6th Apr 2006 07:01
Future PLC06 April 2006 6 April 2006 Future plc International Financial Reporting Standards Restatement from UK GAAP to International Financial Reporting Standards for the year ended 30 September 2005 1 Introduction In accordance with EU legislation, Future plc ("the Group") will prepareconsolidated financial information under International Financial ReportingStandards ("IFRS") commencing with the accounting period starting on 1 October2005. Future's first annual report under IFRS will therefore be for the yearending 30 September 2006. The Group will also restate the comparative year ended30 September 2005 (the transition date to IFRS is therefore 1 October 2004). Thefirst published financial results under IFRS will be the interim results for thehalf year to 31 March 2006. The purpose of this document is to show the effect of adopting IFRS for theGroup, setting out the basis of preparation and significant adjustments. As previously communicated in the Group's annual report for the year ended 30September 2005, the most significant adjustments under IFRS relate to thefollowing: • accounting for business combinations whereby goodwill is not amortised but will be subject to annual impairment testing, and • share-based payments whereby the fair value of each instrument is recognised in the income statement. The transition to IFRS has no effect on the cash flows of the business, nor theability to pay dividends for the foreseeable future. Full IFRS accounting policies will be disclosed in the Group's interim IFRSfinancial statements for the six months ended 31 March 2006. 2 Summary impact of IFRS for the year ended 30th September 2005 ("FY05") The unaudited impact for the Group for FY05 is as follows: --------- --------- ----------Summary income UK GAAP IFRS adj IFRS restatedstatement £'m £'m £'m --------- --------- ---------- Revenue 212.3 - 212.3 --------- --------- ----------Operating profit/(loss) Operating profit before exceptional itemsand amortisation/impairment of intangible assets 20.7 (0.3) 20.4Exceptional items (7.2) - (7.2)Amortisation/impairment of intangibleassets (23.5) 21.7 (1.8) --------- --------- ----------Operating (loss)/profit (10.0) 21.4 11.4Profit on disposal of subsidiaries 2.1 - 2.1Financial income 0.4 - 0.4Financial costs (1.4) - (1.4)Taxation (2.1) (0.1) (2.2) --------- --------- ----------(Loss)/profit for year (11.0) 21.3 10.3Dividends (5.8) (0.7) (6.5) --------- --------- ----------Retained (loss)/profit for the year (16.8) 20.6 3.8 --------- --------- ---------- --------- --------- ----------Earnings per share (pence): UK GAAP IFRS adj IFRS restated --------- --------- ---------- Basic (3.4) 6.6 3.2Adjusted 5.1 (0.1) 5.0 --------- --------- ---------- --------- --------- ----------Summary balance sheet UK GAAP IFRS adj IFRS restatedat 30 September 2005 £'m £'m £'m --------- --------- ---------- --------- --------- ----------Goodwill 135.8 11.5 147.3Other intangibles - 12.9 12.9Tangible assets 3.9 (0.2) 3.7Deferred tax 1.7 0.2 1.9Current assets 65.4 - 65.4 --------- --------- ----------Total assets 206.8 24.4 231.2 --------- --------- ---------- --------- --------- ----------Equity and reserves 91.7 25.8 117.5Current liabilities 80.9 (3.7) 77.2Non-current liabilities 34.2 2.3 36.5 --------- --------- ----------Total equity and liabilities 206.8 24.4 231.2 --------- --------- ---------- The IFRS adjustments are fully discussed in section 3. The main adjustments are as follows: Income statement • A charge to operating profit (before amortisation and impairment of intangibles and exceptional items) of £0.3m relating to a charge for share based payments of £0.4m, a charge for holiday pay of £0.2m, less amortisation of non-integral software costs of £0.3m reclassified as intangibles. • A £21.7m credit to amortisation and impairment of intangibles relating to the non-amortisation of goodwill of £23.5m, less amortisation of "new intangible assets" (such as magazine titles etc) of £1.5m, and £0.3m amortisation relating to reclassified software costs. Balance sheet • A net adjustment to goodwill of £11.3m representing the non-amortisation of goodwill of £23.5m, less newly recognised intangible assets which were previously subsumed within goodwill. • An increase in other intangibles of £12.9m representing newly recognised intangibles and the reclassification of non-integral software costs. • A reduction in current liabilities of £3.7m representing a £4.2m adjustment to exclude the final FY05 dividend and the inclusion of a holiday pay accrual of £0.5m. • Recognition of a deferred tax liability of £2.3m mainly relating to cases where items treated as goodwill within the financial statements (and therefore not amortised) are nonetheless tax deductible within the books of individual subsidiaries. Adjusted earnings used to calculate adjusted EPS are based on earnings for theyear, adjusted for exceptional items, amortisation and impairment of intangibleassets, and profit on disposal of subsidiaries. Given that the most significantadjustments relate to intangibles and goodwill, adjusted EPS under IFRS are notmaterially different from adjusted EPS reported under UK GAAP. 3 Basis of preparation and key standards impacting our business The financial information included within this document has been prepared basedon the adoption of IFRS, including International Accounting Standards ("IAS")adopted by the EU, and interpretations issued by the Standing InterpretationsCommittee ("SIC") of the International Accounting Standards Board ("IASB").These standards are subject to ongoing amendment by the IASB and therefore thefinancial information may require updating for such changes or any new standardswhich the Group elects to adopt early. The financial information set out here isunaudited. Key areas impacting the IFRS transition are as follows: First-time Adoption of International Financial Reporting Standards (IFRS 1) IFRS 1 sets out the procedures to be followed for transition to IFRS. Thegeneral principle is that the Group will adopt appropriate accounting policiesfor each standard and apply retrospectively. There are however a number ofoptional exemptions and mandatory exceptions to retrospective restatement. Themost significant of those which apply to the Group are as follows: a) Business combinations The Group has elected not to apply IFRS 3, "Business combinations"retrospectively, to business combinations prior to the transition date.Consequently, goodwill recorded from past combinations is recognised at the UKGAAP value on transition. Goodwill is not amortised under IFRS but will besubject to annual impairment testing. b) Share-based payments The Group will apply IFRS 2 to all relevant share-based payment transactionsgranted after 7 November 2002 which had not fully vested at 1 January 2005. c) Financial instruments The Group has taken advantage of the exemptions in IAS 32 & IAS 39 enabling itto apply these standards from 1 October 2005. Share-based payments (IFRS 2) IFRS 2 requires an expense for equity instruments granted to be recognised inthe financial statements over the appropriate vesting period, measured at their"fair value" at the date of grant. The Group has used the Black Scholes model to value instruments with nonmarket-based performance criteria such as earnings per share ("EPS"). Foroptions with market-based performance criteria, notably total shareholder return("TSR"), the Group has applied a Monte Carlo model to determine the fair value. The financial impact for FY05 is a charge to the income statement of £0.4m. Business combinations (IFRS 3) Acquisitions undertaken in FY05 have been restated in accordance with thisstandard. The main impact is the requirement to identify separately certainintangible assets previously included within goodwill under UK GAAP. Intangible assets have been recognised relating mainly to magazine titles,customer lists and advertising relationships and these will be amortised overtheir estimated economic lives, typically ranging between 1 and 5 years. Theresidual amount will be recorded as goodwill. Goodwill is not amortised underIFRS but is subject to annual impairment tests. Events after the balance sheet date (IAS 10) IAS 10 requires that dividends declared after the balance sheet date should notbe recognised as a liability within the financial statements. Accordingly suchdividends are recognised in the following period. The final dividend of £4.9m for the period ended 30 September 2004 has beenadjusted in the opening transition balance sheet. Similarly the final dividendof £4.2m for the year ended 30 September 2005 has not been accrued in the 30September 2005 balance sheet. Intangible assets (IAS 38) As noted under IFRS 3 above, the Group will recognise a number of intangiblessuch as magazine titles, customer lists and advertising relationships, separatefrom goodwill. These will be amortised over their estimated economic lives. The Group has reclassified non-integral computer software costs from property,plant and equipment to intangible assets. These assets will continue to beamortised over their estimated economic lives. Impairment (IAS 36) Goodwill has been tested for impairment at both the transition date and 30September 2005 and no impairment was required. Income taxes (IAS 12) The Group has provided for deferred income tax, using the liability method, ontemporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the consolidated financial statements. Deferredincome tax is determined using tax rates which are expected to apply when therelated deferred tax asset is realised or the deferred tax liability settled. The Group has recognised deferred tax assets only to the extent that it isprobable that future taxable profits will be available against which thetemporary differences can be utilised. The main areas of deferred tax impact relate to business combinations andshare-based payment charges. Restated Group income statementfor the year ended 30 September 2005 (unaudited) Appendix i -------------- ------- -------- -------- -------- ---------- ------ -------- ------ Events Re- after classif- the ication UK GAAP Business Share- balance of Total (IFRS combin- based sheet software adjust- format) ations payments date costs Other ments IFRS-------------- ------- -------- -------- -------- ---------- ------ -------- ------ £m £m £m £m £m £m £m £m-------------- ------- -------- -------- -------- ---------- ------ -------- ------ Revenue 212.3 - - - - - - 212.3-------------- ------- -------- -------- -------- ---------- ------ -------- ------Operatingprofit beforeexceptionalitems andamortisation and impairment of intangibleassets 20.7 - (0.4) - 0.3 (0.2) (0.3) 20.4Exceptional items (7.2) - - - - - - (7.2)Amortisationand impairment of intangible assets (23.5) 22.0 - - (0.3) - 21.7 (1.8)-------------- ------- -------- -------- -------- ---------- ------ -------- ------Operating(loss)/profit (10.0) 22.0 (0.4) - - (0.2) 21.4 11.4Profit ondisposal of subsidiaries 2.1 - - - - - - 2.1-------------- ------- -------- -------- -------- ---------- ------ -------- ------(Loss)/profitonordinary activitiesbeforefinancing (7.9) 22.0 (0.4) - - (0.2) 21.4 13.5Financial income 0.4 - - - - - - 0.4Financial costs (1.4) - - - - - - (1.4)-------------- ------- -------- -------- -------- ---------- ------ -------- ------(Loss)/profiton ordinary activities before tax (8.9) 22.0 (0.4) - - (0.2) 21.4 12.5Tax on (loss)/profit on ordinary activities (2.1) (0.1) - - - - (0.1) (2.2)-------------- ------- -------- -------- -------- ---------- ------ -------- ------(Loss)/profitfor the period (11.0) 21.9 (0.4) - - (0.2) 21.3 10.3Dividends (5.8) - - (0.7) - - (0.7) (6.5)-------------- ------- -------- -------- -------- ---------- ------ -------- ------Retained(loss)/profit (16.8) 21.9 (0.4) (0.7) - (0.2) 20.6 3.8-------------- ------- -------- -------- -------- ---------- ------ -------- ------ Restated Group balance sheetAt 30 September 2005 (unaudited) Appendix ii -------------- ------- -------- -------- -------- ---------- ------ -------- ------ Events Re- after classif- the ication UK GAAP Business Share- balance of Total (IFRS combin- based sheet software adjust- format) ations payments date costs Other ments IFRS-------------- ------- -------- -------- -------- ---------- ------ -------- ------ £m £m £m £m £m £m £m £m-------------- ------- -------- -------- -------- ---------- ------ -------- ------ AssetsProperty, plantand equipment 3.9 - - - (0.2) - (0.2) 3.7Intangibleassets - goodwill 135.8 11.5 - - - - 11.5 147.3Intangibleassets - other - 12.7 - - 0.2 - 12.9 12.9Deferred tax 1.7 - 0.2 - - - 0.2 1.9---------------- -------- -------- -------- -------- --------- ------ ------- ------Totalnon-current assets 141.4 24.2 0.2 - - - 24.4 165.8---------------- -------- -------- -------- -------- --------- ------ ------- ------Inventories 6.2 - - - - - - 6.2Corporation taxrecoverable 2.3 - - - - - - 2.3Trade and otherreceivables 46.2 - - - - - - 46.2Cash and cashequivalents 10.7 - - - - - - 10.7---------------- -------- -------- -------- -------- --------- ------ ------- ------Total current assets 65.4 - - - - - - 65.4 ---------------- -------- -------- -------- -------- --------- ------ ------- ------Total assets 206.8 24.2 0.2 - - - 24.4 231.2---------------- -------- -------- -------- -------- --------- ------ ------- ------ Equity Issued share capital 3.3 - - - - - - 3.3Share premium account 24.4 - - - - - - 24.4Merger reserve 109.0 - - - - - - 109.0Retained earnings (45.0) 22.1 0.2 4.2 - (0.7) 25.8 (19.2)---------------- -------- -------- -------- -------- --------- ------ ------- ------Total equity 91.7 22.1 0.2 4.2 - (0.7) 25.8 117.5---------------- -------- -------- -------- -------- --------- ------ ------- ------ Liabilities Interest-bearingloans and borrowings 20.4 - - - - - - 20.4Trade and otherpayables 60.2 - - (4.2) - 0.5 (3.7) 56.5Corporation taxpayable 0.3 - - - - - - 0.3---------------- -------- -------- -------- -------- --------- ------ ------- ------Total currentliabilities 80.9 - - (4.2) - 0.5 (3.7) 77.2---------------- -------- -------- -------- -------- --------- ------ ------- ------ Interest-bearingloans 29.8 - - - - - - 29.8and borrowingsDeferred tax - 2.1 - - - 0.2 2.3 2.3Provisions 2.2 - - - - - - 2.2Other 2.2 - - - - - - 2.2---------------- -------- -------- -------- -------- --------- ------ ------- ------Totalnon-current liabilities 34.2 2.1 - - - 0.2 2.3 36.5---------------- -------- -------- -------- -------- --------- ------ ------- ------Total liabilities 115.1 2.1 - (4.2) - 0.7 (1.4) 113.7---------------- -------- -------- -------- -------- --------- ------ ------- ------Total equity andliabilities 206.8 24.2 0.2 - - - 24.4 231.2---------------- -------- -------- -------- -------- --------- ------ ------- ------ Restated Group balance sheetAt the transition date 30 September 2004 (unaudited) Appendix iii -------------- ------- -------- -------- -------- ---------- ------ -------- ------ Events Re- after classif- the ication UK GAAP Business Share- balance of Total (IFRS combin- based sheet software adjust- format) ations payments date costs Other ments IFRS-------------- ------- -------- -------- -------- ---------- ------ -------- ------ £m £m £m £m £m £m £m £m-------------- ------- -------- -------- -------- ---------- ------ -------- ------ -------------- ------- -------- -------- -------- --------- ------ -------- ------AssetsProperty, plant and equipment 3.5 - - - (0.3) - (0.3) 3.2Intangible assets -goodwill 108.4 - - - - - - 108.4Intangible assets - other - - - - 0.3 - 0.3 0.3Deferred tax 1.8 - 0.2 - - - 0.2 2.0---------------- -------- -------- -------- -------- --------- ------ ------- ------Total non-current assets 113.7 - 0.2 - - - 0.2 113.9---------------- -------- -------- -------- -------- --------- ------ ------- ------Inventories 5.0 - - - - - - 5.0Corporation tax recoverable 2.0 - - - - - - 2.0Trade and other receivables 35.7 - - - - - - 35.7Cash and cash equivalents 14.5 - - - - - - 14.5---------------- -------- -------- -------- -------- --------- ------ ------- ------Total current assets 57.2 - - - - - - 57.2---------------- -------- -------- -------- -------- --------- ------ ------- ------Total assets 170.9 - 0.2 - - - 0.2 171.1---------------- -------- -------- -------- -------- --------- ------ ------- ------ Equity Issued share capital 3.2 - - - - - - 3.2Share premium account 23.7 - - - - - - 23.7Merger reserve 109.0 - - - - - - 109.0Retained earnings (28.2) - 0.2 4.9 - (0.5) 4.6 (23.6) ---------------- -------- -------- -------- -------- --------- ------ ------- ------Total equity 107.7 - 0.2 4.9 - (0.5) 4.6 112.3---------------- -------- -------- -------- -------- --------- ------ ------- ------ Liabilities Interest-bearingloans and borrowings 4.7 - - - - - - 4.7Trade and other payables 55.5 - - (4.9) - 0.3 (4.6) 50.9Corporation tax payable 2.1 - - - - - - 2.1---------------- -------- -------- -------- -------- --------- ------ ------- ------Total current liabilities 62.3 - - (4.9) - 0.3 (4.6) 57.7---------------- -------- -------- -------- -------- --------- ------ ------- ------ Interest-bearing loans andborrowings - - - - - - - -Deferred tax - - - - - 0.2 0.2 0.2Provisions 0.9 - - - - - - 0.9Other - - - - - - - ----------------- -------- -------- -------- -------- --------- ------ ------- ------Total non-current liabilities 0.9 - - - - 0.2 0.2 1.1---------------- -------- -------- -------- -------- --------- ------ ------- ------Total liabilities 63.2 - - (4.9) - 0.5 (4.4) 58.8---------------- -------- -------- -------- -------- --------- ------ ------- ------Total equity and liabilities 170.9 - 0.2 - - - 0.2 171.1---------------- -------- -------- -------- -------- --------- ------ ------- ------ Restated Group cash flow statementfor the year ended 30 September 2005 (unaudited) Appendix iv ---------------------------------------- ------- ---------- -------- UK GAAP (IFRS Total format) adjustments IFRS---------------------------------------- ------- ---------- -------- £m £m £m---------------------------------------- ------- ---------- --------Cash flows from operating activitiesCash generated from operations 9.8 - 9.8Interest received 0.5 - 0.5Tax received 1.4 - 1.4Interest paid (0.8) - (0.8)Tax paid (5.5) - (5.5)---------------------------------------- ------- ---------- --------Net cash generated from operations 5.4 - 5.4---------------------------------------- ------- ---------- -------- Cash flows from investing activities Disposal of subsidiary undertakings 2.1 - 2.1Purchase of tangible fixed assets (1.8) - (1.8)Purchase of subsidiary undertakings (33.6) - (33.6)Net cash acquired with subsidiary undertakings 0.8 - 0.8Purchase of magazine titles (15.3) - (15.3)Payment of deferred consideration (0.1) - (0.1)---------------------------------------- ------- ---------- --------Net cash used in investing activities (47.9) - (47.9)---------------------------------------- ------- ---------- -------- Cash flows from financing activities Decrease in short-term deposits with bank 2.5 (2.5) -Proceeds from issue of Ordinary share capital 0.8 - 0.8Drawdown of bank loans 53.6 - 53.6Issue costs of new bank loan (0.4) - (0.4)Repayment of bank loans (8.7) - (8.7)Equity dividends paid (6.5) - (6.5)---------------------------------------- ------- ---------- --------Net cash generated from financing activities 41.3 (2.5) 38.8---------------------------------------- ------- ---------- -------- Net decrease in cash and cash equivalents (1.2) (2.5) (3.7)---------------------------------------- ------- ---------- --------Cash and cash equivalents at 1 October 2004 12.0 2.5 14.5Exchange adjustments (0.1) - (0.1)---------------------------------------- ------- ---------- --------Cash and cash equivalents at 30 September 2005 10.7 - 10.7---------------------------------------- ------- ---------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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