8th May 2006 07:00
Diploma PLC08 May 2006 FOR IMMEDIATE RELEASE 8 May 2006 Announcement of Interim Results for the six months ended 31 March 2006 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 Sept 2005 (Restated*) (Restated*) Revenue £63.5m £54.5m £111.3m Operating profit, before exceptional items £9.3m £7.8m £16.2m Profit before tax, before exceptional items £9.7m £8.1m £16.9m Profit before tax, after exceptional items £20.3m £8.3m £17.1m Adjusted earnings per share 28.9p 25.3p 52.9p Basic earnings per share 69.9p 24.8p 52.0p Dividends per share 8.0p 7.0p 20.0p \* The results for the six months ended 31 March 2006 have been prepared in accordance with International Financial Reporting Standards. The results for the comparative periods have been restated on a comparable basis. • Strong growth in sales and operating profits, up 17% and 19% respectively, driven by the North American Seals business, Somagen in Canada and IS Rayfast in the UK. • Underlying operating profits up 10%, after adjusting for the acquisition of HKX and a benefit of £0.4m on currency translation. • Profit before tax and exceptional items up 20% to £9.7m; operating margin at 14.6% (2005: 14.3%). • Proceeds of £11.4m, before expenses, from sale of Stamford land Phase 3 completed in February 2006; exceptional profit before tax of £10.6m. • Earnings per share, after adjusting for exceptional items, amortisation of acquisition intangible assets and related tax, up 14% at 28.9p; basic earnings per share were 69.9p. Interim dividend up 1.0p to 8.0p. • Strong free cash flow of £15.2m (2005: £4.3m) boosted by proceeds from Phase 3 Stamford land. Cash funds at 31 March 2006 were £30.3m. Commenting on the results for the period, Bruce Thompson, Diploma's Chief Executive said: "The Group continues to benefit from generally strong trading conditions in North America. Specific market opportunities in the UK and Germany have also contributed to enhance the Group's results. While these favourable trading conditions prevail, the Group is confident of showing continued progress in 2006." www.diplomaplc.com REGISTERED IN ENGLAND. NUMBER 3899848. 20 BUNHILL ROW, LONDON EC1Y 8UD. For further enquiries please contact: Bruce Thompson, Chief Executive Officer 020 7638 0934Nigel Lingwood, Group Finance Director 020 7448 4875Ian Seaton, Bankside Consultants 020 7367 8891 NOTE TO EDITORS: Diploma PLC is a specialised international distribution group operating in threesectors: Life Sciences - Distributors of consumables, instrumentation and relatedservices to research, development and diagnostic laboratories. Principalcompanies are Anachem Group and a1 envirosciences in Europe, and Somagen inCanada. Seals - Next day delivery of hydraulic kits, gaskets and cylinders, for mobilemachinery. Principal companies are Hercules Bulldog Sealing Products and HKX inNorth America and FPE in the UK. Controls - Distributors of specialised wiring, connectors and control devicesfor a range of technically demanding applications. Principal companies are ISGroup in the UK and US, Sommer & Filcon in Germany and Hawco in the UK. Within each of these sectors, the Diploma businesses serve industry segmentswith long term growth potential and with the opportunity for sustainablesuperior margins through the quality of customer service, depth of technicalsupport and value adding activities. Further information on Diploma PLC can be found at www.diplomaplc.com HALF YEAR REVIEW TO 31 MARCH 2006 In the six months to 31 March 2006, the Group continued to generate stronggrowth in sales and profits. The main driver for growth was the North AmericanSeals business which delivered strong organic growth, improved operating marginsand absorbed the new HKX acquisition. Other strong performers were Somagen inCanada and IS Rayfast in the UK. The Group also benefited from an appreciationin overseas exchange rates which contributed £0.4m to operating profits,relative to the comparable period in 2005. This Interim Report has been prepared in accordance with International FinancialReporting Standards ("IFRS") and the prior year results have been restated toensure comparability. Sales increased by 17% to £63.5m (2005: £54.5m) and profit before exceptionalitems and tax increased by 20% to £9.7m (2005: £8.1 m). Operating margins were maintained at a healthy 14.6% (2005: 14.3%). Asignificant increase in operating margins in the Seals sector more than offset areduction in Life Sciences and all three sectors now generate broadly similarmargins. The sale of the 12.2 acre former Williamson Cliff production site, known asStamford land Phase 3, was completed in February 2006.The proceeds received onsale were £11.4m, before expenses and an exceptional profit before tax of £10.6mwas generated. Taxation of £1.3m has been provided on the exceptional profit.Group profit before tax, after exceptional items, was £20.3m (2005: £8.3m). Adjusted earnings per share, which are stated after excluding exceptional items,increased by 14% to 28.9p, compared with 25.3p in the prior year. Basic earningsper share were 69.9p (2005: 24.8p). The Directors have declared an increased interim dividend of 8.0p per share(2005: 7.0p) payable on 14 June 2006 to shareholders on the register on 19 May2006. LIFE SCIENCES The Life Science businesses increased sales by 17% to £20.4m (2005: £17.5m) withoperating margins of 14.7% (2005:16.6%). Strong performances from Somagen anda1-envirosciences, the former boosted by the appreciation of the Canadiandollar, offset lower operating margins in the Anachem core business. Somagen delivered growth in sales of both consumables and capital products.There were particularly strong performances in sales of reagent kits forCellular Pathology, Point of Care and Allergy applications; capital sales alsobenefited from further releases of government funding, with Ontario being themain beneficiary. The appreciation of the Canadian dollar against both Sterlingand the US dollar gave benefits both in terms of translation of sales andprofits and in purchasing products from US suppliers. a1-envirosciences performed strongly in the period with the environmentalanalysis businesses in the UK and Germany delivering record sales. Sales ofautomated systems were particularly strong as customers in the Electricity,Water, Petrochemical and Chemical industries continued to seek productivitygains from high throughput sample testing. The new start-up operation inSwitzerland made a strong start and benefited from a one-off project to installmore than 100 vented balance safety enclosures in newly built laboratories forRoche. The core Anachem Bioscience business maintained its market leading position inpipettes, tips and service through sustained investment in direct marketing,on-line promotions and extensive field sales coverage. In addition, a newLaboratory Filtration Products unit began trading in the period with attractivesupplier franchises and experienced personnel. These investments however reducedoperating margins in the consumables businesses and sales of instrumentsremained difficult as customers continued to delay purchasing decisions. SEALS The Seals businesses increased sales by 32% to £17.6m (2005: £13.3m) andoperating margins increased to 14.8% (2005:11.3%).The newly acquired HKXbusiness made a good initial contribution to results, but more than half of thegrowth in sector sales came from the continuing businesses. The largely North American business of Hercules Bulldog delivered solid growthin favourable market conditions. Double digit growth in both seal and cylindersales in the US was fuelled by strong economic activity and the continuedsuccess of the tie-rod replacement programme. New suppliers from Asia Pacificwere brought on line to improve the supply chain and a range of new cataloguesintroduced, displaying the broader product line and new pricing. Theseinitiatives, combined with tight operational control in the core Herculesbusiness in Clearwater, Florida, led to a significant increase in operatingmargins. Solid growth was also achieved in the Canadian seals businesses despite a slowerNorth American automotive industry impacting economic activity in Ontario andpartly Quebec. The Edmonton operation continued to benefit from the strongoil-driven Alberta economy. The Bulldog gaskets and seals business in Renoexperienced somewhat mixed fortunes. The US domestic business was held back bycut backs in purchasing by Bulldog's largest domestic customer, butinternational export sales grew as new sales and marketing initiatives began toimpact. In the UK, FPE made progress in a sluggish domestic market and it has begundistributing its new up-dated catalogue. FPE also made modest progress in exportmarkets. HKX, a leading provider of hydraulic system kits for the installation ofattachments on excavators, was acquired in November 2005. HKX offers customers acolour coded kit system with easy to use instructions that simplify theinstallation process. The kits substantially reduce the time and skill levelsrequired to install attachments. Since acquisition, HKX has delivered resultsahead of expectations with double digit sales growth, as its concept is rolledout to the large North American excavator dealerships. This performance isparticularly creditable as HKX had, during the months leading up to itsacquisition, completed the relocation of its operations to a larger facility andimplemented a major upgrade to its IT systems. CONTROLS The Controls businesses increased sales by 8% to £25.5m (2005: £23.7m) andmaintained operating margins at 14.5% (2005:14.3%). Overall a solid performanceby the businesses, boosted by exceptionally strong results from the IS Group. The IS Group delivered double digit growth in sales from its UK operations whereGround Defence and Military Marine sales were very strong. Major stockingprogrammes established at the end of the last financial year ensured that ISRayfast was able to respond, with high levels of customer service, to demandgenerated from the defence industry UOR's (urgent operational requirements).Thenew Otto range of high performance switches also strengthened the productoffering in supplying to a range of major weapons programmes. Outside the UK defence industry, IS Rayfast also benefited from larger one-offorders from the Oil and Gas and Power Generation sectors. Sales to the AsiaPacific region also increased as relationships were strengthened in the growingChinese aerospace sector. In Motorsport, activity was also strong as theClarendon fastener business, in particular, benefited as Formula 1 teamsredesigned engines (from V10 to V8) to comply with FIA directives. Sommer & Filcon grew steadily as they continued to exploit opportunities tomarket the expanded product range to the traditional customer base, as well asnew customers. Order levels were particularly strong at Filcon where significantconnector orders were secured on the Eurofighter Tranche 2 and Tornado upgradeprogrammes, as well as several Helicopter and Tank programmes. In February 2006,Sommer joined Filcon in achieving the ISO EN9001: 2000 quality approval whichwill assist in cross-selling initiatives. Sales at Hawco were flat overall, with growth in the Refrigeration businessoffsetting the more difficult Controls markets. Hawco's Controls businesscontinues to be exposed to the twin threats of UK customers moving manufacturingto lower cost locations, as well as direct competition from Asia Pacificsuppliers. Work continues to source quality, competitively priced products andto enhance sales and support capabilities. In the Refrigeration and Coolingbusiness, Hawco delivered solid results by offering a broad range ofcompetitively priced components combined with excellent customer service andsupport. FINANCE The Group generated a strong cash flow from operations in the first half of theyear of £8.1m compared with £5.3m in the comparable period. Tax paid this yearof £3.5m was significantly higher than last year, largely reflecting theincrease in underlying profitability. However, with net proceeds of £11.1mreceived from the sale of the Stamford land Phase 3 and capital expenditure of£0.8m (in line with depreciation), free cash flow, which is before acquisitionsand dividends, was £15.2m compared with £4.3m in the comparable period. The Group acquired HKX Inc on 29 November 2005 for a maximum consideration of£7.2m (US$12.5m). During the half year, £6.6m (US$11.5m) was paid as cashconsideration, with up to a further £0.6m (US$1.0m) payable based on theperformance of the business in calendar year 2006. The maximum considerationpayable, in excess of the net assets, will be £6.2m and this has provisionallybeen attributed to goodwill at this stage; its allocation to intangible assetsin accordance with IFRS 3 will be completed at 30 September 2006. Deferredconsideration of £1.0m (C$2.0m) was also paid to the vendors of Somagen as finalsettlement of their performance payment. After the acquisition and dividendpayments, the Group's cash funds at 31 March 2006 were £30.3m. CURRENT TRADING The Group continues to benefit from generally strong trading conditions in NorthAmerica. Specific market opportunities in the UK and Germany have alsocontributed to enhance the Group's results. While these favourable tradingconditions prevail, the Group is confident of showing continued progress in2006. Bruce ThompsonChief Executive Officer8 May 2006 Consolidated Income Statementfor the six months ended 31 March 2006 Unaudited Unaudited Unaudited 31 March 2006 31 March 2005 Year ended (Restated) 30 Sept Before Before 2005 exceptional Exceptional exceptional Exceptional (Restated) items items Total items items Total Total Note £m £m £m £m £m £m £m Revenue 2 63.5 63.5 54.5 54.5 111.3 Operating profit 2 9.3 - 9.3 7.8 - 7.8 16.2Pension curtailment gain 3 - - - - 0.2 0.2 0.2 Profit on disposal of fixedassets 3 - 10.6 10.6 - - - - Profit before finance incomeand tax 2 9.3 10.6 19.9 7.8 0.2 8.0 16.4 Finance income 0.4 - 0.4 0.3 - 0.3 0.7Profit before tax 9.7 10.6 20.3 8.1 0.2 8.3 17.1Tax expense 4 (3.0) (1.3) (4.3) (2.4) (0.1) (2.5) (5.0)Profit for the period 6.7 9.3 16.0 5.7 0.1 5.8 12.1 Attributable to:Shareholders of the Company 15.7 5.6 11.7Minority interests 0.3 0.2 0.4 16.0 5.8 12.1Earnings per 5p share 5Basic and diluted earnings 69.9p 24.8p 52.0pAdjusted earnings 28.9p 25.3p 52.9p All activities both in the current and prior year, relate to continuingoperations. Statement of Recognised Income and Expense for the six months ended 31 March 2006 Unaudited Unaudited Unaudited 31 March 31 March 30 Sept 2006 2005 2005 (Restated) (Restated) Note £m £m £mExchange rate adjustments on foreign currency netinvestments 0.9 (0.4) 2.2Adjustment on adoption of IAS 39 10 (0.1) - -Changes in fair value of cash flow hedges 0.1 - -Actuarial losses on defined benefit pension schemes - - (0.6)Net income recognised directly in equity for the period 0.9 (0.4) 1.6Profit for the period 16.0 5.8 12.1 Total recognised income and expense for the period 16.9 5.4 13.7 Attributable to:Shareholders of the Company 16.6 5.2 13.3Minority interests 0.3 0.2 0.4 16.9 5.4 13.7 Consolidated Balance Sheet as at 31 March 2006 Unaudited Unaudited Unaudited 31 March 31 March 30 Sept 2006 2005 2005 (Restated) (Restated) Note £m £m £mNon-current assetsGoodwill 8 31.2 23.3 24.6Other intangibles assets 0.6 0.6 0.6Property, plant and equipment 10.1 9.5 9.8Deferred tax assets 3.1 2.9 3.1 45.0 36.3 38.1 Current assetsInventories 22.8 20.3 21.3Trade and other receivables 21.8 19.7 19.7Cash and cash equivalents 7 30.3 19.7 25.7 74.9 59.7 66.7 Current liabilitiesTrade and other payables (19.6) (17.2) (19.1)Current tax liabilities (3.9) (3.0) (2.9)Other liabilities (1.1) (1.4) (1.3) (24.6) (21.6) (23.3) Net current assets 50.3 38.1 43.4 Total assets less current liabilities 95.3 74.4 81.5 Non-current liabilitiesRetirement benefit obligations (4.2) (3.8) (4.4) Net assets 91.1 70.6 77.1 EquityShare capital 1.1 1.1 1.1Capital redemption reserve 0.2 0.2 0.2Translation reserve 3.1 (0.4) 2.2Retained earnings 85.0 68.2 71.9Total shareholders' equity 11 89.4 69.1 75.4Minority interests 1.7 1.5 1.7 Total equity 91.1 70.6 77.1 Consolidated Cash Flow Statement for the six months ended 31 March 2006 Unaudited Unaudited Unaudited 31 March 31 March 30 Sept 2006 2005 2005 (Restated) (Restated) Note £m £m £m Cash flows from operating activities Cash flow from operations 6 8.1 5.3 16.4Finance income received 0.4 0.3 0.7Tax paid (3.5) (1.0) (3.7) Net cash from operating activities 5.0 4.6 13.4 Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) 8 (7.6) - (0.3)Proceeds from the sale of property, plant and equipment 11.1 0.4 0.4Purchase of property, plant and equipment (0.8) (0.4) (0.8)Purchase of intangible assets - (0.3) (0.6) Net cash from/(used) in investing activities 2.7 (0.3) (1.3) Cash flows from financing activities Dividends paid to shareholders (2.9) (2.5) (4.1)Dividends paid to minority interests (0.3) - -Purchase of own shares (0.1) - (0.5) Net cash used in financing activities (3.3) (2.5) (4.6) Net increase in cash and cash equivalents 4.4 1.8 7.5 Cash and cash equivalents at beginning of period 25.7 17.9 17.9Effect of exchange rates on cash and cash equivalents 0.2 - 0.3 Cash and cash equivalents at end of period 7 30.3 19.7 25.7 Notes to the Financial Statementsfor the six months ended 31 March 2006 1. BASIS OF PREPARATION The Group has previously prepared its financial statements under UK GenerallyAccepted Accounting Principles ("UK GAAP"). Following a directive issued by theEuropean Parliament, the Group is required to prepare its 2006 consolidatedfinancial statements in accordance with International Financial ReportingStandards ("IFRS"), as adopted for use in the European Union. The Group haschosen not to adopt IAS 34 "Interim Financial Statements". Accordingly, this Interim Report has been prepared in accordance with theListing Rules of the Financial Services Authority and using IFRS accountingpolicies consistent with those the Directors expect to apply in the Group'sfirst annual IFRS financial statements for the year ending 30 September 2006.However, although this financial information is based on the Director's bestknowledge of standards and interpretations, this may change. For example, IFRSstandards and IFRC interpretations are subject to ongoing review and possibleamendment or interpretative guidance and are still subject to change.Therefore, until the Group prepares its first set of financial statements inaccordance with IFRS, as adopted for use in the European Union, the possibilitycannot be excluded that the accompanying financial information may have to beadjusted. For these interim financial statements, the Group has applied accountingpolicies consistent with those required by IFRS and which were set out in aseparate Announcement published by the Group on the 25 January 2006, entitled"The Impact of International Financial Reporting Standards". A copy of thisAnnouncement is available on the Company's website at www.diplomaplc.com. Withthe exception of those accounting policies discussed in the Announcement and theaccounting policy on financial instruments, referred to below, no otheraccounting policy has been amended from those disclosed in the audited financialstatements for the year ended 30 September 2005. In addition to the changes in accounting policies identified in theAnnouncement, with effect from 1 October 2005, the Group has adopted IAS 39"Financial Instruments: Recognition and Measurement". The impact on thefinancial statements of adopting IAS 39 is set out in Note 10. As permitted byIFRS 1, comparative information for financial instruments for the six monthsended 31 March 2005 and the year ended 30 September 2005 has been prepared inaccordance with UK GAAP. This Interim Report, which is unaudited, was approved by the Directors on 8 May2006. It should be read in conjunction with the Announcement entitled "TheImpact of International Financial Reporting Standards", as published by theGroup on 25 January 2006 and the 2005 Annual Report, which contains the mostrecent audited financial statements. This Interim Report does not constitute statutory financial statements asdefined in section 240 of the Companies Act 1985. The comparative annual figuresfor the year ended 30 September 2005 set out in this report have been extractedfrom the Announcement entitled "The Impact of International Financial ReportingStandards", as published by the Group on the 25 January 2006. Statutoryconsolidated financial statements for the Group for the year ended 30 September2005, prepared in accordance with UK GAAP, on which the auditors gave anunqualified opinion and did not include a statement under section 237(2) or (3)of the Companies Act 1985, have been filed with the Registrar of Companies. 2. ANALYSIS OF RESULTS Segmental information is presented in this Interim Report in respect of theGroup's business segments, which are the primary basis of segment reporting.The business segment reporting format reflects the Group's management andinternal reporting structure. Revenue Operating profit* Profit before finance income and tax 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 2006 2005 2005 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £m £m £m £m By ActivityLife Sciences 20.4 17.5 34.7 3.0 2.9 4.9 3.0 3.1 5.1Seals 17.6 13.3 27.6 2.6 1.5 4.0 2.6 1.5 4.0Controls 25.5 23.7 49.0 3.7 3.4 7.3 3.7 3.4 7.3 63.5 54.5 111.3 9.3 7.8 16.2 9.3 8.0 16.4Unallocated items:Profit on sale of properties - - - - - - 10.6 - - 63.5 54.5 111.3 9.3 7.8 16.2 19.9 8.0 16.4 By Geographic AreaUnited Kingdom 28.5 27.1 55.7 3.3 3.6 7.4 13.9 3.8 7.6Rest of Europe 10.0 8.5 17.0 1.8 1.4 2.7 1.8 1.4 2.7North America 25.0 18.9 38.6 4.2 2.8 6.1 4.2 2.8 6.1 63.5 54.5 111.3 9.3 7.8 16.2 19.9 8.0 16.4 * before exceptional items and tax At 30 September 2005 the Group revised its definition of revenue to excluderecovery of freight costs from customers. Recovered freight costs are nowdeducted from distribution costs. Total recovered freight costs in the sixmonth period ended 31 March 2005 were £1.3m (Life Sciences £0.2m, Seals £0.9m,Controls £0.2m). Comparatives for the six months ended 31 March 2005 have beenrestated. This adjustment has not impacted operating profit or profit aftertax. Revenue by geographical area is stated by origin, which with the exception ofNorth America, is not materially different from revenue by destination. InNorth America, revenue of £2.2m (out of £25.0m) is to customers based outsideNorth America. 3. EXCEPTIONAL ITEMS (a) The profit on disposal of fixed assets in 2006 arose from the sale of 12.2 acres of land (known as Phase 3) in Stamford, East Midlands for consideration of £11.1m, after expenses. Tax of £1.3m has been provided on this disposal, having taken account of available surplus capital tax losses. There remains a further 150 acres of land at Stamford which comprises mostly farm land and former quarry land. In the Directors' opinion the current value of this land is £0.5m. (b) The pension curtailment gain arose on 31 March 2005 from the termination of the defined benefit scheme operated by a subsidiary company in the Group. 4. TAXATION 31 March 31 March 30 Sept 2006 2005 2005 £m £m £mUK tax charge 2.4 1.1 2.5Overseas tax charge 1.9 1.4 2.5 Total tax charge 4.3 2.5 5.0 Taxation on profits before tax has been calculated by applying the Directors'best estimate of the annual rate of taxation to taxable profits for the period. The rate of taxation on profit, before exceptional items, for the period is30.9% (2005: 29.6%). Tax of £1.3m (2005: £0.1m) has been provided onexceptional items in the period. 5. EARNINGS PER ORDINARY SHARE Basic and diluted earnings per share Basic and diluted earnings per ordinary share are calculated on the basis of theweighted average number of ordinary shares in issue during the period of22,469,915 (2005: 22,542,538) and the profit for the period attributable toshareholders of £15.7m (2005: £5.6m). There were no potentially dilutiveshares. Adjusted earnings per share Adjusted earnings per share are shown by reference to earnings beforeamortisation of acquisition intangible assets, exceptional items and relatedtax. The Directors consider that this gives a clearer indication of theunderlying performance of the Group. Adjusted earnings are calculated asfollows: 31 Mar 31 Mar 30 Sept 31 Mar 31 Mar 30 Sept 2006 2005 2005 2006 2005 2005 pence pence pence per share per share per share £m £m £m Profit for the period attributable toshareholders 69.9 24.8 52.0 15.7 5.6 11.7Exceptional items, net of tax (41.4) (0.4) (0.4) (9.3) (0.1) (0.1)Tax effects on goodwill 0.4 0.9 1.3 0.1 0.2 0.3 Adjusted earnings 28.9 25.3 52.9 6.5 5.7 11.9 6. RECONCILIATION OF CASH FLOW FROM OPERATIONS 31 March 31 March 30 Sept 2006 2005 2005 £m £m £mProfit for period 16.0 5.8 12.1Depreciation 0.8 0.7 1.5Share based payments expense 0.4 0.2 0.5Finance income (0.4) (0.3) (0.7)Pension curtailment gain - (0.2) (0.2)Profit on disposal of fixed assets (10.6) - -Tax expense 4.3 2.5 5.0 Operating cash flow before changes in working capital 10.5 8.7 18.2 Increase in inventories (0.8) (0.2) (0.6) (Increase)/decrease in trade and other receivables (1.6) 0.2 0.6Decrease in trade and other payables (0.2) (3.3) (1.8)Increase/(decrease) in other liabilities 0.2 (0.1) - Cash flow from operations 8.1 5.3 16.4 7. CASH AND CASH EQUIVALENTS 1 October Cash flow Exchange 31 March 2005 movement 2006 £m £m £m £m Cash at bank 6.1 (1.3) 0.2 5.0Short term deposits 19.6 5.7 - 25.3 Cash and cash equivalents 25.7 4.4 0.2 30.3 8. ACQUISITIONS On the 29 November 2005, the Group acquired 100% of the share capital of HKXIncorporated ("HKX"), a leading provider of hydraulic system kits for theinstallation of attachments on excavators. The initial consideration wasUS$10.5m (£6.0m), including expenses, and a further US$1.0m (£0.6m) was paid inMarch 2006. Further deferred consideration up to a maximum of US$1.0m (£0.6m)will be payable in January 2007 depending on the gross profit of HKX for thetwelve months ending 31 December 2006. The provisional fair value of identifiable assets and liabilities of theacquired business, excluding intangible assets, was US$1.8m (£1.0m), includingcash of US$0.2m (£0.1m). Provisional goodwill of £6.2m arose on thisacquisition and this goodwill will be analysed into its constituent intangibleassets, in accordance with IFRS 3, in the full year financial statements at 30September 2006. The contribution of the acquired business to the Group's revenue and operatingprofit for the six months ended 31 March 2006 was £2.1m and £0.4m respectively. In November 2005, £1.0m (C$2.0m) of deferred consideration was paid to thevendors of Somagen Diagnostics Inc as final settlement of their performancepayments. 9. DIVIDENDS The Directors have declared an interim dividend of 8.0p per share (2005: 7.0p)payable on 14 June 2006 to shareholders on the register on 19 May 2006. In accordance with IAS 10 "Events after the Balance Sheet Date", this interimdividend has not been reflected in the interim financial statements. The totalvalue of the dividend is £1.8m (2005: £1.6m). 10. OPENING BALANCE SHEET ADJUSTMENT The Group adopted IAS 32 "Financial Instruments: Disclosure and Presentation"and IAS 39 "Financial Instruments: Recognition and Measurement" as from 1October 2005. An adjustment has been made to reduce opening equity as at 1 October 2005 by£0.1m and increase trade and other payables by £0.1m. This adjustment representsthe difference between the book value and fair value of the Group's forwardforeign exchange contracts at 1 October 2005. Comparative information has notbeen restated, as permitted by IFRS 1. 11. RECONCILIATION OF MOVEMENT IN TOTAL SHAREHOLDERS' EQUITY Unaudited Unaudited Unaudited 31 March 31 March 30 Sept (Restated) (Restated) 2006 2005 2005 £m £m £mTotal shareholders' equity at beginning of period 75.4 65.9 65.9 Total recognised income and expense for the period 16.6 5.2 13.3Share based payments expense 0.4 0.4 0.7Purchase of own shares (0.1) - (0.5)Dividends (2.9) (2.4) (4.0) Total shareholders' equity at end of period 89.4 69.1 75.4 12. EXCHANGE RATES Average Closing 31 31 30 31 31 30 March March Sept March March Sept 2006 2005 2005 2006 2005 2005 US Dollar 1.75 1.89 1.84 1.73 1.89 1.77Canadian Dollar 2.03 2.30 2.27 2.02 2.29 2.05Euro 1.46 1.44 1.46 1.43 1.45 1.47 13. FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS The reconciliations of equity as at 1 October 2004 (the date of transition toIFRS) and 30 September 2005 and the reconciliation of profit for the year to 30September 2005, including details of significant accounting policies, werepublished on 25 January 2006 in an Announcement entitled "The Impact ofInternational Financial Reporting Standards". The full Announcement is set outon the Company's website, www.diplomaplc.com. The reconciliation from UK GAAP to IFRS of profit for the six months ended 31March 2005, and of total shareholders' equity as at 31 March 2005, has beenincluded below to enable a comparison to be made to the 2005 published interimresults. Reconciliation of profit from UK GAAP to IFRS Unaudited 31 March 2005 £mProfit for the period reported under UK GAAP 4.8Share based payments 0.1Pension costs 0.2Exceptional pension curtailment gain 0.2Reversal of goodwill amortisation 0.7Deferred taxation (0.2) Profit for the period reported under IFRS 5.8 Reconciliation of total shareholders' equity from UK GAAP to IFRS Unaudited 31 March 2005 £mTotal shareholders' equity reported under UK GAAP at 31 March 2005 66.6Share based payments 0.4Retirement benefit obligations, gross of tax (3.1)Reversal of goodwill amortisation 0.7Dividends 1.6Deferred taxation 2.9 Total shareholders' equity reported under IFRS at 31 March 2005 69.1 None of the IFRS adjustments affect the free cash flow of the Group. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Diploma