24th Jan 2006 16:19
Filtronic PLC24 January 2006 24 January 2006 Filtronic plc International Financial Reporting Standards In prior years Filtronic plc prepared its consolidated financial statementsaccording to UK Generally Accepted Accounting Practice (UK GAAP). From 1 June2005 Filtronic plc is required to prepare its consolidated financial statementsin accordance with International Financial Reporting Standards (IFRS).Consequently Filtronic plc's first results to be reported in accordance withIFRS will be the interim results for the six months ended 30 November 2005,which will be announced on Monday 30 January 2006. The comparative financial information for the six months ended 30 November 2004and the year ended 31 May 2005 have been restated in accordance with IFRS asreported below. Consolidated Income Statement 6 months ended 30 November 2004 Continuing Discontinued operations operation Total note £000 £000 £000 Revenue 103,168 26,973 130,141 ======== ======== ======== Operating (loss)/profit (1,329) 4,311 2,982 Gain on disposal ofproperty 2,372 - 2,372Finance income 3 431 - 431Finance costs 4 (2,281) - (2,281) -------- -------- --------(Loss)/profit beforetaxation (807) 4,311 3,504Taxation (1,668) - (1,668) -------- -------- --------(Loss)/profit aftertaxation (2,475) 4,311 1,836 -------- -------- --------(Loss)/profit for theperiod (2,475) 4,311 1,836 ======== ======== ======== (Loss)/earnings per shareBasic 5 (3.31)p 5.77p 2.46pDiluted 5 (3.31)p 5.76p 2.45p The (loss)/profit for the period is attributable to the equity shareholders ofthe parent. Consolidated Income Statement Year ended 31 May 2005 Continuing Discontinued operations operation Total note £000 £000 £000 Revenue 212,891 49,974 262,865 ======== ======== ======== Operating profit 5,650 5,554 11,204 Gain on disposal ofproperty 2,356 - 2,356Finance income 3 607 - 607Finance costs 4 (4,624) - (4,624) -------- -------- -------- Profit before taxation 3,989 5,554 9,543Taxation (241) - (241) -------- -------- --------Profit after taxation 3,748 5,554 9,302 -------- -------- --------Profit for the period 3,748 5,554 9,302 ======== ======== ========Earnings per shareBasic 5 5.01p 7.43p 12.44pDiluted 5 5.00p 7.41p 12.41p The profit for the period is attributable to the equity shareholders of theparent. Consolidated Balance Sheet 30 November 31 May 2004 2005 £000 £000Non-current assetsGoodwill 32,024 31,400Property, plant and equipment 81,601 79,793Deferred tax - 2,309 ------- ------- 113,625 113,502 ------- -------Current assetsInventories 30,862 34,802Trade and other receivables 58,731 67,924Income tax receivable 686 -Cash and cash equivalents 6,322 6,563 ------- ------- 96,601 109,289 ------- ------- ------- -------Total assets 210,226 222,791 ------- -------Current liabilitiesBank overdraft 2,369 5,958Bank loan 8,000 11,000Trade and other payables 40,224 49,844Income tax payable 1,954 1,880 ------- ------- 52,547 68,682 ------- -------Non-current liabilitiesBank loan 40,000 33,000Defined benefit pension 15,804 16,149Deferred income 12,295 10,730Deferred tax 608 661 ------- ------- 68,707 60,540 ------- ------- ------- -------Total liabilities 121,254 129,222 ------- -------Net assets 88,972 93,569 ======= =======EquityShare capital 7,484 7,484Share premium 139,172 139,172Translation reserve 554 1,302Other reserve 1,937 5,584Accumulated losses (60,175) (59,973) ------- -------Total equity 88,972 93,569 ======= ======= Consolidated Statement of Recognised Income and Expense 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000 Profit for the period 1,836 9,302Actuarial loss on defined benefitpension scheme (3,584) (6,784)Currency translation movement arising onconsolidation 471 1,314 -------- --------Total recognised income and expensefor the period (1,277) 3,832 ======== ======== Consolidated Cash Flow Statement 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000Cash flows from operating activities Profit for the period 1,836 9,302Taxation 1,668 241Finance costs 2,281 4,624Finance income (431) (607)Gain on disposal of property (2,372) (2,356) -------- --------Operating profit 2,982 11,204Defined benefit pension charge/(credit) 1,476 (422)Defined benefit pension contributions paid (855) (2,029)Share-based payment 129 291Depreciation 7,235 14,572Gain on disposal of plant and equipment (136) (235)Licence fee released (1,167) (2,335)Government grants released (296) (693)Government grants received 1,000 1,000Government grants repaid (150) (150)Movement in inventories 5,466 2,107Movement in trade and other receivables (4,915) (13,249)Movement in trade and other payables 1,034 10,384 -------- --------Cash flow from operations 11,803 20,445Taxation paid (1,662) (1,846) -------- --------Net cash from operating activities 10,141 18,599 -------- -------- Consolidated Cash Flow Statement 6 months Year ended ended 30 November 31 May 2004 2005 note £000 £000 Net cash from operating activities 10,141 18,599 -------- --------Cash flows from investing activitiesProceeds from sale of property 6,358 6,349Proceeds from sale of plant andequipment 1,004 1,555Interest received 45 85Acquisition of property, plant andequipment (7,255) (12,963) -------- --------Net cash from investing activities 152 (4,974) -------- --------Cash flows from financing activitiesBank loan repaid (2,000) (6,000)Interest paid (2,063) (4,189)Dividends paid (1,344) (2,018) -------- --------Net cash from financing activities (5,407) (12,207) -------- -------- Increase in cash and cashequivalents 4,886 1,418Currency exchange movement 366 486Opening cash and cash equivalents (1,299) (1,299) -------- --------Closing cash and cash equivalents 7 3,953 605 ======== ======== Notes to the Interim Financial Information 1. Business segment analysis 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000RevenueWireless Infrastructure 86,631 177,733Electronic Defence 15,216 31,590Compound Semiconductors 3,610 8,572Inter segment (2,289) (5,004) -------- --------Continuing operations 103,168 212,891Handset Products - discontinued operation 26,973 49,974 -------- -------- 130,141 262,865 ======== ======== Operating profit/(loss)Wireless Infrastructure 7,062 17,524Electronic Defence 1,197 3,070Compound Semiconductors (6,289) (11,701)Central Services (2,678) (5,694)Unallocated pension (charge)/credit (621) 2,451 -------- --------Continuing operations (1,329) 5,650Handset Products - discontinued operation 4,311 5,554 -------- --------Operating profit 2,982 11,204Gain on disposal of property 2,372 2,356Finance income 431 607Finance costs (2,281) (4,624) -------- --------Profit before taxation 3,504 9,543Taxation (1,668) (241) -------- --------Profit after taxation 1,836 9,302 ======== ======== The business segments were redefined with effect from 1 June 2005. The businesssegment results for the comparative periods have been re-analysed to beconsistent with the current period. 2. Geographical origin segment analysis 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000RevenueUnited Kingdom 54,614 106,447Finland 16,223 31,214United States of America 27,030 65,880China 23,647 57,147Australia 2,405 4,300Inter segment (20,751) (52,097) -------- --------Continuing operations 103,168 212,891 -------- --------Finland 13,374 23,220China 14,990 29,841Inter segment (1,391) (3,087) -------- --------Discontinued operation 26,973 49,974 -------- -------- 130,141 262,865 ======== ========Operating (loss)/profitUnited Kingdom (10,077) (20,798)Finland 2,227 3,041United States of America 1,080 9,538China 6,750 16,198Australia (1,309) (2,329) -------- --------Continuing operations (1,329) 5,650 -------- --------Finland (137) (2,923)China 4,448 8,477 -------- --------Discontinued operation 4,311 5,554 -------- --------Operating profit 2,982 11,204Gain on disposal of property 2,372 2,356Finance income 431 607Finance costs (2,281) (4,624) -------- --------Profit before taxation 3,504 9,543Taxation (1,668) (241) -------- --------Profit after taxation 1,836 9,302 ======== ======== 3. Finance income 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000 Interest income 45 85Currency exchange gains 386 522 -------- -------- 431 607 ======== ========4. Finance costs 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000 Interest expense (2,063) (4,189)Net pension finance cost (218) (435) -------- -------- (2,281) (4,624) ======== ======== 5. (Loss)/earnings per share 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000(Loss)/profit for the period- continuing operations (2,475) 3,748- discontinued operation 4,311 5,554 -------- --------Profit for the period 1,836 9,302 ======== ======== 000 000Weighted average number of shares 74,753 74,797Dilution effect of share options 33 84Dilution effect of contingentlyissuable shares 89 45 -------- --------Diluted weighted average numberof shares 74,875 74,926 ======== ========Basic (loss)/earnings per share- continuing operations (3.31)p 5.01p- discontinued operation 5.77p 7.43p -------- --------Basic earnings per share 2.46p 12.44p ======== ========Diluted (loss)/earnings per share- continuing operations (3.31)p 5.00p- discontinued operation 5.76p 7.41p -------- --------Diluted earnings per share 2.45p 12.41p ======== ======== 6. Dividends The dividends recognised in equity and paid during the period were as follows: 6 months Year ended ended 30 November 31 May 2004 2005 Per share £000 £000Final dividend year ended31 May 2004 1.80p 1,344 1,344Interim dividend year ended31 May 2005 0.90p - 674 -------- -------- 1,344 2,018 ======== ======== 7. Cash and cash equivalents and net debt 30 November 31 May 2004 2005 £000 £000 Cash and cash equivalents 6,322 6,563Bank overdraft (2,369) (5,958) -------- --------Cash and cash equivalents in thecash flow statement 3,953 605 -------- -------- Bank loan - current (8,000) (11,000)- non-current (40,000) (33,000) -------- --------Debt (48,000) (44,000) -------- -------- -------- --------Net debt (44,047) (43,395) ======== ======== 8. Reconciliation of movements in equity 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000 Opening equity 91,464 91,464Total recognised income andexpensefor the period (1,277) 3,832Share-based payments 129 291Dividends (1,344) (2,018) -------- --------Closing equity 88,972 93,569 ======== ======== 9 Basis of preparation These comparative interim financial statements have been prepared on the basisof International Financial Reporting Standards (IFRS) as adopted for use in theEuropean Union that are effective at 31 May 2006, which is the group's firstannual reporting date under IFRS. IFRS are subject to ongoing amendment by theInternational Accounting Standards Board and subsequent endorsement by theEuropean Union, and therefore are subject to change. The consolidated financial statements for the year ended 31 May 2006 will be thegroup's first full IFRS financial statements. The date of transition to IFRS is1 June 2004. The financial information for the comparative periods has beenrestated on the basis of IFRS. Reconciliations from UK GAAP to IFRS of theprofit for the period and total equity for the comparative periods are set outin note 10. Explanations of the differences between the UK GAAP and the IFRSfinancial statements are provided in note 11. The group has elected to takecertain IFRS first-time adoption options and these are described in note 12. The accounting policies adopted when reporting under UK GAAP have been revisedwhere necessary to comply with IFRS. The accounting policies adopted by thegroup under IFRS are laid out in note 13. The accounting policies have beenapplied consistently to all the periods presented in these comparative interimfinancial statements. 10 Reconciliations from UK GAAP to IFRS The reconciliations from UK GAAP to IFRS of the profit for the period and totalequity for the comparative periods are as follows: Profit for the period 6 months Year ended ended 30 November 31 May 2004 2005 £000 £000 Profit for the period perUK GAAP 1,652 5,312Goodwill amortisation 1,109 2,222Share-based payments (86) (248)Defined benefit pensionoperating (charge)/credit (621) 2,451Defined benefit pension netfinance cost (218) (435) -------- --------Profit for the period perIFRS 1,836 9,302 ======== ======== Total equity 1 June 30 November 31 May 2004 2004 2005 £000 £000 £000 Total equity per UK GAAP 101,113 102,590 105,778Proposed dividends 1,344 674 1,347SSAP 24 pension accrual 388 388 388Defined benefit pensionliability (11,381) (15,804) (16,149)Goodwill amortisation - 1,109 2,222Goodwill currencytranslation movement - 15 (17) -------- -------- --------Total equity per IFRS 91,464 88,972 93,569 ======== ======== ======== 11 Differences between the UK GAAP and the IFRS financial statements Explanations of the differences between the UK GAAP and the IFRS financialstatements are as follows: Presentation of financial statements The formats of the income statement, balance sheet and particularly the cashflow statement are different under IFRS as compared to those used for UK GAAP. Segment reporting The reportable business segments were redefined to comply with the requirementsof IAS 14 Segment Reporting. Each reportable business segment is subject torisks and returns that are different from the other business segments. Goodwill Goodwill is not amortised under IFRS. Instead goodwill is subject to annualimpairment testing, which indicated there was no impairment. Share-based payment Under IFRS, the fair value of share options at the date of grant is expensed inthe income statement over the vesting periods of the options. Defined benefit pension IAS 19 Employee Benefits requires the separate recognition of the operating andfinancing costs of the defined benefit pension scheme in the income statement.Service costs are spread systematically over the working lives of the employees.Financing costs are recognised in the periods in which they arise. There was apast service credit in the year ended 31 May 2005 as a result of a reduction inthe benefits payable under the scheme. The defined benefit pension liability isthe present value of the defined benefit obligation less the fair value of thepension scheme assets. Actuarial gains and losses are recognised immediately inthe statement of recognised income and expense. Previously under UK GAAP the defined benefit pension scheme was accounted for inaccordance with SSAP 24. The SSAP 24 charge to the income statement for thecomparative periods presented was the same as the employers pensioncontributions for the period. The defined benefit pension costs and pension liability under IAS 19 are thesame as disclosed under FRS 17 in the UK GAAP financial statements for the yearended 31 May 2005. Dividends Under IFRS, interim dividends are recognised in the period they are declared,and final dividends are recognised in the period they are approved byshareholders. Dividends are recognised directly in equity, and not in the incomestatement. Translation reserve Under IFRS, currency translation movements arising from the consolidation ofoverseas subsidiaries are accumulated in the translation reserve, which is aseparate component of equity. Revaluation reserve The UK GAAP revaluation reserve of £106,000 has been reclassified to accumulatedlosses under IFRS. The amount was the balance on the revaluation reserve at thetransition date in respect of assets that are measured on the basis of deemedcost under IFRS. 12 IFRS First-time adoption options The group has elected to take certain IFRS first-time adoption options asfollows: Business combinations All prior business combination accounting has been frozen at the transitiondate. This includes goodwill on the balance sheet and goodwill deducted fromequity. Share-based payments Only share options granted since 7 November 2002 have been fair valued andexpensed in the income statement over the vesting periods. Employee benefits All cumulative actuarial gains and losses in respect of the defined benefitpension scheme have been recognised at the transition date. Foreign exchange The translation reserve arising from the consolidation of foreign subsidiarieswas set to zero at the transition date. 13 Accounting policies Basis of accounting The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union. The financial statements have been prepared under the historical costconvention, except for the defined benefit pension liability which is measuredat fair value. The accounting policies have been applied consistently throughout the group. Basis of consolidation The financial statements consolidate the income statements, balance sheets andcash flow statements of the company and all of its subsidiaries. Subsidiaries are all entities over which the group has the power to govern thefinancial and operating policies. Subsidiaries are consolidated from the date onwhich control is transferred to the group. Subsidiaries are not consolidatedfrom the date that control ceases. Intra group transactions and balances are eliminated on consolidation. Segment reporting The business segments are the primary segments and the geographical originsegments are the secondary segments. Each reportable segment is subject to risksand returns that are different from the other segments. Foreign currency translation The functional currency of each subsidiary is the currency of the primaryeconomic environment in which the subsidiary operates. The financial statementsare presented in sterling which is the functional and presentational currency ofthe company. Transactions denominated in foreign currencies are translated into thefunctional currency of each subsidiary at the exchange rate ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are translated into sterling at the rate of exchange ruling at thebalance sheet date. Foreign exchange gains and losses arising on the settlement of such transactionsand translation of monetary assets and liabilities are recognised in the incomestatement. On consolidation, the financial statements of subsidiaries with a functionalcurrency other than sterling are translated into sterling as follows: - The assets and liabilities in their balance sheets plus any goodwill aretranslated at the rate of exchange ruling at the balance sheet date. - The income statements and cash flow statements are translated at the averagerate of exchange for the period. Currency translation movements arising on the translation of the net investmentsin foreign subsidiaries are recognised in the translation reserve, which is aseparate component of equity. Revenue Revenue is recognised for goods and services provided to customers during theperiod. Revenue excludes any related value added or sales tax. Research and development All research costs are expensed as incurred. Development costs chargeable to the customer are recognised as an expense in thesame period as the associated customer revenue. Development costs incurred on projects requiring product qualification tests tosatisfy customer specifications are generally expensed as incurred, reflectingthe technical risks associated with meeting the resultant product qualificationtest. Development costs incurred on projects are capitalised where firstly thetechnical feasibility can be tested against relevant milestones, secondly theprobable revenue stream foreseen over the life of the resulting product cansupport the development and thirdly sufficient resources are available tocomplete the development. These capitalised costs are amortised on a straightline basis over the expected life of the associated product. Once a new product is qualified, further development costs are expensed as theyarise because they are incurred in response to continual customer demand toenhance the product functionality and to reduce product selling prices. Government grants Government grants related to operating expenditure are recognised in the incomestatement in the same period as the expenditure. Government grants related to capital expenditure are credited to deferred incomein the balance sheet on receipt. The deferred government grant income isrecognised in the income statement over the expected life of the related assets. Operating leases Operating lease rentals are charged to the income statement on a straight linebasis over the lease term. Share-based payments The group operates share option schemes, under which share options are grantedto certain employees. The granting of the share options is a share-basedpayment. The fair value of the share options at the date of grant is calculated using anoption pricing model, taking into account the terms and conditions applicable tothe option grant. The fair value of the number of share options expected to vestis expensed in the income statement on a straight line basis over the expectedvesting period. Each reporting period these vesting expectations are revised asappropriate. A credit is made to equity, equal to the share-based payment expense in theperiod. Goodwill Goodwill represents the excess of the cost of acquisitions over the fair valueof the net identifiable assets of the subsidiary acquired at the date ofacquisition. Goodwill is stated at cost less any accumulated impairment losses.Goodwill is allocated to cash generating units. Goodwill is tested forimpairment annually and when there is an indication of impairment. If impaired,the goodwill carrying value is written down to its recoverable amount. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand less any accumulated impairment losses. Depreciation is provided on a straight line basis over the estimated usefullives of the assets as follows: Freehold land Not depreciatedFreehold buildings 50 yearsPlant and equipment 3 to 10 years Property, plant and equipment are tested for impairment when there is anindication of impairment. If impaired, the carrying values of the assets arewritten down to their recoverable amounts. Inventories Inventories are stated at the lower of cost and net realisable value. Costcomprises weighted average cost of materials and components together withattributable direct labour and overheads. Net realisable value is the estimatedselling price less estimated costs of completion and sale. Trade receivables Trade receivables are stated net of any provision for doubtful debts. Cash and cash equivalents Cash and cash equivalents comprise cash balances and bank deposits with anoriginal maturity of three months or less. Bank overdrafts that are repayable ondemand and form an integral part of the group's cash management are included asa component of cash and cash equivalents for the purpose of the cash flowstatement. Net debt Net debt is cash and cash equivalents less bank overdrafts, bank revolvingcredits and bank loans. Dividends Interim dividends are recognised in equity in the period they are declared.Final dividends are recognised in equity in the period they are approved byshareholders. Share capital Ordinary shares issued are classified as share capital in equity. Pension schemes Defined contribution pension schemes are operated for overseas employees.Contributions are recognised as an expense in the income statement as incurred. A defined benefit pension scheme is operated for United Kingdom employees. Thedefined benefit pension liability is the present value of the defined benefitobligation less the fair value of the pension scheme assets. The defined benefitobligation is calculated by independent actuaries using the projected unitmeasure. The discount rate used to calculate the present value of the definedbenefit obligation is the yield on AA credit rated corporate bonds that havematurity dates approximating the terms of the benefit obligations. Service costs are spread systematically over the working lives of the employees,and are recognised within operating costs in the income statement. Financingcosts are recognised in the periods in which they arise within finance costs inthe income statement. Actuarial gains and losses arising from experience adjustments and changes inactuarial assumptions are recognised immediately in the statement of recognisedincome and expense. Deferred taxation Deferred tax is provided using the balance sheet liability method. Provision ismade for temporary differences between the carrying amounts of assets andliabilities in the financial statements and the amounts for taxation purposes.Temporary differences are not provided for the initial recognition of assets orliabilities that affect neither accounting nor taxable profit. No provision ismade for differences relating to investments in subsidiaries to the extent thatthey will probably not reverse in the foreseeable future. The amount of deferredtax provided is based on the expected manner of realisation or settlement of thecarrying amount of the assets and liabilities, using tax rates enacted orsubstantially enacted at the balance sheet date. Deferred tax assets arerecognised only to the extent that it is probable that future taxable profitswill be available against which the asset can be utilised. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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