Interim Results
C&C Group Plc
11 October 2005
C&C GROUP PLC
INTERIM RESULTS
FOR SIX MONTHS ENDED 31 AUGUST, 2005
Dublin, London, 11 October, 2005: C&C Group plc ('C&C' or the 'Group'), the
leading manufacturer, marketer and distributor of branded beverages and snacks
in Ireland, today announced its interim results for the six months ended 31
August, 2005.
C&C adopted International Financial Reporting Standards (IFRS) on 1 March 2005.
A full reconciliation between Irish GAAP and IFRS for the year to 28 February
2005 is set out in Appendix 1. Prior year comparatives in this release have
been re-stated in accordance with IFRS.
Financial & Operating Highlights
Financial Highlights
• Revenue growth of 9%(i)
• Profit before finance costs growth of 10%(i)
• Earnings growth of 16%(i)
• Adjusted basic EPS of 16.2 cent - an increase of 14%
• Interim dividend of 6.5 cent per share - an increase of 18%
• Free cash flow of €62 million (79% of EBITDA)
• Net debt reduced by €47 million to €394 million
Operating Highlights
• Volume for the Group's cider brands grew by 27%
• Volume for the Group's Irish whiskey brand, Tullamore Dew, grew by 15%
• Successfully extended distribution of Magners to the greater London
area
• Marketing investment in the period increased by 34%(i)
(i) Comparisons are based on figures excluding non-recurring items
and are on a constant 2005 currency basis in relation to transactions in the
International Spirits & Liqueurs division; and translation of sterling
operations.
Investors and analysts Irish Media International Media
Mark Kenny or Jonathan Neilan Paddy Hughes or Ann Marie Curran Edward Orlebar
K Capital Source Drury Communications Finsbury Group
Tel: +353-1- 631 5500 Tel: +353 1 260 5000 Tel: +44 20 7251 3801
Email :c&cgroup@kcapitalsource.com Email: phughes@drurycom.com Email:edward.orlebar@finsbury.com
Interim results for six months ended 31 August, 2005
C&C is reporting profit before finance costs and non-recurring items of €68.4
million and adjusted earnings per share of 16.2 cent for the six months ended 31
August 2005, increases of 10%(i) and 14% respectively. The Group generated free
cash flow of €61.9 million in the period.
Maurice Pratt, Group Chief Executive Officer, commented "C&C is pleased to
report continued earnings growth, notwithstanding significant marketing
investment behind the Magners brand."
"This financial performance reflects a better than expected contribution from
the Group's cider division. Magners has exceeded our expectations in the U.K.
while Bulmers, with the benefit of good summer weather, delivered strong growth
in Ireland."
Dividends and Dividend Policy
Reflecting the Group's strong and sustainable cash flow generation capability,
the Group will pay an interim dividend for the period of 6.5 cent per share, an
18% increase on last year. The interim dividend will be paid on 7 December, 2005
to shareholders on the Group's register at the close of business on 21 October,
2005. A scrip dividend option will also be available.
C&C intends to maintain a progressive dividend policy.
Outlook
C&C expects the strong underlying (i.e. weather adjusted) market performance of
its Cider division to continue into the second half of the year. This division
is the principal driver of C&C's earnings growth.
The International Spirits & Liqueurs division could experience some temporary
performance shortfall in the second half as a result of impending distribution
changes. The weak overall trends in the Soft Drinks & Snacks division are
continuing into the second half of the year. The planned re-organisation of the
Snacks business, announced in June, commenced implementation on 30 September.
The realignment of distribution of the former Allied Domecq brands in Ireland
will substantially reduce the profit of the Group's Distribution division when
the expected changes become effective in February 2006.
In summary, the Group expects moderate EPS growth for the full 2005/6 fiscal
year. Beyond 2005/6, the Group's objective is to enhance underlying earnings
growth from the further roll-out of Magners in the U.K. To support this growth,
C&C will expand its cider manufacturing capacity in Clonmel in 2006, ahead of
the timeframe originally envisaged.
(i) Before non-recurring items and at constant 2005 currency rates
First Half Review
Objectives
C&C's objective is to deliver revenue and earnings growth by:
• Investing behind the continuing growth of Magners in the U.K. long alcohol
drinks ("LAD") market.
• Supporting Bulmers continued outperformance of the Irish LAD market.
• Maintaining Tullamore Dew's strong growth trend in the international
whiskey market.
• Maintaining operating margins in mature categories.
C&C's financial objectives include generating consistent, high levels of free
cash flow and sustaining an attractive dividend stream for its shareholders. C&
C will further enhance shareholder value by applying free cash flow to debt
paydown.
Operating Review
Group Operating Summary 6 months to 6 months to 6 months to Growth
31 August 2005 31 August 2004 31 August 2004 Year-on-Year
(Reported) (Constant fx) (Constant fx)
€m €m €m %
Revenue 419.5 385.7 383.4 9.4
Profit before finance costs (ii) 68.4 62.9 62.0 10.3
Operating Margin % 16.3% 16.3% 16.2%
Revenue of €419.5 million, represents a 9.4% increase on 2004 levels. Profit
before finance costs increased by 10.3% to €68.4 million against €62.0 million
in 2004(i). Operating margin, at 16.3%, is up slightly year-on-year,
notwithstanding a 34%(i) increase in marketing investment.
The revenue increase principally reflects growth of 28% in the Cider division.
The operating margin reflects the mix effect of strong growth in the higher
margin Cider division which offset the margin declines in Soft Drinks & Snacks
and Distribution divisions.
On a reported basis, revenue and profit before finance costs both increased 8.7%
leaving operating margins unchanged.
(i) At constant 2005 currency rates
(ii) Excluding non-recurring items
Divisional Analysis: Cider
Cider Division 6 months to 6 months to 6 months to Growth
31 August 2005 31 August 2004 31 August 2004 Year-on-Year
(Reported) (Constant fx) (Constant fx)
€m €m €m %
Revenue 144.5 112.9 112.7 28.2
Profit before finance 45.1 35.7 35.6 26.7
costs
Operating Margin % 31.2% 31.6% 31.6%
Revenue for the Cider division of €144.5 million, represents a 28.2% increase on
2004 levels. Profit before finance costs increased 26.7% to €45.1 million
against €35.6 million in 2004. Operating margin, at 31.2%, declined by 0.4
percentage points year-on-year.
It is estimated that the overall LAD market in the Republic of Ireland grew in
terms of volume by 1% in the six months to August 2005 and that, within this,
the on-trade showed modest decline and the off-trade strong growth. This
outcome reflects good summer weather, particularly compared to 2004, and also
the impact of the smoking ban in licensed premises for part of the comparable
2004 period.
Bulmers outperformed the LAD market and grew by 8% in the period. This strong
performance reflected primarily the good summer weather but also strong brand
fundamentals.
The Group's international cider brand Magners was successfully launched in the
greater London area at the start of 2005. This, together with continued, strong
growth in Scotland and Northern Ireland contributed to sales volumes which more
than doubled within the period.
The decline in operating margins was due to increased marketing investment
behind the Magners brand, partially offset by operational leverage.
Divisional Analysis: International Spirits & Liqueurs
International Division 6 months to 6 months to 6 months to Growth
31 August 2005 31 August 2004 31 August 2004 Year-on-Year
(Reported) (Constant fx) (Constant fx)
€m €m €m %
Revenue 28.9 28.8 28.0 3.2
Profit before finance costs 7.6 7.6 6.8 11.8
Operating Margin % 26.3% 26.4% 24.3%
Revenue for the International Spirits & Liqueurs division of €28.9 million,
represents a 3.2% increase on 2004 levels. Profit before finance costs increased
11.8% to €7.6 million against €6.8 million in 2004. Operating margin, at 26.3%,
increased by 2.0 percentage points year-on-year.
Overall volume shipments increased 2% year-on-year. Within this total increase,
Tullamore Dew recorded strong growth while Carolans declined.
The negative currency impact of the stronger euro amounted to €0.8 million to
both revenue and profit before finance costs in the period.
The improved operating margin reflects reduced raw material costs.
Divisional Analysis: Soft Drinks & Snacks
Soft Drinks & Snacks 6 months to 6 months to 6 months to Growth
31 August 2005 31 August 2004 31 August 2004 Year-on-Year
(Reported) (Constant fx) (Constant fx)
€m €m €m %
Revenue 129.3 131.0 130.5 (0.9)
Profit before finance costs 13.3 16.6 16.6 (19.9)
Operating Margin % 10.3% 12.7% 12.7%
Revenue for the Soft Drinks & Snacks division of €129.3 million, represents a
0.9% decrease on 2004 levels. Profit before finance costs decreased 19.9% to
€13.3 million against €16.6 million in 2004. Operating margin, at 10.3%,
declined by 2.4 percentage points year-on-year.
The overall soft drinks market volume grew by an estimated 2% in the period
reflecting, in part, the good summer weather for the period. A modest decline in
carbonated soft drinks was offset by strong growth in bottled water. The snack
market showed modest decline in the period.
The revenue decrease in the period comprises a 2.1% volume decline and growth in
net price yield of 1.2%. The volume decline reflected a drop in market share
principally in the take home beverage category and market decline in the snacks
category.
The decline in operating margins is a result of revenue decline and
significantly increased marketing investment behind company brands in growth
categories - these include Ballygowan and Club Energise.
Divisional Analysis: Distribution
Distribution 6 months to 6 months to 6 months to Growth
31 August 2005 31 August 2004 31 August 2004 Year-on-Year
(Reported) (Constant fx) (Constant fx)
€m €m €m %
Revenue 116.8 113.0 112.2 4.1%
Profit before finance costs 2.4 3.0 3.0 (20.0%)
Operating Margin % 2.1% 2.7% 2.7%
Revenue for the Distribution division of €116.8 million represents a 4.1%
increase on 2004 levels. Profit before finance costs declined by 20.0% to €2.4
million compared to €3.0 million in 2004.
Operating margin at 2.1% fell by 0.6 percentage points year-on-year.
The principal profit contributor of this division, wine & spirits distribution,
recorded revenue growth of 6% and broadly unchanged margins. Declining margins
in the wholesale segment of the division accounted for the profit and operating
margin decline.
Finance Review
Foreign exchange
The restatement of August 2004 profit before finance costs, at 2005 exchange
rates, reduces the reported figure for that period by €0.9 million. €0.8
million of this relates to transactions in the International Spirits & Liqueurs
division and arises from the change in the US Dollar and Canadian Dollar
exchange rates. The remaining €0.1 million relates to the translation of
Sterling denominated results at the 2005 exchange rate. The restatement of
profit before finance costs for the year ended 28 February 2005 at the average
hedged rates for the current fiscal year (US41.27 and Can$ 1.61) is expected to
reduce the reported figure by €2.2 million.
Non-recurring Items
Non-recurring items for the period of €8.3 million represent a provision for the
costs associated with the re-organisation of the Snacks business announced in
June 2005. Non-recurring items in the first half of 2004/5 represent costs
associated with the Initial Public Offering of the Group's shares which took
place in May 2004.
Interest costs
Interest costs, excluding non-recurring items, amounted to €10.3 million, which
is €2.1 million lower than the corresponding period in 2004. The reduction is
due to lower levels of debt as a result of internal cash flow and reduced
interest rates following the May 2004 refinancing. The reduction is net of a
€0.3 million increase arising from the IFRS reclassification of pension costs.
Future interest rate exposure is partially hedged at the following base
(excluding margin) interest rates: Current year fully hedged at an effective
rate of 3.00%; fiscal year 2007 - €250 million hedged at 3.375%; fiscal year
2008 - €200 million hedged at 3.30%; and fiscal year 2009 - €50 million hedged
at 2.80%.
Taxation
The taxation charge for the period is based on an anticipated effective rate of
tax on profits, before non-recurring items, of approximately 10% for the full
financial year to 28 February, 2006.
Dividend
The Company will pay an interim dividend of 6.5 cent per share on 7 December,
2005. The dividend will be payable to shareholders on the Group's register at
the close of business on 21 October, 2005.
Cash flow
Free Cash Flow amounted to €62 million (79% of EBITDA) in the period and
benefited from positive movement on working capital and a low level of capital
expenditure. Net cash flow of €47 million (before loan repayments) also
benefited from a €9 million uptake of scrip shares in lieu of a cash dividend.
Net debt
Net debt at 31 August, 2005 amounted to €394.3 million, a reduction of €47
million from the 28 February 2005 level. This represents an enterprise value
gearing (net debt as a percentage of market capitalisation plus net debt) of
21%. Interest cover based on EBITDA was 7.9 times.
Group income statement
for the six months ended 31 August 2005
Six months ended 31 August 2005 Six months ended 31 August 2004
Before Before
Non-recurring Non-recurring Non-recurring Non-recurring
items items items items
€m €m Total €m €m Total
€m €m
Revenue 419.5 - 419.5 385.7 - 385.7
Net operating costs (351.1) (8.3) (359.4) (322.8) (3.4) (326.2)
Profit before finance costs 68.4 (8.3) 60.1 62.9 (3.4) 59.5
Finance costs (net) (10.3) - (10.3) (12.4) (9.1) (21.5)
Profit before tax 58.1 (8.3) 49.8 50.5 (12.5) 38.0
Income tax expense (6.0) 0.9 (5.1) (4.8) 0.4 (4.4)
Profit attributable to ordinary
shareholders
52.1 (7.4) 44.7 45.7 (12.1) 33.6
Basic earnings per share (cent) 13.9 10.5
Diluted earnings per share (cent) 13.8 10.5
Group statement of recognised income and expense
for the six months ended 31 August 2005
€m €m
Profit for period attributable to ordinary
shareholders 44.7 33.6
Income and expense recognised directly in equity:
Exchange adjustments 0.3 (1.2)
Cash flow hedges (2.6) -
Actuarial gain/ (loss) 4.6 (3.9)
Deferred tax (0.4) 0.8
Total recognised income and expense for period 46.6 29.3
Group statement of changes in equity
for the six months ended 31 August 2005 €m €m
Total equity at beginning of period 157.8 104.8
Impact of adopting IAS 32/ IAS 39 on 1 March 05 (4.1) -
Total recognised income & expense for period 46.6 29.3
Scrip Issue 9.4 -
Dividends (24.1) -
New ordinary shares issued - 6.1
Shares to be issued 0.5 0.2
Total equity at end of period 186.1 140.4
Group Balance Sheet
as at 31 August 2005
31-Aug-05 31-Aug-04 28-Feb-05
Notes (audited)
€m €m €m
Assets
Non-current assets
Property, plant & equipment 128.0 145.4 142.4
Goodwill 461.9 461.9 461.9
Deferred tax 7.8 6.7 7.4
597.7 614.0 611.7
Current assets
Inventories 53.5 52.2 49.2
Trade & other receivables 146.9 124.5 92.6
Cash & cash equivalents 62.7 43.7 26.0
Assets held for sale 4.8 - -
267.9 220.4 167.8
Total assets 865.6 834.4 779.5
Equity
Issued capital 6 3.2 3.2 3.2
Share premium 6 12.8 3.4 3.4
Reserves 6 19.8 25.1 26.0
Retained earnings 6 150.3 108.7 125.2
Total equity 186.1 140.4 157.8
Liabilities
Non-current liabilities
Financial liabilities 439.9 486.3 447.0
Employment benefits - pension deficit 49.9 43.2 53.0
Deferred tax 5.5 5.6 5.9
495.3 535.1 505.9
Current liabilities
Financial liabilities 24.6 10.0 20.0
Trade & other payables 148.6 138.4 89.3
Current tax liabilities 11.0 10.5 6.5
184.2 158.9 115.8
Total liabilities 679.5 694.0 621.7
Total equity and liabilities 865.6 834.4 779.5
Group cash flow statement
for the six months ended 31 August 2005
6 months ended 6 months ended
31 August 2005 31 August 2004
€m €m
Cash flows from operating activities
Profit for period 44.7 33.6
Adjustments for:
Finance costs 10.3 21.5
Income tax expense 5.1 4.4
Depreciation of property plant & equipment 10.1 10.2
Impairment of plant & equipment 2.6 -
Profit on disposal of property (2.8) -
Charge for share based employee benefits 0.5 0.2
Pensions charged to profit before finance costs less
contributions paid
1.6 2.6
Provision movement re IPO costs (0.1) 2.3
Provision movement re re-organisation costs 6.5 (2.4)
78.5 72.4
Increase in inventories (4.4) (4.8)
Increase in debtors (47.4) (33.5)
Increase in creditors 51.2 37.0
Cash generated from operations 77.9 71.1
Interest received 0.4 0.4
Interest paid (9.9) (17.9)
Income taxes paid (1.0) (2.0)
Net cash from operating activities 67.4 51.6
Cash flows from investing activities
Purchase of property plant & equipment (6.2) (10.4)
Sale of property plant & equipment 0.7 6.0
(5.5) (4.4)
Cash flows from financing activities
Net issue/ redemption of ordinary share capital - 0.3
Expenses paid in respect of shares issued (13.5)
Bank loans repaid (10.0) (565.2)
New bank loans drawn down / issue costs paid (0.5) 496.1
Dividends paid (14.7) -
Net cash used in financing activities (25.2) (82.3)
Net increase/ (decrease) in cash & cash equivalents 36.7 (35.1)
Cash & cash equivalents at beginning of period 26.0 78.8
Cash & cash equivalents at end of period 62.7 43.7
Notes to the interim results for the six months ended 31 August 2005
1. Basis of preparation
The interim results, which are abridged and unaudited, have been prepared on the
basis of the accounting policies expected to apply for the financial year to 28
February 2006. This is the first year when the financial statements will be
prepared under the International Financial Reporting Standards (IFRS) and the
comparatives for 2004 have been restated from Irish Generally Accepted
Accounting Principles (GAAP) to comply with IFRS. The accounting policies of
the Group under IFRS are shown in appendix 1.
Preliminary IFRS financial statements for the year to 28 February 2005 and for
the six months to 31 August 2004, which include reconciliations of Irish GAAP to
IFRS, are also shown in appendix 1.
As permitted under the IFRS transition arrangements, the 2004 comparative
figures have not been adjusted for the implementation of IAS 32 (Financial
Instruments: Disclosure and Presentation) and IAS 39 (Financial Instruments:
Recognition and Measurement). Instead IAS 32 and IAS 39 have been implemented
at 1 March 2005 when the impact was as follows:
€m
Non-current assets - deferred tax 0.5
Financial Liabilities (4.6)
Equity (4.1)
The reduction in equity of €4.1m is recognised in the restated reserves at 1
March 2005 as outlined in note 6 and relates to interest rate swaps and forward
currency contracts and related deferred tax which were not recognised under
Irish GAAP.
The income tax expense for the six month period is calculated by applying the
directors' best estimate of the annual effective tax rate to the profit for the
period.
The interim results were approved by the Board on 11 October 2005.
2. Segmental analysis
Six months ended 31 August Six months ended 31 August
2005 2004
Class of business analysis Revenue *Net result Revenue *Net result
€m €m €m €m
Cider 144.5 45.1 112.9 35.7
International Spirits & Liqueurs 28.9 7.6 28.8 7.6
Soft Drinks & Snacks 129.3 13.3 131.0 16.6
Distribution 116.8 2.4 113.0 3.0
419.5 68.4 385.7 62.9
*Net result represents profit before finance costs and non-recurring items
3. Earnings per ordinary share
Six months to 31 August Six months to 31 August
2005 2004
€m €m
Earnings as reported 44.7 33.6
Adjustments for non-recurring items net of tax 7.4 12.1
Earnings adjusted for non-recurring items 52.1 45.7
'000 '000
Number of shares at beginning of period 321,130 321,130
Shares issued in lieu of dividend 2,922 -
Number of shares at end of period 324,052 321,130
Weighted average number of ordinary shares 321,940 321,130
Weighted average number of ordinary shares including share
options
323,302 321,130
Basic earnings per share - cent 13.9 10.5
Diluted earnings per share - cent 13.8 10.5
Adjusted basic earnings per share - cent 16.2 14.2
4. Financial Liabilities
31 August 2005 31 August 2004
€m €m
Amounts falling due within one year
Bank loans 20.0 10.0
Loss on mark to market - Derivatives 4.6 -
24.6 10.0
Amounts falling due after one year
Bank Loans 437.0 486.3
Loss on mark to market - Derivatives 2.9 -
439.9 486.3
Unamortised issue costs of €3.0m have been netted against outstanding bank loans repayable after 1 year.
5. Analysis of net debt
Cash & cash Bank loans due Bank loans due Net debt
equivalents within one year after one year
€m €m €m €m
At 1 March 2005 (26.0) 20.0 447.0 441.0
At 31 August 2005 (62.7) 20.0 437.0 394.3
6. Reserves
Capital Reserves
Share Share Capital Capital Hedge Shares to FX Retained
capital Premium redemption reserve reserve be
reserve Translation Earnings
issued reserve
€m €m €m €m €m €m €m €m
Group
At 28 February 2005 3.2 3.4 0.3 24.9 - 0.6 0.2 125.2
IAS 39 adjustment - - - - (4.1) - - -
At 1 March 2005 - as
restated
3.2 3.4 0.3 24.9 (4.1) 0.6 0.2 125.2
Scrip Issue - 9.4 - - - - - -
Retained profits - - - - - - - 44.7
Dividend on ordinary
shares
(24.1)
Other movements - - - - (2.6) 0.5 - 4.5
At 31 August 2005 3.2 12.8 0.3 24.9 (6.7) 1.1 0.2 150.3
7. Dividend
An interim dividend of 6.5 cent per share is proposed on 324,052,889 ordinary
shares amounting to €21.1m.
Notes not forming part of the interim results
1. General
Unless otherwise stated comparative information in this statement for revenue,
marketing investment and profit before finance costs are for continuing
operations, at constant foreign exchange rates for translation of Sterling and
for transaction exposures for International spirits & liqueurs and are before
non-recurring items. EBITDA is before non-recurring items and Free Cash Flow is
before financing activities.
Volume data is in litres for ciders and soft drinks; 9 litre cases for wines,
spirits and liqueurs; and kilos for snacks. Volume for the Soft Drinks & Snacks
division is weighted on the basis of revenue. Unit price movements quoted are
based on revenue net of excise duty where applicable.
The loss from transaction exposure is calculated by applying the actual rates in
six months to 31 August, 2005 to the actual currency receipts in six months to
31 August, 2004.
2. Reconciliation of six months to 31 August, 2004 results at constant currency.
Actual 6 months IAS adjustments FX FX 6 months to Aug
to Aug '04 '04 at constant
Translation Transaction currency
€m €m €m €m €m
Revenue
Cider 112.9 - (0.2) - 112.7
International 28.8 - - (0.8) 28.0
Soft drinks & snacks 131.0 - (0.5) - 130.5
Distribution 113.0 - (0.8) - 112.2
Total 385.7 - (1.5) (0.8) 383.4
Profit before finance costs
Cider 36.5 (0.8) (0.1) - 35.6
International 7.7 (0.1) - (0.8) 6.8
Soft drinks & snacks 17.0 (0.4) - - 16.6
Distribution 3.0 - - - 3.0
Total (1.3) (0.1) (0.8) 62.0
64.2
3. Special note regarding forward-looking information
Some statements in this interim report contain forward-looking statements. They
represent our expectations for our business, and involve risks and
uncertainties. We have based these forward-looking statements on our current
expectations and projections about future events. We believe that our
expectations and assumptions with respect to these forward-looking statements
are reasonable. However, because these forward-looking statements involve known
and unknown risks, uncertainties and other factors, which are in some cases
beyond our control, our actual results or performance may differ materially from
those expressed or implied by such forward-looking statements.
Appendix 1
Restatement of 2004/05 Results under
International Financial Reporting
Standards
CONTENTS
1. Overview
1.1 Highlights of restatement of 2004/05 results under IFRS
1.2 Introduction
1.3 Overview of impact of transition to IFRS
2. Basis of preparation of financial statements under IFRS
3. Principal exemptions availed of on transition to IFRS
4. Review of main changes arising on transition to IFRS
5. Restatement of 2004/05 Financial Statements
5.1 Year ended 28 February 2005
5.2 Six months ended 31 August 2004
5.3 Transition balance sheet as at 1 March 2004
5.4 Segmental analysis restated
6. Statement of accounting policies under IFRS
7. Auditors' Report
1. OVERVIEW
1.1 HIGHLIGHTS OF RESTATEMENT OF 2004/5 RESULTS UNDER IFRS
The Group's results for 2004/5 which were previously prepared in accordance with
accounting practice generally accepted in the Republic of Ireland (Irish GAAP)
have been restated under the recognition and measurement principles of
International Financial Reporting Standards (IFRS).
The restated results and the reconciliations to the originally reported Irish
GAAP statements are shown in Section 5.
The impact on the audited results for year-ended 28 February 2005 is summarised
as follows:
Irish GAAP % Comments on principal IFRS changes
IFRS Change
€ m € m
Revenue 750.4 750.4 -
Operating Profit before goodwill 111.8 109.1 -2% Employee benefits and share based
amortisation payments adjustments
Profit before tax 54.4 81.5 +50% Non amortisation of goodwill
Profit after tax 48.3 75.9 +57% Non amortisation of goodwill
Total equity 150.4 157.8 +5% Pension and deferred tax assets
and liabilities included under
IFRS
Net debt 441.0 441.0 -
cent cent
Earnings per share
Basic EPS 15.0 23.6 +57% Non amortisation of goodwill
Adjusted EPS 26.4 25.8 -2% Employee benefits and share based
payments
1.2 INTRODUCTION
Up to and including 28 February 2005, C&C Group plc ("the Group'') prepared its
consolidated financial statements in accordance with Irish GAAP.
The application of IFRS is mandatory for the consolidated financial statements
of all entities whose securities are listed on a regulated exchange in the
European Union (EU) and applies in respect of accounting periods commencing on
or after 1 January 2005. The Regulation passed by the EU requires that
IFRS-compliant financial statements be produced by the Group for the interim
period ended 31 August 2005 and the year ending 28 February 2006 and that those
financial statements contain a full set of disclosures for the comparative
periods in 2004/5. As stipulated under IFRS 1 First-time Adoption of
International Financial Reporting Standards, the transition date to IFRS (being
the beginning of the earliest period for which the Group presents full
comparative information under IFRS in its first IFRS financial statements) is 1
March 2004 other than for IAS32 and IAS39 where the transition date is 1 March
2005.
This document deals with the transition to IFRS under the following sections:
1. Overview of impact of transition to IFRS.
2. Basis of preparation of financial statements under IFRS.
3. Principal exemptions availed of on transition to IFRS.
4. Main changes arising on transition to IFRS.
5. Details of the reconciliation between Irish GAAP and the
restated IFRS financial information.
6. New Group accounting policies based on IFRS.
7. Independent auditors' report on the restated IFRS financial
information.
Details of the impact of the transition to the recognition and measurement
principles of IFRS on the Group's reported performance and financial position is
shown in Section 5 as follows:
5.1 Audited Group Income Statement and Group Statement of Recognised
Income and Expense for the year ended 28 February 2005 and Group Balance Sheet
as at that date together with reconciliations of profit and equity from Irish
GAAP to IFRS.
5.2 Unaudited Group Income Statement and Group Statement of Recognised
Income and Expense for the six-month period ended 31 August 2004 and Group
Balance Sheet as at that date together with reconciliations of profit and equity
from Irish GAAP to IFRS.
5.3 Adjustments required to the Irish GAAP Group Balance Sheet as at 1
March 2004 (the "transition date" as defined above) for transition to IFRS.
5.4 Restatement under IFRS of selected segmental information published in
2004/5 Interim and Annual Reports.
The Group has adopted preliminary new accounting policies to adopt IFRS which
are outlined in Section 6 and which are conditional on the adoption by the EU of
a number of IFRS that still have to be endorsed.
The restatements of the Group Income Statement, Statement of Recognised Income
and Expense, Balance Sheet and segmental information for the full year ended 28
February 2005 and the Transition Balance Sheet dated 1 March 2004 have been
audited by the Group's auditors, KPMG, Chartered Accountants. The financial
information in respect of the six months ended 31 August 2004 is unaudited.
1.3 OVERVIEW OF IMPACT OF TRANSITION TO IFRS
The standards which give rise to the most significant changes to the Group
financial statements on transition to IFRS are:
IFRS 2 Expensing of share-based payments at fair value
IFRS 3 Non-amortisation of goodwill
IAS 12 Deferred tax computed on the basis of temporary
differences
IAS 19 Recognition of defined benefit pension schemes'
assets and liabilities
IAS 32/ IAS 39 Recognition and measurement of financial instruments -
derivatives carried at fair value; classification of hedges
(from 1 March 2005 only)
The impact of the transition to IFRS on the Group financial statements is
summarised as follows:
Full year 2005 Interim 2004
(Unaudited)
Irish GAAP IFRS Irish GAAP IFRS
€m €m €m €m
Group Income Statement
Revenue 750.4 750.4 385.7 385.7
Operating profit before goodwill 111.8 109.1 60.8 59.5
Profit before finance costs 85.2 112.3 45.9 59.5
Profit before tax (PBT) 54.4 81.5 24.4 38.0
Profit after tax 48.3 75.9 19.9 33.6
Tax rate (as a % of PBT) 11.2% 6.9% 18.4% 11.6%
Basic EPS (euro cent) 15.0c 23.6c 6.2c 10.5c
Group Balance Sheet
Total assets 742.6 779.5 813.1 834.4
Total liabilities 592.2 621.7 666.5 694.0
Total equity 150.4 157.8 146.6 140.4
Net debt 441.0 441.0 452.6 452.6
2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS UNDER IFRS
EU law requires all publicly quoted companies in the EU to prepare their
consolidated financial statements for accounting periods commencing on or after
1 January 2005 in accordance with IFRS and accordingly the Group's financial
statements for the year to 28 February 2006 will be prepared on this basis.
The financial information presented in this document has been prepared in
accordance with the recognition and measurement principles of IFRS and
Interpretations issued by the International Accounting Standards Board (IASB)
that either have been endorsed by the EU or are expected to be endorsed and be
effective by 28 February 2006. On this basis the Group has adopted preliminary
new accounting policies and these are set out in Section 6.
The restated 2004/5 financial information provided in this document and the new
group accounting policies are conditional on certain of the IFRS being approved
by the EU, in particular the Amendment to IAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures which allows the recognition of actuarial gains and
losses in the Statement of Recognised Income and Expense.
3 PRINCIPAL EXEMPTIONS AVAILED OF ON TRANSITION TO IFRS
The rules for first time adoption of IFRS are set out in IFRS 1, First-time
adoption of International Financial Reporting Standards. In general the Group is
required to establish its IFRS Accounting Policies for 2005/6 and apply these
retrospectively to determine the IFRS opening balance sheet at the transition
date of 1 March 2004. The standard permits a number of specified exemptions from
the general principle of retrospective restatement and the Group has elected, in
common with the majority of other listed companies, to avail of a number of
these exemptions as follows:
(i) Business Combinations
Business combinations that occurred prior to the transition date of 1 March 2004
have not been subject to restatement. As a result, goodwill as at the transition
date is carried forward at its net book value and together with goodwill arising
on business combinations after the transition date is subject to annual
impairment testing in accordance with IAS 36: Impairment of Assets. As required
by IFRS 1 goodwill was assessed for impairment as at the transition date and no
impairment resulted from this exercise.
(ii) Employee Benefits
The Group has elected to recognise all cumulative actuarial gains and losses
applicable to defined benefit pension schemes in the transition balance sheet
and to adjust them against retained income. Going forward, the Group expects to
apply the amendment to IAS 19: Actuarial Gains and Losses, Group Plans and
Disclosures, (not yet endorsed by the EU) which allows actuarial gains and
losses to be recognised immediately in the Statement of Recognised Income and
Expense. This approach is consistent with the treatment required by FRS 17 the
effect of which we have previously disclosed in our Irish GAAP financial
statements.
(iii) Financial Instruments
The Group has availed of the exemption under IFRS 1 not to restate the
comparative information under IAS 32: Financial Instruments: Disclosure and
Presentation and IAS 39: Financial Instruments: Recognition and Measurement.
Comparative information on financial instruments for 2004/5 in the 2005/6
financial statements will be presented on the Irish GAAP basis.
(iv) Currency Translation Adjustments
IFRS require that on disposal of a foreign operation, the cumulative amount of
currency translation differences previously recognised directly in reserves for
that operation be transferred to the income statement as part of the profit or
loss on disposal. The Group has deemed the cumulative currency translation
differences applicable to foreign operations to be zero as at the transition
date. The cumulative currency translation differences arising after the
transition date (i.e. during 2004/5) have been re-classified from retained
income to a separate component of equity (termed the "foreign currency
translation reserve") with no net impact on capital and reserves attributable to
the Group's equity holders.
4 REVIEW OF MAIN CHANGES ARISING ON TRANSITION TO IFRS
The most significant changes arising from the transition to IFRS from Irish GAAP
are described in the following paragraphs. The impact of these changes on the
Group's 2004/5 Full Year and Interim Income Statements and Balance Sheets is set
out in Section 5 of this document and is based on the preliminary accounting
policies set out in Section 6.
(i) IFRS 2: Share-based Payment
IFRS 2: Share-based Payment, requires that an expense for share-based payments,
which in the case of the Group are executive share option schemes, be recognised
in the income statement based on their fair value at the date of grant. This
expense is recognised over the vesting period of the schemes. The charge
recognised in the Income Statement is based on the directors' assessment of the
likelihood that the vesting conditions attaching to the options will be
achieved. Fair value calculations have been applied in respect of share
entitlements granted in May 2004. The fair value of the share entitlements was
determined by using a trinomial option-pricing model. The following inputs were
used in determining the fair value of share entitlements:
• The exercise price, which is the market price at the date the share
entitlements were granted.
• Future price volatility was based on historical volatility of mid cap
Irish companies and international drink companies and is assessed over five
years being the estimated average period from date of grant to exercise of the
share entitlements.
• The risk free interest rate used in the model is the rate applicable
to Irish Government Bonds with a remaining term equal to the expected term of
the share entitlements being valued.
• Dividend yield.
An expense of €0.6 million has been recognised in the Group Income Statement in
respect of the year ended 28 February 2005 (€0.2 million for the six months
ended 31 August 2004) and this is based on share entitlements granted in May
2004.
(ii) IFRS 3: Business Combinations
Under Irish GAAP, goodwill recognised on acquisitions was amortised over its
useful life of 20 years. Under IFRS 3 goodwill is no longer amortised on a
straight line basis but instead is subject to annual impairment testing. At 1
March 2004, the transition date, the Group held a net goodwill asset of €461.9
million that is carried forward at its net book value and, together with
goodwill arising on business combinations subsequent to the transition date, is
subject to annual impairment testing in accordance with IAS 36: Impairment of
Assets. As a result the 2004/5 charge of €29.8 million under Irish GAAP for
goodwill amortisation is not charged under IFRS and results in an increase in
pre-tax profit. Under Irish GAAP, the Group previously reversed the goodwill
amortisation charge to determine adjusted earnings per share. This change,
therefore, more appropriately aligns the accounting treatment of goodwill with
the Group's presentation of the underlying earnings performance of the business.
At 1 March 2004 and 28 February 2005 impairment testing was performed on
goodwill and no impairments resulted.
(iii) IAS 12: Income taxes
Under Irish GAAP, deferred tax was recognised in respect of all timing
differences as required by FRS 19: Deferred Tax that had originated but not
reversed by the balance sheet date.
Deferred tax under IAS 12: Income Taxes, is recognised in respect of all
temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying value for financial reporting purposes, with
certain exceptions. IAS 12 also requires that deferred tax assets and
liabilities must be disclosed separately on the balance sheet, unless they
qualify for offset. IAS 12 results in an overall increase in the net deferred
tax liability of the Group. The adjustments made to deferred tax assets and
liabilities as at the transition date of 1 March 2004, and reflected in the
transition balance sheet, principally relate to the following issues:
• The Group revalued its freehold and long leasehold properties in 1998.
IAS 12 requires a provision to be made for deferred tax on property revaluation
surpluses and this gave rise to a deferred tax liability of €1.5m that is
reflected in the transition balance sheet.
• IAS 12 requires that a deferred tax provision be made for all
rolled-over capital gains rather than only those expected to crystallise. The
IFRS transition balance sheet includes a deferred tax liability of €0.5m in
respect of rolled-over capital gains, which did not arise under Irish GAAP.
• The deferred tax impact of defined benefit pension scheme surpluses
and deficits accounted for in accordance with IAS 19: Employee Benefits, has
resulted in the creation of a deferred tax asset of €5.8 million in the
transition balance sheet.
IAS 12 requires deferred tax to be provided in respect of undistributed profits
of overseas subsidiaries unless the parent is able to control the timing of
remittances and it is probable that such remittances will not be made in the
foreseeable future. As the Group is able to control the timing of remittances
from overseas subsidiaries and no such remittances are anticipated in the
foreseeable future, no provision has been made for any tax on undistributed
profits of overseas subsidiaries.
(iv) IAS 19: Employee Benefits
The Group previously applied the provisions of SSAP 24: Accounting for Pension
Costs under Irish GAAP and provided detailed disclosure under FRS 17: Retirement
Benefits in accounting for pensions and other post employment benefits. IAS 19:
Employee Benefits, requires the net assets and liabilities of defined benefit
pension schemes to be recognised on the face of the balance sheet. The Group's
transition IFRS Balance Sheet reflects the net assets and liabilities of the
Group's defined benefit pension schemes. In accordance with the alternative
allowed under IFRS 1, the Group has recognised all cumulative actuarial gains
and losses attributable to its defined benefit pension schemes as at the
transition date. This has resulted in a pre-tax reduction in net assets of €37.0
million, which represents the sum of the deficit plus the reversal of a SSAP 24
creditor in the Irish GAAP balance sheet as at 28 February 2004. An associated
deferred tax asset of €5.8 million has been recognised in respect of the pension
deficit. Therefore the total adjustment to net assets is €31.2 million.
The reduction in the 2004/5 profit before tax as a result of the adoption of IAS
19, compared to SSAP 24, is €2.1 million.
The Group has elected to apply the amendment to IAS 19, which allows actuarial
gains and losses to be taken directly to reserves through the Statement of
Recognised Income and Expense.
(v) IAS 32: Financial Instruments: Disclosure and Presentation and IAS 39
Financial Instruments: Recognition and Measurement
The Group has availed of the exemption not to restate comparative information
for both IAS 32 and IAS 39 in relation to financial instruments.
The Group enters into derivative instruments to limit its exposure to interest
rate and foreign exchange risk. Under Irish GAAP, these instruments were
accounted for using a hedging model, whereby gains and losses were deferred
until the underlying transaction occurred. Under IFRS, derivative instruments
are recognised on the balance sheet at fair value. In order to achieve hedge
accounting under IFRS, certain criteria must be met regarding documentation,
designation and effectiveness of the hedge.
When a derivative is used to hedge against fluctuations in fair value of a
recognised asset, liability or firm commitment, the change in fair value of both
the hedging instrument and the hedged risk in the hedged item are recognised in
the income statement when they occur.
When a derivative is used to hedge against fluctuations in future cash flows
relating to a recognised asset, liability or probable forecast transaction, the
change in fair value of the hedging instrument is recognised in equity to the
extent that it is an effective hedge until those future cash flows occur.
The Group will apply IAS 32 and IAS 39 for the first time prospectively from 1
March 2005.
(vi) Other less significant adjustments
• Dividends. In accordance with IAS 10: Events after the Balance Sheet date
interim dividends are recognised when paid and final dividends once approved
by shareholders at the Annual General Meeting.
• Returnable packaging has been reclassified as Property, plant & equipment
in accordance with IAS 16.
5. RESTATEMENT OF 2004/05 FINANCIAL STATEMENTS
5.1 FOR THE YEAR ENDED 28 FEBRUARY 2005
C&C Group plc
Group income statement
for the year ended 28 February 2005
Restated under IFRS
Audited
Before Non-recurring
non-recurring Items
items Total
€m €m €m
Revenue 750.4 - 750.4
Operating costs (638.0) (0.1) (638.1)
Profit before finance costs 112.4 (0.1) 112.3
Finance costs (net) (21.6) (9.2) (30.8)
Profit before tax 90.8 (9.3) 81.5
Income tax expense (8.1) 2.5 (5.6)
Profit attributable to ordinary shareholders 82.7 (6.8) 75.9
Basic earnings per share (cent) 23.6
Diluted earnings per share (cent) 23.6
Group statement of recognised income and expense
for the year ended 28 February 2005 €m
Profit attributable to ordinary shareholders 75.9
Income and expense recognised directly in equity:
Exchange differences (1.5)
Deferred tax 1.4
Actuarial loss (11.8)
Total recognised income and expense for year 64.0
Group statement of changes in equity
for the year ended 28 February 2005 €m
Total equity at beginning of year 104.8
Total recognised income and expense for year 64.0
Dividends on ordinary shares (17.7)
Shares to be issued 0.6
New ordinary shares issued 6.1
Total equity at end of year 157.8
C&C Group plc
Group income statement - reconciliation from Irish GAAP to IFRS (audited)
for the year ended 28 February 2005
Impact of transition to IFRS
Under IAS 10 IAS 12 IAS 19 IFRS2 IFRS 3
Irish Events Deferred Employee Share Business
GAAP after the Taxation Benefits Based Combinations Under
BS date Payments IFRS
€m €m €m €m €m €m €m
Revenue 750.4 - - - - - 750.4
Operating costs (635.3) - - (2.1) (0.6) - (638.0)
IPO related transaction costs (3.3) - - - - - (3.3)
Amortisation of goodwill (29.8) - - - - 29.8 -
Operating Profit 82.0 - - (2.1) (0.6) 29.8 109.1
Profit on disposal of fixed assets 3.2 - - - - - 3.2
Profit before finance costs 85.2 - - (2.1) (0.6) 29.8 112.3
Finance costs (net) (30.8) - - - - - (30.8)
Profit before tax 54.4 - - (2.1) (0.6) 29.8 81.5
Income tax expense (6.1) - 0.3 0.2 - - (5.6)
Profit attributable to ordinary 48.3 - 0.3 (1.9) (0.6) 29.8 75.9
shareholders
Dividends - paid (17.7) - - - - - (17.7)
- proposed (24.1) 24.1 - - - - -
Profit retained for financial year 6.5 24.1 0.3 (1.9) (0.6) 29.8 58.2
C&C Group plc
Consolidated Group Balance Sheet
as at 28 February 2005
Restated under
IFRS
(audited)
28 Feb 05
€m
Assets
Non-current assets
Property, plant & equipment 142.4
Goodwill 461.9
Deferred tax 7.4
611.7
Current assets
Inventories 49.2
Trade & other receivables 92.6
Cash & cash equivalents 26.0
167.8
Total assets 779.5
Equity
Issued capital 3.2
Share premium 3.4
Other reserves 26.0
Retained earnings 125.2
Total equity 157.8
Liabilities
Non-current liabilities
Financial liabilities 447.0
Employee benefits - pension deficit 53.0
Deferred tax 5.9
505.9
Current liabilities
Financial liabilities 20.0
Trade & other payables 89.3
Current tax liabilities 6.5
115.8
Total liabilities 621.7
Total equity and liabilities 779.5
C&C Group plc
Consolidated Group Balance Sheet - reconciliation from Irish GAAP to IFRS
(audited) as at 28 February 2005
Under IAS 10 IAS 12 IAS 16 IAS 19 IAS 21 IFRS2 IFRS 3
Irish Events Income Property, Employee Effects Business
GAAP after the Taxes Plant & Benefits of Share Combinations Under
BS date Equipment changes Based IFRS
in FX Payments
rates
€m €m €m €m €m €m €m €m €m
Assets
Non-current assets
Property, plant & 138.5 - - 3.9 - - - - 142.4
equipment
Goodwill 432.1 - - - - - - 29.8 461.9
Deferred tax - - - - 7.4 - - - 7.4
570.6 - - 3.9 7.4 - - 29.8 611.7
Current assets
Inventories 55.0 - - (5.8) - - - - 49.2
Trade & other receivables 91.0 - - 1.9 - (0.3) - - 92.6
Cash & cash equivalents 26.0 - - - - - - - 26.0
172.0 - - (3.9) - (0.3) - - 167.8
Total assets 742.6 - - - 7.4 (0.3) - 29.8 779.5
Equity
Issued capital 3.2 - - - - - - - 3.2
Share premium 3.4 - - - - - - - 3.4
Other reserves 25.2 - - - - 0.2 0.6 - 26.0
Retained earnings 118.6 24.1 (1.7) - (44.5) (0.5) (0.6) 29.8 125.2
Total equity 150.4 24.1 (1.7) - (44.5) (0.3) - 29.8 157.8
Liabilities
Non-current liabilities
Financial liabilities 447.0 - - - - - - - 447.0
Employee benefits -
pension deficit
- - - - 53.0 - - - 53.0
Deferred tax 4.2 - 1.7 - - - - - 5.9
451.2 - 1.7 - 53.0 - - - 505.9
Current liabilities
Financial liabilities 20.0 - - - - - - - 20.0
Trade & other payables 114.5 (24.1) - - (1.1) - - - 89.3
Current tax liabilities 6.5 - - - - - - - 6.5
141.0 (24.1) - - (1.1) - - - 115.8
Total liabilities 592.2 (24.1) 1.7 - 53.0 - - - 621.7
Total equity and 742.6 - - - 7.4 (0.3) - 29.8 779.5
liabilities
5.2 FOR SIX MONTHS ENDED 31 AUGUST 2004
C&C Group plc
Group income statement
for six months ended 31 August 2004
Restated under IFRS
Unaudited
Before Non-
non-recurring recurring
items items Total
€m €m €m
Revenue 385.7 - 385.7
Operating costs (322.8) (3.4) (326.2)
Profit before finance costs 62.9 (3.4) 59.5
Finance costs (net) (12.4) (9.1) (21.5)
Profit before tax 50.5 (12.5) 38.0
Income tax expense (4.8) 0.4 (4.4)
Profit attributable to ordinary shareholders 45.7 (12.1) 33.6
Basic earnings per share (cent) 10.5
Diluted earnings per share (cent) 10.5
Group statement of recognised income and expense
for the six months ended 31 August 2004 €m
Profit attributable to ordinary shareholders 33.6
Income and expense recognised directly in equity:
Exchange differences (1.2)
Actuarial loss (3.9)
Deferred tax 0.8
Total recognised income and expense for period 29.3
Group statement of changes in equity
for the six months ended 31 August 2004 €m
Total equity at beginning of period 104.8
Total recognised income and expense for period 29.3
Shares to be issued 0.2
New ordinary shares issued 6.1
Total equity at end of period 140.4
C&C Group plc
Group income statement - reconciliation from Irish GAAP to IFRS (unaudited)
for six months ended 31 August 2004
Impact of transition to IFRS
Under IAS 10 IAS 19 IFRS2 Share IFRS 3 Business
Events Employee Based Combinations
Irish GAAP after the Benefits Payments Under
BS date IFRS
€m €m €m €m €m €m
Revenue 385.7 - - - - 385.7
Operating costs (321.5) - (1.1) (0.2) - (322.8)
IPO related transaction costs (3.4) - - - - (3.4)
Amortisation of goodwill (14.9) - - - 14.9 -
Profit before finance costs 45.9 - (1.1) (0.2) 14.9 59.5
Finance costs (net) (21.5) - - - - (21.5)
Profit before tax 24.4 - (1.1) (0.2) 14.9 38.0
Income tax expense (4.5) - 0.1 - - (4.4)
Profit attributable to ordinary 19.9 - (1.0) (0.2) 14.9 33.6
shareholders
Ordinary dividends - proposed interim (17.7) 17.7 - - - -
Profit retained for financial period 2.2 17.7 (1.0) (0.2) 14.9 33.6
C&C Group plc
Consolidated Group Balance Sheet
as at 31 August 2004
Restated under
IFRS
(unaudited)
€m
Assets
Non-current assets
Property, plant & equipment 145.4
Goodwill 461.9
Deferred tax 6.7
614.0
Current assets
Inventories 52.2
Trade & other receivables 124.5
Cash & cash equivalents 43.7
220.4
Total assets 834.4
Equity
Issued capital 3.2
Share premium 3.4
Other reserves 25.1
Retained earnings 108.7
Total equity 140.4
Liabilities
Non-current liabilities
Financial liabilities 486.3
Employee benefits - pension deficit 43.2
Deferred tax 5.6
535.1
Current liabilities
Financial liabilities 10.0
Trade & other payables 138.4
Current tax liabilities 10.5
158.9
Total liabilities 694.0
Total equity and liabilities 834.4
C&C Group plc
Consolidated Group Balance Sheet - reconciliation from Irish GAAP to IFRS
(unaudited) as at 31 August 2004
Under IAS 10 IAS 12 IAS 16 IAS 19 IAS 21 IFRS2 IFRS 3 Under
Irish Events Income Property, Employee Effects of Share Business IFRS
GAAP after Taxes Plant & Benefits changes of Combinations
the Equipment in FX Based
BS date rates Payments
€m €m €m €m €m €m €m €m €m
Assets
Non-current assets
Property, plant & equipment 141.8 - - 3.6 - - - - 145.4
Goodwill 447.0 - - - - - - 14.9 461.9
Deferred tax - - - - 6.7 - - - 6.7
588.8 - - 3.6 6.7 - - 14.9 614.0
Current assets
Inventories 57.7 - - (5.5) - - - - 52.2
Trade & other receivables 122.9 - - 1.9 - (0.3) - - 124.5
Cash & cash equivalents 43.7 - - - - - - - 43.7
224.3 - - (3.6) - - - - 220.4
Total assets 813.1 - - - 6.7 (0.3) - 14.9 834.4
Equity
Issued capital 3.2 - - - - - - - 3.2
Share premium 3.4 - - - - - - - 3.4
Other reserves 24.9 - - - - - 0.2 - 25.1
Retained earnings 115.1 17.7 (2.0) - (36.5) (0.3) (0.2) 14.9 108.7
Total equity 146.6 17.7 (2.0) - (36.5) (0.3) - 14.9 140.4
Liabilities
Non-current liabilities
Financial liabilities 486.3 - - - - - - - 486.3
Employee benefits - pension
deficit - - - - 43.2 - - - 43.2
Deferred tax 3.6 - 2.0 - - - - - 5.6
489.9 - 2.0 - 43.2 - - - 535.1
Current liabilities
Financial liabilities 10.0 - - - - - - - 10.0
Trade & other payables 156.1 (17.7) - - - - - - 138.4
Current tax liabilities 10.5 - - - - - - - 10.5
176.6 (17.7) - - - - - - 158.9
Total liabilities 666.5 (17.7) 2.0 - 43.2 - - - 694.0
Total equity and 813.1 - - - 6.7 (0.3) - 14.9 834.4
liabilities
5.3 TRANSITION BALANCE SHEET AS AT 1 MARCH 2004
C&C Group plc
Consolidated Group Balance Sheet
as at 1 March 2004 (transition date)
Restated under
IFRS
(audited)
€m
Assets
Non-current assets
Property, plant & equipment 147.8
Goodwill 461.9
Deferred tax 5.8
615.5
Current assets
Inventories 46.2
Trade & other receivables 97.6
Cash & cash equivalents 78.8
222.6
Total assets 838.1
Equity
Issued capital 0.5
Share premium -
Other reserves 24.9
Retained earnings 79.4
Total equity 104.8
Liabilities
Non-current liabilities
Financial liabilities 507.0
Employee benefits - pension deficit 37.7
Deferred tax 5.7
Provision for Liabilities and charges 22.0
572.4
Current liabilities
Financial liabilities 52.9
Trade & other payables 85.3
Current tax liabilities 22.7
160.9
Total liabilities 733.3
Total equity and liabilities 838.1
C&C Group plc
Consolidated Group Balance Sheet - reconciliation from Irish GAAP to IFRS
(audited)
as at 1 March 2004 (transition date)
Under IAS 12 IAS 16 IAS 19 IAS 21 Under
Income Property, Employee Effects of
Irish Plant & Benefits changes in IFRS
Taxes Equipment FX rates
GAAP
€m €m €m €m €m €m
Assets
Non-current assets
Property, plant & equipment 144.1 - 3.7 - - 147.8
Goodwill 461.9 - - - - 461.9
Deferred tax - - - 5.8 - 5.8
606.0 - 3.7 5.8 - 615.5
Current assets
Inventories 51.7 - (5.5) - - 46.2
Trade & other receivables 96.1 - 1.8 - (0.3) 97.6
Cash & cash equivalents 78.8 - - - - 78.8
226.6 - (3.7) - (0.3) 222.6
Total assets 832.6 - - 5.8 (0.3) 838.1
Equity
Issued capital 0.5 - - - - 0.5
Share premium - - - - - -
Other reserves 24.9 - - - - 24.9
Retained earnings 112.9 (2.0) - (31.2) (0.3) 79.4
Total equity 138.3 (2.0) - (31.2) (0.3) 104.8
Liabilities
Non current liabilities
Financial liabilities 507.0 - - - - 507.0
Employee benefits - pension - - - 37.7 - 37.7
deficit
Deferred tax 3.7 2.0 - - - 5.7
Provisions for liabilities & 22.0 - - - - 22.0
charges
532.7 2.0 - 37.7 - 572.4
Current liabilities
Financial liabilities 52.9 - - - - 52.9
Trade & other payables 86.0 - - (0.7) - 85.3
Current tax liabilities 22.7 - - - - 22.7
161.6 - - (0.7) - 160.9
Total liabilities 694.3 2.0 - 37.0 - 733.3
Total equity and liabilities 832.6 - - 5.8 (0.3) 838.1
5.4 SEGMENTAL ANALYSIS RESTATED
C&C Group plc
Restatement under IFRS of selected segmental information
Year ended 28 February 2005 (audited) Year ended 28 February 2005
Turnover *Net result Net assets
€m €m €m
Class of business analysis
Cider 212.6 64.8 385.6
International Spirits & Liqueurs 68.5 17.4 59.7
Soft Drinks & Snacks 238.7 24.3 113.0
Distribution 230.6 5.9 40.5
Total 750.4 112.4 598.8
Unallocated IPO preparation costs - (3.3) -
Group net borrowings - - (441.0)
750.4 109.1 157.8
Geographical analysis by country of operation
Republic of Ireland 613.5 112.5 589.7
Rest of the world 136.9 (0.1) 9.1
Unallocated items - (3.3) (441.0)
Total 750.4 109.1 157.8
Geographical analysis by country of destination
Republic of Ireland 530.2
UK 147.6
Rest of Europe 27.3
North America 35.9
Rest of the world 9.4
Total 750.4
Other Segment Information Capital Expenditure Depreciation
€m €m
Class of business analysis
Cider 6.5 7.2
International Spirits & Liqueurs 3.1 0.6
Soft Drinks & Snacks 9.9 11.6
Distribution 0.8 1.0
20.3 20.4
6 months ended 31 August 2004 (unaudited)
Six months ended 31 August 2004
Class of business analysis Revenue €m *Net result €m
Cider 112.9 35.7
International Spirits & Liqueurs 28.8 7.6
Soft drinks & snacks 131.0 16.6
Distribution 113.0 3.0
385.7 62.9
*Net result represents profit before net finance costs and non-recurring items
6. STATEMENT OF ACCOUNTING POLICIES UNDER IFRS
Statement of compliance
The financial information in this document has been prepared in accordance with
the recognition and measurement principles of International Financial Reporting
Standards (IFRS), including Interpretations issued by the International
Accounting Standards Board ("IASB") and its committees which are expected to be
endorsed by the European Commission by 28 February 2006.
Details of the qualifications to be taken into account and the principal
exemptions availed of on transition to IFRS are set out in Sections 2 and 3 of
this document.
Basis of preparation
The financial information, which is presented in euro millions to one decimal
place, has been prepared on an historical cost basis except for the measurement
at fair value of share options and derivative instruments (prospectively from 1
March 2005).
Basis of consolidation
The financial statements comprise the financial statements of C&C Group plc and
its subsidiaries. Subsidiaries, which are entities controlled by the Group, are
consolidated from the date on which control is transferred to the Group and
cease to be consolidated from the date on which control is transferred out of
the Group. Control exists when the company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to
obtain economic benefits from its activities. Financial statements of
subsidiaries are prepared for the same reporting year as the parent company and,
where necessary, adjustments are made to the results of subsidiaries to bring
their accounting policies into line with those used by the Group.
All inter-company balances and transactions, including unrealised gains arising
from inter-group transactions, have been eliminated in full. Unrealised losses
are eliminated in the same manner as unrealised gains except to the extent that
they provide evidence of impairment.
Revenue
Revenue comprises the fair value of goods supplied by the Group, inclusive of
excise duty and exclusive of inter-company sales and value added tax, after
allowing for discounts and other allowances. Revenue is recognised to the
extent that it is probable that the economic benefits will flow to the Group,
that it can be reliably measured, and that the significant risks and rewards of
ownership of the goods have passed to the buyer.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate of exchange ruling
at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the exchange rate ruling at the balance
sheet date and all differences arising are taken to the consolidated income
statement with the exception of differences arising on long term inter-company
monetary assets and liabilities which form part of the net investment of the
group in its foreign subsidiaries. Exchange differences on the net investment in
foreign entities are taken directly to equity.
Results and cash flows of non-euro subsidiary undertakings are translated into
euro at average exchange rates for the year, and the related balance sheets are
translated at the rates of exchange ruling at the balance sheet date.
On disposal of a foreign operation, accumulated currency translation differences
are recognised in the income statement as part of the overall gain or loss on
disposal; the cumulative currency translation differences arising prior to the
transition date are deemed to be zero for the purposes of ascertaining the gain
or loss on disposal of a foreign operation subsequent to 1 March 2004.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and impairment losses except for land which is not depreciated. Subsequent
costs are included in an asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group. Property, plant and equipment
is depreciated over its expected useful economic life on a straight line basis
at the following rates:
Freehold and long leasehold buildings 2%
Plant and machinery 10%
Motor vehicles 15%
Other equipment 5-20%
Returnable bottles, cases and kegs 10-25%
The residual value and useful lives of property, plant and equipment are
reviewed and adjusted if appropriate at each balance sheet date.
On disposal of property, plant and equipment the cost and related accumulated
depreciation and impairments are removed from the financial statements and the
net amount, less any proceeds, is taken to the income statement.
The carrying amounts of the Group's property, plant and equipment are reviewed
at each balance sheet date to determine whether there is any indication of
impairment. An impairment loss is recognised when the carrying amount of an
asset or its cash generation unit exceeds its recoverable amount (being the
greater of fair value less costs of sale and value in use). Impairment losses
are recognised in the income statement unless the asset is recorded at a
revalued amount in which case it is firstly dealt with through the revaluation
reserve with any residual amount being transferred to the income statement.
Business combinations
Other than the merger of the Company with C&C Group International Holdings Ltd
and subsidiaries in 2004, which was accounted for as a transaction under common
control, the purchase method of accounting is employed in accounting for
acquisitions of new subsidiaries by the Group. The Group has availed of the
exemption under IFRS 1: First-time Adoption of International Financial Reporting
Standards, whereby business combinations prior to the transition date of 1 March
2004 are not restated. IFRS 3: Business Combinations, has been applied with
effect from the transition date of 1 March 2004 and goodwill amortisation ceased
from that date.
The cost of a business combination is measured as the aggregate of the fair
value at the date of exchange of assets given, liabilities incurred or assumed
and equity instruments issued in exchange for control together with any directly
attributable expenses.
Goodwill
Goodwill arising on acquisitions prior to the date of transition to IFRS has
been retained, with the previous Irish GAAP amount being its deemed cost,
subject to being tested for impairment. Goodwill written off to reserves under
Irish GAAP prior to 1998 has not been reinstated and will not be included in
determining any subsequent profit or loss on disposal.
Goodwill on acquisitions is initially measured at cost being the excess of the
cost of the business combination over the acquirer's interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill relating to acquisitions from 1 March 2004 and
goodwill carried in the balance sheet at 1 March 2004 is not amortised. Goodwill
is reviewed for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
As at the acquisition date, any goodwill acquired is allocated to each of the
cash-generating units expected to benefit from the combination's synergies.
Impairment is determined by assessing the recoverable amount of the
cash-generating unit, to which the goodwill relates.
Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured on the basis of the relative values of the operation
disposed of and the proportion of the cash-generating unit retained.
Leases
Where the Group has entered into lease arrangements on land and buildings the
lease payments are allocated between land and buildings and each is assessed
separately to determine whether it is a finance or operating lease.
Finance leases, which transfer to the Group substantially all the risks and
benefits to ownership of the leased asset, are capitalised at the inception of
the lease at the fair value of the leased asset or if lower the present value of
the minimum lease payments. The corresponding liability to the lessor is
included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and a reduction of the lease obligation so
as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged to the income statement as part of
finance costs.
Capitalised leased assets are depreciated over the shorter of the estimated
useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of
ownership of the assets are classified as operating leases. Operating lease
payments are recognised as an expense in the income statement on a straight line
basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all expenditure incurred in acquiring the inventories and bringing them
to their present location and condition and is based on the first-in first-out
principle.
In the case of finished goods and work in progress, cost includes direct
production costs and the appropriate share of production overheads plus excise
duties where appropriate. Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs of completion and
estimated costs necessary to complete the sale.
Trade and other receivables
Trade receivables, which generally have 30 to 90 day terms, are recognised and
carried at original invoice amount less an allowance for incurred losses.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand
and short term deposits with an original maturity of three months or less. Bank
overdrafts that are repayable on demand and form part of the Group's cash
management are included as a component of cash and cash equivalents for the
purpose of the statement of cashflows.
Interest-bearing borrowings
Up to 28 February 2005 all interest-bearing borrowings were initially recognised
at cost being fair value less attributable transaction costs. Transaction costs
were amortised over the expected life of the relevant borrowing.
From 1 March 2005 interest-bearing borrowings continue to be recognised
initially at fair value less attributable transaction costs but subsequently are
measured at amortised cost with any difference between cost and redemption value
being recognised in the income statement over the period of the borrowings on an
effective interest rate basis.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits would be required to settle the obligation.
If the effect of the time value of money is material, provisions are determined
by discounting the expected future cash flows at an appropriate rate.
Pensions and other post-employment benefits
Obligations to the defined contribution pension plans are recognised as an
expense in the income statement as incurred.
The Group operates a number of defined benefit pension schemes that require
contributions to be made to separately administered funds. The Group's net
obligation in respect of defined benefit pension schemes is calculated
separately for each plan by estimating the amount of future benefits that
employees have earned in return for their service in the current and prior
periods. That benefit is discounted to determine its present value, and the fair
value of any plan asset is deducted. The discount rate employed in determining
the present value of the schemes' liabilities is determined by reference to
market yields at the balance sheet date on high quality corporate bonds for a
term consistent with the currency and term of the associated post-employment
benefit obligations.
The net surplus or deficit arising in the Group's defined benefit pension
schemes is shown within either non-current assets or liabilities on the face of
the Group Balance Sheet. The deferred tax impact of pension scheme surpluses and
deficits is disclosed separately within deferred tax assets or liabilities as
appropriate. The Group has elected to avail of the Amendment to IAS 19: Employee
Benefits, to recognise post transition date actuarial gains and losses
immediately in the statement of recognised income and expense even though this
has not yet been endorsed by the EU.
Any increase in the present value of plans' liabilities expected to arise from
employee service during the period is charged to operating profit. The expected
return on the plans' assets and the expected increase during the period in the
present value of the plans' liabilities arising are included in finance costs.
When the benefits of a defined benefit plan are improved, the portion of the
increased benefit relating to past service by employees is recognised as an
expense in the income statement over the periods during which they vest. To the
extent that the benefits vest immediately, the expense is recognised immediately
in the income statement.
Share based payment transactions
Group share schemes allow employees to acquire shares in the company. The fair
value of share entitlements granted is recognised as an employee expense in the
income statement with a corresponding increase in equity. An external valuer
using a trinomial model determines the fair value. Share entitlements granted by
the company are subject to certain non market-based vesting conditions.
Non-market vesting conditions are not taken into account when estimating the
fair value of entitlements as at the grant date. The expense for the share
entitlements shown in the income statement is based on the fair value of the
total number of entitlements expected to vest and is allocated to accounting
periods on a straight line basis over the vesting period. The cumulative charge
to the income statement is only reversed where entitlements do not vest because
all performance conditions have not been met or where an employee in receipt of
share entitlements leaves the Group before the end of the vesting period.
The proceeds received by the company on the vesting of share entitlements are
credited to share capital and share premium when the share entitlements are
exercised.
Tax
Current tax
Current tax expense represents the expected amount to be paid in respect of
taxable income for the current year. Current tax for the current and prior
years, to the extent that it is unpaid, is recognised as a liability in the
balance sheet.
Deferred tax
Deferred tax is recognised as a component of the tax expense in the income
statement except to the extent that it relates to items recognised directly in
equity.
Deferred income tax is provided, using the liability method, on temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred income
tax assets and liabilities are calculated, without discounting, at the tax rates
that are expected to apply to their respective periods of realisation, based on
tax laws enacted or substantively enacted at the balance sheet date.
In accordance with IAS 12 no deferred taxes are recognised in conjunction with
the initial recognition of goodwill and the initial recognition of assets and
liabilities that affect neither accounting nor taxable income. This also
applies to differences relating to investments in subsidiaries to the extent
that the company controls the timing of the reversal and it is probable that
reversal will not occur in the foreseeable future.
Deferred tax liabilities are provided in full. Deferred tax assets are
recognised for deductible temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which they can be offset.
Dividends
Final dividends on ordinary shares are recognised as a liability in the Group
financial statements only after they have been approved at an annual general
meeting of the Company. Interim dividends on ordinary shares are recognised when
they are paid.
Derivative financial instruments
The Group uses derivative financial instruments (principally interest rate swaps
and forward foreign exchange contracts) to hedge its exposure to foreign
exchange and interest rate risks arising from operational and financing
activities.
Up to 28 February 2005 gains and losses on derivative financial instruments used
to hedge foreign exchange and interest rate exposures arising on future planned
transactions were recognised in the income statement when the hedged
transactions occur.
With effect from 1 March 2005 derivative financial instruments are recognised
initially at cost and thereafter are stated at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in the income statement.
However, where derivatives qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the item being hedged (see
hedging accounting policy).
The fair value of interest rate swaps is the estimated amount that the Group
would receive or pay to terminate the swap at the balance sheet date, taking
into the account current interest and currency exchange rates and the current
creditworthiness of the swap counterparties. The fair value of forward exchange
contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles and equates to the quoted market price
at the balance sheet date, being the present value of the quoted forward price.
Hedge accounting
For the purposes of hedge accounting, derivative financial instruments are
classified either as fair value hedges (which entail hedging the exposure to
movements in the fair value of a recognised asset, liability or firm commitment)
or cash flow hedges (which hedge exposure to fluctuations in future cash flows
derived from a particular risk associated with a recognised asset, liability, a
firm commitment or a highly probable forecast transaction).
In the case of fair value hedges any gain or loss stemming from the
re-measurement of the hedging instrument to fair value is reported in the income
statement and reflected in the carrying value of the hedged item on the balance
sheet.
Where a derivative financial instrument is designated as a hedge of the
variability in cash flows of a recognised liability, a firm commitment or a
highly probable forecasted transaction, the effective part of any gain or loss
on the derivative financial instrument is recognised as a separate component of
equity with the ineffective portion being reported in the income statement. When
a firm commitment or forecast transaction results in the recognition of a
non-financial asset or a non-financial liability, the cumulative gain or loss is
removed from equity and included in the initial measurement of the asset or
liability. Otherwise, the associated gains or losses that had previously been
recognised in equity are transferred to the income statement contemporaneously
with the materialisation of the hedged transaction. Any gain or loss arising in
respect of changes in the time value of the derivative financial instrument is
excluded from the measurement of hedge effectiveness and is recognised
immediately in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for special hedge accounting. At
that point in time, any cumulative gain or loss on the hedging instrument
recognised as a separate component of equity is kept in equity until the
forecast transaction occurs with future changes in fair value recognised in the
income statement. If a hedged transaction is no longer anticipated to occur, the
net cumulative gain or loss recognised in equity is transferred to the income
statement in the period.
Research and development
Expenditure on research that is not related to specific product development is
recognised in the income statement as incurred.
Expenditure on the development of new or substantially improved products or
processes is capitalised if the product or process is technically feasible and
commercially viable.
7. Independent auditors' report to the Directors of C&C Group plc on its
consolidated preliminary International Financial Reporting Standards ('IFRS')
financial information
In accordance with the terms of our engagement letter, we have audited the
accompanying consolidated preliminary IFRS balance sheet of the Company and its
subsidiaries ('the Group') as at 1 March 2004 and 28 February 2005, the related
consolidated preliminary IFRS income statement for the year ended 28 February
2005 and related basis of preparation, accounting policies and other notes as
set out on pages 25 to 43 ('the preliminary IFRS financial information').
Included with the preliminary IFRS financial information set out on pages 25 to
43 are the consolidated preliminary balance sheet as at 31 August 2004 and the
related consolidated preliminary income statement for the six-month period then
ended ('the preliminary IFRS interim financial information'). We have not
audited this preliminary IFRS interim financial information and therefore it is
not covered by this opinion.
Respective responsibilities of Directors and KPMG
The directors of the Company have accepted responsibility for the preparation of
the preliminary IFRS financial information which has been prepared as part of
the Group's conversion to IFRS.
As part of its conversion to IFRS, the Group has prepared the preliminary IFRS
financial information for the year ended 28 February 2005 to establish the
financial position and results of operations of the Group necessary to provide
the comparative financial information expected to be included in the Group's
first complete set of IFRS consolidated financial statements as at 28 February
2006. The preliminary IFRS financial information does not include comparative
financial information for the prior period. As explained in the basis of
preparation note on page 20, this preliminary IFRS financial information has
been prepared on the basis of the recognition and measurement criteria of IFRS
in issue that either are endorsed by the European Union ("EU") and effective (or
available for early adoption) at 28 February 2006 or are expected to be endorsed
and effective (or available for early adoption) at 28 February 2006. 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 IFRS endorsed for use by the EU.
This is because, as disclosed in the basis of preparation, the directors have
anticipated that a standard, which has yet to be formally endorsed for use in
the EU, will be so endorsed in time to be applicable to the next annual
financial statements. Similarly changes may arise from further interpretations
issued between now and the year end date which may result in the directors
revising the accounting policies applied. The directors have applied IFRS in
accordance with IFRS 1: First-time Adoption of International Financial Reporting
Standards and have taken advantage of certain exemptions available in that
standard and, in particular, IAS 32: Financial Instruments: Disclosure and
Presentation and IAS 39: Financial Instruments: Recognition and Measurement have
not been applied to the preliminary IFRS financial information relating to the
year ended 28 February 2005.
Our responsibilities, as independent auditors, are established in Ireland by the
Auditing Practices Board, our profession's ethical guidance and the terms of our
engagement.
Under the terms of engagement we are required to report to you our opinion as to
whether the preliminary IFRS financial information has been properly prepared,
in all material respects, in accordance with the respective accounting policy
notes to the preliminary IFRS financial information. We also report to you if,
in our opinion, we have not received all the information and explanations we
require for our audit.
We read the other information accompanying the preliminary IFRS financial
information and consider whether it is consistent with the preliminary IFRS
financial information. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary IFRS financial information.
Our report has been prepared for the Company solely in connection with the
Company's conversion to IFRS. Our report was designed to meet the agreed
requirements of the Company determined by the Company's needs at the time. Our
report should not therefore be regarded as suitable to be used or relied on by
any party wishing to acquire rights against us other than the Company for any
purpose or in any context. Any party other than the Company who chooses to rely
on our report (or any part of it) will do so at its own risk. To the fullest
extent permitted by law, KPMG will accept no responsibility or liability in
respect of our report to any other party.
Basis of audit opinion
We conducted our audit having regard to Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the preliminary IFRS
financial information. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the
preliminary IFRS financial information, and of whether the accounting policies
are appropriate to the Group's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the preliminary IFRS
financial information has been prepared in accordance with the basis of
preparation on page 20 and is free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the preliminary IFRS
financial information.
Opinion
In our opinion, the accompanying preliminary IFRS financial information on pages
25 to 43 has been prepared, in all material respects, in accordance with the
basis of preparation and accounting policy notes which describe how IFRS have
been applied under IFRS 1: First-time Adoption of International Financial
Reporting Standards and the assumptions made by the directors of the Company
about the standards and interpretations expected to be effective, and the
policies expected to be adopted, when they prepare the first complete set of
consolidated IFRS financial statements of the Group for the year ended 28
February 2006.
KPMG
Registered Auditors
Date: 10 October 2005
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