14th Apr 2008 07:00
Armour Group PLC14 April 2008 Armour Group plc (AIM: AMR) Unaudited Interim Statement For the six months to 29 February 2008 Armour Group plc is the United Kingdom's leading consumer electronics groupfocused on the in-car communications and entertainment and home entertainmentmarkets. The Board is pleased to announce interim results for the six months to29 February 2008. Financial Highlights • Sales of £30.2 million (2007: £28.4 million) up 6%. • EBITDA* of £3.4 million (2007: £3.2 million) up 6%. • Profit before taxation of £2.6 million (2007: £2.4 million) up 9%. • Continuing basic earnings per ordinary share of 2.7p (2007: 2.5p) up 8%. • Continuing underlying basic earnings per ordinary share of 2.8p (2007: 2.6p) up 8%. • Cash generated from operations of £1.6 million (2007: £1.5 million). * EBITDA is defined as earnings before interest, tax, depreciation, amortisationof goodwill and share-based payments. Commenting on today's results, George Dexter, CEO, said: "We are pleased to report continued organic growth in the first half of theyear. We believe that the group has benefited from our strategy of investment inour brands, research and development and extensive range of quality products. Weaim to continue this strategy of investment and combine it with market leadingcustomer service." For further information please contact: Armour Group plc Tel: 01892 502700George Dexter, Chief ExecutiveJohn Harris, Finance Director FinnCap, Nominated Adviser and Broker Tel: 0207 600 1658Geoff Nash Threadneedle Communications, Financial PR Tel: 0207 936 9666Trevor Bass, Alex White ABOUT ARMOURwww.armourgroup.uk.com Armour Group plc is the United Kingdom's leading consumer electronics group,focused on the in-car communications and entertainment and home entertainmentmarkets. The Group has an impressive brand portfolio, which boasts some of the UnitedKingdom's market leaders, regularly winning industry awards for quality andinnovation. In the United Kingdom consumer electronics market, the Group hasdirect access to over 5,000 retail outlets. It comprises two divisions: Armour Automotive and Armour Home. Armour Automotivewww.armourautomotive.uk.com The Automotive division is the market leader in Europe in the design,manufacture and supply of products for the in-car entertainment andcommunications markets. Its proprietary brands include Autoleads (connectivity leads and smartleads suchas the telemute lead used in mobile telephone hands free kits), CTI (GSM and GPSaerials), VEBA (a range of in-car audio-visual entertainment systems) and Mutant(a range of quality amplifiers and speakers for the in-car entertainmententhusiast). The division has recently launched its proprietary iO range of Bluetooth musicstreaming and mobile phone hands free solutions for the in-car environment(www.my-io.com). Armour Automotive supplies both retail and non-retail customers which includeHalfords, Motorworld, Carphone Warehouse, BMW and Hyundai. Armour Homewww.armourhome.co.ukwww.alphasondesigns.com The Home division is a market leader in the United Kingdom's specialist homeentertainment market. It designs, manufactures, distributes and sells productinto the hi-fi, home theatre and home entertainment markets. Its proprietary brands include QED (quality cables and interconnects),Systemline (multi-room home entertainment systems), Alphason (hi-fi andaudio-visual furniture), Goldring (turntables, styli and headphones), QAcoustics (award winning speakers) and Myryad (mid to high end hi-fi separates). The Home division also distributes third party brands, typically on an exclusivebasis in the United Kingdom. These brands include Grado headphones, Nevo remotecontrols, Sonance speakers, NAD hi-fi separates, Tivoli radios and Audicaspeakers. The Home division's customers are both retail and non-retail and include Comet,Argos, John Lewis, Tesco, Sevenoaks Sound and Vision, Berkeley Homes, GeorgeWimpey, Taylor Woodrow, Linden Homes and David Wilson Homes. Interim Statement for the six months to 29 February 2008 Results and Dividend The Group's results for the six months to 29 February 2008 are pleasing withboth sales and operating profit showing solid like for like growth on last yearand cash generation ahead of our expectations. • Sales of £30.2 million (2007: £28.4 million) up 6%. • EBITDA of £3.4 million (2007: £3.2 million) up 6%. • Profit before taxation of £2.6 million (2007: £2.4 million) up 9%. • Continuing basic earnings per ordinary share of 2.7p (2007: 2.5p) up 8%. • Continuing underlying basic earnings per ordinary share of 2.8p (2007: 2.6p) up 8%. • Cash generated from operations of £1.6 million (2007: £1.5 million). The Board is not recommending an interim dividend. Operations Armour Automotive The Automotive division has won a considerable amount of new business and hassuccessfully launched its iO range of in-car Bluetooth music streaming andmobile phone hands free solutions. The first of the iO Bluetooth products, iO Play, which was launched in December2007, has been very well received in the market and is now being sold in allCarphone Warehouse's United Kingdom stores and will also be available from April2008 in over four hundred Halfords stores. The iO brand is building marketawareness and will receive further market exposure with the release, in May2008, of the second Bluetooth product, iO Talk, which is targeted at the highvolume business to business market. We expect iO to have an increasing influenceon the financial performance of the Automotive division over the coming months. Sales in the non-retail channel have been slow in the first six months, due tochanges in the marketing programme of a major customer. In addition, there hasbeen weaker demand for our GPS antennae than originally forecast by systemmanufacturers, due to slower take up of their vehicle tracking systems. Weexpect that business will improve over the remaining months of this calendaryear. Sales into the retail channel have reduced in the first half of the year due toour decision to withdraw from selling low margin satellite navigation productsat the end of last year. In the independent retail channel, and having adjustedto exclude satellite navigation product sales, like-for-like sales haveincreased. Sales to the national accounts have been delayed by product rangereviews, which have now been completed, ready for the second half of the year. In the first six months Armour Automotive has been successful in winning newbusiness across all channels. In non-retail, significant new contracts have beensecured with LDV Group Limited, Case New Holland and Lunar Caravans with therealistic prospect of further contract wins in the coming months. In retail, themost important new business wins have been the listing of the iO range withCarphone Warehouse and Halfords. The majority of this new business will start togenerate sales over the course of the second half of the year. Armour Home The Home division has had a good first six months of the year. All our corebrands and channels to market have shown steady growth. Our retail channel sales have grown with QED cables, Alphason and Sonaaudio-visual furniture, Goldring headphones and Q Acoustics speakers allperforming well. The NAD and Tivoli brands, whose distribution was taken on lastyear, are also now making a meaningful contribution in the retail channel. Thewider consumer electronics market continues to be driven forward by the demandfor flat screen televisions, which in turn stimulates sales of accessories suchas cables and audio-visual furniture, two categories where we consider ourselvesto be the United Kingdom market leader. The continued expansion of the home automation market has been to the benefit ofour Home division. We have seen growth in sales for Systemline multi-roomsystems, Sonance speakers and QED Professional cables. The launch, in November2007, of our new Systemline S6 multi-room system has lifted sales and fuelleddemand for Sonance speakers and our Systemline Music server, which was alsolaunched last year. We believe that, through our Systemline Brand, we are theUnited Kingdom market leader for multi-room systems and now have over 100 homebuilders who have adopted and are installing Systemline. Our international sales have also continued to show good growth with Systemline,QED and Q Acoustics forming the backbone to our export business. The investmentmade last year to expand our international sales and distribution network isdelivering increased sales and building the awareness of our brandsinternationally. Exciting opportunities exist in our export markets,particularly for Systemline Modular, which are expected to come to fruition overthe coming months. Our channel expansion into hotels, lifestyle and e-commerce is making progresswith new customers secured and sales generated. Whilst it is still early daysfor all these new channels, the signs are encouraging. Outlook The Group has performed well over the first six months of the year. Our strategyof investment to expand sales channels, develop new products and build ourbrands is delivering good organic growth. Through this momentum, and thefinancial strength of the Group, we are well placed to take advantage ofopportunities as they arise in the market. Bob Morton George DexterChairman Chief Executive 14 April 2008 CONSOLIDATED INCOME STATEMENTFor the six months to 29 February 2008 Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Notes Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Continuing operations: Revenue 3 30,225 28,435 55,171 Profit from operations 2,864 2,745 5,243Share of (loss)/profit of associated undertakings (7) (4) 3Finance income 23 11 22Finance costs (304) (390) (765) Profit before taxation 2,576 2,362 4,503Taxation expense 4 (747) (686) (1,262) Profit from continuing operations 1,829 1,676 3,241Discontinued operations - (100) (2,979) Profit for the financial period 1,829 1,576 262 Earnings/(loss) per ordinary share 5From continuing and discontinued operationsBasic 2.7p 2.3p 0.4pDiluted 2.7p 2.3p 0.4p From continuing operationsBasic 2.7p 2.5p 4.8pDiluted 2.7p 2.5p 4.7p From discontinued operationsBasic - (0.2)p (4.4)pDiluted - (0.2)p (4.3)p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months to 29 February 2008 Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Profit for the financial period 1,829 1,576 262Tax effect of share-based payments recognised - (7) -directly in equityCurrency translation differences on foreign 49 (1) (7)currency net investments Total recognised income and expense for the 1,878 1,568 255financial period CONSOLIDATED BALANCE SHEETAt 29 February 2008 29 February 28 February 31 August 2008 2007 2007 Notes Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Non-current assetsGoodwill 21,082 23,338 21,082Other intangible assets 1,233 1,027 991Property, plant and equipment 1,425 2,081 1,604Investment in associated undertakings 368 368 375 Total non-current assets 24,108 26,814 24,052 Current assetsInventories 11,561 11,065 10,490Trade and other receivables 11,055 10,946 11,430Cash and cash equivalents 245 445 892 Total current assets 22,861 22,456 22,812 Total assets 46,969 49,270 46,864 Current liabilitiesBank overdrafts and borrowings (4,176) (2,456) (714)Trade and other payables (9,855) (13,626) (14,664)Corporation taxation liability (1,400) (1,410) (1,146)Provisions (266) (140) (296) Total current liabilities (15,697) (17,632) (16,820) Non-current liabilitiesBorrowings (2,739) (3,423) (3,082)Deferred taxation liability (84) (19) (18) Total non-current liabilities (2,823) (3,442) (3,100) Total liabilities (18,520) (21,074) (19,920) Total net assets 28,449 28,196 26,944 EquityShare capital 6,848 6,848 6,848Share premium account 8,513 8,512 8,513Other reserves 871 871 871Retained earnings 12,375 12,166 10,919Translation reserve 42 (1) (7)Share trust reserve (200) (200) (200) Total equity 6 28,449 28,196 26,944 CONSOLIDATED CASH FLOW STATEMENTFor the six months to 29 February 2008 Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and Notes unaudited unaudited £000 £000 £000 Cash flow from operating activitiesCash generated from operations 7 1,614 1,539 5,892Income taxes paid (427) (140) (919) Net cash from operating activities 1,187 1,399 4,973 Investing activitiesAcquisition of subsidiary, net of cash acquired 8 (4,302) (85) (155)Disposal of subsidiary, net of cash disposed 400 - -Purchase of property, plant and equipment (146) (375) (718)Sale of property, plant and equipment 126 14 84Expenditure on intangible assets (384) (230) (646)Invested in associated undertakings - (372) (372)Interest received 23 11 22 Net cash used in investing activities (4,283) (1,037) (1,785) Financing activitiesProceeds on issue of shares - 23 24Dividends paid (439) (371) (371)Repayment of bank loans (360) (360) (720)Repayment of finance lease creditors (16) (23) (44)Interest paid (263) (240) (511) Net cash used in financing activities (1,078) (971) (1,622) Net (decrease)/increase in cash and cash 9 (4,174) (609) 1,566equivalents Notes to the Interim Financial Statements 1. Basis of preparation Armour Group plc (the "Company") has historically prepared its consolidatedfinancial statements in accordance with UK Generally Accepted AccountingPractice ("UK GAAP"). As required by the AIM Rules and European Union Law, theCompany is required to prepare its consolidated financial statements for theaccounting period ending 31 August 2008 in accordance with InternationalFinancial Reporting Standards ("IFRS"). Accordingly, these interim financial statements have been prepared usingaccounting policies consistent with those that the Board expects will apply tothe Company's consolidated financial statements to be included in the firstannual report to adopt IFRS, being that for the year ending 31 August 2008. The consolidated financial statements for the year ending 31 August 2008 willinclude IFRS re-stated comparative figures for the year ended 31 August 2007.Therefore, the transition date for the adoption of IFRS is 1 September 2006. IFRS currently in issue are subject to ongoing review and endorsement by theEuropean Commission, or possible amendment by the International AccountingStandards Board, and are therefore subject to change. Further standards orclarification of interpretations may be issued that could be applicable for theconsolidated financial statements for the year ending 31 August 2008. Thesepotential changes could result in the need to change the basis of accounting orpresentation of certain financial information from that presented in thisInterim Report. These results for the six months to 29 February 2008, and the comparativefigures for the six months to 28 February 2007, are unaudited and do notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. Consolidated statutory accounts for the twelve months to 31 August 2007,prepared in accordance with UK GAAP and on which the auditors gave anunqualified opinion, were approved by shareholders at the Annual General Meetingand have been delivered to the Registrar of Companies. They did not include areference to any matters to which the auditors drew attention by way of emphasiswithout qualifying their report and did not include a statement under section237(2) or 237(3) of the Companies Act 1985. 2. Summary of Significant Accounting Policies The significant accounting policies used in the preparation of these interimfinancial statements are outlined as follows: IFRS 1 exemptions applied The Company has elected to apply the following exemptions: • Not to apply IFRS 3: Business Combinations to acquisitions that occurred before the transition date. • Not to revisit currency translation reserve movements prior to the transition date. • Not to apply IFRS 2: Share-based Payments to share-based payments granted prior to 7 November 2002. The consolidated accounts for the twelve months to 31 August 2007, prepared by the Company under UK GAAP, adopted FRS 20 Share-based Payments and therefore no additional adjustment is required on conversion to IFRS. Notes to the Interim Financial Statements (continued) Basis of consolidationThe Group's financial statements consolidate the financial information of theCompany and its subsidiary undertakings. Subsidiary undertakings are entitiesover which the Group has control in terms of the power to govern the financialand operating policies of an acquired entity so as to obtain benefits from itsactivities. GoodwillGoodwill arising on the acquisition of a business represents any excess of thefair value of the consideration over the fair value of the identifiable assetsand liabilities acquired. The identifiable assets and liabilities acquired areincorporated into the consolidated financial statements at their fair value tothe Group. In accordance with IFRS 3, with effect from 1 September 2006 goodwill is notamortised but tested for impairment annually. Any impairment is recognisedimmediately in the income statement and is not subsequently reversed. On disposal of a business, the attributable amount of goodwill is included inthe determination of the profit or loss on disposal. Goodwill that arose on consolidation prior to 1 May 1998, which represented theexcess of the fair value of the consideration over the fair value of the netassets acquired, was written off directly to reserves in accordance with theUnited Kingdom accounting standard then in force. This goodwill has not beenreinstated and is not included in determining any subsequent profit or loss ondisposal. Intangible assets (excluding goodwill)Intangible assets (excluding goodwill) include the following: (a) Development costs Development costs, both internal and external, associated with the production ofsaleable products, are capitalised as an intangible asset where an asset iscreated that can be identified, the cost can be measured reliably and it isprobable that the asset will generate future economic benefits. The asset isthen amortised on a straight line basis over the expected sales period for theproduct, on a product type by product type basis. Where no intangible asset can be identified, development expenditure isrecognised as an expense in the financial period in which it is incurred. (b) Other intangible assets Other intangible assets include investments, recorded at cost, in software whichis separately identifiable from the hardware on which it runs. The asset socreated is then depreciated on a straight line basis over the software'sexpected useful life. Where the software is not separately identifiable from the hardware, it isincluded with the hardware in property, plant and equipment. Property, plant and equipment Property, plant and equipment are stated at cost less the accumulateddepreciation and, where appropriate, provision for impairment in value orestimated loss on disposal. Property, plant and equipment are depreciated overtheir estimated useful lives on a straight line basis as follows: • Plant and fixtures and fittings 10% - 33% • Motor vehicles 20% - 25% Notes to the Interim Financial Statements (continued) Associated undertakings An entity is treated as an associated undertaking where the Group exercisessignificant influence over its operating and financial policy decisions. Interests in associated undertakings are accounted for using the equity methodof accounting. The Consolidated Income Statement includes the Group's share ofthe profit after taxation of such undertakings based upon the most recentlyavailable management information. In the Consolidated Balance Sheet, theinvestment in associated undertakings is shown as the Group's share of theidentifiable net assets and the premium paid on acquisition, to the extent thatthe latter has not been impaired. Deferred taxation Deferred taxation is the taxation expected to be payable or recoverable ondifferences between the carrying amounts of assets and liabilities in thefinancial statements and the corresponding taxation bases used in thecomputation of taxable profit. It is accounted for using the balance sheetliability method. Deferred taxation liabilities are generally recognised forall taxable temporary differences. Deferred taxation assets are recognised tothe extent that it is probable that taxable profits will be available againstwhich deductible temporary differences can be utilised. Deferred taxation is calculated at the taxation rate that is expected to applyin the financial period when the liability is settled or the asset is realised. Inventories Inventories have been valued at the lower of cost and net realisable value. Costincludes all direct expenditure to bring items to their condition and locationat the accounting date, together with, in the case of goods manufactured by theGroup, an appropriate proportion of production overhead expenditure attributablethereto. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, at bank and deposits where theamounts are not part of the Group's set-off arrangements and, in the case ofdeposits, where they are repayable within three months and are subject to aninsignificant risk of a change in value. Overdrafts are shown within currentliabilities in the Consolidated Balance Sheet but are included within cash andcash equivalents in respect of the Consolidated Cash Flow Statement. Foreign currencies The results of overseas subsidiary undertakings are translated into sterling atthe actual rates of exchange during the financial period and their balancesheets at the rates ruling at the financial period end. Gains or losses arisingon the translation of the opening net assets and results of overseas subsidiaryundertakings are taken to the Group's Translation Reserve. Transactions denominated in foreign currencies are translated into sterling atthe exchange rate in operation on the date of the transaction. Monetary assetsand liabilities originally denominated in foreign currencies are translated intosterling at the exchange rate in operation at the date of the financial periodend. Exchange gains and losses are reported as part of the Consolidated IncomeStatement. The Group makes use of foreign currency derivatives (forward foreign currencycontracts) to protect its position on the purchase of inventories. Under UKGAAP, foreign currency derivatives were held off balance sheet. Under IAS 32 andIAS 39, derivative contracts are valued ("marked to market") at the balancesheet date and any resulting gains or losses are taken to the ConsolidatedIncome Statement. Notes to the Interim Financial Statements (continued) Revenue Revenue represents the invoiced value of goods sold and the value of servicesprovided to third party customers, excluding value added tax. Revenue isrecognised when the risks and rewards of owning the goods have passed to thecustomer, which is generally on delivery or when services have been provided. Share-based payments Where share options are awarded to employees, the fair value of the option atthe date of grant is charged to the Consolidated Income Statement over thevesting period. Non-market vesting conditions are taken into account byadjusting the number of equity instruments expected to vest at each balancesheet date so that, ultimately, the cumulative amount recognised over thevesting period is based on the number of options that eventually vest. Marketvesting conditions are factored into the fair value of the options granted. Aslong as all other vesting conditions are satisfied, a charge is madeirrespective of whether the market vesting conditions are satisfied. Thecumulative expense is not adjusted for failure to achieve a market vestingcondition. Pension Costs The Group operates defined contribution arrangements. The pension costs payableby the Group in the financial period are charged to the Consolidated IncomeStatement. Financial Instruments (a) Derivative financial instruments The Group uses foreign exchange forward contracts to hedge financial risks tochanges in foreign currency exchange rates. These financial instruments areincluded in the balance sheet as assets or liabilities at their fair values. TheGroup does not use derivative financial instruments for speculative purposes butits financial instruments do not qualify for hedge accounting under IFRS andconsequently changes in their fair values are recognised in the ConsolidatedIncome Statement as they arise. (b) Bank Borrowings Bank borrowings are initially recognised at fair value. Such interest bearingliabilities are subsequently measured at amortised cost using the effectiveinterest rate method, which ensures that any interest expense over the period torepayment is at a constant rate on the balance of the liability carried in thebalance sheet. The interest expense includes initial transaction costs andpremiums payable on redemption, as well as any interest coupon payable while theliability is outstanding. (c) Trade receivables and trade payables Trade receivables and trade payables are non-derivative assets and liabilitiesof fixed or determinable amounts that are not quoted in an active market. Theyarise principally through the provision of goods and services to customers(trade debtors) or the purchase of goods and services (trade creditors, accrualsand prepayments). They are carried at amortised cost less any provision forimpairment. 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. Notes to the Interim Financial Statements (continued) 3. Business Segments Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 RevenueArmour Automotive 7,360 8,490 17,290Armour Home 22,865 19,945 37,881 Total 30,225 28,435 55,171 Revenue by country of operationUnited Kingdom 29,939 28,163 54,591Sweden 553 572 1,198Inter-area eliminations (267) (300) (618) 30,225 28,435 55,171 Revenue by country of destinationUnited Kingdom 25,725 24,244 46,930Rest of Europe 3,499 3,444 6,624Rest of world 1,001 747 1,617 30,225 28,435 55,171 4. Taxation The taxation charge for the six months to 29 February 2008 is based on theeffective taxation rate, which is estimated will apply to earnings for the yearending 31 August 2008. 5. Earnings per Ordinary Share Basic earnings per ordinary share is calculated using the weighted averagenumber of shares in issue during the financial period of 67,514,067 (28 February2007: 67,473,568 and 31 August 2007: 67,493,840). Diluted earnings per ordinary share is calculated using the weighted averagenumber of shares in issue during the financial period of 68,506,387 (28 February2007: 68,709,936 and 31 August 2007: 68,831,976). The 966,000 ordinary shares held by the Armour Employees' Share Trust are notincluded in either the weighted average, or diluted weighted average, ordinaryshares in issue during the financial period. Underlying earnings per share is also shown calculated by reference to earningsbefore share-based payments. The Directors consider that this gives a usefuladditional indication of underlying performance. Notes to the Interim Financial Statements (continued) 5. Earnings per share (continued) Six months to Six months to Twelve months to 29 February 2008 28 February 2007 31 August 2007 Unaudited Restated and Restated and unaudited unauditedBasic earnings per ordinary share £000 p £000 p £000 p Total operationsProfit for the financial period 1,829 2.7 1,576 2.3 262 0.4Share-based payments 48 0.1 43 0.1 87 0.1 Underlying earnings 1,877 2.8 1,619 2.4 349 0.5 Continuing operationsProfit from continuing operations 1,829 2.7 1,676 2.5 3,241 4.8Share-based payments of continuing operations 48 0.1 41 0.1 83 0.1 Underlying earnings 1,877 2.8 1,717 2.6 3,324 4.9 Six months to Six months to Twelve months to 29 February 2008 28 February 2007 31 August 2007 Unaudited Restated and Restated and unaudited unauditedDiluted earnings per ordinary share £000 p £000 p £000 p Total operationsProfit for the financial period 1,829 2.7 1,576 2.3 262 0.4Share-based payments 48 - 43 0.1 87 0.1 Underlying earnings 1,877 2.7 1,619 2.4 349 0.5 Continuing operationsProfit from continuing operations 1,829 2.7 1,676 2.5 3,241 4.7Share-based payments of continuing operations 48 - 41 - 83 0.1 Underlying earnings 1,877 2.7 1,717 2.5 3,324 4.8 6. Reconciliation of Movement in Equity Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Opening equity 26,944 26,915 26,915 Profit for the financial period 1,829 1,576 262Dividend (439) (371) (371) Profit/(loss) for the financial period retained 1,390 1,205 (109)New share capital subscribed - 23 24Share-based payments 66 61 121Tax effect of share-based payments recognised directly in - (7) -equityCurrency translation differences 49 (1) (7) Net movement in equity 1,505 1,281 29 Closing equity 28,449 28,196 26,944 Notes to the Interim Financial Statements (continued) 7. Net Cash Inflow from Operating Activities Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Profit from operations 2,864 2,745 5,243Loss from trading of discontinued operations - (143) (269)Depreciation of property, plant and equipment 307 385 715Amortisation of intangible assets 142 153 553Share-based payments 66 61 121(Gain)/loss on sale of property, plant and equipment (108) - 9 Earnings before movements in working capital 3,271 3,201 6,372 Increase in inventories (1,071) (1,229) (1,201)Increase in trade and other receivables (25) (1,244) (1,926)(Decrease)/increase in trade, other payables and provisions (561) 811 2,647 Net cash from operating activities 1,614 1,539 5,892 8. Acquisition of Subsidiary £4.2 million has been spent during the financial period, being deferredconsideration relating to Alphason Designs Limited, acquired by the Group inFebruary 2006. In addition, a payment of £0.1 million has been made being thefinal instalment of deferred consideration for Myryad Systems Limited, acquiredby the Group in November 2004. 9. Reconciliation of Net Cash Flow to Movement in Net Debt Six months to Six months to Twelve months to 29 February 28 February 31 August 2008 2007 2007 Unaudited Restated and Restated and unaudited unaudited £000 £000 £000 Net (decrease)/increase in cash and cash equivalents (4,174) (609) 1,566Net cash outflow from debt and lease financing 376 383 764Other non-cash movements 32 (17) (43) (Increase)/decrease in net debt in the financial period (3,766) (243) 2,287Opening net debt (2,904) (5,191) (5,191) Closing net debt (6,670) (5,434) (2,904) 10. Copies of Interim Report Copies of this interim report are being sent to shareholders and will also bemade available upon request to members of the public at the Company's RegisteredOffice, Lonsdale House, 7 - 9 Lonsdale Gardens, Tunbridge Wells, Kent, TN1 1NU.This interim report can also be viewed on the Group's website:www.armourgroup.uk.com. Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS The differences between UK GAAP and IFRS are outlined below in thereconciliation of the consolidated balance sheets at 31 August 2006, 28 February2007 and 31 August 2007 and in the reconciliations of net profit for the sixmonths to 28 February 2007 and twelve months to 31 August 2007. The following represents the differences relevant to the Group of moving from UKGAAP to IFRS: (a) Goodwill Under IFRS 3, goodwill is not amortised but instead is subject to an annualimpairment review. An adjustment has been made to remove the goodwillamortisation charge made under UK GAAP. Under the transition rules, noadjustment need be made to the carrying value of goodwill at the date oftransition. (b) Software costs Under UK GAAP, IT software was considered to be part of the operating system ofthe computer systems used by the Group and was capitalised within plant andequipment. Under IAS 38, this software should be separately identified as anintangible asset. (c) Product development expenditure Under UK GAAP, the Group's accounting policy was to expense all developmentexpenditure when incurred. In accordance with IAS 38, costs incurred on productdevelopment are capitalised as an intangible asset where the asset created canbe identified, its cost measured reliably and it is probable that the asset willgenerate future economic benefits. Capitalised development expenditure isamortised over its expected useful life. (d) Translation reserve Under IAS 21, foreign exchange differences arising from the translation ofopening net assets, must be included in a separate translation reserve ratherthan being included in retained profit. The Group has elected not to revisitcurrency translation reserve movements prior to the date of transition.Accordingly, at the date of transition, the Translation Reserve balance waszero. Only cumulative translation differences arising after the date oftransition in respect of overseas subsidiaries will be recycled to the incomestatement on disposal of these subsidiaries. (e) Forward foreign currency contracts The Group makes use of foreign currency derivatives (forward foreign currencycontracts) to protect its position on the purchase of inventories. Under UKGAAP, foreign currency derivatives were held off balance sheet. Under IAS 32 andIAS 39, derivative contracts are valued ("marked to market") at the balancesheet date and any resulting gains or losses are taken to the income statement. (f) Lease incentives In accordance with IAS 17: Leases and SIC 15: Operating Leases - Incentives,adjustments have been made to recognise the benefit of lease incentives over thefull lease term rather than to the date of the first break clause. (g) Share of profits/losses in associated undertakings Under UK GAAP, the premium on acquisition of the investment was amortised to nilin equal annual instalments over its estimated useful life of 20 years. UnderIFRS, the premium is not amortised but instead is subject to an annualimpairment review. An adjustment has been made to remove the amortisation chargemade under UK GAAP. Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) (h) Deferred taxation Adoption of IFRS has caused adjustment to the value of deferred taxation assetsand liabilities. The most significant adjustment has been caused by therecognition of product development expenditure as an asset, thereby creating adeferred taxation liability. (i) Balance sheet reclassifications To comply with IFRS 1, various amounts have been reclassified within the balancesheet. Provisions have been separated within current liabilities and deferredtaxation assets and liabilities are shown separately within non-current assetsand liabilities respectively. Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) Reconciliation of the Consolidated Balance Sheet at 31 August 2006 (date oftransition to IFRS). Transition UK GAAP adjustments IFRS Notes £000 £000 £000 Non-current assetsGoodwill a 23,338 - 23,338Other intangible assets b, c - 950 950Property, plant and equipment b 2,256 (151) 2,105Deferred taxation assets h, i 291 (291) - Total non-current assets 25,885 508 26,393 Current assetsInventories 9,836 - 9,836Trade and other receivables 9,702 - 9,702Cash and cash equivalents 186 - 186 Total current assets 19,724 - 19,724 Total assets 45,609 508 46,117 Current liabilitiesBank overdrafts and borrowings (1,610) - (1,610)Trade and other payables e, f, i (12,631) (8) (12,639)Corporation taxation liability (916) - (916)Provisions i - (140) (140) Total current liabilities (15,157) (148) (15,305) Non-current liabilitiesBorrowings (3,767) - (3,767)Deferred consideration (127) - (127)Deferred taxation liability h, i - (3) (3) Total non-current liabilities (3,894) (3) (3,897) Total liabilities (19,051) (151) (19,202) Total net assets 26,558 357 26,915 EquityShare capital 6,841 - 6,841Share premium account 8,496 - 8,496Other reserves 871 - 871Retained earnings 10,550 357 10,907Share trust reserve (200) - (200) Total equity 26,558 357 26,915 Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) Reconciliation of profit for the year ended 31 August 2007 Transition UK GAAP adjustments IFRS £000 £000 £000RevenueContinuing operations 55,171 - 55,171Discontinued operations 2,185 (2,185) - 57,356 (2,185) 55,171 Profit from operationsContinuing operations 4,118 1,125 5,243Discontinued operations (360) 360 - 3,758 1,485 5,243Share of (loss)/profit of associated undertakings (15) 18 3Finance income 22 - 22Finance costs (765) - (765) Profit before taxation 3,000 1,503 4,503Taxation expense (1,155) (107) (1,262) 1,845 1,396 3,241Discontinued operations (2,711) (268) (2,979) (Loss)/profit for the financial period (866) 1,128 262 Summary of adjustments Notes £000 Reversal of amortisation of goodwill a 1,168Development costs capitalised in the financial period c 539Amortisation and amounts written off capitalised development costs c (484)Losses recognised on derivatives e (58)Restatement of lease rental incentives f (40)Restatement of associated undertakings g 18Deferred taxation adjustment h (15)Total of adjustments 1,128 The trading result of discontinued operations, being a post tax loss of£268,000, has been reclassified within the single income statement heading of "Discontinued operations". Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) Reconciliation of the Consolidated Balance Sheet at 31 August 2007 Transition UK GAAP adjustments IFRS Notes £000 £000 £000Non-current assetsGoodwill a 19,914 1,168 21,082Other intangible assets b, c - 991 991Property, plant and equipment b 1,741 (137) 1,604Investment in associated undertakings g 357 18 375Deferred taxation assets h, i 291 (291) - Total non-current assets 22,303 1,749 24,052 Current assetsInventories 10,490 - 10,490Trade and other receivables 11,430 - 11,430Cash and cash equivalents 892 - 892 Total current assets 22,812 - 22,812 Total assets 45,115 1,749 46,864 Current liabilitiesBank overdrafts and borrowings (714) - (714)Trade and other payables e, f, i (14,714) 50 (14,664)Corporation taxation liability (1,146) - (1,146)Provisions i - (296) (296) Total current liabilities (16,574) (246) (16,820) Non-current liabilitiesBorrowings (3,082) - (3,082)Deferred taxation liability h, i - (18) (18) Total non-current liabilities (3,082) (18) (3,100) Total liabilities (19,656) (264) (19,920) Total net assets 25,459 1,485 26,944 EquityShare capital 6,848 - 6,848Share premium account 8,513 - 8,513Other reserves 871 - 871Retained earnings 9,427 1,492 10,919Translation reserve d - (7) (7)Share trust reserve (200) - (200) Total equity 25,459 1,485 26,944 Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) Reconciliation of profit for the six months to 28 February 2007 Transition UK GAAP adjustments IFRS £000 £000 £000 RevenueContinuing operations 28,435 - 28,435Discontinued operations 1,054 (1,054) - 29,489 (1,054) 28,435 Profit from operationsContinuing operations 2,103 642 2,745Discontinued operations (188) 188 - 1,915 830 2,745Share of loss of associated undertakings (13) 9 (4)Finance income 11 - 11Finance costs (390) - (390) Profit before taxation 1,523 839 2,362Taxation expense (616) (70) (686) 907 769 1,676Discontinued operations - (100) (100) Profit for the financial period 907 669 1,576 Summary of adjustments Notes £000 Reversal of amortisation of goodwill a 655Development costs capitalised in the period c 212Amortisation and amounts written off capitalised development costs c (128)Losses recognised on derivatives e (65)Restatement of lease rental incentives f 13Restatement of associated undertakings g 9Deferred taxation adjustment h (27) Total of adjustments 669 The trading result of discontinued operations, being a post tax loss of£100,000, has been reclassified within the single income statement heading of "Discontinued operations". Notes to the Interim Financial Statements (continued) 11. Explanation of Transition to IFRS (continued) Reconciliation of the Consolidated Balance Sheet at 28 February 2007 Transition UK GAAP adjustments IFRS Notes £000 £000 £000 Non-current assetsGoodwill a 22,683 655 23,338Other intangible assets b, c - 1,027 1,027Property, plant and equipment b 2,225 (144) 2,081Investment in associated undertakings g 359 9 368Deferred taxation assets h, i 309 (309) - Total non-current assets 25,576 1,238 26,814 Current assetsInventories 11,065 - 11,065Trade and other receivables 10,946 - 10,946Cash and cash equivalents 445 - 445 Total current assets 22,456 - 22,456 Total assets 48,032 1,238 49,270 Current liabilitiesBank overdrafts and borrowings (2,456) - (2,456)Trade and other payables e, f, i (13,566) (60) (13,626)Corporation taxation liability (1,410) - (1,410)Provisions i - (140) (140) Total current liabilities (17,432) (200) (17,632) Non-current liabilitiesBorrowings (3,423) - (3,423)Deferred taxation liability h, i - (19) (19) Total non-current liabilities (3,423) (19) (3,442) Total liabilities (20,855) (219) (21,074) Total net assets 27,177 1,019 28,196 EquityShare capital 6,848 - 6,848Share premium account 8,512 - 8,512Other reserves 871 - 871Retained earnings 11,146 1,020 12,166Translation reserve d - (1) (1)Share trust reserve (200) - (200) Total equity 27,177 1,019 28,196 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
OneView Group