Interim Results
Braime (T.F.& J.H.) (Hldgs) PLC
28 September 2005
T.F. & J.H. BRAIME (HOLDINGS) P.L.C.
INTERIM REPORT
FOR THE PERIOD ENDED
30 JUNE 2005
The delay in announcing the interim result has been caused by the requirement to
prepare both the half year accounts and to re-state last years figures in
accordance with the new International Financial Reporting Standards (IFRS).
While the directors support any measures which improve transparency in the
presentation of accounts, they are of the opinion that IFRS achieves the reverse
effect while adding a further burden of unproductive cost.
Sales for the first six months increased by 9% compared to the first half of
2004. The improvement in sales was still not sufficient to return the company
to profit and the result for the half year was a net loss of £81,000 compared to
a loss of £172,000 for the same period of 2004.
The effect of the application of IFRS relating to pensions created an increased
finance cost and produced an operating profit of £6,000.
In view of the overall half year result, the directors have decided it would be
unwise to pay an interim dividend.
Our USA subsidiary had a successful half year. However, all other parts of the
group continued to struggle to restore margins following the significant
increases in raw material costs over the past twelve months.
Since the half year, Braime Pressings Limited has secured a significant amount
of new work.
In September, the company acquired tooling and equipment to manufacture
additional components, for distribution through existing channels.
Taken together this additional volume should Note 2005 2004
significantly improve our long term profitability (unaudited) (unaudited)
£ £
Sales revenue 5 5,140,165 4,703,180
Operating profit/( loss) 6,443 (94,780)
Finance costs (111,740) (102,829)
Finance income 24,632 25,487
Result for the year before tax (80,665) (172,122)
Tax expense, net - -
Net result of the period 5 (80,665) (172,122)
Attributable to shareholders of T.F. & J.H. Braime (80,665) (172,122)
(Holdings) P.L.C.
Earnings per share Pence Pence
Basic 7 (5.60) (11.95)
30 June 30 June 31 Dec
2005 2004 2004
(unaudited) (unaudited) (unaudited)
£ £ £
Assets
Non-current
Pension benefits 75,000 - 85,000
Property, plant and equipment 587,334 567,832 555,488
662,334 567,832 640,488
Current
Inventories 2,412,309 1,916,092 2,115,681
Trade and other receivables 2,554,732 2,287,893 2,450,028
Cash and cash equivalents 1,493,715 1,420,186 1,415,832
6,460,756 5,624,171 5,981,541
Total assets 7,123,090 6,192,003 6,622,029
30 June 30 June 31 Dec
2005 2004 2004
(unaudited) (unaudited) (unaudited)
Equity £ £ £
Equity attributable to shareholders of
T.F. & J. H. Braime (Holdings) P.L.C.
Share capital 540,000 540,000 540,000
Capital reserve 77,319 77,319 77,319
Translation reserve (6,345) (7,750) (9,137)
Retained earnings 3,482,501 3,039,163 3,567,666
Total equity 4,093,475 3,648,732 4,175,848
Liabilities
Non-current
Pension and other employee obligations - 259,500 -
Long term financial liabilities 42,864 - 52,979
Other liabilities 23,956 25,612 24,784
66,820 285,112 77,763
Current
Bank overdrafts 1,338,305 1,084,832 1,080,600
Bank loan 133,854 133,376 140,307
Trade and other payables 1,480,636 1,039,951 1,094,311
Current tax liabilities 10,000 - 10,000
Other liabilities - - 43,200
2,962,795 2,258,159 2,368,418
Total liabilities 3,029,615 2,543,271 2,446,181
Total equity and liabilities 7,123,090 6,192,003 6,622,029
6 months to 6 months to
30 June 30 June
2005 2004
(unaudited) (unaudited)
£ £
Exchange differences on translation of foreign operations 2,792 (7,750)
Net income recognised directly in equity 2,792 (7,750)
Loss for the period (80,665) (172,122)
Total recognised income and expense for the period (77,873) (179,872)
Attributable to:
Equity holders of T.F. & J.H. Braime (Holdings) P.L.C. (77,873) (179,872)
6 months to 6 months to
30 June 30 June
2005 2004
(unaudited) (unaudited)
£ £
Operating activities
Result for the year before tax 6,443 (94,780)
Adjustments
Changes in inventories (296,628) (25,893)
Change in trade and other receivables (90,138) (366,942)
Change in trade and other payables 386,325 51,611
Outflow from pension and other employee obligations (84,000) (72,000)
Depreciation 52,990 46,992
Profit on sale (3,316) -
Grants amortised (828) (828)
Taxes paid (14,566) (31,906)
Taxes recovered - 10,399
Exchange difference in value of assets 10,856 (4,208)
(32,862) (487,555)
Investing activities
Additions to property, plant and equipment (92,902) (91,830)
Proceeds from disposals of property, plant and equipment 3,318 600
Interest received 24,632 25,487
(64,952) (65,743)
Financing activities
Repayment of bank loans (6,453) (6,269)
Discharge of finance liability (10,115) -
Interest paid (17,740) (10,329)
Dividends paid (47,700) (62,100)
(82,008) (78,698)
Cash and cash equivalents, beginning of period 335,232 967,350
Net decrease in cash and cash equivalents (179,822) (631,996)
Cash and cash equivalents, end of period 155,410 335,354
1 basis of preparation
The unaudited condensed consolidated interim financial statements of the Group
have been prepared in accordance with International Accounting Standard 34
Interim Financial Reporting and the requirements of International Financial
Reporting Standard 1 First-time Adoption of International Financial Reporting
Standards relevant to interim reports.
T.F. & J.H. Braime (Holdings) P.L.C. is adopting International Financial
Reporting Standards (IFRS) for the first time in its consolidated financial
statements for the year ending 31 December 2005, of which these condensed
consolidated interim financial statements form a part. The change from UK GAAP
to IFRS was mandatory on this date to comply with UK security exchange
regulations for all listed companies.
These condensed consolidated interim financial statements have been prepared on
the basis of IFRSs in issue that are effective or available for early adoption
at the Group's first IFRS annual reporting date, 31 December 2005. Based on
these IFRSs, the Board of Directors have made assumptions about the accounting
policies expected to be adopted when the first IFRS annual financial statements
are prepared for the year ended 31 December 2005.
There is, however, a possibility that the directors may determine that some
changes to these policies are necessary when preparing the full annual financial
statements for the first time in accordance with those IFRSs adopted for use by
the European Union. This is because the directors have anticipated that the
revised IAS 19 Employee Benefits, which has yet to be formally adopted for use
in the European Union, will be so adopted in time to be applicable to the next
annual financial statements (see note 3.16).
The transition to IFRS reporting has resulted in a number of changes in the
reported financial statements, notes thereto and accounting principles compared
to previous interim reports. Note 2 provides further details on the transition
from UK GAAP to IFRS and note 3 provides a summary of significant accounting
policies.
The condensed consolidated interim financial statements for the six months ended
30 June 2005 were approved by the board of directors on 27 September 2005.
2 Transition to International Financial Reporting
Standards
The transition from previous GAAP to IFRS has been made in accordance with IFRS
1, First-time Adoption of International Financial Reporting Standards.
The following reconciliations and explanatory notes thereto describe the effects
of the transition on the IFRS opening balance sheet as at 1 January 2004 and for
the financial year 2004. All explanations should be read in conjunction with the
IFRS accounting policies of T.F. & J.H. Braime (Holdings) P.L.C. as disclosed in
note 3.
The remeasurement of balance sheet items at the IFRS opening balance sheet date
may be summarised as follows:
Reconciliation as at 1 January 2004 UK GAAP Effect of IFRS
transition
£ £ £
Other intangible assets 11,644 (11,644) -
Property, plant and equipment 554,479 (27,343) 527,136
Total change to assets (38,987)
Pension and other employee obligations - (239,000) (239,000)
Total change to liabilities (239,000)
Total adjustment to equity (277,987)
The reconciliation of the Group's equity reported under previous GAAP to its
equity under IFRSs as at 1 January 2004 may be summarised as follows:
Reconciliation as at 1 January 2004 £
Share capital - UK GAAP 540,000
Share capital - IFRS 540,000
Capital reserve - UK GAAP 77,319
Capital reserve - IFRS 77,319
Retained earnings - UK GAAP 3,493,772
- derecognition of other intangible assets (11,644)
- derecognition of property, plant and equipment (27,343)
- recognition of pension obligations (239,000)
Retained earnings - IFRS 3,215,785
Total adjustments to equity (277,987)
The remeasurement of balance sheet items as at 31 December 2004 may be
summarised as follows:
Reconciliation as at 31 December 2004 UK GAAP Effect of IFRS
transition
£ £ £
Other intangible assets 11,035 (11,035) -
Property, plant and equipment 557,301 (1,813) 555,488
Pension benefits - 85,000 85,000
Total change to assets 72,152
Total adjustment to equity 72,152
The reconciliation of the Group's equity reported under previous GAAP to its
equity under IFRSs as at 31 December 2004 may be summarised as follows:
Reconciliation as at 31 December 2004 £
Share capital - UK GAAP 540,000
Share capital - IFRS 540,000
Translation reserve - UK GAAP -
- reclassification of currency translation differences (9,137)
Translation reserve - IFRS (9,137)
Capital reserve - UK GAAP 77,319
Capital reserve - IFRS 77,319
Retained earnings - UK GAAP 3,486,377
- reclassification to other reserves 9,137
- derecognition of other intangible assets (11,035)
- derecognition of property, plant and equipment (17,553)
- reversal of property depreciation 15,740
- recognition of pension benefits 85,000
Retained earnings - IFRS 3,567,666
Total adjustments to equity 72,152
The remeasurement of balance sheet items as at 30 June 2004 may be summarised as
follows:
Reconciliation as at 30 June 2004 UK GAAP Effect of IFRS
transition
£ £ £
Other intangible assets 10,806 (10,806) -
Property, plant and equipment 582,916 (15,084) 567,832
Total change to assets (25,890)
Pension and other employee obligations - (259,500) (259,500)
Total change to liabilities (259,500)
Total adjustment to equity (285,390)
The reconciliation of the Group's equity reported under previous GAAP to its
equity under IFRSs as at 30 June 2004 may be summarised as follows:
Reconciliation as at 30 June 2004 £
Share capital - UK GAAP 540,000
Share capital - IFRS 540,000
Translation reserve - UK GAAP -
- reclassification of currency translation differences (7,750)
Translation reserve - IFRS (7,750)
Capital reserve - UK GAAP 77,319
Capital reserve - IFRS 77,319
Retained earnings - UK GAAP 3,316,803
- reclassification to other reserves 7,750
- derecognition of other intangible assets (10,806)
- derecognition of property, plant and equipment (27,343)
- reversal of property depreciation 12,259
- recognition of pension obligations (259,500)
Retained earnings - IFRS 3,039,163
Total adjustments to equity (285,390)
Profit and loss reported under UK GAAP for the year ending 31 December 2004 is
reconciled to IFRS as follows:
Reconciliation for the year ending UK GAAP Effect of IFRS
31 December 2004 transition
£ £ £
Sales revenue 9,330,733 - 9,330,733
Costs of material (4,751,911) - (4,751,911)
Employee benefits expense (2,766,754) 144,000 (2,622,754)
Depreciation and amortisation (90,882) 26,139 (64,743)
Other expenses (1,679,398) - (1,679,398)
Operating result 41,788 170,139 211,927
Finance costs (23,238) (185,000) (208,238)
Finance income 50,363 - 50,363
Result for the year before tax 68,913 (14,861) 54,052
Tax expense, net (14,971) - (14,971)
Net result for the year 53,942 (14,861) 39,081
Profit and loss reported under UK GAAP for the period ending 30 June 2004 is
reconciled to IFRS as follows:
Reconciliation for the period ending UK GAAP Effect of IFRS
30 June 2004 transition
£ £ £
Sales revenue 4,703,180 - 4,703,180
Costs of material (2,765,229) - (2,765,229)
Employee benefits expense (1,403,128) 72,000 (1,331,128)
Depreciation and amortisation (60,089) 13,097 (46,992)
Other expenses (654,611) - (654,611)
Operating result (179,877) 85,097 (94,780)
Finance costs (10,329) (92,500) (102,829)
Finance income 25,487 - 25,487
Result for the period before tax (164,719) (7,403) (172,122)
Tax expense, net - - -
Net result for the period (164,719) (7,403) (172,122)
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Overall considerations
The significant accounting policies that have been used in the preparation of
these condensed consolidated interim financial statements are summarised below.
The condensed consolidated interim financial statements have been prepared on
the historical cost basis except for the revaluation of certain financial assets
and liabilities. The measurement bases are more fully described in the
accounting policies below.
It should be noted that accounting estimates and assumptions are used in
preparing the interim financial statements. Although these estimates are based
on management's best knowledge of current events and actions, actual results may
ultimately differ from those estimates.
3.2 Consolidation
Subsidiaries are all entities over which the Group has the power to control the
financial and operating policies.
T.F. & J.H. Braime (Holdings) P.L.C. obtains and exercises control through
voting rights. The consolidated financial statements of T.F. & J.H. Braime
(Holdings) P.L.C. incorporate the financial statements of the parent company as
well as those entities controlled by the Group by full consolidation.
In addition, acquired subsidiaries are subject to application of the purchase
method. This involves the revaluation to fair value of all identifiable assets
and liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair value amounts, which are also used as
the bases for subsequent measurement in accordance with the Group accounting
policies. Goodwill represents the excess of acquisition cost over the fair
value of the Group's share of the identifiable net assets of the acquired
subsidiary at the date of acquisition.
3.3 Foreign currency translation
T.F. & J.H. Braime (Holdings) P.L.C. consolidated financial statements are
presented in Sterling (£), which is also the functional currency of the parent
company.
In the separate financial statements of the consolidated entities, foreign
currency transactions are translated into the functional currency of the
individual entity using the exchange rates prevailing at the dates of the
transactions (spot exchange rate). Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation of monetary
assets and liabilities at year-end exchange rates are recognised in the income
statement under 'other income' or 'other expenses', respectively.
In the consolidated financial statements, all separate financial statements of
subsidiaries originally presented in a currency different from the Group's
presentation currency, have been converted into Sterling. Assets and
liabilities have been translated into Sterling at the closing rate at the
balance sheet date. Income and expenses have been converted into the Group's
presentation currency using the exchange rates prevailing at the dates of the
transactions. Any differences arising from this procedure have been charged/
(credited) to the currency translation reserve in equity.
The company has taken advantage of the exemption in IFRS 1 with respect to
cumulative translation differences that existed at the date of transition to
IFRS. Accordingly, the cumulative translation differences for all foreign
operations are deemed to be zero at the date of transition.
3.4 Income and expenses recognition
Revenue is recognised when the risks and rewards of owning the goods have passed
to the customer, which is generally on delivery.
Operating expenses are recognised in the income statement upon utilisation of
the service or at the date of their origin. Expenditure for warranties is
recognised and charged against the associated provision when the related revenue
is recognised. Interest income and expenses are reported on an accrual basis.
Dividends received are recognised at the time of their distribution.
3.5 Borrowing costs
All borrowing costs are expensed as incurred.
3.6 Goodwill
Goodwill arising on past acquisitions was written off against reserves in
accounting periods prior to transition to IFRS.
3.7 Research and development activities
Costs associated with research activities are expensed in the income statement
as they occur. Costs that are directly attributable to the development phase of
new products are recognised as intangible assets provided they meet the
following recognition requirements:
- demonstration of technical feasibility of the prospective
product for internal use or sale
- the intangible asset will generate probable economic
benefits through internal use or sale
- sufficient technical, financial and other resources are
available for completion
- the costs to be capitalised as an intangible asset can be
reliably measured.
All other development costs are expensed as incurred.
3.8 Property, plant and equipment
Property, plant and equipment (other than freehold land) are carried at
acquisition cost less subsequent depreciation and impairment losses. Freehold
land is carried at acquisition cost and is not depreciated.
The useful lives of property, plant and equipment (other than freehold land) can
be summarised as follows:
- Freehold buildings 25 years
- Property improvements 10 years
- Plant and fixtures 5 years
- Motor vehicles 4 years
-
3.9 Leases
In accordance with IAS 17 (rev 2003), the economic ownership of a leased asset
is transferred to the lessee if the lessee bears substantially all the risks and
rewards related to the ownership of the leased asset. The related asset is
recognised at the time of inception of the lease at the fair value of the leased
asset or, if lower, the present value of the lease payments plus incidental
payments, if any, to be borne by the lessee. A corresponding amount is
recognised as a finance leasing liability, irrespective of whether some of these
lease payments are payable up-front at the date of inception of the lease.
Subsequent accounting for assets held under finance lease agreements, ie
depreciation methods and useful lives, correspond to those applied to comparable
acquired assets. The corresponding finance leasing liability is reduced by
lease payments less finance charges, which are expensed to finance costs.
Finance charges represent a constant periodic rate of interest on the
outstanding balance of the finance lease liability.
All other leases are treated as operating leases. Payments on operating lease
agreements are recognised as an expense on a straight-line basis. Associated
costs, such as maintenance and insurance, are expensed as incurred. The Group
does not act as a lessor.
3.10 Impairment testing of intangible assets and property, plant and
equipment
The Group's intangible assets and property, plant and equipment are subject to
impairment testing.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level.
Individual assets or cash-generating units that include intangible assets with
an indefinite useful life or those not yet available for use are tested for
impairment at least annually. All other individual assets or cash-generating
units are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell and value in use, based on an internal discounted cash flow
evaluation. Impairment losses are charged pro rata to the assets in the cash
generating unit. All assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist.
3.11 Financial assets
T.F. & J.H. Braime (Holdings) P.L.C.'s financial assets include cash and
financial instruments. Financial assets, other than hedging instruments, can be
divided into the following categories: loans and receivables, financial assets
at fair value through profit or loss, available-for-sale financial assets and
held-to-maturity investments. Financial assets are assigned to the different
categories by management on initial recognition, depending on the purpose for
which the investments were acquired. The designation of financial assets is
re-evaluated at every reporting date at which a choice of classification or
accounting treatment is available.
Management consider that the financial assets of T.F & J.H. Braime (Holdings)
P.L.C.'s represent loans and receivables. No items have been designated at fair
value through profit or loss.
All financial assets are recognised on their settlement date. All financial
assets are initially recognised at fair value, plus transaction costs.
Derecognition of financial instruments occurs when the rights to receive cash
flows from the investments expire or are transferred and substantially all of
the risks and rewards of ownership have been transferred. An assessment for
impairment is undertaken at least at each balance sheet date whether or not
there is objective evidence that a financial asset or a group of financial
assets is impaired.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognised in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise when
the Group provides money, goods or services directly to a debtor with no
intention of trading the receivables. Loans and receivables are subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. Any change in their value is recognised in profit or loss.
Trade receivables are provided against when objective evidence is received that
the Group will not be able to collect all amounts due to it in accordance with
the original terms of the receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.
3.12 Inventories
Inventories comprise raw materials, supplies and purchased goods. Cost includes
all expenses directly attributable to the manufacturing process as well as
suitable portions of related production overheads, based on normal operating
capacity. Financing costs are not taken into consideration. At the balance
sheet date, inventories are carried at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in the ordinary
course of business less any applicable selling expenses.
3.13 Accounting for income taxes
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable profit for the year. All changes to
current tax assets or liabilities are recognised as a component of tax expense
in the income statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. However, in accordance with the rules set out in IAS 12, no deferred
taxes are recognised in conjunction with goodwill. This applies also to
temporary differences associated with shares in subsidiaries and joint ventures
if reversal of these temporary differences can be controlled by the Group and it
is probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component
of tax expense in the income statement. Only changes in deferred tax assets or
liabilities that relate to a change in value of assets or liabilities that is
charged directly to equity (such as the revaluation of land) are charged or
credited directly to equity.
3.14 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as short term
highly liquid investments such as money market instruments and bank deposits.
3.15 Equity
Ordinary share capital is determined using the nominal value of shares that have
been issued.
Retained earnings include all current and prior period results as disclosed in
the income statement.
3.16 Pension obligations and short term employee benefits
Pensions to employees are provided through a defined benefit plan as well as a
defined contribution plan.
A defined benefit plan is a pension plan that defines an amount of pension
benefit that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and salary. The legal obligation for
any benefits from this kind of pension plan remains with the Group, even if plan
assets for funding the defined benefit plan have been acquired. Plan assets may
include assets specifically designated to a long term benefit fund as well as
qualifying insurance policies.
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into an independent entity. The Group has no legal or constructive
obligations to pay further contributions after payment of the fixed
contribution.
The liability recognised in the balance sheet for defined benefit pension plans
is the present value of the defined benefit obligation (DBO) at the balance
sheet date less the fair value of plan assets, together with adjustments for
past service costs. The DBO is calculated annually by independent actuaries
using the projected unit credit method. The present value of the DBO is
determined by discounting the estimated future cash outflows using interest
rates of high quality corporate bonds that are denominated in the currency in
which the benefits will be paid and that have terms to maturity approximating to
the terms of the related pension liability.
Actuarial gains and losses are recognised immediately and in full in the
statement of recognised income and expense. Past-service costs are recognised
immediately in the income statement, unless the changes to the pension plan are
conditional on the employees remaining in service for a specified period of time
(the vesting period). In this case, the past service costs are amortised on a
straight-line basis over the vesting period.
The contributions recognised in respect of defined contribution plans are
expensed as they fall due. Liabilities and assets may be recognised if
underpayment or prepayment has occurred and are included in current liabilities
or current assets as they are normally of a short term nature.
Short-term employee benefits are recognised for the number of paid leave days
(usually holiday entitlement) remaining at the balance sheet date. They are
included in current pension and other employee obligations at the undiscounted
amount that the Group expects to pay as a result of the unused entitlement.
This accounting policy reflects the early adoption of the amendment to IAS 19
which, although yet to be formally adopted for use in the European Union, the
directors anticipate will be so adopted in time to be applicable to the next
annual financial statements.
3.17 Financial liabilities
The Group's financial liabilities include bank loans and overdrafts, trade and
other payables and finance leasing liabilities. They are included in balance
sheet line items 'long-term financial liabilities' and 'trade and other
payables'.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest related charges is
recognised as an expense in 'finance cost' in the income statement.
Bank loans are raised for support of long term funding of the Group's
operations. They are recognised at proceeds received, net of direct issue
costs. Finance charges, including premiums payable on settlement or redemption
and direct issue costs, are charged to profit or loss on an accrual basis using
the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they
arise.
Trade payables are recognised initially at their nominal value and subsequently
measured at amortised cost less settlement payments.
Dividend distributions to shareholders are included in 'other short term
financial liabilities' when the dividends are approved by the shareholders'
meeting.
3.18 Other provisions, contingent liabilities and contingent assets
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Group and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example, product warranties granted, legal
disputes or onerous contracts. Restructuring provisions are recognised only if a
detailed formal plan for the restructuring has been developed and implemented,
or management has at least announced the plan's main features to those affected
by it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including the risks and uncertainties associated with the present
obligation. Any reimbursement expected to be received in the course of
settlement of the present obligation is recognised, if virtually certain as a
separate asset, not exceeding the amount of the related provision. Where there
are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as
a whole. In addition, long term provisions are discounted to their present
values, where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
consolidated balance sheet, unless assumed in the course of a business
combination as described in note 3.2. These contingent liabilities are
recognised in the course of the allocation of purchase price to the assets and
liabilities acquired in the business combination. They are subsequently
measured at the higher amount of a comparable provision as described above and
the amount initially recognised, less any amortisation.
Probable inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets. They are
described along with the Group's contingent liabilities in note 10.
4 BASIS OF CONSOLIDATION
4.1 Unconsolidated subsidiaries
4B Sudamerica SA (incorporated in Argentina) has not been consolidated into T.F.
& J.H. Braime (Holdings) P.L.C. Group's financial statements on the grounds of
immateriality.
5 SEGMENTAL INFORMATION
Segment information is presented in the condensed consolidated interim financial
statements in respect of the Group's business segments, which are the primary
basis of segment reporting. The business segment reporting format reflects the
Group's management and internal reporting structure.
T.F. & J.H. Braime (Holdings) P.L.C. operates two business segments, the
manufacture of metal presswork and the distribution of bulk material handling
components.
All inter-segment transfers are priced and carried out at arm's length.
Business segments Pressings Elevator Group
30 June 2005 components
£ £ £
Revenue
- from external customers 1,685,506 3,454,659 5,140,165
- from other segments
Operating result 18,783 (12,340) 6,443
Finance costs, net (84,227) (2,881) (87,108)
Tax expense - - -
Net result for the period (65,444) (15,221) (80,665)
Depreciation and amortisation 28,440 24,550 52,990
Comparative figures for the period ended 30 June 2004:
Business segments Pressings Elevator Group
30 June 2004 components
£ £ £
Revenue
- from external customers 1,437,032 3,266,148 4,703,180
- from other segments
Operating result (23,737) (71,043) (94,780)
Finance costs, net (76,862) (480) (77,342)
Tax expense - - -
Net result for the period (100,599) (71,523) (172,122)
Depreciation and amortisation 26,238 20,754 46,992
6 WRITE-DOWN OF INVENTORIES
During the six months ended 30 June 2005 the Group recognised a write-down of
finished goods inventories of £38,580 (2004: £66,671) to reflect the ageing of
certain items of stock.
7 EARNINGS PER SHARE AND DIVIDENDS
Both the basic and diluted earnings per share have been calculated using the net
results attributable to shareholders of T.F. & J.H. Braime (Holdings) P.L.C. as
the numerator.
The weighted average number of outstanding shares used for basic earnings per
share amounted to 1,440,000 shares (30 June 2004: 1,440,000 shares).
No dilutive shares existed during the periods ended 30 June 2005 or 30 June
2004.
During the six months to 30 June 2005, T.F. & J.H. Braime (Holdings) P.L.C. paid
dividends of £4,500 to its equity shareholders (30 June 2004: £4,500). This
represents a payment of 2.5p per share (30 June 2004: 2.5p per share).
8 PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the six months ended 30 June 2005, the Group acquired assets with a cost
of £92,902 (30 June 2004: £91,830). Assets with a net book value of £2 were
disposed of during the period (30 June 2004: £600), resulting in a gain on
disposal of £3,316 (30 June 2004: £Nil).
Capital commitments
At 30 June 2005 the Group was contracted to acquire plant at a cost of £61,250
(30 June 2004: £Nil).
9 EMPLOYEE REMUNERATION
Pensions and other employee benefits and obligations
The assets recognised for pensions and other employee remuneration in the
balance sheet consist of the following amounts:
30 June 31 Dec
2005 2004
£ £
Non-current pension benefits 75,000 85,000
The current portion of these liabilities represents T.F. & J.H. Braime
(Holdings) P.L.C.'s obligations to its current and former employees that are
expected to be settled by 30 June 2006. These liabilities arise mainly from
accrued holiday entitlement at the balance sheet date and pension payments. As
none of the employees is eligible for early settlement of pension arrangements,
the remaining part of pension obligations is considered non-current.
T.F. & J.H. Braime (Holdings) P.L.C. operates a defined benefit pension scheme
for certain employees of the Group. According to the plan, a certain percentage
of the current salary is converted into a pension component each year. Pensions
under this scheme are paid out when a beneficiary has reached the age of 65.
30 June 31 Dec
2005 2004
£ £
Present value of funded obligations (3,774,000) (3,618,000)
Fair value of plan assets 3,849,000 3,703,000
Pension benefits 75,000 85,000
The plan assets held for funding the defined benefit obligation do not include
any of T.F. & J.H. Braime (Holdings) P.L.C.'s own shares or any assets used by
the Group. Actual returns on plan assets in the six months ended 30 June 2005
were £110,000 (year ended 31 December 2004: £495,000).
The movement of the net asset / (liability), including the components of pension
benefit expense due to defined benefit arrangements can be reconciled as
follows:
30 June 31 Dec
2005 2004
£ £
Carrying amount brought forward 85,000 (239,000)
Current service costs (82,000) (156,000)
Current interest costs (94,000) (185,000)
Return on plan assets 110,000 495,000
Actuarial gains on funded obligations - 60,000
Contributions paid 56,000 110,000
Carrying amount carried forward 75,000 85,000
Interest costs are included in the line item 'finance costs' on the face of the
income statement. All other expenses relating to employee benefits are included
in the line item named 'employee benefits expense'.
For determination of the pension asset / liability, the following actuarial
assumptions were used:
30 June 31 Dec
2005 2004
Discount rate 5.25% 5.25%
Expected rate of return on plan assets 5.90% 5.90%
Expected rate of salary increases 4.00% 4.00%
Inflation 3.00% 3.00%
10 CONTINGENT LIABILITIES
At 30 June 2005 and 30 June 2004, the Group had no contingent liabilities.
11 PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. A copy
of the statutory accounts for the year ended 31 December 2004, prepared under UK
GAAP, have been delivered to the Registrar of Companies and contained an
unqualified auditors' report in accordance with s235 of the Companies Act 1985.
--------------------------
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