19th Oct 2005 07:30
Braemar Seascope Group PLC19 October 2005 BRAEMAR SEASCOPE GROUP PLC Adoption of International Financial Reporting Standards 19 October 2005 Braemar Seascope Group PLC ("the Group") is preparing for the adoption ofInternational Financial Reporting Standards (IFRS) as its primary accountingbasis for the year ended 28 February 2006. As part of this transition, BraemarSeascope is presenting unaudited financial information prepared in accordancewith IFRS for the year ended 28 February 2005 and six months ended 31 August2004. This regulatory news release explains how formerly published financialstatements prepared under UK GAAP are reported under IFRS and provides theappropriate reconciliations from UK GAAP to IFRS. The Group's interim results for the six months ending 31 August 2005 will bepublished on 25 October 2005. The interim results including all relevantcomparatives will be prepared in accordance with applicable IFRS. IFRS does not affect the underlying business performance of the Group and has noimpact on cash generated from operations. The principal changes to BraemarSeascope Group PLC's financial information under UK GAAP arising from theadoption of IFRS are as a result of: •The requirement not to amortise goodwill •The recognition of other intangible assets arising on acquisition •The inclusion of a fair value cost associated with employee share options •A change in accounting for foreign exchange KEY POINTS •Reported pre tax profit for the year to 28 February 2005 increases by £1.0m to £8.1m •Reported earnings per share for the year to 28 February 2005 increases from 23.67 pence to 29.50 pence •Reported net assets at 28 February 2005 increases to £28.0m from £25.0m •No impact on cash flows For further information please contact: James Kidwell, Group Finance Director (+44) (0) 207 535 2881 This announcement together with other information regarding Braemar SeascopeGroup PLC can be found at: www.braemarseascope.com 1. INTRODUCTION In accordance with European Regulations for listed entities, Braemar SeascopeGroup PLC is required to adopt International Financial Reporting Standards('IFRS') for its consolidated accounts for accounting periods commencing 1 March2005. The Group's first published interim statements under IFRS will be theresults for the six months to 31 August 2005. These will be published on 25October 2005. In advance of the publication of future results on an IFRS basis, we set outbelow an unaudited restatement of financial statements which were previouslyreported under UK Generally Accepted Accounting Principles ('UK GAAP'), togetherwith a summary and explanations of the major changes. These adjustments areexplained in detail in later sections of this document. The information, whichis unaudited, has been prepared by management using its best knowledge,judgement and interpretation of the expected standards and accounting policiesthat will be adopted when the Group prepares its first complete set of IFRSaccounts as at 28 February 2006. It should be noted that only a complete set ofaccounts comprising an income statement, a balance sheet, a cash flow statement,a statement of recognised income and expense together with comparative financialinformation and explanatory notes can provide a fair presentation of the Group'sfinancial position and operating performance. This financial information doesnot constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985 (as amended). The major accounting changes which are required by the introduction of IFRS are: •Goodwill will no longer be amortised through the income statement and is instead included at cost less impairment charges and is subject to an annual impairment review. The amortisation for the year ended 28 February 2005 under UK GAAP is reversed as part of the IFRS restatement. •On acquisition the excess of consideration over net assets acquired is required to be allocated over a larger, more defined list of intangible assets, with the unallocated balance representing goodwill. Intangible assets, other than goodwill, are amortised through the income statement over their expected useful economic life. •The fair value of share-based payments is recorded as an expense in the income statement, spread over the vesting period. Under UK GAAP there was no charge to profit because executive share options were issued at market value and Save As You Earn options were exempt any charge. •The fair value of outstanding derivative forward currency contracts is required to be included in the balance sheet and the movement in the period included either in the income statement (where hedge accounting has not been applied or to the extent that it has become ineffective) or in equity (where hedge accounting has been applied and remains effective). •Under UK GAAP trade debtors were valued at the contracted rate of exchange (rather than at the closing rate of exchange) to the extent that they were covered by a forward foreign exchange contract. Under IFRS all assets and liabilities are translated at the closing spot rate of exchange. •Under UK GAAP the share of a joint venture's tax charge was reflected as part of the Group's tax charge. Under IFRS the share of the joint venture's post tax result is reflected as part of the Group's profit before tax. There are also significant changes in the presentation of the financialstatements including the presentation of the results of equity accounted jointventures. 2. BASIS OF PREPARATIONThe unaudited financial information in the statements set out below has beenprepared in accordance with the International Accounting Standards ('IAS') andInternational Financial Reporting Standards ('IFRS') expected to apply to theGroup at 28 February 2006. Certain standards are still subject to change. TheEuropean Union has not yet adopted all of the IFRS (including amendments to IAS19 'Employee Benefits' and IAS 39 'Financial Instruments: Recognition andMeasurement') consequently on adoption of these standards there may be furtherchanges to the figures provided in this document. Further IFRS may beintroduced between now and the finalisation of the 2006 Report and Accounts. Asa result there may be further changes when the Group prepares its first fullyear IFRS financial statements. The Group's significant accounting policiesunder IAS and IFRS are set out in section 9 of this document. The Group hastaken advantage of certain exemptions permitted under IFRS 1 - First-timeadoption of IFRS - and these are set out in section 11 of this document. 3. OVERALL IMPACT OF CHANGES The table below summarise the impact of IFRS. Further details are given insections 4,5 and 6. Year ended 28 February 2005 ----------------------- IFRS UK GAAP (unaudited) £000 £000Revenue 45,203 45,057Operating profit 7,790 6,566Profit before tax 8,130 7,120Profit after tax 5,432 4,358 Earnings per share (pence) 29.50 23.67 Net assets 27,985 25,012 4. KEY INCOME STATEMENT AND BALANCE SHEET ADJUSTMENTS This section describes the accounting and financial reporting changes whichaffect the Group's consolidated income statement and balance sheet in transitionfrom UK GAAP to IFRS. The financial impact of each change is set out is sections5 and 6 respectively. (a) Goodwill and business combinationsUnder UK GAAP goodwill was capitalised and amortised over 20 years. The Grouphas taken the exemption under IFRS 1 for Business Combinations. As a result thenet book value of goodwill under UK GAAP has been used as the deemed cost at thedate of transition. Under IFRS 3 goodwill is no longer amortised but is subjectto an annual impairment review. The impact on the Group's financial statementsof this policy is that all goodwill previously amortised in the year ended 28February 2005 has been written back to the balance sheet and income statement. (b) Share-based paymentsIFRS 2 - Share-Based Payments - requires that the Group calculate the fair valueat the date of grant of awards of share options made to directors and employees.The fair value is then amortised in the income statement over the vesting periodof the options with a corresponding credit to equity. In applying the provisionsof IFRS 2 - Share based payments, the group has adopted the exemption to applythis standard only to awards granted after 7 November 2002 and vesting after 28February 2004. No charge is recognised in respect of awards granted prior tothat date. Deferred taxation is provided in respect of the charge. (c ) Foreign exchangeUnder IAS 21 - the effects of changes in foreign exchange rates - trade debtorsare translated at the prevailing rate of exchange at the balance sheet date.Under SSAP 20 trade debtors were permitted to be translated at the contract rateto the extent that they were covered by forward foreign exchange contracts. Theadjustment to revalue the trade debtor under IFRS is reflected in income withinthe income statement. Under IFRS, a foreign currency translation reserve in respect of the conversionof foreign currency denominated investments is required to be separatelymeasured and included in foreign currency translation differences in the equityand reserves section of the balance sheet. Therefore there is an adjustment toreclassify these translation differences out of the profit and loss reserve. (d) Reclassifications - Income StatementUnder UK GAAP, the profit on sale of investments is shown as an exceptional itembelow operating profit whereas under IFRS this is reflected as an other gainwithin operating profit. Under UK GAAP, the Group's share of profits of associates and joint ventures forthe year to 28 February 2005 is shown before tax of £107,000 which is includedin the taxation charge. Under IFRS, the Group's share of profits is reportedafter tax with no amount in the taxation charge. - Balance sheetUnder UK GAAP certain assets, which are expected to be recovered after more thanone year, and other non-current assets were shown as part of current assets andshown separately as to their long term nature in a note to the accounts. UnderIFRS these are reflected within non-current assets. (e) Financial InstrumentsUnder UK GAAP the mark-to-market value of outstanding derivative contracts wasnot recognised in the balance sheet. Under IAS 39 - Financial Instruments:recognition and measurement - the mark-to-market value of derivative contractsis recognised in the balance sheet as an asset or liability. Where it can bedemonstrated that a derivative is an effective hedge the value is recognisedwithin a hedging reserve or, if ineffective, within the income statement.Deferred tax is provided in respect of the gain or loss. (f) TaxationUK GAAP required deferred taxation to be recognised on timing differenceswhereas IFRS requires that deferred taxation is provided on all temporarydifferences including the revaluation of non-monetary assets and on un-remittedoverseas earnings to the extent that a tax charge is foreseeable. Under UK GAAP,deferred tax assets and liabilities were shown on a net basis. IFRS requiresseparate disclosure of deferred tax assets and liabilities. Deferred tax assetsare reclassified as long-term assets to the extent they are recoverable aftermore than one year. (g) Dividend recognitionUnder IAS10 - Events After the Balance Sheet Date - dividends are not recogniseduntil they are approved. The final and interim dividends approved after the endof the relevant accounting period have therefore been reversed, resulting in anincrease in net assets at the end of each accounting period. Dividends will nolonger be shown as appropriations on the face of the income statement butinstead will be shown within the analysis of movements on reserves. (h) Other intangible assets.From 1 March 2004, business acquisitions have been accounted for in accordancewith IFRS 3 - Business Combinations - which requires the acquirer to allocatethe purchase price across the identifiable assets and liabilities. As a resultan intangible asset has been recognised on the acquisition of Braemar SeascopePty Limited (formerly Seawise Australia Pty Limited). Under IAS 38 - IntangibleAssets - the Group is required to capitalise the fair value of the forward orderbook and to amortise it over its estimated useful life. In respect of thepurchase Braemar Seascope Pty Limited the Group has capitalised the forwardorder book at a value of £215,000 with a resulting reduction in the value ofgoodwill. The expected life of the forward order book is up to two years. 5. RESTATED INCOME STATEMENT Braemar Seascope Group PLCConsolidated income statement Year to 6 months to 28-Feb-05 31-Aug-04 £000 £000 Revenue 45,203 17,439 ---------- ---------Operating costs (37,535) (14,297)Other gains 123 - ---------- --------- (37,412) (14,297) ---------- ---------Operating profit 7,790 3,142 Finance income 28 5Finance costs (53) (50)Share of profit from joint ventures 365 171 ---------- ---------Profit before tax 8,130 3,268Taxation (2,699) (1,063) ---------- ---------Profit for the period attributable to shareholders 5,432 2,205 ---------- --------- Earnings per shareBasic - pence 29.50 11.89Diluted - pence 28.59 11.78 Braemar Seascope Group PLCConsolidated income statement Six months to 31 August 2004 Year to 28 February -------------------- 2005 --- -------- --------------- UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS £000 £000 £000 £000 £000 £000 Revenue 17,526 (087) 17,439 45,057 146 45,203 ------- -------- ------- ------- -------- --------Operatingcosts (14,806) 509 (14,297) (38,491) 956 (37,535)Other gains - - - - 123 123 ------- -------- ------- ------- -------- -------- (14,806) 509 (14,297) (38,491) 1,079 (37,412) ------- -------- ------- ------- -------- --------Operatingprofit 2,720 422 3,142 6,566 1,225 7,791Profit on saleof investments - - - 123 (123) -Finance income 5 - 5 28 - 28Finance (50) - (50) (53) - (53)costsShare ofprofit fromjoint ventures 223 (52) 171 456 (91) 365 ------- -------- ------- ------- -------- --------Profit beforetax 2,898 370 3,268 7,120 1,011 8,131Taxation (1,141) 78 (1,063) (2,762) 63 (2,699) ------- -------- ------- ------- -------- --------Profit for theperiod 1,757 448 2,205 4,358 1,074 5,432 ------- -------- ------- ------- -------- -------- Earnings pershare Basic - 9.47 2.42 11.89 23.67 5.83 29.50penceDiluted -pence 9.39 2.39 11.78 22.94 5.65 28.59 IFRS Income statement adjustmentsfor the six months ended 31 August 2004 Goodwill Share Foreign Reclass- Total Amortisation Options Exchange ification IFRS (a) (b) (c) (d) Adjustments £000 £000 £000 £000 £000Revenue - - (87) - (87) --------- ------- -------- -------- ---------Operating costs 548 (39) - - 509 --------- ------- -------- -------- --------- 548 (39) - - 509 --------- ------- -------- -------- ---------Operating profit 548 (39) (87) - 422Finance income - - - - -Finance costs - - - - -Share of profit fromjoint ventures - - - (52) (52) --------- ------- -------- -------- ---------Profit before tax 548 (39) (87) (52) 370Taxation - - 26 52 78 --------- ------- -------- -------- ---------Profit for the period 548 (39) (61) - 448 --------- ------- -------- -------- --------- IFRS Income statement adjustmentsfor the year ended 28 February 2005 Goodwill Share Foreign Reclass- Total Amortisation Options Exchange ification IFRS (a) (b) (c) (d) Adjustments £000 £000 £000 £000 £000Revenue - - 146 - 146 --------- ------- -------- -------- ---------Operating costs 1,034 (78) - - 956Other gains - - - 123 123 --------- ------- -------- -------- --------- 1,034 (78) - 123 1,079 --------- ------- -------- -------- ---------Operating profit 1,034 (78) 146 123 1,224Profit on sale ofinvestments - - - (123) (123)Finance income - - - - -Finance costs - - - - -Share of profit fromjoint ventures 16 - - (107) (91) --------- ------- -------- -------- ---------Profit before tax 1,050 (78) 146 (107) 1,010Taxation - - (44) 107 63 --------- ------- -------- -------- ---------Profit for the period 1,050 (78) 102 - 1,074 --------- ------- -------- -------- --------- 6. RESTATED BALANCE SHEET Braemar Seascope Group PLC Consolidated Balance Sheet As at 28 February 2005 As at ----------------- 28-Feb-05 31-Aug-04 ASSETS £000 £000 Non-current assets Property, plant and equipment 4,960 4,911 Goodwill 21,587 18,537 Other intangible assets 215 - Investments 1,555 1,625 Deferred tax assets 262 250 Other receivables 95 107 --------- ---------- 28,674 25,430 Current assets Trade and other receivables 11,688 9,729 Financial instruments - - Restricted cash 4,434 8,329 Cash and cash equivalents 9,606 4,894 --------- ---------- 25,728 22,952 --------- ---------- Total assets 54,402 48,382 --------- ---------- LIABILITIES Current liabilities Trade and other payables 17,170 11,633 Current tax payable 1,556 1,161 Short term borrowings 3,067 3,830 Finance leases 39 - Client monies held as escrow agent 4,434 8,329 --------- ---------- 26,266 24,953 Provisions 151 121 --------- ---------- Total liabilities 26,417 25,074 --------- ---------- Total assets less total liabilities 27,985 23,308 --------- ---------- EQUITY Share capital 1,945 1,862 Capital redemption reserve 396 396 Share premium 7,505 7,506 Shares to be issued (637) (65) Merger reserve 21,346 18,302 Hedging reserve - - Translation reserve (8) - Other reserves 100 61 Retained earnings (2,661) (4,754) --------- ---------- Total equity 27,985 23,308 --------- ----------Braemar Seascope Group PLCConsolidated Balance Sheets At 31 August 2004 At 28 February 2005 ------------- --- ------ ------------- --- ------ UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRSASSETS £000 £000 £000 £000 £000 £000Non-currentassetsProperty,plant andequipment 4,911 - 4,911 4,960 - 4,960Goodwill 17,997 540 18,537 20,768 819 21,587Otherintangibleassets - - - - 215 215Investments 1,617 8 1,625 1,539 16 1,555Deferred taxassets - 250 250 - 262 262Otherreceivables - 107 107 - 95 95 ------- -------- ------- ------- -------- ------- 24,525 905 25,430 27,267 1,407 28,674Current assetsTrade andotherreceivables 9,961 (232) 9,729 11,688 - 11,688Deferred taxassets 180 (180) - 262 (262) -Othernon-currentassets 107 (107) - 95 (95) -Restrictedcash 8,329 - 8,329 4,434 - 4,434Cash and cashequivalents 4,894 - 4,894 9,606 - 9,606 ------- -------- ------- ------- -------- ------- 23,471 (519) 22,952 26,085 (357) 25,728 ------- -------- ------- ------- -------- -------Total assets 47,996 386 48,382 53,352 1,050 54,402 ------- -------- ------- ------- -------- ------- LIABILITIESCurrentliabilitiesTrade andother payables 12,746 (1,113) 11,633 19,093 (1,923) 17,170Current taxpayable 1,161 - 1,161 1,556 - 1,556Short termborrowings 3,830 - 3,830 3,067 - 3,067Finance leases - 39 - 39Client moniesheld as escrowagent 8,329 - 8,329 4,434 - 4,434 ------- -------- ------- ------- -------- ------- 26,066 (1,113) 24,953 28,189 (1,923) 26,266 Provisions 121 - 121 151 - 151Totalliabilities 26,187 (1,113) 25,074 28,340 (1,923) 26,417 ------- -------- ------- ------- -------- -------Total assetsless totalliabilities 21,809 1,499 23,308 25,012 2,973 27,985 ------- -------- ------- ------- -------- ------- EQUITYShare capital 1,862 - 1,862 1,945 - 1,945Capitalredemptionreserve 396 - 396 396 - 396Share premium 7,506 - 7,506 7,505 - 7,505Shares to beissued (65) - (65) (637) - (637)Merger reserve 18,302 - 18,302 21,346 - 21,346Translationreserve - - - - (8) (8)Other reserves - 61 61 - 100 100Retainedearnings (6,192) 1,438 (4,754) (5,543) 2,882 (2,661) ------- -------- ------- ------- -------- -------Total equity 21,809 1,499 23,308 25,012 2,973 27,985 ------- -------- ------- ------- -------- ------- IFRS adjustments to 28 February 2005balance sheet Goodwill Share Foreign Reclass- Dividend Other Total Amortisation Options Exchange ification accrual Intangibles IFRS Notes (a) (b ) (c) (d) (g) (h) AdjustmentsASSETS £000 £000 £000 £000 £000 £000 £000Non-currentassetsProperty, -plant andequipmentGoodwill 1,034 (215) 819Otherintangibleassets 215 215Investments 16 16Deferred taxassets 262 262Otherreceivables 95 95 --------- ------- -------- ------- -------- -------- --------- 1,050 - - 357 - - 1,407CurrentassetsTrade and -otherreceivablesDeferred taxassets (262) (262)Othernon-currentassets (95) (95)Restricted -cashCash and cash -equivalents --------- ------- -------- ------- -------- -------- --------- - - - (357) - - (357) --------- ------- -------- ------- -------- -------- ---------Total assets 1,050 - - - - - 1,050 --------- ------- -------- ------- -------- -------- --------- LIABILITIESCurrentliabilitiesTrade andother payables (1,923) (1,923)Current tax -payableShort term -borrowingsFinance -leasesClient monies -held as escrow --------- ------- -------- ------- -------- -------- ---------agent - - - - (1,923) - (1,923) Provisions - --------- ------- -------- ------- -------- -------- ---------Totalliabilities - - - - (1,923) - (1,923) --------- ------- -------- ------- -------- -------- ---------Total assetsless totalliabilities 1,050 - - - 1,923 - 2,973 --------- ------- -------- ------- -------- -------- --------- EQUITYShare -capitalCapital -redemptionreserveShare -premiumShares to be -issuedMerger -reserveTranslationreserve (8) (8)Other reserves 100 100Retainedearnings 1,050 (100) 8 1,923 2,881 --------- ------- -------- ------- -------- -------- ---------Total equity 1,050 - - - 1,923 - 2,973 IFRS adjustments to 31 August 2004 balance sheet Goodwill Share Foreign Reclass- Dividend Total Amortisation Options Exchange ification accrual IFRS Notes (a) (b ) (c) (d) (g) AdjustmentsASSETS £000 £000 £000 £000 £000 £000Non-currentassetsProperty, -plant andequipmentGoodwill 540 540Other -intangibleassetsInvestments 8 8Deferred taxassets 70 180 250Otherreceivables 107 107 548 - 70 287 - 905CurrentassetsTrade andotherreceivables (232) (232)Deferred taxassets (180) (180)Othernon-currentassets (107) (107)Restricted -cashCash and cash -equivalents - - (232) - - (519) Total assets 548 - (163) - - 385 LIABILITIESCurrentliabilitiesTrade andother payables (1,113) (1,113)Current tax -payableShort term -borrowingsFinance -leasesClient monies -held as escrowagent - - - - (1,113) (1,113) Provisions - Totalliabilities - - - - (1,113) (1,113) Total assetsless totalliabilities 548 - (163) - 1,113 1,498 EQUITYShare -capitalCapital -redemptionreserveShare -premiumShares to be -issuedMerger -reserveTranslation -reserveOther reserves 61 61Retainedearnings 548 (61) (163) 1,113 1,438Total equity 548 - (163) - 1,113 1,498 7. RESTATED CASH FLOW STATEMENT Braemar Seascope Group PLCConsolidated Cash Flow Statement Year to Half year to 28-Feb-05 31-Aug-04 £000 £000Cash flows from operating activitiesCash generated from operations 11,044 1,622Interest received 26 3Interest paid (52) (20)Tax paid (2,448) (884) --------- ---------Net cash generated from operating activities 8,570 721 --------- --------- Cash flows from investing activitiesDividends from joint ventures - -Acquisition of subsidiary, net of cash acquired (1,026) -Purchase of property, plant and equipment (175) (102)Proceeds from sale of property, plant and equipment 11 -Purchase of investments (21) (26)Proceeds from sale of investment 386 -Other long term assets 8 (4) --------- ---------Net cash used in investing activities (817) (132) --------- --------- Cash flows from financing activitiesProceeds from issue of ordinary shares 1 1Dividends paid (2,597) (1,484)Purchase of own shares (572) -Payment of principal under finance leases (2) -Other (2) - --------- ---------Net cash used in financing activities (3,172) (1,483) --------- --------- --------- ---------Increase/(decrease) in cash and cash equivalents 4,581 (894) --------- --------- Cash and cash equivalents at beginning of the period 1,958 1,958Foreign exchange differences - - --------- ---------Cash and cash equivalents at end of the period 6,539 1,064 --------- --------- Balance sheet analysis of cash and cash equivalentsCash and cash equivalents 9,606 4,894Short term borrowings (3,067) (3,830) --------- --------- 6,539 1,064 --------- --------- Braemar Seascope Group PLCConsolidated Cash flow Year ended 28 6 months ended February 2005 31 August 2004 ----------------- ------------------ UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS £000 £000 £000 £000 £000 £000Cash flows fromoperatingactivitiesCash generatedfromoperations 11,052 (8) 11,044 1,618 4 1,622Interestreceived 26 - 26 3 - 3Interest paid (52) - (52) (20) - (20)Tax paid (2,448) - (2,448) (884) - (884) ------- -------- ------- -------- -------- -------Net cash fromoperatingactivities 8,578 (8) 8,570 717 4 721 ------- -------- ------- -------- -------- ------- Cash flows frominvestingactivitiesAcquisition ofsubsidiary,net of cashacquired (1,026) - (1,026) - - -Purchase offixed assets (175) - (175) (102) - (102)Proceeds fromsale of fixedassets 11 - 11 - - -Purchase ofinvestments (21) - (21) (26) - (26)Proceeds fromsale ofinvestment 386 - 386 - - -Other longterm assets - 8 8 - (4) (4) ------- -------- ------- -------- -------- -------Net cash usedin investingactivities (825) 8 (817) (128) (4) (132) ------- -------- ------- -------- -------- ------- Cash flows fromfinancingactivitiesProceeds fromissue ofordinaryshares 1 - 1 1 - 1Dividends paid (2,597) - (2,597) (1,484) - (1,484)Purchase ofown shares (572) - (572) - - -Payment ofprincipalunder financeleases (2) - (2) - - -Other (2) - (2) - - - ------- -------- ------- -------- -------- -------Net cash usedin financingactivities (3,172) - (3,172) (1,483) - (1,483) ------- -------- ------- -------- -------- ------- Net increasein cash andbankoverdrafts 4,581 - 4,581 (894) 0 (894) Cash and cashequivalents atbeginning ofthe period 1,958 - 1,958 1,958 - 1,958Exchange gains/ - - - - - -losses ------- -------- ------- -------- -------- -------Cash and cashequivalents atend of theperiod 6,539 - 6,539 1,064 0 1,064 ------- -------- ------- -------- -------- ------- Notes:(a) Under UK GAAP the movement in other long-term debtors was shown as part ofworking capital within operating cash flows whereas under IFRS it is shownwithin investing cash flows. 8. SEGMENTAL INFORMATION SegmentalInformation Six months to 31 August 2004 Year to 28 February 2005 -------------------- ---------------------Revenue UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS £000 £000 £000 £000 £000 £000Shipbroking 13,364 (87) 13,277 32,274 146 32,420Ship agency,forwarding &logistics 2,100 - 2,100 8,461 - 8,461Technicalshippingsupport 2,062 - 2,062 4,322 - 4,322 -------- -------- -------- -------- -------- -------- 17,526 (87) 17,439 45,057 146 45,203 -------- -------- -------- -------- -------- -------- OperatingprofitShipbroking 3,421 (126) 3,295 8,673 190 8,863Ship agency,forwarding &logistics (226) - (226) (282) (931) (1,213)Technicalshippingsupport 73 - 73 140 - 140Goodwillamortisation (548) 548 - (1,078) 1,078 -Exceptionalimpairment (887) 887 - -------- -------- -------- -------- -------- -------- 2,720 422 3,142 6,566 1,224 7,790 -------- -------- -------- -------- -------- -------- Net assets As at As at As at As at As at As at 31-Aug-04 31-Aug-04 31-Aug-04 28-Feb-05 28-Feb-05 28-Feb-05 £000 £000 £000 £000 £000 £000Shipbroking 19,068 1,458 20,526 22,881 2,957 25,838Ship agency,forwarding &logistics 1,171 24 1,195 376 - 376Technicalshippingsupport 988 8 996 996 - 996Share ofjoint 582 8 590 759 16 775ventures -------- -------- -------- -------- -------- -------- 21,809 1,498 23,307 25,012 2,973 27,985 -------- -------- -------- -------- -------- -------- Segment adjustments Revenue- The adjustments are in respect of foreign exchange adjustments - see 4 (c)above. Operating Profit- The Shipbroking adjustments are in respect of foreign exchange, the cost ofshare options and reclassifications into operating profit - see 4 (b) and (d)above.- The Ship agency, forwarding & logistics adjustment is in respect of a goodwillimpairment charge.- Goodwill amortisation charged under UK GAAP has been reversed. Net assets- The shipbroking adjustments in the year to 28 Feb 2005 are in respect ofgoodwill amortisation (£1,034,000), the cost of share options (£70,000),financial instruments (£1,076,000) and dividends (£1,923,000). 9. RECONCILIATION OF NET ASSETS/EQUITY AT 1 MARCH 2004 £000Net assets at 1 March 2004 under UK GAAP 21,164Reversal of proposed final dividend 1,491Foreign exchange translation of debtors (102) Net assets at 1 March 2004 under IFRS 22,553 10. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting and consolidationThe financial statements will be prepared in accordance with IFRS for the firsttime for accounting periods commencing from 1 March 2005. They will be preparedon the historical cost basis, except for the derivative financial instrumentswhich are measured at fair value. The principal accounting policies expected tobe adopted in the preparation of the 2005/6 Group accounts under IFRS are setout below. The consolidated accounts incorporate the accounts of Braemar Seascope Group PLCand all its subsidiary undertakings made up to 28 February each year. The results of companies acquired or disposed of during the year are included inthe group from the effective date of acquisition or up to the effective date ofdisposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Revenue recognitionRevenue consists of commission arising from tanker and dry cargo charterbroking, sale and purchase broking, offshore broking, financial consultancyarrangement fees and fees for the supply of technical and agency services. Thepolicies for accounting for revenue are as follows: Shipbroking - income is recognised when the company has a contractualentitlement to commission, normally the point at which there is completion ofcontractual terms between the principals of a transaction. Technical services - fee income is recognised as invoiced for work performed and/or in accordance with the agreement. Agency, forwarding and logistics - agency income is recognised at the point whenthe ship sails from the port. Forwarding and logistics income is recognised on ashipment basis. Where the Group acts as a principal rather than as agent, theturnover and costs are shown gross. GoodwillOn the acquisition of a business, fair values are attributed to the net assets(including any identifiable intangible assets) acquired. Goodwill arises wherethe fair value of the consideration given exceeds the fair value of the netassets acquired. Goodwill is recognised as an asset and is reviewed forimpairment at least annually. Impairments are recognised immediately in theincome statement. Goodwill is allocated to cash generating units for the purposeof impairment testing. On the disposal of a business, goodwill relating to thatbusiness remaining on the balance sheet is included in the determination of theprofit or loss on disposal. Goodwill written off to reserves prior to 1998 hasnot been reinstated and will not be included in determining any subsequentprofit or loss on disposal. As permitted by IFRS1 goodwill on acquisitionsarising prior to 1 March 2004 has been retained at prior amounts and will betested annually for impairment. Other intangible assetsIntangible assets acquired as part of a business combination are stated in thebalance sheet at their fair value at the date of acquisition less accumulatedamortisation. The amortisation of the carrying value of the forward order bookis charged to the income statement concurrent with the subsequent recognition ofthe income. The carrying values of intangible assets are reviewed for impairmentwhen there is an indication that they may be impaired. LeasingA finance lease is a lease that transfers substantially all the risks andrewards of ownership of an asset. Assets acquired under finance leases arerecorded in the balance sheet as property, plant and equipment at their fairvalue and depreciated over the shorter of their estimated useful lives and theirlease terms. Obligations under such agreements are included in liabilities netof the finance charge allocated to future periods. All other leases areoperating leases, and the rental of these is charged to the income statement asincurred over the life of the lease. Operating lease income is recognised in theincome statement as it is earned. Foreign currenciesThe functional currency of the Group is pounds Sterling. Transactions incurrencies other than pounds Sterling are recorded at the rates of exchangeprevailing on the date of the transaction. Foreign exchange gains and lossesresulting from the settlement of such transactions and from the translation atyear end exchange rates of monetary assets and liabilities denominated inforeign currency are recognised in the income statement. In order to hedge its exposure to certain foreign exchange risks, the Groupenters into forward contracts (see below for details of the Group's accountingpolicies in respect of such derivative financial instruments). Assets and liabilities of overseas subsidiaries and associates are translatedinto pounds Sterling at the exchange rates ruling at the balance sheet date.Trading results are translated at the average rates for the period. Exchangedifferences arising on the consolidation of the net assets of overseassubsidiaries are dealt with through the foreign currency translation reserve,whilst those arising from trading transactions are dealt with in the incomestatement. On disposal of a business, the cumulative exchange differencespreviously recognised in the foreign currency translation reserve relating tothat business are transferred to the income statement as part of the gain orloss on disposal. Deferred taxationFull provision is made for deferred taxation on all taxable temporarydifferences. Deferred tax assets and liabilities are recognised separately onthe balance sheet. Deferred tax assets are recognised only to the extent thatthey are expected to be recoverable. Deferred taxation is recognised in theincome statement unless it relates to taxable transactions taken directly toequity, in which case the deferred tax is also recognised in equity. Thedeferred tax is released to the income statement at the same time as the taxabletransaction is recognised in the income statement. Deferred taxation onun-remitted overseas earnings is provided for to the extent a tax charge isforeseeable. Property, plant and equipmentProperty, plant and equipment are shown at historical cost less accumulateddepreciation and any impairment value.Depreciation is provided at rates calculated to write off the cost, lessestimated residual value of each asset, on a straight line basis over itsexpected useful life as follows (except for long leasehold interests which arewritten off against the remaining period of the lease): Motor Vehicles - three yearsComputers - four yearsFixtures and equipment - four years InvestmentsInvestments in associates and joint ventures are accounted for under the equitymethod of accounting. Investments are carried in the balance sheet at cost pluspost acquisition changes in the Group's share in the net assets of associatesand joint ventures, less any impairment in value. The income statement reflectsthe Group's share of the results of the operations of associates and jointventures. Derivative financial instruments and hedging - adopted from 1 March 2005Derivatives are initially recognised at fair value and are subsequentlyre-measured at their fair value at each balance sheet date. Recognition of theresulting gain or loss depends on whether the derivative is designated as ahedging instrument, and if it is, the nature of the item being hedged. Changesin the fair value of derivatives that do not qualify for hedge accounting arerecognised immediately in the income statement. The Group designates derivativesthat qualify for hedge accounting as a cash flow hedge where there is a highprobability of the forecast transactions arising. The effective portion ofchanges in the fair value of these derivatives are recognised in equity. Thegain or loss relating to the ineffective portion is recognized immediately inthe income statement. Amounts accumulated in equity are dealt with in the incomestatement at the same time as the gains or losses on the hedged items. When aforecast transaction is no longer expected to occur, the cumulative gains orlosses that were reported in equity are immediately transferred to the incomestatement.When a hedging instrument expires or is sold, terminated or exercised, or theentity revokes designation of the hedge relationship but the hedged forecasttransaction is still expected to occur, the cumulative gain or loss at thatpoint remains in equity and is recognised in accordance with the above policywhen the transaction occurs. If the hedged transaction is no longer expected totake place, the cumulative unrealised gain or loss recognised in equity isrecognised immediately in the income statement.The fair value of forward foreign exchange contracts which are traded in activemarkets is based on quoted market prices at the balance sheet date. Share based paymentsThe fair value at the date of grant of share based remuneration, principallyshare options, is calculated using a binomial pricing model and charged to theincome statement on a straight line basis over the vesting period of the award.The charge to the income statement takes account of the estimated number ofshares that will vest. All share-based remuneration is equity settled. In accordance with the IFRS transitional provisions, IFRS2 has been applied togrants of executive share options issued after 7 November 2002 that had notvested as of 1 January 2005. No charge is recognised for grants or share optionsvested prior to those respective dates. Commissions payableCommissions payable to clients are recognised in trade creditors due within oneyear on the earlier of the date of invoicing or the date of receipt of cash. Pension scheme arrangementsThe Group operates several defined contribution pension schemes. The assets ofthe schemes are held separately from those of the Company in an independentlyadministered fund. The pension cost charge represents contributions payable bythe Company to the fund. Segmental analysisThe Group's primary segmental analysis is based on its three business segments:Shipbroking; Ship agency, forwarding and logistics; and Technical shippingsupport. The secondary analysis will be presented according to geographicmarkets comprising UK and the Far East (including Australia). This is consistentwith the way the Group manages itself and with the format of the Group'sinternal financial reporting. 11. IFRS 1 EXEMPTIONS Braemar Seascope Group PLC has taken the following exemptions, as permitted byIFRS 1, in the transition to IFRS: (a) Business combinationsThe accounting for acquisitions that occurred prior to the transition date of 1March 2004 has not been restated. (b) Tangible fixed assetsThe Group has chosen not to restate property, plant and equipment to fair valueat the date of transition. These are carried at historic cost which has beentaken as the effective cost for IFRS purposes. (c ) Share based paymentsThe Group has elected to apply the exemption whereby IFRS 2 only applies toshare options granted after 7 November 2002 but that have not vested by 1March 2005. (d) Financial InstrumentsThe Group has taken advantage of the exemption under IAS 32 & 39 that enablesthe Group to only apply these standards from 1 March 2005. Accordingly, anyhedging gains or losses at 1 March 2004 and 28 February 2005 remain off balancesheet. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Braemar Shipping