30th Nov 2005 07:03
Hampson Industries PLC30 November 2005 Hampson Industries PLC30 November 2005 Embargoed: for release 7.00 am, 30 November 2005 HAMPSON INDUSTRIES PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2005 Hampson Industries PLC, the aerospace and precision engineering group, announcesunaudited interim results for the six-month period ended 30 September 2005.These results represent the Group's first published financial information underapplicable International Financial Reporting Standards. Highlights • Sales increased 33% to £46 million • Operating profit doubled • Sustained recovery in commercial aerospace markets • Continuing strong demand in automotive turbo chargers • Significant growth investment on-going • Proposed acquisitions in high growth aerospace niches • Low cost manufacturing facilities in advanced development • Management team strengthened Six months to Six months to % 30 September 30 September 2005 2004(1) £m £mSales 45.8 34.5 +33Operating Profit(2) 2.6 1.1 +139Operating Profit 2.2 1.1 +101Profit Before Tax 0.9 0.4 +119Earnings per share(2) 0.35p 0.15p +133Earnings per share 0.24p 0.15p +60 Notes1. The comparative figures for the six-month period ended 30 September2004 have been restated to reflect the fist time adoption of InternationalFinancial Reporting Standards ("IFRS"). The impact of adopting IFRS has been toincrease operating profit and profit before tax for the prior period by £0.1m.There has been no material effect on operating profit for the current periodcompared to that which would have been reported UK GAAP.2. Before exceptional items Commenting on the first half, Chairman Tony Gilroy said: "Commercial aerospace markets continue to grow strongly. Our new capacity andrecently announced proposed acquisitions transform Hampson's strategic presencein aerospace, notably in laminates and the high growth composites market.Automotive turbo charger demand has also remained at a high level withencouraging prospects for further medium-to-long term growth. Against thisbackground, we are continuing to invest for growth to secure opportunities tomaximise value for our shareholders." Further Information:Kim Ward, Chief Executive +44 (0)1384 472 941Howard Kimberley, Finance Director +44 (0)1384 472 946Jonathan Gollins/Tim Draper, Financial +44 (0)20 7872 5442Village Chairman's StatementInternational Financial Reporting StandardsThe Group's results for the six-month period ended 30 September, 2005 presentedherewith have been prepared in accordance with applicable InternationalFinancial Reporting Standards ("IFRS"). These include the relevant transitionalprovisions applicable to initial adoption of IFRS. In order to provide a greaterlevel of clarity, the results for the year ended 31 March, 2005 and for thesix-month period ended 30 September, 2004, and the Group's net assets as atthose dates as previously reported, have been restated under IFRS in Note 9 tothe interim consolidated financial statements. The adoption of IFRS has had no material impact on the Group's profit before taxfor the six month period to 30 September, 2005. If the Group had reported underthe previously existing framework of generally accepted accounting principles,its net assets at 30 September 2005 would have been £1.3 million lower. ResultsResults for the six-month period ended 30 September, 2005 have been in line withexpectations. Sales were £11.3 million (33%) higher than in the comparableperiod of the prior year, and profit before tax, at £0.9 million, was £0.5million higher. AerospaceAerospace sales were £10.4 million (49%) higher, reflecting a full contributionin the period from Texstars, our specialist transparency, composites andplastics manufacturing business, acquired in December 2004. Texstars continuesto perform well with results for the six-month period ahead of our expectation. In our AGM Statement we referred to the intensive development activity that hasbeen undertaken during the period in our aerospace machining operations,principally at our largest facility in Birmingham. This has resulted inadditional expensed cost as well as increased investment in working capital.This activity is now coming to an end and we expect it to be concluded by theend of the calendar quarter to 31 December, 2005, whereupon we expectmanufacturing efficiencies to improve. Our shim businesses have continued to perform very well in the period in linewith increased commercial aerospace build rates. Subject to approval byShareholders, our intended acquisition of Lamsco West Inc. will furtherstrengthen our position in this market niche, providing the Group with a globalleadership position. Performance at our larger aerospace fabrications facility at Wigan was held backduring the first half as a result of a continued deferral of military spares andrepairs ordering by the UK MOD. Improved results are expected in the second halfdue to rising build rates on a number of commercial programmes as well asactions that have already been taken to improve margins. Eclipse programmereadiness activity continues to advance and the first production orders have nowbeen received. Planned investment will continue throughout the year to ensureour dedicated manufacturing and assembly facilities are of a world-classstandard. Precision EngineeringPrecision Engineering sales increased by £1.0 million (7%). The Lattimerbusinesses saw a 13% in drop in sales compared to the equivalent period of theprior year as demand for glass bottle and container manufacturing componentsremained slack. We expect an improved performance in the second half in linewith scheduled deliveries under new contracts for practice ordnance. The market for precision turbo charger components and assemblies continued asexpected to show strong demand during the period. Sales at Erlson were some 17%higher than in the equivalent period of the prior year, as a result. Efficiencylevels have continued to improve following the restructuring which commencedduring the second half of the previous year and capacity has been increasedthrough further machine tool investment. Further recent increases in the priceof copper and bronze - which are used in the manufacture of bearing components -to record highs have had some restraining effect on margins and action continuesto be taken to seek to recover or mitigate these increases. A contractor has now been selected to project manage construction of theproposed new manufacturing facility of Hampson-Maini Pvt Ltd in Bangalore, Indiaand with designs complete and groundwork preparation now under way, constructionis to start shortly with the building planned to be ready for occupation inApril 2006. In the meantime, training of the first phase of Hampson-Mainiemployees has now started at our Skelmersdale, UK facility and stock continuesto be built in preparation for the transfer of machine tools to India in early2006. Proposed Acquisitions of Coast Composites, Inc. and Lamsco West Inc., Placingand Consolidation of Share CapitalApproval is being sought from Shareholders to proceed with the proposedacquisitions of Coast Composites, Inc. and Lamsco West Inc., with the placing of161,904,760 new ordinary shares and with the consolidation of the Company'sshare capital at an Extraordinary General Meeting to take place on 15 December,2005. Both Coast and Lamsco are well-run, attractive businesses that are stronglypositioned in niche sectors of the aerospace market, with significant furthergrowth potential. We believe that the proposed acquisitions, if approved, willfurther strengthen the Group and accelerate our growth strategy, building on thesuccessful integration of Texstars and the contribution that business has madeto the Group. Further information on both Coast and Lamsco is contained withinthe prospectus sent to Shareholders on 15 November, 2005. FinanceNet debt stood at £38.0 million at 30 September, 2005 reflecting the significantinvestment we have made in supporting our growth plans to date. We expect tocontinue to invest over the second half of the current financial year as we moveinto production status on a number of key new aerospace programmes (includingthe Eclipse 500) and further increase capacity in our turbo charger componentand assembly business. As mentioned, the latter will include the constructionphase of our new, purpose-designed manufacturing facility in India. In view ofthe need to fund this investment, the Directors recommend that no interimdividend be paid. ProspectsThe outlook for the Group's core aerospace and precision automotive markets isencouraging and in that regard remains unchanged from the assessment made withinour AGM Statement. Since that statement, there have in fact been furtherannouncements of new orders for large commercial aircraft which serve to furtherunderpin confidence in the recovery of demand for global air travel. Againstthis positive background, we are continuing to execute our investment plan tocapitalise on this demand, support our customers and maximise the benefits forour Shareholders. In parallel, we shall continue to focus internally on improving operationalperformance at our larger facilities and to strengthen our management resourcesto support the continued growth of the Group. In this regard we have todayannounced the appointments of Tim Hayter as Group Chief Operating Officer andBrendan Johnson as Managing Director of our aerospace machining facility inBirmingham. Both Tim and Brendan bring significant experience and expertise toHampson and we look forward to the contribution they will make to the Group aswe continue to execute our strategy going forward. Tony GilroyChairman30 November, 2005 Consolidated Income Statement Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2005 Continuing 2004 Continuing Continuing activities activities activities £'000 £'000 £'000 ------------- ------------ ------------Continuing OperationsRevenue (note 2) 45,792 34,474 77,762----------------------- ------------- ------------ ------------Total operating profit before 2,567 1,075 3,266exceptional itemsExceptional items (note 4) (407) - (572)Total operating profit (notes 2, 3) 2,160 1,075 2,694 Interest payable and finance (1,300) (704) (1,501)costsInterest receivable and finance income 17 30 43----------------------- ------------- ------------ ------------Profit on ordinary activities 877 401 1,236before taxTaxation (note 6) (271) (112) (514)----------------------- ------------- ------------ ------------Profit from continuing operations after tax 606 289 722----------------------- ------------- ------------ ------------Discontinuing OperationsLoss from discontinued operations (note 5) - - (129)----------------------- ------------- ------------ ------------Profit for the financial period 606 289 593----------------------- ------------- ------------ ------------Minority interests 66 - 59Profit attributable to equity shareholders 672 289 652----------------------- ------------- ------------ ------------Earnings per 5p ordinary share(note 8)Earnings per share based oncontinuing activitiesBefore exceptional items 0.35p 0.15p 0.52pBasic 0.24p 0.15p 0.29pDiluted 0.24p 0.15p 0.29p There have been no dividends declared or proposed in the period (period to 30September, 2004: £nil; year to 31 March, 2005: £nil). Consolidated Balance Sheet 30 September, 30 September, 31 March, 2005 2004 2005 £'000 £'000 £'000 ------------ ------------ ------------AssetsNon-current assetsGoodwill 22,924 2,716 21,614Intangible assets 3,722 227 2,278Property, plant and equipment 32,121 22,963 29,026Deferred tax asset 1,056 896 1,084------------------------ ------------ ------------ ------------ 59,823 26,802 54,002------------------------ ------------ ------------ ------------Current assetsInventories 21,360 15,705 19,031Trade and other receivables 21,333 16,161 19,191Financial assets 250 - -Cash and cash equivalents 3,740 2,544 3,227------------------------ ------------ ------------ ------------ 46,683 34,410 41,449------------------------ ------------ ------------ ------------LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings (1,567) (1,223) (1,501)- Derivative financial instruments (16) - -Trade and other payables (20,219) (13,171) (20,415)Current tax liabilities (224) (161) (169)Provisions (404) (231) (673)------------------------ ------------ ------------ ------------ (22,430) (14,786) (22,758) Net current assets 24,253 19,624 18,691------------------------ ------------ ------------ ------------Total assets less current liabilities 84,076 46,426 72,693------------------------ ------------ ------------ ------------Non-current liabilitiesFinancial liabilities- Borrowings (40,176) (16,252) (31,491)Deferred tax liability (74) (1,259) (74)Provisions (62) (126) (135)Retirement benefit liabilities (3,569) (3,301) (3,678)------------------------ ------------ ------------ ------------ (43,881) (20,938) (35,378)------------------------ ------------ ------------ ------------Net assets 40,195 25,488 37,315------------------------ ------------ ------------ ------------ Shareholders' equityOrdinary shares 13,775 10,310 13,775Share premium 22,692 14,676 22,692Other reserves 2,755 2,453 2,472Retained earnings 1,024 (1,951) (1,565)------------------------ ------------ ------------ ------------Shareholders' equity 40,246 25,488 37,374------------------------ ------------ ------------ ------------ Total shareholders' equity 40,246 25,488 37,374Minority interest in equity (51) - (59)Total equity 40,195 25,488 37,315------------------------ ------------ ------------ ------------ Consolidated Cash Flow Statement Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2004 2005 £'000 £'000 £'000 ------------ ------------ ------------Cash flows from operatingactivitiesCash generated from operations (1,476) (1,154) 3,280Interest received 17 30 48Interest paid (1,395) (616) (1,262)Tax paid (91) (75) (61)------------------------ ------------ ------------ ------------Net cash from operating activities (2,945) (1,815) 2,005------------------------ ------------ ------------ ------------Cash flows from investingactivitiesAcquisitions - - (24,218)Disposals - 100 100Purchase of property, plant and (2,860) (870) (3,293)equipmentProceeds on sale of property, plant 169 - -and equipmentDevelopment costs (1,223) - (1,893)------------------------ ------------ ------------ ------------Net cash used in investing activities (3,914) (770) (29,304)------------------------ ------------ ------------ ------------Cash flows from financingactivitiesNet proceeds from issue of ordinary 74 13,353 24,832share capital including minorityinterestsNew borrowings 8,250 - 4,000Finance lease principal payments (1,068) (896) (1,671)Repayment of loans - (10,756) (11)------------------------ ------------ ------------ ------------Net cash flow used in financing activities 7,256 1,701 27,150------------------------ ------------ ------------ ------------Currency variations on cash and cash equivalents 116 24 (28)------------------------ ------------ ------------ ------------Increase/(decrease) in cash and cash equivalents 513 (860) (177)------------------------ ------------ ------------ ------------Cash and cash equivalents at the beginning of the period 3,227 3,404 3,404------------------------ ------------ ------------ ------------Cash and cash equivalents at the end of the period 3,740 2,544 3,227------------------------ ------------ ------------ ------------ Reconciliation of movement in cash and cash equivalents to movement in net funds Movement in cash and cash equivalents 513 (860) (177)Repayment/(proceeds) of borrowings (8,751) 10,625 (4,892)------------------------ ------------ ------------ ------------Movement in period (8,238) 9,765 (5,069)Net funds at beginning of period (29,765) (24,696) (24,696)------------------------ ------------ ------------ ------------Net funds at end of period (38,003) (14,931) (29,765)------------------------ ------------ ------------ ------------ Other Primary Statements Statement of Recognised Income and Expense Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2004 2005 £'000 £'000 £'000 ------------ ------------ ------------Profit for the financial period 672 289 652Currency translation difference onnet foreign investment 1,917 89 6Value of financial instruments at1 April, 2005 76 - -Change in value of financial instruments 158 - -Actuarial gains on retirement benefitschemes - gross - - 154Deferred tax credit related thereto - - (46)------------------------ ------------ ------------ ------------Total recognised income for theperiod 2,823 378 766------------------------ ------------ ------------ ------------Net gains not recognised in incomestatement 2,151 89 114------------------------ ------------ ------------ ------------ Statement of Changes in Equity Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2004 2005 £'000 £'000 £'000 ------------ ------------ ------------At start of period 37,374 11,739 11,739Total recognised income andexpenses for the period 2,823 378 766Issue of Ordinary Share Capital - 13,353 24,832Share based payments 49 18 37------------------------ ------------ ------------ ------------At end of period 40,246 25,488 37,374------------------------ ------------ ------------ ------------ Notes to the financial statements Accounting Policies 1. Accounting policies The principal accounting policies adopted in the preparation of these financialstatements are set out below. Basis of preparationThe unaudited interim consolidated financial statements of Hampson IndustriesPLC are for the six months ended 30 September, 2005. These interim consolidatedfinancial statements have been prepared in accordance with those InternationalFinancial Reporting Standards ("IFRS") and International Financial ReportingInterpretations Committee ("IFRIC") interpretations issued and effective orissued and early adopted as at the time of preparing these statements (September2005) and in respect of International Accounting Standard ("IAS") 19 (EmployeeBenefits) issued but awaiting EU ratification. The IFRS standards and IFRICinterpretations that will be applicable at 31 March, 2006, including those thatwill be applicable on an optional basis, are not known with certainty at thetime of preparing these interim consolidated financial statements. The Group's IFRS accounting policies set out below have been consistentlyapplied to all the periods presented. The Group's consolidated financialstatements were prepared in accordance with the United Kingdom's GenerallyAccepted Accounting Principles ("UK GAAP") until the year ended 31 March, 2005.UK GAAP differs in some areas from IFRS. In preparing these interim consolidatedfinancial statements, the Board of Directors has amended certain accounting,valuation and consolidation methods applied in the UK GAAP financial statementsto comply with IFRS. The comparative figures in respect of the year ended 31March, 2005 have been restated to reflect these adjustments. These figures havenot been subject to audit review. The effect of the transition from UK GAAP to IFRS on the Group's profit aftertaxation, net assets and cash flows is provided in the reconciliations andnarrative in Note 9. These interim consolidated financial statements have been prepared under thehistorical cost convention, as modified by the revaluation of certain assets andfinancial liabilities (including derivative instruments) at fair value. Thebasis of consolidation is set out in the Group's accounting policies below. The comparative figures for the year ended 31 March, 2005 do not constitutestatutory accounts for the purposes of s240 of the Companies Act 1985. A copy ofthe statutory accounts for the year ended 31 March, 2005, prepared under UKGAAP, has been delivered to the Registrar of Companies and contained anunqualified auditors' report in accordance with s235 of the Companies Act 1985. Transitional arrangementsRules regarding transitional arrangements are set out in IFRS 1 (First-timeAdoption) which generally requires full retrospective adoption of all accountingstandards effective at the reporting date. The primary IFRS exemptions of whichthe Group has taken advantage relate to; business combinations that occurredprior to 1 April, 2004, property, plant and equipment that were revalued at orbefore that date and that are now deemed to be carried at cost, the prospectiveapplication of IAS 32 (Financial Instruments: Disclosure and Presentation) andIAS 39 (Financial Instruments: Recognition and Measurement) from 1 April, 2005and accounting for post-employment obligations under IAS 19. Further informationand explanatory narrative is contained in Note 9. Accounting policiesThe Group's key accounting policies that have been applied under IFRS and willbe applied in the 2006 Annual Report are summarised below. Basis of consolidationThe Group's financial statements consolidate the financial statements of theCompany and its subsidiaries. Intra-group transactions and balances and anyunrealised gains and losses arising from intra-group transactions are eliminatedon consolidation. The results of subsidiaries acquired or sold during the year are included in theconsolidated Income Statement from the date of acquisition or to the date ofdisposal. All business combinations are accounted for by the purchase method.Profits and losses on the realisation of currency net investments include theaccumulated net exchange differences that have arisen on the retranslation ofthe currency net investments since 1 April, 2004 up to the date of realisation. Foreign currenciesThe results and cash flows of overseas subsidiaries are translated into sterlingat average exchange rates. Transactions of subsidiaries are translated atexchange rates approximating to the rate ruling on the date of the transactionexcept in the case of material transactions where actual spot rate may be usedif it more accurately reflects the underlying substance of the transaction.Where practicable, transactions involving foreign currencies are protected byforward contracts. Assets and liabilities in foreign currencies are translatedat the exchange rates ruling at the balance sheet date. Financial instrumentsDerivative financial instruments including structured and forward foreignexchange contracts are taken out by the Group to manage its exposure to (i)changes in the fair value of recognised assets and liabilities, (ii) riskassociated with the variability in cash flows in relation to both recognisedassets or liabilities or forecast transactions and (iii) changes in the value ofthe Group's net investment in overseas operations. All derivative financialinstruments are measured at the balance sheet date at their fair value. Where derivative financial instruments are not designated as or not determinedto be effective hedges any gain or loss on the re-measurement of the fair valueof the instrument at the balance sheet date is taken to the Income Statement.Where derivative financial instruments are held as and are effective as hedgesagainst the fair value changes in recognised assets and liabilities,re-measurement gains and losses on the instrument are matched against there-measurement gain or loss on the recognised asset and liability in the IncomeStatement. Re-measurement gains and losses on derivative financial instrumentsheld as net investment hedges are recognised in equity via the Statement ofRecognised Income and Expense until the instrument and the underlying hedgedinvestment are sold, when the profit or loss arising is recognised in the IncomeStatement. Any derivative financial instruments no longer designated aseffective hedges are restated at market value and any gains or losses are takendirectly to the Income Statement. Interest differentials resulting from the use of derivative financialinstruments to hedge the Group's exposures to interest fluctuations are dealtwith in the Income Statement. Identifiable derivatives embedded in non-derivative host contracts arerecognised at their fair value when the nature, characteristics and risks of thederivative are not closely related to the host contract. Material gains andlosses arising on the re-measurement of these embedded derivatives at eachbalance sheet date are taken to the Income Statement. Borrowings are measured at their amortised cost unless they are matched by anassociated effective hedging financial instrument in which case they are statedat the fair value. The carrying value of other financial assets and liabilities, includingshort-term receivables and payables are stated at amortised cost less anyimpairment provision unless the impact of the time value of money is consideredto be material. Sales and revenue recognitionSales and revenue from subsidiaries in continuing operations shown in the IncomeStatement exclude value added taxes and generally represent the invoiced valueof goods and services charged to customers net of returns, early cash settlementdiscounts and rebates. Invoices are raised and revenue recognised when goods aredespatched or when the risks and rewards of ownership otherwise irrevocablypasses to the customer and the collectability of the revenue is reasonablyassured. Intangible assetsAll intangible assets, excluding goodwill arising on a business combination, arestated at their amortised cost or fair value less any provision for impairment. Research and development costsResearch and development expenditure is written off as incurred with theexception of expenditure on the development of certain major new programmeswhere the outcome of these programmes and recoverability of costs is assessed asbeing reasonably certain, they are capable of production and their duration isexpected to be substantial. Such expenditure is capitalised and amortised overits useful economic life, being in most normal circumstances the life of theprogramme concerned, commencing in the year sales of the product are first made. Computer software costsWhere computer software is not integral to an item of property, plant orequipment its costs are capitalised and categorised as intangible assets.Amortisation is provided on a straight line basis over its economic useful lifewhich is in the range of up to 4 years. Acquired intangible assets - business combinationsIntangible assets that are acquired as a result of a business combinationincluding but not limited to customer contracts, order backlog, intellectualproperty rights, patents and know-how and that can be separately identified andmeasured at fair value on a reliable basis, are separately recognised onacquisition at their fair value. Amortisation is charged on a straight linebasis to the Income Statement over their expected useful lives. Goodwill - business combinationsGoodwill arising on consolidation consists of the excess of the fair value ofthe consideration over the fair value of the identifiable intangible andtangible assets net of the fair value of the liabilities including contingenciesof businesses acquired at the date of acquisition. Goodwill in respect ofbusiness combinations of subsidiaries is recognised as an intangible asset.Goodwill arising on the acquisition of a joint venture or associated undertakingis included in the carrying value of the investment. Where negative goodwill arises, following re-assessment of fair values, it iscredited to the Income Statement in the period in which the acquisition is made. Goodwill is carried at cost less any recognised impairment losses that arisefrom annual assessment of its carrying value. To the extent that the carryingvalue exceeds the value in use, determined from estimated discounted future netcash flows, goodwill is written down to the value in use and an impairmentcharge is recognised in the Income Statement. Property, plant and equipmentCostProperty, plant and equipment are valued at cost or valuation less accumulateddepreciation and impairment charges. Cost comprises the purchase price pluscosts directly incurred in bringing the asset into use but excludes interest. Where freehold properties were carried at a valuation, these values have beenretained as book values, under the provisions of IFRS 1. DepreciationDepreciation is not provided on freehold land. In the case of all othercategories of asset, depreciation is provided on a straight line basis over thecourse of the financial year. Depreciation is applied to specific classes of asset so as to reduce them totheir residual values over their estimated useful lives, which are reviewedannually. Leasehold properties are amortised by equal annual instalments over the periodof the lease or 50 years, whichever is the shorter. Leased assetsWhere fixed assets are financed by leasing arrangements which give rightsapproximating to ownership, the assets are treated as if they had been purchasedand the capital element of the leasing commitment is shown as obligations underfinance leases. The rentals payable are apportioned between interest, which ischarged to the Income Statement, and capital which reduces the outstandingobligation. Operating lease rentals are charged to the Income Statement asincurred over the lease term. Impairment of non-current assetsAll non-current assets are tested for impairment when events occur orcircumstances indicate that their carrying values might be impaired. Goodwill,capitalised development costs and acquired intangibles are subject to annualimpairment tests. Impairments arising are charged to the Income Statement. InventoriesInventories, including work in progress have been valued at the lower of costand net realisable value, subject to appropriate provisioning for obsolete andslow-moving items. Cost includes materials, direct labour and, where applicable,attributable overheads. Net realisable value is based on estimated selling priceless all further costs to completion and all relevant marketing, selling anddistribution costs. Long-term contract balances represents costs incurred on specific contractsextending over more than one year, net of amounts transferred to cost of salesin respect of work recorded as turnover, less foreseeable losses and payments onaccount not matched with turnover. Deferred taxationFull provision is made for deferred tax on all temporary timing differencesresulting from the difference between the carrying value of an asset orliability and its tax base. Deferred tax assets are recognised to the extent that it is probable that thedeferred tax asset will be recovered in future. Pensions and post-retirement benefitsFor defined benefit schemes the amounts charged or credited to operating profitare the gains and losses on settlements and curtailments. They are included aspart of staff costs. Past service costs are recognised immediately in the IncomeStatement if the benefits have vested. If the benefits have not vestedimmediately, the costs are recognised over the period until vesting occurs. Theinterest cost and the expected return on assets are shown within interestpayable and finance costs or interest receivable and finance income in theIncome Statement. Actuarial gains and losses are recognised immediately in theStatement of Recognised Income and Expenses. Where defined benefit schemes arefunded, the assets of the scheme are held separately from those of the Group, inseparate trustee administered funds. Pension scheme assets are measured at fairvalue and liabilities are measured on an actuarial basis using the projectedunit method and discounted at a rate equivalent to the current rate of return ona high quality corporate bond of equivalent currency and term to the schemeliabilities. The actuarial valuations are obtained at least triennially and areupdated at each balance sheet date. The resulting defined benefit asset orliability is presented separately on the face of the balance sheet. Share based paymentsShare based incentive arrangements are provided to certain employees under theGroup's executive share option scheme of long term incentive plan. Share optionsgranted to employees and share based arrangements put in place since 7 November,2002 are valued at the date of grant or award using an appropriate optionpricing model and are charged to operating profit over the performance orvesting period of the scheme. The annual charge is modified to take account ofshares forfeited by employees who leave during the performance or vesting periodand, in the case of non-market related performance conditions, where it becomesunlikely the option will vest. Significant and exceptional itemsItems that are both material and non-recurring and whose significance issufficient to warrant separate disclosure and identification within thefinancial statements are referred to as Exceptional Items and disclosed withintheir relevant consolidated Income Statement category. Events and transactionsthat may give rise to classification as exceptional include but are not limitedto significant and material announced restructuring and reorganisationprogrammes, gains or losses arising from the disposal of businesses notclassified as discontinued operations, asset impairment charges and materialadjustments arising to the fair value of acquired assets and or liabilities on abusiness combination that arise after the hindsight recognition period. Notes to the Interim Statement 2. Segmental analysis By primary segment - business group Revenue Operating Profit ------------------------------ ----------------------------- Half Year Half Year Year to Half Year Half Year Year to to 30 to 30 31 to 30 to 30 31 September, September, March, September, September, March, 2005 2004 2005 2005 2004 2005 £'000 £'000 £'000 £'000 £'000 £'000 --------- --------- -------- --------- --------- --------Continuing operationsAerospace 31,358 20,995 50,386 1,157 101 2,093PrecisionEngineering 14,434 13,479 27,376 1,471 1,652 2,461Head Officecosts - - - (468) (678) (1,860)--------------- --------- --------- -------- --------- --------- --------Totaloperations 45,792 34,474 77,762 2,160 1,075 2,694Interestreceivable andfinance income 17 30 43Interestpayable andfinance costs (1,300) (704) (1,501)--------------- --------- --------- -------- --------- --------- --------Profit beforetax 877 401 1,236Income taxes (271) (112) (514)Profit for theyear fromcontinuingoperations 606 289 722--------------- --------- --------- -------- --------- --------- --------Discontinued operationsSegment revenue - - ---------------- --------- --------- -------- --------- --------- --------Segment result - - -Operating loss - - (129)--------------- --------- --------- -------- --------- --------- --------Loss beforetax - - (129)Taxation - - -Loss for theyear fromdiscontinuedoperations - - (129)--------------- --------- --------- -------- --------- --------- --------Minorityinterests 66 - 59--------------- --------- --------- -------- --------- --------- --------Net profitattributableto equityshareholders 672 289 652--------------- --------- --------- -------- --------- --------- -------- By secondary segment - geographical origin Revenue Operating Profit ------------------------------ ----------------------------- Half Year Half Year Year to Half Year Half Year Year to to 30 to 30 31 to 30 to 30 31 September, September, March, September, September, March, 2005 2004 2005 2005 2004 2005 £'000 £'000 £'000 £'000 £'000 £'000 --------- --------- -------- --------- --------- --------Continuing OperationsUnited Kingdom- Home sales 25,291 21,852 49,175- Export sales 8,870 10,183 18,888--------------- --------- --------- -------- --------- --------- ------- 34,161 32,035 68,063 507 882 1,034 North America- USA 11,631 2,439 9,699 1,653 193 1,660--------------- --------- --------- -------- --------- --------- ------- 45,792 34,474 77,762 2,160 1,075 2,694--------------- --------- --------- -------- --------- --------- -------The discontinued operations in the year to 31 March, 2005 were in the UK. 3. Operating profit Half Year to Half Year to Year to 30 September, 2005 30 September, 2004 31 March, 2005 Continuing Continuing Continuing activities activities activities £'000 £'000 £'000 -------------- -------------- --------------Revenue 45,792 34,474 77,762Cost of sales (34,800) (26,697) (59,760)------------------ -------------- -------------- --------------Gross profit 10,992 7,777 18,002Other income 85 84 150Distributioncosts (864) (1,056) (2,513)Administrationexpenses (8,053) (5,730) (12,945)------------------ -------------- -------------- --------------Totaloperatingprofit 2,160 1,075 2,694------------------ -------------- -------------- -------------- 4. Exceptional items Exceptional items in the current half year period and the prior year to 31March, 2005 relate mainly to restructuring and rationalisation costs of whichthe main constituents are employee terminations. £0.2m of exceptional itemsincurred in the prior year to 31 March, 2005 were project costs associated withthe establishment of a new operation in India. 5. Discontinued operations Costs of £0.1m were incurred in relation to the discharge during the year to 31March, 2005 of liabilities associated with a previously discontinued operation. 6. Taxation The taxation charge for the half year to 30 September, 2005 is based on theestimated effective tax rate for the full year to 31 March, 2006 of 30%. 7. Ordinary dividends per share Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2004 2005 -------------- -------------- --------------Interim - - -Final - - - -------------- -------------- --------------No interim dividend has been approved by the Board. 8. Earnings per share Earnings per share are calculated on the profit attributable to ordinaryshareholders and the weighted average number of ordinary shares in issue duringthe year. The average number of ordinary shares has been weighted in both yearsin respect of the date of issue of such shares. Half Year to Half Year to Year to 30 September, 30 September, 31 March, 2005 2004 2005 Earnings Number of 5p Earnings Number of Earnings Number of £'000 Ordinary £'000 5p Ordinary £'000 5p Ordinary Shares Shares Shares------------- ------- ---------- ------- ---------- ------- ----------Beforeexceptionalitems 957 275,506,831 289 189,124,707 1,143 221,018,157Basic 672 275,506,831 289 189,124,707 652 221,018,157Diluted 672 276,545,203 289 192,050,174 652 221,760,208------------- ------- ---------- ------- ---------- ------- ---------- 9. Reconciliation of net assets and profit under UK GAAP to IFRSHampson Industries PLC and its subsidiary companies ("the Group") havehistorically prepared consolidated financial statements in accordance with UKGAAP. With effect from 1 April, 2005 the Group is required to prepare itsconsolidated financial statements under IFRS. The Group previously reported under UK GAAP in its published financialstatements for the year ended 31 March, 2005 and period ended 30 September,2004. The tables that follow this narrative show a reconciliation of net assetsand profit as reported under UK GAAP as at 31 March, 2005 and 30 September, 2004to the revised net assets and profit under IFRS as reported in these financialstatements. In addition, there is a reconciliation of net assets under UK GAAPto IFRS at the date of transition to IFRS for the Group being 1 April, 2004. Rules regarding transitional arrangements are set out in IFRS 1, which generallyrequires full retrospective adoption of all accounting standards that areeffective as at the reporting date. The primary IFRS exemptions of which theGroup has taken advantage relate to business combinations that occurred prior to1 April, 2004, fixed assets held at 1 April, 2004 that were carried atvaluations and which are now deemed to be carried at cost, the prospectiveapplication of IAS 32 (Financial Instruments: Disclosure and Presentation) andIAS 39 (Financial Instruments: Recognition and Measurement) from 1 April, 2005,the accounting for post-employment obligations under IAS 19 and the applicationof IFRS 2 to equity instruments granted before 7 November, 2002. Explanations of the main adjustments in each of the columns in the tables beloware set out after the reconciliation tables. Reconciliation of equity at 1 April 2004 Previous IFRS2 IAS12 IAS16 IAS19 IAS38 Total Restated GAAP Share based Income Property, Employee Intangible effect under payment tax plant & Benefits assets of IFRS IFRS equipment £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 1 April (i) (iii) (iv) (v) (vii) 1 April, 2004 2004--------------- ------- ------- ------- ------- ------- ------- ------- -------AssetsNon-currentassetsGoodwill 2,692 - - - - - 2,692Intangibleassets - - - - - 251 251 251Property,plant andequipment 21,299 - - 1,733 - (251) 1,482 22,781Deferred taxasset - - - - 950 - 950 950--------------- ------- ------- ------- ------- ------- ------- ------- -------Totalnon-currentassets 23,991 - - 1,733 950 - 2,683 26,674 Current AssetsInventories 15,104 - - - - - - 15,104Trade andotherreceivables 15,109 - - - - - - 15,109Cash and cashequivalents 3,404 - - - - - - 3,404--------------- ------- ------- ------- ------- ------- ------- ------- -------Total currentassets 33,617 - - - - - - 33,617--------------- ------- ------- ------- ------- ------- ------- ------- -------LiabilitiesCurrentLiabilitiesFinancialLiabilities- Borrowings - - - - - - - -- Derivative - - - - - - - -financialinstrumentsTrade andother payables (15,068) - - - (303) - (303) (15,371)Current taxliabilities (126) - - - - - - (126)Provisions (632) - - - - - - (632)--------------- ------- ------- ------- ------- ------- ------- ------- ------- (15,826) - - - (303) - (303) (16,129)--------------- ------- ------- ------- ------- ------- ------- ------- ------- Net currentassets 17,791 - - - (303) - (303) 17,488--------------- ------- ------- ------- ------- ------- ------- ------- -------Total assetsless currentliabilities 41,782 - - 1,733 647 - 2,380 44,162--------------- ------- ------- ------- ------- ------- ------- ------- -------Non-currentliabilitiesFinancialLiabilities- Borrowings (25,011) - - - - - - (25,011)- Derivative - - - - - - - -financialinstrumentsOthernon-currentliabilities (2,491) - - - - - - (2,491)Deferred taxliabilities (660) - (599) - - - (599) (1,259)Provisions (180) - - - - - - (180)Retirementbenefitliabilities (2,217) - - - (1,265) - (1,265) (3,482)--------------- ------- ------- ------- ------- ------- ------- ------- ------- (30,559) - (599) - (1,265) - (1,864) (32,423)--------------- ------- ------- ------- ------- ------- ------- ------- -------Net assets 11,223 - (599) 1,733 (618) - 516 11,739--------------- ------- ------- ------- ------- ------- ------- ------- -------Share capital 5,908 - - - - - - 5,908Share premium 5,727 - - - - - - 5,727Other reserves 2,399 36 - - - - 36 2,435Retainedearnings (2,811) (36) (599) 1,733 (618) - 480 (2,331)--------------- ------- ------- ------- ------- ------- ------- ------- -------Totalshareholders'equity 11,223 - (599) 1,733 (618) - 516 11,739Minority Interest - - - - - - - -in equity --------------- ------- ------- ------- ------- ------- ------- ------- -------Total equity 11,223 - (599) 1,733 (618) - 516 11,739--------------- ------- ------- ------- ------- ------- ------- ------- ------- Reconciliation of equity at 30 September, 2004 Previous IFRS2 IAS12 IAS16 IAS19 IAS38 IFRS3 Total Restated GAAP Share based Income Property, Employee Intangible Business effect under IFRS payment tax plant & Benefits assets combinations of IFRS equipment £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 30 (i) (iii) (iv) (v) (vii) (ii) 30 September, September, 2004 2004 ------- ------- ------- ------- ------- ------- ------- ------- ------- AssetsNon-currentassetsGoodwill 2,614 - - - - - 102 102 2,716Intangibleassets - - - - - 227 - 227 227Property,plant andequipment 21,463 - - 1,727 - (227) - 1,500 22,963Deferred taxasset - - - 896 - - 896 896--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Totalnon-currentassets 24,077 - - 1,727 896 - 102 2,725 26,802 CurrentAssetsInventories 15,705 - - - - - - - 15,705Trade andotherreceivables 16,161 - - - - - - - 16,161Cash and cashequivalents 2,544 - - - - - - - 2,544--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total currentassets 34,410 - - - - - - - 34,410--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------LiabilitiesCurrentLiabilitiesFinancialLiabilities- Borrowings (5) - - - - - - - (5)- Derivative - - - - - - - - -financialinstrumentsTrade andother payables (14,140) - - - (249) - - (249) (14,389)Current taxliabilities (161) - - - - - - - (161)Provisions (231) - - - - - - - (231)--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- (14,537) - - - (249) - - (249) (14,786)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net currentassets 19,873 - - - (249) - - (249) 19,624--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total assetsless currentliabilities 43,950 - - 1,727 647 - 102 2,476 46,426--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Non-currentliabilitiesFinancialLiabilities- Borrowings (14,250) - - - - - - - (14,250)- Derivative - - - - - - - - -financialinstrumentsOthernon-currentliabilities (2,002) - - - - - - - (2,002)Deferred taxliabilities (660) - (599) - - - - (599) (1,259)Provisions (126) - - - - - - - (126)Retirementbenefitliabilities (2,090) - - - (1,211) - - (1,211) (3,301)--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- (19,128) - (599) - (1,211) - - (1,810) (20,938)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net assets 24,822 - (599) 1,727 (564) - 102 666 25,488--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Share capital 10,310 - - - - - - - 10,310Share premium 14,678 - - - - - - - 14,678Other reserves 2,399 54 - - - - - 54 2,453Retainedearnings (2,565) (54) (599) 1,727 (564) - 102 612 (1,953)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Totalshareholders'equity 24,822 - (599) 1,727 (564) - 102 666 25,488Minority - - - - - - - - -Interest in equity--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total equity 24,822 - (599) 1,727 (564) - 102 666 25,488--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- Reconciliation of profit for the half year ended 30 September, 2004 Previous IFRS2 IAS12 IAS16 IAS19 IAS38 IFRS3 Total Restated GAAP Share based Income Property, Employee Intangible Business effect under IFRS payment tax plant & Benefits assets combinations of IFRS equipment £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 30 (i) (iii) (iv) (v) (vii) (ii) 30 September, September, 2004 2004 ------- ------- ------- ------- ------- ------- ------- ------- -------Revenue 34,474 - - - - - - - 34,474Cost of sales (26,751) - - - 54 - - 54 (26,697)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Gross Profit 7,723 - - - 54 - 54 7,777Other income 84 - - - - - - - 84Distributioncosts (1,056) - - - - - - - (1,056)Administrativeexpenses (5,808) (18) - (6) - - 102 78 (5,730)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Operatingprofit 943 (18) - (6) 54 - 102 132 1,075 Finance costs- net (674) - - - - - - - (674)Taxation (112) - - - - - - - (112)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net profit 157 (18) - (6) 54 - 102 132 289--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- Reconciliation of equity at 31 March, 2005 Previous IFRS2 IAS12 IAS16 IAS19 IAS38 IFRS3 Total Restated GAAP Share based Income Property, Employee Intangible Business effect under IFRS payment tax plant & Benefits assets combinations of IFRS equipment £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 31 (i) (iii) (iv) (v) (vii) (ii) 31 March, March, 2005 2005 ------- ------- ----- ------- ------ ------ ------ ------ ------- AssetsNon-currentassetsGoodwill 21,100 - - - - - 514 514 21,614Intangibleassets 2,059 - - - - 219 - 219 2,278Property,plant andequipment 27,524 - - 1,721 - (219) - 1,502 29,026Deferred taxasset 564 - (564) - 1,084 - - 520 1,084--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Totalnon-currentassets 51,247 - (564) 1,721 1,084 - 514 2,755 54,002 CurrentAssetsInventories 19,031 - - - - - - - 19,031Trade andotherreceivables 19,191 - - - - - - - 19,191Cash and cashequivalents 3,227 - - - - - - - 3,227--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total currentassets 41,449 - - - - - - - 41,449--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------LiabilitiesCurrentLiabilitiesFinancialLiabilities- Borrowings - - - - - - - - -- Derivative - - - - - - - - -financialinstrumentsTrade andother payables (21,587) - - - (329) - - (329) (21,916)Current taxliabilities (169) - - - - - - - (169)Provisions (973) 300 - - - - - 300 (673)--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- (22,729) 300 - - (329) - - (29) (22,758)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net currentassets 18,720 300 - - (329) - - (29) 18,691--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total assetsless currentliabilities 69,967 300 (564) 1,721 755 - 514 2,726 72,693--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Non-currentliabilitiesFinancialLiabilities- Borrowings (29,000) - - - - - - - (29,000)- Derivative - - - - - - - - -financialinstrumentsOthernon-currentliabilities (2,491) - - - - - - - (2,491)Deferred taxliabilities - - (74) - - - - (74) (74)Provisions (135) - - - - - - - (135)Retirementbenefitliabilities (2,289) - - - (1,389) - - (1,389) (3,678)--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- (33,915) - (74) - (1,389) - - (1,463) (35,378)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net assets 36,052 300 (638) 1,721 (634) - 514 1,263 37,315--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Share capital 13,775 - - - - - - - 13,775Share premium 22,692 - - - - - - - 22,692Other reserves 2,399 73 - - - - - 73 2,472Retainedearnings (2,755) 227 (638) 1,721 (634) - 514 1,190 (1,565)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Totalshareholders'equity 36,111 300 (638) 1,721 (634) - 514 1,263 37,374MinorityInterest inequity (59) - - - - - - - (59)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Total equity 36,052 300 (638) 1,721 (634) - 514 1,263 37,315--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- Reconciliation of profit for the year ended 31 March, 2005 Previous IFRS2 IAS12 IAS16 IAS19 IAS38 IFRS3 Total Restated GAAP Share based Income Property, Employee Intangible Business effect under IFRS payment tax plant & Benefits assets combinations of IFRS equipment £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 31 (i) (iii) (iv) (v) (vii) (ii) 31 March, March, 2005 2005 ------- ------- ----- ------- ------ ------ ------ ------ -------Revenue 77,762 - - - - - - - 77,762Cost of sales (59,734) - - - (26) - - (26) (59,760)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Gross Profit 18,028 - - - (26) - - (26) 18,002Other income 150 - - - - - - 150Distributioncosts (2,513) - - - - - - (2,513)Administrativeexpenses (13,710) 263 (12) - 514 765 (12,945)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Operatingprofit 1,955 263 - (12) (26) - 514 739 2,694 Finance costs- net (1,441) - - - (17) - - (17) (1,458)Taxation (475) - (39) - - - - (39) (514)Discontinuedoperations (129) - - - - - - - (129)--------------- ------- ------- ----- ------- ------ ------ ------ ------ -------Net profit (90) 263 (39) (12) (43) - 514 683 593--------------- ------- ------- ----- ------- ------ ------ ------ ------ ------- Notes(i) IFRS 2 - Share-based PaymentThe Group operates several share-based payment schemes under which options orshares may be granted to employees. Under UK GAAP, the Group has recognisedexpenses in its Income Statement in relation to shares awarded under itsExecutive Share Option Scheme and Long Term Incentive Plan. Under IFRS 2(Share-based Payment), the Group is required to record an expense for allshare-based payments based on the fair value of those payments as determined atthe date of grant. IFRS 2 also permits an entity to recognise a deferred taxasset in relation to its share-based payment expense to the extent that it isable to obtain a tax deduction upon exercise of the equity instruments granted. The Group has taken advantage of the exemption under IFRS 1 which states thatthe requirements of IFRS 2 do not need to be applied to equity instruments whichwere granted before 7 November, 2002. The effect of applying IFRS 2 is to decrease the Group's net assets by £36,000at 1 April, 2004. (ii) IFRS 3 - Business CombinationsUnder UK GAAP goodwill on acquisitions made since 1 January, 1998 wascapitalised and amortised over its estimated useful life up to a maximum of 20years. IFRS 3 deals with accounting for businesses acquired and requires separatelyidentifiable intangible assets to be fair valued at the date of acquisition(where this can be done with sufficient reliability) and amortised over anappropriate time period. Any residual goodwill is not amortised but is subjectto an annual impairment review. Furthermore, cumulative exchange differences onnet investments are deferred within equity until realisation of the investment.These exchange differences are recognised in the Income Statement in the periodof realisation. The Group has elected to apply the exemption in IFRS 1 which does not requirethis standard to be applied to acquisitions made prior to 1 April, 2004. There is no effect on the Group's net assets at the transition date, 1 April,2004. Goodwill amortisation of £0.5m has been added back in the profit and lossaccount for the year ended 31 March, 2005 consequently increasing the net assetsas at 31 March 2005 and thereafter by an equivalent amount. (iii) IAS 12 - Income TaxesUnder UK GAAP deferred tax was provided on timing differences between theaccounting and taxable profits. In other words, focus was placed on the IncomeStatement. Deferred tax assets were only recognised to the extent that they wereregarded as recoverable. IFRS results in deferred tax being provided on alltiming differences between the accounting carrying values and the tax bases ofassets and liabilities. Excluding the effect of no longer netting off the deferred tax in relation toretirement benefit liabilities against the retirement benefits liability (£1.0mat 1 April, 2004) , the impact of the adoption of IFRS on the deferred taxposition of the Group at 1 April, 2004 is an increase in the deferred taxliability of £0.6m. (iv) IAS 16 - Property, Plant and EquipmentUnder the transition rules to IFRS, fair value may be used as deemed cost forany item of property, plant and equipment. The Group's freehold property hasbeen revalued and restated at its resulting fair value as at 1 April, 2004,which has been carried forward as deemed cost.Using this exemption does not mean that the Group will have to adopt a policy ofregular revaluation under IAS 16 in future periods and neither is such actionpresently contemplated. The impact of this adjustment is to increase the Group's net assets at 1 April,2004 by £1.7m. (v) IAS 19 - Employee BenefitsThe Group operates three defined benefit pension schemes, all of which areclosed to the accrual of further benefit and an unfunded post-retirement medicalscheme. The Group has previously reported in full accordance with FRS 17 (PostRetirement Benefits) since 31 March, 2004. IAS 19 (Employee Benefits) prescribes a similar valuation approach to FRS 17.There is, however, a difference in the valuation of equity investments in thatFRS 17 requires mid-market price to be used whereas IAS 19 requires the bidprice to be used. As a result of further guidance provided in IAS 19, all futureadministration costs have also now been included in the liability under IFRS forthe closed defined benefit pension schemes. Adopting IFRS has resulted in an increase in the Group's provision forretirement benefit liabilities of £0.3m at 1 April, 2004. This has had theeffect of increasing the resulting net finance cost associated with the schemes'liabilities in the profit and loss account by £17,000 in the year ended 31March, 2005. Also under IFRS, the deferred tax asset in relation to retirementbenefit liabilities (£1.0m at 1 April, 2004) is no longer netted off the relatedliability, which is consequently reported on a gross basis. As a result of further guidance, holiday pay accruals have also now beenreflected which has had the effect of decreasing net assets by £0.3m at 1 April,2004. (vi) IAS 32&39 - Financial InstrumentsThe basis of accounting and disclosure for financial instruments is governed byIAS 32 (Financial Instruments: Disclosure and Presentation) and IAS 39(Financial Instruments: Recognition and Measurement). Derivative financial instruments including structured and forward foreignexchange contracts are taken out by the Group to manage its exposure to (i)changes in the fair value of the recognised assets and liabilities, (ii) riskassociated with the variability in cash flows in relation to both recognisedassets or liabilities or forecast transactions and (iii) changes in the value ofthe Group's net investment in overseas operations. All derivative financialinstruments are measured at the balance sheet date at their fair value. Where derivative financial instruments are not designated as or not determinedto be effective hedges any gain or loss on the re-measurement of the fair valueof the instruments at the balance sheet date is taken to the Income Statement.Where derivative financial instruments are held as and are effective as hedgesagainst the fair value changes in recognised assets and liabilities,re-measurement gains and losses on the instrument are matched against there-measurement gain or loss on the recognised asset and liability in the IncomeStatement. Re-measurement gains and losses on derivative financial instrumentsheld as net investment hedges are recognised in equity via Statement ofRecognised Income and Expense until the instrument and underlying hedgedinvestment are sold, when the profit or loss arising is recognised in the IncomeStatement. Any derivative financial instruments no longer designated aseffective hedges are restated at market value and any gains or losses are takendirectly to the Income Statement. Interest differentials resulting from the use of derivative financialinstruments to hedge the Group's exposure to interest fluctuations are dealtwith in the Income Statement. Identifiable derivatives embedded in non-derivative host contracts arerecognised at their fair value when the nature, characteristics and risks of thederivative are not closely related to the host contract. Material gains andlosses arising on the re-measurement of these embedded derivatives at eachbalance sheet date are taken to the Income Statement. The Group has chosen to apply IAS 39 and has taken the exemption under thetransition rules which states that IAS 39 need only be applied from 1 April,2005. On the adoption of IAS 39 at 1 April, 2005, the fair valuation of foreignexchange contracts, interest rate swaps and embedded derivatives resulted in anincrease in net assets at the 30 September, 2005 of £0.2m. (vii) IAS 38 - Intangible AssetsIFRS has resulted in a number of other minor changes such as thereclassification of computer software (£0.2m) from tangible property, plant andequipment to intangible assets. The Group has also isolated any other separable intangible assets that therecognition criteria of IAS 38 and are capable of being measured with sufficientreliability. 10. This interim statement will be posted to shareholders on or around30 November, 2005. Copies are available from the Company's registered office, atthe address shown below. Group Headquarters and Registered Office7 Harbour Buildings, Waterfront West, Dudley Road,Brierley Hill, Halesowen, West Midlands, DY5 1LNTel: +44(0)1384 485 345 Registrars & Transfer OfficeNeville Registrars Limited, Neville House, 18 Laurel Lane,West Midlands, B63 3DATel: +44(0)121 585 1131Fax: +44(0)1384 472962 Website: www.hampsongroup.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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