15th Aug 2005 07:37
AGA Foodservice Group PLC15 August 2005 15th August 2005FOR IMMEDIATE RELEASE RESTATEMENT OF FINANCIAL INFORMATION UNDER INTERNATIONAL FINANCIAL REPORTINGSTANDARDS 'IFRS' 2004 Aga Foodservice Group plc is preparing for the adoption of InternationalFinancial Reporting Standards 'IFRS' as its primary accounting basis for theyear ending 31st December 2005. As part of this transition, Aga FoodserviceGroup plc is presenting today its primary financial statements and accountingpolicies prepared under IFRS, for the year ended 31st December 2004 and the halfyear ended 30th June 2004, together with explanations and reconcilations of thechanges. Results for the periods ended 31st December 2004 and 30th June 2004 under UKGAAP, as previously released, are available on the Group's website www.agafoodservice.com. The primary changes, as previously highlighted, to the Group's reportedfinancial information at 31st December 2004 and 30th June 2004 from the adoptionof IFRS are as a result of the: • Recognition of all employee benefit related obligations, principally pensions; • Derecognition of goodwill amortisation in the income statement; • Recognition of dividends when approved; • Recognition of deferred tax liabilities on historical property revaluations and other temporary differences. For the year ended 31st December 2004 the impact on profits from the adoption ofIFRS would be to increase operating profit and profit before tax by £5.7m,principally the elimination of £8.0m of goodwill amortisation and £2.3madditional costs of retirement benefit schemes. As at 31st December 2004 totalequity after adoption of IFRS is £275.8m, a reduction of £7.9m from the amountshown in the UK GAAP balance sheet. A full reconciliation between UK GAAP andIFRS of the profit and loss account and balance sheets for the year ended 31stDecember 2004 and half year ended 30th June 2004 are set out on pages 14 - 19 ofthis announcement. Impact of the adoption of IFRS on the full year figures: • 2004 operating profit £35.2m (UK GAAP £29.5m) • 2004 profit before tax £36.3m (UK GAAP £30.6m) • Basic earnings per share 22.9p (UK GAAP 18.4p) • Total equity at 31st December 2004 £275.8m (UK GAAP £283.7m) • 2004 net cash unchanged as a result of the transition Shaun Smith, Finance Director, commented: "This detailed analysis of the impact of IFRS on our interim and full yearfinancial statements for 2004 will help shareholders prepare for the adoption ofthe new rules for the 2005 half year and full year results. As previouslyindicated there will be a positive impact on our operating profit, profit beforetax, EPS and no effect on the net cash flow. We will, in conjunction with our auditors, continue to review the impact of anyfurther IFRS guidance that may be issued by the IASB to ensure that ourimplementation is in accordance with best practice." The interim results for the half year ended 30th June 2005 will be announced on9th September 2005. Enquiries:Shaun Smith, Finance Director - 0121 711 6015 Contents Page Consolidated income statement (restated under IFRS) 3 Statement of recognised income and expenditure (under IFRS) 4 Balance sheets (restated under IFRS) 5 Cash flow statement (restated under IFRS) 6 Accounting policies under IFRS 7 - 13 Reconciliation of equity at 1st January 2004 14 Reconciliation of equity at 31st December 2004 15 Reconciliation of profit at 31st December 2004 andexplanation of reconciling items at 1st January 2004& 31st December 2004 16 - 17 Reconciliation of equity and profits at 30th June 2004 18 Explanation of reconciling items at 30th June 2004 19 Consolidated income statement (restated under IFRS) For the period ended 30th June and 31st December 2004 Unaudited Unaudited 30 June 31 December 2004 2004 £m £mContinuing operationsTotal revenue 203.8 433.7-------------------------------- ---------- ----------- Group operating profit 15.2 35.2Share of result of associate - 0.5-------------------------------- ---------- -----------Profit before finance income and income tax 15.2 35.7Finance income 0.6 1.4Finance costs (0.3) (0.8)-------------------------------- ---------- -----------Profit before income tax 15.5 36.3Income tax expense (3.1) (7.1)-------------------------------- ---------- -----------Profit for period for continuing operations 12.4 29.2-------------------------------- ---------- ----------- Profit attributable to equity shareholders 12.4 29.1Profit attributable to minority interests - 0.1-------------------------------- ---------- -----------Profit retained 12.4 29.2-------------------------------- ---------- ----------- Earnings per share p pBasic 9.7 22.9Diluted 9.6 22.8-------------------------------- ---------- ----------- All operations are continuing Statement of recognised income and expenditure (under IFRS) For the period ended 30th June and 31st December 2004 Unaudited Unaudited 30 June 31 December 2004 2004 £m £mProfit for period 12.4 29.2----------------------------------- ---------- -----------Exchange adjustments on net investments (2.0) (3.4)Purchase own shares (8.9) (9.4)Realisation of property revaluation gains - 0.3Actuarial gains on defined benefit pension schemes 9.0 18.2Tax on items taken directly to reserves (3.2) (4.5)Future share scheme issues 0.2 0.3----------------------------------- ---------- -----------Net (loss) / gain not recognised in income statement (4.9) 1.5----------------------------------- ---------- -----------Total recognised income for period 7.5 30.7----------------------------------- ---------- ----------- Attributable to:Equity shareholders 7.5 30.6Minority interests - 0.1----------------------------------- ---------- -----------Total recognised income for period 7.5 30.7----------------------------------- ---------- ----------- Balance sheets (restated under IFRS) As at 30th June and 31st December 2004 Unaudited Unaudited 30 June 31 December 2004 2004 £m £mNon-current assets Goodwill 136.0 137.4Intangible assets 5.5 8.5Property, plant and equipment 72.5 77.5Investment in associates 5.9 6.5Retirement benefit asset - 1.2Deferred tax asset 7.3 5.6-------------------------- ----------- ----------- 227.2 236.7-------------------------- ----------- ----------- Current assets Inventories 63.0 70.2Trade and other receivables 75.9 78.6Cash and cash equivalents 40.5 49.8-------------------------- ----------- ----------- 179.4 198.6-------------------------- ----------- ----------- Total assets 406.6 435.3-------------------------- ----------- -----------Current liabilities Borrowings (2.4) (23.1)Trade and other payables (87.1) (102.7)Current tax liabilities (5.5) (2.1)Current provisions (1.1) (1.3)-------------------------- ----------- ----------- (96.1) (129.2)-------------------------- ----------- ----------- Net current assets 83.3 69.4-------------------------- ----------- ----------- Non-current liabilities Borrowings (18.7) (1.6)Retirement benefit obligation (18.1) (7.8)Deferred tax liabilities (4.3) (5.0) Provisions (14.3) (15.9)-------------------------- ----------- ----------- (55.4) (30.3)-------------------------- ----------- ----------- Total liabilities (151.5) (159.5)-------------------------- ----------- ----------- Net assets 255.1 275.8-------------------------- ----------- ----------- Shareholders' equity Share capital 31.4 31.5Share premium account 59.9 60.9Other reserves 38.3 38.1Retained earnings 125.1 145.1-------------------------- ----------- -----------Total shareholders' equity 254.7 275.6 Minority interest in equity 0.4 0.2-------------------------- ----------- -----------Total equity 255.1 275.8-------------------------- ----------- ----------- Cash flow statement (restated under IFRS) For the period ended 30th June and 31st December 2004 Unaudited Unaudited 30 June 31 December 2004 2004Cash flows from operating activities £m £mCash generated from operations 9.4 32.9Interest received 0.6 1.4Interest paid (0.3) (0.8)Tax paid (1.8) (5.5)---------------------------------- --------- -----------Net cash generated from operating activities 7.9 28.0---------------------------------- --------- ----------- Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired - (4.6)Purchase of property, plant and equipment (6.3) (14.6)Expenditure on product development (1.4) (2.8)Proceeds from disposal of property, plant andequipment 4.6 7.8---------------------------------- --------- -----------Net cash used in investing activities (3.1) (14.2)---------------------------------- --------- ----------- Cash flows from financing activitiesDividends paid to shareholders (6.4) (9.6)Net proceeds from issue of ordinary share capital - 1.1Loan to associated undertaking (0.3) (0.3)Purchase of own shares (8.9) (9.4)Finance lease (repayment) / inception (0.1) 0.1Repayment of borrowings (0.9) (2.5)New bank borrowings 0.4 4.8---------------------------------- --------- -----------Net cash used in financing activities (16.2) (15.8)---------------------------------- --------- -----------Exchange adjustment (0.1) (0.2)---------------------------------- --------- -----------Decrease in cash and cash equivalents (11.5) (2.2)Opening cash and cash equivalents 52.0 52.0---------------------------------- --------- -----------Closing cash and cash equivalents 40.5 49.8---------------------------------- --------- ----------- Reconciliation of operating profit to net cash Unaudited Unauditedinflow from operating activities 30 June 31 December 2004 2004 £m £mOperating profit 15.2 35.2Intangibles amortisation 0.4 1.0Depreciation 3.9 7.7Profit on disposal of property, plant andequipment (1.2) (1.3)(Increase) / decrease in inventories (2.5) (8.0)(Increase) / decrease in receivables (1.5) (10.5)Increase / (decrease) in payables (0.4) 14.4Increase / (decrease) in pensions (1.2) (2.3)Increase / (decrease) in provisions (3.3) (3.3)--------------------------------- --------- -----------Net cash inflow from operating activities 9.4 32.9--------------------------------- --------- ----------- Accounting policies under IFRS Basis of accounting The financial information presented in this document has been prepared on thebasis of all International Financial Reporting Standards ('IFRS'), includingInternational Accounting Standards ('IAS') and interpretations issued by theInternational Accounting Standards Board ('IASB') and its committees, and asinterpreted by any regulatory bodies applicable to the Group published by 30thJune 2005. These are subject to ongoing amendment by the IASB and subsequentendorsement by the European Commission and are therefore subject to possiblechange. Further standards and interpretations may also be issued that will beapplicable for financial years beginning on or after 1st January 2005 or thatare applicable to later accounting periods but may be adopted early. The Group'sfirst IFRS financial statements may, therefore, be prepared in accordance withsome different accounting policies from the financial information presentedhere. In preparing this financial information, the Group has assumed that the EuropeanCommission will endorse the amendment to IAS 19, 'Employee Benefits - ActuarialGains and Losses, Group Plans and Disclosures'. The primary statements within the financial information contained in thisdocument have been presented in accordance with IAS 1, 'Presentation ofFinancial Statements.' However, this format and presentation may requiremodification as practice develops and in the event that further guidance isissued. The accounts are prepared under the historical cost convention, except whereadjusted for revaluations of certain fixed assets, and in accordance withapplicable Accounting Standards and those parts of the Companies Act 1985applicable to companies reporting under IFRS. A summary of the principal GroupIFRS accounting policies is set out below, together with an explanation of wherechanges have been made to previous policies on the adoption of new accountingstandards. IFRS exemptions Business combinations - IFRS 1 'First time adoption of IFRS' allows companies toelect not to apply IFRS 3 retrospectively to business combinations whichoccurred before the date of transition to IFRS. The Group has elected to takeadvantage of this exemption and not apply IFRS 3 retrospectively to businesscombinations that took place before 1st January 2004, the date of transition toIFRS. Retirement benefits - the Group has elected to recognise all cumulativeactuarial gains and losses as at 1st January 2004 which is an optional exemptionfrom full retrospective application given by IFRS 1. Property, plant and equipment - as permitted under IFRS 1 the Group has valuedproperty, plant and equipment at the date of transition using a revaluation madein prior years under UK GAAP, the revalued amount at 1st January 2004 has beendeemed to be cost. Foreign currencies - under IFRS 1, the Group is not required to recordcumulative translation differences arising prior to the transition date. Inutilising this exemption, all cumulative exchange differences are deemed to bezero as at 1st January 2004 and all subsequent disposals shall exclude anytranslation differences arising prior to the date of transition. Financial instruments - the Group has taken advantage of the exemption underIFRS 1 not to present its comparatives in accordance with IAS 32 'FinancialInstruments: Disclosure and Presentation' and IAS 39 'Financial Instruments:Recognition and Measurement'. Consequently, for the comparatives to the 2005financial statements, the financial information will be presented in accordancewith UK GAAP. IFRS 2 'Share-based Payments' - the Group has taken advantage of the exemptionto not apply the requirements of IFRS 2 to equity instruments that were grantedbefore 7th November 2002. Basis of consolidation The consolidated income statement and balance sheet include the accounts of theparent company and all its subsidiaries made up to the end of the financial yearand include the results of subsidiaries and businesses acquired and sold duringthe year from or up to their effective date of acquisition or sale. Theconsolidated accounts also include the Group's share of post-acquisitionearnings and net assets of associated undertakings. The Group defines asubsidiary as an entity that the Group has the power to control. Business combinations and goodwill Shares issued as consideration for the acquisition of companies have a fairvalue attributed to them, which is normally their market value at the date ofacquisition. Net tangible assets acquired are consolidated at a fair value tothe Group at the date of acquisition. All changes to those assets andliabilities, and the resulting gains and losses that arise after the Group hasgained control of the subsidiary, are credited and charged to thepost-acquisition income statement. Under UK GAAP, goodwill arising on acquisitions prior to 1998 was written off toreserves. From 1998, goodwill, being the difference between the fair value of the purchaseconsideration and the fair value of the assets acquired, was capitalised in theUK GAAP balance sheet as goodwill and until 31st December 2004 was amortised ona straight line basis over its estimated useful life, not exceeding 20 years.Under IFRS 3 'Business Combinations' the amortisation of goodwill ceased from1st January 2004 and is subject to an impairment review annually and when thereare indications that the carrying value may not be recoverable. An impairmentloss is recognised for the amount by which the asset's carrying value exceedsits recoverable amount. The recoverable amount is the higher of an asset's fairvalue less costs to sell and its discounted value in use. For the purpose ofassessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows. Segmental reporting A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that issubject to risks and returns that are different from those of segments operatingin other economic environments. Other operating income, expenses, assets andliabilities are allocated based on revenues. Based on the risks and returns of the Group's products and services thedirectors consider that the primary reporting format is by business segment andthe secondary reporting format is geographical. The business segments have beenchosen on the basis of the internal management structure and system of reportingto the board of directors. Revenue recognition Revenue, which excludes value added tax and intra-group sales, represents theinvoiced value of goods and services sold to customers. Appropriate provisionsfor returns, trade discounts and other allowances are deducted from revenue asappropriate. Under IAS 18 'Revenue' the Group's revenue has been recognised when performancehas occurred and a right to consideration has been obtained. Post retirement benefits The Group's major pension plans are of a defined benefit type. Under IAS 19'Employee Benefits' the employer's portion of the current service costs andcurtailment gains are charged to operating profit for these plans, with theinterest cost net of the expected return on assets in the plans also beingcredited to operating profit. Actuarial gains and losses are recognised directlyin equity, in the statement of recognised income and expenditure, and thebalance sheet reflects the schemes' surplus or deficit at the balance sheetdate. Payments to defined contribution schemes are charged to the income statement asthey become payable. Intangible assets Development expenditure is capitalised when a clear, commercially viable futurefor that development is confirmed and it is amortised on a straight line basisover the life of the project, limited to a maximum of five years, following thecommencement of its commercial production. All other research and developmentexpenditure is written off in the year in which it is incurred. This isconsistent with the Group's accounting policy under UK GAAP. Computer software licences acquired, costs associated with the developing ofsoftware products and software that is not integral to a related item ofhardware, are recognised as intangible assets and are amortised over theiruseful lives, which is limited to a maximum of five years. Separable intangible assets, such as trademarks, licences and brands, arerecognised separately from goodwill on all acquisitions after the date oftransition which are carried at cost less accumulated amortisation and areamortised over their estimated useful life. Brands identified in certainbusiness combinations have been assessed as having an indefinite useful life. Inreaching this assessment, account was made of their market-leading position inniche markets, premium image, length of history and unchanging fashion. Thesefactors are coupled with continuing marketing spend to maintain the brand.Intangible assets with indefinite lives are not amortised but are subject toannual impairment tests. Intangible assets are reviewed for impairment on an annual basis. Property, plant and equipment Under IAS 16 'Property, Plant and Equipment,' assets are held at cost lessaccumulated depreciation. Depreciation is provided on property, plant andequipment, other than freehold land and assets in the course of construction, atrates calculated to write off the cost of each asset on a straight line basisover its expected useful life as follows: i. Freehold buildings over 50 years.ii. Leasehold land and buildings over 50 years or the period of the lease whichever is less.iii. Plant and equipment over a period of 3 to 12 1/2 years. The Group annually reviews the assessment of residual values and useful lives inaccordance with IAS 16. Leases Under IAS 17 'Leases,' assets, held under leases and hire purchase contracts,where the Group has substantially all the risks and rewards of ownership, arecapitalised as owned property, plant and equipment and the obligations relatingthereto, excluding finance charges, are included in borrowings. Finance costsare charged to the income statement over the contract term to give a constantrate of interest on the outstanding balance. Finance lease assets held asproperty, plant and equipment are depreciated over the shorter of the asset'sexpected useful life and the lease term. Payments in respect of operating leases, net of any incentives received, arecharged in arriving at the operating profit on a straight line basis over theperiod of the lease. Assets leased to third parties under operating leases (principally land andbuildings) are held as tangible fixed assets and depreciated over their expecteduseful life in line with the depreciation policy. Rental income (net of anyincentives given) from leased assets is credited to the income statement on an accruals basis over the lease term. Inventories and long-term contracts In accordance with IAS 2 'Inventories' the Group's inventories are valued at thelower of cost on a first in first out basis and net realisable value. Costincludes a proportion of production overheads based on normal levels ofactivity. Provision is made for obsolete and slow moving items. The amount by which recorded turnover is in excess of payments on account isincluded in debtors as amounts recoverable on long-term contracts. Revenue isrecognised by reference to the stage of completion of the contract, when theoutcome of the transaction can be assessed reliably. Borrowings Borrowings are recognised initially at their amortised cost, net of theassociated finance costs, which are amortised to the income statement over thelife of the borrowings. Borrowings are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of the liability for atleast twelve months after the balance sheet date. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits at call with banks,other short term highly liquid investments and bank overdrafts. Bank overdraftsare shown within borrowings in current liabilities. Financial instruments The Group's operations bring about a variety of financial risks that includefluctuations in foreign currency, liquidity, interest rate and credit risk. Setting the general treasury policy is a matter reserved for the board withauthority delegated to the chief executive's committee. The board of directors therefore has the responsibility for the risk managementpolicies applied by the Group. The Group treasury has a policy and proceduresmanual that sets out specific guidelines to manage Group foreign exchange risk,interest rate risk, credit risk and the use of financial instruments to managethese risks. a) Foreign exchange risk Foreign currency transactional risk As a result of the Group's geographical presence and operations, it is exposedto foreign currency risks primarily with respect to the US dollar and the Euro.The Group requires its operating units to apply transactional hedging for highlyprobable sales receipts and purchase commitments denominated in currencies otherthan the units' functional currency. Operating units enter into forward currencycontracts for a period of up to twelve months directly with their relationshipbanks. This is performed on a rolling twelve month basis. Foreign currency translation risk With its strategy of growth on an international level, the Group has significantinvestments in overseas operations. Such investments in foreign currencydenominated assets are hedged primarily by putting in place foreign currencyborrowings. Other hedging instruments such as cross currency interest swaps andforward foreign currency contracts may also be considered from time to time. b) Interest rate risk The Group maintains a policy to minimise interest rate risk on its borrowingsand deposits by using interest rate swaps and forward agreements whereappropriate. The Group's policy is, normally, to have between 25% and 75% ofdebt at fixed rates at any time. As the Group currently has net cash, interestrate risk is managed without the need to use derivative financial instruments. The Group regularly reviews its operations to ensure there is no significantconcentration of credit risk. The Group policy requires appropriate creditchecks to be carried out on potential customers prior to trading. Financialinstruments are undertaken with counterparties that are approved by the board.Deposits and derivative financial instruments are placed with counterpartieswhich have a AA credit rating or above. The amount of exposure to anycounterparty is subject to an approved limit, which is reviewed annually by theboard. c) Liquidity risk The Group maintains a mixture of short term, uncommitted and medium term,committed facilities to ensure a sufficient level of funds are available for itsbusiness operations. Accounting for derivative financial instruments and hedging activities Hedge accounting alters the accounting treatment that would otherwise apply, sothat gains and losses on the hedging instrument are recognised in the incomestatement in the same period as offsetting gains and losses on the hedged item. The accounting treatment of derivatives classified as hedges by the Groupdepends on the designation, which occurs on the date that the derivativeinstrument is committed to. Derivatives under IAS 39 fall into one of the following three categories: • Fair value hedge, i.e. a hedge of a fair value of an asset or a liability • Cash flow hedge, i.e. a hedge of the income or cost of a highly probable forecasted transaction or commitment • A hedge of a net investment in a foreign entity To qualify for hedge accounting, the Group is required to document in advancethe relationship between the hedged item and the hedging instrument. The formaldocumentation includes the method for testing the hedge relationship on anongoing basis. This effectiveness test is performed at the end of each reportingperiod to demonstrate that the hedge remains highly effective. Hedge of net investments in foreign entities The Group hedges net investments in foreign entities primarily through currencyborrowings. Any gains and losses on the translation of the borrowings arerecognised in equity. As the hedge relationship is expected to remain highlyeffective, the accounting treatment will be applied on an ongoing basis untilthe foreign operation is disposed of. Transactional hedging by forward foreign currency contracts Where the appropriate criteria are met for hedge accounting, it is applied tothe forward foreign currency contracts put in place to reduce exposure tocurrency denominated sales and purchases. Where the criteria for hedge accounting are not met, or the Group elects not tohedge account, gains or losses on the fair value of forward contracts are takento the income statement as they arise. Foreign currencies The income statement items of overseas subsidiaries and related companies aretranslated into sterling using average exchange rates. Assets and liabilities inforeign currencies including goodwill arising on acquisitions are translated atthe mid-market rates of exchange ruling at the balance sheet date. Otherexchange differences are dealt with through the income statement. Where the translation of overseas subsidiaries and associated undertakings, netof any foreign currency borrowing used to finance them, gives rise to anexchange difference, this is taken directly to reserves. UK GAAP does notrequire these translation differences to be separately identified and accountedfor in subsequent disposals of foreign operations whereas under IFRS thetranslation differences arising are separately recorded in equity. Government grants Under IAS 20 'Government Grants,' grants relating to fixed assets, are treatedas deferred income and are transferred to revenue in equal amounts over the lifeof the assets. Current and deferred tax The scope of IAS 12 'Income Taxes' is wider than the corresponding UK GAAPstandards, and requires deferred tax to be provided on historic propertyrevaluations and all other temporary differences, using the liability method,rather than just taxable timing differences under UK GAAP. Deferred income taxassets are recognised to the extent that it is probable that future taxableprofit will be available against which the temporary differences can beutilised. In the holding company and its subsidiaries the liability is assessed withreference to the individual company. On consolidation the liability is assessedwith reference to the Group as a whole. Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which the timing differences are expected to reverse, based ontax rates and laws that have been enacted or substantially enacted by thebalance sheet date. Income tax is provided for, using current rates. Employee share options IFRS 2 'Share-based Payments' requires that an expense for equity instrumentsgranted is recognised in the financial statements based on its fair value at thedate of grant. This expense, which is primarily in relation to employee shareoption and Executive LTIP schemes, is recognised over the vesting period of thescheme. The Group has principally adopted the Black Scholes model and a TSRPricing Model, respectively, for the purposes of computing fair value underIFRS.IFRS 2 allows the measurement of this expense to be calculated only on optionsgranted after 7th November 2002. Dividends Under UK GAAP the Group accrued for the final dividend when proposed. Under IFRSthe dividend is only recognised at the point it is declared and approved by theshareholders at the Annual General Meeting. Provisions Provision is made for the estimated liability on all products still underwarranty. Product warranties of between 1 and 3 years are given, whereappropriate, by individual businesses in the Group. Following the disposalprogramme of previous years certain vacant properties located in the UK remainwith the Group. Full provision has been made for the residual onerous leasecommitments, together with other outgoings, for the remaining period of theleases. The Group's and Company's other provisions relate to the remaining costsin respect of the disposal of Pipe Systems, including probable warranty andindemnity claims, pensions, taxation exposures, other claims and other costsfrom third parties in relation to divested businesses. Reconciliation of equity at 1st January 2004 The reconciliations of equity at 1st January 2004 (date of transition to IFRS)and at 31st December 2004 (date of last UK GAAP financial statements) and thereconciliation of profit for 2004, as required by IFRS 1, are shown below. UK GAAP Unaudited Unaudited effect of IFRS transition to IFRS £m £m £mGoodwill 137.2 - 137.2Intangible assets (note a) 3.5 0.7 4.2Property, plant andequipment (note a) 73.2 (0.7) 72.5Investment in associates 5.8 - 5.8Retirement benefit asset 23.3 (23.3) -(note b)Deferred taxasset (note d) - 10.5 10.5------------------------ ----------- ---------- ---------- Non-currentassets 243.0 (12.8) 230.2------------------------ ----------- ---------- ---------- Inventories 61.3 - 61.3Trade and other 79.4 - 79.4receivablesCash and cashequivalents 52.0 - 52.0------------------------ ----------- ---------- ---------- Current assets 192.7 - 192.7------------------------ ----------- ---------- ---------- Trade andother payables (97.6) 6.5 (91.1)(note c)Deferred tax(note d) (8.0) 3.7 (4.3)Current taxliabilities (3.0) - (3.0)Bank loans,overdrafts and (22.4) - (22.4)finance leasesProvisions(note b) (22.4) 2.3 (20.1)Retirement benefitobligation (note b) - (27.9) (27.9)------------------------ ----------- ---------- ---------- Totalliabilities (153.4) (15.4) (168.8)------------------------ ----------- ---------- ---------- Total assetsless total liabilities 282.3 (28.2) 254.1------------------------ ----------- ---------- ---------- Share capital 32.4 - 32.4Share premium account 59.9 - 59.9Other reserves 37.4 - 37.4Retained earnings 152.2 (28.2) 124.0Minority interests 0.4 - 0.4------------------------ ----------- ---------- ---------- Total equity 282.3 (28.2) 254.1------------------------ ----------- ---------- ---------- Reconciliation of equity at 31st December 2004 UK GAAP Unaudited Unaudited effect of IFRS transition to IFRS £m £m £mGoodwill (note e) 131.1 6.3 137.4Intangible assets (note a) 5.7 2.8 8.5Property, plantand equipment (note a) 78.6 (1.1) 77.5Investment in associates 6.5 - 6.5Retirementbenefit asset (note b) 28.6 (27.4) 1.2Deferred taxasset (note d) - 5.6 5.6------------------------ ----------- ---------- ---------- Non-current assets 250.5 (13.8) 236.7------------------------ ----------- ---------- ---------- Inventories 70.2 - 70.2Trade and other receivables 78.6 - 78.6Cash and cashequivalents 49.8 - 49.8------------------------ ----------- ---------- ---------- Current assets 198.6 - 198.6------------------------ ----------- ---------- ---------- Trade and otherpayables (note c) (110.0) 7.3 (102.7)Current tax liabilities (2.1) - (2.1)Deferred taxliabilities (note d) (9.1) 4.1 (5.0)Bank loans,overdrafts and (24.7) - (24.7)finance leasesProvisions (note b) (19.5) 2.3 (17.2)Retirement benefitobligation (note b) - (7.8) (7.8)------------------------ ----------- ---------- ---------- Total liabilities (165.4) 5.9 (159.5)------------------------ ----------- ---------- ---------- Total assetsless liabilities 283.7 (7.9) 275.8------------------------ ----------- ---------- ---------- Share capital 31.5 - 31.5Share premium account 60.9 - 60.9Other reserves 38.1 - 38.1Retained earnings 153.0 (7.9) 145.1Minority interests 0.2 - 0.2------------------------ ----------- ---------- ---------- Total equity 283.7 (7.9) 275.8------------------------ ----------- ---------- ---------- Reconciliation of profit at 31st December 2004 and explanation of reconcilingitems at 1st January 2004 & 31st December 2004 Reconciliation of profit for the year ended 31st December 2004 UK GAAP Unaudited Unaudited effect of transition to IFRS IFRS £m £m £m------------------------ ----------- ---------- ----------Revenue (note h) 435.0 (1.3) 433.7------------------------ ----------- ---------- ---------- Group operatingprofit (note b, e & f) 29.5 5.7 35.2Share of resultof associate (note g) 0.5 - 0.5Net finance income 0.6 - 0.6------------------------ ----------- ---------- ---------- Profit before tax 30.6 5.7 36.3Income tax (note d) (7.1) - (7.1)------------------------ ----------- ---------- ---------- Net profit 23.5 5.7 29.2------------------------ ----------- ---------- ---------- Explanation of reconciling items between UK GAAP and IFRS (a) Intangibles - In accordance with IAS 38 'Intangible Assets' certain software costs of £1.1m (2003: £0.7m) have been transferred from property, plant and equipment to intangible assets. £1.7m of brands have been transferred from goodwill in respect of acquisitions since the transition date. (b) Retirement benefit schemes - Accounting for pensions in accordance with IAS 19 requires the pension asset / liability to be brought onto the balance sheet. At 31st December 2003 the Group's defined benefit pension schemes were in deficit under IAS 19 requiring a pension liability of £27.9m to be shown on the balance sheet. At 31st December 2004 the Aga Pension Scheme showed a surplus of £1.2m which is included in assets and the other schemes' deficits of £7.8m are shown in liabilities in the restated balance sheet. At 31st December 2004 the SSAP 24 pension prepayment of £28.6m (2003: £23.3m) which was included in the balance sheet has been removed under IAS 19. Retirement benefit provisions for overseas businesses of £2.3m at 31st December 2004 (2003: £2.3m) were transferred from provisions to retirement benefit liabilities. The related deferred tax has been adjusted accordingly. The operating profit is reduced by £2.3m in the year to 31st December 2004 (the IAS 19 service cost of £6.3m and net finance income of £4.0m for the full year). (c) Dividends - Under UK Company law, companies were required to provide for their final dividend in the closing balance sheet and in advance of the dividend being declared and approved by the Annual General Meeting. Under IAS 37, 'Provisions' the dividend cannot be provided in the year end balance sheet as, at that date, the dividend did not represent a liability. At 31st December 2004 accrued dividends of £7.3m (2003: £6.5m) were removed from other payables. (d) Tax - In accordance with IAS 12, provision has been made for deferred tax on revalued assets. This was not required under UK GAAP unless there was a binding commitment to sell the asset. The increase in the deferred tax liability at 31st December 2004 was £0.9m (2003: £1.2m). A deferred tax asset has also been included in respect of the IAS 19 pension liability and the deferred tax liability has been removed in relation to the SSAP 24 pension prepayment, a total pensions related tax adjustment of £10.6m on 31st December 2004 (2003: £15.4m). Explanation of reconciling items at 1st January 2004 & 31st December 2004 (d) Tax (continued) - The total deferred tax adjustment is therefore £9.7m, split between £5.6m of deferred tax assets and £4.1m of deferred tax liabilities which are now shown gross on the face of the balance sheet. (e) Goodwill - The operating profit is increased by £8.0m in the year to 31st December 2004 as goodwill amortisation is no longer required under IFRS 3 as these assets are subject to annual impairment testing. The goodwill in the balance sheet has been frozen at 31st December 2003. On restatement of the balance sheet under IFRS, goodwill has been adjusted by £1.7m in relation to brands on recent acquisitions that were transferred to intangibles. (f) Share options - No adjustment has been made to the profit and loss charge of £0.3m in the year to 31st December 2004, under UK GAAP, in relation to share option schemes. This is because one of the two Executive LTIP schemes is excluded from the IFRS 2 calculation, as it was granted before 7th November 2002, and one of the employee share option schemes, granted after 7th November 2002, is included, both of which have similar valuations of £0.3m. (g) Share of result of associate - The share of the result post tax and after adding back goodwill amortisation under IFRS is not materially different from that shown in the profit and loss account under UK GAAP. (h) Revenue recognition - Revenue has been adjusted by £1.3m to ensure settlement discounts have been presented in accordance with IAS 18, these costs were previously reported as an operating cost rather than a deduction from revenue. Reconciliation of equity and profits at 30th June 2004 The reconciliation of equity at 30th June 2004 and the reconciliation of profitfor the six months ended 30th June 2004 have been included below to enable acomparison of the 2005 published interim figures with those published in thecorresponding period of the previous financial year. Reconciliation of equity at 30th June UK GAAP Unaudited Unaudited2004 effect of IFRS transition to IFRS £m £m £m Goodwill (note m) 132.0 4.0 136.0Intangible assets (note i) 4.6 0.9 5.5Property, plant andequipment (note i) 73.4 (0.9) 72.5Investment in associates 5.9 - 5.9Retirement benefit asset 25.7 (25.7) -(note j)Deferred taxasset (note l) - 7.3 7.3------------------------ ----------- ---------- ---------- Non-currentassets 241.6 (14.4) 227.2------------------------ ----------- ---------- ---------- Inventories 63.0 - 63.0Trade and other receivables 75.9 - 75.9Cash and cash equivalents 40.5 - 40.5------------------------ ----------- ---------- ---------- Current assets 179.4 - 179.4------------------------ ----------- ---------- ---------- Trade and other payables (90.2) 3.1 (87.1)(note k)Current tax liabilities (5.5) - (5.5)Deferred tax liabilities (8.0) 3.7 (4.3)(note l)Bank loans, overdrafts and (21.1) - (21.1)finance leasesProvisions (note j) (18.1) 2.7 (15.4)Retirement benefit - (18.1) (18.1)obligation (note j) ------------------------ ----------- ---------- ---------- Total liabilities (142.9) (8.6) (151.5)------------------------ ----------- ---------- ---------- Total assets less liabilities 278.1 (23.0) 255.1------------------------ ----------- ---------- ---------- Share capital 31.4 - 31.4Share premium account 59.9 - 59.9Other reserves 38.3 - 38.3Retained earnings 148.1 (23.0) 125.1Minority interests 0.4 - 0.4------------------------ ----------- ---------- ---------- Total equity 278.1 (23.0) 255.1------------------------ ----------- ---------- ---------- Reconciliation of profit for the period ended 30th June 2004 UK GAAP Unaudited Unaudited IFRS effect of transition to IFRS £m £m £m ------------------------ ----------- ---------- ---------- Revenue (note n) 204.4 (0.6) 203.8 ------------------------ ----------- ---------- ---------- Operating profit (note j & m) 12.4 2.8 15.2 Net finance income 0.3 - 0.3 ------------------------ ----------- ---------- ---------- Profit before tax 12.7 2.8 15.5 Income tax (3.1) - (3.1) ------------------------ ----------- ---------- ---------- Net profit 9.6 2.8 12.4 ------------------------ ----------- ---------- ---------- Explanation of reconciling items 30th June 2004 Explanation of reconciling items between UK GAAP and IFRS (i) Software costs - In accordance with IAS 38 certain software costs have been transferred from Property, plant and equipment to intangible assets. (j) Retirement benefit schemes - Accounting for pensions in accordance with IAS 19 requires the pension asset / liability to be brought onto the balance sheet. At 30th June 2004 the scheme's deficit of £18.1m is shown in liabilities in the restated balance sheet. At 30th June 2004 the SSAP 24 pension prepayment of £25.7m which was included in the balance sheet has been removed under IAS 19. Retirement benefit provisions of £2.7m were transferred from provisions. The related deferred tax has been adjusted accordingly. The operating profit is reduced by £1.2m in the period to 30th June 2004 in order to reflect the IAS 19 service cost of £3.2m and net finance income of £2.0m for the half year. (k) Dividends - Under UK Company law, companies were required to provide for their final dividend in the closing balance sheet and in advance of the dividend being declared and approved by the Annual General Meeting. Under IAS 37, 'Provisions' the dividend cannot be provided in the half year balance sheet as, at that date, the dividend did not represent a liability. At 30th June 2004 accrued dividends of £3.1m were removed from other payables. (l) Tax - In accordance with IAS 12, provision has been made for deferred tax on revalued assets. This was not permitted under UK GAAP unless there was a binding commitment to sell the asset. The increase in the deferred tax liability at 30th June 2004 was £2.1m. A deferred tax asset has also been included in respect of the IAS 19 pension liability and the deferred tax liability has been removed in relation to the SSAP 24 pension prepayment, a total pensions related tax adjustment of £13.1m on 30th June 2004. The total deferred tax adjustment is therefore £11.0m, split between £7.3m deferred tax assets and £3.7m deferred tax liabilities, which are now shown gross on the face of the balance sheet. (m) Goodwill - The operating profit is increased by £4.0m in the period to 30th June 2004 as goodwill amortisation is no longer required under IFRS 3 as these assets are subject to annual impairment testing. The goodwill in the balance sheet has been frozen at 1st January 2004 and increased accordingly by £4.0m at 30th June 2004 on restatement of the balance sheet under IFRS. (n) Revenue recognition - Revenue has been adjusted by £0.6m to ensure settlement discounts have been presented in accordance with IAS 18, these costs were previously reported as an operating cost rather then a deduction from revenue. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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