6th Jul 2005 07:00
Wood Group (John) PLC06 July 2005 John Wood Group PLC ("Wood Group")Adoption of International Financial Reporting Standards ("IFRS")(Unaudited) Introduction The first set of results to be prepared under IFRS will be the interim accountsfor the six months ending 30 June 2005, which will contain comparative financialstatements under IFRS for the periods ending June and December 2004. Thefollowing note highlights the main areas of impact for Wood Group on adoption ofIFRS, the estimated impact on the 2004 reported figures and an indication of theimpact for 2005. At this stage, accounting practice is continuing to evolve andtherefore the full effect of adopting IFRS on the financial statements cannot bedetermined with certainty and may be subject to change. However, there is noimpact on cash flows arising from the adoption of IFRS. IFRS 1 "Transitional Arrangements" IFRS 1 sets out how a company should apply IFRS at the transition date. In linewith the standard, Wood Group will use accounting policies that comply with IFRSfor the interim accounts and apply these policies to all historic periodspresented. Wood Group will use certain exemptions allowable under IFRS 1 inpreparing historic information, which are included in the descriptions outlinedbelow. IFRS 2 "Share-based payments" Wood Group will recognise a charge to the Income Statement for the fair value ofshare options and other share based payments granted after 7 November but whichhave not yet vested. The impact on 2004 Profit before tax was approximately $2Mand is expected to be approximately $3M in 2005 in relation to share options.The increase in the 2005 charge is due to the full year impact of optionsgranted during 2004 and new options granted in 2005. The accounting treatment ofother share based payments, being the Long Term Retention Plan (LTRP) and LongTerm Incentive Scheme (LTIS), is not expected to be materially different underIFRS. IFRS 3 "Business Combinations"/ IAS 38 "Intangible Assets" Wood Group will apply IFRS 3 to all acquisitions made on or after 1 January2004. Goodwill amortisation of approximately $17M booked in 2004 will bereversed and acquisition goodwill will be carried at 1 January 2004 levels plusthe goodwill on acquisitions made since that date; goodwill will be subject toan annual impairment test. Other intangible assets will continue to be amortised over their useful economiclives in a similar way to UK GAAP. This is expected to result in an amortisationcharge of $1-2M in 2005 (2004:$1M). Wood Group will also be required to recognise other intangible assets that mayexist on acquisition separately from goodwill, and amortise these over theiruseful economic life. An amount of $3M will be recognised on the acquisitionsmade during 2004 relating to the value of customer contracts, which will befully amortised in 2004. This amount had been accounted for as goodwill under UKGAAP. IAS 10 (Revised) "Events after the Balance Sheet Date" IAS 10 requires that dividends should not be recognised as a liability orcharged to the income statement until they have been declared. As a result, theinterim accounts will not take into account the interim dividend, which will nothave been declared at 30 June 2005. IAS 12 "Income Taxes" As a result of the reversal of the goodwill amortisation charge for 2004 thebook value of goodwill has increased by a net amount of $14M. There has been nochange in the underlying tax basis of the goodwill in those countries wheregoodwill is deductible and therefore a further deferred tax liability arises onthe increase in the temporary difference. The impact on the tax charge for 2004is $2M and is expected to be the same in 2005. IAS 14 "Segmental Reporting" Wood Group has determined that its primary segmental reporting format is bybusiness and that the segments will continue to be Engineering & ProductionFacilities, Well Support and Gas Turbine Services. Additional segmentalinformation under IFRS will include inter-segment revenues, gross assets andliabilities, capital expenditure, depreciation and amortisation by businesssegment. IAS 19 "Employee Benefits" Wood Group adopted FRS 17 in 2001 and recognised the full net liability on thedefined benefit pension scheme at that time. The treatment under IFRS will belargely the same and therefore there will be no material impact on either 2004or 2005 as a result of the transition to IFRS. IAS 31 "Interests in Joint Ventures" Wood Group has opted to consolidate proportionally its joint ventures under IAS31. As a result, it will consolidate its share of joint venture net debt, which,as previously disclosed, was $39.5M and $45.5M at 30 June 2004 and 31 December2004 respectively. There is no impact on either net assets or earnings. IAS 32 and 39 (Revised) "Financial Instruments" Wood Group has elected, under IFRS1, to adopt IAS 32 and 39 as if arising from achange in accounting policy as at 1 January 2005. It has assessed its foreignexchange and interest rate exposures and documented the hedges taken out againstthese exposures. Any elements of the hedges determined to be ineffective will betaken through the income statement. These amounts are not expected to bematerial. There will be an impact on the Wood Group's net assets of recognising certainfinancial assets and liabilities at their fair value at 1 January 2005. Theseamounts are not expected to be material. Appendix 1 - Restatement of UK GAAP Reported Figures EBITA 30 June 2004 31 Dec 2004 $M $MEBITA as reported under UK GAAP (1) 54 117Share-based payments (IFRS 2) (1) (2)Adjusted EBITA as adjusted for IFRS 53 115 PBT 30 June 2004 31 Dec 2004 $M $MPBT as reported under UK GAAP (2) 12 54Share-based payments (IFRS 2) (1) (2)Reverse acquisition goodwill amortisation (IFRS 3) 8 17Other intangibles amortisation (IFRS 3) (1) (3)PBT as adjusted for IFRS 18 66 Adjusted Earnings per share (EPS) 30 June 2004 31 Dec 2004 (cents) (cents)Adjusted EPS as reported under UK GAAP (3) 6.0 13.1Share-based payments (IFRS 2) (0.2) (0.3)Tax adjustment (IAS 12) (0.2) (0.4)Adjusted EPS as adjusted for IFRS 5.6 12.4 Balance Sheet 1 Jan 2004 30 June 2004 31 Dec 2004 $M $M $M (Restated)(4) Net Assets as reported under UK GAAP 540 514 519Acquisition goodwill adjustment (IFRS 3) - 8 17Other intangibles amortisation (IFRS 3) - (1) (3)Dividend adjustment (IAS 10) 10 6 11Tax adjustment (IAS 12) - (1) (2)Net Assets as adjusted for IFRS 550 526 542 Notes (1) 'EBITA' is earnings before interest, tax and amortisation and representsoperating profit before deduction of amortisation and impairment andrestructuring charges. (2) 'PBT' is Profit on ordinary activities before taxation. (3) Adjusted EPS represents the fully diluted EPS excluding the impact ofamortisation and exceptional items, net of tax. (4) Restated under UK GAAP for the adoption of UITF 38 "Accounting for ESOPTrusts". For enquiries please contact Wood Group +44 (0) 1224 851000Alan Semple Finance DirectorNick Gilman Investor RelationsCarolyn Smith Corporate Communications BrunswickPatrick Handley/ Nina Coad + 44 (0) 20 7404 5959 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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