17th Nov 2005 07:01
Morrison(Wm.)Supermarkets PLC17 November 2005 Wm Morrison Supermarkets PLC Restatement of Interim Results Announcement under IFRS 17 November 2005 Restatement of results: 25 weeks ended 24 July 2005, 25 weeks ended 25 July 2004 and 52 weeks ended 30 January 2005 Introduction Following the publication on 20 October 2005 of the Group's unaudited UK GAAPresults for the 25 weeks ended 24 July 2005, Morrisons today announces theconversion of those UK GAAP interim results to International Financial ReportingStandards (IFRS) using the standards and interpretations that are anticipated tobe in force on 29 January 2006, the year end date of the Group's first fullfinancial results under IFRS. Tables reconciling UK GAAP to IFRS, explanatory slides and the related notes areavailable on the Company website at www.morrisons.co.uk. Overview of impact on results 25 weeks ended 24 July 2005: • Operating profit before "exceptionals" unchanged • Exceptionals unchanged • Loss before tax increased by £8.4 million, primarily due to reversal of negative goodwill amortisation • No asset impairment • Net debt decreased by £19.1 million • Operating cash flow unchanged for all periods Financial highlights 25 weeks ended 25 weeks ended 52 weeks ended 24 July 2005 (1) 25 July 2004 (1) 30 January 2005 (2) UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS £m £m £m £m £m £m Group turnover 5,853.7 5,847.5 5,590.5 5,584.3 12,116.1 12,103.7 Operating profit beforeexceptionals (Safewayintegration costs) 50.7 50.7 168.9 172.9 380.3 395.4 Exceptionals (Safeway 118.8 118.8 21.8 61.8 99.2 139.2integration costs) (Loss)/profit before tax (73.7) (82.1) 121.6 80.1 297.1 193.0 Basic earnings per share (2.26)p (2.54)p 2.68p 1.02p 8.1p 4.17p Net assets 3,989.7 3,910.8 4,054.1 4,036.9 4,017.5 4,005.9 Net debt 1,120.1 1,101.0 1,609.7 1,599.5 1,171.1 1,160.9 (1) The restated IFRS balances contained within this document are unaudited (2) The results for the 52 weeks ended 30 January 2005 are based on an abridgedversion of the UK GAAP Group accounts which carry an unqualified audit reportand have been filed with the Registrar of Companies Financial impact summary The reconciliations of operating profit before Safeway integration, profit forthe period and net assets are set out below. Further details about eachadjustment are included in the section "Significant changes under IFRS" below. Reconciliation of operating profit Operating profit is affected by the introduction of IFRS: 25 weeks 25 weeks 52 weeks ended ended ended 24 Jul 2005 25 Jul 2004 30 Jan 2005 £m £m £m UK GAAP operating profit before exceptionals 50.7 168.9 380.3Reclassification of UK GAAP profit ondivestment of assets 2.5 4.3 17.9Share-based payments (note 1) (2.6) (0.2) (2.6)Employee benefits (note 2) (0.4) (0.5) (1.1)Leases (note 3) 0.5 0.4 0.9 IFRS operating profit before Safeway integration 50.7 172.9 395.4 Reconciliation of (loss)/profit before taxation The largest impact on profit for the period is the reversal of the amortisationof negative goodwill. This is included under business combinations, as is the£40 million retirement of the Safeway brand (see note 4 below): 25 weeks 25 weeks 52 weeks ended ended ended 24 Jul 2005 25 Jul 2004 30 Jan 2005 £m £m £m (Loss)/profit before taxation under UK GAAP (73.7) 121.6 297.1Share-based payments (note 1) (2.6) (0.2) (2.6)Employee benefits (note 2) (1.2) (1.2) (2.8)Leases (note 3) 0.5 0.4 0.9Business combinations (note 4) (8.3) (40.0) (98.2)Financial instruments (note 5) 3.9 - -Other (0.7) (0.5) (1.4) (Loss)/profit before taxation under IFRS (82.1) 80.1 193.0 Reconciliation of net assets Net assets are affected by the cumulative impact of the Safeway brand retirementand the removal of the amortisation of negative goodwill, both shown withinbusiness combinations (note 4). The reversal of dividends proposed and anincrease in pension liability within employee benefits are the other materialmovements. 25 weeks 25 weeks 52 weeks ended ended ended 24 Jul 2005 25 Jul 2004 30 Jan 2005 £m £m £m Net assets under UK GAAP 3,989.7 4,054.1 4,017.5Share-based payments (note 1) (0.2) 2.3 2.1Employee benefits (note 2) (20.4) (20.4) (22.4)Leases (note 3) 7.9 7.0 7.4Business combinations (note 4) (88.6) (22.3) (80.3)Financial instruments (note 5) 6.2 - -Dividends (note 6) 16.6 16.6 82.0Other items (0.4) (0.4) (0.4)Net assets under IFRS 3,910.8 4,036.9 4,005.9 Significant changes under IFRS 1 Share-based payments (IFRS 2) Under IFRS 2 Share-based Payment an annual charge based on the fair value of theoptions (or shadow options in the case of the LTIP) has to be booked. Thischarge is spread over the vesting period. The stochastic valuation model hasbeen chosen to calculate this fair value charge. The LTIP that is in place to retain key staff and personnel during the period ofintegration accounted for £2.3 million of the £2.6 million fair value charge made to the profit beforetax. The balance sheet has been adjusted by the generation of a deferred tax asset inrespect of the ESOP and an accrued liability in respect of the LTIP. Thesereduced net assets at 24 July 2005 by £0.2 million. 2 Employee benefits (IAS 19) Pensions In the financial statements for the 52 weeks ended 30 January 2005, the Groupadopted early the full requirements of FRS 17 Retirement Benefits. The differences that exist between FRS 17 and IAS 19 are: • IAS 19 requires a reserve to be held on the balance sheet in respect of accrued death in service benefits. Under FRS 17 death in service benefits are expensed to the profit and loss account as incurred. This is the major factor explaining the opening and acquisition adjustments and the service cost differences in the tables below. • IAS 19 requires pension scheme assets to be valued at bid value rather than at mid market values. This has the effect of marginally increasing the deficit in the Balance Sheet and the associated finance charges in the Income Statement. The tables below reconcile the pension scheme deficit and Income Statementcharges as reported under UK GAAP to the figures now reported in accordance withIFRS: 25 weeks ended 25 weeks ended 52 weeks ended 24 Jul 2005 25 Jul 2004 30 Jan 2005 £m £m £m Pension liability impact: Pension liability as reported under UK GAAP 207.0 166.2 263.5Add back related deferred tax asset 88.7 71.2 112.9 Gross pension provision under UK GAAP 295.7 237.4 376.41 February 2004 IFRS transitional adjustment 8.8 8.8 8.8Safeway acquisition fair value adjustment 21.4 21.4 21.4Service cost 1.5 0.5 1.1Finance charges 2.5 0.7 1.7Actuarial gains and losses (5.5) (2.7) (1.3) Total IFRS adjustments 28.7 28.7 31.7 Retirement benefit obligation as reported under IFRS 324.4 266.1 408.1 Income statement impact:Current service costs and amortisation 28.0 23.2 56.0Net finance charges 1.4 2.1 4.5 Total reported under UK GAAP 29.4 25.3 60.5Service cost 0.4 0.5 1.1Finance charges 0.8 0.7 1.7 As reported under IFRS 30.6 26.5 63.3 3 Leases (IAS 17) Long leasehold land Under UK GAAP the Group's long leasehold land and buildings were treated asfixed assets and depreciated over the lives of the buildings, which in somecases is less than the length of the lease. Under IFRS long leasehold land istreated as an operating lease with all lease premiums included as long termnon-current assets rather than fixed assets. This prepayment is released on astraight line basis over the lives of the leases giving rise to a reduction ofthe charge and a commensurate increase in the net assets of the Group. Thisresulted in a balance sheet reclassification of £223.5 million and an increaseto net assets of £7.9 million at 24 July 2005. 4 Business combinations (IFRS 3) Under UK GAAP goodwill is generated on an acquisition where the fair value ofassets is different from the fair value of the consideration. Where goodwill isnegative, as with the acquisition of Safeway, it is amortised over the life ofthe non-monetary assets acquired. Under IFRS negative goodwill is replaced bypositive goodwill as outlined below. Under IFRS positive goodwill is taken tothe balance sheet and not amortised but is subject instead to annual impairmenttesting. Fair values are applied differently under IFRS as a result of a number ofstandards. These impacts are laid out below: Employee benefits (IAS 19) - pensions The acquired Safeway pension was fair valued and the resulting differenceimpacts goodwill. This resulted in an increase in pension liability of £21.4million to £251.0 million. Deferred tax (IAS 12) Under UK GAAP and IFRS the Group provides in full for deferred taxation. UnderIAS 12 Income Taxes provision is required to be made for deferred tax onpotential capital gains, even if the properties are to remain as part of acontinuing business or the gain can be rolled over; under UK GAAP no provisionwas made. This accounted for £417.0 million of the total fair value adjustment,the remainder being the combined impact on deferred taxation of the otheradjustments. Goodwill amortisation (IFRS 3) This adjustment reverses the goodwill amortisation taken under UK GAAP. Hindsight adjustments (IFRS 3) Adjustments to acquisition fair values are made when better information as tothe circumstances and values existing at the date of acquisition becomesavailable. The adjustments relate either to initial estimates which have beenturned into final numbers, or provisions which have been adjusted following thedivestment programme. The nature of these adjustments may not differ from UKGAAP but they have had to be made in this conversion because the "hindsightperiod" is one year compared to two years under UK GAAP. Property fair value re sales and closures On acquisition all the Safeway properties were fair valued. Where, within thehindsight period, it became apparent that the value attributed to them wasincorrect this value was adjusted, with an equal and opposite effect ongoodwill. £m Negative goodwill under UK GAAP at 30 January 2005 (262.9)Employee benefits (see also note 2) 21.4Deferred tax (see also note 7) 413.9Negative goodwill amortisation (58.2)Hindsight adjustments (43.8)Property fair value adjustments - uplifts (32.2)Property fair value adjustments - writedowns 75.7Financial instruments (10.7) Goodwill under IFRS at 24 July 2005 103.2 5 Financial instruments (IAS 39) Under IFRS derivative instruments are included on the balance sheet at fairvalue with movements being taken to the SORIE provided the hedges qualify forhedging. Movements on hedges that are ineffective or do not qualify are postedto the Income Statement. The Group's derivatives are those that cover the interest and currency movementsof the bonds that formed the major part of the Safeways debt. These were broughton at fair value at the date of acquisition under UK GAAP. These were not turned into "IAS hedges" in the 25 weeks ended 24 July 2005 asthey did not qualify, and consequently the fair value movement has been takenthrough the Income Statement rather than the SORIE which is the proposedaccounting treatment from 25 July onwards. Finance income of £3.9 million was recognised in the 25 weeks to 24 July 2005for the fair value movement of the "hedges" that did not qualify. Net assets at24 July 2005 increased by £6.2 million. 6 Events after the balance sheet date (IAS 10) Dividends IAS 10 prohibits the provision for dividends until they are either authorised atthe AGM (for final dividends) or paid (for interim dividends). Consequentlythese are adjusted and net assets at 24 July 2005 increased by £16.6 million. 7 Taxation (IAS 12) The majority of the adjustment to the balance sheet for tax relates to deferredtax on the fair value uplift of the Safeway properties, which is described aboveunder business combinations. In addition there are tax effects from the other IFRS adjustments which havebeen taken at 30% where the adjustment represents a taxable temporarydifference. The exception to this is the tax impact of the share-based paymentswhere the charge arising on employee share schemes is reversed through thereconciliation of shareholders funds and so the deferred tax asset does notrelate to the change in the balance sheet. 8 Impairment (IAS 36) Impairment has been considered as required for first-time adoption, and despitethere being a trading loss, cash flow remains positive after depreciation. Noadjustment has been made for the current period as the market values of theformer Safeway properties (which have been revisited as part of the closing ofthe hindsight period) support the carrying value of the assets in question. Under IFRS the Group will be required to consider the recoverability of eachstore by reviewing for signs of impairment, a process being undertaken as partof the optimisation plan. Appendix Chairman's statement The financial numbers quoted in the Chairman's statement announced 20 October2005 have been converted to IFRS numbers. This statement can be viewed on theGroup's web site www.morrisons.co.uk. Accounting Policies Basis of preparation These half year interim consolidated financial statements for the 25 weeks ended24 July 2005 have been prepared on the basis of International FinancialReporting Standards (IFRSs) and IFRIC interpretations adopted for use in theEuropean Community that the directors expect to be in issue and effective at 29January 2006, the Group's first annual reporting year end date in accordancewith IFRS. Future developments by the International Accounting Standards Board,or endorsements by the European Community, may affect the scope of the standardsin force and, consequently, the accounting policies derived from them asdescribed below. The results for the 52-week period ended 30 January 2005 arebased on an abridged version of the UK GAAP group accounts which carry anunqualified auditors report and which have been filed with the Registrar ofCompanies. The interim results for current and comparative periods areunaudited. The Group's accounting policies as set out in the 2005 Financial Statements(prepared under UK GAAP) have been revised where applicable to conform withIFRS. The significant restated accounting policies are laid out below. In futureyears these policies will not form part of this interim document, as the interimfinancial statements will be based on the accounting policies in the previousfull year's financial statements prepared under IFRS (unless otherwise stated).The accounting policies have been applied consistently to all periods presented,with the exception of financial instruments. The Group has taken advantage of an exemption under IFRS 1 First-time Adoptionof International Financial Reporting Standards not to restate comparative datain respect of IAS 39 Financial Instruments: Recognition and Measurement. Financial instruments have been measured in accordance with UK GAAP for thecomparative period. In accordance with transitional provisions, financialinstruments have been re-measured as a change of accounting policy as at 31January 2005 and the appropriate adjustment taken to equity as shown in Note 9 'First-time adoption of IAS 39 Financial Investments: Recognition andMeasurement'. Significant Accounting Policies Morrisons directors consider the following to summarise the more importantaccounting policies: Turnover Turnover represents sales to customers outside the Group excluding value addedtax, intra-group transactions, staff discounts, coupons and the free element ofmulti-save transactions. Supplier income Supplier incentives, rebates and discounts are recognised on an accruals basisbased on management expectations of the performance criteria that will be met bythe end of each relevant supplier contract. Business combinations and goodwill On the acquisition of a business, fair values are attributed to the net assetsacquired. Goodwill arises where the fair value of the consideration given for abusiness exceeds the fair value of such net assets. Goodwill arising onacquisitions is capitalised and subject to impairment reviews annually. Property, plant and equipment a. Land and buildings are carried at cost less accumulated depreciation. Properties in the course of construction are carried at cost. Costs include directly attributable costs and borrowing costs. Property assets held under a finance lease are written-off over their estimated useful life or the life of the lease, whichever is shorter. Land is not depreciated and land under a lease is classified as an operating lease. b. Plant, equipment and vehicles are written-off over their estimated useful lives. Annual reviews are made of estimated useful lives and material residual values. c. Depreciation rates used by the Group for the assets described above are: Freehold land 0% Freehold and long leasehold buildings 2.5% Short lease buildings Over lease period Plant, equipment and vehicles 15 -33% Borrowing costs Finance costs which are directly attributable to the construction of a propertyare capitalised gross of taxation relief. All other borrowing costs arerecognised in the Group's income statement on an accruals basis. Impairment of non-financial assets The carrying value of property, plant and equipment is reviewed for impairmentwhen events or changes in circumstances indicate that the carrying amount maynot be recoverable. An asset impaired is written down to the higher of value inuse or its net selling price. Inventories Inventories are valued at the lower of cost and net realisable value. Cost iscalculated using the weighted average cost. Inventories comprise primarily goodsfor resale. Leases Finance leases: Rental payments are apportioned between the finance charge andthe outstanding obligation so as to produce a constant rate of charge on theremaining balance. Operating leases: Rental payments are taken to the income statement on astraight line basis over the life of the lease. Provisions Onerous contracts: Provision is created for the net present obligation ofonerous contracts based on the Group's best estimate of the committed net cashflows. Other provisions: These are created where the Group has a present obligation(legal or constructive) as a result of a past event, where it is probable thatit will result in an outflow from the Group, and where it can be reliablymeasured. Taxation Taxation is based on the profits or losses for the period and takes into accountdeferred taxation arising on temporary differences between the taxation andaccounting carrying amounts of certain assets and liabilities. Full provision ismade for the tax effects of these differences. Foreign currencies On consolidation, the assets and liabilities of the Group's overseas operationsare translated at the rates of exchange at the balance sheet date. Income andexpense items are translated at the average exchange rates for the period. Retirement benefits The Group operates defined benefit retirement schemes in respect of which theobligations are measured at discounted present value, whilst scheme assets arerecorded at fair value. The operating and financing costs of such schemes arerecognised separately in the income statement; service costs are spreadsystematically over the lives of employees, and financing costs are recognisedin the periods in which they arise. Actuarial gains and losses are recognisedimmediately in the statement of recognised income and expense upon valuation. Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payment to allgrants of equity instruments and shadow equity instruments after 7 November 2002which were unvested as of 1 January 2005. The Group issues equity share-based payments to certain employees. The cost ismeasured at fair value at the date of grant, which is expensed on a straightline basis over the vesting period, based on the Group's estimate of shareoptions that will eventually vest. Fair value is measured by use of a Stochastic model. The expected life used inthe model has been adjusted, based on management's best estimate, for effects ofnon-transferability, exercise restrictions and behavioural considerations. Financial instruments Financial assets and liabilities are recognised on the Group's balance sheetwhen the Group becomes a party to the contractual provisions of the instrument. Derivative financial instruments are measured at fair value. If they aredesignated to be part of a cash flow hedge, the effective part of any gain orloss is recognised through the statement of income and expense. Any ineffectivepart, or instrument not designated as a cash flow hedge, is recognised directlyto the Group's income statement. Cash and cash equivalents Cash and cash equivalents includes cash-in-hand, cash at bank and bankoverdrafts together with short term, highly-liquid investments that are readilyconvertible into known amounts of cash, with an insignificant risk of a changein value, within three months from the date of acquisition. Net debt Net debt is cash and cash equivalents, bank and other current loans, bonds andderivative financial instruments stated at current fair value. Consolidated income statement (unaudited) Year ended 25 weeks ended 25 weeks ended 30 January 24 July 2005 25 July 2004 2005 Note £m £m £m Sales including VAT 1 6,339.0 6,025.1 13,029.1 Total turnover 1 5,913.9 5,663.2 12,283.7Less share of BP Joint Venture (66.4) (78.9) (180.0) Group turnover 5,847.5 5,584.3 12,103.7 Operating profit before Safewayintegration costs 3 50.7 172.9 395.4 Safeway integration costs 4 (118.8) (61.8) (139.2) (68.1) 111.1 256.2 Share of post-tax BP Joint Venture 2.2 0.9 2.2profitFinance income 5 10.5 7.3 21.1Finance costs 5 (26.7) (39.2) (86.5) (Loss)/profit before taxation (82.1) 80.1 193.0 Tax credit/(charge) 14.9 (55.5) (88.0) (Loss)/profit for financial period (67.2) 24.6 105.0 Earnings per share: Basic (2.54)p 1.02p 4.17p Diluted (2.54)p 1.01p 4.15p Consolidated balance sheet (unaudited) 30 January 24 July 2005 25 July 2004 2005 Note £m £m £mNon-current assetsIntangible assets 7 103.2 103.2 103.2Property, plant and equipment 6,139.1 6,796.3 5,699.6Investment properties 82.8 84.9 83.8Other non-current assets: Investment in BP Joint Venture - 76.2 78.4 Long lease land premium 231.4 232.8 232.1 Non-current assets classified as held for 8 387.2 272.0 725.7 sale 6,943.7 7,565.4 6,922.8 Current assetsInventories 440.0 410.6 424.6Trade and other receivables 221.9 116.6 222.6Derivative financial instruments 9 43.8 37.8 37.0Cash and cash equivalents 134.6 478.3 93.5 840.3 1,043.3 777.7 Current liabilitiesBank overdrafts (15.7) (89.9) (122.1)Other financial liabilities (252.3) (1,003.2) (152.6)Trade and other payables (1,705.3) (1,551.6) (1,435.0)Current tax liabilities - (20.1) (0.5) (1,973.3) (2,664.8) (1,710.2) Non-current liabilitiesFinancial liabilities (1,011.4) (1,022.5) (1,016.7)Retirement benefit obligation (324.4) (266.1) (408.1)Deferred tax liabilities (508.9) (555.8) (501.6)Provisions (55.2) (62.6) (58.0) (1,899.9) (1,907.0) (1,984.4) Net assets 3,910.8 4,036.9 4,005.9 Shareholders' equityOrdinary shares 265.9 265.6 265.8Share premium 20.6 16.8 20.1Merger reserve 2,578.3 2,578.3 2,578.3Retained earnings 1,046.0 1,176.2 1,141.7 Total equity 3,910.8 4,036.9 4,005.9 Consolidated cash flow statement (unaudited) 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 2005 Note £m £m £m Cash generated from operations 10 326.6 332.4 442.9 Taxation paid (4.3) (90.2) (171.5) Net cash inflow from operating activities 322.3 242.2 271.4 Cash flows from investing activitiesInterest received 8.7 7.3 21.1Subsidiary undertakings and businesses acquired - (820.4) (831.4)Purchase of property, plant and equipment (338.2) (212.8) (428.3)Subsidiary undertakings and businesses disposed 49.1 - -Proceeds of sale of property, plant and 109.8 209.9 903.0equipment Net cash outflow from investing activities (170.6) (816.0) (335.6) Cash flows from financing activitiesNet proceeds from the issue of ordinary share 0.5 0.4 8.9capitalSale of own shares - 0.9 12.0New borrowings 100.0 1,000.0 1,000.0Interest paid (20.0) (22.8) (96.9)Finance lease principal repayments (1.5) (1.6) (3.4)Repayment of bonds, loans and loan notes (2.0) (150.1) (1,003.9)Equity dividends paid 6 (81.2) (71.2) (87.7) Net cash used in financing activities (4.2) 755.6 (171.0) Net increase in cash and cash equivalents 147.5 181.8 (235.2) Opening cash and cash equivalents (28.6) 206.6 206.6 Closing cash and cash equivalents 118.9 388.4 (28.6) Statement of recognised income and expense (unaudited) 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 2005 £m £m £m Actuarial gain/(loss) on defined benefit pension schemes 70.4 62.7 (80.5)Tax on items recognised directly in equity (21.1) (19.0) 24.0 Net gain recognised directly in equity 49.3 43.7 56.5(Loss)/profit for the period (67.2) 24.6 105.0 Total recognised income and expense for the period (17.9) 68.3 48.5 Analysis of net debt (unaudited)Net increase/(decrease) in cash and cash equivalents 147.5 181.8 (235.2)Cash outflow from the repayment of loans and finance leases 3.5 151.7 1,007.3Cash inflow from the receipt of loans (100.0) (1,000.0) (1,000.0)Other non-cash movements 8.9 11.6 11.6Loans and finance leases acquired with subsidiary - (1,149.8) (1,149.8) Movement in net debt in the period 59.9 (1,804.7) (1,366.1)Opening (net debt)/net cash (1,160.9) 205.2 205.2 Closing net debt (1,101.0) (1,599.5) (1,160.9) Statement of changes in equity (unaudited)Opening shareholders' funds under IFRS 4,005.9 1,397.2 1,397.2(Loss)/profit for the period (67.2) 24.6 105.0Dividends (81.2) (71.2) (87.7)As reported in the SORIE 49.3 43.7 (56.5)Conversion of preference share capital 0.1 1.0 1.0Investment in own shares - (43.8) (43.7)New share capital subscribed 0.5 2,686.5 2,690.0Share option charge - (1.1) 0.6First-time adoption of IAS 39 (net of deferred tax) 3.4 - - Closing net assets under IFRS 3,910.8 4,036.9 4,005.9 Notes 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 20051 Turnover £m £m £m Stores 5,147.9 5,036.5 10,927.0 Fuel 1,191.1 988.6 2,102.1 Total sales including VAT 6,339.0 6,025.1 13,029.1 VAT (488.9) (452.0) (1,003.6) Share of BP Joint Venture 66.4 78.9 180.0 Other turnover and adjustments (2.6) 11.2 78.2 Total Turnover 5,913.9 5,663.2 12,283.7 2 Departmental analysis of the like for like increase/(decrease) in supermarket takings Converted Core Morrison stores Safeway Total % % % % Food (2.6) 16.1 2.7 2.9 Off licence (0.9) 8.9 4.1 3.1 (2.4) 15.0 2.9 2.9 Home and leisure (7.6) 24.8 (11.5) (1.9) Total excluding forecourt (2.7) 15.6 2.0 2.6 Forecourt 22.5 16.3 7.6 16.8 Total 1.1 15.7 3.0 5.0 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 20053 Operating profit before Safeway integration £m £m £m Includes: Net (loss)/profit on sale of fixed assets (1.3) (1.7) 14.5 Notes (continued) 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 20054 Safeway integration costs £m £m £m Acquisition costs - 0.8 0.3 Redundancy costs 9.9 17.6 23.8 Divestment costs 0.5 0.5 2.7 Store conversion costs 90.7 2.9 57.5 Retired Safeway brand - 40.0 40.0 Fixtures written off on conversion 17.7 - 14.9 Total 118.8 61.8 139.2 5 Interest Interest receivable 8.7 7.3 21.1 Fair value movements on financial instruments 1.8 - - Finance income 10.5 7.3 21.1 Interest payable (24.0) (36.4) (80.3) Other finance costs (2.7) (2.8) (6.2) Finance costs (26.7) (39.2) (86.5) Note: Net interest payable (15.3) (29.1) (59.2) 6 Dividends Dividends paid in the period 81.2 71.2 87.7 The directors propose an interim dividend of 0.625p per share and dividend warrants will be paid on 5 December 2005 to those members registered in the books of the company on 28 October 2005. Participants in the dividend reinvestment plan will receive their statements and, if applicable, share certificates by 13 December 2005. 7 Goodwill reconciliation £m Goodwill as reported under UK GAAP at 30 January 2005 (262.9) Employee benefits 21.4 Deferred tax 413.9 Business combinations - including previous goodwill amortisation (58.2) Financial instruments (10.7) Other (0.3) Goodwill as reported under IFRS at 24 July 2005 103.2 Notes (continued) 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 20058 Non-current assets classified as held for sale £m £m £m Divestment stores 329.7 272.0 725.7 Ex BP Joint Venture assets 57.5 - - 387.2 272.0 725.7 Divestment properties are stated at the lower of carrying amount or fair value 9 First-time adoption of IAS 39 Financial Instruments: Recognition and Measurement The adoption date for conversion of financial instruments to IFRS is 31 January 2005. Below is a reconciliation of the adjustments at that date, movements for the period and closing balance sheet. Closing Opening 24 July 31 January 2005 Movements 2005 £m £m £m Derivatives included within Bonds under UK GAAP 23.7 (2.6) 26.3 Hindsight adjustment 10.7 - 10.7 Adjustment to fair value under IFRS 9.4 4.4 5.0 Derivative financial instruments under IFRS 43.8 1.8 42.0 Bonds under UK GAAP (999.9) 4.6 (1,004.5) Adjustment to IFRS (0.6) (0.5) (0.1) Total under IFRS (included within Financial (1,000.5) 4.1 (1,004.6) Liabilities) 25 weeks 25 weeks Year ended ended ended 30 January10 Reconciliation of profit before tax to cash 24 July 2005 25 July 2004 2005 generated from operations £m £m £m (Loss)/profit before tax (82.1) 80.1 193.0 Net interest payable 15.3 29.1 59.2 Fair value movements on financial instruments (1.8) - - Other finance costs 2.7 2.8 6.2 Net loss/(profit) on the sale of fixed assets 1.3 1.7 (14.5) Depreciation and other fixed asset adjustments 157.2 172.8 314.1 Share of post-tax BP Joint Ventures profit (2.2) (0.9) (2.2) Share option charge 1.0 0.4 0.9 Excess of contributions over pension service (15.9) (2.3) (7.5) cost 75.5 283.7 549.2 Net movements in working capital 251.1 48.7 (106.3) Cash generated from operations 326.6 332.4 442.9 Notes (continued)11 IFRS Reconciliations of Net Assets and Profit £mOpening net assets at 1 February 2004 Net assets per UK GAAP 1,317.4 Share-based payments 3.8 Employee benefits (6.6) Leases 6.5 Dividends 71.6 Other 4.5 Net assets per IFRS 1,397.2 25 weeks 25 weeks Year ended ended ended 30 January 24 July 2005 25 July 2004 2005 £m £m £mProfit for the period (Loss)/profit per UK GAAP (59.6) 65.1 205.7 Share-based payments (2.6) (0.2) (2.6) Employee benefits (1.2) (1.2) (2.8) Leases 0.5 0.4 0.9 Business combinations (8.3) (40.0) (98.2) Financial instruments 3.9 - - Taxation 0.8 1.0 3.4 Other items (0.7) (0.5) (1.4) (Loss)/profit per IFRS (67.2) 24.6 105.0 Closing net assets Net assets per UK GAAP 3,989.7 4,054.1 4,017.5 Share-based payments (0.2) 2.3 2.1 Employee benefits (20.4) (20.4) (22.4) Leases 7.9 7.0 7.4 Business combinations (88.6) (22.3) (80.3) Financial instruments (IAS 32/39) 6.2 - - Dividends 16.6 16.6 82.0 Other items (0.4) (0.4) (0.4) Closing net assets per IFRS 3,910.8 4,036.9 4,005.9 Notes (continued)12 Explanation of differences These half year interim consolidated financial statements for the 25 weeks ended24 July 2005 have been prepared in accordance with International FinancialReporting Standards (IFRSs). Listed below are the various options that werechosen from those available under IFRS 1 First-time Adoption of IFRSs with abrief description of material differences. IFRS 1 first-time adoption options IAS 19 Employee Benefits - all cumulative actuarial gains and losses arerecognised at date of transition. This is similar to the UK GAAP approach. IFRS 2 Share-based Payment - recommended approach of only valuing post-November2002 share-based payments has been followed. IAS 39 Financial Instruments: Recognition and Measurement- implementationdeferred to 31 January 2005. Comparative figures for 25 weeks ended 25 July 2004and 52 weeks ended 30 January 2005 are under UK GAAP. IFRS 3 Business Combinations -not applicable as the only material acquisition tobe considered was the Safeway acquisition on 8 March 2004 which is after thedate of first-time adoption. IAS 21 Foreign Exchange - nil balance brought forward on translation of foreignsubsidiaries at the transition date. Material differences Share-based Payments - fair value is charged to the income statement forexecutive share options and share-based incentive payments to employees. Pensions - the liability and charge will differ due to different treatment ofdeath in service costs and the use of the bid value under IAS 19 compared tomarket value under FRS 17. Leases - premiums for long leasehold land are now recognised as operating leaseprepayments rather than fixed assets. The effect on the income statement is areduced charge. Business combinations - goodwill is not amortised under IFRS. There areprimarily two adjustments - the reversal of negative goodwill amortisation andthe retirement of the Safeway brand - plus the variations in valuations thatarise from the application of IFRS standards compared to UK GAAP. Financial instruments - derivative instruments are recognised at market value ateach balance sheet date. The change in fair value from date of transition (31January 2005) has been taken to the Income Statement as hedge accounting has notbeen adopted. Taxation - provision is required under IAS 12 Income Taxes for the potentialcapital gains tax arising on the fair value uplift of properties acquired fromSafeway, even though this is commercially remote. This accounts for almost allof the IFRS adjustment set out in Note 7. Dividends - proposed dividends are not allowed to be recognised until authorisedor paid. Authorisation is normally at an Annual General Meeting. Reclassifications - the format of financial statements and classification ofitems is slightly different. Under IFRS, items are generally shown gross and notnetted-off. This results in some reclassifications. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MRW.L