Interim Results - Part 2

Centaur Holdings PLC 10 March 2006 10 March 2006 Centaur Holdings plc Adoption of International Financial Reporting Standards Highlights This Statement is intended to explain the effect of the adoption of International Financial Reporting Standards ('IFRS') on the consolidated accounts of Centaur Holdings plc. The Group's first results to be published under IFRS are the interim accounts for the six months ended 31 December 2005 which are also announced today. The key effects on the Group's results arising from adoption of IFRS are highlighted below in respect of the profits reported under UK GAAP for the year ended 30 June 2005: £'000 Profit before tax under UK GAAP 2,616 Goodwill no longer amortised 7,034 Employee benefit charges (447) -------------------------------------------------------------------------------- Profit before tax under IFRS 9,203 ================================================================================ 1. Introduction From 1 July 2005, Centaur Holdings plc ('Centaur') is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the European Union ('EU') and applicable to all listed companies in the EU for financial reporting periods beginning on or after 1 January 2005. The Group's first results to be published under IFRS are for the six months ended 31 December 2005. The comparative information in those financial statements must be restated to IFRS and therefore the Group's transition date for the adoption of IFRS is 1 July 2004. This report is to inform shareholders of the impact on Centaur's financial position and results for 2005 due to the change from reporting under UK Generally Accepted Accounting Principles ('UK GAAP') to IFRS. The information presented in this document sets out the adjustments between the audited UK GAAP prepared statements for the year ended 30 June 2005, the reviewed UK GAAP prepared statements for the six months ended 31 December 2004 and the unaudited IFRS results for the same periods. 2. Summary impact for the year ended 30 June 2005 UK GAAP IFRS (audited) (unaudited) Variance £'000 £'000 £'000 Turnover 72,215 72,215 - EBITDA before exceptional costs 12,202 12,212 10 Profit before tax 2,616 9,203 6,587 (Loss) / profit for the financial year (144) 6,449 6,593 The component adjustments to profit for the year ended 30 June 2005 are as follows: Profit before Tax (Loss) / profit tax before tax £'000 £'000 £'000 UK GAAP (audited) 2,616 (2,760) (144) Amortisation of goodwill 7,034 - 7,034 Share based payments and other employee benefits (447) 6 (441) -------------------------------------------------------------------------------- IFRS (unaudited) 9,203 (2,754) 6,449 ========================================================= 3. Basis of preparation The financial information presented in this document has been prepared on the basis that all relevant International Financial Reporting Standards ('IFRSs'), including interpretations of both the Standing Interpretations Committee and the International Financial Reporting Interpretations Committee ('IFRIC'), issued by the International Accounting Standards Board are effective for Centaur's reporting for the year ended 30 June 2006. As at the date of this announcement IFRS's are subject to ongoing review and endorsement by the European Commission. These potential changes could result in the need to change the basis of accounting or presentation of certain financial information from that presented in this document. A summary of the significant accounting policies expected to be used in the preparation of the 2006 financial statements under IFRS is provided in section 6 of this document. IFRS 1, First Time Adoption of IFRS, outlines how to apply IFRS for the first time. Centaur's transition date is 1 July 2004, and the standard permits certain exemptions from the full requirements of IFRS as at that date. Centaur has taken advantage of the following exemptions or options available at transition; a) Business combinations Centaur has taken the option not to restate business combinations that occurred prior to 1 July 2004 on an IFRS 3, Business Combinations basis. Consequently, goodwill balances relating to Centaur's acquisition of the Centaur Communications Group in March 2004 have been frozen at 1 July 2004. b) Share based payments Centaur has applied IFRS 2, Share-based payments only to equity instruments that were granted after 7 November 2002, and which had not vested before 1 July 2005. The grants and exercise prices of options which create a charge to the income statement are: Award Grant date Number at 30 Exercise price June 2005 Approved and unapproved 09/03/2004 3,438,692 100p Approved and unapproved 29/09/2004 1,540,000 88.5p c) Financial instruments Centaur has chosen not to apply IAS 32 and IAS 39 for the year ended 30 June 2005. The requirements of IAS 32 and IAS 39 will be applied prospectively from 1 July 2005, as permitted by IFRS 1. 4. Principal changes under International Financial Reporting Standards a) Presentation adjustments Section 5 of this report contains reconciliations to assist in understanding the nature and value of the differences between UK GAAP and IFRS. The financial information is in IFRS format and reflects a number of differences in presentation between UK GAAP and IFRS as follows; i) The classification of software that is not an integral part of operating hardware, including website development costs, as an intangible asset separate from property plant and equipment on the balance sheet and the classification of the related depreciation as amortisation. ii) The disclosure of goodwill as separate from intangible assets on the balance sheet. iii) The reclassification of provisions as current or non current liabilities. iv) The classification of dividends as a movement in equity. v) The disclosure of current tax liabilities as separate from creditors falling due within one year. vi) The disclosure of loan notes as separate from creditors falling due within one year. vii) The disclosure of deferred shares as other reserves. viii) The separate disclosure of deferred tax assets and liabilities. b) Share-based payments IFRS 2 requires a charge to be made to the income statement for the cost of providing share options to employees. The expense is calculated as the fair value of the award on the date of the grant, and is recognised over the vesting period of the scheme. A stochastic model has been used to calculate the fair value of options on their grant date. Centaur has applied the provisions of IFRS 2 only to awards made after 7 November 2002, an exemption allowed on transition by IFRS 1. There was no net impact on the balance sheet at 1 July 2004 as a result of adopting IFRS 2. In the six months to 31 December 2004 and in the year to 30 June 2005, the application of IFRS 2 results in pre tax charges to the income statement of £261,000 and £457,000 respectively. The application of IFRS 2 results in a tax credit of £9,000 in the six months to 31 December 2004 and a tax credit of £6,000 in the year to 30 June 2005. 4. Principal changes under International Financial Reporting Standards (continued) c) Business combinations Under UK GAAP, goodwill arising on business combinations is amortised over a period not exceeding 20 years. Under IFRS 3, regular amortisation of goodwill is prohibited. Instead, an annual impairment test is required to support the carrying value of goodwill. This test was carried out at 30 June 2004 and 30 June 2005. No impairment of goodwill was noted at either of these dates. Amortisation of goodwill arising on the acquisition of the Centaur Communications Group in March 2004 ceased on 1 July 2004, resulting in an increase of pre tax profits of £3,555,000 for the six months to 31 December 2004 and £7,034,000 for the year to 30 June 2005. d) Employee benefits Under UK GAAP, no provision is made for annual leave accrued. Under IAS 19, the expected cost of compensated short term absences should be recognised at the time the related service is provided. As a result, on transition, a provision of £441,000 has been recognised. There is a credit of £441,000 for the six months ended 31 December 2004 and a credit of £10,000 for the year ended 30 June 2005. e) Dividends Interim dividends declared are not considered a liability under IFRS until they are paid. Final dividends declared are recognised as a liability under IFRS in the period in which they are approved by the shareholders in general meeting. Centaur has restated its liabilities in respect of dividend payments on transition, in the six months to 31 December 2004 and in the year to 30 June 2005. 5. Reconciliations to International Financial Reporting Standards (i) Consolidated balance sheet at 30 June 2004. UK GAAP Presentation adjustments Employee Dividends IFRS benefits £ 4 (a) 4 (a) 4 (a) 4 (a) 4 (a) 4(d) 4 (e) £ (i) (ii) (iii) (vii) (viii) Assets ---------------------------------------------------------------------------------------------------------- Non-current assets Goodwill - - 138,512 - - - - - 138,512 Intangible assets 138,701 3,433 (138,512) - - - - - 3,622 Property, plant and equipment 5,311 (3,433) - - - - - - 1,878 Investments accounted for using equity method 185 - - - - - - - 185 Deferred tax assets - - - - - 2,107 14 - 2,121 ---------------------------------------------------------------------------------------------------------- 144,197 - - - - 2,107 14 - 146,318 ---------------------------------------------------------------------------------------------------------- Current assets Inventories 1,185 - - - - - - - 1,185 Trade and other receivables 14,771 - - - - (995) - - 13,776 Cash and cash equivalents 9,132 - - - - - - - 9,132 ---------------------------------------------------------------------------------------------------------- 25,088 - - - - (995) - - 24,093 ---------------------------------------------------------------------------------------------------------- Liabilities Current liabilities Trade and other payables (23,426) - - - - - (441) 1,480 (22,387) Provisions - - - (887) - - - - (887) ---------------------------------------------------------------------------------------------------------- (23,426) - - (887) - - (441) 1,480 (23,274) ---------------------------------------------------------------------------------------------------------- Net current assets 1,662 - - (887) - (995) (441) 1,480 819 ---------------------------------------------------------------------------------------------------------- Non-current liabilities Deferred tax liabilities - - - - - (1,112) - - (1,112) Provisions (3,387) - - 887 - - - - (2,500) ---------------------------------------------------------------------------------------------------------- (3,387) - - 887 - (1,112) - - (3,612) ---------------------------------------------------------------------------------------------------------- Net assets 142,472 - - - - - (427) 1,480 143,525 ---------------------------------------------------------------------------------------------------------- Shareholders' equity Ordinary shares 14,879 - - - (80) - - - 14,799 Share premium 127,047 - - - - - - - 127,047 Other reserves 1,486 - - - 80 - - - 1,566 Retained earnings (940) - - - - - (427) 1,480 113 ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 142,472 - - - - - (427) 1,480 143,525 ========================================================================================================== 5. Reconciliations to International Financial Reporting Standards (continued) (ii) Consolidated profit and loss account for the 6 months ended 31 December 2004. UK GAAP Presentation Share-based Business Employee IFRS adjustment payments combinations benefits £ 4 (a) (i) 4 (b) 4 (c) 4 (d) £ Revenue 31,602 - - - - 31,602 Cost of sales (18,317) - - - - (18,317) --------------------------------------------------------------------------------------- Gross Profit 13,285 - - - - 13,285 Distribution costs (1,994) - - - - (1,994) Administrative expenses (14,145) - (261) 3,555 441 (10,410) --------------------------------------------------------------------------------------- EBITDA before exceptional costs 2,406 - - - 441 2,847 Depreciation of property, plant and equipment (1,215) 779 - - - (436) Amortisation of intangibles (3,560) (779) - 3,555 - (784) Share based payments - (261) - - (261) Exceptional administrative costs (485) - - - - (485) --------------------------------------------------------------------------------------- Operating (loss) / profit (2,854) - (261) 3,555 441 881 Interest payable and similar charges (5) - - - - (5) Interest receivable 127 - - - - 127 Share of profit from associate 39 - - - - 39 --------------------------------------------------------------------------------------- (Loss) / profit before tax (2,693) - (261) 3,555 441 1,042 Taxation (414) - 9 - - (405) --------------------------------------------------------------------------------------- (Loss) / profit for the year (3,107) - (252) 3,555 441 637 ======================================================================================= 5. Reconciliations to International Financial Reporting Standards (continued) (iii) Consolidated balance sheet at 31 December 2004. UK GAAP Presentation adjustments Share-based Business Dividends IFRS payments combinations £ 4 (a) 4 (a) 4 (a) 4 (a) 4 (a) 4 (b) 4 (c) 4 (e) £ (i) (ii) (iii) (vii) (viii) Assets Non-current assets Goodwill - - 134,871 - - - - 3,555 - 138,426 Intangible assets 135,049 3,418 (134,871) - - - - - - 3,596 Property, plant and equipment 5,180 (3,418) - - - - - - - 1,762 Investments accounted for using equity method 224 - - - - - - - - 224 Deferred tax assets - - - - - 1,693 56 - - 1,749 ------------------------------------------------------------------------------------------------------------------- 140,453 - - - - 1,693 56 3,555 - 145,757 ------------------------------------------------------------------------------------------------------------------- Current assets Inventories 1,529 - - - - - - - - 1,529 Trade and other receivables 14,790 - - - - (581) - - - 14,209 Cash and cash equivalents 9,167 - - - - - - - 9,167 ------------------------------------------------------------------------------------------------------------------- 25,486 - - - - (581) - - - 24,905 ------------------------------------------------------------------------------------------------------------------- Liabilities Current liabilities Trade and other (24,268) - - - - - - - 740 (23,528) payables Provisions - - - (546) - - - - (546) ------------------------------------------------------------------------------------------------------------------- (24,268) - - (546) - - - - 740 (24,074) ------------------------------------------------------------------------------------------------------------------- Net current assets 1,218 - - (546) - (581) - - 740 831 ------------------------------------------------------------------------------------------------------------------- Non-current liabilities Deferred tax liabilities - - - - - (1,112) - - - (1,112) Provisions (3,046) - - 546 - - - - - (2,500) ------------------------------------------------------------------------------------------------------------------- (3,046) - - 546 - (1,112) - - - (3,612) ------------------------------------------------------------------------------------------------------------------- Net assets 138,625 - - - - - 56 3,555 740 142,976 ------------------------------------------------------------------------------------------------------------------- Shareholders' equity Ordinary shares 14,879 - - - (80) - - - - 14,799 Share premium 127,047 - - - - - - - - 127,047 Other reserves 1,486 - - - 80 - 261 - - 1,827 Retained earnings (4,787) - - - - - (205) 3,555 740 (697) ------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 138,625 - - - - - 56 3,555 740 142,976 =================================================================================================================== 5. Reconciliations to International Financial Reporting Standards (continued) (iv) Consolidated profit and loss account for the year ended 30 June 2005. UK GAAP Presentation Share-based Business Employee IFRS adjustment payments combinations benefits £ 4 (a) (i) 4 (b) 4 (c) 4 (d) £ Revenue 72,215 - - - - 72,215 Cost of sales (39,248) - - - - (39,248) ---------------------------------------------------------------------------------------- Gross Profit 32,967 - - - - 32,967 Distribution costs (4,164) - - - - (4,164) Administrative expenses (26,506) - (457) 7,034 10 (19,919) ---------------------------------------------------------------------------------------- EBITDA before exceptional costs 12,202 - - - 10 12,212 Depreciation of property, plant and equipment (2,368) 1,811 - - - (557) Amortisation of intangibles (7,052) (1,811) - 7,034 - (1,829) Share based payments - - (457) - - (457) Exceptional administrative costs (485) - - - - (485) ---------------------------------------------------------------------------------------- Operating profit 2,297 - (457) 7,034 10 8,884 Interest payable and similar charges (3) - - - - (3) Interest receivable 295 - - - - 295 Share of profit from associates 27 - - - - 27 ---------------------------------------------------------------------------------------- Profit before tax 2,616 - (457) 7,034 10 9,203 Taxation (2,760) - 6 - - (2,754) ---------------------------------------------------------------------------------------- (Loss) / profit for the year (144) - (451) 7,034 10 6,449 ======================================================================================== 5. Reconciliations to International Financial Reporting Standards (continued) (v) Consolidated balance sheet at 30 June 2005. UK GAAP Presentation adjustments Share-based Business Employee Dividends IFRS payments combinations benefits £ 4 (a) 4 (a) 4 (a) 4 (a) 4(a) 4 (b) 4 (c) 4 (d) 4 (e) £ (i) (ii) (v) (vii) (viii) Assets Non-current assets Goodwill - - 131,392 - - - - 7,034 - - 138,426 Intangible assets 132,062 3,406 (131,392) - - - - - - - 4,076 Property, plant and equipment 5,502 (3,406) - - - - - - - - 2,096 Investments accounted for using equity method 212 - - - - - - - - - 212 Deferred tax assets 1,175 74 1,249 ------------------------------------------------------------------------------------------------------------------------ 137,776 - - - - 1,175 74 7,034 - - 146,059 ------------------------------------------------------------------------------------------------------------------------ Current assets Inventories 1,320 - - - - - - - - - 1,320 Trade and other receivables 15,761 - - - - (63) - - - - 15,698 Cash and cash equivalents 12,480 - - - - - - - - - 12,480 ------------------------------------------------------------------------------------------------------------------------ 29,561 - - - - (63) - - - - 29,498 ------------------------------------------------------------------------------------------------------------------------ Liabilities Current liabilities Trade and other (24,621) - - 461 - - - - (431) 1,792 (22,799) payables Current tax liabilities - - - (461) - - - - - - (461) Provisions - - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------ (24,621) - - - - - - - (431) 1,792 (23,260) ------------------------------------------------------------------------------------------------------------------------ Net current assets 4,940 - - - - (63) - - (431) 1,792 6,238 ------------------------------------------------------------------------------------------------------------------------ Non-current liabilities Deferred tax liabilities - - - - - (1,112) - - - - (1,112) Provisions (2,500) - - - - - - - - - (2,500) ------------------------------------------------------------------------------------------------------------------------ (2,500) - - - - (1,112) - - - - (3,612) ------------------------------------------------------------------------------------------------------------------------ Net assets 140,216 - - - - - 74 7,034 (431) 1,792 148,685 ------------------------------------------------------------------------------------------------------------------------ Shareholders' equity Ordinary shares 15,012 - - - (80) - - - - - 14,932 Share premium 287 - - - - - - - - - 287 Other reserves 1,486 - - - 80 - 457 - - - 2,023 Retained earnings 123,431 - - - - - (383) 7,034 (431) 1,792 131,443 ------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 140,216 - - - - - 74 7,034 (431) 1,792 148,685 ======================================================================================================================== 6. Accounting policies expected to be adopted for the year ended 30 June 2006 The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act, 1985 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention. A summary of the more important group accounting policies is set out below. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, events or actions, the actual results may ultimately differ from those estimates. Consolidation The consolidated financial statements incorporate those of Centaur Holdings plc and all its subsidiaries for the years made up to 30 June 2005 and 2006, together with the attributable share of results and reserves of associated undertakings, adjusted where appropriate to conform with Centaur's accounting policies. A subsidiary is an entity controlled by Centaur. Control exists when the Company has the power, directly of indirectly, to govern the financial and operating policies of an entity so as to benefit from its activities. Associates are those entities in which Centaur has significant influence, but not control over the financial and reporting policies. Associates are equity accounted for. Intragroup balances and transactions and any unrealised gains or losses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Revenue recognition Revenue represents sales of advertising space, subscriptions and individual publications and revenue from exhibitions and conferences, exclusive of value added tax. Sales of advertising space are recognised in the period in which publication occurs. Sales of publications are recognised in the period in which the sale is made. Revenue received in advance for exhibitions and conferences is deferred and recognised in the period in which the event takes place. Revenue from subscriptions to publications and online services is deferred and recognised in the profit and loss account on a straight-line basis over the subscription period. Investments Investments in subsidiaries are stated at cost less provision for impairment in value in the Company financial statements. Investments in associates are stated at cost, identifying any goodwill arising. The carrying amount of the investment is adjusted by the Group's share of the results of its associate. Goodwill Where the cost of a business acquisition exceeds the fair values attributable to the separable net assets acquired, the resulting goodwill is capitalised. Goodwill has an indefinite useful life and is tested for impairment annually or where indicators imply that the carrying value is not recoverable. For the purposes of impairment testing, goodwill is allocated to cash generating units and is then tested for impairment at the level of the reportable segments. Cash generating units are considered to be individual magazine titles as each magazine title generates profits and cash flows that are largely independent from other units. On the disposal of a cash generating unit, the attributable amount of goodwill is included in the determination of the profit and loss on disposal. Intangibles (a) Brands and publishing rights Brands and publishing rights are carried at cost less accumulated amortisation. They are amortised on a straight line basis over their useful economic lives of 20 years. (b) Computer Software Computer software that is not integral to the operation of the related hardware is carried at cost less accumulated amortisation. Computer software is amortised on a straight line basis over its useful economic life of between 3-5 years. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation. The cost of property, plant and equipment is the purchase cost together with any incidental costs of acquisition. Depreciation is calculated to write off the cost, less estimated residual value, of assets, on a straight line basis over the expected useful economic lives to the Group over the following periods: Useful economic life Leasehold property 20 years or the length of the lease if shorter Fixtures and fittings 10 years Computer equipment 3 - 5 years Motor Vehicles 4 years Residual values, where applicable are reviewed annually against prevailing market rates at the balance sheet date for equivalent aged assets and depreciation rates adjusted accordingly on a prospective basis. A review of the estimated useful economic life of each asset is carried out annually to ensure depreciation rates are adequate. Impairment of assets Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events indicate that the carrying value may not be recoverable. An impairment loss is recognised to the extent that the carrying value exceeds the higher of the asset's fair value less cost to sell and its value in use. An assets value in use is calculated by discounting an estimate of future cash flows by Centaur's pre tax weighted average cost of capital. Taxation including deferred tax The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further includes items that are never taxable or deductible. Centaur's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax accounted for in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements, and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Inventories Inventories are stated at the lower of cost and net realisable value. For raw materials, cost is the purchase price. Work in progress comprises costs incurred relating to publications, exhibitions and conferences prior to the publication date or the date of the event. For goods for resale, cost is the purchase price, or, in the case of publications, the direct cost of production. Net realisable value is based on estimated future selling price less all the further costs to completion and all relevant marketing, selling and distribution costs. Inventories are reviewed regularly and full provision is made for obsolete, slow moving or defective stock. Leases All leases held by Centaur are considered to be operating leases. Rental charges on operating leases are charged to the profit and loss account on a straight line basis over the life of the lease. Employee benefit cost Centaur contributes to a defined contribution pension scheme for the benefit of employees. The assets of the scheme are held separately from those of the group in an independently administered fund. Contributions to defined contribution schemes are charged to the profit and loss account at the time that the related service is provided. The expected cost of compensated holidays is recognised at the time that the related service is provided. Share-based payment Centaur has equity settled share based payment compensation plans. The fair value of equity settled share based payments is measured at the date of the grant using the stochastic option pricing model. The fair value of the estimate of the number of options that are expected to be exercised is expensed on a straight line basis over the vesting period. In accordance with the transition provisions of IFRS 1, Centaur has applied this fair value calculation to share options that were made after 7 November 2002. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, when it is probable that an outflow of resources will be required to settle the obligation and where a reliable estimate can be made of the amount of the obligation. Segmental reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments Substantially all of Centaur's net assets are located and all turnover and profit are generated in the United Kingdom and therefore the primary reporting format is by business segment based on the Group's management and internal reporting structure. Financial instruments • 2005 financial statements Within the 2005 financial statements, Centaur has applied UK GAAP in accounting for financial instruments. Financial assets and financial liabilities are recognised when Centaur becomes a party to the contractual provisions of the relevant instrument and derecognised when it ceases to be a party to such provisions. Financial instruments are used by Centaur to hedge interest rate and foreign currency exposure where these circumstances arise. Discounts and premiums are charged or credited to the income statement over the life of the asset or liability to which they relate. Centaur does not hold or issue derivative financial instruments for trading purposes. Income and expenditure arising on financial instruments is recognised on the accruals basis and credited or charged to the income statement in the financial period to which it relates. • 2006 financial statements Within the 2006 financial statements, Centaur has applied IAS 32, Financial Instruments: Disclosure and Presentation, and IAS 39, Financial Instruments: Recognition and Measurement, as outlined below. Derivative financial instruments Derivative financial instruments are used by Centaur to hedge interest rate and foreign currency exposure where these circumstances arise. Discounts and premiums are charged or credited to the income statement over the life of the asset or liability to which they relate. Centaur does not hold or issue derivative financial instruments for trading purposes. Derivative financial assets and liabilities are stated at fair value. Changes to fair value are recognised directly in equity, to the extent that they are effective, with the ineffective portion being recognised in the income statement in the financial period to which it relates. Trade receivables Trade receivables do not carry any interest and are stated at their fair value measured on an amortised cost basis, as reduced by appropriate allowances for estimated irrecoverable amounts incurred up the balance sheet date. Trade payables Trade payables are non interest bearing and are stated at their fair value. Loan notes Loan notes are recorded at the proceeds received, net of issue costs. The carrying value of loan notes includes accrued interest payable. Finance charges are accounted for on an accruals basis and charged to the income statement using the effective interest method. Cash and cash equivalents Cash and cash equivalents includes cash in hand and deposits repayable on demand or maturing within three months of the balance sheet date, less any overdrafts repayable on demand. Share capital and share premium Ordinary shares are classified as equity. The excess of consideration received in respect of shares issued over the nominal value of those shares is held in the share premium account. Centaur also holds a non-distributable reserve representing the fair value of share options. Dividends are recognised as a liability in the period in which they are paid or approved by the shareholders in general meeting. Significant judgements All significant judgements relating to accounting policies are disclosed in the detailed notes to the accounts. Key assumptions and estimates No assumptions regarding the future are made during the preparation of the financial statements which have the ability to cause material adjustment to the balance sheet during the next financial year. This information is provided by RNS The company news service from the London Stock Exchange

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