13th Nov 2006 07:01
Majestic Wine PLC13 November 2006 FOR IMMEDIATE RELEASE 13 November 2006 Majestic Wine PLC INTERIM RESULTS Majestic Wine PLC ("Majestic"), the UK's largest wine warehouse chain with 133(2005 - 125) stores, today announces its interim results for the 26 weeks ended26 September 2006. Highlights •Profit before tax increased by 17.0% to £6.5m (2005: £5.5m). •Total sales of £88.3m (2005: £80.8m). Like for like UK sales up 6.2% (2005: 5.5%). •Interim dividend increased by 21% to 2.3p net per share (2005: 1.9p) •Average spend per transaction has risen to £121 (2005: £115). Average bottle price of still wine purchased at Majestic is now £5.66 (2005: £5.54). •Fine wine continues to show good growth. Sales of wines priced at £20 and above increased by 33% on last year. Fine wine display areas now in 20 stores. •Good progress with new store openings. Three new stores opened in the period (Bicester, East Molesey and Cheam) , plus two re-sites (Cardiff and Tunbridge Wells). Leamington Spa opened at the end of September. Lincoln and Huddersfield open during November. In the first half of 2007, planned openings in Dulwich, Sonning, Aberdeen, Colchester and St Albans re-site. •Orders placed via our website are up 43% and represent 6.4% of UK retail sales. •Intend to commence share buy-back up to a value of £20m in next few months. Commenting on current trading Tim How, Chief Executive of Majestic said: "I am very pleased with our first half performance and the rate of new storeopenings. Like for like sales for the five weeks from 26 September 2006 to 30October 2006 were up 4.3%". For further information, please contact: Tim HowNigel AlldrittMajestic Wine PLC Tel: 01923 298200 Tim Thompson / Nicola Cronk/ Tel: 020 7466 5000Susanna GaleBuchanan Communications Chairman's Statement I am very pleased to announce that for the first half of the 2006/2007 financialyear, profit before tax rose 17.0% to £6.5m. These results and the prior year figures are the first to be prepared underInternational Financial Reporting Standards (IFRS). Reconciliations of UK GAAPto IFRS are included as appendices to the interim report. Total sales grew by £7.6m to £88.3m and like for like UK sales were up 6.2%. Theaverage bottle price of still wine purchased at Majestic is now £5.66 comparedwith £5.54 last year and the average spend per transaction is now £121, up from£115 last year. We saw strong sales growth in wines from the Loire, Spain, New Zealand, Chileand Argentina. Champagne and rose wine sales were also strong. Fine winecontinues to show good growth, with sales of wines priced at £20 and aboveincreasing by 33% on last year. We have now installed fine wine display areas in20 stores. Ecommerce Orders placed via our website are up 43% and now represent 6.4% of UK retailsales. We have continued to be successful in collecting customers' emailaddresses so that we can communicate with them more frequently. We now have130,000 addresses on our email database. New Stores We are encouraged by the progress made in the rate of new store openings. Duringthe period we opened three new stores in Bicester, East Molesey and Cheam and were-sited our stores in Cardiff and Tunbridge Wells. Leamington Spa opened at the end of September. Lincoln and Huddersfield openduring November. This will bring the number of stores trading in the UK to 133. In the first half of 2007 we have openings planned in Dulwich, Sonning, Aberdeenand Colchester. In addition we will be re-siting our store in St. Albans.Several other new stores are at advanced stages of negotiation. We are pleasedwith the sales performance at all new stores opened to date. Wine and Beer World A sales decline of 8.3% reflected the continuing difficult trading conditions inthe cross-channel market. However the sales decline has slowed in recent weeksand pre-ordering for collection from our stores continues to grow, representing32% of sales during the period. Dividend We are declaring an increased interim dividend of 2.3p net per share, up by 21%on last year, in line with our progressive dividend policy. The dividend will bepaid on 5 January 2007 to shareholders on the register at the close of businesson 8 December 2006. Share Buy-back Programme Our strategy remains focused on building shareholder value through the growth ofthe trading business and the opening of new stores. In addition the Company hasthe capacity, as a strongly cash generative business, to return cash toshareholders. There is an existing authority for the Company to purchase up to 10% of itsissued share capital and the Board intends to commence an open market programmeto buy-back Ordinary Shares up to a value of £20m in the next few months. Current Trading Like for like UK sales for the five weeks from 26 September to 30 October 2006were up 4.3%. Simon BurkeChairman 13 November 2006 Group Income Statement For the 26 weeks ended 25 September 2006 26 weeks 26 weeks Year ended ended ended 25.09.06 26.09.05 27.03.06 Note £000 £000 £000 Turnover 88,345 80,766 172,195 Cost of sales (70,550) (64,451) (135,925) Gross profit 17,795 16,315 36,270 Distribution costs (7,309) (6,836) (13,949) Administrative costs (4,567) (4,256) (8,827) Other operating income 358 301 584 Operating profit 6,277 5,524 14,078 Interest receivable 184 29 155 Interest payable - (32) (74) Profit before taxation 6,461 5,521 14,159 UK corporation tax 4 (1,905) (1,511) (3,885) Overseas corporation tax 4 (298) (371) (644) Profit for the period attributable to equity shareholders 4,258 3,639 9,630 Earnings per share Basic 6 6.6p 5.7p 15.0p Diluted 6 6.5p 5.6p 14.7p Dividend 5 2.3p 1.9p 7.0p Group Balance Sheet As at 25 September 2006 As at As at As at 25.09.06 26.09.05 27.03.06 £000 £000 £000 Non current assets Goodwill and intangible fixed assets 6,563 6,610 6,620 Property, plant and equipment 34,731 32,439 33,732 Prepaid operating lease costs 1,244 1,124 1,203 Deferred tax asset 1,768 2,271 2,125 44,306 42,444 43,680 Current assets Stock 30,221 30,109 28,698 Trade and other receivables 7,251 6,361 6,116 Financial instruments at fair value - 22 129 Cash and cash equivalents 7,042 1,238 5,916 44,514 37,730 40,859 Non current assets held for sale - 350 - Total assets 88,820 80,524 84,539 Current liabilities Trade and other payables (36,014) (35,051) (33,725) Provisions (132) (222) (229) Deferred income (95) (90) (93) Financial instruments at fair value (263) (194) (49) Current tax liabilities (969) (1,094) (770) (37,473) (36,651) (34,866) Non current liabilities Provisions (33) (56) (57) Deferred income (680) (750) (728) Deferred tax liabilities (404) (331) (331) Total liabilities (38,590) (37,788) (35,982) Net assets 50,230 42,736 48,557 Shareholders' equity Called up share capital 4,905 4,839 4,864 Share premium account 9,034 7,961 8,371 Other reserve 22 22 22 Capital reserve - own shares (120) (391) (391) Currency translation reserve (64) (30) 19 Retained earnings 36,453 30,335 35,672 Equity shareholders' funds 50,230 42,736 48,557 Group Cash Flow Statement For the 26 weeks ended 25 September 2006 26 weeks 26 weeks Year ended ended ended 25.09.06 26.09.05 27.03.06 £000 £000 £000 Cash flows from operating activities: Operating profit 6,277 5,524 14,078 Amortisation and depreciation 1,269 1,155 2,519 Profit on disposal of non current assets (239) (47) (133) Increase in stocks (1,523) (2,202) (791) Increase in debtors (1,135) (2,475) (2,230) Increase/(decrease) in creditors 2,306 1,310 (8) Decrease in deferred income (46) (44) (63) Change in fair value of derivative instruments 343 159 (93) (Decrease)/increase in provisions (121) 56 64 Share based payments 199 196 483 Cash generated from operations 7,330 3,632 13,826 UK corporation tax paid (1,324) (1,880) (3,948) Overseas corporation tax paid (304) (369) (699) Net cash generated by operating activities 5,702 1,383 9,179 Cash flows from investing activities Interest received 167 45 170 UK corporation tax paid (16) (17) (34) Overseas corporation tax paid (8) (8) (16) Purchase of non current assets (3,571) (6,334) (8,971) Receipts from sales of non current assets 1,544 185 519 Net cash used by investing activities (1,884) (6,129) (8,332) Cash inflow/(outflow) before financing 3,818 (4,746) 847 Cash flows from financing activities Interest paid - (21) (74) Issue of Ordinary Share capital 704 575 877 Receipt for exercise of share options satisfied by QUEST - 174 199 Equity dividends paid (3,327) (2,554) (3,785) Net cash used by financing activities (2,623) (1,826) (2,783) Net increase/(decrease) in cash and cash equivalents 1,195 (6,572) (1,936) Cash and cash equivalents at beginning of period 5,916 7,840 7,840 Effect of foreign exchange differences (69) (30) 12 Cash and cash equivalents at end of period 7,042 1,238 5,916 Statement of Changes in Equity For the 26 weeks ended 25 September 2006 Capital Reserve Total Share Own Shares Currency Share- Share Premium Other Held in Translation Retained holders' Capital Account Reserves ESOT Reserve Earnings Funds £000 £000 £000 £000 £000 £000 £000 At 28 March 2005 as previously stated 4,776 6,750 22 (407) - 28,191 39,332 Prior period effect of adoption of IFRS - - - - - 1,268 1,268 At 28 March 2005 as restated 4,776 6,750 22 (407) - 29,459 40,600 Share issue 64 813 - - - - 877 ESOT share issue 7 225 - (116) - (116) - QUEST share issue 1 17 583 - - - (600) - Options satisfied from QUEST - - - - - 199 199 Transfer to shareholders' funds - employee costs expected to be satisfied in shares - - - - - 483 483 Shares vesting under deferred bonus scheme - - - 132 - (132) - Profit for the year - - - - - 9,630 9,630 Tax credit on employee share options - - - - - 534 534 Total income and expense for the period - - - - - 10,164 10,164 Equity dividends paid - - - - - (3,785) (3,785) Currency translation differences on foreign currency net investments - - - - 19 - 19 At 27 March 2006 4,864 8,371 22 (391) 19 35,672 48,557 Share issue 41 663 - - - - 704 Shares vesting under deferred bonus scheme - - - 271 - (271) - Transfer to shareholders' funds - employee costs expected to be satisfied in shares - - - - - 199 199 Profit for the period - - - - - 4,258 4,258 Tax debit on employee share options - - - - - (78) (78) Total income and expense for the period - - - - - 4,180 4,180 Equity dividends paid - - - - - (3,327) (3,327) Currency translation differences on foreign currency net investments - - - - (83) - (83) At 25 September 2006 4,905 9,034 22 (120) (64) 36,453 50,230 Notes to the Group Interim Financial Statements 1. General Information Majestic Wine PLC is a public limited company ("Company") incorporated in theUnited Kingdom under the Companies Act 1985 (registration number 2281640). TheCompany is domiciled in the United Kingdom and its registered address isMajestic House, Otterspool Way, Watford, WD25 8WW. The Company's Ordinary Sharesare traded on the Alternative Investment Market ("AIM"). Copies of the InterimReport are being sent to shareholders. Further copies of the Interim Report andAnnual Report and Accounts may be obtained from the address above. The Group's principal activity is the retailing of wines and beers. 2. Basis of preparation Majestic Wine PLC has adopted International Financial Reporting Standards("IFRS") with effect from 28 March 2005. The Group will apply IFRS in itsconsolidated financial statements for the 53 weeks ending 2 April 2007.Therefore, these interim statements for the 26 weeks to 25 September 2006 arethe Group's first financial statements prepared in accordance with IFRS andInternational Financial Reporting Committee ("IFRIC") interpretations that areexpected to be applicable to the consolidated financial statements for the 53weeks ended 2 April 2007. These standards remain subject to ongoing amendmentand/or interpretation and are therefore still subject to change. Accordingly,information contained in these interim financial statements may need updatingfor subsequent amendments to IFRS required for first time adoption or for newstandards issued post the balance sheet date. The financial information for the year ended 27 March 2006 has been extractedfrom the statutory accounts for the Group for that year, now amended to conformwith the IFRS accounting policies expected to be applied in the consolidatedfinancial statements for the year ended 2 April 2007. These published accounts,in a form consistent with UK GAAP were reported on by the auditors withoutqualification or statement under section 237(2) or (3) of the Companies Act 1985and have been delivered to the Registrar of Companies. The basis of preparation and accounting policies followed in this interim reportdiffer from those set out in the Annual Report and Accounts for the year ended27 March 2006 which were prepared in accordance with United Kingdom accountingstandards (UK GAAP). A summary of significant accounting policies used in the preparation of thisinterim report under IFRS is provided in note 3 below. As permitted, this interim report has been prepared in accordance with UKlisting rules and not in accordance with IAS 34 "Interim Financial Reporting",therefore they are not fully in compliance with IFRS. The interim financial statements do not constitute statutory accounts as definedby Section 240 of the Companies Act 1985. The financial statements are presented in sterling and all values are rounded tothe nearest thousand pounds (£000) except when otherwise indicated. A detailed explanation of the impact of the transition from UK GAAP to IFRS iscontained in the appendix to this interim report. 3. Accounting policies Basis of consolidation The full year consolidated financial statements incorporate the results and netassets of the Company and its subsidiary undertakings drawn up to the nearestMonday to 31 March each year. The interim results are prepared for the first 26weeks of the relevant full period Notes to the Group Interim Financial Statements Intercompany transactions and balances between Group entities are eliminatedupon consolidation. Revenue recognition Revenue consists of sales through retail outlets and trade sales through bothhead office and our dedicated depot in King's Cross. Revenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration, net of returns, rebatesand value-added taxes and recognised when the significant risks and rewards ofownership have been transferred to the buyer. Intangible assets Computer software Computer software is carried at cost less accumulated amortisation and anyimpairment loss. Externally acquired computer software and software licences arecapitalised at the costs incurred to acquire and bring in to use the specificsoftware. Internally developed computer software programs are capitalised to theextent that costs can be separately identified and attributed to particularsoftware programs, measured reliably, and that the asset developed can be shownto generate future economic benefits. These assets are considered to have finiteuseful lives and are amortised on a straight line basis over the estimateduseful economic lives of each of the assets, considered to be between three andfive years. The carrying value of intangible assets is reviewed for impairment wheneverevents or changes in circumstances indicate the carrying value may not berecoverable. Goodwill Goodwill arising on consolidation represents the excess of the cost of anacquisition over the fair value of the Group's share of the identifiable netassets of the acquired subsidiary at the date of acquisition. Goodwill isrecognised as an asset on the Group's balance sheet in the year in which itarises. Goodwill is tested for impairment at least annually and more frequentlyif events or changes indicate that the carrying value may be impaired and iscarried at cost less accumulated impairment losses. Any impairment is recognisedimmediately in the consolidated income statement and is not subsequentlyreversed. Goodwill arising on acquisitions before 28 March 2005 (the date of transition toIFRS) has been retained at the previous UK GAAP amounts subject to being testedfor impairment at that date. Goodwill arising on the acquisition of subsidiariesprior to 31 December 1997 was written off immediately against reserves. This hasnot been reinstated and is not included in determining any subsequent profit ofloss on disposal. Property, plant and equipment Property, plant and equipment assets are carried at cost less accumulateddepreciation and any recognised impairment in value. Depreciation is calculated to write down the cost of the assets to theirresidual values, on a straight-line method on the following bases: • Freehold buildings and leasehold properties - 50 years, or the lease term if shorter. • Plant, equipment, fixtures and fittings and motor vehicles - at rates varying from 10% to 33%. • Freehold land is not depreciated. Land and buildings under construction and non current assets held for sale arenot depreciated. Notes to the Group Interim Financial Statements The assets' residual values, useful lives and methods of depreciation arereviewed, and adjusted if appropriate on an annual basis. An item of property,plant and equipment is derecognised upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising onderecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the asset) is included in theincome statement in the year that the asset is derecognised. All tangible fixed assets are reviewed for impairment in accordance with IAS 36,Impairment of Assets, when there are indications that the carrying value may notbe recoverable. Inventories Inventories are valued at the lower of cost and net realisable value. Cost isdetermined on a first in, first out basis and includes carriage and duty costs.Net realisable value is based on estimated selling price less any further costsexpected to be incurred to disposal. Trade and other receivables Trade receivables, which are generally on end of month following terms, arerecognised and carried at the lower of their original invoiced value andrecoverable amount. Provision is made when it is likely that the balance willnot be recovered in full. Balances are written off when the probability ofrecovery is considered remote. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in handand short-term deposits with an original maturity of three months or less. Bankoverdrafts that are repayable on demand and form an integral part of the Group'scash management are included as components of cash and cash equivalents for thepurposes of the cash flow statement. Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount willbe recovered through sales rather than continuing use. This condition isregarded as met if management are committed to the sale and the asset isavailable for immediate disposal in its present condition. Non-current assetsclassified as held for sale are measured at the lower of carrying amount andfair value less costs to sell. Foreign currencies - Group Foreign operations The income and expenses of overseas subsidiaries are translated at the averagerate of exchange ruling during the year. The balance sheet of the overseassubsidiary undertaking is translated into sterling at the rate of exchangeruling at the balance sheet date. Exchange differences arising, if any, areincluded within equity and transferred to the Group's translation reserve. Suchtranslation differences are recognised as income or as expenses in the period inwhich the operation is disposed. Foreign currency transactions Transactions denominated in foreign currencies are translated at the exchangerate on the date of the transaction. Monetary assets and liabilities denominatedin foreign currencies at the balance sheet date are translated at the exchangerate ruling at that date. Foreign exchange differences arising on translationare recognised in the income statement for the period. Provisions Provisions are recognised when there is a present legal or constructiveobligation as a result of past events, for which it is probable that an outflowof economic benefit will be required to settle the obligation, and where theamount of the obligation can be reliably measured. Notes to the Group Interim Financial Statements Leased Assets Group as lessee Leases are classified as finance leases when the terms of the lease transfersubstantially all the risks and rewards of ownership to the Group. All otherleases are classified as operating leases. Assets held as finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease paymentsduring the lease term at the inception of the lease. Lease payments areapportioned between the reduction of the lease liability and finance charges inthe income statement so as to achieve a constant rate of interest in theremaining balance of the liability. Assets held under finance leases aredepreciated over the shorter of the estimated useful life of the assets and thelease term. Assets leased under operating leases are not recorded on the balance sheet.Rental payments are charged directly to the income statement. Lease incentives,primarily up-front cash payments or rent-free periods, are capitalised andspread over the period of the lease term. Payments made to acquire operatingleases are treated as prepaid lease expenses and amortised over the life of thelease. Group as lessor Assets leased out under operating leases are included in property, plant andequipment and depreciated over their useful lives. Rental income, including theeffect of lease incentives, is recognised on a straight line basis over thelease term. Pensions The Group contributes to the personal pension plans of certain staff. Thecontributions are charged as an expense as they fall due. Any contributionsunpaid at the balance sheet date are included as an accrual at that date. TheGroup has no further payment obligations once the contributions have been paid. Share based payments The Group provides benefits to employees (including Directors) in the form ofshare based payment transactions, whereby employees render services in exchangefor rights over shares ("equity-settled transactions"). The cost of theequity-settled transactions with employees and Directors are measured byreference to the fair value at the date at which they are granted and isrecognised as an expense over the vesting period, which ends on the date atwhich the relevant employees become fully entitled to the award. Fair value ofemployee share option plans is calculated using the Black-Scholes model. Invaluing equity settled transactions, no account is taken of any vestingconditions, other than conditions linked to the price of the shares of theCompany (market conditions). No expense is recognised for awards that do not ultimately vest, except forawards where vesting is conditional upon a market condition, which are treatedas vesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated,representing the extent to which the vesting period has expired and theDirector's best estimate of the number of equity instruments that willultimately vest on achievement or otherwise of non-market conditions or in thecase of an instrument subject to a market condition, be treated as vested asdescribed above. The movement in the cumulative expense since the previousbalance sheet date is recognised in the income statement, with the correspondingincrease in equity. The group has taken advantage of the transitional provisions of IFRS 2 inrespect of equity-settled awards so as to apply IFRS 2 only to thoseequity-settled awards granted after 7 November 2002 that had not vested before28 March 2005. Income Taxes Current tax assets and liabilities are measured at the amount expected to berecovered or paid to the taxation authorities, based on tax rates and laws thatare enacted or substantively enacted by the balance sheet date. Notes to the Group Interim Financial Statements Deferred income tax is recognised using the balance sheet liability method,providing for temporary differences between the tax bases and the accountingbases of assets and liabilities. Deferred tax is calculated on an undiscountedbasis at the tax rates that are expected to apply in the period when theliability is settled or the asset is realised, based on tax rates and lawsenacted or substantively enacted at the balance sheet date. Deferred income tax liabilities are recognised for all temporary differences,except where the deferred income tax liability from the initial recognition ofgoodwill or of an asset or liability in a transaction that is not a businesscombination and at the time of the transaction, affects neither the accountingprofit nor taxable profit or loss. Deferred tax is charged or credited to the income statement, except when itrelates to items charged or credited directly to equity, in which case thedeferred tax is also dealt with in equity. Deferred tax assets and liabilitiesare offset against each other when they relate to income taxes levied by thesame tax jurisdiction and when the Group intends to settle its current taxassets and liabilities on a net basis. Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreigncurrency fluctuations arising from operational activities. These instruments areprimarily foreign exchange forwards contracts. The Group does not hold or issuederivative financial instruments for speculative purposes. However ifderivatives do not qualify for hedge accounting they are accounted for as such. All derivative financial instruments are initially measured at fair value on thecontract date and are also measured at fair value at subsequent reporting dates.Derivatives are carried as assets when the fair value is positive and asliabilities when the fair value is negative. The fair value of forward currencycontracts is calculated by reference to current forward exchange rates forcontracts with similar maturity profiles. For those derivatives designated as hedges and for which hedge accounting isdesired, the hedging relationship is documented at its inception. Thisdocumentation identifies the hedging instrument, the hedged item or transaction,the nature of the risk being hedged and how effectiveness will be measuredthroughout its duration. Such hedges are expected at inception to be highlyeffective. Forward currency contract hedge relationships are classified as cash flow hedgeswhere the derivative financial instruments hedge the currency risk of futurehighly probable inventory purchases. Changes in the fair value of derivativefinancial instruments that are designated and effective as hedges of future cashflows are recognised directly in equity and the ineffective portion isrecognised immediately in the income statement. Amounts taken to equity aretransferred to the income statement when the hedged transaction affects profitor loss, such as when a forecast purchase occurs. Where the hedged item is thecost of a non-financial asset or liability, the amounts taken to equity aretransferred to the initial carrying amount of the non-financial asset orliability. There were no derivatives accounted for using hedge accounting during theperiod. Own Shares Majestic Wine PLC shares held by the Company and the Group are classified inshareholders' equity as 'Capital Reserve Own Shares' and are recognised at cost.No gain or loss is recognised in the profit or loss on the purchase or sale ofsuch shares. Use of assumptions and estimates The Group makes judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The resulting accounting estimates calculated using thesejudgements and assumptions will, by definition, seldom equal the related actualresults but are based on historical experience and expectations of futureevents. The estimates and underlying assumptions are reviewed on an ongoingbasis. Revisions to accounting estimates are Notes to the Group Interim Financial Statements recognised in the period in which the estimate is revised if the revisioneffects only that period, or in the period of revision and future periods if therevision affects both current and future periods. The estimates and assumptions that have a significant effect on the amountsrecognised in the financial statements are those related to establishingdepreciation and amortisation periods for the Group, and the estimates inrelation to future cash flows and discount rates utilised in impairment testing. 4. Taxation Taxation for the 26 weeks to 25 September 2006 has been calculated by applyingthe estimated tax rate for the current financial year ending 2 April 2007. 5. Dividend A dividend of 5.1p net per share was paid to shareholders on 11 August 2006. Aninterim dividend of 2.3p per share will be paid on 5 January 2007 toshareholders on the register at the close of business on 8 December 2006. 6. Earnings per share Basic earnings per share is calculated on profit for the period attributable toequity shareholders of £4,258,000 (2005: £3,639,000) apportioned over theweighted average number of Ordinary Shares that were in issue for the period:64,975,323 (2005: 63,657,591). The calculation of diluted earnings per share isin accordance with IAS 33 - Earnings Per Share. The weighted average number ofOrdinary Shares in issue has been adjusted to take account of the effect of alldilutive potential Ordinary Shares. The number of shares used in the calculationwas 65,909,946 (2005: 65,399,352). Appendix to the Interim Report Reporting under International Financial Reporting Standards This interim report is the first to be prepared under IFRS. The comparativefigures have been prepared on the same basis and have therefore been restatedfrom those previously prepared under UK GAAP. The commentary below details thekey changes that have arisen due to the transition to reporting under IFRS. TheGroup's date of transition is 29 March 2005, which is the beginning of thecomparative period for the 2005/2006 financial year. Therefore the openingbalance sheet for IFRS purposes is that reported at 28 March 2005 as amended forchanges due to IFRS. To explain the impact of the transition, reconciliations have been included inthis appendix that show the changes made to the statements previously reportedunder UK GAAP. The following unaudited reconciliations are included in thisappendix. 1. Reconciliation of Group balance sheet at 28 March 2005 from UK GAAP to IFRS 2. Reconciliation of Group balance sheet at 27 March 2006 from UK GAAP to IFRS 3. Reconciliation of Group income statement for the 52 weeks ended 27 March 2006 from UK GAAP to IFRS 4. Reconciliation of Group balance sheet at 26 September 2005 from UK GAAP to IFRS 5. Reconciliation of Group income statement for the 26 weeks ended 26 September 2005 from UK GAAP to IFRS The transition from UK GAAP to IFRS does not effect the cash flows generated bythe Group. The IFRS cash flow statement is presented in a different format thanthat required under UK GAAP. The reconciling items between the UK GAAP formatand the IFRS format have no net impact on the cash flows generated andaccordingly reconciliations have not been presented. The accounting policies used for IFRS are set out in note 3 of the main report. First time adoption The Group has applied the provisions of IFRS 1 - First Time Adoption ofInternational Financial Reporting Standards which, generally, requires that IFRSaccounting policies be applied retrospectively in determining the openingbalance sheet at the date of transition. IFRS 1 contains both mandatory andoptional exemptions to the principle of retrospective application. Where theGroup has made use of an exemption it is noted below. Descriptions of the reconciling items between UK GAAP and IFRS are listed below.The amounts of the reconciling items are detailed in tables set out beneath eachof the reconciliations. Share based payments The Group operates a number of executive and employee share schemes. For allgrants of share options and awards the fair value at the date of grant iscalculated using an appropriate pricing model and the corresponding expense isrecognised over the vesting period. The Group has elected to take advantage ofthe transitional provisions of IFRS 2 and has applied the fair value model toall grants of equity instruments after 7 November 2002 that had not vested as at28 March 2005. In addition the Group has applied the provisions of IFRS 2 to the Group's seniormanagement bonus scheme. The scheme includes the issue of matching loyaltyshares to participants after a two year deferral period. Previously under UKGAAP the cost of issuing these shares was borne in the period in which theinitial bonus was earned; under IFRS the cost is spread over the bonus year andthe deferral period. Goodwill and business combinations The Group has taken the exemption not to apply IFRS 3 retrospectively tobusiness combinations occurring prior to the date of transition to IFRS.Goodwill arising on the acquisition of subsidiaries prior to 31 December 1997was written off immediately against reserves and this has not been reinstated.Goodwill arising on the acquisition of the French subsidiary in October 2001,Les Celliers de Calais SAS, has been retained at its carrying value as at 28March 2005. The Group under the provisions of IAS 36 only recognises impairment.This results in the reversal of the goodwill amortisation previously charged tothe income statement in the 52 weeks to 27 March 2006. Appendix to the Interim Report Reporting under International Financial Reporting Standards Assets held for sale As at 28 March 2005 the Group owned three residential flats above freeholdproperties in Roehampton and Bromley with a net book value of £350,000 which metthe criteria of assets held for sale under IFRS 5. These have been reclassifiedto a separate line within total assets on the Group balance sheet. Intangible assets On transition the Group following the provisions of IAS 36 has reclassifiedseparately identifiable computer software assets from tangible assets tointangible assets. Prepaid operating lease costs The Group incurs costs in acquiring property leases. The Group previouslytreated these costs as additions to tangible fixed assets, however under IAS 17they are more correctly described as prepaid operating lease expenses.Accordingly on transition these expenses are reclassified from tangible fixedassets to prepaid lease costs. The expenses are amortised over the lives of theoperating leases on which they were incurred. Lease inducements The Group under UK GAAP recognised rent free periods over the period to thecommencement of market rent and premiums paid, over the period to the firstmarket rent review. According to provisions in SIC15 lease incentives are spreadover the full term of the lease. As at the date of transition, deferred incomereflecting the amount of lease inducements to be taken to the income statementin future periods has been recognised on the balance sheet. Cumulative translation differences Under IAS 21, exchange differences arising on consolidation of overseassubsidiaries are required to be recognised as a separate equity reserve. TheGroup has utilised the exemption available in IFRS 1 whereby cumulativetranslation differences are deemed to be zero at the date of transition to IFRS. Previously under UK GAAP purchases covered by forward currency contracts weretranslated at their contract rate when initially recognised. This is notpermitted under IAS 21 as items must be converted at the spot rate on the dateof transaction with any impact of the forward currency contract being accountedfor under IAS 39 - see derivative financial instruments section below. As aresult an adjustment has been made to reverse the effects of using the contractrate Employee benefits The Group in accordance with IAS 19 has recognised untaken holiday payentitlements as at the date of transition to IFRS. Derivative financial instruments The Group makes use of forward currency contracts in order to mitigate exposuresto movements in exchange rates that arise from its dealings with foreignsuppliers. The Group applied hedge accounting under UK GAAP but has decided notto under IFRS. The Group has applied the provisions of IAS 39 and hasre-measured the derivative at fair value at each balance sheet date taking anygain or loss to the income statement. Deferred taxation IAS 12 takes a balance sheet approach to deferred tax whereby deferred tax isrecognised in the balance sheet by applying the appropriate tax rate to thetemporary differences arising between the carrying value of assets andliabilities and their tax base. The Group, on transition to IFRS, has recognised a deferred tax asset arising onthe difference between market value and exercise price of unexercised employeeshare options. These were previously credited to the income statement in theyear that the market value adjustment arising on exercised share options wasclaimed from the relevant tax authorities. In addition the Group has recogniseddeferred tax liabilities arising on held-over capital gains previously reportedby way of note to the financial statements. Appendix to the Interim Report Reconciliation of Group balance sheet at 28 March 2005 from UK GAAP to IFRS(unaudited) UK GAAP Effect of IFRS As at transition As at 28.03.05 to IFRS 28.03.05 £000 £000 £000Non current assets Goodwill and intangible fixed assets 6,135 576 6,711 Property, plant and equipment 29,347 (2,082) 27,265 Prepaid operating lease costs - 1,156 1,156 Deferred tax asset 40 2,405 2,445 35,522 2,055 37,577 Current assets Stock 27,798 109 27,907 Trade and other receivables 3,886 - 3,886 Financial instruments at fair value - 18 18 Cash and cash equivalents 7,840 - 7,840 39,524 127 39,651 Non current assets held for sale - 350 350 Total assets 75,046 2,532 77,578 Current liabilities Trade and other payables (33,625) (93) (33,718) Provisions (297) 96 (201) Deferred income - (90) (90) Financial instruments at fair value - (31) (31) Current tax liabilities (1,792) - (1,792) (35,714) (118) (35,832) Non current liabilities Provisions - (21) (21) Deferred income - (794) (794) Deferred tax liabilities - (331) (331) Total liabilities (35,714) (1,264) (36,978) Net assets 39,332 1,268 40,600 Shareholders' equity Called up share capital 4,776 - 4,776 Share premium account 6,750 - 6,750 Other reserve 22 - 22 Capital reserve - own shares (407) - (407) Currency translation reserve - - - Retained earnings 28,191 1,268 29,459 Equity shareholders' funds 39,332 1,268 40,600 Appendix to the Interim Report Reconciliation of Group balance sheet at 28 March 2005 from UK GAAP to IFRS(unaudited) Non Current Non Assets Non Share- Current Current Held for Current Current holders' Assets Assets Sale Liabilities Liabilities Funds £000 £000 £000 £000 £000 £000 Conversion effects comprise: IAS38 - reclassification of software from tangible to intangible fixed assets 576 - - - - - IAS38 - reclassification of software from tangible to intangible fixed assets (576) - - - - - IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets 1,156 - - - - - IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets (1,156) - - - - - SIC15 - lease inducements now spread over full lease term - - - (90) (794) (884) IFRS5 - reclassification of residential flats as assets held for sale (350) - 350 - - - IAS19 - recognition of employee benefits: untaken holiday accrual - - - (123) - (123) IAS39 - recognition of fair value of derivative instruments - 18 - (31) - (13) IAS21 - reversal of hedge accounting - 109 - 38 - 147 IFRS2 - re-phasing of senior managers bonus costs - - - 67 - 67 IAS1 - reclassification of provisions to non current liabilities - - - 21 (21) - IFRS2 - recognition of share based payment reserve - - - - - 694 IFRS2 - recognition of share based payment reserve - - - - - (694) IAS12 - recognition of deferred tax asset for share based payments 2,147 - - - - 2,147 IAS12 - recognition of deferred tax liabilities for roll over relief - - - - (331) (331) IAS12 - tax effects of conversion 258 - - - - 258 Net movement 2,055 127 350 (118) (1,146) 1,268 Appendix to the Interim Report Reconciliation of Group balance sheet at 27 March 2006 from UK GAAP to IFRS(unaudited) UK GAAP Effect of IFRS As at transition As at 27.03.06 to IFRS 27.03.06 £000 £000 £000 Non current assets Goodwill and intangible fixed assets 5,765 855 6,620 Property, plant and equipment 35,420 (1,688) 33,732 Prepaid operating lease costs - 1,203 1,203 Deferred tax asset - 2,125 2,125 41,185 2,495 43,680 Current assets Stock 28,722 (24) 28,698 Trade and other receivables 6,116 - 6,116 Financial instruments at fair value - 129 129 Cash and cash equivalents 5,916 - 5,916 40,754 105 40,859 Non current assets held for sale - - - Total assets 81,939 2,600 84,539 Current liabilities Trade and other payables (33,615) (110) (33,725) Provisions (383) 154 (229) Deferred income - (93) (93) Financial instruments at fair value - (49) (49) Current tax liabilities (770) - (770) (34,768) (98) (34,866) Non current liabilities Provisions - (57) (57) Deferred income - (728) (728) Deferred tax liabilities (12) (319) (331) Total liabilities (34,780) (1,202) (35,982) Net assets 47,159 1,398 48,557 Shareholders' equity Called up share capital 4,864 - 4,864 Share premium account 8,371 - 8,371 Other reserve 22 - 22 Capital reserve - own shares (391) - (391) Currency translation reserve - 19 19 Retained earnings 34,293 1,379 35,672 Equity shareholders' funds 47,159 1,398 48,557 Appendix to the Interim Report Reconciliation of Group balance sheet at 27 March 2006 from UK GAAP to IFRS(unaudited) Non Current Non Assets Non Share- Current Current Held for Current Current holders' Assets Assets Sale Liabilities Liabilities Funds £000 £000 £000 £000 £000 £000 Conversion effects comprise: IAS38 - reclassification of software from tangible to intangible fixed assets 485 - - - - - IAS38 - reclassification of software from tangible to intangible fixed assets (485) - - - - - IAS38 - goodwill no longer amortised annually 370 - - - - 370 IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets 1,203 - - - - - IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets (1,203) - - - - - SIC15 - lease inducements now spread over full lease term - - - (93) (728) (821) IAS19 - recognition of employee benefits: untaken holiday accrual - - - (119) - (119) IAS39 - recognition of fair value of derivative instruments - 129 - (49) - 80 IAS21 - reversal of hedge accounting - (24) - 9 - (15) IFRS2 - re-phasing of senior managers bonus costs - - - 97 - 97 IAS1 - reclassification of provisions to non current liabilities - - - 57 (57) - IAS21 - recognition of exchange difference on translation of subsidiary - - - - - 19 IAS21 - recognition of exchange difference on translation of subsidiary - - - - - (19) IFRS2 - recognition of share based payment reserve - - - - - 869 IFRS2 - recognition of share based payment reserve - - - - - (869) IAS12 - recognition of deferred tax asset for share based payments 1,839 - - - - 1,839 IAS12 - recognition of deferred tax liabilities for roll over relief - - - - (319) (319) IAS12 - tax effects of conversion 286 - - - - 286 Net movement 2,495 105 - (98) (1,104) 1,398 Appendix to the Interim Report Reconciliation of income statement for the 52 weeks ended 27 March 2006 from UKGAAP to IFRS (unaudited) UK GAAP IFRS 52 weeks Effect of 52 weeks ended transition ended 27.03.06 to IFRS 27.03.06 £000 £000 £000 Turnover 172,195 - 172,195 Cost of sales (135,689) (236) (135,925) Gross profit 36,506 (236) 36,270 Distribution costs (14,004) 55 (13,949) Administrative costs (8,959) 132 (8,827) Other operating income 584 - 584 Operating profit 14,127 (49) 14,078 Interest receivable 155 - 155 Interest payable (74) - (74) Profit before taxation 14,208 (49) 14,159 UK corporation tax (3,083) (802) (3,885) Overseas corporation tax (644) - (644) Profit for the year attributable to the equity shareholders 10,481 (851) 9,630 Earnings per share Basic 16.3p (1.3)p 15.0p Diluted 16.0p (1.3)p 14.7p Basic £000 EPS (p) £000 £000 Conversion effects comprise: IFRS2 - employee option and bonus schemes (417) (0.6) SIC15 - lease inducements now spread over full lease term 63 0.1 IAS19 - employee benefits untaken holiday pay accrual 4 - IAS38 - goodwill no longer amortised annually 370 0.6 IAS39 - recognition of fair value of derivative instruments 93 0.1 IAS21 - reversal of hedge accounting (162) (0.3) Profit before taxation (49) (0.1) IAS12 - taxation effects of share based payments under IFRS2 (830) (1.3) IAS12 - taxation effect of conversion 28 0.1 Profit for the year (851) (1.3) Appendix to the Interim Report Reconciliation of Group balance sheet at 26 September 2005 from UK GAAP to IFRS(unaudited) UK GAAP Effect of IFRS As at transition As at 26.09.05 to IFRS 26.09.05 £000 £000 £000 Non current assets Goodwill and intangible fixed assets 5,950 660 6,610 Property, plant and equipment 34,388 (1,949) 32,439 Prepaid operating lease costs - 1,124 1,124 Deferred tax asset 40 2,231 2,271 40,378 2,066 42,444 Current assets Stock 30,192 (83) 30,109 Trade and other receivables 6,361 - 6,361 Financial instruments at fair value - 22 22 Cash and cash equivalents 1,238 - 1,238 37,791 (61) 37,730 Non current assets held for sale - 350 350 Total assets 78,169 2,355 80,524 Current liabilities Trade and other payables (35,067) 16 (35,051) Provisions (293) 71 (222) Deferred income - (90) (90) Financial instruments at fair value - (194) (194) Current tax liabilities (1,471) 377 (1,094) (36,831) 180 (36,651) Non current liabilities Provisions - (56) (56) Deferred income - (750) (750) Deferred tax liabilities - (331) (331) Total liabilities (36,831) (957) (37,788) Net assets 41,338 1,398 42,736 Shareholders' equity Called up share capital 4,839 - 4,839 Share premium account 7,961 - 7,961 Other reserve 22 - 22 Capital reserve - own shares (391) - (391) Currency translation reserve - (30) (30) Retained earnings 28,907 1,428 30,335 Equity shareholders' funds 41,338 1,398 42,736 Appendix to the Interim Report Reconciliation of Group balance sheet at 26 September 2005 from UK GAAP to IFRS(unaudited) Non Current Non Assets Non Share- Current Current Held for Current Current holders' Assets Assets Sale Liabilities Liabilities Funds £000 £000 £000 £000 £000 £000 Conversion effects comprise: IAS38 - reclassification of software from tangible to intangible fixed assets 475 - - - - - IAS38 - reclassification of software from tangible to intangible fixed assets (475) - - - - - IAS38 - goodwill no longer amortised annually 185 - - - - 185 IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets 1124 - - - - - IAS17 - reclassification of prepaid operating lease costs from tangible fixed assets (1,124) - - - - - SIC15 - lease inducements now spread over full lease term - - - (90) (750) (840) IFRS5 - reclassification of residential flats as assets held for sale (350) - 350 - - - IAS19 - recognition of employee benefits: untaken holiday accrual - - - (122) - (122) IAS39 - recognition of fair value of derivative instruments - 22 - (194) - (172) IAS21 - reversal of hedge accounting - (83) - 138 - 55 IFRS2 - re-phasing of senior managers bonus costs - - - 15 - 15 IAS1 - reclassification of provisions to non current liabilities - - - 56 (56) - IAS21 - recognition of exchange difference on translation of subsidiary - - - - - 30 IAS21 - recognition of exchange difference on translation of subsidiary - - - - - (30) IFRS2 - recognition of share based payment reserve - - - - - 580 IFRS2 - recognition of share based payment reserve - - - - - (580) IAS12 - recognition of deferred tax asset for share based payments 1,959 - - 377 - 2,336 IAS12 - recognition of deferred tax liabilities for roll over relief - - - - (331) (331) IAS12 - tax effects of conversion 272 - - - - 272 Net movement 2,066 (61) 350 180 (1,137) 1,398 Appendix to the Interim Report Reconciliation of Group income statement for the 26 weeks ended 26 September2005 from UK GAAP to IFRS (unaudited)) UK GAAP IFRS 26 weeks Effect of 26 weeks ended transition ended 26.09.05 to IFRS 26.09.05 £000 £000 £000 Turnover 80,766 - 80,766 Cost of sales (64,124) (327) (64,451) Gross profit 16,642 (327) 16,315 Distribution costs (6,876) 40 (6,836) Administrative costs (4,297) 41 (4,256) Other operating income 301 - 301 Operating profit 5,770 (246) 5,524 Interest receivable 29 - 29 Interest payable (32) - (32) Profit before taxation 5,767 (246) 5,521 UK corporation tax (1,582) 71 (1,511) Overseas corporation tax (371) - (371) Profit for the period attributable to equity shareholders 3,814 (175) 3,639 Earnings per share Basic 6.0p (0.3)p 5.7p Diluted 5.8p (0.3)p 5.5p Basic £000 EPS (p) £000 £000 Conversion effects comprise: IFRS2 - employee option and bonus schemes (225) (0.4) SIC15 - lease inducements now spread over full lease term 44 0.1 IAS19 - employee benefits untaken holiday pay accrual 1 - IAS38 - goodwill no longer amortised annually 185 0.3 IAS39 - recognition of fair value of derivative instruments (159) (0.3) IAS21 - reversal of hedge accounting (92) (0.1) Profit before taxation (246) (0.4) IAS12 - taxation effect of conversion 71 0.1 Profit for the period (175) (0.3) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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