18th Oct 2005 07:02
Huntsworth PLC18 October 2005 Huntsworth PLC Interim Results for six months to 30 June 2005 Strong results from merged group Huntsworth PLC, the international public relations group, has today announcedits interim results for the six months to 30 June 2005. These results include two months' contribution from Incepta, which joined theGroup as a result of the merger of Huntsworth and Incepta that completed on 29April 2005. Highlights • Operating income of £54.1 million (2004: £17.4 million) • Operating profit before highlighted items* increased to £7.1 million (2004: £2.0m) • Statutory operating profit was £3.32 million (2004: £1.35 million), after highlighted items of £3.73 million • Overall operating companies margins (before highlighted items): 17.8%; Public Relations and Healthcare Communications at 19.2%; Marketing Services and Specialist Advertising at 13.5% • Annualised pre-tax cost savings of £3.5 million achieved to date, well in advance of the £2.5 million estimated at the time of the merger • Substantial first time contribution from Incepta PR companies • Adjusted earnings per share (before 1 for 5 share consolidation): 0.8p (2004: 0.6p), equivalent to 3.8p post consolidation. Basic earnings per share (before share consolidation): 0.2p (2004: 0.4p) • Interim dividend of 0.5p per share (post 1 for 5 share consolidation) • Proposed disposal of marketing services and specialist advertising businesses for a net cash consideration, before disposal costs, of £55 million * Highlighted items are made up of IFRS related charges as well as merger,restructuring and other non- recurring costs. Comparatives for the six months ended 30 June 2004 are for the Huntsworthbusinesses consolidated for that period only. Jon Foulds, Chairman of Huntsworth, said: "This has been a momentous period for the Group. We have made a step change inscale, not only in terms of revenues and profits, but also in the scope ofservices we are able to offer clients and the geographies in which we cansupport them. With the strategic review completed and implemented, a clearlyrefocused group, reduced debt levels and cost savings coming through, we haveincreasing confidence for the development of our businesses in 2006." Contacts: Lord Chadlington, Chief Executive, Huntsworth PLC, +44 (0) 20 7408 2232Roger Selman, Finance Director, Huntsworth PLC, +44 (0) 20 7408 2232Patrick Toyne-Sewell, Citigate Dewe Rogerson +44 (0) 7767 498195 Interim Results for Six Months to 30 June 2005 Financial performance This is the first set of results the Group has reported since the mergercompleted on 29 April of Huntsworth and Incepta. It therefore covers a period ofsignificant change for the Group; the Board has undertaken a major strategicreview and the integration of the two businesses has been completed. The Board is very pleased to report that the results for the six months to 30June 2005 reflect a strong contribution from the PR businesses of Incepta.Operating income for the period was £54.1 million compared with £17.4 million inthe six months to 30 June 2004. Operating profit before highlighted items(described in detail under 'Further financial information', below) was£7,053,000, compared with £1,990,000 in the six months to 30 June 2004. Statutory operating profit was £3,324,000 (2004: £1,353,000), after highlighteditems of £3,729,000. The Board has declared an interim dividend of 0.5p per share. The interimdividend will be paid on 13 December 2005 to shareholders on the Group'sregister at the close of business on 28 October 2005. A scrip dividend optionwill also be available. Strategy Following the merger of Huntsworth and Incepta, the new Board carried out acomprehensive strategic review to determine the appropriate focus and structurefor the enlarged group. The results of that review were announced in September.Huntsworth's strategy is to build an international Public Relations businessspecialising in consumer PR, investor/financial PR, Public Affairs, TechnologyPR and a broad communications offering for clients in Healthcare. Huntsworthwill continue to expand within this strategy, both organically and byacquisition. This strategy lies behind the Board's decision to focus Huntsworth on its corePR and Healthcare communications activities and sell its Marketing Services andSpecialist Advertising divisions. The sale of these businesses to Media Squarewas announced on 13 October and will result in Huntsworth receiving £55 millionin cash. The sale involves 16 businesses including those in Sales Promotion,Design, Direct Marketing, Sponsorship Consultancy, Publishing and Specialist andregional advertising. The net proceeds of the sale will be used to reduceborrowings and will increase the Group's financial flexibility. The sale, whichis subject, inter alia, to shareholders' approval, is expected to be completedat the beginning of November. Following the disposal, the Group will have a focused, international PublicRelations and Healthcare Communications business operating through a whollyowned network of some 45 principal offices in 20 countries and serving over2,000 clients. Huntsworth's operating income will be well spread across theGroup's key areas of activity - 51 per cent from its full service PR businesses,42 per cent from Financial, Investor Relations and Public Affairs and thebalance from Healthcare Communications. Geographically, Huntsworth will alsohave a better spread of operating income with 53 per cent from the UK, 23 percent from other European countries, 21 per cent from the USA and 3 per cent fromthe Rest of World. Huntsworth now services an increasingly high profile client list as the scale ofthe business and its broadened international reach has allowed it to attract andretain larger clients: • The Group provides services to 73 companies in the FTSE 100, 178 in the Fortune 500, and 164 in the Eurotop 300. • The Group now represents 136 clients in more than one country and 121 clients are serviced by more than one of our brands. The benefits of Huntsworth's group structure are already becoming apparent withrecent new business wins including: The AA, Capital One, Coca Cola, Diageo(Johnnie Walker), Foreign & Commonwealth Office, Fujitsu Siemens Computers,GNER, John Lewis, LogicaCMG, Nikon, Novartis, Pernot Ricard, Premier Food,QinetiQ, Sanofi-Aventis, Thwaites Brewery, United Business Media and Volvo. Cost savings At the time of the announcement of the merger of Huntsworth and Incepta, theGroup estimated that annualised pre-tax cost savings of at least £2.5 millionwould be achieved in 2006. The Board is very pleased to report that the Grouphas already achieved annualised savings of some £3.5 million, comprisingreductions in staff costs of £2.0 million, in property costs of £0.8 million andin administrative costs of £0.7 million. The one-off cash cost of implementingthese savings is £1.6 million. The Group is continuing to look for furthersavings and will report back to shareholders on this at the time of the fullyear's results. Operational Review Operating margins Operating company margins were 17.8 per cent, before central costs and excludinghighlighted items. Margins in Public Relations and Healthcare were 19.2 per centand in Marketing Services/Specialist Advertising, 13.5 per cent. The margintarget for the Group remains 20 per cent across the board and the Group willmaintain its focus on achieving this over the medium term. Operating income On a like-for-like basis, operating income in the period was down 0.7 per centcompared with the first half of 2004. However, the core Public Relations andHealthcare businesses were up 3.7 per cent, whilst Marketing Services andSpecialist Advertising were down 7.3 per cent. The like-for-like comparison isat constant currency rates and includes all operations on a full six monthsbasis. Particularly strong performances were achieved by Avenue, Citigate DeweRogerson, Citigate PR Force, Citigate Sard Verbinnen, Grayling, HaslimannTaylor, Hudson Sandler, The RED Consultancy, Trimedia UK and VB Communications. Further financial information Earnings Profits for the period amounted to £1,517,000 (2004: £898,000), after tax of£816,000. Adjusted earnings* per share, pre the 1 for 5 consolidation carried out in July(excluding highlighted items) were 0.8 pence (2004: 0.6 pence). Both basic anddiluted earnings per share were 0.2 pence (2004: both 0.4 pence). *Adjusted earnings exclude highlighted items, discontinued operations and thetax effect thereon. Highlighted items (including IFRS related charges) The introduction of International Financial Reporting Standards (IFRS) has beenreflected in both the 2005 and 2004 results. This has had a particularlysignificant effect at Huntsworth because a substantial part of the group hasbeen acquired since 1 January 2004, the date from which acquisitions areaccounted for under IFRS. The total of highlighted items is £3,729,000, and is made up as follows: IFRSrelated charges comprise £1,484,000 for the amortisation of intangibles, a shareoption charge of £286,000 and a holiday pay accrual of £545,000. In additionthere were merger, restructuring and other non-recurring costs of £1,414,000. It is estimated, assuming the disposal of the Marketing Services and SpecialistAdvertising companies, that for the full year 2005 the amortisation ofintangibles and the current share option charge will be approximately £5.0million and £0.8 million respectively, with those amounts increasing toapproximately £5.6 million and £0.9 million respectively in 2006. There shouldbe little holiday pay accrual at the year end. Treasury In the six months Huntsworth generated positive trading cash flow of £3.6million, before exceptional cash flows (2004: £636,000). Huntsworth now has twobankers, Lloyds TSB Bank and The Royal Bank of Scotland, and has a committedunsecured term, overdraft and guarantee facility totalling £95 million in placeuntil April 2008. The facilities will reduce to not less than £55 million aftercompletion of the disposal of the Marketing Services and Specialist Advertisingbusinesses. EBITDA interest cover (excluding highlighted items) was 8.2x in the six monthsended 30 June 2005. Huntsworth has protected its US dollar and Euro earnings for 2005 by enteringinto average rate options arrangements. It has also partially protected itselfagainst the effects of interest rate increases for the three years to August2007 by taking out a base interest rate cap over £5 million. Tax and minority interests The tax charge of £816,000 comprises £1,510,000 in respect of profit beforehighlighted items (based on the expected full year rate of 25%), less £694,000for tax credits on highlighted items. With an increased proportion of overseasoperations, and brought forward tax losses not available across all companies,tax as a percentage of profits will continue to increase. UK tax losses carriedforward amount to approximately £7 million and overseas tax losses amount toapproximately £28 million. Minority interests amounted to £484,000 for the period. Balance Sheet Net bank debt at 30 June 2005 was £71.5 million, compared with £4.1 million at31 December 2004. Shareholders' funds at 30 June 2005 increased to £168.2million, compared with £43.4 million at 31 December 2004. Acquisition payments Acquisition payments totalled £3.4 million in the period. Net debt acquired withsubsidiaries totalled £60.2 million. A total of 611.3 million shares, with avalue of £122.3 million, were issued in respect of acquisitions in the sixmonths. Earn-out payments Future earn-out payments are estimated at £11.3 million, comprising £7.5 millionpayable in cash or in shares at Huntsworth's option, £1.8 million in shares and£2.0 million in cash. The timing of the aggregate of these payments is £2.3million in 2005, £3.0 million in 2006, £5.1 million in 2007 and £0.9 million in2008. Outlook The strategic review has refocused the Group on Public Relations and IntegratedHealthcare and the reorganisation of the executive management. The disposal ofthe Marketing Services and Specialist Advertising businesses will reduce debtsignificantly and places Huntsworth in a strong position to develop itsbusinesses within a well defined strategy. Since the end of June, the Group's Public Relations businesses have continued toperform well, with good growth and margins. The Board has every expectation thatthis performance will be sustained. The Marketing Services and SpecialistAdvertising businesses had a difficult start to the year, despite some recoveryfollowing the merger, and have seen their operating income fall well below theprevious year. Huntsworth has first class brands with international reach, run by anexceptional group of senior managers. The companies in the merged group arealready working together to develop opportunities across brands. While theprofits of Marketing Services and Advertising businesses for the period up totheir disposal will be below expectations, the Public Relations businessesshould have a strong finish to the year. Overall the Board has increasingconfidence for the development of the Group's businesses in 2006 and beyond. H Jon FouldsChairman18 October 2005 Unaudited Consolidated Income Statement for the six months ended 30 June 2005 Notes Six months ended 30 June 2005 Six months ended Year ended 30 June 2004 31 December 2004 £000 £000 £000Continuing operationsTurnoverExcluding acquisitions 28,456 23,083 63,575Acquisitions 42,375 - - 70,831 23,083 63,575Cost of sales (16,766) (5,729) (18,713) Operating incomeExcluding acquisitions 28,363 17,354 44,862Acquisitions 25,702 - - 4 54,065 17,354 44,862 Operating expenses including highlighted items (50,741) (16,001) (42,041) Operating profit before highlighted itemsExcluding acquisitions 3,344 1,990 5,353Acquisitions 3,709 - - 4 7,053 1,990 5,353 Highlighted items 5 (3,729) (637) (2,532) Operating profit 3,324 1,353 2,821 Finance income 6 90 31 75Finance costs 6 (1,081) (279) (622) Profit before tax and highlighted items 6,062 1,742 4,806Highlighted items 5 (3,729) (637) (2,532) Profit before tax 2,333 1,105 2,274Taxation 7 (816) (152) (378)Profit for the period from continuing operations 1,517 953 1,896 Loss from discontinued operations - (55) (256) Profit for the period 1,517 898 1,640 Attributable to:Parent company's shareholders 1,033 770 1,262Minority interests 484 128 378 1,517 898 1,640 Earnings per share from continuing operations:Basic - pence 9 0.2 0.4 0.6Diluted - pence 9 0.2 0.4 0.6 Adjusted - pence 9 0.8 0.6 1.5 Unaudited Consolidated Balance Sheet as at 30 June 2005 Notes 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Non-current assetsIntangible assets 10 270,655 51,202 62,261Property, plant and equipment 10,492 2,850 2,680Deferred tax 3,439 27 13Other investments 108 191 - 284,694 54,270 64,954Current assetsWork in progress 5,696 1,444 1,148Trade and other receivables 73,358 15,496 18,046Cash and short-term deposits 12(c) 11,273 2,136 2,773 90,327 19,076 21,967Current liabilitiesBank overdraft 12(c) (2,086) (566) (141)Loan notes payable 12(c) (1,998) (1,742) (2,080)Obligations under finance leases 12(c) (127) (182) (135)Trade and other payables (63,753) (14,619) (18,088)Corporation tax payable (8,341) (322) (1,312)Provisions (11,027) (2,047) (4,402) (87,332) (19,478) (26,158)Non-current liabilitiesBank loans and overdrafts 12(c) (80,658) (3,902) (6,727)Loan notes payable 12(c) (1,434) - -Obligations under finance leases 12(c) (370) (308) (162)Provisions (16,397) (6,703) (8,001)Other creditors (5,687) (1,250) -Deferred tax liabilities (13,589) (1,536) (1,792) (118,135) (13,699) (16,682)NET ASSETS 169,554 40,169 44,081 EquityCalled up share capital 91,572 28,709 30,444Share premium account 22,888 23,612 23,615Merger reserve 69,067 6,563 7,902Foreign exchange translation reserve 2,068 (62) (183)Shares to be issued 4,864 - -Treasury shares (710) (8) (8)Potential acquisition of minority interests (4,168) - -Retained earnings (17,373) (18,773) (18,388) Equity attributable to equity holders of the 168,208 40,041 43,382parent 11Minority interests 1,346 128 699 TOTAL EQUITY 169,554 40,169 44,081 Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2005 Six months ended Six months ended Year ended Notes 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Cash inflow (outflow) from operating activitiesCash generated from operations 12(a) 483 111 4,635Interest paid (1,120) (293) (570)Interest received 151 45 75Corporation tax paid (632) (73) (522)Net cash (outflow) inflow from operating activities (1,118) (210) 3,618 Cash inflow (outflow) from investing activitiesAcquisitions of subsidiaries (3,416) (11,134) (18,164)Purchases of property, plant and equipment (1,149) (135) (380)Proceeds from sale of property, plant and equipment 361 6 65Proceeds from sale of fixed asset investments 55 - -Net cash (overdraft) acquired with subsidiaries 24,854 (871) 927 Net cash inflow (outflow) from investing activities 20,705 (12,134) (17,552) Cash inflow (outflow) from financing activitiesProceeds from issue of ordinary shares 13 20,413 20,886Purchase of treasury shares - (3) (3)Repayment of finance lease liabilities (108) (101) (272)Repayment of loan notes (4,974) - -Net movement in borrowings (5,438) (6,128) (3,303)Dividends paid to minority interests (76) - (130)Special dividend paid to Incepta shareholders (2,100) - -Dividends paid to equity holders of the parent (306) (163) (467)Net cash (outflow) inflow from financing activities (12,989) 14,018 16,711 Increase in cash and cash equivalents 6,598 1,674 2,777 Movements in cash and cash equivalentsNet increase in cash and cash equivalents 6,598 1,674 2,777Effects of exchange rate fluctuations on cash held (43) (58) (99)Cash and cash equivalents at 1 January 2,632 (46) (46)Cash and cash equivalents at end of period 12(c) 9,187 1,570 2,632 Unaudited Consolidated Statement Of Recognised Income And Expense for the sixmonths ended 30 June 2005 Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Profit for the period 1,033 770 1,262Exchange differences on retranslation of net assets 2,251 (62) (183)of subsidiary undertakingsTotal recognised net income for the period 3,284 708 1,079 Notes to the financial statements for the six months ended 30 June 2005 1. Basis of preparation Prior to 2005 the Group prepared its audited financial statements under UKGenerally Accepted Accounting Principles ('UK GAAP'). For the year ended 31December 2005 the Group is required to prepare its annual consolidated financialstatements in accordance with accounting standards adopted for use in theEuropean Union (International Financial Reporting Standards ('IFRS')).Theseinterim financial statements have been prepared in accordance with theaccounting policies set out below, taking into account the requirements andoptions in IFRS 1 'First-time adoption of International Financial ReportingStandards'. The Group has not adopted the reporting requirements of IAS 34 'Interim Financial Reporting'. The transition date for the Group's application of IFRS is 1 January 2004 andthe comparative figures for 30 June 2004 and 31 December 2004 have been restatedaccordingly. Reconciliations of the income statement, balance sheet and netequity from previously reported UK GAAP to IFRS are shown in note 14. Theconsolidated interim statements are prepared on the basis of all IAS and IFRSpublished by the International Standards Board that are currently in issue. Anelement of uncertainty still surrounds the application of IFRS as the EU may notendorse all IASB pronouncements, new interpretations may be issued by IFRIC onexisting standards and best practice continues to evolve. It is thereforepossible that the accounting policies set out below may be updated by the timethe Group prepares its first full set of financial statements under IFRS for theyear ending 31 December 2005. The information relating to the six months ended 30 June 2005 and 30 June 2004is unaudited and does not constitute statutory accounts. The comparative figuresfor the year ended 31 December 2004 are not the company's statutory accounts forthat financial year. The statutory accounts for the year ended 31 December 2004,prepared under UK GAAP, have been reported on by the company's auditors anddelivered to the Registrar of Companies. The report of the auditors wasunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. The interim financial statements are unaudited but have been reviewed by theauditors and their report to the Board of Huntsworth PLC is set out at the endof this document. 2. Accounting policies The Group's significant accounting policies are listed below: Basis of consolidation The Group financial statements consolidate the financial statements ofHuntsworth PLC and all of its subsidiaries. The results of subsidiaries acquired or disposed of during the period areincluded in the consolidated financial statements from the date of acquisitionor to the date of disposal respectively. On acquisition of a business, all ofthe assets and liabilities of that business that exist at the date ofacquisition are recorded at their fair values reflecting their condition at thatdate. Turnover, cost of sales and operating income Group turnover represents amounts received or receivable from clients, exclusiveof value added tax, in respect of charges for fees, commissions, rechargeableexpenses and sales of marketing products. Cost of sales include amounts payable to external suppliers where they areretained at the Group's discretion to perform part of a specific client projector service where the Group has full exposure to the benefits and risks of thecontract with the client. Group operating income is turnover less cost of sales, and represents fees,commissions and mark ups on rechargeable expenses and marketing products. Turnover and operating income are calculated on a prudent basis to reflect thefair value of the proportion of the work carried out in the year, by recordingturnover and related costs (as defined in Work in progress below) as serviceactivity progresses. Public Relations & Healthcare Communications Operating income is derived from retainers and fees for services provided.Operating income is recognised when the service is performed in accordance withthe contract and the stage of completion. Marketing Services & Specialist Advertising Operating income is in the form of commissions on media placements and fees forcreative and production services provided. Operating income is recognised as theservices are performed. Goodwill and intangible fixed assets Goodwill arising on consolidation, being the excess of the fair value of theconsideration paid over the net fair value of the identifiable assets,liabilities and contingent liabilities acquired, is capitalised as an asset inthe balance sheet. Goodwill arising before the date of transition to IFRS hasbeen retained at the previous UK GAAP amounts subject to being tested forimpairment at that date. Goodwill is reviewed for impairment annually and in any periods in which eventsor changes in circumstances indicate the carrying value may not be recoverable. Intangible fixed assets comprise acquired separable corporate brand names andcustomer relationships. Intangible fixed assets are amortised systematicallyover their estimated useful lives, which vary from 3 to 20 years depending onthe nature of the asset. These intangible assets are reviewed for impairment inany periods in which events or changes in circumstances indicate the carryingvalue may not be recoverable. Property, plant and equipment Property, plant and equipment are stated at their purchase price, together withany incidental expenses of acquisition. Provision for depreciation is made so asto write off the cost of tangible fixed assets less the estimated residualvalue, on a straight line basis, over the expected useful economic life of theassets concerned. The principal annual rates used for this purpose are: Motor vehicles 25% Equipment, fixtures and fittings 15% - 35% Leasehold improvements are amortised over the period of the lease. Depreciation is provided on freehold and long leasehold property over the usefuleconomic life of between 30 and 70 years. The carrying values of tangible fixed assets are reviewed for impairmentperiodically if events or changes in circumstances indicate the carrying valuemay not be recoverable. Work in progress Work in progress is stated at the lower of cost and net realisable value, andconsists of third party costs incurred on behalf of clients which have still tobe re-charged. Taxation The tax charge for the period represents the sum of the tax currently payableand deferred tax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement as itexcludes items of income or expense that are deductible in other years and itemsthat are never deductible. The current and deferred tax charges are calculatedusing tax rates and laws that have been enacted or substantively enacted atbalance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Provisions Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow ofresources will be required to settle the obligation and a reliable estimate canbe made of the amount of the obligation. If the amounts involved aresignificant, provisions are determined by discounting the expected future cashflows at a pre-tax rate which reflects the current market assessment of the timevalue of money and when appropriate the risks specific to the liability. Wherediscounting is applied to provisions, the increase in the value of the provisiondue to the passage of time is recognised as a finance cost. Where a leasehold property substantially ceases to be used for the Group'sbusiness, or a commitment is entered into which would cause this to occur,provision is made to the extent that the recoverable amount of the interest inthe property is expected to be insufficient to cover the future obligationsrelating to the lease. Leasing and hire purchase commitments Assets held under finance leases, which are leases where substantially all therisks and rewards of ownership of the asset have passed to the Group, and hirepurchase contracts are capitalised in the balance sheet and are depreciated overtheir useful lives or lease terms, whichever is shorter. The capital elements offuture obligations under finance leases and hire purchase contracts are includedas liabilities in the balance sheet. The interest elements of the rentalobligations are charged in the profit and loss account over the periods of thefinance leases and hire purchase contracts and represent a constant proportionof the balance of capital repayments outstanding. Rentals payable under operating leases are charged to the profit and lossaccount on a straight line basis over the lease term. Foreign currencies Sterling is the functional currency of Huntsworth PLC and the presentationalcurrency of the Group. The functional currency of subsidiaries is the localcurrency of the economic environment in which they operate. Transactionsdenominated in foreign currencies are initially translated at the exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are retranslated at the rate of exchangeruling at the balance sheet date. All gains and losses are recorded in theincome statement, with the exception of gains and losses relating to borrowingsthat provide a hedge against a net investment in a foreign entity, in which casethey are recorded in equity until the disposal of the net investment to whichthey relate. The financial statements of subsidiaries are translated into the presentationalcurrency of the Group on consolidation. Assets and liabilities are translated atthe exchange rate ruling at the balance sheet date with items in the incomestatement being translated at the average rate for the period. Exchangedifferences arising on consolidation are recorded in a separate component ofequity, but are recognised in the consolidated income statement on disposal ofthe subsidiary to which they relate. Goodwill and fair value adjustments arising on the acquisition of an overseassubsidiary are treated as assets and liabilities of the overseas subsidiary andtranslated at the closing rate. Derivative financial instruments The Group uses derivative financial instruments to reduce its exposure toforeign exchange and interest rate movements. The Group does not hold or issuederivative financial instruments for financial trading purposes but derivativesthat do not qualify for hedge accounting are accounted for as tradinginstruments. Derivative financial instruments are initially recognised at fairvalue at the contract date and continue to be stated at fair value at thebalance sheet date with gains and losses on revaluation being recognisedimmediately in the income statement. Share-based payments The Group issues equity-settled share-based payments to certain employees. TheGroup has used a binomial share option valuation model for the purposes ofcalculating the fair value of the share options granted to employees. The costof share-based payments is recognised in the income statement as an expensespread over the relevant vesting period, with a corresponding increase inequity. Employee benefits All accumulating employee compensated absences that are unused at the balancesheet date are recognised as a liability. Dividends Interim dividends are recognised as a deduction from equity in the period inwhich they are paid. Final dividends are recognised in the period in which theyare approved by the company in general meeting. Pensions The Group operates defined contribution money purchase pension schemes and makescontributions to individual employees' personal pension schemes. The Group'scontributions are charged against profits in the year in which contributions aredue. Employee share ownership plans Shares in Huntsworth PLC held by Employee Benefit Trusts have been includedwithin equity and are stated at cost. 3. Acquisitions The following acquisitions were made during the period: i) Incepta Group plc On 29 April 2005 the Group acquired 100% of the issued share capital of InceptaGroup plc through a share for share exchange in which 3.13654 ordinary 10pHuntsworth PLC shares were issued for every Incepta ordinary share of 5p each.The fair value of the consideration given for the acquisition of the Inceptashares was £126.6m based on the issue of 633,086,083 Huntsworth shares at thequoted market bid price of 20p at the date of acquisition. There were alsorelated acquisition costs incurred of £3.0m that are included in the total costof acquisition. Included within the consolidated income statement is operating income of £25.2mand operating profit (before highlighted items) of £3.6m in respect of Incepta'spost acquisition results. ii) Sinclair Mason Limited On 23 February 2005 the Group acquired 100% of the issued share capital ofSinclair Mason Limited for an initial consideration of £1.1m satisfied by £0.62mof cash and £0.48m of Huntsworth shares. Additional deferred consideration ispayable dependent on the next three years' trading profits up to a maximum of£2.8m. iii) Neisser Communications Austria On 26 May 2005 the Group acquired the brand and associated client and staffcontracts of Neisser Communications Austria for an initial consideration of€139,000 satisfied 50% in cash and the balance by the issue of Huntsworthshares. Additional deferred consideration based on financial performance overthe next three years is payable up to a maximum of €1.1m. 4. Segmental analysis The Group's primary reporting segment is business divisions which correspondwith the way the operating businesses are organised and managed within the Groupand its secondary segment is geographical origin. The following table analysesthe operating income and operating profit before highlighted items fromcontinuing operations accordingly: Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Operating incomeBusiness segmentPublic Relations & Healthcare 40,172 16,680 43,323CommunicationsMarketing Services & Specialist Advertising 14,082 711 1,575Intra group (189) (37) (36)Total 54,065 17,354 44,862 Geographical originUnited Kingdom 33,238 12,571 31,376Other European 10,210 2,782 9,050USA 8,875 1,927 4,034Rest of World 1,931 111 438Intra group (189) (37) (36)Total 54,065 17,354 44,862 Operating profit before highlighted itemsBusiness segmentPublic Relations & Healthcare 7,732 3,310 8,367CommunicationsMarketing Services & Specialist Advertising 1,899 (35) 70Less corporate costs (2,578) (1,285) (3,084)Total 7,053 1,990 5,353 Geographical originUnited Kingdom 6,838 2,640 6,467Other European 1,321 376 1,201USA 1,286 238 656Rest of World 186 21 113Less corporate costs (2,578) (1,285) (3,084)Total 7,053 1,990 5,353 5. Highlighted items Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Amortisation of intangible assets 1,484 101 448Share option charge 286 72 244Holiday pay charge 545 250 2Merger, restructuring and other 1,414 214 1,838non-recurring costs 3,729 637 2,532 Highlighted items comprise expenses relating to the introduction ofInternational Financial Reporting Standards and costs incurred in theintegration and restructuring of businesses within the Group. 6. Finance costs Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Bank interest payable 1,022 258 537Loan note interest 22 - 39Finance lease interest 17 20 42Other net interest payable 20 1 4 1,081 279 622Bank interest receivable (90) (31) (75) 991 248 547 7. Taxation The tax charge for the half year ended 30 June 2005 has been based on anestimated effective tax rate on profit before highlighted items for the fullyear of 25% (year ended 31 December 2004: 11.2% before non-recurring items andgoodwill). 8. Dividends Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Equity dividends on ordinary shares:Interim dividend for year ended 2003 - 0.1p - 163 163Interim dividend for year ended 2004 - 0.1p - - 303Special second interim dividend for year 306 - -ended 2004 - 0.1p 306 163 466 The proposed interim dividend of 0.5p per share was approved by the Board on 17October 2005 and in accordance with IFRS has not been included as a deductionfrom equity at 30 June 2005. The dividend will be paid on 13 December 2005 tothose shareholders on the register at 28 October 2005. 9. Earnings per share The data used in the calculations of the earnings per share numbers issummarised in the table below: Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Earnings Weighted Earnings Weighted Earnings Weighted average average average £'000 no of shares £'000 no of shares £'000 no of shares 000's 000's 000'sContinuing operations:Basic 1,033 514,230 825 214,294 1,518 257,954Diluted 1,033 530,838 825 226,410 1,518 269,645Adjusted basic 4,068 514,230 1,387 214,294 3,891 257,954 The basic earnings per share calculation is based on the profit for the periodattributable to parent company shareholders divided by the weighted averagenumber of ordinary shares outstanding during the period. Diluted earnings per share is calculated based on the profit for the periodattributable to parent company shareholders divided by the weighted averagenumber of ordinary shares outstanding during the period adjusted for thepotentially dilutive impact of employee share option schemes and shares to beissued as part of deferred consideration on acquisitions of subsidiaries. Adjusted earnings per share is calculated in order to provide information toshareholders about continuing trading performance and is based on the profitattributable to parent company shareholders excluding discontinued operations,amortisation of intangible assets, share option charges, holiday pay charges andnon-recurring merger/restructuring costs together with related tax effects asset out below: Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Basic earnings from continuing operations 1,033 825 1,518Highlighted items 3,729 637 2,532Tax on highlighted items (694) (75) (159)Adjusted earnings from continuing operations 4,068 1,387 3,891 10. Intangible fixed assets Brands and Goodwill Total customer relationships £000 £000 £000CostAt 1 January 2005 7,318 55,391 62,709Arising on acquisitions in the period 38,095 167,852 205,947Adjustment to prior year acquisitions - 268 268Exchange differences 614 3,049 3,663At 30 June 2005 46,027 226,560 272,587AmortisationAt 1 January 2005 448 - 448Charge for the period 1,484 - 1,484At 30 June 2005 1,932 - 1,932Net book value at 30 June 2005 44,095 226,560 270,655Net book value at 31 December 2004 6,870 55,391 62,261 Brands and customer relationships are being amortised over their useful economiclives of between 3 and 20 years. The amounts recognised above for intangibleassets arising on acquisitions in the period are provisional awaiting finaldetermination in accordance with the time limit allowed in IFRS 3. Details ofacquisitions made during the period are set out in note 3. 11. Reconciliation of movements in consolidated equity shareholders' funds Six months to Six months to Year ended Note 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Balance at start of period 14(c) 43,382 13,453 13,453Impact of adoption of IAS32 and IAS39 (4,168) - -on 1 January 2005Shares issued for cash consideration 13 21,873 21,896Shares issued on acquisitions 122,282 5,555 8,609Shares to be issued for acquisitions 4,864 - -Share issue costs (729) (1,460) (1,460)Credit for share based payments 286 72 244Deferred tax on share based payments 2 6 30Movement in investment in own shares (702) (3) (3)Currency translation differences 2,251 (62) (183)Profit for the period 1,033 770 1,262 Equity dividends 8 (306) (163) (466)Balance at end of period 168,208 40,041 43,382 As consideration for the share for share exchange arising on the merger withIncepta Group plc on 29 April 2005, 633,086,083 ordinary shares of 10p each wereissued under the terms of the merger agreement. As at 30 June 2005 608,767,283ordinary 10p shares had been issued and a further 24,318,800 were issued inearly July which are reflected in shares to be issued. The 608,767,283 shareswere issued at a bid price of 20p per share resulting in a total share premiumof £60,876,728 which has been credited to merger reserve. Share issue costs incurred in respect of the merger of £729,000 have beenwritten off against share premium account. 12. Cash flow analysis (a) Reconciliation of operating profit to net cash inflow from operations Six months to Six months to Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Operating profit 3,324 1,353 2,821Depreciation 1,035 433 1,059Share option charge 286 72 244Loss on write down of associated - - 151undertakingProperty, plant and equipment written 25 - 50off(Profit) loss on disposal of property, (49) (2) 67plant & equipmentAmortisation of intangible assets 1,484 101 448(Increase) decrease in work in progress (1,655) (290) 214(Increase) in debtors (1,778) (1,891) (1,611)(Decrease) increase in creditors (805) 707 1,501(Decrease) in provisions (1,384) (372) (309)Net cash inflow from operations 483 111 4,635 Net cash inflow (outflow) from operations is analysed as follows: Six months to Six months to Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Before non-recurring items and 3,646 691 6,579discontinued operationsNon-recurring items (3,163) (525) (1,610)Discontinued operations - (55) (334) 483 111 4,635 12(b) Reconciliation of net cash flow to movement in net debt Six months to Six months to Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Increase in cash and cash equivalents in the 6,598 1,674 2,777periodCash outflow from debt repayment 5,438 6,128 3,303Bank loans and overdrafts acquired (78,535) - -Loan notes acquired (6,326) - -Loan notes repaid 4,974 - -Repayment of capital element of finance leases 108 101 272Change in net debt resulting from cashflows (67,743) 7,903 6,352Loan notes issued - - (2,080)Finance leases acquired with subsidiaries (159) (49) (60)New finance leases (148) (133) (137)Disposal/cancellation of finance leases - 6 43Translation differences (878) (58) (99)(Increase) decrease in net debt (68,928) 7,669 4,019Net debt at beginning of period (6,472) (10,491) (10,491)Net debt at end of period (75,400) (2,822) (6,472) 12(c) Analysis of net debt 1 January Cash 30 June 2005 flow Other 2005 £000 £000 £000 £000Cash and short terms deposits 2,773 8,541 (41) 11,273Bank overdraft (141) (1,943) (2) (2,086)Net cash and cash equivalents 2,632 6,598 (43) 9,187Committed bank facility repayable between one (6,727) (73,098)and two years (833) (80,658)Loan notes payable (2,080) (1,352) - (3,432)Obligations under finance leases (297) 108 (308) (497)Net debt (6,472) (67,744) (1,184) (75,400) 13. Post balance sheet events On 14 July 2005 the Company's existing 10p ordinary shares were consolidated onthe basis of 1 new 50p ordinary share for 5 existing 10p ordinary shares. On 13 October 2005 the Company announced that, subject inter alia to shareholderapproval, it had agreed to sell its marketing services and specialistadvertising businesses to Media Square plc for £55 million in cash less expecteddisposal costs of £2.5 million. These businesses contributed operating income of£12.8m and operating profits (before highlighted items) of £1.8m in the resultsof the Group for the six months ended 30 June 2005. 14. Explanation of transition to IFRS The accounting policies in note 2 have been applied in preparing theconsolidated interim financial statements for the six months ended 30 June 2005,the comparative information for the six months ended 30 June 2004 and the yearended 31 December 2004 and the preparation of the opening IFRS balance sheet at1 January 2004 (the Group's date of transition). In preparing its opening balance sheet, comparative information for the sixmonths ended 30 June 2004 and the year ended 31 December 2004, the Group hasadjusted amounts reported previously in financial statements prepared inaccordance with UK GAAP. An explanation of the principal changes in accounting policies and how thetransition from UK GAAP to IFRS has affected the Group's income statement,balance sheet and net equity is set out in the tables and accompanying notesbelow: IFRS 1 First-time adoption of IFRS In making the transition to IFRS, the following optional exemptions from fullretrospective application of IFRS accounting policies have been adopted: (1) Business combinations - the Group has chosen not to restate businesscombinations which completed prior to the transition date of 1 January 2004. (2) Share based payments - the Group has elected to fair value onlyequity instruments that have been granted after 7 November 2002 that had notvested by 1 January 2005. (3) Cumulative translation differences - the Group has chosen to resetall translation reserves to £nil as at 1 January 2004. (4) Recognition, measurement and disclosure of financial instruments -the Group has opted not to apply IAS 32 and IAS 39 for the periods to 31December 2004 and has adopted these standards from 1 January 2005. Goodwill The Group's application of IAS 38 to acquisitions after 1 January 2004 hasresulted in the recognition of intangible assets that did not qualify forrecognition under UK GAAP, and were instead subsumed into goodwill. Theseintangibles which include the fair value of brands and customer relationshipsare amortised over their useful economic lives, which vary depending on theindividual characteristics of the intangible assets. Under IAS 36 remaining goodwill is tested annually for impairment, unless thereis any indication of impairment before that time. Share-based payments IFRS 2 requires that the costs of share-based payments are recognised in theincome statement as an expense spread over the relevant vesting period. TheGroup has used a binomial share option valuation model for the purposes ofcalculating the fair value of these share options granted to employees. Dividends IAS 10 requires that interim dividends are recognised as a deduction from equityin the period in which they are paid, and final dividends are recognised in theperiod in which they are approved by the company in general meeting.Consequently dividends proposed or declared after the balance sheet date do notrepresent a present obligation of the entity at that date. Therefore certainprior year dividends have been derecognised on transition to IFRS and have beendisclosed as a movement in shareholders equity. Employee benefits Short term employee benefits are payable within one year after the end of theperiod in which the services have been rendered and in accordance with IAS 19employee holiday pay owing at the end of a financial period is now beingrecorded as a current liability. Cumulative translation differences Under IAS 21 'The Effects of Changes in Foreign Exchange Rates', cumulativetranslation differences are separately accounted for within reserves and arerecycled from equity to the income statement on disposal of a foreign operation. Deferred tax Under IFRS deferred tax is provided in full using the balance sheet liabilitymethod, on the basis of temporary differences between the carrying value ofassets and liabilities in the balance sheet and their tax bases used in thecomputation of taxable profit. Deferred tax assets are recognised only to theextent that it is probable that they can be utilised against future taxableprofits. The principal items that result in adjustments to deferred tax betweenUK GAAP and IFRS are fair value accounting for share based payments and acquiredintangible assets. Financial instruments: Recognition and Measurement All derivative financial instruments have been recognised at fair value on thedate the derivative contract is entered into and are subsequently remeasured attheir fair value at the balance sheet date. The method of recognising theresulting gain or loss on revaluation depends on whether the derivative isdesignated as a hedging instrument and, if so, on the nature of the asset orliability being hedged. Certain derivative instruments that provide effectivehedging of the Group's economic exposures are not designated as hedges as theyare not taken out to cover a specific position and the change in their fairvalue is recognised in the income statement. Shares to be issued Shares to be issued as contingent consideration for acquisitions, previouslyshown in equity, have been reclassified to current and non-current liabilities.The balance remaining in equity represents shares due to former Inceptashareholders following the merger on 29 April 2005. 14(a) IFRS reconciliation of income statement comparatives Six months ended 30 June 2004 Year ended 31 December 2004 Notes Published IFRS Restated Published IFRS Restated UK GAAP* adjustments under IFRS UK GAAP adjustments under IFRS £000 £000 £000 £000 £000 £000Continuing operationsTurnoverExcluding acquisitions 23,083 - 23,083 63,575 - 63,575Acquisitions - - - - - - 23,083 - 23,083 63,575 - 63,575Cost of sales (5,729) - (5,729) (18,713) - (18,713) Operating incomeExcluding acquisitions 17,354 - 17,354 44,862 - 44,862Acquisitions - - - - - - 17,354 - 17,354 44,862 - 44,862Operating expenses including (15,733) (268) (16,001) (41,760) (281) (42,041)highlighted items Operating profit before highlighteditemsExcluding acquisitions 1,990 - 1,990 5,353 - 5,353Acquisitions - - - - - - 1,990 - 1,990 5,353 - 5,353 Highlighted itemsAmortisation of intangibles 1,2 (155) 54 (101) (413) (35) (448)Share option charge 3 - (72) (72) - (244) (244)Holiday pay charge 4 - (250) (250) - (2) (2)Merger, restructuring and other (214) - (214) (1,838) - (1,838)non-recurring costs Operating profit 1,621 (268) 1,353 3,102 (281) 2,821 Finance income 31 - 31 75 - 75 Finance costs (279) - (279) (622) - (622) Profit before tax and highlighted items 1,742 - 1,742 4,806 - 4,806Highlighted items above (369) (268) (637) (2,251) (281) (2,532) Profit before tax 1,373 (268) 1,105 2,555 (281) 2,274Taxation 5 (227) 75 (152) (528) 150 (378)Profit for the period from continuing 1,146 (193) 953 2,027 (131) 1,896operations Loss from discontinued operations (55) - (55) (256) - (256) Minority interests (128) - (128) (378) - (378) Profit for the period 963 (193) 770 1,393 (131) 1,262 Earnings per share from continuingoperations:Basic - pence 0.5 (0.1) 0.4 0.6 - 0.6Diluted - pence 0.4 - 0.4 0.6 - 0.6 \* The published UK GAAP figures for the six months ended 30 June 2004 have beenrestated for the impact of operations discontinued during the second half of theyear ended 31 December 2004. 14(b) IFRS reconciliation of balance sheet comparatives Six months ended 30 June 2004 Year ended 31 December 2004 Published IFRS Restated Published IFRS Restated UK GAAP adjustments under UK GAAP adjustments under Notes IFRS IFRS £000 £000 £000 £000 £000 £000 Non-current assets Intangible assets 1 49,537 1,665 51,202 60,043 2,218 62,261 Property, plant and equipment 2,850 - 2,850 2,680 - 2,680Deferred tax 6 - 27 27 - 13 13Other investments 191 - 191 - - - 52,578 1,692 54,270 62,723 2,231 64,954 Current assets Work in progress 1,444 - 1,444 1,148 - 1,148Trade and other receivables 15,496 - 15,496 18,046 - 18,046Cash and short-term deposits 2,136 - 2,136 2,773 - 2,773 19,076 - 19,076 21,967 - 21,967 Current liabilities Bank overdrafts (566) - (566) (141) - (141) Loan notes payable (1,742) - (1,742) (2,080) - (2,080) Obligations under finance leases (182) - (182) (135) - (135) Trade and other payables 2 (14,437) (182) (14,619) (18,106) 18 (18,088) Corporation tax payable (322) - (322) (1,312) - (1,312) Provisions 4,5,9 - (2,047) (2,047) - (4,402) (4,402) (17,249) (2,229) (19,478) (21,774) (4,384) (26,158)Non-current liabilities Bank loans and overdrafts (3,902) - (3,902) (6,727) - (6,727) Obligations under finance leases (308) - (308) (162) - (162) Provisions 4,9 (3,121) (3,582) (6,703) (5,215) (2,786) (8,001) Other creditors (1,250) - (1,250) - - - Deferred tax liabilities 3 (220) (1,316) (1,536) - (1,792) (1,792) (8,801) (4,898) (13,699) (12,104) (4,578) (16,682)NET ASSETS 45,604 (5,435) 40,169 50,812 (6,731) 44,081 Equity Called up share capital 28,709 - 28,709 30,444 - 30,444Share premium account 23,612 - 23,612 23,615 - 23,615Merger reserve 6,563 - 6,563 7,902 - 7,902Foreign exchange translation reserve 7 - (62) (62) - (183) (183)Shares to be issued 9 5,602 (5,602) - 7,157 (7,157) -Treasury shares (8) - (8) (8) - (8)Retained earnings 8 (19,002) 229 (18,773) (18,997) 609 (18,388)Equity attributable to equity 45,476 (5,435) 40,041 50,113 43,382holders of the parent (6,731)Minority interests 128 - 128 699 - 699 TOTAL EQUITY 45,604 (5,435) 40,169 50,812 (6,731) 44,081 14(c) Reconciliation of net equity 1 January 2004 30 June 2004 31 December 2004 £000 £000 £000Net equity under UK GAAP 16,306 45,476 50,113Impact of changes in accounting under IFRS:Add back goodwill amortisation - 155 413 Amortisation of intangible assets - (101) (448)Holiday pay accrual (48) (298) (50)Reclassification of shares to be issued to (2,995) (5,602) (7,157)provisionsTax relief on holiday pay accruals 14 48 -Deferred tax on goodwill and share based payments 13 60 207Write back of proposed dividends 163 303 304Net equity under IFRS 13,453 40,041 43,382 Explanatory notes to the UK GAAP to IFRS reconciliations Income statement 1. Under UK GAAP goodwill was, where considered appropriate, amortisedthrough the income statement on a straight line basis whereas under IFRS 3goodwill is not amortised through the income statement but is instead subject toan annual impairment test. This change results in credits to the incomestatement of £155,000 for the six months ended 30 June 2004 and £413,000 for theyear ended 31 December 2004. 2. Under IAS 38 and the transitional provisions of IFRS 1 being adoptedby the Group, acquisitions made after 1 January 2004 result in recognition ofintangible assets including brands and customer relationships that did notqualify for recognition under UK GAAP and were subsumed into goodwill. Theseintangible assets are being amortised over their useful economic lives and thecharge for the six months ended 30 June 2004 is £101,000 and for the year ended31 December 2004 is £448,000. 3. IFRS 2 requires the expensing of employee share options to the incomestatement that were not previously charged to profit under UK GAAP and theseamount to £72,000 for the six months ended 30 June 2004 and £244,000 for theyear ended 31 December 2004. These charges relate to the share options grantedafter 7 November 2002. 4. Under IAS 19 employee holiday pay owing at the end of a financialperiod is now required to be recognised as a current liability and charged tothe income statement. A charge of £250,000 has been made for the six monthsended 30 June 2004 and £2,000 for the year ended 31 December 2004. 5. Under IAS 12 deferred tax is recognised on the basis of temporarydifferences between balance sheet amounts of assets and liabilities and theircorresponding tax bases rather than the UK GAAP approach of recognising deferredtax assets and liabilities for the estimated future tax effects of all timingdifferences that have originated but not reversed at the balance sheet date andare expected to crystallise a tax asset or liability in the future. The abovedifferences relate to fair value accounting for share options, acquiredintangible assets and holiday pay. A £75,000 deferred tax credit has beenrecognised in the six months ended 30 June 2004 and £150,000 in the year ended31 December 2004. 6. Under IAS 10 equity dividends are not recognised until they are paidor formally approved whereas under UK GAAP dividends relating to a period wererecognised at the balance sheet date even if they were declared or approvedafter the balance sheet date. Accordingly certain dividends have beenderecognised in prior periods and a credit of £140,000 has been reflected in thesix months ended 30 June 2004 and £141,000 credit for the year ended 31 December2004. Balance sheet 1. The £1,665,000 net debit to intangible assets in the 30 June 2004balance sheet (31 December 2004 - £2,218,000) consists of additional goodwillarising on the reversal of goodwill previously charged to profit of £155,000 (31December 2004 - £413,000), £101,000 of amortisation of brands and customercontracts (31 December- £448,000), additional goodwill of £214,000 recognised asa result of provisions made for holiday pay in businesses acquired during theperiod (31 December 2004 - £267,000) and deferred tax liabilities arising onbrands and customer contracts of £1,397,000 (31 December 2004 - £1,986,000). 2. The £182,000 credit to trade and other payables in the 30 June 2004balance sheet (31 December 2004 - £18,000 debit) consists of £485,000 of holidaypay accruals (31 December 2004 - £286,000) less the £303,000 debit arising onthe de-recognition of the proposed dividend (31 December 2004 - £304,000). 3. The £1,316,000 credit to deferred tax liabilities represents theadditional deferred tax liabilities of £1,367,000 (31 December 2004 - £1,851,000credit) arising from the recognition of brands and customer contracts less a£51,000 debit in respect of deferred tax relief of on share based payments (31December 2004 - £59,000 debit). 4. Under IFRS provisions previously shown under UK GAAP as provisions forliabilities and charges have been reclassified to show the analysis ofprovisions that are current liabilities and those that are payable beyond oneyear. The amounts reclassified from provisions due after more than one year toprovisions due within one year are £1,590,000 at 30 June 2004 and £3,753,000 at31 December 2004. 5. The balance of £27,000 credited to provisions at 30 June 2004represents the cost of providing for long term staff benefits (31 December 2004- £31,000 credit). 6. The £27,000 debit to deferred tax at 30 June 2004 arises from deferredtax relief on share based payments of £13,000 (31 December 2004 - £13,000) anddeferred tax relief in respect of holiday pay of £14,000 (31 December 2004 -£nil). 7. In accordance with IAS 21, cumulative translation differences areseparately accounted for within reserves and are recycled from equity to theincome statement on disposal of a foreign operation. The adjustments of £62,000for the six months ended 30 June 2004 represents a reclassification of a balancepreviously shown in retained earnings under UK GAAP (31 December 2004 -£183,000). 8. The net credit to retained earnings of £229,000 for the six monthsended 30 June 2004 is made up as follows: a £303,000 credit arising fromdividend de-recognition, a holiday pay charge of £264,000, deferred tax reliefcredit on share options and holiday pay of £44,000, a credit of £155,000 inrespect of the reversal of previously amortised goodwill, a charge of £101,000for goodwill on brands and customer contracts and a £30,000 deferred tax creditarising from the recognition of brands and customer contracts. In addition£62,000 of cumulative foreign exchange losses have been reclassified to aseparate reserve (see note 7 above). The net credit to retained earnings of£609,000 for the year ended 31 December 2004 consists of the following: a£304,000 credit arising from dividend de-recognition, a holiday pay charge of£50,000, deferred tax relief credit on share options and holiday pay of £72,000,a credit of £413,000 in respect of the reversal of previously amortisedgoodwill, a charge of £448,000 for goodwill on brands and customer contracts anda £135,000 deferred tax credit arising on the recognition of brands and customercontracts. In addition £183,000 of cumulative foreign exchange losses have beenreclassified to a separate reserve (see note 7 above). 9. Under IFRS shares to be issued in respect of deferred consideration,previously shown under UK GAAP within equity, are regarded as liabilities andhave therefore been reclassified to current and non-current liabilities asprovisions. The amounts reclassified from shares to be issued to provisions duewithin one year at 30 June 2004 are £430,000 (31 December 2004 - £618,000) andthe amounts reclassified from shares to be issued to provisions due in more thanone year at 30 June 2004 are £5,172,000 (31 December 2004 - £6,539,000). Independent review report to Huntsworth PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income and Expense and the related notes 1to 14. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with those IFRSs adopted for use by the EuropeanUnion. The accounting policies are consistent with those that the directors intend touse in the next financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4' Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies have been applied. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Ernst & Young LLP London 18 October 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HNT.L