RNS Number:9618P
AGA Foodservice Group PLC
15 August 2005
15th August 2005
FOR IMMEDIATE RELEASE
RESTATEMENT OF FINANCIAL INFORMATION UNDER INTERNATIONAL FINANCIAL REPORTING
STANDARDS 'IFRS' 2004
Aga Foodservice Group plc is preparing for the adoption of International
Financial Reporting Standards 'IFRS' as its primary accounting basis for the
year ending 31st December 2005. As part of this transition, Aga Foodservice
Group plc is presenting today its primary financial statements and accounting
policies prepared under IFRS, for the year ended 31st December 2004 and the half
year ended 30th June 2004, together with explanations and reconcilations of the
changes.
Results for the periods ended 31st December 2004 and 30th June 2004 under UK
GAAP, as previously released, are available on the Group's website
www.agafoodservice.com.
The primary changes, as previously highlighted, to the Group's reported
financial information at 31st December 2004 and 30th June 2004 from the adoption
of IFRS are as a result of the:
* Recognition of all employee benefit related obligations, principally
pensions;
* Derecognition of goodwill amortisation in the income statement;
* Recognition of dividends when approved;
* Recognition of deferred tax liabilities on historical property
revaluations and other temporary differences.
For the year ended 31st December 2004 the impact on profits from the adoption of
IFRS would be to increase operating profit and profit before tax by #5.7m,
principally the elimination of #8.0m of goodwill amortisation and #2.3m
additional costs of retirement benefit schemes. As at 31st December 2004 total
equity after adoption of IFRS is #275.8m, a reduction of #7.9m from the amount
shown in the UK GAAP balance sheet. A full reconciliation between UK GAAP and
IFRS of the profit and loss account and balance sheets for the year ended 31st
December 2004 and half year ended 30th June 2004 are set out on pages 14 - 19 of
this announcement.
Impact of the adoption of IFRS on the full year figures:
* 2004 operating profit #35.2m (UK GAAP #29.5m)
* 2004 profit before tax #36.3m (UK GAAP #30.6m)
* Basic earnings per share 22.9p (UK GAAP 18.4p)
* Total equity at 31st December 2004 #275.8m (UK GAAP #283.7m)
* 2004 net cash unchanged as a result of the transition
Shaun Smith, Finance Director, commented:
"This detailed analysis of the impact of IFRS on our interim and full year
financial statements for 2004 will help shareholders prepare for the adoption of
the new rules for the 2005 half year and full year results. As previously
indicated there will be a positive impact on our operating profit, profit before
tax, EPS and no effect on the net cash flow.
We will, in conjunction with our auditors, continue to review the impact of any
further IFRS guidance that may be issued by the IASB to ensure that our
implementation is in accordance with best practice."
The interim results for the half year ended 30th June 2005 will be announced on
9th September 2005.
Enquiries:
Shaun Smith, Finance Director - 0121 711 6015
Contents
Page
Consolidated income statement (restated under IFRS) 3
Statement of recognised income and expenditure (under IFRS) 4
Balance sheets (restated under IFRS) 5
Cash flow statement (restated under IFRS) 6
Accounting policies under IFRS 7 - 13
Reconciliation of equity at 1st January 2004 14
Reconciliation of equity at 31st December 2004 15
Reconciliation of profit at 31st December 2004 and
explanation of reconciling items at 1st January 2004
& 31st December 2004 16 - 17
Reconciliation of equity and profits at 30th June 2004 18
Explanation of reconciling items at 30th June 2004 19
Consolidated income statement
(restated under IFRS)
For the period ended 30th June and 31st December 2004
Unaudited Unaudited
30 June 31 December
2004 2004
#m #m
Continuing operations
Total revenue 203.8 433.7
-------------------------------- ---------- -----------
Group operating profit 15.2 35.2
Share of result of associate - 0.5
-------------------------------- ---------- -----------
Profit before finance income and income tax 15.2 35.7
Finance income 0.6 1.4
Finance costs (0.3) (0.8)
-------------------------------- ---------- -----------
Profit before income tax 15.5 36.3
Income tax expense (3.1) (7.1)
-------------------------------- ---------- -----------
Profit for period for continuing operations 12.4 29.2
-------------------------------- ---------- -----------
Profit attributable to equity shareholders 12.4 29.1
Profit attributable to minority interests - 0.1
-------------------------------- ---------- -----------
Profit retained 12.4 29.2
-------------------------------- ---------- -----------
Earnings per share p p
Basic 9.7 22.9
Diluted 9.6 22.8
-------------------------------- ---------- -----------
All operations are continuing
Statement of recognised income and expenditure
(under IFRS)
For the period ended 30th June and 31st December 2004
Unaudited Unaudited
30 June 31 December
2004 2004
#m #m
Profit for period 12.4 29.2
----------------------------------- ---------- -----------
Exchange adjustments on net investments (2.0) (3.4)
Purchase own shares (8.9) (9.4)
Realisation of property revaluation gains - 0.3
Actuarial gains on defined benefit pension schemes 9.0 18.2
Tax on items taken directly to reserves (3.2) (4.5)
Future share scheme issues 0.2 0.3
----------------------------------- ---------- -----------
Net (loss) / gain not recognised in income statement (4.9) 1.5
----------------------------------- ---------- -----------
Total recognised income for period 7.5 30.7
----------------------------------- ---------- -----------
Attributable to:
Equity shareholders 7.5 30.6
Minority interests - 0.1
----------------------------------- ---------- -----------
Total recognised income for period 7.5 30.7
----------------------------------- ---------- -----------
Balance sheets
(restated under IFRS)
As at 30th June and 31st December 2004
Unaudited Unaudited
30 June 31 December
2004 2004
#m #m
Non-current assets
Goodwill 136.0 137.4
Intangible assets 5.5 8.5
Property, plant and equipment 72.5 77.5
Investment in associates 5.9 6.5
Retirement benefit asset - 1.2
Deferred tax asset 7.3 5.6
-------------------------- ----------- -----------
227.2 236.7
-------------------------- ----------- -----------
Current assets
Inventories 63.0 70.2
Trade and other receivables 75.9 78.6
Cash and cash equivalents 40.5 49.8
-------------------------- ----------- -----------
179.4 198.6
-------------------------- ----------- -----------
Total assets 406.6 435.3
-------------------------- ----------- -----------
Current liabilities
Borrowings (2.4) (23.1)
Trade and other payables (87.1) (102.7)
Current tax liabilities (5.5) (2.1)
Current provisions (1.1) (1.3)
-------------------------- ----------- -----------
(96.1) (129.2)
-------------------------- ----------- -----------
Net current assets 83.3 69.4
-------------------------- ----------- -----------
Non-current liabilities
Borrowings (18.7) (1.6)
Retirement benefit obligation (18.1) (7.8)
Deferred tax liabilities (4.3) (5.0)
Provisions (14.3) (15.9)
-------------------------- ----------- -----------
(55.4) (30.3)
-------------------------- ----------- -----------
Total liabilities (151.5) (159.5)
-------------------------- ----------- -----------
Net assets 255.1 275.8
-------------------------- ----------- -----------
Shareholders' equity
Share capital 31.4 31.5
Share premium account 59.9 60.9
Other reserves 38.3 38.1
Retained earnings 125.1 145.1
-------------------------- ----------- -----------
Total shareholders' equity 254.7 275.6
Minority interest in equity 0.4 0.2
-------------------------- ----------- -----------
Total equity 255.1 275.8
-------------------------- ----------- -----------
Cash flow statement
(restated under IFRS)
For the period ended 30th June and 31st December 2004
Unaudited Unaudited
30 June 31 December
2004 2004
Cash flows from operating activities #m #m
Cash generated from operations 9.4 32.9
Interest received 0.6 1.4
Interest paid (0.3) (0.8)
Tax paid (1.8) (5.5)
---------------------------------- --------- -----------
Net cash generated from operating activities 7.9 28.0
---------------------------------- --------- -----------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (4.6)
Purchase of property, plant and equipment (6.3) (14.6)
Expenditure on product development (1.4) (2.8)
Proceeds from disposal of property, plant and
equipment 4.6 7.8
---------------------------------- --------- -----------
Net cash used in investing activities (3.1) (14.2)
---------------------------------- --------- -----------
Cash flows from financing activities
Dividends paid to shareholders (6.4) (9.6)
Net proceeds from issue of ordinary share capital - 1.1
Loan to associated undertaking (0.3) (0.3)
Purchase of own shares (8.9) (9.4)
Finance lease (repayment) / inception (0.1) 0.1
Repayment of borrowings (0.9) (2.5)
New bank borrowings 0.4 4.8
---------------------------------- --------- -----------
Net cash used in financing activities (16.2) (15.8)
---------------------------------- --------- -----------
Exchange adjustment (0.1) (0.2)
---------------------------------- --------- -----------
Decrease in cash and cash equivalents (11.5) (2.2)
Opening cash and cash equivalents 52.0 52.0
---------------------------------- --------- -----------
Closing cash and cash equivalents 40.5 49.8
---------------------------------- --------- -----------
Reconciliation of operating profit to net cash Unaudited Unaudited
inflow from operating activities 30 June 31 December
2004 2004
#m #m
Operating profit 15.2 35.2
Intangibles amortisation 0.4 1.0
Depreciation 3.9 7.7
Profit on disposal of property, plant and
equipment (1.2) (1.3)
(Increase) / decrease in inventories (2.5) (8.0)
(Increase) / decrease in receivables (1.5) (10.5)
Increase / (decrease) in payables (0.4) 14.4
Increase / (decrease) in pensions (1.2) (2.3)
Increase / (decrease) in provisions (3.3) (3.3)
--------------------------------- --------- -----------
Net cash inflow from operating activities 9.4 32.9
--------------------------------- --------- -----------
Accounting policies under IFRS
Basis of accounting
The financial information presented in this document has been prepared on the
basis of all International Financial Reporting Standards ('IFRS'), including
International Accounting Standards ('IAS') and interpretations issued by the
International Accounting Standards Board ('IASB') and its committees, and as
interpreted by any regulatory bodies applicable to the Group published by 30th
June 2005. These are subject to ongoing amendment by the IASB and subsequent
endorsement by the European Commission and are therefore subject to possible
change. Further standards and interpretations may also be issued that will be
applicable for financial years beginning on or after 1st January 2005 or that
are applicable to later accounting periods but may be adopted early. The Group's
first IFRS financial statements may, therefore, be prepared in accordance with
some different accounting policies from the financial information presented
here.
In preparing this financial information, the Group has assumed that the European
Commission will endorse the amendment to IAS 19, 'Employee Benefits - Actuarial
Gains and Losses, Group Plans and Disclosures'.
The primary statements within the financial information contained in this
document have been presented in accordance with IAS 1, 'Presentation of
Financial Statements.' However, this format and presentation may require
modification as practice develops and in the event that further guidance is
issued.
The accounts are prepared under the historical cost convention, except where
adjusted for revaluations of certain fixed assets, and in accordance with
applicable Accounting Standards and those parts of the Companies Act 1985
applicable to companies reporting under IFRS. A summary of the principal Group
IFRS accounting policies is set out below, together with an explanation of where
changes have been made to previous policies on the adoption of new accounting
standards.
IFRS exemptions
Business combinations - IFRS 1 'First time adoption of IFRS' allows companies to
elect not to apply IFRS 3 retrospectively to business combinations which
occurred before the date of transition to IFRS. The Group has elected to take
advantage of this exemption and not apply IFRS 3 retrospectively to business
combinations that took place before 1st January 2004, the date of transition to
IFRS.
Retirement benefits - the Group has elected to recognise all cumulative
actuarial gains and losses as at 1st January 2004 which is an optional exemption
from full retrospective application given by IFRS 1.
Property, plant and equipment - as permitted under IFRS 1 the Group has valued
property, plant and equipment at the date of transition using a revaluation made
in prior years under UK GAAP, the revalued amount at 1st January 2004 has been
deemed to be cost.
Foreign currencies - under IFRS 1, the Group is not required to record
cumulative translation differences arising prior to the transition date. In
utilising this exemption, all cumulative exchange differences are deemed to be
zero as at 1st January 2004 and all subsequent disposals shall exclude any
translation differences arising prior to the date of transition.
Financial instruments - the Group has taken advantage of the exemption under
IFRS 1 not to present its comparatives in accordance with IAS 32 'Financial
Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments:
Recognition and Measurement'. Consequently, for the comparatives to the 2005
financial statements, the financial information will be presented in accordance
with UK GAAP.
IFRS 2 'Share-based Payments' - the Group has taken advantage of the exemption
to not apply the requirements of IFRS 2 to equity instruments that were granted
before 7th November 2002.
Basis of consolidation
The consolidated income statement and balance sheet include the accounts of the
parent company and all its subsidiaries made up to the end of the financial year
and include the results of subsidiaries and businesses acquired and sold during
the year from or up to their effective date of acquisition or sale. The
consolidated accounts also include the Group's share of post-acquisition
earnings and net assets of associated undertakings. The Group defines a
subsidiary as an entity that the Group has the power to control.
Business combinations and goodwill
Shares issued as consideration for the acquisition of companies have a fair
value attributed to them, which is normally their market value at the date of
acquisition. Net tangible assets acquired are consolidated at a fair value to
the Group at the date of acquisition. All changes to those assets and
liabilities, and the resulting gains and losses that arise after the Group has
gained control of the subsidiary, are credited and charged to the
post-acquisition income statement.
Under UK GAAP, goodwill arising on acquisitions prior to 1998 was written off to
reserves.
From 1998, goodwill, being the difference between the fair value of the purchase
consideration and the fair value of the assets acquired, was capitalised in the
UK GAAP balance sheet as goodwill and until 31st December 2004 was amortised on
a straight line basis over its estimated useful life, not exceeding 20 years.
Under IFRS 3 'Business Combinations' the amortisation of goodwill ceased from
1st January 2004 and is subject to an impairment review annually and when there
are indications that the carrying value may not be recoverable. An impairment
loss is recognised for the amount by which the asset's carrying value exceeds
its recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and its discounted value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
Segmental reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that is
subject to risks and returns that are different from those of segments operating
in other economic environments. Other operating income, expenses, assets and
liabilities are allocated based on revenues.
Based on the risks and returns of the Group's products and services the
directors consider that the primary reporting format is by business segment and
the secondary reporting format is geographical. The business segments have been
chosen on the basis of the internal management structure and system of reporting
to the board of directors.
Revenue recognition
Revenue, which excludes value added tax and intra-group sales, represents the
invoiced value of goods and services sold to customers. Appropriate provisions
for returns, trade discounts and other allowances are deducted from revenue as
appropriate.
Under IAS 18 'Revenue' the Group's revenue has been recognised when performance
has occurred and a right to consideration has been obtained.
Post retirement benefits
The Group's major pension plans are of a defined benefit type. Under IAS 19
'Employee Benefits' the employer's portion of the current service costs and
curtailment gains are charged to operating profit for these plans, with the
interest cost net of the expected return on assets in the plans also being
credited to operating profit. Actuarial gains and losses are recognised directly
in equity, in the statement of recognised income and expenditure, and the
balance sheet reflects the schemes' surplus or deficit at the balance sheet
date.
Payments to defined contribution schemes are charged to the income statement as
they become payable.
Intangible assets
Development expenditure is capitalised when a clear, commercially viable future
for that development is confirmed and it is amortised on a straight line basis
over the life of the project, limited to a maximum of five years, following the
commencement of its commercial production. All other research and development
expenditure is written off in the year in which it is incurred. This is
consistent with the Group's accounting policy under UK GAAP.
Computer software licences acquired, costs associated with the developing of
software products and software that is not integral to a related item of
hardware, are recognised as intangible assets and are amortised over their
useful lives, which is limited to a maximum of five years.
Separable intangible assets, such as trademarks, licences and brands, are
recognised separately from goodwill on all acquisitions after the date of
transition which are carried at cost less accumulated amortisation and are
amortised over their estimated useful life. Brands identified in certain
business combinations have been assessed as having an indefinite useful life. In
reaching this assessment, account was made of their market-leading position in
niche markets, premium image, length of history and unchanging fashion. These
factors are coupled with continuing marketing spend to maintain the brand.
Intangible assets with indefinite lives are not amortised but are subject to
annual impairment tests.
Intangible assets are reviewed for impairment on an annual basis.
Property, plant and equipment
Under IAS 16 'Property, Plant and Equipment,' assets are held at cost less
accumulated depreciation. Depreciation is provided on property, plant and
equipment, other than freehold land and assets in the course of construction, at
rates calculated to write off the cost of each asset on a straight line basis
over its expected useful life as follows:
i. Freehold buildings over 50 years.
ii. Leasehold land and buildings over 50 years or the period of the
lease whichever is less.
iii. Plant and equipment over a period of 3 to 12 1/2 years.
The Group annually reviews the assessment of residual values and useful lives in
accordance with IAS 16.
Leases
Under IAS 17 'Leases,' assets, held under leases and hire purchase contracts,
where the Group has substantially all the risks and rewards of ownership, are
capitalised as owned property, plant and equipment and the obligations relating
thereto, excluding finance charges, are included in borrowings. Finance costs
are charged to the income statement over the contract term to give a constant
rate of interest on the outstanding balance. Finance lease assets held as
property, plant and equipment are depreciated over the shorter of the asset's
expected useful life and the lease term.
Payments in respect of operating leases, net of any incentives received, are
charged in arriving at the operating profit on a straight line basis over the
period of the lease.
Assets leased to third parties under operating leases (principally land and
buildings) are held as tangible fixed assets and depreciated over their expected
useful life in line with the depreciation policy. Rental income (net of any
incentives given) from leased assets is credited to the income statement on an
accruals basis over the lease term.
Inventories and long-term contracts
In accordance with IAS 2 'Inventories' the Group's inventories are valued at the
lower of cost on a first in first out basis and net realisable value. Cost
includes a proportion of production overheads based on normal levels of
activity. Provision is made for obsolete and slow moving items.
The amount by which recorded turnover is in excess of payments on account is
included in debtors as amounts recoverable on long-term contracts. Revenue is
recognised by reference to the stage of completion of the contract, when the
outcome of the transaction can be assessed reliably.
Borrowings
Borrowings are recognised initially at their amortised cost, net of the
associated finance costs, which are amortised to the income statement over the
life of the borrowings. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the liability for at
least twelve months after the balance sheet date.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits at call with banks,
other short term highly liquid investments and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities.
Financial instruments
The Group's operations bring about a variety of financial risks that include
fluctuations in foreign currency, liquidity, interest rate and credit risk.
Setting the general treasury policy is a matter reserved for the board with
authority delegated to the chief executive's committee.
The board of directors therefore has the responsibility for the risk management
policies applied by the Group. The Group treasury has a policy and procedures
manual that sets out specific guidelines to manage Group foreign exchange risk,
interest rate risk, credit risk and the use of financial instruments to manage
these risks.
a) Foreign exchange risk
Foreign currency transactional risk
As a result of the Group's geographical presence and operations, it is exposed
to foreign currency risks primarily with respect to the US dollar and the Euro.
The Group requires its operating units to apply transactional hedging for highly
probable sales receipts and purchase commitments denominated in currencies other
than the units' functional currency. Operating units enter into forward currency
contracts for a period of up to twelve months directly with their relationship
banks. This is performed on a rolling twelve month basis.
Foreign currency translation risk
With its strategy of growth on an international level, the Group has significant
investments in overseas operations. Such investments in foreign currency
denominated assets are hedged primarily by putting in place foreign currency
borrowings. Other hedging instruments such as cross currency interest swaps and
forward foreign currency contracts may also be considered from time to time.
b) Interest rate risk
The Group maintains a policy to minimise interest rate risk on its borrowings
and deposits by using interest rate swaps and forward agreements where
appropriate. The Group's policy is, normally, to have between 25% and 75% of
debt at fixed rates at any time. As the Group currently has net cash, interest
rate risk is managed without the need to use derivative financial instruments.
The Group regularly reviews its operations to ensure there is no significant
concentration of credit risk. The Group policy requires appropriate credit
checks to be carried out on potential customers prior to trading. Financial
instruments are undertaken with counterparties that are approved by the board.
Deposits and derivative financial instruments are placed with counterparties
which have a AA credit rating or above. The amount of exposure to any
counterparty is subject to an approved limit, which is reviewed annually by the
board.
c) Liquidity risk
The Group maintains a mixture of short term, uncommitted and medium term,
committed facilities to ensure a sufficient level of funds are available for its
business operations.
Accounting for derivative financial instruments and hedging activities
Hedge accounting alters the accounting treatment that would otherwise apply, so
that gains and losses on the hedging instrument are recognised in the income
statement in the same period as offsetting gains and losses on the hedged item.
The accounting treatment of derivatives classified as hedges by the Group
depends on the designation, which occurs on the date that the derivative
instrument is committed to.
Derivatives under IAS 39 fall into one of the following three categories:
* Fair value hedge, i.e. a hedge of a fair value of an asset or a
liability
* Cash flow hedge, i.e. a hedge of the income or cost of a highly probable
forecasted transaction or commitment
* A hedge of a net investment in a foreign entity
To qualify for hedge accounting, the Group is required to document in advance
the relationship between the hedged item and the hedging instrument. The formal
documentation includes the method for testing the hedge relationship on an
ongoing basis. This effectiveness test is performed at the end of each reporting
period to demonstrate that the hedge remains highly effective.
Hedge of net investments in foreign entities
The Group hedges net investments in foreign entities primarily through currency
borrowings. Any gains and losses on the translation of the borrowings are
recognised in equity. As the hedge relationship is expected to remain highly
effective, the accounting treatment will be applied on an ongoing basis until
the foreign operation is disposed of.
Transactional hedging by forward foreign currency contracts
Where the appropriate criteria are met for hedge accounting, it is applied to
the forward foreign currency contracts put in place to reduce exposure to
currency denominated sales and purchases.
Where the criteria for hedge accounting are not met, or the Group elects not to
hedge account, gains or losses on the fair value of forward contracts are taken
to the income statement as they arise.
Foreign currencies
The income statement items of overseas subsidiaries and related companies are
translated into sterling using average exchange rates. Assets and liabilities in
foreign currencies including goodwill arising on acquisitions are translated at
the mid-market rates of exchange ruling at the balance sheet date. Other
exchange differences are dealt with through the income statement.
Where the translation of overseas subsidiaries and associated undertakings, net
of any foreign currency borrowing used to finance them, gives rise to an
exchange difference, this is taken directly to reserves. UK GAAP does not
require these translation differences to be separately identified and accounted
for in subsequent disposals of foreign operations whereas under IFRS the
translation differences arising are separately recorded in equity.
Government grants
Under IAS 20 'Government Grants,' grants relating to fixed assets, are treated
as deferred income and are transferred to revenue in equal amounts over the life
of the assets.
Current and deferred tax
The scope of IAS 12 'Income Taxes' is wider than the corresponding UK GAAP
standards, and requires deferred tax to be provided on historic property
revaluations and all other temporary differences, using the liability method,
rather than just taxable timing differences under UK GAAP. Deferred income tax
assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be
utilised.
In the holding company and its subsidiaries the liability is assessed with
reference to the individual company. On consolidation the liability is assessed
with reference to the Group as a whole.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse, based on
tax rates and laws that have been enacted or substantially enacted by the
balance sheet date. Income tax is provided for, using current rates.
Employee share options
IFRS 2 'Share-based Payments' requires that an expense for equity instruments
granted is recognised in the financial statements based on its fair value at the
date of grant. This expense, which is primarily in relation to employee share
option and Executive LTIP schemes, is recognised over the vesting period of the
scheme. The Group has principally adopted the Black Scholes model and a TSR
Pricing Model, respectively, for the purposes of computing fair value under
IFRS.
IFRS 2 allows the measurement of this expense to be calculated only on options
granted after 7th November 2002.
Dividends
Under UK GAAP the Group accrued for the final dividend when proposed. Under IFRS
the dividend is only recognised at the point it is declared and approved by the
shareholders at the Annual General Meeting.
Provisions
Provision is made for the estimated liability on all products still under
warranty. Product warranties of between 1 and 3 years are given, where
appropriate, by individual businesses in the Group. Following the disposal
programme of previous years certain vacant properties located in the UK remain
with the Group. Full provision has been made for the residual onerous lease
commitments, together with other outgoings, for the remaining period of the
leases. The Group's and Company's other provisions relate to the remaining costs
in respect of the disposal of Pipe Systems, including probable warranty and
indemnity claims, pensions, taxation exposures, other claims and other costs
from third parties in relation to divested businesses.
Reconciliation of equity at 1st January 2004
The reconciliations of equity at 1st January 2004 (date of transition to IFRS)
and at 31st December 2004 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2004, as required by IFRS 1, are shown below.
UK GAAP Unaudited Unaudited
effect of IFRS
transition to
IFRS
#m #m #m
Goodwill 137.2 - 137.2
Intangible assets (note a) 3.5 0.7 4.2
Property, plant and
equipment (note a) 73.2 (0.7) 72.5
Investment in associates 5.8 - 5.8
Retirement benefit asset 23.3 (23.3) -
(note b)
Deferred tax
asset (note d) - 10.5 10.5
------------------------ ----------- ---------- ----------
Non-current
assets 243.0 (12.8) 230.2
------------------------ ----------- ---------- ----------
Inventories 61.3 - 61.3
Trade and other 79.4 - 79.4
receivables
Cash and cash
equivalents 52.0 - 52.0
------------------------ ----------- ---------- ----------
Current assets 192.7 - 192.7
------------------------ ----------- ---------- ----------
Trade and
other payables (97.6) 6.5 (91.1)
(note c)
Deferred tax
(note d) (8.0) 3.7 (4.3)
Current tax
liabilities (3.0) - (3.0)
Bank loans,
overdrafts and (22.4) - (22.4)
finance leases
Provisions
(note b) (22.4) 2.3 (20.1)
Retirement benefit
obligation (note b) - (27.9) (27.9)
------------------------ ----------- ---------- ----------
Total
liabilities (153.4) (15.4) (168.8)
------------------------ ----------- ---------- ----------
Total assets
less total liabilities 282.3 (28.2) 254.1
------------------------ ----------- ---------- ----------
Share capital 32.4 - 32.4
Share premium account 59.9 - 59.9
Other reserves 37.4 - 37.4
Retained earnings 152.2 (28.2) 124.0
Minority interests 0.4 - 0.4
------------------------ ----------- ---------- ----------
Total equity 282.3 (28.2) 254.1
------------------------ ----------- ---------- ----------
Reconciliation of equity at 31st December 2004
UK GAAP Unaudited Unaudited
effect of IFRS
transition to
IFRS
#m #m #m
Goodwill (note e) 131.1 6.3 137.4
Intangible assets (note a) 5.7 2.8 8.5
Property, plant
and equipment (note a) 78.6 (1.1) 77.5
Investment in associates 6.5 - 6.5
Retirement
benefit asset (note b) 28.6 (27.4) 1.2
Deferred tax
asset (note d) - 5.6 5.6
------------------------ ----------- ---------- ----------
Non-current assets 250.5 (13.8) 236.7
------------------------ ----------- ---------- ----------
Inventories 70.2 - 70.2
Trade and other
receivables 78.6 - 78.6
Cash and cash
equivalents 49.8 - 49.8
------------------------ ----------- ---------- ----------
Current assets 198.6 - 198.6
------------------------ ----------- ---------- ----------
Trade and other
payables (note c) (110.0) 7.3 (102.7)
Current tax liabilities (2.1) - (2.1)
Deferred tax
liabilities (note d) (9.1) 4.1 (5.0)
Bank loans,
overdrafts and (24.7) - (24.7)
finance leases
Provisions (note b) (19.5) 2.3 (17.2)
Retirement benefit
obligation (note b) - (7.8) (7.8)
------------------------ ----------- ---------- ----------
Total liabilities (165.4) 5.9 (159.5)
------------------------ ----------- ---------- ----------
Total assets
less liabilities 283.7 (7.9) 275.8
------------------------ ----------- ---------- ----------
Share capital 31.5 - 31.5
Share premium account 60.9 - 60.9
Other reserves 38.1 - 38.1
Retained earnings 153.0 (7.9) 145.1
Minority interests 0.2 - 0.2
------------------------ ----------- ---------- ----------
Total equity 283.7 (7.9) 275.8
------------------------ ----------- ---------- ----------
Reconciliation of profit at 31st December 2004 and explanation of reconciling
items at 1st January 2004 & 31st December 2004
Reconciliation of profit for the year ended 31st December 2004
UK GAAP Unaudited Unaudited
effect of
transition to
IFRS IFRS
#m #m #m
------------------------ ----------- ---------- ----------
Revenue (note h) 435.0 (1.3) 433.7
------------------------ ----------- ---------- ----------
Group operating
profit (note b, e & f) 29.5 5.7 35.2
Share of result
of associate (note g) 0.5 - 0.5
Net finance income 0.6 - 0.6
------------------------ ----------- ---------- ----------
Profit before tax 30.6 5.7 36.3
Income tax (note d) (7.1) - (7.1)
------------------------ ----------- ---------- ----------
Net profit 23.5 5.7 29.2
------------------------ ----------- ---------- ----------
Explanation of reconciling items between UK GAAP and IFRS
(a) Intangibles - In accordance with IAS 38 'Intangible Assets' certain
software costs of #1.1m (2003: #0.7m) have been transferred from property, plant
and equipment to intangible assets. #1.7m of brands have been transferred from
goodwill in respect of acquisitions since the transition date.
(b) Retirement benefit schemes - Accounting for pensions in accordance with
IAS 19 requires the pension asset / liability to be brought onto the balance
sheet. At 31st December 2003 the Group's defined benefit pension schemes were in
deficit under IAS 19 requiring a pension liability of #27.9m to be shown on the
balance sheet. At 31st December 2004 the Aga Pension Scheme showed a surplus of
#1.2m which is included in assets and the other schemes' deficits of #7.8m are
shown in liabilities in the restated balance sheet. At 31st December 2004 the
SSAP 24 pension prepayment of #28.6m (2003: #23.3m) which was included in the
balance sheet has been removed under IAS 19. Retirement benefit provisions for
overseas businesses of #2.3m at 31st December 2004 (2003: #2.3m) were
transferred from provisions to retirement benefit liabilities. The related
deferred tax has been adjusted accordingly. The operating profit is reduced by
#2.3m in the year to 31st December 2004 (the IAS 19 service cost of #6.3m and
net finance income of #4.0m for the full year).
(c) Dividends - Under UK Company law, companies were required to provide
for their final dividend in the closing balance sheet and in advance of the
dividend being declared and approved by the Annual General Meeting. Under IAS
37, 'Provisions' the dividend cannot be provided in the year end balance sheet
as, at that date, the dividend did not represent a liability. At 31st December
2004 accrued dividends of #7.3m (2003: #6.5m) were removed from other payables.
(d) Tax - In accordance with IAS 12, provision has been made for deferred
tax on revalued assets. This was not required under UK GAAP unless there was a
binding commitment to sell the asset. The increase in the deferred tax liability
at 31st December 2004 was #0.9m (2003: #1.2m). A deferred tax asset has also
been included in respect of the IAS 19 pension liability and the deferred tax
liability has been removed in relation to the SSAP 24 pension prepayment, a
total pensions related tax adjustment of #10.6m on 31st December 2004 (2003:
#15.4m).
Explanation of reconciling items at 1st January 2004 & 31st December 2004
(d) Tax (continued) - The total deferred tax adjustment is therefore #9.7m,
split between #5.6m of deferred tax assets and #4.1m of deferred tax liabilities
which are now shown gross on the face of the balance sheet.
(e) Goodwill - The operating profit is increased by #8.0m in the year to
31st December 2004 as goodwill amortisation is no longer required under IFRS 3
as these assets are subject to annual impairment testing. The goodwill in the
balance sheet has been frozen at 31st December 2003. On restatement of the
balance sheet under IFRS, goodwill has been adjusted by #1.7m in relation to
brands on recent acquisitions that were transferred to intangibles.
(f) Share options - No adjustment has been made to the profit and loss
charge of #0.3m in the year to 31st December 2004, under UK GAAP, in relation to
share option schemes. This is because one of the two Executive LTIP schemes is
excluded from the IFRS 2 calculation, as it was granted before 7th November
2002, and one of the employee share option schemes, granted after 7th November
2002, is included, both of which have similar valuations of #0.3m.
(g) Share of result of associate - The share of the result post tax and
after adding back goodwill amortisation under IFRS is not materially different
from that shown in the profit and loss account under UK GAAP.
(h) Revenue recognition - Revenue has been adjusted by #1.3m to ensure
settlement discounts have been presented in accordance with IAS 18, these costs
were previously reported as an operating cost rather than a deduction from
revenue.
Reconciliation of equity and profits at 30th June 2004
The reconciliation of equity at 30th June 2004 and the reconciliation of profit
for the six months ended 30th June 2004 have been included below to enable a
comparison of the 2005 published interim figures with those published in the
corresponding period of the previous financial year.
Reconciliation of equity at 30th June UK GAAP Unaudited Unaudited
2004 effect of IFRS
transition to
IFRS
#m #m #m
Goodwill (note m) 132.0 4.0 136.0
Intangible assets (note i) 4.6 0.9 5.5
Property, plant and
equipment (note i) 73.4 (0.9) 72.5
Investment in associates 5.9 - 5.9
Retirement benefit asset 25.7 (25.7) -
(note j)
Deferred tax
asset (note l) - 7.3 7.3
------------------------ ----------- ---------- ----------
Non-current
assets 241.6 (14.4) 227.2
------------------------ ----------- ---------- ----------
Inventories 63.0 - 63.0
Trade and other receivables 75.9 - 75.9
Cash and cash equivalents 40.5 - 40.5
------------------------ ----------- ---------- ----------
Current assets 179.4 - 179.4
------------------------ ----------- ---------- ----------
Trade and other payables (90.2) 3.1 (87.1)
(note k)
Current tax liabilities (5.5) - (5.5)
Deferred tax liabilities (8.0) 3.7 (4.3)
(note l)
Bank loans, overdrafts and (21.1) - (21.1)
finance leases
Provisions (note j) (18.1) 2.7 (15.4)
Retirement benefit - (18.1) (18.1)
obligation (note j)
------------------------ ----------- ---------- ----------
Total liabilities (142.9) (8.6) (151.5)
------------------------ ----------- ---------- ----------
Total assets less liabilities 278.1 (23.0) 255.1
------------------------ ----------- ---------- ----------
Share capital 31.4 - 31.4
Share premium account 59.9 - 59.9
Other reserves 38.3 - 38.3
Retained earnings 148.1 (23.0) 125.1
Minority interests 0.4 - 0.4
------------------------ ----------- ---------- ----------
Total equity 278.1 (23.0) 255.1
------------------------ ----------- ---------- ----------
Reconciliation of profit for the period ended 30th June 2004
UK GAAP Unaudited Unaudited IFRS
effect of
transition to
IFRS
#m #m #m
------------------------ ----------- ---------- ----------
Revenue (note n) 204.4 (0.6) 203.8
------------------------ ----------- ---------- ----------
Operating
profit (note j & m) 12.4 2.8 15.2
Net finance income 0.3 - 0.3
------------------------ ----------- ---------- ----------
Profit before tax 12.7 2.8 15.5
Income tax (3.1) - (3.1)
------------------------ ----------- ---------- ----------
Net profit 9.6 2.8 12.4
------------------------ ----------- ---------- ----------
Explanation of reconciling items 30th June 2004
Explanation of reconciling items between UK GAAP and IFRS
(i) Software costs - In accordance with IAS 38 certain software costs have
been transferred from Property, plant and equipment to intangible assets.
(j) Retirement benefit schemes - Accounting for pensions in accordance
with IAS 19 requires the pension asset / liability to be brought onto the
balance sheet. At 30th June 2004 the scheme's deficit of #18.1m is shown in
liabilities in the restated balance sheet. At 30th June 2004 the SSAP 24 pension
prepayment of #25.7m which was included in the balance sheet has been removed
under IAS 19. Retirement benefit provisions of #2.7m were transferred from
provisions. The related deferred tax has been adjusted accordingly. The
operating profit is reduced by #1.2m in the period to 30th June 2004 in order to
reflect the IAS 19 service cost of #3.2m and net finance income of #2.0m for the
half year.
(k) Dividends - Under UK Company law, companies were required to provide for
their final dividend in the closing balance sheet and in advance of the dividend
being declared and approved by the Annual General Meeting. Under IAS 37,
'Provisions' the dividend cannot be provided in the half year balance sheet as,
at that date, the dividend did not represent a liability. At 30th June 2004
accrued dividends of #3.1m were removed from other payables.
(l) Tax - In accordance with IAS 12, provision has been made for deferred
tax on revalued assets. This was not permitted under UK GAAP unless there was a
binding commitment to sell the asset. The increase in the deferred tax liability
at 30th June 2004 was #2.1m. A deferred tax asset has also been included in
respect of the IAS 19 pension liability and the deferred tax liability has been
removed in relation to the SSAP 24 pension prepayment, a total pensions related
tax adjustment of #13.1m on 30th June 2004. The total deferred tax adjustment is
therefore #11.0m, split between #7.3m deferred tax assets and #3.7m deferred tax
liabilities, which are now shown gross on the face of the balance sheet.
(m) Goodwill - The operating profit is increased by #4.0m in the period to
30th June 2004 as goodwill amortisation is no longer required under IFRS 3 as
these assets are subject to annual impairment testing. The goodwill in the
balance sheet has been frozen at 1st January 2004 and increased accordingly by
#4.0m at 30th June 2004 on restatement of the balance sheet under IFRS.
(n) Revenue recognition - Revenue has been adjusted by #0.6m to ensure
settlement discounts have been presented in accordance with IAS 18, these costs
were previously reported as an operating cost rather then a deduction from
revenue.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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