20th Jul 2005 07:00
Incisive Media PLC20 July 2005 INCISIVE MEDIA PLC UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS Incisive Media is preparing for the adoption of International FinancialReporting Standards ("IFRS") as its primary accounting basis for the year ending31 December 2005. As part of this transition, Incisive Media is todaypresenting unaudited financial information prepared in accordance with IFRS forthe year ended 31 December 2004. This press release explains how the Group's previously reported UK GAAPfinancial performance and position are reported under IFRS. It providesreconciliations from UK GAAP to IFRS for the following: • the Group's unaudited consolidated income statement for the year ended 31 December 2004; • the Group's unaudited consolidated balance sheet as at 31 December 2004 • the Group's unaudited consolidated cash flow statement for the year ended 31 December 2004 • the Group's unaudited consolidated balance sheet as at 1 January 2004. The principal changes to Incisive Media's reported financial information underUK GAAP arising from the adoption of IFRS are as a result of the: • requirement not to amortise goodwill • inclusion of a "fair value" charge in relation to employee share options • recognition of deferred tax liabilities on a different basis • requirement to recognise property lease incentives over the life of a lease and not the period until the first rent review. Jamie Campbell-Harris, Finance Director of Incisive Media, commented: "The unaudited financial information provided today shows how IFRS impactsIncisive Media's recent results in advance of its adoption in the 2005 financialyear. The most significant change is that Incisive Media will no longeramortise goodwill, and for the year ended 31 December 2004 the expected impactof the adoption of IFRS is to increase profit attributable to equityshareholders by £4,190k. This comprises a credit of £4,434k relating to thenon-amortisation of goodwill, partially offset by additional costs of £244k,comprising a charge for share based payments of £131k, an additional lease costof £90k and a net increase in the tax charge of £23k." Enquiries Jamie Campbell-Harris Tel: 020 7484 9700Incisive Media plc Anthony Payne Tel: 020 7484 9983Peregrine Communications 07930 643 983 INTRODUCTION Incisive Media Plc is preparing for the adoption of International FinancialReporting Standards ("IFRS") as its primary accounting basis following adoptionof Regulation No. 1606/2002 by the European Parliament on 19 July 2002. The financial information contained on pages 5 to 10 has been prepared inaccordance with applicable International Financial Reporting Standards ("IFRS"),including International Accounting Standards ("IAS") and interpretations issuedby the Standing Interpretations Committee ("SIC") of the InternationalAccounting Standards Board ("IASB") and its committees. These standards aresubject to ongoing amendment by the IASB and subsequent endorsement by theEuropean Commission and are therefore subject to possible change. As a result,information contained within these statements may require updating at a futuredate. Therefore it is possible that the comparative information included in thefirst complete set of IFRS financial statements as at 31 December 2005 may notbe consistent with the disclosure below. The financial information has been prepared by management using their bestknowledge and judgement of the expected standards and interpretations of theIASB, facts and circumstances, and accounting policies that will be applied whenthe Company prepares its first complete set of IFRS financial statement as at 31December 2005. The first financial report prepared under IFRS will be for thesix months ending 30 June 2005. This press release explains how the Group's previously reported UK GAAPfinancial performance and position are reported under IFRS. It provides, on anIFRS basis, reconciliations from UK GAAP to IFRS for the following: • the Group's unaudited consolidated income statement for the year ended 31 December 2004; • the Group's unaudited consolidated balance sheet as at 31 December 2004; • the Group's unaudited consolidated cash flow statement for the year ended 31 December 2004; • the Group's unaudited consolidated balance sheet as at 1 January 2004. The financial information presented is unaudited. Attention is drawn to the fact that under IFRS, only a complete set of financialstatements comprising a balance sheet, income statement, statement of changes inequity, cash flow statement, together with comparative information andexplanatory notes, can provide a fair presentation of the Company's financialposition, results of operations and cash flows. Basis of preparation The financial information presented has been prepared based on the adoption ofIFRS, including IAS and interpretations issued by the IASB and its committees asinterpreted by any regulatory bodies relevant to the Group. These are subject toongoing amendment by the IASB and subsequent endorsement by the EuropeanCommission and are therefore subject to change. As a result, informationcontained herein may need to be updated for any subsequent amendment to IFRSrequired for first time adoption, or any new standards that the Group may electto adopt early. As permitted by IFRS 1, the Group will apply the full version of IAS 32"Financial Instruments: Disclosure and presentation" and IAS 39 "FinancialInstruments: Recognition and Measurement" as issued by the IASB from 1 January2005. IFRS 1 exemptions IFRS 1, "First-time Adoption of International Financial Reporting Standards"sets out the procedures that the Group must follow when it adopts IFRS for thefirst time as the basis for preparing its consolidated financial statements.The Group is required to establish its IFRS accounting policies as at 31December 2004 and, in general, apply these retrospectively to determine the IFRSopening balance sheet at its date of transition, 1 January 2004. However, IFRS 1 provides a number of optional exceptions to this generalprinciple. The most significant of these are set out below, together with adescription in each case of the exception adopted by the Group. • IFRS 3 - "Business Combinations" The Group has elected not to apply IFRS 3 retrospectively to business combinations prior to 1 January 2004. Therefore business combinations prior to this date have not been revisited in order to separately identify specific intangible assets acquired. The balance of goodwill at 1 January 2004 will be subject to an annual impairment review but will no longer be amortised going forward. • IFRS 2 - "Share based payments" IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that had not vested at 1 January 2005. • IAS 39 - "Financial instruments: Recognition and measurement"; and IAS 32 - "Financial Instruments: Disclosure and Presentation" The Group has taken advantage of the exemption in IFRS 1 that enables the Group to only apply these standards from 1 January 2005. Presentation of financial information 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 in the event that further guidance is issued and as practicedevelops. KEY IMPACT ANALYSIS The analysis below sets out the most significant adjustments arising from thetransition to IFRS. Presentation of Financial Statements The primary statements within the financial information contained in thisdocument have been presented in accordance with IAS 1, "Presentation ofFinancial Statements". Intangible assets a) Goodwill and acquired intangible asset amortisation IAS 38, "Intangible Assets" states that goodwill is not amortised. Instead it is subject to an annual impairment review. As the Group has elected not to apply IFRS 3 retrospectively to business combinations prior to the opening balance sheet date under IFRS, the UK GAAP goodwill balance at 1 January 2004 (£69,742k) has been included in the opening balance sheet. From 1 January 2004, business acquisitions have been accounted for in accordance with IFRS 3, "Business Combinations". b) Computer software Under UK GAAP, capitalised computer software has been included within tangible fixed assets on the balance sheet as property, plant and equipment. Under IAS 38 only computer software that is integral to a related item of hardware can be included as property plant and equipment. All other computer software is recorded as an intangible asset. Accordingly, a reclassification has been made in each balance sheet between property, plant and equipment and intangible assets. Deferred and current taxes The scope of IAS 12, "Income Taxes" is wider than the corresponding UK GAAPstandards as, in principle, it requires deferred tax to be provided on alltemporary differences rather than just timing differences. A requirement of IAS 12 is to provide a full deferred tax liability in respectof intangible assets, other than goodwill, which were recognised on acquisitionssince 1 January 2004 to the extent that the assets exceed their tax base. Theeffect of this recognition has been to increase goodwill and deferred taxliabilities by £5,005k. IAS 12 also requires deferred tax to be provided in respect of employee shareand share options schemes. Share based payments IFRS 2, "Share-based Payments" requires that an expense for equity instrumentsgranted be recognised in the financial statements based on their fair value atthe date of grant. This expense, which is in relation to employee option andperformance share schemes, is recognised over the vesting period of the scheme. IFRS 2 has been applied to all options granted after 7 November 2002 and notfully vested by 1 January 2005. The Group has adopted the Black Scholes modelfor the purposes of computing fair value of options under IFRS. IFRS 2 requires that a deferred tax adjustment is made to the financialstatements relating to the intrinsic value of share options at the balance sheetdate. This creates a deferred tax asset which has been reflected in the balancesheet and a deferred tax credit in the income statement. The deferred tax creditis restricted to the tax value of the expense recognised in the incomestatement, with any excess credit taken to reserves. Lease incentives SIC 15, "Operating Lease - Incentives", an interpretation of IAS 17, "Leases",requires that incentives to agree a new operating lease, such as a reduction inrental expense, must be recognised on a straight line basis over the lease term.This differs from UK GAAP that requires that such incentives should berecognised over the period from commencement to the first rent review. Post Balance Sheet events and dividends IAS 10, "Events after the Balance Sheet Date" requires that dividends declaredafter the balance sheet date should not be recognised as a liability at thatbalance sheet date as the liability does not represent a present obligation asdefined by IAS 37, "Provisions, Contingent Liabilities and Contingent Assets". The final dividend proposed in relation to the financial year ended 31 December2004 of £1.1m has been reversed in the opening balance sheet. Dividends are nowrecognised in the accounts from the date they are declared. FINANCIAL INFORMATION Income statement Reconciliation of UK GAAP consolidated profit and loss account to IFRSconsolidated income statement for the year ended 31 December 2004. Thisreconciliation is presented in the format required by IFRS 1 and is unaudited. The impact of deferred and current taxes on each adjustment is shown within therelevant column. UNAUDITED INCOME STATEMENT(IN IFRS FORMAT) ShareYEAR TO 31 DECEMBER 2004 UK Intangible Based GAAP Assets Payments Leases IFRS 2004 IAS 38 IFRS 2 IAS 17 2004 £'000 £'000 £'000 £'000 £'000 Revenue 46,492 - - - 46,492 Cost of sales (27,081) - - - (27,081) ____________________________________________________Gross profit 19,411 - - - 19,411 Administrative expenses (11,752) 4,434 (131) (90) (7,539) ____________________________________________________Group operating profit 7,659 4,434 (131) (90) 11,872 Finance revenue 130 - - - 130Finance costs (2,485) - - - (2,485) ____________________________________________________Profit before tax 5,304 4,434 (131) (90) 9,517 Taxation (2,787) (89) 39 27 (2,810) ____________________________________________________Profit for the year 2,517 4,345 (92) (63) 6,707 ____________________________________________________ Attributable to- minority interests (6) - - - (6)- equity shareholders 2,523 4,345 (92) (63) 6,713 ____________________________________________________ 2,517 4,345 (92) (63) 6,707 ____________________________________________________ pence pence Earnings per share - basic 2.85 7.57Earnings per share - diluted 2.79 7.41 Balance sheet Reconciliation of UK GAAP to IFRS consolidated balance sheet as at 31 December2004. This reconciliation is presented in IFRS format and is unaudited. The impact of deferred and current taxes on each adjustment is shown within therelevant column. UNAUDITED BALANCE SHEET (IN IFRS FORMAT) Share31 DECEMBER 2004 UK Intangible Based GAAP Assets Payments Leases Dividends IFRS 2004 IAS 38 IFRS 2 IAS 17 IAS 10 2004 £'000 £'000 £'000 £'000 £'000 £'000 Non current assetsIntangible assets 86,806 9,484 - - - 96,290Property, plant & equipment 841 (44) - - - 797 ________________________________________________________________ 87,647 9,440 - - - 97,087 Current assetsInventories 467 - - - - 467Trade and other receivables 10,235 - - - - 10,235Cash and cash equivalents 5,334 - - - - 5,334 ________________________________________________________________ 16,036 - - - - 16,036 Current liabilitiesFinancial liabilities (7,385) - - - - (7,385)Trade and other payables (17,708) - - (90) 1,142 (16,656)Current tax liabilities (1,972) - - - - (1,972) (27,065) - - (90) 1,142 (26,013) ________________________________________________________________Net current liabilities (11,029) - - (90) 1,142 (9,977) ________________________________________________________________ Non current liabilitiesFinancial liabilities (26,500) - - - - (26,500)Deferred tax liabilities (169) (5,095) 154 27 - (5,083) ________________________________________________________________ (26,669) (5,095) 154 27 - (31,583) ________________________________________________________________Net assets 49,949 4,345 154 (63) 1,142 55,527 ________________________________________________________________ Shareholder's equityOrdinary shares 914 - - - - 914Share premium 35,903 - - - - 35,903Other reserves 8,953 - - - - 8,953Retained earnings 4,185 4,345 154 (63) 1,142 9,763 ________________________________________________________________Total shareholder's equity 49,955 4,345 154 (63) 1,142 55,533 ________________________________________________________________ Minority interest in equity (6) - - - - (6) ________________________________________________________________Total equity 49,949 4,345 154 (63) 1,142 55,527 ________________________________________________________________ Cash flow statement Reconciliation of UK GAAP to IFRS consolidated cash flow statement for the yearended 31 December 2004. This reconciliation is presented in IFRS format and isunaudited. There are no differences between the UK GAAP and IFRS consolidatedcashflow statements. UNAUDITED CASH FLOW STATEMENT(IN IFRS FORMAT) UKYEAR TO 31 DECEMBER 2004 GAAP IFRS 2004 2004 £'000 £'000 Cash flows from operating activitiesCash generated from operations 11,932 11,932Interest received 124 124Interest paid (2,435) (2,435)Tax paid (1,843) (1,843) _________ _________Net cash from operating activities 7,778 7,778 Cash flows from investing activitiesAcquisition of subsidiaries (16,851) (16,851)Purchase of plant and equipment (430) (430)Proceeds from sale of plant and equipment 8 8 _________ _________Net cash flows from investing activities (17,273) (17,273) Cash flows from financing activitiesNet proceeds from issue of ordinary shares 10,987 10,987Net proceeds from issue of new bank loans 9,100 9,100Repayment of borrowings (3,057) (3,057)Repayment of loan notes (2,124) (2,124)Issue costs of new loans (196) (196)Dividends paid to shareholders (1,514) (1,514) _________ _________Net cash used in financing activities 13,196 13,196 _________ _________Net increase in cash and cash equivalents 3,701 3,701 _________ _________ Cash and cash equivalents at 1 January 1,633 1,633 _________ _________Cash and cash equivalents at 31 December 5,334 5,334 _________ _________ (IN IFRS FORMAT) ShareYEAR TO 31 DECEMBER 2004 UK Intangible Based GAAP Assets Payments Leases IFRS 2004 IAS 38 IFRS 2 IAS 17 2004 £'000 £'000 £'000 £'000 £'000 Net profit 2,517 4,345 (92) (63) 6,707 Adjustments for:Tax 2,787 89 (39) (27) 2,810Depreciation 360 (19) - - 341Profit on disposal of plant and equipment (3) - - - (3)Amortisation of intangibles 4,440 (4,415) - - 25Share based payments - - 131 - 131Interest income (130) - - - (130)Interest expense 2,485 - - - 2,485 Changes in working capital(excluding the effect of acquisitions)Increase in inventories (162) - - - (162)Increase in trade and other receivables 556 - - - 556Increase in payables (918) - - 90 (828) _____________________________________________________Cash generated from operations 11,932 - - - 11,932 _____________________________________________________ Opening balance sheet Reconciliation of UK GAAP to IFRS consolidated balance sheet as at 1 January2004. This reconciliation is presented in IFRS format and is unaudited.The impact of deferred and current taxes on each adjustment is shown within therelevant column. UNAUDITED BALANCE SHEET(IN IFRS FORMAT) Share1 JANUARY 2004 UK Financial Intangible Based Deferred GAAP Instrmnts Assets Payments Tax Dividends IFRS 2004 IAS 32 IAS 38 IFRS 2 IAS 12 IAS 10 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Non current assetsIntangible assets 69,754 - 63 - - - 69,817Property, plant & equipment 741 - (63) - - - 678Deferred tax assets 135 - - 31 18 - 184 ______________________________________________________________________________ 70,630 - - 31 18 - 70,679 Current assetsInventories 306 - - - - - 306Trade and other receivables 10,335 - - - - - 10,335Cash and cash equivalents 1,633 - - - - - 1,633 ______________________________________________________________________________ 12,274 - - - - - 12,274 Current liabilitiesFinancial liabilities (9,080) (600) - - - - (9,680)Trade and other payables (12,136) - - - - 829 (11,307)Current tax liabilities (1,342) - - - - - (1,342) ______________________________________________________________________________ (22,558) - - - - 829 (22,329) ______________________________________________________________________________Net current liabilities (10,284) (600) - - - 829 (10,055) ______________________________________________________________________________ Non current liabilitiesFinancial liabilities (21,486) - - - - - (21,486)Deferred tax liabilities - - - - (18) - (18) ______________________________________________________________________________ (21,486) - - - (18) - (21,504) ______________________________________________________________________________Net assets 38,860 (600) - 31 - 829 39,120 ______________________________________________________________________________ Shareholder's equity Ordinary shares 829 - - - - - 829Shares to be issued 600 (600) - - - - -Share premium 25,001 - - - - - 25,001Other reserves 8,953 - - - - - 8,953Retained earnings 3,477 - - 31 - 829 4,337 ______________________________________________________________________________Total shareholder's equity 38,860 (600) - 31 - 829 39,120 ______________________________________________________________________________ Notes to the consolidated IFRS statement. These notes are presented in IFRS format and are unaudited. Earnings per share UNAUDITED EARNINGS PER SHARE(IN IFRS FORMAT) UKYEAR TO 31 DECEMBER 2004 GAAP IFRS 2004 2004 £'000 £'000 Profit for the financial year 2,523 6,713 number number '000 '000 Weighted average number of shares in issue in period - basic 88,660 88,660Effect of dilutive securities - options to staff 1,889 1,889 _________ _________Weighted average number of shares in issue in period - diluted 90,549 90,549 pence pence Earnings per share - basic 2.85 7.57Earnings per share - diluted 2.79 7.41 SUPPLEMENTARY EARNINGS PER SHARE £'000 £'000 Profit for the financial year 2,523 6,713Effect of- goodwill amortisation 4,434 -- deferred tax effect on US goodwill 255 344- share based charges on options to staff - 92 _________ _________Adjusted profit for the financial year 7,212 7,149 _________ _________ pence pence Supplementary earnings per share - basic 8.13 8.06Supplementary earnings per share - diluted 7.96 7.90 Supplementary earnings per share have been calculated to exclude the effect ofgoodwill. Charges on options to staff are excluded on the basis that they are anon-cash item in the income statement that are already accounted for whencalculating fully diluted shares in issue. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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