16th Mar 2006 07:01
United Drug PLC16 March 2006 UNITED DRUG PLC Transition to International Financial Reporting Standards (IFRS) Restatement of 2005 financial information under IFRS 16 March 2006 United Drug plc United Drug plc today announces the impact of the transition to InternationalFinancial Reporting Standards ('IFRS') on its opening Balance Sheet at 1 October2004 and on its results for the six months ended 31 March 2005 and for the yearended 30 September 2005, previously prepared in accordance with Irish GenerallyAccepted Accounting Principles ('Irish GAAP'). The Group's financial statements for the six months ending 31 March 2006 and forthe year ending 30 September 2006 will be prepared under IFRS. Impact of the transition to IFRS on the Group's key consolidated financial information for the year ended 30 September 2005 Irish GAAP IFRS •'000 •'000 Group revenue 1,325,915 1,325,915 Profit before tax 53,407 56,086 Adjusted profit before tax 49,220 48,367 Fully diluted EPS 19.12 cent 20.71 cent Adjusted fully diluted EPS 18.13 cent 17.76 cent Shareholders' funds 237,783 240,577 Ends Thursday 16th March 2006 For reference Liam Fitzgerald Pauline McAlister United Drug PLC Murray Consultants +353-1-4598877 +353-1-4980300 Contents 1. Overview 1.1 Introduction 1.2 Summary of impact on key financial information 1.3 Basis of preparation 1.4 Principal exemptions availed of on transition to IFRS 2. Main changes in accounting policies 2.1 Pension and other post retirement benefits 2.2 Accounting for joint ventures 2.3 Goodwill and intangible assets 2.4 Expensing share options 2.5 Dividend recognition 2.6 Taxation 2.7 Derivatives and other financial instruments 2.8 Other matters including disclosure issues 3. Summary of impact of transition to IFRS - restatement of 2005 results 3.1 Profit before tax (PBT) 3.2 Adjusted PBT 3.3 Earnings per share (EPS) 3.4 Adjusted EPS 3.5 Net assets Schedules 1. Provisional Revised Group Accounting Policies under IFRS 2. Transition balance sheet as at 1 October 2004 3. Restatement of 2005 full year financial information 3.1 Income statement 3.2 Statement of Recognised Income and Expense 3.3 Balance sheet 4. Restatement of 2005 interim financial information (unaudited) 4.1 Income statement 4.2 Statement of Recognised Income and Expense 4.3 Balance sheet 5. KPMG audit opinion 1. Overview 1.1 Introduction United Drug plc ('United Drug' or 'the Group'), in common with all other listedcompanies in Europe, is required to prepare its 30 September 2006 consolidatedfinancial statements in accordance with International Financial ReportingStandards ('IFRS') as adopted by the EU. The Group previously reported inaccordance with Irish Generally Accepted Accounting Principles ('Irish GAAP').As part of the transition to IFRS, this document outlines the key changesarising for United Drug and provides a detailed reconciliation of the Group'sfinancial information for the period from 1 October 2004 to 30 September 2005 aspreviously reported under Irish GAAP and as restated in accordance with therecognition and measurement principles of IFRS. Section 2 of this document explains the main issues affecting United Drug as aresult of the transition to IFRS. Section 3 outlines the impact of the resulting changes in accounting policies onthe 2005 interim and full year financial information - focusing on the impact onProfit before Tax, Earnings per Share and Net Assets. Schedule 1 sets out the Provisional Revised Group Accounting Policies which areexpected to be applied in preparing the Group's consolidated financialstatements for the year ending 30 September 2006. Schedule 2 is a reconciliation of the Group's consolidated balance sheet asoriginally prepared under Irish GAAP to the equivalent figures prepared inaccordance with these IFRS accounting policies, as at 1 October 2004 (the dateof transition to IFRS). Schedule 3 is a reconciliation of the summary financial information (IncomeStatement and Balance Sheet) for the year ended 30 September 2005, as originallyprepared under Irish GAAP to the equivalent prepared in accordance with theGroup's IFRS accounting policies. A Group Statement of Recognised Income andExpense and a Group Statement of Changes in Equity for the year ended 30September 2005 are also included. Schedule 4 is a reconciliation of the summary financial information (IncomeStatement and Balance Sheet) for the six month period ended 31 March 2005, asoriginally reported under Irish GAAP to the equivalent prepared in accordancewith the Group's IFRS accounting policies. A Group Statement of RecognisedIncome and Expense and a Group Statement of Changes in Equity for the six monthperiod ended 31 March 2005 are also included. The restated interim financial information for the six months ended 31 March2005 is unaudited. The restatement of the financial information for the yearended 30 September 2005 has been audited by the Group's auditor, KPMG CharteredAccountants. Their audit opinion in this regard is set out in Schedule 5. 1.2 Summary of impact on key financial information The following table summarises the impact of the transition to IFRS on theGroup's key consolidated financial information for the year ended 30 September2005. Irish GAAP IFRS Change Change •'000 •'000 •'000 % Group revenue 1,325,915 1,325,915 - - Profit before tax 53,407 56,086 2,679 +5.0% Adjusted profit before 49,220 48,367 (853) (1.7%)tax Fully diluted EPS 19.12 cent 20.71 cent 1.59 cent +8.3% Adjusted fully diluted 18.13 cent 17.76 cent (0.37 cent) (2.0%)EPS Shareholders' funds 237,783 240,577 2,794 1.2% Adjusted profit before tax excludes separately reportable items / exceptionalitems, amortisation charges, and in the case of the IFRS financial information,the Group's share of the tax charge of its joint venture. 1.3 Basis of preparation The financial information comprising the consolidated IFRS Balance Sheet of theCompany and its subsidiaries at 1 October 2004, 31 March 2005 and 30 September2005, the consolidated IFRS Income Statements for the year ended 30 September2005 and the six month period ended 31 March 2005, have been prepared on thebasis of the recognition and measurement requirements of IFRSs currently inissue together with those that are expected to be adopted and effective at 30September 2006, the Group's first annual reporting date at which it will useIFRSs as adopted by the EU together with the early adoption of the Amendment toIAS 19, Actuarial Gains and Losses, Group Plans and Disclosures. Based on theserecognition and measurement requirements, management has applied in thepreparation of the financial information set out in this document the accountingpolicies expected to be applied when the first annual financial statements areprepared in accordance with IFRSs as adopted by the EU for the year ended 30September 2006. The IFRSs as adopted by the EU that will be effective in the annual financialstatements for the year ending 30 September 2006 are still subject to change andto additional interpretations and therefore cannot be determined with certainty.Accordingly, the accounting policies will only be finally determined when theannual financial statements are prepared for the year ending 30 September 2006.The provisional group accounting policies used in the preparation of thisdocument are set out in Schedule 1 attached. Details of the exemptions availed of on transition to IFRS are set out in 1.4below. 1.4 Principal exemptions availed of on transition to IFRS In restating the Group's 2005 financial information, United Drug, in common withmost other listed companies, is availing of the following relevant mandatory andoptional exemptions in accordance with IFRS 1, First-time Adoption ofInternational Financial Reporting Standards. • Business combinations before 1 October 2004 have not been restated.Consequently, goodwill at the transition date was carried forward at its netbook value and was subject to impairment testing at that date. No impairmentcharges arose from this exercise. Going forward, together with goodwill on anysubsequent acquisitions, it will be subject to annual impairment testing.Goodwill on acquisitions prior to 1998, which was set-off against revenuereserves under Irish GAAP, is deemed to be permanently written off under IFRSand not subject to impairment testing or write-off on disposal. • Cumulative currency translation differences have been reset at zero at thetransition date. The currency translation reserve mainly comprises theretranslation of the net assets of the Group's non-Euro denominated subsidiariesand joint venture, net of exchange differences on related borrowings. Goingforward, any cumulative currency translation differences after said transitiondate, will be included in the profit or loss on disposal of any subsidiary orjoint venture. • IFRS 2, Share-based Payment, is being applied in respect of share optionsgranted after 7 November 2002 that have not vested before 1 January 2005. • The Group is applying IAS 32, Financial Instruments: Presentation andDisclosure, and IAS 39, Financial Instruments: Recognition and Measurement,prospectively from 1 October 2005. Consequently, financial instruments arerecognised in accordance with Irish GAAP in the 2005 (interim and full year)financial information. • On the adoption of IAS 32 & 39 (from 1 October 2005), the Group carriesderivative instruments on its balance sheet at fair value, which previouslywould have been held off balance sheet under Irish GAAP. The Group is satisfiedthat at that date it met the hedge criteria under IAS 39 for all hedgingarrangements. In particular, the Group's debt arising on the private placementundertaken in 2004 is accounted for under the fair value hedging model. 2. Main changes in accounting policies 2.1 Pension and other post retirement benefits Under IAS 19, Employee Benefits, defined benefit pension scheme surpluses ordeficits (net) must be recognised on the Balance Sheet. The operating andfinancial costs of these schemes, calculated in accordance with IAS 19principles, are accounted for in the Income Statement. Under Irish GAAP, theSSAP 24 cost of pensions, which broadly speaking was the same as the annualfunding contribution, was charged to the profit and loss account. IAS 19, as amended, permits a number of alternatives in relation to therecognition of actuarial gains and losses. United Drug is adopting a policy ofthe immediate recognition of such gains or losses (rather than the permitted'corridor approach'), in the Statement of Recognised Income and Expense. Theadjustments arising from the adoption of IAS 19 are as follows: Balance sheet 1 Oct 2004 31 Mar 2005 30 Sept 2005 •'000 •'000 •'000 Gross pension deficit recognised (11,650) (13,306) (12,708) Deferred tax asset (net) 2,284 2,332 2,282recognised Reversal of pension accrual bookedunder Irish GAAP 1,890 1,711 122 Net impact on shareholders' funds (7,476) (9,263) (10,304) Income statement 6 mths to 12 mths to 31 Mar 2005 30 Sept 2005 •'000 •'000 Net (increase) in distribution expenses (75) (224) Deferred tax charge (3) (206) Net impact on profit after tax (78) (430) Statement of Recognised Income and Expense 6 mths to 12 mths to 31 Mar 2005 30 Sept 2005 •'000 •'000 Actuarial losses (1,781) (2,582) Exchange movement 21 (20) Deferred tax 51 204 Net impact on SORIE (1,709) (2,398) 2.2 Accounting for joint ventures Under Irish GAAP, the Group's share of profit from its joint venture wasanalysed in the profit and loss account, under equity accounting rules, betweenoperating profit, interest income/expense and taxation. Under IFRS, the Grouphas the option of accounting for its joint venture under either proportionateconsolidation rules or equity accounting rules. United Drug has elected tocontinue to apply equity accounting in relation to its joint venture. However,under IAS 1, Presentation of Financial Statements, the Group's share of theprofit after tax of entities accounted for under equity accounting rules must bepresented as a single item, with no separate analysis on the face of the incomestatement of interest or taxation charges. This required presentation does notimpact profit attributable to shareholders or earnings per share. The Group's share of the operating profit, interest income/(expense) and tax ofits joint venture is as follows: Income statement 6 mths to 12 mths to 31 Mar 30 Sept 2005 2005The following items are netted in the income •'000 •'000statement: Share of joint venture's operating profit 979 2,485 Share of joint venture's net interest (1) 1 Share of joint venture's tax charge (294) (746) Share of joint venture's profit after tax 684 1,740 2.3 Goodwill and intangible assets Under IFRS 3, Business Combinations, goodwill amortisation is prohibited. Thegoodwill amortisation charged in the 2005 interim and full year financialstatements, originally prepared under Irish GAAP, has been reversed in therevised IFRS financial information. Under IFRS, capitalised goodwill is nowsubject to annual impairment testing, as explained more fully in the relevantaccounting policy in Schedule 1 attached. These tests did not give rise to anyimpairment charges on transition or in 2005. Also under IFRS 3, it is now necessary to determine the fair value of intangibleassets acquired as part of any business combination, after 1 October 2004, wherethese are identifiable and can be measured reliably. Such intangible assetsinclude, where appropriate, customer contracts, lists or relationships,technology, patents etc. Intangible assets so identified are capitalised on theGroup's Balance Sheet and must be amortised to the Income Statement over theirestimated useful economic lives. In accordance with IFRS 3, United Drug has reviewed its acquisition of In2focusSales Development Services Limited, TD Packaging Limited and Presearch Limitedin June 2005. This review resulted in the identification of intangible assetsamounting to €8.3m (net of deferred tax) at the date of acquisition. As aresult, the residual goodwill on these transactions has been reduced to €29.9munder IFRS from the previously recognised value of €38.2m under Irish GAAP. Theintangible assets arising in this case relate to brand names and existingsupplier / customer relationships and are being amortised over a range of fiveto six years. The impact of IFRS 3 on the Group's Balance Sheet is as follows: Balance sheet 1 Oct 31 Mar 30 Sept 2004 2005 2005 •'000 •'000 •'000 Reversal of goodwill amortisationunder Irish GAAP since 1 Oct 2004 - 2,035 4,710 Reclassification of intangibles under - - -IFRS Amortisation of intangible assets - - (432) Release of deferred tax liability onintangibles in line withamortisation - - 130 Increase in deferred tax liabilityre write back of goodwill - (57) (114) Net impact on shareholders' funds - 1,978 4,294 The impact of IFRS 3 on the Group's Income Statement is as follows: Income statement 6 mths to 12 mths to 31 Mar 2005 30 Sept 2005 •'000 •'000 Reversal of goodwill amortisation 2,035 4,710 Amortisation of intangible assets - (432) Increase in deferred tax charge re write backof (57) (114)goodwill Deferred tax credit re deferred tax liabilityarising on intangibles - 130 Net impact on profit after tax 1,978 4,294 2.4 Expensing share options Under IFRS 2, Share-based Payments, the fair value of share options granted toemployees, after 7 November 2002 and which have not vested at 1 January 2005,must be recognised as an expense in the Income Statement, on a straight linebasis over the vesting period of the options. The impact of IFRS 2 in the IncomeStatement, which has been determined using a binomial model in accordance withthe accounting policy set out in Schedule 1 attached, with the assistance of anexternal specialist, is as follows: Income statement 6 mths to 12 mths to 31 Mar 2005 30 Sept 2005 •'000 •'000 Share option charge under IFRS 2 (264) (629) There is no impact on shareholders' funds as there is a matching reserve inequity. 2.5 Dividend recognition Under IAS 10, Events after the Balance Sheet, proposed final dividends are notrecognised as a liability in the Balance Sheet, until they have been ratified byshareholders in accordance with the Articles of Association of the Company whileinterim dividends are recognised when paid. Consequently, the proposed dividends of €3.3m and €8.8m provided in the BalanceSheets of 31 March 2005 and 30 September 2005 respectively, as originallyprepared under Irish GAAP have been reversed in the restated IFRS BalanceSheets. These are purely timing differences as both of these dividends weresubsequently paid to shareholders. 2.6 Taxation The main difference in IAS 12, Income Taxes, compared to Irish GAAP relates tothe basis of accounting for deferred tax. Under IAS 12, deferred tax is based onthe concept of temporary differences, which are calculated by comparing the bookvalue of each balance sheet item to its tax base. This is a broader concept thanin Irish GAAP where, under FRS 19, Deferred Tax, deferred tax arose on timingdifferences between the recognition of items in the Income Statement and in thetax computation. The main adjustments arising in relation to tax are as follows: • Recognition of a deferred tax asset in relation to the Group's defined benefitpension schemes, see 2.1 above, and the movement in this asset flowing throughthe Income Statement and/or the Statement of Recognised Income and Expense. • The generation of a deferred tax liability in relation to intangible assetsarising on acquisitions made post 1 October 2004. • The impact of the write back of goodwill which was previously deductible underIrish GAAP. • As explained in 2.2 above, the Group's share of the tax charge of its jointventure is netted against the Group's share of profit of this entity rather thanincluded in the total tax charge, when accounted for under IFRS equityaccounting rules. There are no deferred tax implications in relation to the payment of dividendsto the Group by its joint venture as there is joint control of the timing ofsuch distributions with the other joint venture partner and there is no presentintention to make a distribution. The impact on the balance sheet is summarised as follows: Deferred tax asset 1 Oct 31 March 30 Sept 2004 2005 2005 •'000 •'000 •'000 As originally stated under Irish - - -GAAP Deferred tax asset on net pensiondeficit 2,284 2,332 2,282 As restated under IFRS 2,284 2,332 2,282 Deferred tax (liability) 1 Oct 2004 31 March 2005 30 Sept 2005 •'000 •'000 •'000 As originally stated under IrishGAAP (2,957) (3,000) (1,965) Deferred tax liability arisingon - - (2,498)intangible assets Write back of deferred taxliability arising on intangibleassets - - 130 Tax impact of write back ofgoodwill amortisation - (57) (114) As restated under IFRS (2,957) (3,057) (4,447) The impact of the tax adjustments arising from the application of IAS 12 on theIncome Statement for the first half and full year in 2005 is summarised in thefollowing table: Impact on Income Statement 6 mths to 12 mths to 31 March 2005 30 Sept 2005 •'000 •'000 Tax charge as originally stated under IrishGAAP 4,000 11,011 Adjustments: Tax charge of joint venture (netted in PBT) (294) (746) Tax impact of write back of goodwillamortisation 57 114 Tax impact of amortisation of intangibles - (130) Movement on deferred tax asset re pensiondeficit 3 206 Total reduction in tax charge under IFRS (234) (556) Restated tax charge under IFRS 3,766 10,455 Impact on Statement of Recognised Income and 6 mths to 12 mths toExpense 31 March 30 Sept 2005 2005 •'000 •'000 Movement on deferred tax asset re pensiondeficit - credit (51) (204) 2.7 Derivatives and other financial instruments As noted earlier, United Drug is electing to apply IAS 32, FinancialInstruments: Disclosure and Presentation, and IAS 39, Financial Instruments:Recognition and Measurement, on 1 October 2005, as permitted by IFRS 1.Consequently, there is no restatement of the Group's comparative financialinformation for 2005 in this regard. A full restatement of the Group's balance sheet at 1 October 2005, on adoptionof IAS 32 & 39, will be included in the Group's interim results for the sixmonth period ending 31 March 2006. The Group has a number of hedging derivativeinstruments including forward rate contracts, foreign currency and interest rateswaps and foreign currency cylinders all of which are used to hedge theassociated risks. The Group does not anticipate that the adoption of IAS 32 & 39will have a significant effect on results reported. 2.8 Other matters including disclosure issues Under Irish GAAP, profits or losses on disposal of property, plant and equipmentand businesses were separately presented in the profit and loss account asexceptional items. In addition, other material non-trading or unusual items weredisclosed, either on the face of the profit and loss account or in the notes tothe financial statements as exceptional items. IFRS does not recognise thepresentation of exceptional items below operating profit. However, in order tocontinue to provide shareholders and other users of its financial statementswith meaningful information on the underlying performance of its business,United Drug intends to separately disclose certain items that by virtue of theirsize or nature are deemed to be significant to users of the financialstatements. 3. Summary of impact of transition to IFRS - restatement of 2005 results 3.1 Profit before tax (PBT) The table below reconciles United Drug's profit before tax for both the halfyear and full year in 2005 from the figures as originally reported under IrishGAAP to the figures now reported under IFRS. Ref 6 mths ended 12 months 31 March 30 Sept 2005 2005 •'000 •'000 PBT as originally reported under Irish 20,305 53,407GAAP IFRS adjustments: Increase in pension charge 2.1 (75) (224) Tax charge of joint ventures 2.2 (294) (746) Reversal of goodwill amortisation 2.3 2,035 4,710 Amortisation of intangible assets 2.3 - (432) Share option expense 2.4 (264) (629) Total adjustments under IFRS 1,402 2,679 PBT as revised in accordance with IFRS 21,707 56,086 3.2 Adjusted profit before tax (Adjusted PBT) In common with most other listed companies, United Drug highlights its AdjustedPBT as the underlying measure of its performance. Adjusted PBT, in previouslyreported Irish GAAP financial information, excluded exceptional items andgoodwill amortisation. Adjusted PBT, in the IFRS financial information will,similarly, exclude separately disclosable items and amortisation of intangibleassets, but will also exclude the tax charge of the Group's joint venture. Thetables below show the reconciliation of Adjusted PBT originally reported underIrish GAAP to Adjusted PBT under IFRS: Ref 6 mths ended 12 months 31 March 30 Sept 2005 2005 •'000 •'000 Adjusted PBT as originally reportedunder Irish GAAP 22,340 49,220 IFRS adjustments: Increase in pension charge 2.1 (75) (224) Share option expense 2.4 (264) (629) Total adjustments under IFRS (339) (853) Adjusted PBT as revised in accordancewith IFRS 22,001 48,367 3.3 Earnings per share (EPS) The table below reconciles United Drug's fully diluted EPS for both the halfyear and full year in 2005 from the figures as originally reported under IrishGAAP to the figures now reported under IFRS. Ref 6 mths ended 12 mths ended 31 March 2005 30 Sept 2005 •'000 •'000Earnings for EPS calculation -after tax under Irish GAAP 16,305 42,396 IFRS adjustments: Increase in pension costs 2.1 (75) (224) Reversal of goodwill amortisation 2.3 2,035 4,710 Amortisation of intangible assets 2.3 - (432) Share option expense 2.4 (264) (629) Adjustment re write back ofamortised goodwill 2.6 (57) (114) Adjustment re deferred tax on 2.6 - 130intangibles Adjustment re deferred tax onpension deficit 2.6 (3) (206) Earnings for EPS under IFRS 17,941 45,631 Number of shares - fully dilutedunder 220,691,662 221,748,881Irish GAAP Fully diluted EPS under Irish GAAP 7.39 cent 19.12 cent Number of shares - fully dilutedunder 219,208,115 220,356,236IFRS Fully diluted EPS under IFRS 8.18 cent 20.71 cent 3.4 Adjusted EPS The table below reconciles United Drug's head line Adjusted fully diluted EPSfor both the half year and full year in 2005 from the figures as originallyreported under Irish GAAP to the figures now reported under IFRS. Under Irish GAAP, United Drug's Adjusted fully diluted EPS was calculated,similar to many other companies, after excluding goodwill amortisation and theimpact of exceptional items (after tax). United Drug is adopting a similarapproach under IFRS by excluding amortisation charges on intangible assets andthe impact of separately disclosable items (after tax). Consequently, the smalldifference in the Adjusted EPS under IFRS relates mainly to the impact of theshare option expense, the revised pension charge (net of tax) and the changes inthe tax charge. As detailed below, the impact of these changes on restatement of Adjusted EPSfor the half year and full year in 2005 is relatively small: Ref 6 mths ended 12 mths ended 31 March 2005 30 Sept 2005 •'000 •'000 Earnings for adjusted EPScalculation - 18,340 40,203after tax under Irish GAAP IFRS adjustments: Increase in pension costs 2.1 (75) (224) Share option expense 2.4 (264) (629) Adjustment re deferred tax onpension deficit 2.6 (3) (206) Earnings for EPS under IFRS 17,998 39,144 Number of shares - fully dilutedunder Irish GAAP 220,691,662 221,748,881 Fully diluted adjusted EPS under 8.31 cent 18.13 centIrish GAAP Number of shares - fully dilutedunder IFRS* 219,208,115 220,356,236 Fully diluted adjusted EPS under 8.21 cent 17.76 centIFRS * The calculation of the dilutive effect of share options has been recalculatedunder IFRS taking into account the fair value of share options granted asrequired by IAS 33, Earnings per share. 3.5 Net assets The table below summarises the impact of the transition to IFRS on shareholders'funds. Balance sheet 1 Oct 2004 31 Mar 2005 30 Sept 2005 •'000 •'000 •'000 Shareholders' funds as originallyreported under Irish GAAP 195,830 216,881 237,783 IFRS adjustments: Gross pension deficit (11,650) (13,306) (12,708) Related deferred tax asset (net) 2,284 2,332 2,282 Pension accrual write back 1,890 1,711 122 Reversal of proposed dividend 7,532 3,283 8,804 Goodwill amortisation - 2,035 4,710 Amortisation of intangible assets - - (432) Increase in deferred taxliability - (57) (114)re goodwill write back Deferred tax asset re intangibles(net) - - 130 Share holders funds under IFRS 195,886 212,879 240,577 Schedule 1 Provisional Revised Group Accounting Policies under IFRS Basis of Preparation The consolidated financial information of the Group has been prepared inaccordance with the recognition and measurement principles of InternationalFinancial Reporting Standards ('IFRS') as adopted by the EU. The Group's firstconsolidated financial statements prepared in accordance with IFRS as adopted bythe EU will be for the year ending 30 September 2006. An explanation of how thetransition to IFRS has affected the comparative reported financial position andperformance of the Group is provided in sections 2 and 3 of this document. Inaccordance with the exemptions in IFRS 1, First-time Adoption of InternationalFinancial Reporting Standards, the Group did not apply IAS 32, FinancialInstruments: Presentation and Disclosure nor IAS 39, Financial Instruments:Recognition and Measurement retrospectively in the restated 2005 financialinformation. Financial instruments are recognised in accordance with Irish GAAPin 2005 and will be recognised in accordance with IAS32 and 39 in the 2006interim and final financial information. The restated 2005 financial information is subject to the issuance by the IASBof additional interpretations prior to 30 September 2006, which could haveretrospective effect. As a result it is possible that further changes may berequired to the 2005 financial information prior to its inclusion ascomparatives in the 2006 financial statements. The financial statements are prepared on the historical cost basis except thatshare based payments are stated at fair value (Going forward from 1 October2005, certain financial instruments will are stated at fair value). Thefinancial statements are presented in Euro, rounded to the nearest thousand,being the functional currency of most of the Group's business operations. The preparation of financial information in conformity with IFRS requiresmanagement to make judgments, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgmentsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period or in the period ofthe revision and future periods if the revision affects both current and futureperiods. The accounting policies set out below have been applied consistently to allperiods presented in this preliminary financial information and in preparing anopening IFRS balance sheet at 1 October 2004, for the purposes of the transitionto IFRS. The accounting policies have been applied consistently by Groupentities. Basis of consolidation The Group's financial information consolidates the financial information of thecompany and all of its subsidiaries and equity accounts for its joint venture. Subsidiary and joint venture undertaking The Group financial statements consolidate the financial statements of theCompany and all of its subsidiary undertakings together with the Group's shareof profits/losses of its joint venture undertaking made up to the end of thefinancial year. Subsidiaries are entities controlled by the Company. Control exists when theCompany has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. Inassessing control, potential voting rights that presently are exercisable orconvertible are taken into account. The financial statements of subsidiaries areincluded in the consolidated financial statements from the date that controlcommences until the date that control ceases. Intragroup balances and any unrealised gains and losses or income and expensesarising from intragroup transactions are eliminated in preparing the Groupfinancial statements, except to the extent they provide evidence of impairment Joint ventures are those entities over whose activities the Group has jointcontrol, established by contractual arrangement. Joint ventures are included inthe financial statements using the gross equity method, front the date thatjoint control commences until the date that joint control ceases. Under theequity method of accounting the Group's share of the post-acquisition profits orlosses of its joint venture are recognised in the consolidated income statement.The Income Statement reflects in profit before tax, the Group's share of profitafter tax of its joint venture in accordance with IAS 31, Interests in JointVentures. The Group's interest in its net assets is included as investment injoint venture in the consolidated balance sheet at an amount representing theGroup's share of the fair value of the identifiable net assets at acquisitionplus the Group's share of post acquisition retained profits or losses of thejoint venture. Acquisitions Where a subsidiary or joint venture undertaking or a business is acquired duringthe financial year, the Group financial statements include the attributableresults from the date of acquisition up to the end of the financial year.Goodwill, being the difference between the cost of acquisition and the fairvalue of the net assets at the date of acquisition, is dealt with as set outbelow. Goodwill All business combinations are accounted for by applying the purchase method ofaccounting. Goodwill represents amounts arising on acquisition of subsidiariesand joint ventures. In respect of business acquisitions that have occurred since1 October 2004, goodwill represents the difference between the cost of theacquisition and the fair value of the net identifiable assets, includingintangible assets, acquired. In respect of acquisitions prior to this date,goodwill is included on the basis of its deemed cost, i.e. original cost lessaccumulated amortisation since acquisition up to 30 September 2004, whichrepresents the amount recorded under Irish GAAP. The classification andaccounting treatment of business combinations that occurred prior to 1 October2004 has not been reconsidered in preparing the Group's opening IFRS balancesheet at 1 October 2004. Goodwill is allocated to cash generating units and isnow no longer amortised but is tested annually for impairment at a consistenttime each year. Goodwill is now stated at cost or deemed cost less anyaccumulated impairment losses. In respect of joint ventures, the carrying amountof goodwill is included in the carrying amount of the investment. Goodwill which arose on acquisitions prior to 1 October 1999 was eliminatedagainst reserves on acquisition as a matter of accounting policy. In preparingthe Group's IFRS balance sheet at 1 October 2004 this goodwill is considered tohave been permanently offset against retained earnings and, on any subsequentdisposal, will not form part of the gain or loss on the disposal of thebusiness. Intangible Assets Intangible assets, that are acquired by the Group, are stated at cost lessaccumulated amortisation and impairment losses, when separable or arising fromcontractual or other legal rights and reliably measurable. Amortisation is charged to the Income Statement on a straight-line basis overthe estimated useful lives of intangible assets, unless such lives areindefinite, from the date they are available for use. Intangible assetscurrently represent brand names and supplier and customer relationships and areamortised over periods ranging from five to six years. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciationand impairment losses. Depreciation is calculated, on a straight line basis oncost less estimated residual value, to write property, plant and equipment offover their anticipated useful lives using the following annual rates: Land and buildings Freehold land not depreciated Freehold buildings 2% Plant, fixtures & fittings 10% Computer equipment 20 - 33% Motor vehicles 20% Depreciation is provided on additions with effect from the first day of themonth following commissioning and on disposals up to the end of the month ofretirement. The residual value of assets, if not insignificant, and the useful life ofassets is reassessed annually. Gains and losses on disposals are determined by comparing the proceeds receivedwith the carrying amount and are included in operating profit. Impairment reviews and testing The carrying amounts of the Group's assets, other than inventories, (which arecarried at the lower of cost and net realisable value) and deferred tax assets,(which are recognised based on recoverability), are reviewed to determinewhether there is any indication of impairment when an event or transactionindicates that there may be, except for goodwill which is reviewed annually. Ifany such indication exists, an impairment test is carried out and the asset iswritten down to its recoverable amount. The recoverable amount of an asset is the greater of its net selling price andvalue in use. In assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific tothe asset. For an asset that does not generate largely independent cash inflows,the recoverable amount is determined for the cash-generating unit to which theasset belongs. Goodwill and intangible assets with an indefinite useful life are tested forimpairment at each balance sheet date. Impairment losses are recognised in theincome statement. An impairment loss, other than in the case of goodwill, is reversed if there hasbeen a change in the estimates used to determine the recoverable amount. Animpairment loss is reversed only to the extent that the asset's carrying amountdoes not exceed the carrying amount that would have been determined, net ofdepreciation or amortisation, if no impairment loss had been recognised. Leases Leases of property, plant and equipment, where the Group has substantially allthe risks and rewards of ownership, are classified as finance leases. Financeleases are capitalised at the inception of the lease at the lower of the fairvalue of the leased asset or the present value of the minimum lease payments.The corresponding rental obligations, net of finance charges, are included ininterest bearing loans and borrowings. The interest element of the finance costis charged to the income statement over the lease period so as to produce aconstant periodic rate of interest on the remaining balance of the liability foreach period. The property, plant and equipment acquired under finance leases aredepreciated over the shorter of the useful life of the asset or the lease term. Leases where a significant portion of the risks and rewards of ownership areretained by the lessor are classified as operating leases. Payments made underoperating leases are charged to the income statement on a straight line basisover the term of the lease. Inventory Inventories are valued at the lower of cost and net realisable value. Cost isbased on the first in, first out principle and includes all expenditure whichhas been incurred in the normal course of business in bringing the products totheir present location and condition. Net realisable value is the estimatedselling price of inventory on hand less all costs expected to be incurred inmarketing, distribution and selling. Foreign currency Transactions in foreign currencies are translated into the functional currencyof the entity at the foreign exchange rate ruling at the date of thetransaction. Non-monetary carried at historic cost are not subsequentlyretranslated. Non-monetary assets carried at fair value are subsequentlyremeasured at the exchange rate at the date of valuation. Monetary assets andliabilities denominated in foreign currencies at the balance sheet date aretranslated into functional currencies at the foreign exchange rate ruling atthat date. Foreign exchange differences arising on translation are recognisedin the income statement. The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated to euro at theforeign exchange rates ruling at the balance sheet date. The revenues andexpenses of foreign operations are translated to euro at the average exchangerate for the financial period. Foreign exchange differences arising ontranslation of the net investment in a foreign operation, including thosearising on long term intra Group loans deemed to be quasi equity in nature, arerecognised directly in equity, in a translation reserve. They are released tothe income statement upon disposal. The portion of exchange gains or losses on foreign currency borrowings usedprovide a hedge against a net investment in a foreign operation that isdetermined to be an effective hedge is recognised directly in equity. Theineffective portion is recognised immediately in profit or loss. Any differences that have arisen since 1 October 2004, the date of transition toIFRS, are recognised in the currency translation reserve and are recycledthrough the income statement on disposal of the related business. Translationdifferences that arose before the date of transition to IFRS in respect of allnon-euro denominated operations are not presented separately. Financial guarantee contracts Where the Company enters into financial guarantee contracts to guarantee theindebtedness of other parties including companies within its Group or jointventures, the Company considers these to be insurance arrangements and accountsfor them as such. The Company treats the guarantee contract as a contingentliability until such time as it becomes probable that the Company will berequired to make a payment under the guarantee. Revenue Revenue represents the fair value of sales of goods delivered and servicesprovided to third party customers in the financial reporting period. The fairvalue of sales is exclusive of value added tax and after allowances fordiscounts and returns and is recognised in the Income Statement when thesignificant risks and rewards of ownership have been transferred to the buyer.Revenue from services rendered is recognised in the Income Statement inproportion to the stage of completion of the related contract or fully when nofurther obligations arise on the related service contract. Employee benefits Pension obligations Obligations for contributions to defined contribution pension plans arerecognised as an expense in the Income Statement as incurred. The Group's netobligation in respect of defined benefit pension plans is calculated, separatelyfor each plan, by estimating the amount of future benefit that employees haveearned in return for their service in the current and prior periods; thatbenefit is discounted to determine the present value, and the fair value of anyplan assets is deducted. The discount rate is the yield at the balance sheetdate on high quality credit rated bonds that have maturity dates approximatingthe terms of the Group's obligations. The calculation is performed by aqualified actuary using the projected unit credit method. All actuarial gainsand losses as at 1 October 2004, the date of transition to IFRS, were recognisedin full against retained earnings. Actuarial gains and losses for subsequentperiods are recognised in the statement of recognised income and expense.Current and past service costs, interest on scheme liabilities and expectedreturn on assets are recognised in the Income Statement as a single chargeagainst distribution expenses. Equity settled compensation The fair value of options granted under the Group's equity settled share optionscheme is recognised as an expense with a corresponding increase in equity. Thefair value is measured at grant date and spread over the period during which theemployees become unconditionally entitled to the options. The fair value of theoptions granted is measured using a binomial model, taking into account theterms and conditions upon which the options were granted. The amount recognisedas a distribution cost is adjusted to reflect the actual number of share optionsthat vest. Taxation Taxation on the profit or loss for the year comprises current and deferred tax.Taxation is recognised in the Income Statement except to the extent that itrelates to items recognised directly in equity, in which case the related tax isrecognised in equity. Current tax is the expected tax payable on the taxable income for the year,using tax rates and laws that have been enacted or substantially enacted at theBalance Sheet date, and any adjustment to tax payable in respect of previousyears. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. If thedeferred tax arises from initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction does not affect accounting nor taxable profit or loss, it is notrecognised. Deferred tax is provided on temporary differences arising oninvestments in subsidiaries, joint ventures, except where the timing of thereversal of the temporary difference is controlled by the Group and it isprobable that the temporary difference will not reverse in the foreseeablefuture. The amount of deferred tax provided is based on the expected manner ofrealisation or settlement of the carrying amount of assets and liabilities,using tax rates enacted or substantively enacted at the Balance Sheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. Cash and cash equivalents Cash and cash equivalents, comprise cash balances and call deposits, includingbank deposits of less than three months maturity. Bank overdrafts that arerepayable on demand and form an integral part of the Group's cash management areincluded as a component of cash and cash equivalents for the purpose of thestatement of cash flows. Financial instruments - from 1 October 2006 Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreignexchange and interest rate risks arising from operational, financing andinvestment activities. In accordance with its treasury policy, the Group doesnot hold or issue derivative financial instruments for trading purposes.However, derivatives that do not qualify for hedge accounting are accounted foras trading instruments. Derivative financial instruments are recognised initially at cost. Subsequent toinitial recognition, derivative financial instruments are stated at fair value.The gain or loss on remeasurement to fair value is recognised immediately inprofit or loss. However, where derivatives qualify for hedge accounting,recognition of any resultant gain or loss depends on the nature of the itembeing hedged. The fair value of interest rate swaps is the estimated amount that the Groupwould receive or pay to terminate the swap at the balance sheet date, takinginto account current interest rates and the current creditworthiness of the swapcounterparties. The fair value of forward exchange contracts is their quotedmarket price at the balance sheet date, being the present value of the quotedforward price. Cash flow hedges Where a derivative financial instrument is designated as a hedge of thevariability in cash flows of a recognised asset or liability, or a highlyprobable forecasted transaction, the effective part of any gain or loss on thederivative financial instrument is recognised directly in equity. When theforecasted transaction subsequently results in the recognition of anon-financial asset or non-financial liability, or the forecast transaction fora non-financial asset or non-financial liability the associated cumulative gainor loss is removed from equity and included in the initial cost or othercarrying amount of the non-financial asset or liability. If a hedge of aforecasted transaction subsequently results in the recognition of a financialasset or a financial liability, the associated gains and losses that wererecognised directly in equity are reclassified into profit or loss in the sameperiod or periods during which the asset acquired or liability assumed affectsprofit or loss (i.e., when interest income or expense is recognised). For cashflow hedges, other than those covered by the preceding two policy statements,the associated cumulative gain or loss is removed from equity and recognised inthe income statement in the same period or periods during which the hedgedforecast transaction affects profit or loss. The ineffective part of any gain orloss is recognised immediately in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or theentity revokes designation of the hedge relationship but the hedged forecasttransaction is still expected to occur, the cumulative gain or loss at thatpoint remains in equity and is recognised in accordance with the above policywhen the transaction occurs. If the hedged transaction is no longer expected totake place, the cumulative unrealised gain or loss recognised in equity isrecognised immediately in the income statement. Fair value hedges Where a derivative financial instrument is designated as a hedge of a change inthe fair value of an asset or liability, gains or losses arising from there-measurement of the hedging instrument to fair value is reported in the incomestatement. In addition, any gain or loss on the hedged item which isattributable to the hedged risk is adjusted against the carrying amount of thehedged item and reflected in the income statement. Where the adjustment is tothe carrying amount of a hedged interest-bearing financial instrument, theadjustment is amortised to the income statement with the objective of achievingfull amortisation by maturity. Trade and other receivables Trade and other receivables are recognised initially at fair value. Subsequentto initial recognition, they are stated at amortised cost less impairmentlosses. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings, other than those accounted for under the fair valuehedging model outlined above are stated at amortised cost with any differencebetween cost and redemption value being recognised in the income statement overthe period of the borrowings on an effective interest basis. Financial instruments - for the year ended 30 September 2005 The Group is a party to derivative financial instruments (derivatives),primarily to manage its exposure to fluctuations in foreign currency exchangerates and interest rates. Gains and losses on derivative contracts used to hedge foreign exchangeexposures arising on future planned transactions are recognised in the profitand loss account when the hedged transactions occur. Interest rate swap agreements and similar contracts are used to manage interestrate exposures. Amounts payable or receivable in respect of these derivativesare recognised as adjustments to interest expense over the period of thecontracts. Provisions A provision is recognised in the Balance Sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. SCHEDULE 2 TRANSITION BALANCE SHEET AS AT 1 OCTOBER 2004 IFRS adjustments --------------------------Irish GAAP Balances in Share Reversal IFRS Format based Employee of Foreign Irish payments benefits proposed ex Converted GAAP dividend reserve IFRS •'000 •'000 •'000 •'000 •'000 •'000 (Ref 2.4) (Ref 2.1) (Ref 2.5) (Ref 1.4) Non current assetsProperty, Plant &equipment 58,223 58,223Goodwill 62,233 62,233Intangible assets 0 0Investment in joint ventures 7,121 7,121Deferred tax assets 0 2,284 2,284 ------- -------- ------- ---------- ------- -------Total non-currentassets 127,577 0 2,284 0 0 129,861 ------- -------- ------- ---------- ------- ------- Current assetsInventories 123,994 123,994Contract work-in-progress 29,300 29,300Income taxreceivables 0 0Trade and otherreceivables 208,524 208,524Cash and cashequivalents 48,671 48,671 ------- -------- ------- ---------- ------- -------Total currentassets 410,489 0 0 0 0 410,489 ------- -------- ------- ---------- ------- ------- Total assets 538,066 0 2,284 0 0 540,350 ======= ======== ======= ========== ======= ======= EquityIssued capital 11,153 11,153Share premium 80,433 80,433Retained earnings 110,377 (311) (7,476) 7,532 (6,133) 103,989Other reserves (6,133) 311 6,133 311 ------- -------- ------- ---------- ------- -------Total equity 195,830 0 (7,476) 7,532 0 195,886 ------- -------- ------- ---------- ------- ------- Non current liabilitiesInterest bearing loans 90,557 90,557Employees benefits 0 11,650 11,650Provisions 0 0Deferred tax liability 2,957 2,957 ------- -------- ------- ---------- ------- ------- 93,514 0 11,650 0 0 105,164 ------- -------- ------- ---------- ------- -------Current liabilitiesBank overdraft 0 0Interest bearing loans& Borrowings 20,392 20,392Trade and other payables 228,330 (1,890) (7,532) 218,908Provisions 0 0 ------- -------- ------- ---------- ------- ------- 248,722 0 (1,890) (7,532) 0 239,300 ------- -------- ------- ---------- ------- -------Total liabilities 342,236 0 9,760 (7,532) 0 344,464 ------- -------- ------- ---------- ------- -------Total equityand liabilities 538,066 0 2,284 0 0 540,350 ======= ======== ======= ========== ======= ======= SCHEDULE 3.1 RESTATEMENT OF GROUP INCOME STATEMENT FOR YEAR ENDED 30SEPTEMBER 2005 SCHEDULE 3.1RESTATEMENT OF GROUP INCOME STATEMENT FOR YEAR ENDED 30 SEPTEMBER2005 ------------------------------ IFRS ADJUSTMENTS ------------------------------ IAS 31 Interest IFRS 2 in Share IFRS 3 IAS 19 Reclass of Irish GAAP joint based Business Employee exceptional Restated ventures payments combinations benefits item under IFRS •'000 •'000 •'000 •'000 •'000 •'000 •'000 (Ref 2.2)(Ref 2.4) (Ref 2.3) (Ref 2.1)Revenue: includingshare of jointventures 1,738,036 1,738,036 ========= ======== ======== ======== ====== ======= ========= Group revenue 1,325,915 1,325,915Cost of sales (1,149,660) (1,149,660) --------- -------- -------- -------- ------ ------- --------- Gross profit 176,255 0 0 0 0 0 176,255Other operatingincome 6,685 6,685Distribution expenses (129,839) (629) (224) (130,692)Administrative expenses (3,743) (3,743)Goodwill amortisation (4,710) 4,710 0Intangibles amortisation 0 (432) (432)Exceptional item 0 8,897 8,897 --------- -------- -------- -------- ------ ------- --------- Operating profit beforefinancing costs 44,648 0 (629) 4,278 (224) 8,897 56,970 Exceptional item (net) 8,897 (8,897) 0Financing costs (3,708) (3,708)Financing income 1,085 (1) 1,084Share of joint venture'soperating profit 2,485 (745) 1,740 --------- -------- -------- -------- ------ ------- --------- Profit before tax 53,407 (746) (629) 4,278 (224) 0 56,086Income tax expense (11,011) 746 16 (206) (10,455) --------- -------- -------- -------- ------ ------- --------- Profit for the financial year 42,396 0 (629) 4,294 (430) 0 45,631 ========= ======== ======== ======== ====== ======= ========= Attributable to:Equity holdersof the Company 42,396 45,631Minority interest 0 0 --------- -------- -------- -------- ------ ------- --------- 42,396 0 0 0 0 0 45,631 ========= ======== ======== ======== ====== ======= ========= Basic earnings per share 19.41c 20.89c(cent) Fully diluted earnings 19.12c 20.71cper share (cent) SCHEDULE 3.2 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR YEAR ENDED 30 SEPTEMBER2005 •'000 Profit for the year attributable to ordinaryshareholders 45,631 Income and expenses recognised directly in equity:---------------------------------------------------- Exchange adjustments (171) Actuarial gain / (loss) (2,582) Deferred tax 204 -------Total recognised income and expenses for year 43,082 ======= GROUP STATEMENT Of CHANGES IN EQUITY FOR YEAR ENDED 30 SEPTEMBER 2005 •'000 Total equity at beginning of year 195,886 Total recognised income and expense for year 43,082 Capital introduced 12,087 Dividends (10,815) Shares to be issued 629 Transfer in respect of share entitlement scheme 74 Restriction arising from treasury shares (366) -------Total equity at end of year 240,577 ======= SCHEDULE 3.3RESTATEMENT OF GROUP BALANCE SHEET AS AT 30 SEPTEMBER 2005 ------------------------------------- IFRS adjustments -------------------------------------Irish GAAP Balances in Share Employee Reclassification Reversal IFRS Format based of IFRS 3 of Foreign Converted Irish payments benefits intangibles Amortsation proposed ex GAAP dividend reserve IFRS •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 (Ref 2.4) (Ref 2.1) (Ref 2.3) (Ref 2.3) (Ref 2.5) (Ref 1.4) Non current assetsProperty, Plant &equipment 58,801 58,801Goodwill 95,315 (8,325) 4,710 91,700Intangibles 0 10,823 (432) 10,391Investment injoint ventures 8,904 8,904Deferred tax assets 0 2,282 2,282 --------- -------- ------- -------- ------- ---------- ------ --------Total non-currentassets 163,020 0 2,282 2,498 4,278 0 0 172,078 --------- -------- ------- -------- ------- ---------- ------ -------- Current assetsInventories 135,852 135,852Trade and otherreceivables 264,104 264,104Cash and cashequivalents 39,804 0 39,804 --------- -------- ------- -------- ------- ---------- ------ --------Total current assets 439,760 0 0 0 0 0 0 439,760 --------- -------- ------- -------- ------- ---------- ------ --------Total assets 602,780 0 2,282 2,498 4,278 0 0 611,838 ========= ======== ======= ======== ======= ========== ====== ======== EquityIssued capital 11,382 11,382Share premium 87,606 87,606Retained earnings 145,079 (940) (10,284) 4,294 8,804 (6,133) 140,820 Other reserves (6,284) 940 (20) 6,133 769 --------- -------- ------- -------- ------- ---------- ------ --------Total equity 237,783 0 (10,304) 0 4,294 8,804 0 240,577 --------- -------- ------- -------- ------- ---------- ------ -------- Non current liabilitiesInterest bearing loans 89,993 89,993Employees benefits 0 12,708 12,708Trade andother payables 8,271 0 8,271Provisions 2,443 2,443Deferred tax liability 1,965 2,498 (16) 4,447 --------- -------- ------- -------- ------- ---------- ------ -------- 102,672 0 12,708 2,498 (16) 0 0 117,862 --------- -------- ------- -------- ------- ---------- ------ --------Current liabilitiesBank overdraft 1,772 1,772Interest bearing loans & Borrowings 1,055 1,055Trade andother payables 259,498 (122) (8,804) 250,572Provisions 0 0 --------- -------- ------- -------- ------- ---------- ------ -------- 262,325 0 (122) 0 0 (8,804) 0 253,399 --------- -------- ------- -------- ------- ---------- ------ --------Total liabilities 364,997 0 12,586 2,498 (16) (8,804) 0 371,261 --------- -------- ------- -------- ------- ---------- ------ --------Total equity andliabilities 602,780 0 2,282 2,498 4,278 0 0 611,838 ========= ======== ======= ======== ======= ========== ====== ======== SCHEDULE 4.1 RESTATEMENT OF GROUP INCOME STATEMENT FOR 6 MONTH PERIOD ENDED 31 MARCH 2005 -UNAUDITED ------------------------- IFRS ADJUSTMENTS ------------------------- IAS 31 Interest IFRS 2 IFRS 3 IAS 19 in Share Restated Irish joint based Business Employee under GAAP ventures payments ombinations benefits IFRS •'000 •'000 •'000 •'000 •'000 •'000 (Ref 2.2) (Ref 2.4) (Ref 2.3) (Ref 2.1)Revenue: includingshare of joint ventures 821,400 821,400 ======= ======== ======== ======== ======= ======= Group revenue 633,977 633,977Cost of sales (552,324) (552,324) -------- -------- -------- -------- ------- ------- Gross profit 81,653 0 0 0 0 81,653Other operatingincome 3,592 3,592Distribution expenses (60,801) (264) (75) (61,140)Administrative expenses (1,740) (1,740)Goodwill amortisation (2,035) 2,035 0Intangibles amortisation 0 0 0 -------- -------- -------- -------- ------- -------Operating profit beforefinancing costs 20,669 0 (264) 2,035 (75) 22,365 Exceptional item (net) 0 0Financing costs (1,799) 1 (1,798)Financing income 456 456Share of joint venture'soperating profit 979 (295) 684 -------- -------- -------- -------- ------- -------Profit before tax 20,305 (294) (264) 2,035 (75) 21,707Income tax expense (4,000) 294 (57) (3) (3,766) -------- -------- -------- -------- ------- -------Profit for the financialperiod 16,305 0 (264) 1,978 (78) 17,941 ======= ======== ======== ======== ======= ======= Attributable to:Equity holdersof the Company 16,305 17,941Minority interest 0 0 -------- -------- -------- -------- ------- ------- 16,305 0 0 0 0 17,941 ======= ======== ======== ======== ======= ======= Basic earnings per share 7.51c 8.26c(cent) Fully diluted earnings per 7.39c 8.18cshare (cent) SCHEDULE 4.2 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR SIX MONTHS ENDED 31MARCH 2005 - UNAUDITED •'000 Profit for the period attributable toordinary shareholders 17,941 Income and expenses recognised directly in equity:-------------------------------------------------- Exchange adjustments (199) Actuarial gain / (loss) (1,781) Deferred tax 51 ------- Total recognised income and expenses forperiod 16,012 ======= GROUP STATEMENT Of CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MARCH2005 •'000 Total equity at beginning of period 195,886 Total recognised income and expense forperiod 16,012 Capital introduced 8,249 Dividends (7,532) Shares to be issued 264 Transfer in respect of share entitlementscheme 0 Restriction arising from treasury shares 0 ------- Total equity at end of period 212,879 ======= SCHEDULE 4.3 RESTATEMENT OF GROUP BALANCE SHEET AS AT 31 MARCH 2005- UNAUDITED -------------------------------- IFRS adjustments --------------------------------Irish GAAP Balances in IFRS Format Share Reversal of Foreign Converted Irish based Employee IFRS 3 proposed ex GAAP payments benefits Amortsation dividend reserve IFRS •'000 •'000 •'000 •'000 •'000 •'000 •'000 (Ref 2.4) (Ref 2.1) (Ref 2.3) (Ref 2.5) (Ref 1.4) Non current assetsProperty, plant &equipment 59,526 59,526Goodwill 60,085 2,035 62,120Investment injoint ventures 7,800 7,800Deferred tax assets 0 2,332 2,332 -------- -------- ------- -------- ---------- ------- -------Total non-currentassets 127,411 0 2,332 2,035 0 0 131,778 -------- -------- ------- -------- ---------- ------- ------- Current assetsInventories 120,552 120,552Contractwork-in-progress 35,511 35,511Income tax receivables 0 0Other receivables 223,128 223,128Cash and cashequivalents 23,911 0 23,911 -------- -------- ------- -------- ---------- ------- -------Total current assets 403,102 0 0 0 0 0 403,102 -------- -------- ------- -------- ---------- ------- -------Total assets 530,513 0 2,332 2,035 0 0 534,880 ======== ======== ======= ======== ========== ======= ======= EquityIssued capital 11,321 11,321Share premium 85,009 85,009Retained earnings 126,904 (575) (9,263) 1,978 3,283 (6,133) 116,194Other reserves (6,353) 575 6,133 355 -------- -------- ------- -------- ---------- ------- -------Total equity 216,881 0 (9,263) 1,978 3,283 0 212,879 -------- -------- ------- -------- ---------- ------- ------- Non current liabilitiesInterest bearing loans 90,048 90,048Employees benefits 0 13,306 13,306Trade and other payables 0 0Provisions 0 0Deferred tax liability 3,000 57 3,057 -------- -------- ------- -------- ---------- ------- ------- 93,048 0 13,306 57 0 0 106,411 -------- -------- ------- -------- ---------- ------- -------Current liabilitiesBank overdraft 0 0Interest bearing loans& Borrowings 11,515 11,515Other payables 209,069 (1,711) 0 (3,283) 204,075Provisions 0 0 -------- -------- ------- -------- ---------- ------- ------- 220,584 0 (1,711) 0 (3,283) 0 215,590 -------- -------- ------- -------- ---------- ------- -------Total liabilities 313,632 0 11,595 57 (3,283) 0 322,001 ======== ======== ======= ======== ========== ======= =======Total equityand liabilities 530,513 0 2,332 2,035 0 0 534,880 ======== ======== ======= ======== ========== ======= ======= Schedule 5 Independent auditor's report to the Directors of United Drug plc on itsconsolidated International Financial Reporting Standards ('IFRS')financial information In accordance with the terms of our engagement letter, we have audited theaccompanying consolidated IFRS balance sheet of the Company and its subsidiaries('the Group') as at 1 October 2004 and 30 September 2005, the relatedpreliminary IFRS income statement for the year ended 30 September 2005 andrelated basis of preparation, accounting policies and other notes as set out onpages 20 to 31 ('the IFRS financial information'). We have not audited the consolidated balance sheet as at 31 March 2005 and therelated consolidated income statement for the six-month period then ended ('theIFRS interim financial information') and therefore it is not covered by thisopinion. Respective responsibilities of directors and auditor The directors of the Company have accepted responsibility for the preparation ofthe IFRS financial information which has been prepared as part of the Group'sconversion to IFRS. As part of its conversion to IFRS, the Group has prepared the IFRS financialinformation for the year ended 30 September 2005 to establish the financialposition and results of operations of the Group necessary to provide thecomparative financial information expected to be included in the Group's firstcomplete set of IFRS consolidated financial statements as at 30 September 2006.The IFRS financial information does not include comparative financialinformation for the prior period. As explained in the basis of preparation noteon page 20, this IFRS financial information has been prepared on the basis ofthe recognition and measurement criteria of IFRSs as adopted by the EuropeanUnion. As explained in the basis of preparation note on page 20, there is, however, apossibility that the directors may determine that some changes to these policiesare necessary when preparing the full annual financial statements for the firsttime in accordance with those IFRSs as adopted by the European Union. This isbecause, as disclosed in the basis of preparation note, changes may arise fromfurther interpretations issued between now and the year end date which mayresult in the directors revising the accounting policies applied or additionalstandards may be issued by the IASB and adopted by the EU. The directors haveapplied IFRS in accordance with IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards and have taken advantage of certain exemptionsavailable in that standard. As explained in the basis of preparation note on page 20, no adjustments havebeen made for any changes in estimates made at the time of approval of the 30September 2005 consolidated financial statements under Irish generally acceptedaccounting principles on which the IFRS financial information is based. Our responsibilities, as independent auditors, are established in Ireland by theAuditing Practices Board, our profession's ethical guidance and the terms of ourengagement. Under the terms of engagement, we are required to report to you our opinion asto whether the IFRS financial information has been properly prepared, in allmaterial respects, in accordance with the basis of preparation and accountingpolicy notes to the IFRS financial information. We also report to you if, in ouropinion, we have not received all the information and explanations we requirefor our audit. We read the other information accompanying the IFRS financial information andconsider whether it is consistent with the IFRS financial information. Weconsider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with IFRS financial information. Our report has been prepared for the Company solely in connection with theCompany's conversion to IFRS. Our report was designed to meet the agreedrequirements of the Company determined by the Company's needs at the time. Ourreport should not therefore be regarded as suitable to be used or relied on byany party wishing to acquire rights against us other than the Company for anypurpose or in any context. Any party other than the Company who chooses to relyon our report (or any part of it) will do so at its own risk. To the fullestextent permitted by law, KPMG will accept no responsibility or liability inrespect of our report to any other party. Basis of audit opinion We conducted our audit having regard to Auditing Standards issued by theAuditing Practices Board. An audit includes examination, on a test basis, ofevidence relevant to the amounts and disclosures in the preliminary IFRSfinancial information. It also includes an assessment of the significantestimates and judgments made by the directors in the preparation of the IFRSfinancial information, and of whether the accounting policies are appropriate tothe Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the IFRS financialinformation has been prepared in accordance with the basis of preparation noteon page 5 and is free from material misstatement, whether caused by fraud orother irregularity or error. In forming our opinion we also evaluated theoverall adequacy of the presentation of information in the IFRS financialinformation. Opinion In our opinion, the accompanying IFRS financial information on pages 20 to 31has been prepared, in all material respects, in accordance with the basis ofpreparation and accounting policy notes which describe how IFRS have beenapplied under IFRS 1 First-time Adoption of International Financial ReportingStandards and the assumptions made by the directors of the Company about thestandards and interpretations expected to be effective, and the policiesexpected to be adopted, when they prepare the first complete set of consolidatedIFRS financial statements of the Group for the year ended 30 September 2006. KPMG 15 March 2006 Chartered Accountants This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
UDG.L