1st Sep 2005 07:03
Hunting PLC01 September 2005 1 September 2005 HUNTING PLC Transition to International Financial Reporting Standards 2005 Introduction Hunting PLC has adopted International Financial Reporting Standards ("IFRS")with effect from 1 January 2004. This announcement accompanies the 2005 interimannouncement and provides the transitional financial information together withthe principal accounting policies adopted under IFRS applied from 1 January2004. In compliance with IFRS, the reconciliations of the income statement, balancesheet and cash flow statements from previously published UK GAAP to the restatedIFRS financial statements are contained in this announcement for the six monthsended 30 June 2004 and the year ended 31 December 2004 including the balancesheet at 1 January 2004. The exemption permitting the deferral of theintroduction of IAS 32 and IAS 39, the International Accounting Standards onFinancial Instruments, until 1 January 2005 has been utilised. Other keyexemptions and exceptions permitted under IFRS 1 First-time adoption ofInternational Financial Reporting Standards and applied by Hunting PLC are alsoset out in this announcement. A reconciliation between the IFRS balance sheetexcluding IAS 32 and IAS 39 at 31 December 2004 and the IFRS balance sheetincluding IAS 32 and IAS 39 at 1 January 2005 is included within thisannouncement. The key changes to the financial statements arising from the transition to IFRSare: • Under IFRS, accounting for pensions and employee benefits results in a lower credit to the income statement than under UK GAAP (SSAP 24). • Goodwill under IFRS is not amortised and consequently the £2.7m charge for the year ended 31 December 2004 under UK GAAP is reversed. • Under IFRS, share option costs for the year ended 31 December 2004 of £0.3m are charged to income compared to £nil under UK GAAP. • The provision for deferred tax increases under IFRS as provisions are required on the revaluation surpluses and unremitted overseas earnings. The impact of the change to IFRS on key ratios for the year ended 31 December2004 are: IFRS UK GAAPBasic earnings per share (restated) 7.9p 5.9pBasic EPS before exceptional items (restated) 13.1p 11.9pProfit before tax £16.5m £15.4mShareholders' funds £108.2m £114.2m Dennis Clark 1 September 2005Finance Director Understanding The Change Summary of Key Changes IFRS has no impact on corporate strategy, operating decisions, or the underlyingvalue of the business. The significant accounting changes for the Group are: 1) Recognising the full net pension surplus and retirement benefit items on the balance sheet. Under IFRS, the methodology for determining the net surplus of scheme assets and liabilities is different to UK GAAP (SSAP 24). At 31 December 2004, this has resulted in a £2.5m reduction in net assets.2) Cessation of goodwill amortisation. For the year ended 31 December 2004, this has resulted in a £2.5m increase in net assets and profit after tax.3) Dividends payable and receivable are now recognised in the period in which they are approved. At 31 December 2004, this has increased net assets by £3.0m.4) Under IFRS, in respect of revalued property, plant and equipment, depreciation in excess of the historic cost basis is transferred from the revaluation reserve to retained earnings. No transfer was made under UK GAAP.5) Deferred tax assets and liabilities are no longer offset. Deferred tax is recognised on all temporary differences, including the revaluation of non-monetary assets. At 31 December 2004, deferred tax assets and liabilities have increased by £11.2m and £20.0m respectively.6) Under UK GAAP, goodwill written off to reserves prior to 1998 was reinstated and included in determining the profit or loss on disposal of a business. Under IFRS, this goodwill is not reinstated. Under UK GAAP, for the year ended 31 December 2004, £1.0m of goodwill previously written off to reserves was included in the loss on disposal, which under IFRS, is not reinstated and therefore gives rise to a £1.0m increase in profit in 2004.7) Under IFRS, a foreign currency translation reserve is required to be separately measured and includes foreign currency translation differences arising on the translation of overseas equity investments. Under the transitional rules, the Company has opted to start the foreign currency translation reserve at the transition date. At 1 January 2005, the adoption of IAS 32 and IAS 39 gives rise to the followingsignificant changes: 8) The recognition of derivative assets and liabilities on the balance sheet at fair values. Derivative assets of £2.6m and derivative liabilities of £2.4m have been recognised under IFRS.9) Bank overdrafts and bank deposits are recognised at gross values and now include accrued interest. At 1 January 2005, the effect is to increase cash and cash equivalents by £59.0m, increase bank borrowings by £59.8m, decrease trade and other receivables by £0.1m and decrease trade and other payables by £1.0m. Please note that the standards currently in issue are subject to interpretationsissued from time to time by the International Financial ReportingInterpretations Committee (IFRIC). Further standards may be issued by the IASBthat may require adoption for financial years beginning on or after 1 January2005. Due to a number of new and revised Standards included within the body ofStandards that comprise IFRS, there is not yet significant established practiceon which to draw in forming decisions regarding the interpretation andapplication of the Standards. Accordingly, practice is continuing to evolve. Atthis preliminary stage, therefore, the full financial effect of reporting underIFRS as it will be applied and reported on in the Company's first IFRS financialstatements for the year ended 31 December 2005 may be subject to change. TheIFRS results are unaudited. Consolidated Income Statement Six months ended 30 June 2004 Year ended 31 December 2004 Effect of Effect of Notes UK transition UK transition GAAP to IFRS IFRS GAAP to IFRS IFRS £m £m £m £m £m £m Revenue 7,8 580.6 (41.1) 539.5 1,255.1 (95.7) 1,159.4Cost of sales 8 (538.4) 40.4 (498.0) (1,161.5) 94.8 (1,066.7) ----------------------------------------------------------------Gross profit 42.2 (0.7) 41.5 93.6 (0.9) 92.7Other operating income 7 - 1.5 1.5 - 2.9 2.9Operating expenses* 7 (29.5) (1.6) (31.1) (66.7) (3.1) (69.8)Share of profit inassociates - - - 0.1 (0.1) -Profit from operations before exceptional items 12.7 (0.8) 11.9 27.0 (1.2) 25.8Exceptional items 7 - - - (6.0) 1.0 (5.0) ----------------------------------------------------------------Profit from operations 12.7 (0.8) 11.9 21.0 (0.2) 20.8Net finance costs 1,7 (2.6) 0.9 (1.7) (5.6) 1.2 (4.4)Share of profits in associates - - - - 0.1 0.1 ----------------------------------------------------------------Profit before tax 10.1 0.1 10.2 15.4 1.1 16.5Taxation 6 (4.0) 0.6 (3.4) (6.3) 1.2 (5.1) ----------------------------------------------------------------Profit for the period 6.1 0.7 6.8 9.1 2.3 11.4 ----------------------------------------------------------------Attributed to:Equity holders of the parent 6.0 6.7 8.6 10.9Minority interests 0.1 0.1 0.5 0.5 ------- ------------------ -------Profit for the period 6.1 6.8 9.1 11.4 ------- ------------------ -------Basic earnings per share(restated) 3.7p 4.4p 5.9p 7.9pDiluted earnings per share(restated) 3.6p 4.3p 5.7p 7.7p *Under UK GAAP and IFRS, operating expenses include a £3.8m exceptional chargefor onerous leases in the year ended 31 December 2004. Consolidated Balance Sheet At 30 June 2004 At 31 December 2004 Effect of Effect of Notes UK transition UK transition GAAP to IFRS IFRS GAAP to IFRS IFRS £m £m £m £m £m £mASSETSNon-current assetsProperty, plant andequipment 9 152.6 (2.2) 150.4 158.1 (2.3) 155.8Goodwill 2 46.2 1.3 47.5 44.8 2.7 47.5Intangible assets 9 - 3.0 3.0 - 3.1 3.1Interests in associates 8.8 - 8.8 8.7 - 8.7Investments 5.7 (0.2) 5.5 3.8 (0.2) 3.6Retirement benefitassets 1 23.7 (0.1) 23.6 25.8 (2.0) 23.8Receivables and otherassets 1.4 1.7 3.1 3.4 (0.1) 3.3Deferred tax assets 5,6 - 4.7 4.7 - 11.2 11.2 ------------------------------------------------------- 238.4 8.2 246.6 244.6 12.4 257.0 -------------------------------------------------------Current assetsInventories 82.0 0.3 82.3 75.7 0.8 76.5Trade and otherreceivables 140.6 (1.8) 138.8 140.5 (0.1) 140.4Investments 1.3 (1.3) - - - -Cash and cashequivalents 7.3 1.3 8.6 15.1 - 15.1 ------------------------------------------------------- 231.2 (1.5) 229.7 231.3 0.7 232.0 -------------------------------------------------------LIABILITIESCurrent liabilitiesTrade and otherpayables 4 144.1 (2.8) 141.3 156.8 (4.0) 152.8Current tax liabilities 4.5 (0.3) 4.2 1.5 (0.4) 1.1Borrowings 7.5 - 7.5 16.4 - 16.4Provisions - - - - 0.6 0.6 ------------------------------------------------------- 156.1 (3.1) 153.0 174.7 (3.8) 170.9 -------------------------------------------------------Net current assets 75.1 1.6 76.7 56.6 4.5 61.1 -------------------------------------------------------Non-current liabilitiesBorrowings 100.0 - 100.0 129.3 - 129.3Deferred tax liabilities 5,6 35.9 13.9 49.8 39.5 20.0 59.5Retirement benefitobligations 10 - 1.5 1.5 - 1.9 1.9Other payables 2.8 (1.1) 1.7 3.0 (1.1) 1.9Provisions 12.3 2.4 14.7 11.5 2.1 13.6 ------------------------------------------------------- 151.0 16.7 167.7 183.3 22.9 206.2 -------------------------------------------------------Net assets 162.5 (6.9) 155.6 117.9 (6.0) 111.9 =======================================================Shareholders' fundsShare capital 73.2 - 73.2 25.3 - 25.3Share premium 41.5 - 41.5 41.5 - 41.5Treasury shares (0.1) - (0.1) - - -Revaluation reserve 5 15.9 (7.3) 8.6 16.6 (7.8) 8.8Other reserves 3,9 - 12.1 12.1 - 13.6 13.6Retained earnings 3,5 28.7 (11.7) 17.0 30.8 (11.8) 19.0 ------------------------------------------------------- 159.2 (6.9) 152.3 114.2 (6.0) 108.2Minority interests 3.3 - 3.3 3.7 - 3.7 -------------------------------------------------------Total equity 162.5 (6.9) 155.6 117.9 (6.0) 111.9 ======================================================= Consolidated Balance Sheet at 1 January 2004(Date of transition to IFRS) Effect of Notes UK transition GAAP to IFRS IFRS £m £m £mASSETSNon-current assetsProperty, plant and equipment 9 160.5 0.9 161.4Goodwill 2 49.1 (3.3) 45.8Intangible assets 9 - 3.3 3.3Interests in associates and joint ventures 13.0 (0.1) 12.9Investments 5.6 - 5.6Retirement benefit assets 1 21.7 (3.4) 18.3Receivables and other assets 1.4 (0.1) 1.3Deferred tax assets 5,6 - 5.8 5.8 ---------------------------- 251.3 3.1 254.4 ----------------------------Current assetsInventories 93.2 0.2 93.4Trade and other receivables 129.5 (0.5) 129.0Current tax assets 5.8 0.4 6.2Investments 0.4 (0.4) -Cash and cash equivalents 15.3 0.5 15.8 ---------------------------- 244.2 0.2 244.4 ----------------------------LIABILITIESCurrent liabilitiesTrade and other payables 4 138.3 (3.7) 134.6Borrowings 8.7 (0.1) 8.6 ---------------------------- 147.0 (3.8) 143.2 ----------------------------Net current assets 97.2 4.0 101.2 ----------------------------Non-current liabilitiesBorrowings 133.6 - 133.6Deferred tax liabilities 5,6 34.4 14.7 49.1Retirement benefit obligations 1 - 1.3 1.3Other payables 2.9 (0.9) 2.0Provisions 12.8 2.4 15.2 ---------------------------- 183.7 17.5 201.2 ----------------------------Net assets 164.8 (10.4) 154.4 ============================Shareholders' fundsShare capital 73.2 - 73.2Share premium 41.5 - 41.5Treasury shares (0.1) - (0.1)Revaluation reserve 5 17.8 (7.8) 10.0Other reserves 3,9 - 12.3 12.3Retained earnings 3,5 29.2 (14.9) 14.3 ---------------------------- 161.6 (10.4) 151.2Minority interests 3.2 - 3.2 ----------------------------Total equity 164.8 (10.4) 154.4 ============================ Consolidated Cash Flow Statement Six months ended 30 June 2004 Year ended 31 December 2004 Effect of Effect of UK transition UK transition GAAP to IFRS IFRS GAAP to IFRS IFRS £m £m £m £m £m £mOperating activitiesProfit from operations 12.7 (0.8) 11.9 27.0 (1.2) 25.8Depreciation ofproperty, plantand equipment 9.3 (0.4) 8.9 18.6 (0.5) 18.1Amortisation ofgoodwill 1.4 (1.4) - 2.7 (2.7) -Amortisation ofintangibles - 0.3 0.3 - 0.6 0.6Impairment ofgoodwill - - - 0.8 - 0.8(Profit) on disposal of investments - - - (0.4) - (0.4)(Profit) on disposal of property, plantand equipment - - - (0.9) - (0.9)Share of (profit) inassociates - - - (0.1) 0.1 -(Increase) ininventories (15.7) (0.1) (15.8) (8.3) (1.7) (10.0)(Increase) inreceivables (16.1) 1.8 (14.3) (17.0) 2.8 (14.2)Increase inpayables 12.0 - 12.0 20.2 (1.0) 19.2Taxation received 8.6 - 8.6 6.6 - 6.6Other non cashflow items (0.8) - (0.8) - 0.4 0.4 ------------------------------------------------------------Net cash inflowfrom operatingactivities 11.4 (0.6) 10.8 49.2 (3.2) 46.0 ------------------------------------------------------------Investing activitiesDividends received from associates 3.5 - 3.5 3.5 - 3.5Purchase ofsubsidiary andbusinesses (0.5) - (0.5) (1.5) - (1.5)Purchase of minorityinterest in subsidiary (0.4) - (0.4) (0.1) - (0.1)Purchase ofassociates andjoint ventures (0.2) - (0.2) (0.2) - (0.2)Proceeds fromdisposal ofinvestments - - - 2.4 - 2.4Proceeds fromdisposal ofsubsidiary 22.9 - 22.9 19.9 - 19.9Proceeds fromdisposal ofproperty, plantand equipment 5.0 - 5.0 6.0 - 6.0Purchase ofproperty, plantand equipment (11.5) 0.6 (10.9) (22.1) 0.2 (21.9)Purchase ofintangibleassets - (0.1) (0.1) - (0.4) (0.4) ------------------------------------------------------------Net cash inflowfrom investingactivities 18.8 0.5 19.3 7.9 (0.2) 7.7 ------------------------------------------------------------ Consolidated Cash Flow Statement(continued) Six months ended 30 June 2004 Year ended 31 December 2004 Effect of Effect of UK transition UK transition GAAP to IFRS IFRS GAAP to IFRS IFRS £m £m £m £m £m £mFinancingactivitiesInterestreceived 1.1 - 1.1 3.1 - 3.1Interest paid (4.0) - (4.0) (8.7) - (8.7)Equity dividendspaid (2.4) 0.1 (2.3) (3.8) - (3.8)Preferencedividends paid (2.0) - (2.0) (2.4) - (2.4)Cancellation andrepayment ofpreference sharecapital - - - (47.9) - (47.9)Increase inborrowings (32.1) 32.1 - 1.6 (1.6) -Proceeds fromborrowings - - - - 92.9 92.9Repayment ofborrowings - (32.1) (32.1) - (87.9) (87.9)Capital elementof financeleases (0.2) - (0.2) (0.3) - (0.3)Movement inshort termdeposits (0.9) 0.9 - 0.4 (0.4) - ------------------------------------------------------------Net cash(outflow) fromfinancingactivities (40.5) 1.0 (39.5) (58.0) 3.0 (55.0) ------------------------------------------------------------Net (decrease)in cash, cashequivalents andbank overdrafts (10.3) 0.9 (9.4) (0.9) (0.4) (1.3) --------------------- -------------------Cash, cashequivalents andbank overdraftsat beginning ofperiod 12.4 12.4Effect offoreign exchangerate changes (0.4) (0.2) ------ ------Cash, cashequivalents andbank overdraftsat end of period 2.6 10.9 ------ ------ UK GAAP required cash flows to be presented under seven different headingswhereas IAS 7 Cash Flow Statements requires cash flows to be presented underthree headings: cash flows from operating, investing and financing activities.Consequently there are a number of re-classifications. Under IAS 7, foreignexchange differences on cash and cash equivalents are presented on the face ofthe cash flow statement. There are no other material differences between thecash flow statement presented under IFRS and the cash flow statement presentedunder UK GAAP. Consolidated Income Statement - IFRS AdjustmentsFor the Six Months ended 30 June 2004 Employee Share Deferred Total Benefits Goodwill options tax Re- adjust- IAS 19 IFRS 3 IFRS 2 IAS 12 allocations Other ments Note 1 Note 2 Note 3 Note 6 Note 7 Note 8 £m £m £m £m £m £m £mRevenue - - - - (0.6) (40.5) (41.1)Cost of (0.1) - - - (0.1) 40.6 40.4sales --------------------------------------------------------------------------Gross (0.1) - - - (0.7) 0.1 (0.7)profitOtheroperatingincome - - - - 1.5 - 1.5Operatingexpenses (1.8) 1.4 (0.2) - (0.8) (0.2) (1.6) --------------------------------------------------------------------------Profitfrom (1.9) 1.4 (0.2) - - (0.1) (0.8)operationsNet finance costs 0.9 - - - - - 0.9 --------------------------------------------------------------------------Profit before tax (1.0) 1.4 (0.2) - - (0.1) 0.1Taxation 0.3 (0.1) - 0.3 - 0.1 0.6 --------------------------------------------------------------------------Profit forthe period (0.7) 1.3 (0.2) 0.3 - - 0.7 -------------------------------------------------------------------------- Consolidated Income Statement - IFRS AdjustmentsFor the Year ended 31 December 2004 Employee Share Deferred Total Benefits Goodwill options tax Re- adjust- IAS 19 IFRS 3 IFRS 2 IAS 12 allocations Other ments Note 1 Note 2 Note 3 Note 6 Note 7 Note 8 £m £m £m £m £m £m £mRevenue - - - - (0.7) (95.0) (95.7)Cost of sales (0.2) - - - (0.1) 95.1 94.8 -------------------------------------------------------------------------- Gross profit (0.2) - - - (0.8) 0.1 (0.9)Otheroperatingincome - - - - 2.9 - 2.9Operatingexpenses (3.9) 2.7 (0.3) - (1.8) 0.2 (3.1)Share ofprofits inassociates - - - - (0.1) - (0.1)Profit fromoperations beforeexceptionalitems (4.1) 2.7 (0.3) - 0.2 0.3 (1.2)Exceptionalitems - 1.0 - - - - 1.0 -------------------------------------------------------------------------- Profit fromoperations (4.1) 3.7 (0.3) - 0.2 0.3 (0.2)Net financecosts 1.7 - - - (0.4) (0.1) 1.2Share ofprofits inassociates - - - - 0.1 - 0.1 -------------------------------------------------------------------------- Profit before tax (2.4) 3.7 (0.3) - (0.1) 0.2 1.1Taxation 0.7 (0.2) 0.1 0.7 0.1 (0.2) 1.2 -------------------------------------------------------------------------- Profit forthe year (1.7) 3.5 (0.2) 0.7 - - 2.3 -------------------------------------------------------------------------- Consolidated Balance Sheet - IFRS AdjustmentsAt 30 June 2004 Revaluation Employee reserve Deferred Re- Total Benefits Goodwill Dividends IAS 12, tax allocations adjust- IAS 19 IFRS 3 IFRS 2 IAS 16 IAS 12s and other ments Note 1 Note 2 Note 4 Note 5 Note 6 Note 9 £m £m £m £m £m £m £mASSETSNon-currentassetsProperty,plant andequipment - - - - - (2.2) (2.2)Goodwill - 1.4 - - - (0.1) 1.3Intangibleassets - - - - - 3.0 3.0Interests in associates - - - - - - -Investments - - - - - (0.2) (0.2)Retirementbenefit assets (0.1) - - - - - (0.1)Receivablesand otherassets (0.6) - - - - 2.3 1.7Deferred taxassets - - - - 4.7 - 4.7 -------------------------------------------------------------------------- (0.7) 1.4 - - 4.7 2.8 8.2 --------------------------------------------------------------------------CurrentassetsInventories - - - - - 0.3 0.3Trade andotherreceivables - - - - - (1.8) (1.8)Investments - - - - - (1.3) (1.3)Cash and cashequivalents - - - - - 1.3 1.3 -------------------------------------------------------------------------- - - - - - (1.5) (1.5) --------------------------------------------------------------------------LIABILITIESCurrentliabilitiesTrade andother payables (1.3) - (1.5) - - - (2.8)Current taxliabilities - - - - (0.3) - (0.3)Borrowings - - - - - - -Provisions - - - - - - - -------------------------------------------------------------------------- (1.3) - (1.5) - (0.3) - (3.1) --------------------------------------------------------------------------Net currentassets 1.3 - 1.5 - 0.3 (1.5) 1.6 --------------------------------------------------------------------------Non-currentliabilitiesBorrowings - - - - - - -Deferred taxliabilities (0.1) 0.1 - 4.7 9.2 - 13.9Retirementbenefitobligations 1.5 - - - - - 1.5Other payables 0.9 - - - - (2.0) (1.1)Provisions (0.9) - - - - 3.3 2.4 -------------------------------------------------------------------------- 1.4 0.1 - 4.7 9.2 1.3 16.7 --------------------------------------------------------------------------Net assets (0.8) 1.3 1.5 (4.7) (4.2) - (6.9) --------------------------------------------------------------------------Shareholders'fundsShare capital - - - - - - -Share premium - - - - - - -Treasury shares - - - - - - -Revaluationreserve - - - (7.2) - (0.1) (7.3)Other reserves 15.8 - - - - (3.7) 12.1Retained earnings (16.6) 1.3 1.5 2.5 (4.2) 3.8 (11.7) -------------------------------------------------------------------------- (0.8) 1.3 1.5 (4.7) (4.2) - (6.9)Minority interests - - - - - - - --------------------------------------------------------------------------Total equity (0.8) 1.3 1.5 (4.7) (4.2) - (6.9) -------------------------------------------------------------------------- Consolidated Balance Sheet - IFRS AdjustmentsAt 31 December 2004 Revaluation Employee reserve Deferred Re- Total Benefits Goodwill Dividends IAS 12, tax allocations adjust- IAS 19 IFRS 3 IFRS 2 IAS 16 IAS 12s and other ments Note 1 Note 2 Note 4 Note 5 Note 6 Note 9 £m £m £m £m £m £m £mASSETSNon-currentassetsProperty,plant andequipment - - - - - (2.3) (2.3)Goodwill - 2.7 - - - - 2.7Intangibleassets - - - - - 3.1 3.1Interests in associates - - - - - - -Investments - - - - - (0.2) (0.2)Retirementbenefit assets (2.0) - - - - - (2.0)Receivablesand otherassets (0.6) - - - - 0.5 (0.1)Deferred taxassets - - - - 11.2 - 11.2 -------------------------------------------------------------------------- (2.6) 2.7 - - 11.2 1.1 12.4 --------------------------------------------------------------------------Current assetsInventories - - - - - 0.8 0.8Trade andother receivables - - - - - (0.1) (0.1)Investments - - - - - - -Cash and cash - - - - - - -equivalents -------------------------------------------------------------------------- - - - - - 0.7 0.7 --------------------------------------------------------------------------LIABILITIESCurrent liabilitiesTrade andother payables (1.4) - (3.0) - - 0.4 (4.0)Current taxliabilities - - - - (0.4) - (0.4)Borrowings - - - - - - -Provisions - - - - - 0.6 0.6 -------------------------------------------------------------------------- (1.4) - (3.0) - (0.4) 1.0 (3.8) --------------------------------------------------------------------------Net currentassets 1.4 - 3.0 - 0.4 (0.3) 4.5 --------------------------------------------------------------------------Non-currentliabilitiesBorrowings - - - - - - -Deferred taxliabilities (0.6) 0.2 - 4.4 16.2 (0.2) 20.0Retirementbenefitobligations 1.9 - - - - - 1.9Other payables - - - - - (1.1) (1.1)Provisions - - - - - 2.1 2.1 -------------------------------------------------------------------------- 1.3 0.2 - 4.4 16.2 0.8 22.9 --------------------------------------------------------------------------Net assets (2.5) 2.5 3.0 (4.4) (4.6) - (6.0) --------------------------------------------------------------------------Shareholders'fundsShare - - - - - - -capitalShare - - - - - - -premiumTreasury - - - - - - -sharesRevaluationreserve - - - (7.8) - - (7.8)Other reserves 15.8 - - - - (2.2) 13.6Retainedearnings (18.3) 2.5 3.0 3.4 (4.6) 2.2 (11.8) -------------------------------------------------------------------------- (2.5) 2.5 3.0 (4.4) (4.6) - (6.0)Minority - - - - - - - --------------------------------------------------------------------------Total equity (2.5) 2.5 3.0 (4.4) (4.6) - (6.0) -------------------------------------------------------------------------- Consolidated Balance Sheet - IFRS AdjustmentsAt 1 January 2004 Employee Share Deferred Total Benefits options tax Re- adjust- IAS 19 IFRS 2 IAS 12 allocations Other ments Note 1 Note 3 Note 6 Note 7 Note 8 £m £m £m £m £m £mASSETSNon-currentassetsProperty, plant andequipment - - - - 0.9 0.9Goodwill - - - - (3.3) (3.3)Intangible assets - - - - 3.3 3.3Interests inassociates andjoint ventures - - - - (0.1) (0.1)Investments - - - - - -Retirement benefitassets (3.4) - - - - (3.4)Receivables andother assets - - - - (0.1) (0.1)Deferred tax assets - - 1.4 4.6 (0.2) 5.8 --------------------------------------------------------------- (3.4) - 1.4 4.6 0.5 3.1 ---------------------------------------------------------------Current assetsInventories - - - - 0.2 0.2Trade and otherreceivables - - - - (0.5) (0.5)Current tax assets - - - - 0.4 0.4Investments - - - - (0.4) (0.4)Cash and cashequivalents - - - - 0.5 0.5 --------------------------------------------------------------- - - - - 0.2 0.2 ---------------------------------------------------------------LIABILITIESCurrent liabilitiesTrade and otherpayables (1.3) (2.4) - - - (3.7)Borrowings - - - - (0.1) (0.1) --------------------------------------------------------------- (1.3) (2.4) - - (0.1) (3.8) ---------------------------------------------------------------Net current assets 1.3 2.4 - - 0.3 4.0 ---------------------------------------------------------------Non-current liabilitiesBorrowings - - - - - -Deferred taxliabilities (1.0) (0.3) 6.5 9.5 - 14.7Retirement benefitobligations 1.3 - - - - 1.3Other payables (1.0) - - - 0.1 (0.9)Provisions 1.1 - - - 1.3 2.4 --------------------------------------------------------------- 0.4 (0.3) 6.5 9.5 1.4 17.5 ---------------------------------------------------------------Net assets (2.5) 2.7 (5.1) (4.9) (0.6) (10.4) ---------------------------------------------------------------Shareholders' fundsShare capital - - - - - -Share premium - - - - - -Treasury shares - - - - - -Revaluation reserve - - (7.7) - (0.1) (7.8)Other reserves 12.8 - - - (0.5) 12.3Retained earnings (15.3) 2.7 2.6 (4.9) - (14.9) --------------------------------------------------------------- (2.5) 2.7 (5.1) (4.9) (0.6) (10.4)Minority interests - - - - - - ---------------------------------------------------------------Total equity (2.5) 2.7 (5.1) (4.9) (0.6) (10.4) --------------------------------------------------------------- Notes to the IFRS Adjustments KEY INCOME STATEMENT AND BALANCE SHEET ADJUSTMENTS: 1. Employee benefitsUnder UK GAAP, the Group accounted for pension costs in accordance with SSAP 24and provided disclosures as required by FRS 17. The expected cost of definedbenefit pensions was charged against operating profit and actuarial gains andlosses were spread evenly over the remaining service lives of current employeesas a credit or charge to the operating profit In accordance with IAS 19 Employee Benefits, the expected cost of definedbenefit pensions is charged against operating profit whilst the net return fromscheme assets and liabilities is recognised within net finance costs in theincome statement. Under the 16 December 2004 amendment to IAS 19, which has notyet been endorsed by the EU, the Group has adopted the option of recognising allactuarial gains and losses immediately, directly in reserves. In the year ended31 December 2004, an actuarial gain of £3.5m has been recognised in thestatement of recognized income and expense. 2. GoodwillGoodwill is not amortised under IFRS 3 Business Combinations, but is subject toan annual impairment review. Under UK GAAP, goodwill written off to reserves prior to 1998 was reinstated andincluded in determining the profit or loss on disposal of a business. TheCompany has applied the exemption within IFRS 1 First-time adoption ofInternational Financial Reporting Standards not to restate its businesscombinations prior to the transition date. Consequently, under IFRS, goodwillwritten off to reserves is not reinstated. For the year ended 31 December 2004,£1.0m of goodwill previously written off to reserves has not been reinstated. 3. Share optionsUK GAAP required that there was no charge to the income statement for shareoptions where the exercise price was equal to the market price at the grantdate. In accordance with IFRS 2 Share-based Payments, all share-based payments,including share option costs are recognised as an expense over the vestingperiod. This has resulted in a £0.1m transfer from retained earnings to otherreserves at 1 January 2004. At 30 June 2004 the charge to the income statement was £0.2m, with a charge of£0.3m for the full year. In accordance with the IFRS transitional provisions, IFRS 2 has been applied togrants of equity instruments issued after 7 November 2002 that had not vested asof 1 January 2005. No charge is recognised in respect of grants to which IFRS 2do not apply. 4. DividendsIFRS requires dividends to be recognised within equity in the period in whichthey are approved. Under UK GAAP, dividends were recognised within the incomestatement in the period in which they were declared. 5. Revaluation reserveA transfer has been made from the revaluation reserve to retained earningsamounting to the difference between the depreciation charged on property, plantand equipment on a revaluation basis and an historical cost basis. In accordance with UK GAAP, no provision was made for deferred taxation on therevaluation reserve. For IFRS, deferred taxation is provided on the revaluationgains. The revaluation reserve includes the related deferred taxation. Notes to the IFRS Adjustments(continued) 6. Deferred taxationUK GAAP required deferred taxation to be recognised on timing differenceswhereas IFRS requires that deferred taxation is provided on all temporarydifferences including the revaluation of non-monetary assets and on unremittedoverseas earnings to the extent that a tax charge is foreseeable. Under UK GAAP, deferred tax assets and liabilities were shown on a net basis.IFRS requires separate disclosure of deferred tax assets and liabilities. 7. Income statement reallocationsFor UK GAAP, royalty, sub-lease and commission income were included in operatingexpenses or revenue, as appropriate. Under IFRS, these are included in otheroperating income. UK GAAP requires the share of operating profits in associates to be included intotal profits from operations, whereas under IFRS the share of profits after taxin associates is included in the Group's profit before tax. 8. OtherUnder IAS 18, revenue is not recognised for barter transactions that involve theexchange of goods or services which are of a similar nature and value. Thesetransactions were recognised as revenue under UK GAAP. The impact for the sixmonths ended 30 June 2004 is a reduction in sales and cost of sales of £42.5m(year ended 31 December 2004: £89.9m). These reductions have no impact onprofits. Other differences comprise a number of adjustments that are not individuallysignificant. 9. Balance sheet reallocations and otherThe Company has taken advantage of the exemption in IFRS 1, whereby thecumulative translation differences for all foreign operations that existed atthe date of transition to IFRS are deemed to be zero. The cumulative translationdifferences from 1 January 2004 are recorded as a separate component of equity. Under UK GAAP, capitalised computer software was included within property, plantand equipment. In accordance with IFRS, capitalised computer software notintegral to plant and equipment, is classified as an intangible asset. The netbook value of computer software reclassified as intangible assets was £3.3m at 1January 2004, £3.0m at 30 June 2004 and £3.1m at 31 December 2004. Other differences comprise a number of adjustments that are not individuallysignificant. Consolidated Balance Sheet - Adoption of IAS 32 and IAS 39At 1 January 2005 IFRS Gross up IFRS 31 December Derivatives borrowings Other 1 January 2004 Note i Note ii Note iii 2005 £m £m £m £m £mASSETSNon-current assetsProperty, plantand equipment 155.8 - - - 155.8Goodwill 47.5 - - - 47.5Intangible assets 3.1 - - - 3.1Interests inassociates 8.7 - - - 8.7Investments 3.6 - - - 3.6Retirementbenefit assets 23.8 - - - 23.8Receivables andother assets 3.3 - - - 3.3Deferred taxassets 11.2 0.4 - - 11.6 ------------------------------------------------------------ 257.0 0.4 - - 257.4 ------------------------------------------------------------Current assetsInventories 76.5 - - - 76.5Trade and otherreceivables 140.4 2.6 (0.2) - 142.8Cash and cashequivalents 15.1 - 59.0 - 74.1 ------------------------------------------------------------ 232.0 2.6 58.8 - 293.4 ------------------------------------------------------------LIABILITIESCurrentliabilitiesTrade and otherpayables 152.8 2.4 (1.0) - 154.2Current taxliabilities 1.1 - - - 1.1Borrowings 16.4 - 59.3 - 75.7Provisions 0.6 - - - 0.6 ------------------------------------------------------------ 170.9 2.4 58.3 - 231.6 ------------------------------------------------------------Net current assets 61.1 0.2 0.5 - 61.8 ------------------------------------------------------------Non-current liabilitiesBorrowings 129.3 - 0.5 - 129.8Deferred taxliabilities 59.5 0.6 - - 60.1Retirement benefitobligations 1.9 - - - 1.9Other payables 1.9 - - - 1.9Provisions 13.6 - - - 13.6 ------------------------------------------------------------ 206.2 0.6 0.5 - 207.3 ------------------------------------------------------------Net assets 111.9 - - - 111.9 ------------------------------------------------------------Shareholders' fundsShare capital 25.3 - - - 25.3Share premium 41.5 - - - 41.5Revaluation reserve 8.8 - - - 8.8Other reserves 13.6 0.3 - 0.2 14.1Retained earnings 19.0 (0.3) - (0.2) 18.5 ------------------------------------------------------------ 108.2 - - - 108.2Minority interests 3.7 - - - 3.7 ------------------------------------------------------------Total equity 111.9 - - - 111.9 ------------------------------------------------------------ Adoption of IAS 32 and IAS 39 - notesAt 1 January 2005 (i) DerivativesUnder IAS 32 and IAS 39, all derivatives are recognised at fair value, withchanges in the value recognised in the income statement immediately unless cashflow hedge accounting is adopted. The portion of the cash flow hedge which is effective is recognised directly inthe hedging reserve included in other reserves. The gain or loss is released tothe income statement when the underlying transaction impacts the incomestatement. Deferred taxation is provided on derivative gains and losses held in the hedgingreserve. The hedging reserve includes the related deferred taxation. (ii) Gross up borrowingsUnder UK GAAP, cash and bank overdrafts which are subject to a common legalright of set-off are shown net. Under IAS 32, these are required to be showngross. The Company is required to include accrued interest within bank balancesand borrowings, whilst under UK GAAP, accrued interest was included in accruals. (iii) OtherOther differences comprise a number of adjustments that are not individuallysignificant. Principal Accounting Policies The principal accounting policies of the Group under IFRS are set out below.These have been applied with effect from 1 January 2004. Basis of AccountingThe financial statements have been prepared under the historical cost conventionas modified by the revaluation of certain property, plant and equipment,available for sale investments, financial assets and financial liabilities heldfor trading. The interim report has been prepared in accordance with IAS 34 Interim FinancialReporting and IFRS 1 First-time adoption of International Financial ReportingStandards, as it is part of the period covered by the Group's first IFRSfinancial statements for the year ended 31 December 2005. Those interimfinancial statements have been prepared in accordance with those IFRS standardsand IFRIC interpretations which are effective, or have been adopted early, as at1 September 2005. The IFRS standards and IFRIC interpretations that will beapplicable at 31 December 2005, including those that will be applicable on anoptional basis, are not known with certainty at the time of preparing thoseinterim financial statements. Consolidation (a) SubsidiariesSubsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies. The Group accounts include the financial statements of the Company and itssubsidiaries, together with its share of associates. Subsidiaries are fullyconsolidated from the date on which control is transferred to the Group. Theyare deconsolidated from the date control ceases. (b) AssociatesAn associate is an entity in which the Group has an effective interest of notless than 20% and over which it has the ability to exercise significantinfluence and that is not a subsidiary. The Group's share of after tax results of associates is included separately inthe income statement. GoodwillOn the acquisition of a business, fair values are attributed to the net assetsacquired. Goodwill arises where the fair value of the consideration givenexceeds the fair value of the net assets acquired. Goodwill is recognised as an asset and is reviewed for impairment at leastannually. Impairments are recognised immediately in the income statement.Goodwill is allocated to cash generating units for the purpose of impairmenttesting. On the disposal of a business, goodwill relating to that business remaining onthe balance sheet is included in the determination of the profit or loss ondisposal. Goodwill written off to reserves prior to 1998 has not been reinstated and willnot be included in determining any subsequent profit or loss on disposal. RevenueRevenue represents the invoiced amount, excluding sales related taxes, of goodssold and services provided and is recognised when title passes to the customeror when the service has been rendered. Revenue on long term contracts is recognised by reference to the value of thework done during the period. Revenue is not recognised for barter transactions that involve the exchange ofgoods or services which are of a similar nature and value. Principal Accounting Policies(continued) Property, Plant and Equipment and DepreciationProperty, plant and equipment are stated at cost or valuation and depreciated totheir expected residual values on a straight line basis over their estimateduseful lives, at the following rates: Freehold property 2% - 10%Leasehold land and buildings life of leaseOil and gas exploration and equipment unit of productionPipelines, tanks and associated equipment 4% - 20%Plant and equipment 6% - 331/3% Freehold property and long leasehold land and buildings and terminals arerevalued with sufficient regularity, at least every five years, such that thecarrying amount does not differ materially from the fair value at the balancesheet date. Computer software integral to an item of machinery is capitalised as part of thehardware. Property, plant and equipment are impaired if their recoverable amount fallsbelow their carrying value. Impairment losses are charged to the incomestatement immediately unless they arise on previously revalued assets, in whichcase they are recognised in the statement of recognised income and expense up toRelated Shares:
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