IFRS Restatement
Colefax Group PLC
24 January 2008
COLEFAX GROUP PLC
('Colefax' or 'the Group')
Statement on the Impact of Adoption of International Financial Reporting
Standards
Colefax Group Plc currently prepares its financial statements in accordance with
UK Generally Accepted Accounting Principles (UK GAAP).
From 1st May 2007 Colefax Group Plc will be required to report its results in
accordance with International Accounting Standards and International Financial
Reporting Standards (collectively 'IFRS') as adopted by the European Union (EU).
The Group's first accounting period under IFRS will be for the financial year
ended 30th April 2008, and its first interim results will be for the six months
ended 31st October 2007. The transition date to IFRS for the Group is 1st May
2006 (the Transition Date), being the start of the period of comparative
information.
This statement presents and explains how the Group's financial performance and
position under IFRS differs from that reported under UK GAAP. Restated
information is presented for:
• The consolidated balance sheet as at 1st May 2006 (the transition date)
• The consolidated income statement for the six month period ending 31st
October 2006
• The consolidated balance sheet as at 31st October 2006
• The consolidated income statement for the year ended 30th April 2007
• The consolidated balance sheet as at 30th April 2007
The adoption of IFRS is a change to the accounting standards used by the Group
and does not affect the Group's strategy, underlying business performance or its
cash flows.
A full restatement of these policies and reconciliation of the resultant changes
will be disclosed in the financial statements for the year ended 30th April
2008.
The financial information presented in this document is unaudited.
The effect of the adoption of IFRS on the financial assets of the Group is
minimal as can be seen from the table below:
Six months to 31 October Year to 30 April 2007
2006
UK GAAP IFRS UK GAAP IFRS
£'000 £'000 £'000 £'000
-----------------------------------------------------------------------------
Profit from operations 2,493 2,453 5,946 5,842
Profit before taxation 2,536 2,477 5,926 5,806
Profit for the year 1,661 1,626 3,971 3,899
Net assets 15,504 15,107 15,691 15,269
BASIS OF PREPARATION
The key differences between UK GAAP and IFRS affecting the Group's accounting
policies are set out below.
It is important to note that the IFRS position as stated is the Group's
interpretation based on the financial reporting standards currently in issue and
changes may arise as new accounting pronouncements are developed and issued.
Emerging industry consensus on the practical application of IFRS and further
technical opinions may also result in amendments to the current views contained
in this statement. As a result of this, the Group's first IFRS financial
statements may be prepared on a different basis to that presented herein.
DIFFERENCES BETWEEN UK GAAP AND IFRS
The following represent the differences relevant to the Group of moving from UK
GAAP to IFRS. Their financial effect on the results is set out in the Appendix.
(a) Employee Benefits - Short-term benefits (IAS 19)
IAS 19 'Employee Benefits' requires holiday pay to be accrued recognising the
employee benefits to be paid in exchange for that service during the accounting
period. This results in the recognition of a provision of £105,000 and deferred
taxation of £31,000 on transition to IFRS and a reduction in pre-tax profit of
£10,000 for the year ended 30th April 2007.
Net assets at 1st May 2006 are reduced by £74,000, at 31st of October 2006 are
reduced by £73,000 and at 30th April 2007 are reduced by £76,000.
(b) Employee Benefits - Post-employment benefits (IAS 19)
IAS 19 'Employee Benefits' requires retirement benefits to be accrued
recognising the employee benefits to be paid on retirement. This results in the
recognition of a provision of £149,000 and deferred taxation of £52,000 on
transition to IFRS and an increase in pre-tax profit of £2,000 in the year ended
30th April 2007.
Net assets at 1st May 2006 are reduced by £97,000, at 31st October 2006 are
reduced by £94,000 and at 30th April 2007 are reduced by £94,000.
(c) Leases (IAS 17)
IAS 17 'Leases' requires operating lease payments to be recognised as an expense
on a straight-line basis over the full length of the lease. This results in the
recognition of a provision of £346,000 and deferred taxation of £141,000 on
transition to IFRS and a reduction of £59,000 in pre-tax profit in the six
months ending 31st October 2006 and reduction of £112,000 for the year ended
30th April 2007.
Net assets at 1st May 2006 are reduced by £205,000, at 31st October 2006 are
reduced by £230,000 and at 30th April 2007 are reduced by £252,000.
(d) Deferred Tax Asset (IAS 12)
Unlike FRS 17 'Retirement Benefits', IAS 19 'Employee Benefits' requires the
pension deficit to be shown gross under long term liabilities rather than net of
deferred tax. We will continue to recognise a deferred tax asset of £93,000 at
1st May 2006 and 31st October 2006 and £83,000 at 30th April 2007 but it will
now be reported within current deferred tax assets.
(e) Foreign Exchange Reserve (IAS 21)
IAS 21 'The Effects of Changes in Foreign Exchange Rates' requires the exchange
differences arising on consolidation on the translation of overseas subsidiaries
to be recognised as a separate equity reserve. This results in an increase in
the foreign exchange reserve of £392,000 at 1st May 2006, a reduction in the
foreign exchange reserve of £370,000 at 31st October 2006 and a reduction in the
foreign exchange reserve of £539,000 at 30th April 2007.
(f) Reclass of profit/loss on disposal of property, plant and equipment (FRS 3)
FRS 3 'Reporting Financial Performance' requires that profit or loss on disposal
of property, plant and equipment be reported as part of the profit from
operations. This results in an increase in profit from operations of £19,000 at
31st October 2006 and £16,000 at 30th April 2007.
APPENDIX I
Reconciliation of Group Balance Sheet at 1st May 2006
Short-term Long-term Lease Deferred Foreign
employee employee payments tax a exchange
benefits benefits sset reserve
UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRS
Note (a) (b) (c) (d) (e)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Property, plant and
equipment 5,403 - - - - - 5,403
Current assets:
Inventories and
contracts in progress 10,942 - - - - - 10,942
Trade and other
receivables 11,498 31 52 141 93 - 11,815
Cash and cash
equivalents 2,347 - - - - - 2,347
------------------------------------------------------------------
24,787 31 52 141 93 - 25,104
Trade and other
payables: amounts
falling due within one
year 14,493 105 149 346 - - 15,093
------------------------------------------------------------------
Net current assets 10,294 (74) (97) (205) 93 - 10,011
------------------------------------------------------------------
Total assets less
current liabilities 15,697 (74) (97) (205) 93 - 15,414
Non-current
liabilities:
Deferred taxation 57 - - - - - 57
Pension liability 134 - - - 93 - 227
------------------------------------------------------------------
191 - - - 93 - 284
==================================================================
Net assets 15,506 (74) (97) (205) - - 15,130
==================================================================
Capital and reserves:
Called up share
capital 1,709 - - - - - 1,709
Share premium account 11,087 - - - - - 11,087
Capital redemption
reserve 1,157 - - - - - 1,157
ESOP share reserve (287) - - - - - (287)
ESOP capital reserve 228 - - - - - 228
Foreign exchange
reserve - - - - - 392 392
Profit and loss
account 1,612 (74) (97) (205) - (392) 844
------------------------------------------------------------------
Total equity 15,506 (74) (97) (205) - - 15,130
==================================================================
Total equity reported Note
under UK GAAP 15,506
Holiday pay accrual (a) (74)
Retirement benefits (b)
accrual (97)
Straight-line lease (c)
adjustment (205)
--------
Total adjustment to
equity (376)
--------
Total equity reported
under IFRS 15,130
========
APPENDIX II
Reconciliation of Group Income Statement for the six months ended 31st October
2006
Lease Reclass
payments profit on
disposal of
property,
plant &
equipment
UK GAAP IAS 17 FRS 3 IFRS
Note (c) (f)
£'000 £'000 £'000s £'000
Revenue 33,764 - - 33,764
Cost of sales 14,870 - - 14,870
-----------------------------------------------
Gross profit 18,894 - - 18,894
Operating expenses 16,401 59 (19) 16,441
-----------------------------------------------
Profit from operations 2,493 (59) 19 2,453
Profit/loss on disposal
of property, plant and
equipment 19 - (19) -
-----------------------------------------------
Profit on ordinary
activities before
interest and taxation 2,512 (59) - 2,453
Finance income 24 - - 24
-----------------------------------------------
Profit on ordinary
activities before
taxation 2,536 (59) - 2,477
Tax on profit on ordinary
activities 875 (24) - 851
-----------------------------------------------
Profit for the period 1,661 (35) - 1,626
===============================================
Profit reported under UK Note
GAAP 1,661
Straight-line lease (c)
adjustment (35)
--------
Profit reported under
IFRS 1,626
========
Basic earnings per share 10.31p 10.09p
Diluted earnings per
share 9.95p 9.74p
APPENDIX III
Reconciliation of Group Balance Sheet at 31st October 2006
Short-term Long-term Lease Deferred Foreign
employee employee payments tax exchange
benefits benefits asset reserve
UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRS
Note (a) (b) (c) (d) (e)
£'000 £'000 £'000 £'000 £'000 £'000s £'000
Non-current
assets:
Property, plant
and equipment 5,402 - - - - - 5,402
Current assets:
Inventories and
contracts in
progress 11,878 - - - - - 11,878
Trade and other
receivables 10,288 31 50 158 93 - 10,620
Cash and cash
equivalents 4,366 - - - - 4,366
---------------------------------------------------------------
26,532 31 50 158 93 - 26,864
Trade and other
payables:
amounts falling
due within one
year 16,263 104 144 388 - - 16,899
---------------------------------------------------------------
Net current
assets 10,269 (73) (94) (230) 93 - 9,965
---------------------------------------------------------------
Total assets
less current
liabilities 15,671 (73) (94) (230) 93 - 15,367
Provision for
liabilities:
Deferred
taxation 33 - - - - - 33
Pension
liability 134 - - - 93 - 227
---------------------------------------------------------------
167 - - - 93 - 260
---------------------------------------------------------------
Net assets 15,504 (73) (94) (230) - - 15,107
===============================================================
Capital and
reserves:
Called up share
capital 1,664 - - - - - 1,664
Share premium
account 11,087 - - - - - 11,087
Capital
redemption
reserve 1,202 - - - - - 1,202
ESOP share
reserve (287) - - - - - (287)
ESOP capital
reserve 228 - - - - - 228
Foreign exchange
reserve - 1 3 10 - (384) (370)
Profit and loss
account 1,610 (74) (97) (240) - 384 1,583
---------------------------------------------------------------
Total equity 15,504 (73) (94) (230) - 15,107
===============================================================
Total equity reported Note
under IFRS 15,504
Holiday pay (a)
accrual (73)
Retirement benefits (b)
accrual (94)
Straight-line lease (c)
adjustment (230)
-------
Total adjustment to
equity (397)
-------
Total equity reported
under IFRS 15,107
=======
APPENDIX IV
Reconciliation of Group Income Statement for the year ended 30th April 2007
Short-term Long-term Lease Reclass
employee employee payments profit in
benefits benefits disposal
of
property,
plant &
equipment
UK GAAP IAS 19 IAS 19 IAS 17 FRS 3 IFRS
Note (a) (b) (c) (f)
£'000 £'000 £'000 £'000 £'000s £'000
Revenue 71,013 - - - - 71,013
Cost of sales 31,602 - - - - 31,602
----------------------------------------------------------
Gross profit 39,411 - - - - 39,411
Operating expenses 33,465 10 (2) 112 (16) 33,569
----------------------------------------------------------
Profit from
operations 5,946 (10) 2 (112) 16 5,842
Profit/loss on
disposal of
property, plant
and equipment 16 - - - (16) -
----------------------------------------------------------
Profit on ordinary
activities before
interest and
taxation 5,962 (10) 2 (112) - 5,842
Finance charge (36) - - - - (36)
----------------------------------------------------------
Profit on ordinary
activities before
taxation 5,926 (10) 2 (112) - 5,806
Tax on profit on
ordinary
activities 1,955 (4) 1 (45) - 1,907
----------------------------------------------------------
Profit for the
period 3,971 (6) 1 (67) - 3,899
==========================================================
Profit reported under UK Note
GAAP 3,971
Holiday pay (a)
accrual (6)
Retirement (b)
benefits accrual 1
Straight-line lease (c)
adjustment (67)
-------
Total adjustments
to profit (72)
-------
Profit reported
under IFRS 3,899
=======
Basic earnings per
share 25.3p 24.8p
Diluted earnings
per share 24.3p 23.9p
APPENDIX V
Reconciliation of Group Balance Sheet at 30th April 2007
Short-term Long-term Lease Deferred Foreign
employee employee payments tax exchange
benefits benefits asset reserve
UK GAAP IAS 19 IAS 19 IAS 17 IAS 12 IAS 21 IFRS
Note (a) (b) (c) (d) (e)
£'000 £'000 £'000 £'000 £'000 £'000s £'000
Non-current assets:
Property, plant and
equipment 5,135 - - - - - 5,135
Current assets:
Inventories and
contracts in progress 12,045 - - - - - 12,045
Trade and other
receivables 11,384 33 50 172 83 - 11,722
Cash and cash
equivalents 4,113 - - - - - 4,113
------------------------------------------------------------------
27,542 33 50 172 83 - 27,880
Trade and other
payables: amounts
falling due within one
year 16,831 109 144 424 - - 17,508
------------------------------------------------------------------
Net current assets 10,711 (76) (94) (252) 83 - 10,372
------------------------------------------------------------------
Total assets less
current liabilities 15,846 (76) (94) (252) 83 - 15,507
Provision for
liabilities:
Deferred taxation 35 - - - - - 35
Pension liability 120 - - - 83 - 203
------------------------------------------------------------------
155 - - - 83 - 238
------------------------------------------------------------------
Net assets 15,691 (76) (94) (252) - - 15,269
==================================================================
Capital and reserves:
Called up share
capital 1,565 - - - - - 1,565
Share premium account 11,141 - - - - - 11,141
Capital redemption
reserve 1,308 - - - - - 1,308
ESOP share reserve (157) - - - - - (157)
ESOP capital reserve 508 - - - - - 508
Foreign exchange
reserve - 4 2 20 - (565) (539)
Profit and loss
account 1,326 (80) (96) (272) - 565 1,443
------------------------------------------------------------------
Total equity 15,691 (76) (94) (252) - - 15,269
==================================================================
Total equity reported Note
under UK GAAP 15,691
Holiday pay accrual (a) (76)
Retirement benefits (b)
accrual (94)
Straight-line lease (c)
adjustment (252)
--------
Total adjustment to
equity (422)
--------
Profit reported under
IFRS 15,269
========
Enquiries:
Colefax Group Plc Rob Barker, Finance Director and Company Secretary 020 7318 6000
KBC Peel Hunt David Anderson and Alina Savych 020 7418 8900
Biddicks Katie Tzouliadis 020 7448 1000
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