004 (the date of transition) and 31 December 2004 As at As at 1 January 31 2004 December Notes 2004 Equity under UK GAAP 323.6 918.0 Adjustments to conform to IFRS Goodwill amortisation b - 49.8 Goodwill impairment b - (7.2) Amortisation of acquisition- c - (9.4)related intangibles Employee benefits d (72.2) (130.7) Tax effect of above d 21.7 65.9 Dividends i 3.6 23.5 Total adjustment to equity (46.9) (8.1) Equity under IFRS 276.7 909.9As presented above, the group has followed the requirements of IFRS 1"First-time Adoption of International Financial Reporting Standards", andprovided a reconciliation of equity as at the date of transition and as at 31December 2004, being the end of the financial year for which the grouppublished its last financial statements under previous GAAP. A reconciliationof the consolidated balance sheet from UK GAAP to IFRS as at 31 December 2004has been presented on page 7. As permitted by IFRS 1, a reconciliation of theconsolidated balance sheet from UK GAAP to IFRS has not been presented as atthe date of transition. In the opinion of the directors, this would not berelevant as it relates to the security businesses of the former Group 4 Falckonly and does not reflect the continuing business.Reconciliation of consolidated statement of recognised gains and losses("STRGL") under UK GAAP to consolidated statement of recognised income andexpenses ("SORIE") under IFRSFor the year ended 31 December 2004 Notes 2004 IFRS 2004 UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Exchange differences on 7.4 0.3 7.7translation of foreign operations Actuarial losses on defined d - (16.5) (16.5)benefit pension schemes Tax on items taken directly d - 4.9 4.9to equity Net income recognised directly 7.4 (11.3) (3.9)in equity Loss for the year (94.9) 29.5 (65.4) Total recognised income (87.5) 18.2 (69.3)and expense Attributable to: Equity holders of the parent (94.4) 18.2 (76.2) Minority interest 6.9 - 6.9 (87.5) 18.2 (69.3)Reconciliation of consolidated cash flow statement from UK GAAP to IFRSAt 31 December 2004 2004 IFRS 2004 Notes UK GAAP adjustment IFRS ‚£m ‚£m ‚£m Cash flows from operating activities Cash generated from operations d,e,f,j,k 157.5 9.2 166.7 Income taxes paid f (30.3) 0.3 (30.0) Net cash from operating activities 127.2 9.5 136.7 Cash flows from investing activities Net cash flow from returns on 4.5 - 4.5investments and servicing of finance Net cash flow from capital f (81.7) (1.4) (83.1)expenditure Net cash flow from acquisitions and f (39.9) 3.9 (36.0)disposals Net movement in funding balances (48.9) - (48.9)with demerged businesses of the former Group 4 Falck A/S Purchase of trading investments (11.6) - (11.6) Net cash from investing activities (177.6) 2.5 (175.1) Cash flows from financing activities Net proceeds from issue of share 5.6 - 5.6capital Capital repayments of obligations k (4.5) (1.4) (5.9)under finance leases Increase in borrowings f 210.8 (0.9) 209.9 Dividends paid (5.6) - (5.6) Interest paid f,k (23.4) (2.2) (25.6) Net cash from financing activities 182.9 (4.5) 178.4 Net increase in cash and 132.5 7.5 140.0cash equivalents Reconciliation of net debt from UK GAAP to IFRS As at As at 1 January 31 2004 December Notes 2004 Net debt under UK GAAP (382.4) (595.8) Adjustments to conform to IFRS Reclassification of finance leases k (4.0) (12.2) Proportionate consolidation of joint f - (32.0)ventures Reclassification of securities as l 46.6 53.6liquid resources Total adjustment to net debt 42.6 9.4 Net debt under IFRS (339.8) (586.4)EXPLANATION OF ADJUSTMENTS TO CONFORM TO IFRSThe analysis below sets out the most significant adjustments to the financialresults for Group 4 Securicor plc for the year to 31 December 2004 arising fromthe transition to IFRS. a. Presentation of financial statements The format of the group's primary financial statements has been presented inaccordance with IAS 1 "Presentation of Financial Statements". The resultantchanges have a significant impact on the presentation of the group's share ofresults of associated undertakings and discontinued operations in theConsolidated Income Statement.Under UK GAAP, the group's share of associated undertakings was disclosedseparately in the Consolidated Income Statement, by operating profit, interestand taxation. Under IFRS, the results of associated undertakings are presentedas a single line item net of tax, as a component of profit before tax.Discontinued operations have been presented in accordance with IFRS 5"Non-current Assets Held for Sale and Discontinued Operations" as a single lineitem, being the total of the post tax profit or loss of discontinued operationsand the post tax gain or loss on disposal of those businesses constitutingdiscontinued operations.IFRS does not follow UK GAAP requirements of specific presentation of`exceptional' items on the face of the Income Statement, but does requireadditional items to be disclosed when such presentation is relevant to anunderstanding of an entity's financial performance. The group therefore intendsto continue to separately identify items similar to those previously treated asexceptional under UK GAAP, with the exception of profit/loss on disposal onsale or termination of operations, which is included in the result fordiscontinued operations, as described above. b. Non-amortisation of Goodwill Under UK GAAP, goodwill arising on acquisition was capitalised and amortisedover its useful economic life. In accordance with IFRS 3 "BusinessCombinations", goodwill is not amortised, but is tested for impairment at leastannually, in accordance with IAS 36 "Impairment of Assets".In the restatement to IFRS, the amortisation charge has been reversed from thedate of transition and added back to profit for the year. The revised goodwillfigure has been tested for impairment as at 31 December 2004 and, as a result,the impairment of goodwill under UK GAAP increases by the 2004 amortisationcharge associated with those businesses. In addition, the provision for loss ondisposal of discontinued operations increases. c. Business combinations IFRS 3 introduces significant changes to accounting for business combinationscompared to UK GAAP, the most significant of which being the recognition ofseparable or contractual intangible assets on an acquisition. The group haselected not to apply IFRS 3 retrospectively to business combinations prior to 1January 2004.The application of IFRS 3 and IAS 38 "Intangible Assets" has resulted in therecognition of separable or contractual intangibles comprising trademarks,technology and customer-related intangibles, on the acquisition of Securicorand other acquisitions during the year. A deferred tax liability is provided inrespect of these intangible assets in accordance with IAS 12 "Income Taxes".These intangibles are amortised over their useful economic lives, applicable tothe individual characteristics of the respective asset. Amortisation has beencharged to the Consolidated Income Statement from the date of acquisition,together with a related deferred tax credit.EXPLANATION OF ADJUSTMENTS TO CONFORM TO IFRS (continued) d. Employee benefits Under UK GAAP, the group accounted for post-retirement benefits in accordancewith SSAP 24 "Accounting for pension costs" and provided detailed disclosuresunder FRS 17 "Retirement benefits". Under SSAP 24, the regular cost ofproviding benefits is charged to operating profit on a systematic basis overthe service lives of member employees with any variation from the regular costbeing allocated over the expected remaining service lives of members. Pensionfund liabilities are valued on a best estimate basis.The approach under IFRS falls under the scope of IAS 19 "Employee Benefits", asamended by the IASB, which is consistent with the approach under FRS 17. Thestandard requires recognition on the balance sheet of employee benefit (largelypension) liabilities. As a result, the full surplus or deficit for eachretirement benefit scheme, representing the difference between the market valueof the scheme's assets and the present value of the accrued liabilities, isrecognised as an asset or liability on the balance sheet. The group has electedto adopt the amendment to IAS 19, which permits actuarial gains and losses tobe charged or credited immediately to equity through the Statement ofRecognised Income and Expense (SORIE). The current cost of benefits accrued inthe period is calculated according to the IAS 19 methodology and the charge tothe income statement is therefore higher than under SSAP 24. e. Share-based payment Under UK GAAP, the group recognised a charge to the profit and loss account forshare-based compensation based on the intrinsic value of the share benefits atthe date of the award expensed over the period of performance. The group'sprincipal schemes comprise savings-related and discretionary share optionschemes. Under UK GAAP, there is no charge for these share-based compensationschemes because they either have an intrinsic value of nil, resulting from theoption price being set at the market value at the date of grant, or becausethey are an Inland Revenue approved scheme, and therefore excluded from therequirement to record a charge.The requirements for accounting for employee share options under IFRS are setout in IFRS 2 "Share-based Payment". This requires an entity to recognise acharge to income in respect of share options based on the fair value of theawarded options at the date of grant. This expense is recognised over therelevant vesting periods, adjusted to reflect the actual and expected levels ofvesting. The group has adopted the Black-Scholes valuation technique for thepurpose of computing fair values under IFRS 2.IFRS 2 has not been applied to options either granted on or before 7 November2002 and/or vesting prior to 1 January 2005, in accordance with the exemptionpermitted in IFRS 1. f. Joint ventures Under UK GAAP, joint ventures are accounted for in accordance with FRS 9"Associates and joint ventures", whereby the results of joint ventureoperations are recognised under the gross equity method. Under this method ofaccounting, the group's share of joint venture turnover was recognised as partof total turnover, and operating profit, interest and taxation from jointventures was shown separately from the rest of the group's results.The accounting treatment for joint ventures under IFRS is governed by IAS 31"Interests in Joint Ventures". In accordance with IAS 31, the group has electedto account for joint ventures using proportionate consolidation, whereby thegroup recognises its share of their results, assets and liabilities on aline-by-line basis, included within the group's results. There is no separaterecognition.EXPLANATION OF ADJUSTMENTS TO CONFORM TO IFRS (continued)(f) Joint ventures (continued)Following a review of the classification of investments, the group hasconcluded that its interest in Safeguards Securicor Sdn Bhd, in Malaysia,classified as an associate undertaking under UK GAAP, should be accounted foras a joint venture under IFRS. The group's share of its results will beproportionately consolidated in line with the group's other joint ventureoperations, as described above. g. Financial instruments For the year to 31 December 2004, in the UK, there was no accounting standardwhich comprehensively addressed accounting for financial instruments, althoughthe disclosure was dealt with in FRS 13 "Derivatives and other financialinstruments: disclosures". IFRS provides detailed guidance on financialinstrument recognition, measurement, presentation and disclosure within IAS 32"Financial Instruments: Disclosures and Presentation" and IAS 39 "FinancialInstruments: Recognition and Measurement".IFRS requires that all derivative financial instruments must be recognised inthe balance sheet as financial assets or financial liabilities and marked tomarket, therefore recorded at their fair value. The change in the fair value ofa derivative instrument is taken immediately to the income statement, resultingin profit and loss volatility, unless it can be demonstrated on inception thatit fulfils a specified hedge function, and can be demonstrated to be effectivein this function.If fair value hedge accounting is applied, the fair value of the derivativewill be offset by a change in the fair value of the hedged item, which willalso be recognised in the income statement. When cash flow hedging is applied,the change in the fair value of the derivative is taken to equity, subsequentlybeing recycled to the income statement when the hedged cash flow impacts theincome statement. The change in the fair value of any ineffective portion of aderivative is taken to the income statement.In accordance with the exemption in IFRS 1, the group will be applying IAS 32and IAS 39 prospectively from 1 January 2005. h. Deferred taxation Under UK GAAP, deferred tax is accounted for under FRS19 "Deferred Taxation"and was provided in full on timing differences between the recognition of gainsand losses in the financial statements and their recognition in taxcomputations. Provision was made for deferred tax that would arise upon theremittance of overseas subsidiaries only to the extent that the dividends hadbeen accrued as received.In accordance with IAS 12 "Income Taxes", deferred tax must be recognised onall taxable temporary timing differences between the accounting base and taxbase of assets and liabilities. As a result, under IFRS deferred tax isrecognised on certain temporary differences that would not generate deferredtax in the UK. i. Dividends Under UK GAAP, the final proposed dividend was provided for in the year-endresults. Under IFRS, however, this is not permitted because it does notrepresent a present obligation as defined by IAS 37 "Provisions, ContingentLiabilities and Contingent Assets". Dividends are provided for in the year theyare declared. The amount provided for in the 2004 financial statements istherefore reversed. Similarly an adjustment is made in the transition balancesheet.EXPLANATION OF ADJUSTMENTS TO CONFORM TO IFRS (continued) j. Capitalisation of software Under UK GAAP, capitalised computer software is included within tangible fixedassets on the balance sheet. Under IFRS, all separately identifiablecapitalised computer software should be shown as an intangible asset, exceptwhere it is integral to a related item of hardware. In this instance it remainsclassified within property, plant and equipment. Any charge to profit inrespect of separately identified computer software is classified asamortisation of intangible assets under IFRS as opposed to depreciation underUK GAAP.Accordingly, software has been reclassified in the balance sheets as at 1January 2004 and 31 December 2004 from property, plant and equipment tointangible assets. This reclassification has no impact on the income statement. k. Leases The criteria applied to the classification of leases as between operatingleases and finance leases are broadly the same under IFRS as under UK GAAP.However, the application to the group's leasing contracts of the series ofqualitative tests laid out in IAS 17 "Leases" has required a reclassificationof certain contracts as finance leases rather than operating leases. Inconsequence, both the value of the asset and the associated financingobligation have been recognised on the balance sheet and costs classified aslease rentals under UK GAAP have been reclassified to depreciation andfinancing costs under IFRS. l. Securities Under UK GAAP, securities held as investments by the group's captive insurancecompanies were not included within net debt. There is no definition of net debtwithin IFRS. However, in the opinion of the directors, net debt includes suchsecurities.APPENDIX : Presentational adjustments to primary Financial Statements under UKGAAPReconciliation of combined pro forma turnover and EBITA presented under UK GAAPto pro forma revenue and PBITA presented under IFRSUK GAAP format 2004 Presentational 2004 UK GAAP adjustment IFRS IFRS format ‚£m ‚£m ‚£m Turnover Total turnover 3,897.6 Less share of Manned (8.2) Security joint venture (Europe) Group turnover 3,889.4 Continuing operations 3,807.5 Discontinued operations 81.9 (81.9) Group turnover 3,889.4 (81.9) 3,807.5 Group Revenue Earnings before Profit from interest, taxation, operations goodwill amortisation before interest, and taxation, exceptional items amortisation and (EBITA) one-off items (PBITA) Continuing operations 207.3 Discontinued operations 2.4 (2.4) Group EBITA 209.7 (2.4) 207.3 Group PBITA Share of joint ventures and associates Continuing operations 9.2 - 9.2 Share of profit from associates Total EBITA 218.9 (2.4) 216.5 Total PBITA Reconciliation of UK GAAP consolidated profit and loss account presented underUK GAAP to UK GAAP consolidated income statement presented under IFRSFor the year ended 31 December 2004 2004 Presentational 2004 UK GAAP format Notes UK GAAP adjustment UK GAAP IFRS format ‚£m ‚£m ‚£m Turnover Total turnover 3,178.4 Less share of joint (4.5) ventures Group turnover 3,173.9 Continuing operations 2,507.8 Acquisitions 602.5 Continuing operations Discontinued 63.6 operations Group turnover a 3,173.9 (63.6) 3,110.3 Revenue Operating profit/ (loss) Continuing operations (24.7) Acquisitions 27.5 Discontinued 1.3 operations Group operating profit a 4.1 156.6 160.7 Profit from operations before amortisation and one-off items Share of operating f 5.7 5.7 Share of profit profit in joint from ventures and associates associates Continuing operations f 2.4 (2.4) Acquisitions f 3.3 (3.3) Total operating profit 168.7 (2.3) 166.4 Profit/(loss) before goodwill from operations amortisation and before operating amortisation exceptional items one-off items Goodwill amortisation (49.8) 1.0 (48.8) Amortisation of acquisition- related intangibles Operating exceptional a (109.1) (37.2) (146.3) One-off items items Total operating profit 9.8 (38.5) (28.7) Total loss from operations Costs of a fundamental a (37.2) 37.2 restructuring Loss on sale or a (37.3) 37.3 closure of discontinued operations Loss on ordinary (64.7) 36.0 activities before interest and taxation Net interest: Group (15.8) 15.8 Joint ventures and (1.6) 1.6 associates f 4.6 4.6 Investment income f (22.0) (22.0) Finance costs (17.4) Loss on ordinary (82.1) 36.0 (46.1) Loss before activities before taxation taxation Taxation: Taxation: Before exceptional a (49.3) 0.4 (48.9) Before one-off items items Exceptional items 36.5 36.5 One-off items (12.8) 0.4 (12.4) (58.5) Loss from operations a (36.4) (36.4) Loss from discontinued operations Loss on ordinary (94.9) (94.9) Loss for the yearactivities after taxation Attributable to: (101.8) Equity holders of the parent Minority interests (6.9) 6.9 Minority interests (94.9) Loss for the year (101.8) Dividends (23.5) Retained deficit (125.3) Reconciliation of UK GAAP consolidated balance sheet presented under UK GAAP toUK GAAP consolidated balance sheet presented under IFRSAt 31 December 2004UK GAAP format UK GAAP Presentational UK GAAP IFRS format adjustment ‚£m ‚£m ‚£m Fixed assets Non-current assets Goodwill 1,117.9 1,117.9 Goodwill Other intangible assets Tangible assets 341.7 341.7 Property, plant and equipment Net investment in 9.2 (9.2) joint ventures Investment in 18.2 9.2 27.4 Interests in associated associates undertakings 14.5 14.5 Trade and other receivables 41.9 41.9 Deferred tax asset 1,487.0 56.4 1,543.4 Current assets Current assets Stocks 34.1 34.1 Inventories 10.0 10.0 Construction contracts Debtors 755.0 (66.4) 688.6 Trade and other receivables Investments 97.0 (36.3) 60.7 Trading investments Cash at bank and in 184.1 184.1 Cash and cash hand equivalents 1,070.2 (92.7) 977.5 36.3 36.3 Non current assets held for sale 2,557.2 Total assets Creditors - amounts Current liabilitiesfalling due within one year Borrowings (121.6) 15.4 (106.2) Bank overdrafts and loans (15.4) (15.4) Obligations under finance leases Corporation tax (21.6) (21.6) Tax liabilities Proposed dividends (23.5) (23.5) Dividends declared Other (687.6) (687.6) Trade and other payables (1.0) (1.0) Retirement benefit obligation (5.0) (5.0) Short-term provisions (854.3) (6.0) (860.3) Net current assets 215.9 Total assets less 1,702.9 current liabilities Creditors - amounts Non-current falling due liabilities after more than one year Borrowings (665.4) 9.5 (655.9) Bank loans (9.5) (9.5) Obligations under finance leases Other (16.0) (16.0) Trade and other payables (68.7) (68.7) Long-term provisions (17.3) (17.3) Retirement benefit obligation (11.5) (11.5) Deferred tax liabilities (681.4) (97.5) (778.9) - Liabilities re assets held for sale (1,639.2) Total Liabilities Provisions (103.5) 103.5 Net assets 918.0 918.0 Capital and Reserves Equity Called up share 316.1 316.1 Share capital capital Reserves 571.4 571.4 Reserves Equity shareholders' 887.5 887.5 Equity attributablefunds to equity holders of the parent Equity minority 30.5 30.5 Minority interests interests Capital employed 918.0 918.0 Total Equity Group 4 Securicor plcReconciliation of summary consolidated cash flow statement presented under UKGAAP to UK GAAP summary consolidated cash flow statement presented under IFRSFor the year ended 31 December 2004UK GAAP format UK GAAP Presentational UK GAAP IFRS Format adjustment ‚£m ‚£m ‚£m Cash flow from Cash flow from operating activities operating activities Net cash flow from 157.5 - 157.5 Cash generated fromoperating activities operations (30.3) (30.3) Income taxes paid Net cash flow from 157.5 (30.3) 127.2 Net cash from operating operating activities activities Returns on investments Cash flows from and servicing of investing finance activities Net cash flow from (21.2) 25.7 4.5 Net cash flow from returns on returns on investments and investments and servicing of servicing of finance finance (81.7) (81.7) Net cash flow from capital expenditure (39.9) (39.9) Net cash flow from acquisitions and disposals (48.9) (48.9) Net movement in funding balances with demerged businesses of the former Group 4 Falck A/S (11.6) (11.6) Purchase of trading investments Net cash outflow from (21.2) (156.4) (177.6) Net cash from returns on investments investing and servicing of activities finance Taxation (30.3) 30.3 Capital expenditure and financial investment Net cash flow from (81.7) 81.7 capital expenditure Purchase of (11.0) 11.0 investments Net cash flow from (92.7) 92.7 capital expenditure and financial investment Net cash flow from (39.9) 39.9 acquisitions and disposals Net movement in (48.9) 48.9 funding balances with demerged businesses of the former Group 4 Falck A/S Dividends paid (3.3) 3.3 Net cash flow from use (0.6) 0.6 of liquid resources Financing Cash flows from financing activities Net proceeds from 5.6 - 5.6 Net proceeds from issue of share capital issue of share capital Capital element of (4.5) - (4.5) Repayments of finance lease rental obligations under payments finance leases Increase in borrowings 210.8 - 210.8 Increase in borrowings (5.6) (5.6) Dividends paid (23.4) (23.4) Interest paid 211.9 (29.0) 182.9 Net cash from financing activities Increase in cash in 132.5 - 132.5 Net increase in the year cash and cash equivalents ENDGROUP 4 SECURICOR PLCRelated Shares:
GFS.L