Interim Results - Part 2 of 2

Berkeley Group Holdings (The) PLC 09 December 2005 Consolidated Income Statement Six months Six months Year ended ended ended 30 April 31 October 31 October 2005 2005 2004 Unaudited Unaudited Unaudited Notes Â£'000 Â£'000 Â£'000 Continuing operations Revenue 3(a) 503,063 419,521 794,461 Cost of sales (379,143) (292,155) (565,395) Gross profit 123,920 127,366 229,066 Net operating expenses (34,727) (37,192) (75,687) Net operating expenses include: (1,536) (1,633) Merger expenses - Operating profit 3(b) 89,193 90,174 153,379 Interest receivable 4 10,682 6,031 11,292 Finance costs 4 (16,472) (4,145) (19,573) Share of post tax results of joint 3(c) 2,610 7,103 10,358 ventures Profit on ordinary activities 86,013 99,163 155,456 before taxation Taxation 5 (24,352) (27,092) (41,439) Profit on ordinary activities after 61,661 72,071 114,017 taxation Discontinued operations Profit from discontinued operations 6 80,782 6,421 24,941 Profit for the financial period 142,443 78,492 138,958 Dividends per Ordinary Share - 16.5p 16.5p Earnings per Ordinary Share - Basic 7 118.7p 65.8p 116.2p - Continuing 51.4p 60.3p 95.3p operations - Discontinued 67.3p 5.5p 20.9p operations - Diluted 7 118.0p 65.1p 115.1p - Continuing 51.1p 59.8p 94.4p operations - Discontinued 66.9p 5.3p 20.7p operations Consolidated Statement of Recognised Income and Expense Six months Six months Year ended 30 ended ended April 2005 31 October 31 October Unaudited 2005 2004 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Profit for the financial period 142,443 78,492 138,958 Actuarial loss recognised in the (529) (1,518) (3,262) pension scheme Deferred tax on actuarial loss 159 455 978 recognised in the pension scheme Credit in respect of employee 3,173 417 3,533 share schemes Deferred tax in respect of 2,210 329 658 employee share schemes Total recognised income for the 147,456 78,175 140,865 period Consolidated Balance Sheet Notes At 31 October At 31 October At 30 April 2005 2004 2005 Unaudited Unaudited Unaudited Â£'000 Â£'000 Â£'000 Assets Non-current assets Property, plant and equipment 2,555 10,462 8,883 Investments accounted for using 65,158 63,929 64,497 equity method Deferred tax assets 10,739 4,816 8,074 78,452 79,207 81,454 Current assets Inventories 879,121 1,109,032 1,103,045 Trade and other receivables 43,696 27,595 48,067 Cash and cash equivalents 568,650 349,311 344,948 1,491,467 1,485,938 1,496,060 Liabilities Current liabilities Borrowings (85) (25,106) (88) Trade and other payables (248,620) (253,436) (293,090) Current tax liabilities (25,674) (23,520) (17,870) (274,379) (302,062) (311,048) Net current assets 1,217,088 1,183,876 1,185,012 Total assets less current 1,295,540 1,263,083 1,266,466 liabilities Non-current liabilities Borrowings (497,302) (75,000) (600,000) Retirement benefit obligation (12,515) (10,716) (12,089) Other non-current liabilities (17,358) (14,591) (32,968) (527,175) (100,307) (645,057) Net assets 768,365 1,162,776 621,409 Shareholders' equity Share capital 24,164 30,200 24,164 Share premium 264 - 264 Capital redemption reserve 6,091 - 6,091 Other reserve (961,299) (961,299) (961,299) Retained profit 1,670,122 2,066,786 1,522,976 Joint ventures' reserves 29,023 26,589 28,713 Total shareholders' equity 8 768,365 1,162,276 620,909 Minority interest in equity - 500 500 Total equity 768,365 1,162,776 621,409 Net assets per ordinary share 640p 971p 518p Consolidated Cash Flow Statement Notes Six months Six months Year ended ended ended 30 April 2005 31 October 31 October 2004 Unaudited 2005 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 116,533 164,169 289,187 Dividends from joint ventures - 510 1,564 Interest received 10,682 5,580 11,413 Interest paid (29,586) (4,055) (7,845) Tax paid (18,893) (29,534) (59,754) Net cash from operating activities 9 78,736 136,670 234,565 Cash flows from investing activities Purchase of tangible fixed assets (778) (789) (1,853) Sale of tangible fixed assets 356 3,365 5,764 Disposal of subsidiary undertaking 250,736 - - Overdraft balance of subsidiary 572 - - disposed Expenses relating to disposal of (2,765) - - subsidiary Movements in loans with joint (454) 3,910 4,490 ventures Merger expenses - (1,536) (1,633) Net cash from investing activities 247,667 4,950 6,768 Cash flows from financing activities Cost of share buybacks - (20,656) (20,656) Share options exercised - 5,477 5,667 Issue / redemption expenses - (2,746) (2,841) Redemption of shares - - (604,153) Repayment of loan stock (3) (14) (32) Repayment of bank loan (102,698) - (100,000) New bank loan issued - - 600,000 Equity dividends paid - (19,676) (19,676) Net cash used in financing (102,701) (37,615) (141,691) activities Net increase in cash and cash 223,702 104,005 99,642 equivalents Cash and cash equivalents at start 344,948 245,306 245,306 of the period Cash and cash equivalents at end of 568,650 349,311 344,948 the period Reconciliation of net cash flow to net cash / (debt) Net increase in cash and cash equivalents 223,702 104,005 99,642 Cash outflow / (inflow) from decrease / 102,701 14 (499,968) (increase) in debt Movement in net (debt) / cash in the 326,403 104,019 (400,326) period Opening net (debt) / cash (255,140) 145,186 145,186 Closing net cash / (debt) 71,263 249,205 (255,140) At 31 October At 31 October At 30 April 2005 2004 2005 Unaudited Unaudited Unaudited Â£'000 Â£'000 Â£'000 Net cash / (debt) Cash and cash equivalents 568,650 349,311 344,948 Borrowings (497,387) (100,106) (600,088) Net cash / (debt) 71,263 249,205 (255,140) 1 Basis of preparation The financial statements of the Group for the year ended 30 April 2006 will be prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the European Union. The interim report has been prepared in accordance with the Listing Rules of the Financial Services Authority and with the accounting policies which the Group intends to adopt for the year ending 30 April 2006, which will be in accordance with IFRS and with those parts of the Companies Act applicable to companies reporting under IFRS. In particular, the Directors have followed the amendment to IAS 19 'Employee Benefits' issued by the IASB on 16 December 2004 and which has now been adopted by the European Union, for use in the financial statements for the year ending 30 April 2006. The Directors may determine that some changes are necessary when preparing the financial statements for the year ended 30 April 2006 in accordance with IFRS, as the IFRS standards and International Financial Reporting Interpretations Committee ('IFRIC') interpretations that will be applicable and adopted for use in the European Union at 30 April 2006 are not known with certainty at the time of preparing this financial information. The Group has elected to take the optional exemption from applying IAS 32 and IAS 39 in the comparative year (and to first apply them at 1 May 2005, for the six months ended 31 October 2005 and for the year ended 30 April 2006). There is no impact on the financial statements of applying IAS 32 and IAS 39 on the implementation of these standards at 1 May 2005. The accounting policies which the Group intends to adopt for the year ending 30 April 2006, and which are have been adopted in preparing the interim report, are set out below. 2 Accounting policies Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, apart from the exception described above. The financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Basis of consolidation The consolidated accounts comprise the accounts of the parent company and all its subsidiary undertakings. The accounting date for subsidiary undertakings is 30 April. In the case of acquisitions or disposals, the Group's result includes that proportion from or to the effective date of acquisition or disposal as appropriate. 2 Accounting policies continued Goodwill Where the cost of acquiring new and additional interests in subsidiaries, joint ventures and businesses exceeds the fair value of the net assets acquired, the resulting premium on acquisition (goodwill) is capitalised and its subsequent measurement is based on annual impairment reviews, with any impairment losses recognised immediately in the income statement. Goodwill written off to reserves prior to 1998 under UK GAAP was not reinstated on transition to IFRS and is not included in determining any subsequent profit or loss on disposal. Joint ventures The results attributable to the Company's holding in joint ventures are shown separately in the consolidated profit and loss account. The amount included in the consolidated balance sheet is the Group's share of the net assets of the joint ventures plus net loans receivable. Goodwill arising on the acquisition of joint ventures is accounted for in accordance with the policy set out above. The carrying value of goodwill is included in the carrying value of the investment in joint ventures. Revenue Revenue represents the amounts receivable from the sale of properties during the year. Properties are treated as sold and profits are taken when contracts are exchanged and the building work is physically complete. This policy applies to both residential housebuilding and commercial property activities. Revenue does not include the value of the onward sale of part exchange properties, for which the net gain or loss is recognised in cost of sales. Taxation The taxation expense represents the sum of the tax currently payable and deferred tax. Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised on all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill, or from the initial recognition (except in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, or from differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred taxation is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available against which taxable temporary differences can be utilised. Deferred taxation is charged or credited to the income statement, except when it relates to items charged or credited directly to reserves, in which case the deferred taxation is also dealt with in reserves. 2 Accounting policies continued Property, plant and equipment Property, plant and equipment is carried at cost. Depreciation is provided to write off the cost of the assets on a straight line basis over their estimated useful lives at the following annual rates: Freehold property 2% Fixtures and fittings 15% / 20% Motor vehicles 25% Computer equipment 33 1/3 % Leasehold property is amortised over the period of the lease. Computer equipment is included within fixtures and fittings. The assets' residual values and useful lives are reviewed on an annual basis and adjusted if appropriate at each balance sheet date. Investments The parent company's investments in subsidiary undertakings are included in the balance sheet at cost less provision for any permanent diminution in value. Inventories Property in the course of development is valued at the lower of cost and net realisable value. Direct cost comprises the cost of land, raw materials and development costs but excludes indirect overheads and interest. Progress payments are deducted from work in progress. Provision is made, where appropriate, to reduce the value of inventories and work in progress to their net realisable value. Land purchased for development, including land in the course of development, is initially recorded at fair value. Where such land is purchased on deferred settlement terms, and the fair value differs from the amount that will subsequently be paid in settling the liability, this difference is charged as a finance cost in the income statement over the period to settlement. Cash and cash equivalents Cash and cash equivalents comprises cash balances in hand and at the bank, including bank overdrafts repayable on demand which form part of the Group's cash management, for which offset arrangements across Group businesses have been applied where appropriate. Derivative financial instruments From time to time the Group makes use of interest rate swaps and caps to manage its exposure to fluctuations in interest rates. The Group does not use derivative financial instruments for speculative purposes. During the period and at the period end the Group held no such instruments. On 1 May 2005, the Group adopted IAS 32 and IAS 39. Derivative financial instruments are initially recognised at cost. Subsequent to initial recognition these instruments are stated at fair value. Where the derivative instrument is deemed an effective hedge over the interest rate exposure, the instrument is treated as a cash flow hedge, and hedge accounting is applied, whereby gains and losses in the fair value of the derivative instrument are recognised directly in equity until such time as the gains or losses are realised. On realisation, any gains are reported in the income statement net of related charges. 3 Analysis by Activity Six months Six months Year ended ended ended 30 April 2005 31 October 2005 31 October 2004 Unaudited Unaudited Unaudited Continuing operations Â£'000 Â£'000 Â£'000 (a) Revenue Residential housebuilding 495,826 381,539 738,349 Commercial property and other 7,237 37,982 56,112 activities 503,063 419,521 794,461 (b) Operating profit Residential housebuilding 87,770 87,829 146,026 Commercial property and other 1,423 3,881 8,986 activities Merger expenses - (1,536) (1,633) 89,193 90,174 153,379 (c) Share of post tax results of joint ventures Residential housebuilding 2,610 6,981 10,117 Commercial property and other - 122 241 activities 2,610 7,103 10,358 All revenue and profit disclosed in the table above relate to continuing activities of the Group and are derived from activities performed in the United Kingdom. Included in Group residential housebuilding revenue and operating profit are Â£528,000 and Â£467,000 in respect of land sales (2004: Â£3,800,000 and Â£1,266,000). 4 Net finance costs Six months Six months Year ended ended ended 30 April 2005 31 October 2005 31 October 2004 Unaudited Unaudited Unaudited Continuing operations Â£'000 Â£'000 Â£'000 Interest receivable 10,682 6,031 11,292 Finance costs Interest payable on bank loans and (15,657) (3,517) (18,058) overdrafts Other finance costs (815) (628) (1,515) (16,472) (4,145) (19,573) (5,790) 1,886 (8,281) 5 Taxation Six months Six months Year ended ended ended 30 April 2005 31 October 2005 31 October 2004 Unaudited Unaudited Unaudited Continuing operations Â£'000 Â£'000 Â£'000 Current tax UK corporation tax payable (25,049) (26,318) (43,157) Adjustments in respect of previous 276 341 427 periods (24,773) (25,977) (42,730) Deferred tax 421 (1,115) 1,291 (24,352) (27,092) (41,439) 6 Profit from discontinued operations The Group completed the sale of The Crosby Group plc ('Crosby') to Lend Lease Corporation Limited on 8 July 2005 for consideration of Â£250,736,000 which included the settlement of Â£151,306,000 of intercompany balances. The profit from discontinued operations which has been included in the consolidated income statement is as follows: Six months Six months Year ended ended ended 30 April 2005 31 October 2005 31 October 2004 Unaudited Unaudited Unaudited Discontinued operations Â£'000 Â£'000 Â£'000 Revenue 8,176 84,200 236,977 Operating profit 1,514 8,576 35,042 Share of post tax results of joint - 602 548 ventures Finance costs (130) (122) (196) Taxation (348) (2,635) (10,453) Post tax results from discontinued 1,036 6,421 24,941 operations Profit on disposal 79,746 - - 80,782 6,421 24,941 Revenue and operating profit from discontinued operations include Â£nil in respect of commercial property and other activities (2004: Â£6,506,000 and Â£687,000 respectively). The profit on disposal of Crosby is set out as Unaudited follows: Â£'000 Non-current assets 8,523 Current assets 202,513 Current liabilities (34,313) Non-current liabilities (7,791) Minority interest (500) Net assets disposed 168,432 Expenses relating to the disposal 2,765 Curtailment gain in The Berkeley Group plc staff (207) benefits plan Profit on disposal 79,746 Consideration 250,736 Of which: Cash 99,430 Settlement of intercompany balances 151,306 250,736 7 Earnings per Ordinary Share Earnings per Ordinary Share is based on the profit for the financial period of Â£142,443,000 (2004: Â£78,492,000) and the weighted average number of Ordinary Shares in issue during the period of 120,007,731 (2004: 119,248,313). For diluted earnings per Ordinary Share, the weighted average number of Ordinary Shares in issue is adjusted to assume the conversion of all dilutive potential Ordinary Shares. The dilutive potential Ordinary Shares relate to shares granted under employee share schemes where the exercise price is less than the average market price of the Ordinary Shares during the period. The effect of the dilutive potential Ordinary Shares is 740,873 shares (2004: 1,252,873), which gives a diluted weighted average number of Ordinary Shares of 120,748,604 (2004: 120,501,186). 8 Consolidated Statement of Changes in Shareholders' Equity Six months Six months Year ended 30 ended ended April 2005 31 October 31 October Unaudited 2005 2004 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Profit for the financial period 142,443 78,492 138,958 Dividends paid to shareholders - (19,646) (19,646) Share buy-backs - (20,656) (20,656) Shares issued on exercise of share - 5,476 5,667 options Issue / redemption expenses - (2,746) (2,841) Share redemptions - - (604,153) Actuarial loss recognised in the (529) (1,518) (3,262) pension scheme Deferred tax on actuarial loss 455 978 recognised in the pension scheme 159 Credit in respect of employee share 3,173 417 3,533 schemes Deferred tax in respect of employee 2,210 329 658 share schemes Net movement on equity shareholders' 147,456 40,603 (500,764) funds Opening equity shareholders' funds 620,909 1,121,673 1,121,673 Closing equity shareholders' funds 768,365 1,162,276 620,909 9 Notes to the Consolidated Cash Flow Statement Six months Six months Year ended ended ended 30 April 2005 31 October 31 October Unaudited 2005 2004 Unaudited Unaudited Â£'000 Â£'000 Â£'000 Net cash flows from operating activities Continuing operations Profit for the period 61,661 72,071 114,017 Adjustments for: - Tax 24,352 27,092 41,439 - Depreciation 799 1,151 2,168 - Profit on sale of property, plant (100) (366) (1,340) and equipment - Interest income (10,682) (6,031) (11,292) - Finance costs 16,472 4,145 19,573 - Share of results of joint ventures (2,610) (7,103) (10,358) after tax - Merger expenses - 1,536 1,633 - Non-cash charge in respect of share 3,173 417 3,533 awards Changes in working capital: - Decrease / (increase) in inventories 39,424 (15,105) (26,281) - (Increase) / decrease in debtors (6,712) 44,533 31,017 - Increase in creditors 9,802 11,747 34,404 - (Decrease) / increase in employee (304) 167 (359) benefit obligations Cash generated from continuing 135,275 134,254 198,154 operating activities Dividends from joint ventures - 183 459 Interest received 10,682 5,519 11,292 Interest paid (29,456) (3,872) (7,528) Taxation (18,893) (29,534) (59,754) Net cash from continuing operating 97,608 106,550 142,623 activities Discontinued operations Profit for the period / year 80,782 6,421 24,941 Adjustments for: - Tax 348 2,635 10,453 - Depreciation 58 207 413 - Profit on sale of property, plant - (34) (39) and equipment - Interest income - (61) (121) - Finance costs 130 183 317 - Share of results of joint ventures - (602) (548) after tax - Profit on disposal of subsidiary (79,746) - - undertaking - Non-cash movement in profit on 707 - - disposal of subsidiary Changes in working capital: - Increase / (decrease) in inventories (15,785) (2,958) 14,205 - Decrease in debtors 5,925 33,999 28,655 - (Increase) / decrease in creditors (11,161) (9,875) 12,757 Cash generated from discontinued (18,742) 29,915 91,033 operating activities Dividends from joint ventures - 327 1,105 Interest received - 61 121 Interest paid (130) (183) (317) Net cash from discontinued operating (18,872) 30,120 91,942 activities Net cash from operating activities 78,736 136,670 234,565 Other net cash flows from discontinued operations Net cash from investing activities 248,556 4,012 441 10 Transition from UK GAAP to IFRS Reconciliation of prior period income statements Six months Year ended ended 31 October 30 April 2004 2005 Unaudited Unaudited Â£'000 Â£'000 Revenue Group turnover as reported under UK GAAP 518,665 1,070,317 IAS 18 - Impact of change of revenue recognition policy (14,944) (38,879) IFRS 5 - Eliminate revenue from discontinued operations (84,200) (236,977) Revenue (continuing operations) as reported under IFRS 419,521 794,461 Operating profit Group operating profit as reported under UK GAAP 100,791 199,569 IAS 1 - Merger expenses classified within operating (1,536) (1,633) profit under IFRS IAS 2 - Increased margin from inventory held at lower 127 250 cost IAS 18 - Impact of change of revenue recognition policy (1,046) (11,272) IAS 19 - Reduced charge for pension costs 78 828 IFRS 2 - Reduction in charge for share-based payments 336 679 IFRS 5 - Eliminate profit from discontinued operations (8,576) (35,042) Operating profit (continuing operations) as reported 90,174 153,379 under IFRS Net finance costs Net interest receivable / (payable) as reported under UK 630 (10,289) GAAP IAS 2 - Unwinding of interest charge on discounted land (473) (1,206) creditors IAS 19 - Increased charge for pension costs (155) (309) IAS 31 - Reclassify joint venture interest to share of 1,762 3,327 profit of joint ventures IFRS 5 - Eliminate finance costs from discontinued 122 196 operations Net finance costs (continuing operations) as reported 1,886 (8,281) under IFRS Joint ventures Share of operating profit of joint ventures as reported 10,663 15,244 under UK GAAP IAS 2 - Net adjustment from discounting of land 298 595 creditors (net of interest and tax) IAS 18 - Impact of change of revenue recognition policy 1,279 1,895 (net of interest and tax) IAS 31 - Reclassification of joint venture interest and (4,535) (6,828) tax IFRS 5 - Eliminate profit from discontinued operations (602) (548) (net of interest and tax) Share of post tax results of joint ventures (continuing 7,103 10,358 operations) as reported under IFRS Taxation Taxation as reported under UK GAAP (32,612) (58,248) IAS 2 - Net tax adjustment from discounting of land 104 287 creditors IAS 18 - Impact of change of revenue recognition policy 314 3,382 IAS 19 - Reduced charge for pension costs 23 (156) IAS 31 - Reclassify joint venture tax to share of profit 2,773 3,501 of joint ventures IFRS 2 - Reclassification of deferred tax to Statement (329) (658) of Recognised Income and Expense IFRS 5 - Eliminate tax from discontinued operations 2,635 10,453 Taxation (continuing operations) as reported under IFRS (27,092) (41,439) 10 Transition from UK GAAP to IFRS continued Reconciliation of prior period equity At At At 1 May 31 October 30 April 2004 2004 2005 Unaudited Unaudited Unaudited Â£'000 Â£'000 Â£'000 Total shareholders' funds as reported under 1,142,610 1,203,373 669,482 UK GAAP Group IAS 18 - Impact of change of revenue (25,413) (26,145) (33,303) recognition policy IAS 10 - Eliminate accrued dividend 19,646 - - IAS 19 - Recognition of pension scheme (5,074) (6,190) (6,994) deficit IAS 2 - Reduction in value of long-term (1,154) (1,397) (1,824) creditors Joint ventures IAS 18 - Impact of change of revenue (3,931) (2,652) (2,036) recognition policy IAS 2 - Reduction in value of long-term (4,511) (4,213) (3,916) creditors Total equity as reported under IFRS 1,122,173 1,162,776 621,409 The tables above set out how the Group's reported opening balance sheet under UK GAAP at 1 May 2004, its financial results under UK GAAP for the six months ended 31 October 2004 and financial position at that date and its audited financial results for the year ended 30 April 2005 and financial position at that date would have been reported under IFRS. The material accounting policy changes resulting from the adoption of IFRS, including the optional exemptions from retrospective application of IFRS that the Group has applied, are set out below. Presentation of financial statements - primary statements The primary statements have been presented in accordance with the guidelines set out in IAS 1 'Presentation of Financial Statements'. Joint ventures (IAS 31): The Group has elected to account for its investments in joint ventures using the equity method of accounting rather than adopting the proportionate consolidation method that is allowable under IAS 31. This is consistent with the existing UK practice, subject to the following key difference. Under IFRS, the Group's share of the results of joint ventures are presented net of interest and tax in one line in the consolidated income statement. Under UK GAAP, the Group's share of the operating profit, interest and tax of joint ventures were disclosed separately. Deferred taxation (IAS 12): Under IFRS, the Group's deferred tax asset is presented in non-current assets on the face of the consolidated balance sheet. Under UK GAAP, it was classified within other debtors in current assets. Discontinued operations (IFRS 5): Under IFRS, the results and profit on disposal from discontinued operations are shown in one line below profit after taxation in the income statement. Under UK GAAP, the results from discontinued operations were included line-by-line in the profit and loss account. 10 Transition from UK GAAP to IFRS continued Group reconstruction In October 2004, the Group implemented a capital reorganisation, incorporating a Scheme of Arrangement, in order to effect the return of Â£12 per share to shareholders by January 2011. In the opinion of the Directors, the Scheme of Arrangement was a group reconstruction rather than an acquisition, since the shareholders in the holding company of the Group after the implementation of the Scheme (The Berkeley Group Holdings plc) were the same as the shareholders in the holding company of the Group before the implementation of the Scheme (The Berkeley Group plc), with no change to the rights of each shareholder, relative to the others, and no alteration to minority interests in the net assets of the Group. Accordingly, the Directors adopted merger rather than acquisition accounting principles in drawing up the financial statements, having regard to the overriding requirement of section 227(6) of the Companies Act 1985 for the accounts to present a true and fair view of the Group's results and financial position. IFRS 3 ('Business Combinations') does not identify merger accounting as applicable for business combinations; however it does not address the accounting for business combinations involving entities under common control, such as group reconstructions. There is currently no guidance as to the appropriate accounting for group reconstructions under IFRS. The Directors therefore believe that it is appropriate to continue to adopt merger accounting for the Group reconstruction under IFRS. Business Combinations before the transition date (IFRS 3) The Group has elected not to apply IFRS 3 retrospectively to business combinations that took place before the beginning of the first IFRS reporting period. Revenue recognition (IAS 18) On traditional developments under UK GAAP, properties were treated as sold and profits were taken when contracts were exchanged and the building work was physically complete. On complex multi-unit developments, revenue and profit were recognised on a staged basis, commencing when the building work was substantially complete, which was defined as being plastered, and when contracts were exchanged. On transition to IFRS, the Group has amended its policy to recognise revenue on properties on both traditional and complex multi-unit developments when contracts are exchanged and the building work is physically complete. This brings the policy on complex multi-unit developments into line with the Group's existing revenue recognition policy on traditional developments and reflects the provisions of IAS 18 ('Revenue'). This change in policy constitutes a timing difference in terms of the point at which revenue is recognised, and has no impact on the underlying profitability of the Group. Profit in any one year will be higher or lower than under the existing policy based on the timing of build programmes. There is no impact on the Group's net debt position as a result of the change in policy. 10 Transition from UK GAAP to IFRS continued Events after the Balance Sheet date (IAS 10) IAS 10 ('Events after the Balance Sheet date') requires that dividends approved after the balance sheet date should not be recognised as a liability at that balance sheet date since the liability did not represent a present obligation at that date. Employee benefits (IAS 19) Under UK GAAP, the Group applied SSAP 24 in respect of the Group's pension schemes, and provided detailed information under the FRS 17 transitional disclosures. The Group has adopted IAS 19 ('Employee benefits') in preparing the IFRS opening balance sheet, including the amendment to IAS 19 issued by the IASB on 16 December 2004 which allows all actuarial gains and losses to be charged or credited to equity through the statement of recognised income and expense. Since the Group has elected to follow this approach, all cumulative actuarial gains and losses in relation to employee benefit schemes have been recognised at the beginning of the first IFRS reporting period. Share-based payments (IFRS 2) The Group has elected to follow the transitional provisions of IFRS 2, and therefore to apply IFRS 2 only to grants under the Group's share option schemes and Long Term Incentive Plans made after 7 November 2002 which had not vested by 1 January 2005. All options under the Group's existing share option schemes had vested by 1 January 2005, and as such, in accordance with IFRS 2, will be included on a disclosure basis in the first IFRS financial statements. Of the four grants under The Berkeley Group plc 2000 Long Term Incentive Plan, only the grant of 22 July 2003 has been accounted for under IFRS 2. The earlier grants of 21 December 2000, 7 August 2001 and 19 August 2002 will be included on a disclosure basis in the first IFRS financial statements. Deferred tax on the 2000 LTIP is calculated at each reporting date based on an estimate of the future tax deduction. The tax benefit up to the amount of the tax effect of the cumulative expense is recorded in the income statement, and the excess tax benefit above this amount is recorded in equity. The Berkeley Group Holdings plc 2004(b) Long-Term Incentive Plan was introduced during the year ended 30 April 2005, and the only grants under this scheme were those made to four main Board Directors on Court approval of the Scheme of Arrangement on 26 October 2004. As such these grants fall to be treated under IFRS 2. The accounting treatment under IFRS 2 is similar to the UK GAAP treatment under UITF 17 (revised) and no significant adjustment arises on transition to IFRS. 10 Transition from UK GAAP to IFRS continued Land purchased on deferred settlement terms (IAS 2) IAS 2 ('Inventories') requires that, where a company purchases inventories on deferred settlement terms and the arrangement effectively contains a financing element, then that element should be recognised as interest expense over the period of financing. This affects the Group in respect of long-term land creditors (which have a price determined at inception but payable a year or more in the future) which must be recognised at a discounted net present ('fair') value on recognition, with the discount being unwound through finance costs over the period to settlement of the liability. This adjustment does not affect net profit or net assets over time. It is a reduction of work in progress and creditors by an equal amount in the balance sheet at inception, and a reclassification between cost of sales and finance costs in the income statement. The timing of recognition of the finance costs (on an effective interest basis) and of the equivalent benefit in operating profit (when sales are recognised on the relevant sites) will however give rise to a net impact on net assets at each balance sheet date. Financial Instruments (IAS 32 and IAS 39) The Group has elected to take the optional exemption from applying IAS 32 and IAS 39 in the comparative year (and to first apply them at 1 May 2005 and for the year ended 30 April 2006). There is one area in which the adoption of these standards would have impacted on the comparative results as at 31 October 2004: Classification of B shares IAS 32 sets out guidelines in respect of the classification of financial instruments between debt and equity. Following the Scheme of Arrangement, the new holding company of the Group, The Berkeley Group Holdings plc, issued Units (each Unit comprising one ordinary share of 5p, one 2004 B share of 5p, one 2006 B share of 5p, one 2008 B share of 5p and one 2010 B share of 5p) to existing shareholders in The Berkeley Group plc in return for their shares in The Berkeley Group plc. Each B share is a non-voting redeemable share in the capital of the Company and is entitled to a return of Â£5, Â£2, Â£2, and Â£3 respectively at specified dates at the discretion of the Directors. The B shares are classified as equity under UK GAAP, and will continue to be classified as equity under IFRS. The share capital of the Company (including the ordinary shares and the B shares) can only be held and traded in the form of Units and, having no fixed redemption date and amount, are equity. However, at the point at which the Board formally commits to making each B share payment, that B share will become debt under IFRS. Were IAS 32 to have been adopted early, the 2004 B shares would have been reclassified as debt in the Half Year balance sheet at 31 October 2004 under IFRS, as the Directors, at that date, had formally committed to the redemption of the 2004 B shares in December 2004. This would have resulted in a reclassification of Â£604,153,000 from shareholders' equity to borrowings in creditors (amounts falling due in less than one year) at 31 October 2004. There is no impact of IAS 32 and IAS 39 on the results at 1 May 2004 and 30 April 2005. 10 Transition from UK GAAP to IFRS continued Segmental reporting (IAS 14) The primary reporting format for the Group is by activity, reflecting the different risks and returns in the Group's residential and commercial activities. As all of the Group's operations are within the United Kingdom, one economic environment in the context of the Group's activities, there are no geographic segments to be disclosed. Information on adoption of International Financial Reporting Standards On 26 October 2005, the Group published the document 'Information on adoption of International Financial Reporting Standards; Impact on results for the year ended 30 April 2005', which is available on the Group's website www.berkeleygroup.co.uk. The document explains how the Group's reported opening balance sheet under UK GAAP at 1 May 2004, its financial results under UK GAAP for the six months ended 31 October 2004 and financial position at that date and its audited financial results for the year ended 30 April 2005 and financial position at that date would have been reported under IFRS. The document also explains the material accounting policy changes resulting from the adoption of IFRS. 11 Interim accounts These interim accounts are unaudited but have been reviewed by the auditors whose review report is set out below. The abridged financial information relating to the year ended 30 April 2005 does not constitute statutory accounts for the purposes of Section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 30 April 2005 under UK GAAP has been filed with the Registrar of Companies. The report of the auditors on these financial statements was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. These interim results were approved by the Board on 9 December 2005 and the interim statement, which is available for inspection at the Company's Registered Office, will be sent by mail to shareholders in December 2005. Independent review report to The Berkeley Group Holdings plc Introduction We have been instructed by the Company to review the financial information for the six months ended 31 October 2005 which comprises the Consolidated Income Statement, the Consolidated Statement of Recognised Income and Expense, the Consolidated Balance Sheet, the Consolidated Cashflow Statement and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of the Group will be prepared in accordance with accounting standards adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in note 1. The accounting policies are consistent with those that the Directors intend to use in the next annual financial statements. As explained in note 1, there is, however, a possibility that the Directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 30 April 2006 are not known with certainty at the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2005. PricewaterhouseCoopers LLP Chartered Accountants, London 9 December 2005 This information is provided by RNS The company news service from the London Stock Exchange CBDDIXGGGUI

Companies

Berkeley Group Holdings (The) (BKG)

Thursday, 9th May 2024

COMPANIES COVERED:

RBN AAF HBR

Airtel Africa left investors underwhelmed despite customer growth, Robinson’s share price jumps on profit upgrade and Harbour Energy nudges higher on trading update.

Full Archive

UK 100

Latest directors dealings

7 minutes ago Trainline
18 minutes ago Barr (A.G.)
27 minutes ago CLS Holdings
31 minutes ago Mondi
39 minutes ago Taylor Wimpey

All directors dealings today