27th Sep 2005 07:00
Havelock Europa PLC27 September 2005 HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT Havelock, whose business is education furniture and supplies, point of saledisplay, and retail interiors, announces a satisfactory first half, increasingits profit in what is traditionally much the weaker half of the year. FINANCIAL HIGHLIGHTS These results are the Group's first financial statements issued underInternational Financial Reporting Standards ("IFRS") •Group turnover increased by 20.3% to £40.3m; the like-for-like increase was 11.3%. •Operating profit before financing costs increased to £1,039,000 from £671,000. •Pre-tax profit increased to £214,000 from £83,000. •Basic earnings per share were unchanged at 0.3p. •The interim dividend per share is increased by 12.5% to 0.9p. •With effect from 19 September 2005, Havelock (HVE.L) was reclassified into the Support Services Sector of the FTSE Listings. COMMERCIAL HIGHLIGHTS •ESA McIntosh, the UK market leader in science laboratories and fitted furniture for schools, increased its turnover to £8.2m from £7.9m despite a particularly slack period around the time of the General and Local Elections. •The Point of Sale Display Division had a good first half and, whilst turnover was down at £11.8m (2004: £12.3m), the contribution to profit remained in line with budget. •The Retail Interiors Division increased its turnover by 30%, to £17.3m from £13.3m, reflecting markedly increased business with the financial services sector. The Division experienced a stronger first half than for many years and has made a positive contribution to the Group's results, in the first half of the year, for only the second time since 1998. •To realise the further synergies available in the Group and to make optimal use of the Group's assets, Richard Lowery has been put in charge of both ESA McIntosh and Retail Interiors and, within the Point of Sale Display Division, Jim Fletcher has taken charge of both Showcard Print and Hartcliffe. Malcolm Gourlay, Chairman, stated "The Board remains optimistic about the growthopportunities in the Group's chosen markets, especially education interiors. TheBoard anticipates further continued progress in the full year, with additionalgrowth in 2006 and 2007, particularly in the education PFI sector. In addition,the Group will continue to study opportunities for further appropriateacquisitions." Enquiries: Havelock Europa PLC 01383-820 044 Hew Balfour (Chief Executive) 07801 683851Graham MacSporran (Finance Director) 07801 683803 Bankside Consultants Limited Charles Ponsonby 020-7367 8851 [email protected] HAVELOCK EUROPA PLC INTERIM ANNOUNCEMENT Havelock has had a satisfactory first half, increasing its pre-tax profit inwhat is traditionally much the weaker half of the year. FINANCIAL REVIEW These results are the Group's first financial statements issued underInternational Financial Reporting Standards ("IFRS"), which became effective forpublic companies listed on the London Stock Exchange with financial yearscommencing on or after 1 January 2005. Outline details of the resulting changesare shown in Note 10 to the Financial Statements. Prior year comparatives havebeen adjusted to conform with these standards. The changes in accounting standards have had the effect of reducing profitsbefore tax by approximately £130,000, the principal changes being in respect ofgoodwill, revenue recognition and amortisation of intangibles. Net assets havebeen impacted by approximately £8.8 million, largely as a result of theinclusion of the pension deficit in the balance sheet. Group turnover for the six months ended 30 June 2005 was £40.3 million (2004 :£33.5 million), an increase of 20.3%. The 2005 figure includes a first halfcontribution from both TeacherBoards and Clean Air, acquired in June 2004 and inJuly 2004 respectively. The like-for-like increase in turnover was 11.3%. Thisincorporated a significant improvement in the level of business transacted bythe Retail Interiors Division, which has experienced a stronger first half thanfor many years and has made a positive contribution to the Group's results, inthe first half of the year, for only the second time since 1998. Group operating profit was £1.0 million (2004 : £0.7 million). The Group profitbefore tax, after financing costs, was £214,000 (2004 : £83,000). Basic earningsper share were 0.3 pence (2004 : 0.3 pence). Net debt at 30 June 2005 stood at £22.2 million (2004 : £19.2 million). Of thisfigure, £6.9 million relates to cash or loan notes arising from the acquisitionof TeacherBoards and Clean Air and, within that figure, £2.3 million representsadditional consideration paid in January and April 2005. Interest cover for thefull year is expected to remain substantial. DIVIDEND The Board is pleased to declare an interim dividend of 0.9 pence per share, anincrease of 12.5%. This dividend will be paid on 28 December 2005 toshareholders on the register at close of business on 11 November 2005. RECLASSIFICATION With effect from 19 September 2005, the Company's share quotation wasreclassified by FTSE from the Construction and Building Materials sector intothe Support Services sector. TRADING REVIEW Education furniture and supplies As indicated in the Chairman's Statement to the AGM on 24 June 2005, ESAMcIntosh, the UK market leader in science laboratories and fitted furniture forschools, started the year more slowly than originally expected. After aparticularly slack period around the time of the General and Local Elections,enquiries and orders picked up sharply. Turnover for the first six months was£8.2 million (2004 : £7.9 million). TeacherBoards, whose specialism is teaching aids and display boards, had astrong first half, recording an increased contribution ahead of budget, on aturnover of £2.2 million. Clean Air, which manufactures fume cupboards, had amore modest first half, stemming largely from the much slower than anticipatedactivity in the schools refurbishment market, outlined above, and recorded aturnover of £0.8 million. Point of Sale Display The Point of Sale Display Division had a good first half and, whilst turnoverwas down at £11.8 million (2004 : £12.3 million), the contribution to profitremained in line with budget. Within this Division, our investment programme continues. A new high volumedigital printing press has been installed at Hartcliffe in Bristol, which willconfer significant advantages in the production of point of sale ticketing, forboth our customers and ourselves, in terms of speed and collation. This presswas commissioned earlier this month. Retail Interiors In the Retail Interiors Division, the level of activity has been strong, despitethe reportedslow-down in the High Street, with turnover increasing by 30% to £17.3 million(2004 : £13.3 million). A high level of enquiries was received from thefinancial services sector. MANAGEMENT CHANGES With a view to achieving further synergies between the Education, Healthcare andRetail Interiors businesses, both ESA McIntosh and Retail Interiors have beenplaced under the direction of Richard Lowery, previously Managing Director ofRetail Interiors. There has been a further restructuring of responsibilitiesunder him to provide improved customer service and a launch pad for the furthersignificant growth expected over the next two years. Within the Point of Sale Display Division, the activities of Showcard Print andHartcliffe are being co-ordinated by Jim Fletcher, the Managing Director ofShowcard, enabling these two businesses to work together. As a result, asignificant rationalisation has taken place at Hartcliffe. A key aim of thisprocess will be to maximise the capacity of the two plants, with specificspecialised capability for lithographic and digital reproduction being developedin Bristol and for large format screen printing and digital graphics atLetchworth. These moves will avoid duplication of capital investment andsignificantly improve customer service levels within this Division, enabling thedevelopment of a wider customer base. A small exceptional charge relating tothis consolidation will be incurred in the second half. At the end of the year, Graham MacSporran, who has been the Group FinanceDirector since August 2000, plans to retire, on the approach to his 59thbirthday, in accordance with his wishes, expressed some 18 months ago. Followinga detailed search, the Board is delighted to announce that Grant Findlay, CA,LLB, 49, presently the Finance Director of the Education Division of Findel PLC,will be joining the Group with effect from 1 November 2005. Grant has wideindustrial experience, including service as Finance Director of two listedcompanies, Charles Sidney PLC and, prior to that, TIP Europe PLC. PROSPECTS Within the education businesses, ESA McIntosh's order intake from LocalAuthorities has recovered since the half year end. With PFI subcontractorbusiness broadly at the same level as last year, McIntosh is expected to recordanother satisfactory result, although additional costs have been incurred onextra resources recruited to support the 2006 programme. TeacherBoards has had aslower start to the second half but anticipates a good result for the year.Clean Air's activity levels have remained at a lower level than last year, butare expected to improve in 2006 as PFI business picks up. July and August were unusually slow months in the Point of Sale sector but anupturn has occurred in September and another good result for the year isexpected in this Division. The Retail Interiors Division is performing above expectation and the prospectsfor this business are likely to improve as a result of continuing success infinancial services and the recent entry into education in support of ESAMcIntosh. Trading conditions in the Middle East have been buoyant and it is anticipatedthat the Middle East joint venture will show an improved contribution relativeto that of last year. The Board remains optimistic about the growth opportunities in the Group'schosen markets, especially educational interiors. The rate of progress towardsfinancial close of a series of PFI contracts in the education and healthcaresectors is encouraging, with 13 of the 18 PFI contracts, rated by the Group ashigh probability wins in the education sector in 2006, having now reachedfinancial close. Four of the remaining five are expected to reach financialclose before the end of the year. Eight of these contracts are located inScotland, where the Group has had an unrivalled record of previous success.Accordingly, the Board anticipates further continued progress in the full year,with additional growth in 2006 and 2007, particularly in the education PFIsector. In addition, the Group will continue to study opportunities for furtherappropriate acquisitions. Malcolm Gourlay Chairman 27 September 2005 CONSOLIDATED INCOME STATEMENT For the 6 months ended 30 June 2005 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Note Revenue 40,310 33,464 86,526Cost of sales (32,949) (27,875) (69,988) _______ _______ _______Gross profit 7,361 5,589 16,538Administrative expenses (6,322) (4,918) (10,996) _______ _______ _______Operating profit before financing 1,039 671 5,542costs _______ _______ _______ Financial income - interest receivable - - 4Expected return on defined benefitpension 623 535 1,070plan assetsFinancial expenses - on bankborrowings and (807) (491) (1,366)finance leasesInterest on defined benefit pensionscheme (711) (663) (1,325)liabilities _______ _______ _______Net financing costs (895) (619) (1,617) Share of profit of associates 70 31 121 _______ _______ _______Profit before tax 214 83 4,046 Income tax expense 2 (117) 9 (1,152) _______ _______ _______Profit for the period attributable toequity 97 92 2,894holders of the parent _______ _______ _______ === === ========= ========= ========= Basic earnings per share 3 0.3p 0.3p 9.1p Diluted earnings per share 3 0.3p 0.3p 8.7p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the 6 months ended 30 June 2005 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Exchange differences on translation ofoverseas associate 40 (11) (42)Actuarial losses on defined benefit pensionplan (1,357) (372) (975)Tax on items taken directly to equity 407 112 292Cash flow hedges:Effective portion of changes in fair value (235) - - _______ _______ _______Net expense recognised directly in equity (1,145) (271) (725) Profit for the period 97 92 2,894 _______ _______ _______Total recognised income and expense for theperiod (1,048) (179) 2,169 _______ _______ _______ ========= ========= ========= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the 6 months ended 30 June 2005 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 NoteShareholders' funds at beginning of 10,278 5,524 5,524periodImplementation of IAS 32 and 39 9 (165) - - _______ _______ _______Adjusted shareholders' funds atbeginning 10,113 5,524 5,524of period _______ _______ _______Total recognised income and expense forthe period (1,048) (179) 2,169Ordinary dividends (823) (653) (928)Issue of ordinary shares 210 751 3,406Movements relating to share-basedpayments (291) 51 107and ESOP trust _______ _______ _______Shareholders' funds at end of period 8,161 5,494 10,278 _______ _______ _______ ========= ========= ========= CONSOLIDATED BALANCE SHEET As at 30 June 2005 (unaudited) Unaudited Unaudited Audited as at as at as at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 NoteAssets Non-current assetsProperty, plant and equipment 13,066 12,673 13,687Intangible assets 5 14,321 8,937 14,467Investments in associates 722 554 612Deferred tax assets 3,000 2,520 2,583 _______ _______ _______Total non-current assets 31,109 24,684 31,349 _______ _______ _______Current assetsInventories 6 13,337 11,609 9,629Trade and other receivables 7 16,596 15,643 16,777Cash and cash equivalents - - 627 _______ _______ _______Total current assets 29,933 27,252 27,033 _______ _______ _______Total assets 61,042 51,936 58,382 _______ _______ _______LiabilitiesCurrent liabilitiesBank overdraft (5,385) (5,372) -Other interest-bearing loans andborrowings (2,418) (1,320) (1,322)Derivative financial instruments (400) - -Income tax payable (947) (1,001) (954)Trade and other payables 8 (18,558) (16,719) (21,112) _______ _______ _______Total current liabilities (27,708) (24,412) (23,388) _______ _______ _______Non-current liabilitiesInterest-bearing loans and borrowings (14,431) (12,545) (13,842)Retirement benefit obligations (10,000) (8,400) (8,610)Other payables 8 - (472) (1,426)Deferred tax liabilities (742) (613) (838) _______ _______ _______Total non-current liabilities (25,173) (22,030) (24,716) _______ _______ _______Total liabilities (52,881) (46,442) (48,104) _______ _______ _______Net assets 8,161 5,494 10,278 _______ _______ _______ ========= ========= =========EquityIssued share capital 3,476 3,186 3,430Share premium 1,971 979 1,808Other reserves 3,177 1,585 3,136Revenue reserves (463) (256) 1,904 _______ _______ _______Total equity attributable to equityholders of the parent 8,161 5,494 10,278 _______ _______ _______ ========= ========= ========= CONSOLIDATED STATEMENT OF CASH FLOWS For the 6 months ended 30 June 2005 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Cash flows from operating activitiesProfit before tax 214 83 4,046Adjustments for:Depreciation 940 849 1,772Amortisation of intangible assets 236 83 452Gain on sale of property, plant and equipment - (17) (30)Net financing costs 895 619 1,617Share of profit of associate (70) (31) (121) Decrease in trade and other receivables 181 514 224Increase in inventories (3,708) (3,720) (1,411)(Decrease)/ increase in trade and otherpayables (2,508) (3,220) 731Movement relative to defined benefit pensionscheme (55) (73) (593) _______ _______ _______Cash (absorbed by)/generated from operations (3,875) (4,913) 6,687 _______ _______ _______Interest paid (737) (475) (1,205)Income taxes paid (231) - (1,244) _______ _______ _______Net cash from operating activities (4,843) (5,388) 4,238 _______ _______ _______Cash flows from investing activitiesProceeds from sale of property, plant andequipment - 6 84Acquisition of property, plant and equipment (320) (1,010) (2,856)Acquisition of intangible assets (88) (32) (51)Acquisition of subsidiaries, net of cashbalances acquired (1,274) (2,470) (6,256) _______ _______ _______Net cash from investing activities (1,682) (3,506) (9,079) _______ _______ _______Cash flows from financing activitiesProceeds from the issue of share capital 210 - 1,656Increase in bank loans 1,255 2,847 4,650Purchase of own shares and proceeds fromexercise of share options (291) 12 95Repayment of bank borrowings (625) (624) (1,250)Repayment of finance lease liabilities (36) (61) (103)Dividends paid - - (928) _______ _______ _______Net cash from financing activities 513 2,174 4,120 _______ _______ _______Net decrease in cash and cash equivalents (6,012) (6,720) (721)Cash and cash equivalents at 1 January 627 1,348 1,348 _______ _______ _______Cash and cash equivalents at end of period (5,385) (5,372) 627 _______ _______ _______ ========= ========= ========= Notes to the financial statements 1. Principal accounting policies Havelock Europa PLC is a company domiciled in the United Kingdom. Theconsolidated interim financial statements for the six months ended 30 June 2005comprise the Company and its subsidiaries (together referred to as the Group)and the Group's interest in its associate. The directors approved theconsolidated interim financial statements on 27 September 2005. Basis of preparation European Union law (IAS Regulation EC 1606/2002) requires that the next annualconsolidated financial statements of the Group, for the year ending 31 December2005, be prepared in accordance with International Financial Reporting Standards(IFRS) adopted for use in the European Union (EU). These consolidated interim financial statements ('financial statements') havetherefore been prepared in accordance with IFRS as endorsed by the EU and itsinterpretations adopted by the International Accounting Standards Board subjectto the exemptions contained in IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards that the Group has elected to use. The interimstatements do not include all the information required for full annual financialstatements. These interim financial statements have been prepared on the basis of therecognition and measurement requirements of IFRS in issue that either areendorsed by the EU and effective (or available for early adoption) at 31December 2005 or are expected to be endorsed and effective (or available forearly adoption) at 31 December 2005, the Group's first annual reporting date atwhich it is required to use adopted IFRS. Based on these adopted and unadoptedIFRS, the directors have made assumptions about the accounting policies expectedto be applied, which are set out below, when the first annual IFRS financialstatements are prepared for the year ending 31 December 2005. In particular, the directors have assumed that the amendment to IAS 19 EmployeeBenefits, covering actuarial gains and losses, group plans and disclosures, willbe adopted by the EU in sufficient time that it will be available for use in theannual IFRS financial statements for the year ending 31 December 2005. In addition, the accounting standards adopted by the EU that will be effective(or available for early adoption) in the annual financial statements for theyear ending 31 December 2005 are still subject to change and to additionalinterpretations and therefore cannot be determined with certainty. Accordingly,the accounting policies for that annual period will be determined only when theannual financial statements are prepared for the year ending 31 December 2005. The financial statements are presented in pounds sterling, rounded to thenearest thousand. They are prepared on the historical cost basis except forintangible assets acquired in a business combination, which are stated at theirfair values and derivative financial instruments, which from 1 January 2005, arestated at their fair values. The preparation of financial statements in conformity with IFRS requires thedirectors to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expense. The estimates and judgements are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The accounting policies that the Group intends to apply for the year ending 31December 2005 are set out in the document referred to below. The accountingpolicies have been applied consistently to all periods presented in thesefinancial statements, subject to the exemptions contained in IFRS 1 that theGroup has elected to use, and except in relation to financial statements wherethe accounting policies for periods prior to 1 January 2005 are different. Theimpact of the adoption of IAS 32 Financial Instruments: Disclosure andPresentation and IAS 39 Financial Instruments: Recognition and Measurement bythe Group prospectively from 1 January 2005 is shown at note 9. Transition to IFRS The date of transition to IFRS was 1 January 2004, which was the beginning ofthe comparative period for the six months ended 30 June 2004 and year ended 31December 2004. A detailed review of the changes in the Group's accountingpolicies and reconciliations of the Group's financial statements from UKGAAP toIFRS at key dates has today been published at the London Stock Exchange and isavailable on the Group's website at www.havelockeuropa.com. A reconciliation of profit before tax and net assets under UKGAAP and IFRS at 30June 2005, 30 June 2004 and 31 December 2004 is provided at note 10. Status of financial information Comparative figures for the financial year ended 31 December 2004 are not thecompany's statutory accounts for that financial year. Those accounts, which wereprepared under UKGAAP, have been reported on by the company's auditors anddelivered to the Registrar of Companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. The financial statements for the year ended 31 December 2004 have been extractedfrom a restatement of the financial information taken from the company'sstatutory accounts for that financial year and the auditors have issued aspecial purpose report on that financial information. This audit report can befound on the Group's website. 2. Income tax A charge for current taxation has been included at 33% (2004: 33%), being theeffective rate likely to be applied to the result for the full year to 31December 2005. The results of the associate, being a Middle East entity, are notsubject to taxation. 3. Earnings per share Basic earnings per share The calculation of basic earnings per share for the period ended 30 June 2005was based on the profit attributable to ordinary shareholders of £97,000 (2004:£92,000) and a weighted average number of ordinary shares outstanding during theperiod ended 30 June 2005 of 33,832,907 (2004: 30,041,093), calculated asfollows: Profit attributable to ordinary shareholders Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Profit for the period 97 92 2,894 _______ _______ _______ Weighted average number of ordinary sharesIn thousands of shares Issued ordinary shares at 1 January 34,300 31,069 31,069Effect of shares issued in 2004 - 9 1,536Effect of own shares held (691) (1,037) (967)Effect of shares issued in 2005 224 - - _______ _______ _______Weighted average number of ordinary shares atend of period 33,833 30,041 31,638 _______ _______ _______ Diluted earnings per share The calculation of diluted earnings per share at 30 June 2005 was based onprofit attributable to ordinary shareholders of £97,000 (2004: £92,000) and aweighted average number of dilutive ordinary shares outstanding during theperiod ended 30 June 2005 of 34,529,434 (2004: 31,311,083), calculated asfollows: Weighted average number of ordinary sharesIn thousands of sharesWeighted average number of ordinary shares 33,833 30,041 31,638Effect of share options on issue 696 1,270 1,540 _______ _______ _______Weighted average number of ordinary shares(diluted) at end of period 34,529 31,311 33,178 _______ _______ _______ 4. Equity dividends The directors approved an interim dividend per equity share of 0.9p after thebalance sheet date. In accordance with IFRS accounting requirements, thisdividend has not been accrued in the interim consolidated financial statements. 5. Intangible assets Carrying amount Unaudited Unaudited Audited as at as at as at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Computer software 238 261 201Goodwill 12,403 7,791 12,403Brands 675 450 713Customer relationships 389 173 453Contracted customer relationships 64 79 75Order backlog - 53 -Non-compete clauses 144 130 192Design rights 408 - 430 _______ _______ _______ 14,321 8,937 14,467 _______ _______ _______ The amortisation charge in the consolidated income statement in respect of theseitems was £236,000 (June 2004: £83,000; December 2004: £452,000). 6. Inventories Unaudited Unaudited Audited as at as at as at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Raw materials and consumables 3,545 3,300 3,312Work in progress 2,442 2,543 1,454Finished goods 7,350 5,766 4,863 _______ _______ _______ 13,337 11,609 9,629 _______ _______ _______ 7. Trade and other receivables Unaudited Unaudited Audited as at as at as at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Trade debtors 15,076 14,161 15,429Other debtors 560 410 340Prepayments 960 1,072 1,008 _______ _______ _______ 16,596 15,643 16,777 _______ _______ _______ 8. Trade and other payables Unaudited Unaudited Audited as at as at as at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Amounts disclosed in current liabilitiesTrade creditors 12,156 11,316 14,125Other taxes and social security 1,330 928 2,584Accruals 2,787 2,404 2,180Dividends 823 653 -Deferred consideration relating to businesscombination 1,462 1,418 2,223 _______ _______ _______ 18,558 16,719 21,112 _______ _______ _______Amounts disclosed in non-currentliabilitiesDeferred consideration relating to businesscombination - 472 1,426 _______ _______ _______ 9. Adoption of IAS32 and IAS 39 from 1 January 2005 Financial instruments As permitted by IFRS 1, the Group has elected to adopt IAS 32 and IAS 39 on aprospective basis from 1 January 2005. The accounting treatment under UKGAAP hasbeen retained for comparative purposes. There is therefore no impact on theresults and financial position for the six months ended 30 June 2004 and yearended 31 December 2004. The principal areas of future impact are in respect of interest rate swaps, andhedge accounting. Under UKGAAP, only accrued interest under interest rate swapsis recognised on the balance sheet. Under IAS 39, the fair value of interestrate swaps is recognised. Interest rate swaps will be revalued at each reportingdate. Changes in fair value will depend on market factors that by their naturecannot be forecast. Treatment of the effective portion of the resulting gain or loss depends onwhether the interest rate swap qualifies for hedge accounting as a cash flowhedge. Gains and losses on interest rate swaps that qualify as effective hedgesare recognised in the consolidated statement of recognised income and expense,with any ineffective portion recognised in the consolidated income statement,which may result in earnings volatility. Interest rate swaps Under UKGAAP, only accrued interest under interest rate swaps was recognised onthe balance sheet. Under IAS 39, the fair value of interest rate swaps isrecognised. The effect is to increase Derivative financial instruments by£165,000 and reduce Revenue reserves by the same amount at 1 January 2005. Interest bearing loans and borrowings Under UKGAAP, interest accrued on borrowings was included in Trade and otherpayables. Under IAS 39, interest accrued on borrowings is included within Otherinterest-bearing loans and borrowings. The effect is to reduce Trade and otherpayables by £76,000 and increase Other interest-bearing loans and borrowings by£76,000 at 1 January 2005. 10. Explanation of transition to IFRS Reconciliation of profit before tax 6 months 6 months Year ended ended ended 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Profit before tax under UKGAAP as previouslystated 347 524 4,486Defined benefit pension scheme:- adjustment to reflect current service cost 55 73 93- net interest charge on scheme's netliabilities (88) (128) (255)Charge for share options and incentiveschemes (24) (46) (13) ______ ______ ______Profit before tax under UKGAAP as restated 290 423 4,311 Deferred revenue recognition (215) (486) (260)Goodwill amortisation not required under IFRS 379 126 547Amortisation of intangible assets arising onbusiness combinations (184) - (291)Other adjustments relating to acquisition ofsubsidiaries - - (141)Interest charge on deferred consideration (76) - (120)Other adjustments 20 20 - ______ ______ ______Profit before tax under IFRS 214 83 4,046 ______ ______ ______ Reconciliation of net assets As at As at As at 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 Net assets under UKGAAP as previously stated 16,951 12,804 17,273Defined benefit pension deficit, net ofdeferred tax (8,148) (6,694) (7,175)Dividends (recognised only when formallyapproved) 322 255 823Financial instruments - fair value ofinterest swaps (400) - -Share options and incentive schemes 27 (119) (52) ______ ______ ______Net assets under UKGAAP as restated 8,752 6,246 10,869 Deferred tax on revalued property, plant andequipment (140) (220) (140)Deferred revenue recognition, net of deferredtax (671) (678) (500)Goodwill amortisation not required under IFRS 889 126 547Amortisation of intangible assets arising onbusiness combinations, net of deferred tax (389) - (237)Other adjustments relating to acquisition ofsubsidiaries - - (141)Interest charge on deferred consideration (196) - (120)Other adjustments (84) 20 - ______ ______ ______Net assets under IFRS 8,161 5,494 10,278 ______ ______ ______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Havelock Europa