1st Jun 2006 07:02
API Group PLC01 June 2006 1 June 2006 API GROUP PLC INTERIM STATEMENT SIX MONTHS ENDED 31 MARCH 2006 • Strong performance and good growth in the Group's global Foils business offset by a marked deterioration in the European Laminates business, where sales were down substantially in the first half. • Operating profit before exceptional items for the Group's continuing operations reduced to break-even (2005: £1.4m profit) and Group sales down slightly to £51.1m (2005: £52.4m), both as a result of the deterioration in Laminates. • Loss per share before exceptional items of 4.6p (2005: 2.5p loss). • Capital expenditure on long-term projects contributed to higher net borrowings. • Performance expected to improve in seasonally stronger second half. Commenting Richard Wright, Chairman of API, said: "The Group is focused on strengthening its position in its core Foils andLaminates businesses. Despite the difficult conditions encountered by certainof our European businesses, we remain confident that the performance of theGroup will improve in the seasonally stronger second half." Enquiries:API Group plc 01625 858700David Walton, Chief Executive Financial Dynamics 020 7831 3113Tim Spratt / Nicola Biles In the last eighteen months, we have successfully withdrawn from loss-making,non-core activities and have focused API on its Foils and Laminates businesses.The Group is now positioned as a focused manufacturer of specialised packagingand security products for the tobacco, drinks, food, luxury and consumer goodssectors. Interim Report to Shareholdersresults for the six months ended 31 March 2006 The trading results for the first half of 2006, while still disappointing inabsolute terms, reflect the progress that has been made with the key strategicinitiatives outlined in previous reports and are consistent with the commentsthat we made in our AGM statement in February. In Foils, new products have beenbrought to market and are performing strongly, and we have made good progresswith our attempts to broaden our distribution base in Europe and improve theefficiency of our manufacturing operations. We are particularly pleased with thestrong financial performance of our US, Chinese and Holographic foilsbusinesses, which all achieved both good sales growth and improved margins. Incontrast, our European foils business continued to experience tough competitionand struggled to improve its financial performance despite making good progressoperationally, while the Laminates business had a very difficult first half,with sales down by 22% compared with the same period in the previous year due toreduced demand and soft market conditions. During 2005 and 2006, we have committed to a number of capital investment andbusiness development initiatives which are expected to deliver substantialbenefits to the Group in the medium to long-term. These include upgrading andimproving our core foils product range, the expansion and broadening of our foildistribution capabilities in Continental Europe, the relocation and substantialexpansion of our foil manufacturing facility in China and the modernisation ofour manufacturing capabilities in the US. Good progress has been made with allof these initiatives and most are ahead of plan, although each requiressubstantial capital expenditure, the full benefits of which will not be realisedfor some time. REVIEW OF RESULTS The Group reported a loss before taxation and net finance costs for the sixmonths ended 31 March 2006 of £0.6m (£7.6m loss) comprising: • Operating loss from continuing operations of £0.5m (£1.3m profit) • Operating loss from discontinued operations £0.1m (£8.9m loss) During the period, £0.4m of exceptional items were charged against the operatingresult of the continuing operations, relating principally to the cost ofrestructuring in Laminates and the foils businesses in Europe. The deterioration in operating profit from continuing operations was principallydue to the poor performance of the Laminates business, which reported anoperating loss before exceptional items for the period of £0.7m, compared withan operating profit of £1.0m for the same period of the previous year, on salesdown by 22%. In contrast the Foils businesses performed well, achieving a 12%improvement in sales and a 13% rise in operating profit before exceptionalitems, reflecting strong performances in the US, China and Holographics. REVIEW OF OPERATIONS The operating profit before exceptional items reduced to break-even (£1.4mprofit) due to a £1.7m reduction in profits in the Laminates business to a lossof £0.7m. In contrast, Foils performed well, improving by £0.2m to a profit of£1.7m despite the fact that some of the improvement achieved in the US, Chinaand Holographics was offset by a weakening of results from the European foilsbusiness. Excluding the impact of exceptional charges, central costs werevirtually unchanged for the period at £1.0m. The US foils business continues to focus on revenue growth and profitimprovement and performed well. Sales grew by 22% and operating margins improveddramatically following a strong resurgence in demand for metallic ink productsand increased penetration of the greetings card sector. We have successfullyintroduced volume products manufactured in our Chinese facility into the USmarket and are also evaluating options for expanding capacity in the US, with aview to aggressively targeting opportunities that we believe exist in thegeneral cartons and label sectors where we are currently under-represented.During 2006, it was necessary to invest heavily in upgrading the environmentalmanagement systems in each of our facilities to achieve full compliance withmore stringent emissions regulations and this in part accounted for the highlevel of capital expenditure during the period. In the Asia-Pacific region, sales increased by 4% and profits improved by 19%following a recovery in demand for holographic products in the tobacco sectorand strong growth in sales of new products and sales into new markets in theChinese domestic market. Exports also grew as a proportion of total sales, withan increase in the value of product sold to other API Group companies, togetherwith particularly strong growth in India and Russia. The relocation andexpansion of the Chinese manufacturing facility is well underway, with the landpurchase completed and construction expected to commence during the summermonths. Orders have already been placed for certain major items of equipment andwe are evaluating options for further investment in additional capacity tosupport growth in the US and European markets. In Europe, foils sales increased by 9%, although this was largely due to theacquisition of MEPA, a distributor in Germany, in October 2005. Underlying saleswere virtually unchanged, reflecting good growth in sales of holographicproducts offset by a decline in sales of metallic and pigment products. TheHolographics business benefited from the introduction of a number of newproducts and advances in manufacturing technology that have enabled us improveour competitive position and to achieve a competitive advantage in certainmarkets. This has translated into increased sales and significantly bettermargins. In contrast, trading conditions for the general foils business haveremained difficult and despite the successful launch of a new range ofversatile, general purpose products imported from China, weak demand and intenseprice competition contributed to a significant reduction in profits earned fromnon-holographic products. The Laminates business experienced very difficult trading conditions during thefirst half and reported poor results. Sales were down by 22% and an operatingloss of £0.7m was reported compared with a profit of £1.0m in the previous year.A number of major customers reduced or deferred orders and the level ofhigh-margin promotional activity was significantly lower than in previous years.The demand from other sectors, such as food, pharmaceutical and consumerproducts, was also relatively weak. In response to the downturn in activity in Laminates, we reduced the workforcein our UK manufacturing facility by over 12%. Further action to reduce fixedcosts will be taken during the second half and we hope to achieve improvement ingross margins through a renewed focus on productivity improvements and lowerwaste levels. We have also redoubled our efforts to explore options forproduction in lower cost economies such as those in Eastern Europe. On a more positive note, average selling prices in the core drinks and tobaccosectors held up well despite pressure for further reductions from majorcustomers, and underlying demand for these and other products remains robust. Wehave seen an increase in order volume in the second half of the year, althoughnot to the levels experienced in 2004 and 2005. Discontinued Businesses The operating loss from discontinued businesses of £0.1m relates principally tothe Group's holographic origination activity in the US. As part of our long-termstrategy for the development of the Holographics business, a decision was takenearlier this year to place increased reliance on third-party specialists and toconcentrate our own design and origination activities in the UK. FINANCE Cash Flow The Group's net cash outflow from operating activities excluding taxation in theperiod was £2.4m (£0.8m inflow). Working capital increased by £3.2m (£1.5mincrease) due principally to a decrease in trade and other payables. Capitalexpenditure of £2.7m (£2.4m) was in-line with expectations, but was ahead ofdepreciation of £1.8m (£2.4m). During the period, the Group completed investments in a number of major projectsincluding a new large-format metalliser for the US foils business, additionalwide-web embossing capacity for the Holographics business and upgrades toenvironmental management systems in the US. In addition, we continued to investin the implementation of the Oracle based ERP system which is now in use withinthe Laminates business and will be rolled out in the Foils business during 2006and 2007. Returns on investment and servicing of finance of £0.8m (£1.4m) included bankinterest and minority dividends. The Group paid interest of £0.8m (£1.0m)compared to the interest charge shown in the income statement of £0.7m (£0.8m). Borrowings Net borrowings increased by £6.0m during the period to £12.7m and representedgearing of 46% at 31 March 2006, compared with 24% at 30 September 2005. Theincrease in borrowings was partly attributable to the normal seasonalfluctuations in working capital. However, the loss for the period of £1.7m andthe relatively high level of capital expenditure also impacted the netborrowings position. The Group has recently renegotiated both its UK and US bank facilities to ensurethat adequate funds are available to support its medium and long-term investmentplans and currently has committed facilities of £19.0m and uncommittedfacilities of £7.9m. Shareholders' funds at 31 March 2006 were £21.8m. Net assets per share wereequivalent to 63p per share. IFRS All listed companies in the European Union are required to adopt InternationalFinancial Reporting Standards (IFRS) for accounting periods beginning on orafter 1 January 2005. The adoption of IFRS has been reflected in the Group'sinterim statement for the period ended 31 March 2006 and the comparative figuresfor the six months ended 31 March 2005 and the year ended 30 September 2005 havebeen appropriately restated. Although the adoption of IFRS has impacted thereported results, the underlying performance of the business has not beenaffected by these changes. PEOPLE Since the Annual General Meeting held on 1 February 2006, Brian Birkenhead andMartin O'Connell have joined the Board as Non-Executive Directors. BrianBirkenhead, who is an independent Non-Executive and will also Chair the AuditCommittee, is a knowledgeable and experienced finance professional whoseprevious positions include Finance Director of National Power plc, Director ofFinance of Johnson Matthey plc and Chairman of The Hundred Group of FinanceDirectors. Martin O'Connell recently retired from a senior position withChesapeake Corporation, one of the world's leading packaging companies, where hehad specific responsibility for businesses targeting the luxury andpremium-branded consumer goods sectors, including Field Packaging, one of theGroup's major customers. The Board is sure that both will be able to make asignificant contribution to the future development of the Group. OUTLOOK The outlook for the remainder of the year remains mixed. We continue to seestrong performance from our Foils businesses in the US and Asia-Pacific and areconfident of further improvement in these areas. We are also optimistic thatthere will be some recovery in the performance of the European businesses duringthe second half, although the extent remains uncertain. While order intake inthe Laminates business has improved recently due to increased activity frommajor customers, trading conditions remain challenging. The Group is focused on strengthening its position in its core Foils andLaminates businesses. We have committed to a number of significant strategicinitiatives, some of which are already beginning to have a positive impact onearnings, while others are progressing ahead of or in line with expectations andare expected to yield considerable benefits in the future. We are working toaddress the performance issues in Laminates and in the European foils businessesand despite the difficult conditions encountered by certain of our Europeanbusinesses, we remain confident that the performance of the Group will improvein the seasonally stronger second half. For and on behalf of API Group plc Richard Wright David WaltonNon-Executive Chairman Group Chief Executive 1 June 2006 Group Income Statementfor the six months ended 31 March 2006 Unaudited Unaudited Audited 6 months to 31 6 months to 31 12 months to March 2006 March 2005 30 September 2005 Note £'000 £'000 £'000Continuing operationsRevenue 3 51,118 52,445 105,570Cost of sales (40,653) (41,116) (82,767)Gross profit 10,465 11,329 22,803 Other operating costs (10,488) (9,881) (19,241) Operating (loss) / profit before exceptional items 3 (23) 1,448 3,562 Exceptional items:Restructuring 4 (443) - (226)Professional expenses incurred in respect of takeover approach 4 - (158) (204) Operating (loss) / profit from continuing operations (466) 1,290 3,132 Finance revenue 51 59 117Finance costs (772) (846) (1,524)Other finance income / (expense)- 12 (96) (142)pensions (709) (883) (1,549) (Loss) / profit on continuing activities (1,175) 407 1,583before taxationTaxation - UK 6 (149) 166 (3) - Overseas 6 (292) (238) (501)(Loss) / profit from continuing operations (1,616) 335 1,079 Discontinued operationsLoss from discontinued operations 7 (103) (8,858) (10,149) Loss for the period (1,719) (8,523) (9,070) Attributable to:Profit attributable to minority equity 318 267 574interestsLoss attributable to equity holders of the parent (2,037) (8,790) (9,644)Total loss for the period (1,719) (8,523) (9,070) Earnings per share (pence)Basic (loss) / earnings per share from continuing operations 5 (5.6) 0.2 1.5Diluted (loss) / earnings per share from continuing operations 5 (5.5) 0.2 1.5 Basic loss per share from loss for the period 5 (5.9) (26.4) (28.7)Diluted loss per share from loss for the period 5 (5.8) (26.1) (28.3) Group Balance Sheetat 31 March 2006 Unaudited 31 Unaudited Audited March 2006 31 March 2005 30 September 2005 Note £'000 £'000 £'000AssetsNon-current assetsProperty plant and equipment 29,810 28,210 28,692Intangible assets 6,225 5,517 6,225Deferred tax asset on defined benefit pension plan 2,760 3,896 3,151 38,795 37,623 38,068Current assetsInventories 13,694 13,372 12,869Trade and other receivables 19,676 21,317 19,824Cash and cash equivalents 7,326 7,839 10,396 40,696 42,528 43,089 Total assets 79,491 80,151 81,157 LiabilitiesCurrent liabilitiesFinancial liabilities 1,264 3,350 2,102Trade and other payables 20,864 24,619 23,306Current tax liabilities 334 267 327Provisions 337 756 593 22,799 28,992 26,328Non-current liabilitiesFinancial liabilities 18,742 10,897 14,980Deferred tax liabilities 940 727 940Other non-current liabilities - 239 -Provisions 103 126 109Defined benefit pension plan deficit 9,199 12,988 10,503 28,984 24,977 26,532 Total liabilities 51,783 53,969 52,860 Net assets 27,708 26,182 28,297 EquityCalled up share capital 8,612 8,494 8,592Share premium 244 51 211Capital redemption reserve 549 549 549ESOP reserve (251) (2,432) (251)Foreign exchange reserve 659 (796) 439Retained earnings 11,964 14,754 13,297 Total shareholders' equity 8 21,777 20,620 22,837 Minority interest in equity 8 5,931 5,562 5,460 Total equity 27,708 26,182 28,297 Group Cash Flow Statementfor the six months ended 31 March 2006 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000Operating activitiesGroup operating (loss) / profit (466) 1,290 3,132Adjustments to reconcile group operating (loss) /profit to net cash flows from operating activitiesLoss before tax from discontinued operations (103) (1,029) (1,974)Depreciation and impairment of property, plant and equipment 1,780 2,387 4,412 (Profit) / loss on disposal of property, plant and equipment (11) (25) 149Share-based payments 74 30 87Difference between pension contributions paid and amounts recognised in the income statement (432) (383) (378)Increase in inventories (727) (2,470) (892)Decrease in trade and other receivables 244 4,930 6,043Decrease in trade and other payables (2,501) (3,980) (6,424)Movement in provisions (261) - (590) Cash (used in) / generated from operations (2,403) 750 3,565Income taxes paid (294) (400) (563)Net cash flow from operating activities (2,697) 350 3,002 Investing activities Interest received 51 59 117Purchase of property, plant and equipment (2,681) (2,367) (4,806)Sale of property, plant and equipment - 52 50Purchase of subsidiary undertakings - - (1,069)Sale of subsidiary undertakings - 7,701 8,033 Net cash flow from investing activities (2,630) 5,445 2,325 Financing activities Interest paid (822) (1,061) (1,483)Dividends paid to minority interests - (444) (788)Proceeds from share issues 53 82 340Cash received from exercise of share options - 81 347New borrowings 2,906 - -Repayment of borrowings - (8,037) (5,310) Net cash flow from financing activities 2,137 (9,379) (6,894)Decrease in cash and cash equivalents (3,190) (3,584) (1,567)Effect of exchange rates on cash and cash equivalents 120 (296) 244Cash and cash equivalents at the beginning of the period 10,396 11,719 11,719 Cash and cash equivalents at the end of the period 7,326 7,839 10,396 Group Statement of Recognised Income and Expenditurefor the six months ended 31 March 2006 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Exchange differences on retranslation of foreign operations 220 (796) 439Actuarial gains / (losses) on defined benefit pension plans 872 (43) 1,920Tax on actuarial gains on defined benefit pension plans (242) - (708) Net income / (expense) recognised directly in equity 850 (839) 1,651Loss for the period (1,719) (8,523) (9,070) Total recognised income and expense relating to the period (869) (9,362) (7,419) Attributable to: Equity holders of the parent (1,187) (9,629) (7,993)Minority equity interests 318 267 574 (869) (9,362) (7,419) Notes 1 Presentation of interim financial statements Authorisation of financial statements The consolidated financial statements of API Group plc for the six months ended31 March 2006 were authorised for issue in accordance with a resolution of thedirectors on 24 May 2006. API Group plc is a public limited companyincorporated in the United Kingdom whose shares are publicly traded. Basis of preparation The Group's first full financial statements to be prepared in accordance withInternational Financial Reporting Standards ("IFRS") will be for the year ending30 September 2006. These interim financial statements, being for part of thatperiod, reflect the provisions of IFRS 1 'First-time Adoption of IFRS'. TheGroup's interim financial statements have been prepared in accordance with IFRSas adopted by the European Union as they apply to the financial statements ofthe Group for the period ended 31 March 2006. The IFRS standards that will beapplicable at 30 September 2006 including those that will be applicable on anoptional basis are not known with certainty at the time of preparing theseinterim financial statements. The Group has not applied IAS 34, InterimFinancial Reporting, which is not mandatory for UK groups. The policies set out in note 2 have been consistently applied to all yearspresented. The Group has applied optional exemptions available to it under IFRS1. These exemptions are described in note 10. The Group's Financial Statements and unaudited interim results were preparedunder UK Generally Accepted Accounting Principles ("UK GAAP") until 30 September2005. UK GAAP differs in some areas from IFRS. In preparing these interimfinancial statements, it has been necessary to amend certain accounting andvaluation methods applied in the UK GAAP financial statements to comply withIFRS. The comparative figures in respect of prior periods have also beenrestated to reflect these adjustments. The effect of the transition from UKGAAP to IFRS on the Group's equity and its net income is provided in note 10. These consolidated interim financial statements are presented in sterling andall values are rounded to the nearest thousand (£'000) except when otherwiseindicated. The financial information contained in this interim statement is unaudited anddoes not constitute statutory accounts as defined in section 240 of theCompanies Act 1985. The audited UK GAAP annual financial statements for theyear ended 30 September 2005, which represent the statutory accounts for thatyear, and on which the auditors gave an unqualified opinion, have been filedwith the Registrar of Companies. Interim Statement The interim statement is being mailed to shareholders on 14 June 2006 and willbe available at the company's registered office, Second Avenue, PoyntonIndustrial Estate, Poynton, Stockport, Cheshire, SK12 1ND. 2 Accounting policies Changes in accounting policies The Group has adopted those standards designed to form the 'stable platform'mandatory for financial years beginning on or after 1 January 2005. Accountingpolicies detailed below reflect the adjustments arising as a result of adoptingIFRS. Basis of consolidation The consolidated accounts comprise those of the parent company and itssubsidiary undertakings. The results for the period ended 31 March 2006 areincluded in the Group results in full except where control of subsidiaryundertakings is acquired or sold during the year, when results are included fromor to the date of acquisition or sale. All intercompany balances and transactions, including unrealised profits arisingfrom intra-group transactions, have been eliminated in full. Minority interest represents the portion of profit or loss and net assets insubsidiaries that is not held by the group and is presented separately withinequity in the consolidated balance sheet, separate from parent shareholders'equity. Notes 2 Accounting policies (continued) Business combinations and goodwill On the acquisition of a business, fair values are attributed to the net assetsacquired. Goodwill arises where the fair value of the consideration given for abusiness exceeds the fair value of such net assets. Goodwill arising on acquisitions is capitalised and subject to impairmentreview, both annually and when there are indications that the carrying value maynot be recoverable. Between 5 October 1997 and 1 October 2004 goodwill wasamortised over its estimated useful life. Such amortisation ceased on 30September 2004. The Group's policy before 5 October 1997 was to eliminategoodwill arising upon acquisitions against reserves. Under IFRS 1 and IFRS 3,such goodwill will remain eliminated against reserves. For the purposes of impairment testing, goodwill is allocated to the relatedcash-generating units monitored by management. Where the recoverable amount ofthe cash-generating unit is less than its carrying amount, including goodwill,an impairment loss is recognised in the income statement. Revenue Recognition Revenue represents amounts invoiced to third parties excluding value added taxesand represents net invoice value less estimated rebates, returns and settlementdiscounts. It is recognised when the significant risks and rewards of ownershipof the goods have passed to the buyer and the amount of revenue can be reliablymeasured. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciationand accumulated impairment losses. The Group's policy is to write off thedifference between the cost of each item of property, plant and equipment andits residual value systematically over its estimated useful life. Annualreviews are made of the estimated remaining lives and residual values ofindividual productive assets, taking account of commercial and technologicalobsolescence as well as normal wear and tear. Under this policy it becomesimpractical to indicate average asset lives exactly but the indicative rangesare as follows: • Freehold buildings and long leasehold property 14 to 50 years• Plant 5 to 20 years• Vehicles 4 years• Furniture and equipment 3 to 10 years The carrying values of property, plant and equipment are reviewed for impairmentif events or changes in circumstances indicate the carrying value may not berecoverable. Borrowing costs are not capitalised. An item of property, plant and equipment is derecognised upon disposal or whenno future economic benefits are expected to arise from the continued use of theasset. Any gain or loss arising on derecognition of the asset (calculated asthe difference between the net disposal proceeds and the carrying amount of theitem) is included in the income statement in the year the item is derecognised. Government grants Government grants in respect of capital expenditure are credited to a deferredincome account and are released to profit over the expected useful lives of therelevant assets by equal annual instalments. Grants of a revenue nature arecredited to income so as to match them with the expenditure to which theyrelate. Intangible assets Intangible assets acquired separately are capitalised at cost. Intangibleassets acquired with a business acquisition are capitalised at fair value at thedate of acquisition if the asset is separable or arises from contractual orother legal rights and its fair value can be measured reliably. The usefullives of intangible assets are assessed as finite or indefinite. Intangible assets, excluding development costs, created within the business arenot capitalised and expenditure is charged against income as it is incurred.The carrying values of intangible assets are reviewed annually for impairment orif events or changes in circumstances indicate the carrying value may not berecoverable. Notes 2 Accounting policies (continued) Research and development Research costs are expensed as incurred. Development expenditure incurred on anindividual project is carried forward when its future recoverability canreasonably be regarded as assured. Following the initial recognition of thedevelopment expenditure, the asset is carried at cost less any accumulatedamortisation and accumulated impairment losses. Any expenditure carried forwardis amortised over the period of expected future sales from the related project. The carrying value of development costs is reviewed for impairment annually whenthe asset is not yet in use, or more frequently, when an indicator of impairmentarises during the reporting year indicating that the carrying value may not berecoverable. Leases Assets held under finance leases, which transfer to the Group substantially allthe risks and benefits incidental to ownership of the leased item, arecapitalised at the inception of the lease, with a corresponding liability beingrecognised for the fair value of the leased asset or, if lower, the presentvalue of the minimum lease payments. Lease payments are apportioned betweenreduction of the lease liability and finance charges in the income statement soas to achieve a constant rate of interest on the remaining balance of theliability. Assets held under finance leases are depreciated over the shorter ofthe estimated useful life of the asset and the lease term. Leases where the lessor retains substantially all the risks and benefits ofownership of the asset are classified as operating leases and rentals payableare charged in the income statement on a straight line basis over the leaseterm. Inventories Inventories are stated at the lower of cost and estimated net realisable value.Cost is determined on a first in first out basis. Cost of work in progress andfinished goods comprises the cost of raw materials, direct labour and overheadsattributable to the production of stock. Net realisable value comprises theestimated selling value less selling costs. Trade and other receivables Trade and other receivables are recognised and carried at original invoice valueless an allowance for any amounts which may not be collectible. Should anamount become uncollectible, it is written off to the income statement in theperiod in which it is identified. Cash and cash equivalents Cash and cash equivalents principally comprise funds held with banks and otherfinancial institutions with an original maturity of three months or less. Forthe purpose of the consolidated cash flow statement, cash and cash equivalentsconsist of cash and cash equivalents as defined above, net of outstanding bankoverdrafts. Financial liabilities - Interest-bearing loans and borrowings All loans and borrowings are initially recognised at fair value of theconsideration received net of issue costs associated with the borrowing. Afterinitial recognition, interest bearing loans and borrowings are subsequentlymeasured at amortised cost. Gains or losses are recognised in the incomestatement as finance income and finance expense. 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 embodying economic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of the obligation. Where theGroup expects some or all of a provision to be reimbursed, for example under aninsurance contract, the reimbursement is recognised as a separate asset but onlywhen the reimbursement is virtually certain. The expense relating to anyprovision is presented in the income statement net of any reimbursement. If theeffect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and, where appropriate,the risks specific to the liability. Where discounting is used, the increase inthe provision due to the passage of time is recognised as a finance cost. Notes 2 Accounting policies (continued) Taxation Current tax assets and liabilities are measured at the amount expected to berecovered from or paid to the taxation authorities, based on tax rates and lawsthat are enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised on all temporary differences arising betweenthe tax bases of assets and liabilities and their carrying amounts in thefinancial statements, with the following exceptions: • where the temporary difference arises from the initial recognition ofgoodwill or of an asset or liability in a transaction that is not a businesscombination that at the time of the transaction affects neither accounting nortaxable profit or loss; • in respect of taxable temporary differences associated withinvestments in subsidiaries, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differenceswill not reverse in the foreseeable future; and • deferred income tax assets are recognised only to the extent that itis probable that taxable profit will be available against which the deductibletemporary differences, carried forward tax credits or tax losses can beutilised. Deferred income tax assets and liabilities are measured on an undiscounted basisat the tax rates that are expected to apply when the related asset is realisedor liability is settled, based on tax rates and laws enacted or substantivelyenacted at the balance sheet date. Income tax is charged or credited directly to equity if it relates to items thatare credited or charged to equity. Otherwise income tax is recognised in theincome statement. Pensions and other post-retirement benefits The cost of providing benefits under the defined benefit pension plans isdetermined separately for each plan using the projected unit credit method,which attributes entitlements to benefits to the current period (to determinecurrent service cost) and to the current and prior periods (to determine thepresent value of defined benefit obligation) and is based on actuarial advice.Past service costs are recognised in profit or loss on a straight line basisover the vesting period or immediately if the benefits have vested. When asettlement (eliminating all obligations for benefits already accrued) or acurtailment (reducing future obligations as a result of a material reduction inthe scheme membership or a reduction in the future entitlement) occurs theobligation and related plan assets are remeasured using current actuarialassumptions and the resultant gain or loss recognised in the income statementduring the period in which the settlement or curtailment occurs. The interest element of the defined benefit pension cost represents the changein present value of scheme obligations resulting from the passage of time, andis determined by applying the discount rate to the opening present value of thebenefit obligation, taking into account material changes in the obligationduring the year. The expected return on plan assets is based on an assessmentmade at the beginning of the year of long term market returns on scheme assets,adjusted for the effect on the fair value of plan assets of contributionsreceived and benefits paid during the year. The difference between the expectedreturn on plan assets and the interest cost is recognised in the incomestatement as other finance income or expense. Actuarial gains and losses are recognised in full in the statement of recognisedincome and expense in the period in which they occur. The defined benefit pension liability in the balance sheet comprises the totalfor each plan of the present value of the defined benefit obligation (using adiscount rate based on high quality corporate bonds), less any past service costnot yet recognised and less fair value of plan assets out of which theobligations are to be settled directly. Fair value is based on market priceinformation and in the case of quoted securities is the published bid price. Contributions to defined contribution schemes are recognised in the incomestatement in the period in which they become payable. Notes 2 Accounting policies (continued) Share based payments The cost of equity-settled transactions with employees is measured by referenceto the fair value at the date at which they are granted and is recognised as anexpense over the vesting period, which ends on the date on which the relevantemployees become fully entitled to the award. Fair value is determined by anexternal valuer using the Monte-Carlo pricing model. In valuing equity-settledtransactions, no account is taken of any vesting conditions, other thanconditions linked to the price of the shares of the company (market conditions). Expense is recognised for all awards irrespective of whether or not the marketcondition is satisfied, provided that all other performance conditions aresatisfied. At each balance sheet date before vesting, the cumulative expense is calculated,representing the extent to which the vesting period has expired. The movementin cumulative expense since the previous balance sheet date is recognised in theincome statement, with a corresponding entry in equity. Foreign currencies The assets and liabilities of overseas subsidiary undertakings are translatedinto Sterling at rates ruling at the balance sheet date and trading items at theaverage rate for the period. The exchange differences arising on thetranslation of the financial statements of foreign subsidiary undertakings aretaken directly to a separate component of equity. On disposal of a foreignentity, the deferred cumulative amount recognised in equity relating to thatparticular foreign operation is recognised in the income statement. Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are retranslated at the rate of exchange ruling at the balance sheetdate. All translation differences are taken to the income statement. Notes 3 Segmental Analysis Primary reporting format - geographic segments: At 31 March 2006, the Group isorganised into three distinct independently managed geographic segments, Europe,North America and Asia Pacific. The following tables present revenue and profitinformation for these segments. 6 months to to 6 months to 6 months to 31 March 2006 31 March 2006 31 March 2006 £'000 £'000 £'000 Continuing Discontinued Total By Geographical segmentTotal revenue by originEurope 36,643 - 36,643North America 12,703 122 12,825Asia Pacific 6,774 - 6,774 56,120 122 56,242Inter-segmental salesEurope 3,683 - 3,683North America 334 - 334Asia Pacific 985 - 985 5,002 - 5,002External sales by originEurope 32,960 - 32,960North America 12,369 122 12,491Asia Pacific 5,789 - 5,789 51,118 122 51,240External sales by destinationUK 16,793 14 16,807Continental Europe 10,778 - 10,778Americas 14,402 99 14,501Asia Pacific 7,071 9 7,080Rest of World 2,074 - 2,074 51,118 122 51,240 Profit / (loss) from operationsEuropebefore exceptional items (285) - (285)exceptional items (399) - (399) (684) - (684)North Americabefore exceptional items 537 (98) 439exceptional items - (5) (5) 537 (103) 434Asia Pacificbefore exceptional items 736 - 736exceptional items - - - 736 - 736Central costsbefore exceptional items (1,011) - (1,011)exceptional items (44) - (44) (1,055) - (1,055) Total loss from operations before exceptional items (23) (98) (121) Total loss from operations (466) (103) (569) Loss on ordinary operations before interest and (466) (103) (569)taxation Notes 3 Segmental Analysis (continued) 6 months to 6 months to 6 months to 31 March 2005 31 March 2005 31 March 2005 £'000 £'000 £'000 Continuing Discontinued Total By Geographical segmentTotal revenue by originEurope 40,368 13,278 53,646North America 10,593 149 10,742Asia Pacific 6,173 6 6,179 57,134 13,433 70,567Inter-segmental salesEurope 3,658 647 4,305North America 418 14 432Asia Pacific 613 - 613 4,689 661 5,350External sales by originEurope 36,710 12,631 49,341North America 10,175 135 10,310Asia Pacific 5,560 6 5,566 52,445 12,772 65,217External sales by destinationUK 19,833 6,007 25,840Continental Europe 13,899 5,474 19,373Americas 10,652 197 10,849Asia Pacific 6,446 1,046 7,492Rest of World 1,615 48 1,663 52,445 12,772 65,217 Profit / (loss) from operationsEuropebefore exceptional items 1,817 (951) 866exceptional items - - - 1,817 (951) 866North Americabefore exceptional items 54 (78) (24)exceptional items - - - 54 (78) (24)Asia Pacificbefore exceptional items 619 - 619exceptional items - - - 619 - 619Central costsbefore exceptional items (1,042) - (1,042)exceptional items (158) - (158) (1,200) - (1,200) Total profit / (loss) from operations before exceptional items 1,448 (1,029) 419 Total profit / (loss) from operations 1,290 (1,029) 261Share of operating loss in joint venture - (55) (55) 1,290 (1,084) 206Loss on disposal of discontinued operations - (7,774) (7,774)Profit / (loss) on ordinary operations before interest and taxation 1,290 (8,858) (7,568) Notes 3 Segmental Analysis (continued) Year to Year to Year to 30 September 30 September 30 September 2005 2005 2005 £'000 £'000 £'000 Continuing Discontinued Total By Geographical segmentTotal revenue by originEurope 79,220 13,278 92,498North America 22,806 181 22,987Asia Pacific 12,614 6 12,620 114,640 13,465 128,105Inter-segmental salesEurope 7,007 647 7,654North America 933 38 971Asia Pacific 1,130 - 1,130 9,070 685 9,755External sales by originEurope 72,213 12,631 84,844North America 21,873 143 22,016Asia Pacific 11,484 6 11,490 105,570 12,780 118,350External sales by destinationUK 40,460 6,024 46,484Continental Europe 26,516 5,474 31,990Americas 22,205 181 22,386Asia Pacific 12,498 1,053 13,551Rest of World 3,891 48 3,939 105,570 12,780 118,350 Profit / (loss) from operationsEuropebefore exceptional items 4,005 (1,213) 2,792exceptional items 20 46 66 4,025 (1,167) 2,858North Americabefore exceptional items 430 (307) 123exceptional items - (500) (500) 430 (807) (377)Asia Pacificbefore exceptional items 1,066 - 1,066exceptional items (36) - (36) 1,030 - 1,030Central costsbefore exceptional items (1,939) - (1,939)exceptional items (414) - (414) (2,353) - (2,353) Total profit / (loss) from operations before exceptional items 3,562 (1,520) 2,042 Total profit / (loss) from operations 3,132 (1,974) 1,158Share of operating loss in joint venture - (55) (55) 3,132 (2,029) 1,103Loss on disposal of discontinued operations - (8,120) (8,120)Profit / (loss) on ordinary operations before interest and taxation 3,132 (10,149) (7,017) Notes 4 Operating (loss) / profit 6 months to 6 months to 12 months to 31 March 2006 31 March 2005 30 September 2005 £'000 £'000 £'000Exceptional items charged against operating (loss) /profit comprise Redundancy and relocation 412 - 390London office closure costs 31 - 82Release of provision for legal claims - - (246)Professional expenses incurred in respect of takeover - 158 204approach 443 158 430 Exceptional items are material items which derive from events or transactionsthat fall within the ordinary activities of the Group and which need to bedisclosed by virtue of their size or incidence. 5 Earnings per share 6 months to 6 months to 12 months to 31 March 2006 31 March 2005 30 September 2005 £'000 £'000 £'000Continuing operations (Loss) / profit attributable to shareholders (1,934) 68 505Add exceptional items (post tax) 443 158 430Adjusted (loss) / profit attributable to shareholders (1,491) 226 935 Discontinued operations Loss attributable to shareholders (103) (8,858) (10,149)Add loss on disposal of discontinued operations (post tax) - 7,774 8,120Add exceptional items (post tax) 5 - 454Adjusted loss attributable to shareholders (98) (1,084) (1,575) Basic weighted average ordinary shares in issue 34,327,701 33,273,392 33,628,497 Dilutive effect of employee share plans 559,801 440,789 634,603 Diluted weighted average ordinary shares 34,887,502 33,714,181 34,263,100 Continuing operations Basic (loss) / earnings per share (5.6) 0.2 1.5Adjustment 1.3 0.5 1.3Adjusted basic (loss) / earnings per share (4.3) 0.7 2.8Diluted (loss) / earnings per share (5.5) 0.2 1.5 Discontinued operations Basic loss per share (0.3) (26.6) (30.2)Adjustment - 23.4 25.5Adjusted basic loss per share (0.3) (3.2) (4.7)Diluted loss per share (0.3) (26.3) (29.8) The weighted average number of shares excludes the shares owned by the API Groupplc No.2 Employee Benefit Trust. Management consider that EPS calculated on the adjusted loss is an appropriateand consistent measure of the Group's performance. Notes 6 Taxation 6 months to 6 months to 12 months to 31 March 2006 31 March 2005 30 September 2005 £'000 £'000 £'000Current income taxForeign tax (292) (238) (501)Adjustment to previous year - 200 281Total current income tax (292) (38) (220) Deferred taxOrigination and reversal of temporary differences (149) (34) (397)Adjustment to previous year - - 113Total deferred tax (149) (34) (284) Tax charge in the income statement (441) (72) (504) 7 Discontinued operations 6 months to 6 months to 12 months to 31 March 2006 31 March 2005 30 September 2005 £'000 £'000 £'000 Revenue 122 12,772 12,780Cost of sales (197) (11,783) (12,021)Gross (loss) / profit (75) 989 759Other operating costs (23) (2,018) (2,279)Operating loss before exceptional items (98) (1,029) (1,520)Exceptional items (5) - (454)Operating loss and loss after tax for the period for (103) (1,029) (1,974)discontinued operationsShare of operating loss in joint venture - (55) (55)Total operating loss: group and share of joint venture (103) (1,084) (2,029)Loss on disposal of discontinued operations - (7,774) (8,120)Loss for the period from discontinued operations (103) (8,858) (10,149) Discontinued operations for the six months ended 31 March 2006 represent theresults of Chromagem, a subsidiary which ceased trading during the period.Discontinued operations in prior periods include the results of the MetallisedPaper division and the Converted Products division. These divisions were soldon 8 December 2004 and 20 January 2005 respectively. Notes 8 Changes in equity Shareholders' Minority Total equity equity interest £'000 £'000 £'000 Balance at 1 October 2004 30,056 5,509 35,565Total recognised income and expense for the period before foreign currency translation differences (8,833) 267 (8,566)Foreign currency translation differences (796) (214) (1,010)Exercise of employee share options 81 - 81New shares issued net of costs 82 - 82Share based payment 30 - 30Balance at 31 March 2005 20,620 5,562 26,182Total recognised income and expense for the period before foreign currency translation differences 401 307 708Foreign currency translation differences 1,235 379 1,614Dividends - (788) (788)Exercise of employee share options 266 - 266New shares issued net of costs 258 - 258Share based payment 57 - 57Balance at 30 September 2005 22,837 5,460 28,297Total recognised income and expense for the period before foreign currency translation differences (1,407) 318 (1,089)Foreign currency translation differences 220 153 373New shares issued net of costs 53 - 53Share based payment 74 - 74Balance at 31 March 2006 21,777 5,931 27,708 9 Contingent liabilities The consideration for the sale of the Converted Products Division includes adeferred element totalling £2.0 million. It is payable in January 2007 and,should the purchaser default, it is guaranteed by an independent insurancecompany. A potential claim has recently been received from the purchasers of theConverted Products Division, Tri-Q Limited which may affect the recoverabilityof £750,000 of the deferred consideration. The Directors consider that any claimwill be unsuccessful and will robustly defend any legal action. Legal adviceobtained indicates that a successful outcome is probable and consequently, noprovision against the recoverability of the deferred consideration has been madein the accounts. Notes 10 Transition to IFRS 10.1 Application of IFRS 1 - First Time Adoption of IFRS The Group's financial statements for the year ending 30 September 2006 will bethe first annual financial statements that comply with IFRS. These interimfinancial statements have been prepared as described in note 1. The Group hasapplied IFRS 1 in preparing these interim financial statements. The Group'stransition date is 1 October 2004. In preparing these interim financial statements in accordance with IFRS 1, theGroup has taken advantage of certain of the optional exemptions from fullretrospective application of IFRS, as detailed below. (a) Business combinations - business combinations that occurred prior to thetransition to IFRS have not been restated and the Group ceased amortisation ofgoodwill from 1 October 2004. From 1 October 2004 onwards, goodwill is testedannually for impairment as well as when there are indications of impairment; (b) Fair value or revaluation as deemed cost - revalued property, plant andequipment will be treated as deemed cost at the transition date; (c) Cumulative translation differences - cumulative foreign exchangetranslation differences have been set to zero as at the date of transition toIFRS; (d) Share based payments - IFRS 2 has only been applied to share basedpayments granted after 7 November 2002 that had not vested on or before 1January 2005; (e) Employee benefits - cumulative actuarial gains and losses on definedbenefit pension plans at the transition date have been recognised and acorresponding adjustment has been made to equity; (f) Financial instruments - IAS 32 and IAS 39 came into effect on 1January 2005. The Group has elected to take the exemption under IFRS 1 not torestate comparative information in respect of these standards. Financialinstruments included in the 2005 comparatives are still accounted for under UKGAAP, whereas they are accounted for in accordance with IFRS in the 2006results. The adoption of IAS 32 and IAS 39 did not have any material financialimpact and therefore no adjustment was required. 10.2 Impact of IFRS and reconciliation to UK GAAP The impact of IFRS on net income already reported under UK GAAP for the sixmonths ended 31 March 2005 and the year ended 30 September 2005 is set out innote 10.3 and 10.4 respectively. The impact on equity at the transition date, 31March 2005 and 30 September 2005 is shown in notes 10.5 to 10.7. Theadjustments referred to in notes 10.3 to 10.7 reconciling UK GAAP to IFRS aredescribed below. The transition from UK GAAP to IFRS has no effect upon reported cash flowsgenerated by the Group. The IFRS cash flow statement is presented in adifferent format from that required under UK GAAP with cash flows split intothree categories of activities - operating activities, investing activities andfinancing activities. The reconciling items between the UK GAAP presentationand the IFRS presentation have no net impact on the cash flows generated. a) Goodwill and intangible assets Under IFRS, goodwill on acquisitions is no longer amortised and is subject to anannual impairment review. The net effect on the results is to remove theamortisation of goodwill charged to the income statement and increase equity bya corresponding amount. The reduction in the charge and increase in equity inrespect of goodwill in the six months ended 31 March 2005 was £204,000 and£407,000 in year ended 30 September 2005. No impairment was identified at thetransition date or at 30 September 2005. The exceptional item reported under UK GAAP in the year ended 30 September 2005relating to the disposal of Converted Products division included £7.9m ofgoodwill previously written off directly to reserves and transferred to theprofit and loss account as part of the calculation of loss on disposal. UnderIFRS this amount remains in reserves and consequently the exceptional costcharged to the income statement is reduced by £7.9m. b) Pensions Pension and post-retirement benefits have been accounted for using themeasurement and recognition requirements of SSAP 24 and disclosed under FRS 17. Notes 10 Transition to IFRS (continued) IAS 19 takes a balance sheet approach to accounting for defined benefit pensionschemes, similar to FRS 17. The deficit similar to that previously disclosedunder FRS 17 is recognised on the balance sheet. Pension costs charged to theincome statement are derived from actuarial assumptions reviewed annually at thebeginning of the financial year. Where actual experience differs from theactuarial assumptions, gains and losses are reported through the statement ofrecognised income and expenditure. Pension costs charged to the income statement in the six months ended 31 March2005 was £383,000 lower under IAS 19 than under SSAP 24 and £378,000 in the yearended 30 September 2005. Of this £337,000 related to discontinued operations andwas largely as a result of a curtailment gain caused by the disposal of theMetallised Paper and Converted Products divisions. The reduced pension costcharged to the income statement under IAS 19 resulted in an increase in thedeferred tax charge of £34,000 in the six months ended 31 March 2005 and £71,000in the year ended 30 September 2005. Also charged to the income statement under IAS 19 are the funding costsassociated with the assets and liabilities of the pension scheme. No suchfunding cost is reflected under UK GAAP. This resulted in an increase in thereported finance charge in the six months ended 31 March 2005 of £96,000 and£142,000 in the year ended 30 September 2005. On transition, the pre-tax deficit of £13.1m has been recognised on the balancesheet and the SSAP 24 pension prepayment of £0.4m has been written-off. This isoffset by the recognition of a deferred tax asset of £3.9m resulting in a totalreduction in equity of £9.6m. At 31 March 2005, the net adjustment to equity remained at a similar level tothe transition date, the pension deficit having reduced slightly to £13.0million. At 30 September 20005, the pre-tax pension deficit fell to £10.5m andthe corresponding deferred tax asset was £3.2m. A prepayment of £0.9 million waswritten off in respect of SSAP 24. c) Share options Under IFRS, share options and other share based remuneration are expensedthrough the income statement based on their fair value at the date of grant toemployees and spread over the vesting period taking into account the number ofshare options expected to vest. The additional charge to the income statement as a result of IFRS is £30,000 and£87,000 in the six months ended 31 March 2005 and the year ended 30 September2005 respectively. d) Deferred tax In addition to the deferred tax referred to under b) above, with respect to thepension adjustment, deferred tax liabilities recognised as a result of adoptingIFRS total £180,000 and £275,000 at the transition date and 30 September 2005respectively. This is mainly as a result of deferred taxation being recognisedon the difference between the cost and the tax written down value of land andbuildings. Under UK GAAP, the revaluation of land and buildings is ignored. e) Holiday pay accrual Under IAS 19, an accrual must be made for any employee holiday allowances whichhave accrued but not been used at the balance sheet date. UK GAAP does notcontain any explicit guidance in this area. The value of unused holidays notreflected under UK GAAP at 1 October 2004 is £67,000 and remained largelyunchanged at both 31 March 2005 and 30 September 2005. f) Foreign exchange Foreign exchange translation differences arising on consolidation were includedin retained earnings under UK GAAP. These are disclosed under a separate foreignexchange reserve under IFRS. Since the date of transition to IFRS, cumulativeforeign exchange translation differences posted to this reserve amount to a lossof £796,000 at 31 March 2005 and a profit of £439,000 at 30 September 2005. g) Revaluation reserve Under IFRS 1, fair value or revaluation of property, plant and equipment may betreated as deemed cost. At the date of transition to IFRS, £2.9m previouslyincluded in the revaluation reserve under UK GAAP, was transferred to retainedearnings. Following the disposal of the Converted Products and Metallised Paperdivisions, this was reduced to £1.9m. Notes 10 Transition to IFRS (continued) 10.3 - Reconciliation of Net Income for six months ended 31 March 2005 Effect of IFRS UK GAAP transition to in IFRS format IFRS £'000 £'000 £'000 Continuing operationsRevenue 52,445 - 52,445Cost of sales (41,116) - (41,116)Gross profit 11,329 - 11,329 Other operating costs i (10,101) 220 (9,881) Operating profit before exceptional items 1,228 220 1,448 Exceptional items:Professional expenses incurred in respect of (158) - (158)takeover approach Operating profit from continuing operations 1,070 220 1,290 Interest expense ii (787) (96) (883) Profit on continuing activities before taxation 283 124 407Taxation iii (38) (34) (72) Profit from continuing operations 245 90 335 Discontinued operationsLoss from discontinued operations iv (17,112) 8,254 (8,858) Loss for the period (16,867) 8,344 (8,523) Attributable to:Profit attributable to minority equity interests 267 - 267Loss attributable to ordinary shareholders (17,134) 8,344 (8,790)Total loss for the period (16,867) 8,344 (8,523) (i) Other operating costs Note £'000 (see 10.2 above) Reversal of goodwill amortisation (a) 204 Lower pension cost under IAS 19 compared to SSAP 24 (b) 383 Recognition of charge on share options (c) (30) Reclassification of reduction in pension cost to discontinued (b) (337) operations 220 (ii) Interest Finance charge on pension fund (b) (96) (iii) Taxation Movement through income statement of deferred tax on pension (b) (34) deficit (iv) Loss from discontinued operations Reclassification of reduction in pension cost from continuing (b) 337 operations Reversal of goodwill charge on disposal of discontinued operations (a) 7,917 8,254Notes 10 Transition to IFRS (continued) 10.4 - Reconciliation of Net Income for year ended 30 September 2005 Effect of IFRS UK GAAP transition to in IFRS IFRS format £'000 £'000 £'000 Continuing operationsRevenue 105,570 - 105,570Cost of sales (82,767) - (82,767)Gross profit 22,803 - 22,803 Other operating costs i (19,939) 698 (19,241) Operating profit before exceptional items 2,864 698 3,562 Exceptional items:Restructuring (226) - (226)Professional expenses incurred in respect of takeover approach (204) - (204) Operating profit from continuing operations 2,434 698 3,132 Interest expense ii (1,407) (142) (1,549) Profit on continuing activities before taxation 1,027 556 1,583Taxation iii (338) (166) (504) Profit from continuing operations 689 390 1,079 Discontinued operationsLoss from discontinued operations iv (18,066) 7,917 (10,149) Loss for the period (17,377) 8,307 (9,070) Attributable to:Profit attributable to minority equity interests 574 - 574Loss attributable to ordinary shareholders (17,951) 8,307 (9,644)Total loss for the period (17,377) 8,307 (9,070) (i) Other operating costs Note £'000 (see 10.2 above) Reversal of goodwill amortisation (a) 407 Lower pension cost under IAS 19 compared to SSAP 24 (b) 378 Recognition of charge on share options (c) (87) 698 (ii) Interest Finance charge on pension fund (b) (142) (iii) Taxation Movement through income statement of deferred tax on pension deficit (b) (71) Other IFRS deferred tax adjustment (d) (95) (166) (iv) Loss from discontinued operations Reversal of goodwill charge on disposal of discontinued operations (a) 7,917 Notes 10 Transition to IFRS (continued) 10.5 - Reconciliation of Equity at 1 October 2004 Note UK GAAP Effect of IFRS transition to (see 10.2 above) in IFRS IFRS format £'000 £'000 £'000AssetsNon-current assetsProperty plant and equipment 38,579 - 38,579Intangible assets 5,516 - 5,516Investments 490 - 490Deferred tax assets b - 3,930 3,930 44,585 3,930 48,515Current assetsInventories 16,957 - 16,957Trade and other receivables b 34,918 (413) 34,505Cash and cash equivalents 11,719 - 11,719 63,594 (413) 63,181 Total assets 108,179 3,517 111,696 LiabilitiesCurrent liabilitiesBorrowings 2,575 - 2,575Trade and other payables e 38,040 67 38,107Current tax liabilities 636 - 636Provisions 826 - 826 42,077 67 42,144Non-current liabilitiesBorrowings 19,679 - 19,679Deferred tax liabilities d 547 180 727Other non-current liabilities 356 - 356Provisions 126 - 126Retirement benefit liability b - 13,099 13,099 20,708 13,279 33,987 Total liabilities 62,785 13,346 76,131 Net assets 45,394 (9,829) 35,565 EquityCalled up share capital 8,463 - 8,463Share premium - - -Capital redemption reserve 549 - 549Merger reserve 14,365 - 14,365ESOP reserve (2,513) - (2,513)Revaluation reserve g 2,886 (2,886) -Retained earnings 16,135 (6,943) 9,192 Total shareholders' equity 39,885 (9,829) 30,056 Minority interest in equity 5,509 - 5,509 Total equity 45,394 (9,829) 35,565 Notes 10 Transition to IFRS (continued) 10.6 - Reconciliation of Equity at 31 March 2005 Note UK GAAP Effect of IFRS transition to (see 10.2 above) in IFRS IFRS format £'000 £'000 £'000AssetsNon-current assetsProperty plant and equipment 28,210 - 28,210Intangible assets a 5,313 204 5,517Deferred tax assets b - 3,896 3,896 33,523 4,100 37,623Current assetsInventories 13,372 - 13,372Trade and other receivables b 21,597 (280) 21,317Cash and cash equivalents 7,839 - 7,839 42,808 (280) 42,528 Total assets 76,331 3,820 80,151 LiabilitiesCurrent liabilitiesBorrowings 3,350 - 3,350Trade and other payables e 24,552 67 24,619Current tax liabilities 267 - 267Provisions 756 - 756 28,925 67 28,992Non-current liabilitiesBorrowings 10,897 - 10,897Deferred tax liabilities d 547 180 727Other non-current liabilities 239 - 239Provisions 126 - 126Retirement benefit liability b - 12,988 12,988 11,809 13,168 24,977 Total liabilities 40,734 13,235 53,969 Net assets 35,597 (9,415) 26,182 EquityCalled up share capital 8,494 - 8,494Share premium 51 - 51Capital redemption reserve 549 - 549ESOP reserve (2,432) - (2,432)Foreign exchange reserve f - (796) (796)Revaluation reserve g 1,866 (1,866) -Retained earnings 21,507 (6,753) 14,754 Total shareholders' equity 30,035 (9,415) 20,620 Minority interest in equity 5,562 - 5,562 Total equity 35,597 (9,415) 26,182 Notes 10 Transition to IFRS (continued) 10.7 - Reconciliation of Equity at 30 September 2005 Note UK GAAP Effect of IFRS transition to (see 10.2 above) in IFRS IFRS format £'000 £'000 £'000AssetsNon-current assetsProperty plant and equipment 28,692 - 28,692Intangible assets a 5,818 407 6,225Deferred tax assets b - 3,151 3,151 34,510 3,558 38,068Current assetsInventories 12,869 - 12,869Trade and other receivables b 20,677 (853) 19,824Cash and cash equivalents 10,396 - 10,396 43,942 (853) 43,089 Total assets 78,452 2,705 81,157 LiabilitiesCurrent liabilitiesBorrowings 2,102 - 2,102Trade and other payables e 23,239 67 23,306Current tax liabilities 327 - 327Provisions 593 - 593 26,261 67 26,328Non-current liabilitiesBorrowings 14,980 - 14,980Deferred tax liabilities d 665 275 940Provisions 109 - 109Retirement benefit liability - 10,503 10,503 15,754 10,778 26,532 Total liabilities 42,015 10,845 52,860 Net assets 36,437 (8,140) 28,297 EquityCalled up share capital 8,592 - 8,592Share premium 211 - 211Capital redemption reserve 549 - 549ESOP reserve (251) - (251)Foreign exchange reserve f - 439 439Revaluation reserve g 1,866 (1,866) -Retained earnings 20,010 (6,713) 13,297 Total shareholders' equity 30,977 (8,140) 22,837 Minority interest in equity 5,460 - 5,460 Total equity 36,437 (8,140) 28,297 Independent Review ReportTo API Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31 March 2006 which comprises Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income and Expense, and the related notes 1to 10. 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. There is, however, a possibility that thedirectors may determine that some changes to these policies are necessary whenpreparing the full annual financial statements for the first time in accordancewith those IFRSs adopted for use by the European Union. 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 Practices Boardfor 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 31 March 2006. Ernst & Young LLP100 Barbirolli SquareManchesterM2 3EY1 June 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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