Interim Results

Macfarlane Group PLC 06 September 2005 6 September 2005 MACFARLANE GROUP RECORDS TRADING PROFIT OF Â£0.2M IN FIRST HALF OF 2005 The Group trading performance improves by Â£2.6 million from a trading loss of Â£2.4 million in 2004 Sales growth of 3.7% from continuing operations in the first six months of 2005 Profit performance broadly in line with expectations for all businesses, with particularly strong improvement in International businesses Sale of Govan property for Â£2.7 million generated gain of Â£1.3 million Net debt reduced to Â£9.1m in the first half of 2005 Expectation to be strongly cash positive from trading activities in second half of 2005 All businesses have the capacity to deliver further performance improvements Archie Hunter, Chairman of Macfarlane Group PLC today said :- 'I am glad to report group trading results for the first half of 2005 in line with the Board's expectations. The recovery continues. The movement in Group trading profit/(loss) is as follows: Trading result Under IFRS Under UK GAAP Â£000 Â£000 Six months to 30 June 2003 (6,982) 2004 (2,352) (2,498) 2005 246 The progress shown is in accord with the Board's plans. Earnings per share in the first six months amounted to 1.32p. The Board is confident that the Group is heading in the right direction. The improving trading position and asset disposals have had the expected positive impact on our cash position. Positive cash flow, from trading plus the proceeds from disposal of the redundant Govan site and the Grantham site in February 2005, reduced bank borrowings by Â£4.0 million in the first half of 2005 and, as a consequence there is a further reduction in net debt as follows: Net debt Â£000 30 June 2003 24,774 2004 17,973 2005 9,063 The Board anticipates significant net cash generation from trading in the second half of 2005. Trading It has been a difficult market for Packaging Distribution in 2005 so far. Reliable measures of the impact of the economic downturn in the markets in which we operate are not easily obtained but certainly an impact there has been. In these circumstances it is heartening to report growth in packaging distribution turnover of 2% over the same period last year and that the majority of our 15 regional distribution centres are showing operating results improvement over the first half of 2004. Some of our RDCs are showing quite exceptional growth and results improvement. They show what can be achieved and demonstrate significant further potential opportunity. We are determined to use our position as market leader to generate additional profitable growth. Trading result comprises profit before tax from continuing operations and loss for the period from discontinued operations less gain on disposal of properties. As reported last year, the Labels business has been experiencing price pressures from both customers and suppliers as well as a shortening of order lead times. Against that background a trading result broadly in line with original expectations and, in particular, a strong order book as we exit the half-year, are encouraging. Management focus continues to be on maintenance of profit margins and pursuit of new business opportunities, particularly in the toiletries, household product and pharmaceutical sectors. Our International operations have performed strongly in the first half of 2005. In the United States, Macfarlane Western Foam has traded ahead of our expectations following a strengthening of the management team. In Hungary our position has been reinforced by the retention of an important customer and trading performance has been ahead of our expectations. Both our UK Packaging Manufacturing and Plastics businesses are performing ahead of the same period last year. International Financial Reporting Statements (IFRS) This half yearly statement is the first compiled under the new IFRS requirements. In the income statement the impact has been to benefit reported results by Â£0.4 million in the six months to 30 June 2005 and by Â£0.2 million in the six months to 30 June 2004. The most significant impact is in the balance sheet through the incorporation of the deficit on the Group's final salary pension scheme amounting to Â£17.6 million, offset by a deferred tax asset of Â£5.3 million, resulting in a net deficit of Â£12.3 million. It is the incorporation of this deficit that gives rise to need for the capital restructuring, put to shareholders at the last AGM. The object of this restructuring is to prevent the pension deficit impacting on the Group's ability to pay dividends from profits to its shareholders. The pension scheme deficit does of course represent an actual liability to the Group. The Board has taken the view that it would be appropriate to take steps to reduce this liability, without adversely affecting the cash needs of the business or the payment of dividends. The Board has therefore agreed to make additional payments to the scheme of Â£0.7 million per annum for three years commencing 2005 to reduce this liability. These additional payments reduce the pension scheme creditor; they are not a charge against profits. Dividends With last year's statement, I reported that as an expression of its confidence and recognising property gains early in 2005, the Board intended to declare a special interim dividend for 2005 of 0.75p per share, subject to completion of the capital restructuring referred to above. The restructuring obtained shareholder approval at the AGM in May and I can now report that the necessary Court Process has been satisfactorily concluded. Accordingly this dividend will be paid on Tuesday 27 September 2005 to those shareholders on the register at Friday 16 September 2005. No further dividend will be declared in respect of 2005 and as to the future, dividends will be determined by the profits we earn and the cash generated. Future prospects The Board's determination was that the Group should return to profitable growth in 2005 and that the scene should be set for further significant profit improvement beyond that. Nothing has changed the Board's expectations in this regard. The recovery in performance is attributable in large part to Peter Atkinson's leadership. The response of his team, some of it quite exceptional, is very much appreciated by the Board.' Further information: Archie S. Hunter Chairman 0141 333 9666 Peter D. Atkinson Chief Executive 0141 333 9666 John Love Finance Director 0141 333 9666 The interim report will be sent to shareholders on 16 September 2005 and be available to members of the public at the Company's Registered Office, 21 Newton Place, Glasgow G3 7PY from 19 September 2005. Trading performance Packaging Distribution Macfarlane's Packaging Distribution business is the leading UK distributor of packaging materials, supplying a wide range of customers through 15 Regional Distribution Centres ('RDCs'). We enable customers to cost effectively package their products through the provision of a comprehensive product range, single source supply, just-in-time delivery and tailored stock management programmes. The results for the Packaging Distribution business in the first half of 2005 have seen year-on-year sales growth of 2%, consistent levels of customer service in excess of 90% as measured by On-Time-In-Full ('OTIF') deliveries and the stabilisation of the customer base. We have also successfully implemented a further series of cost reduction measures, which have reduced the overhead to sales ratio by 2 percentage points in the first half of the year. Our IT system is increasingly being used to streamline transaction processing with both our customer and supplier base. Considerable duplication in the internal supply chain has been eliminated in the year to date, supported by our key suppliers. Staff turnover levels have reduced significantly and are now more in line with the average for service industries. The headcount in the business has stabilised at 410. The priority in the remainder of 2005 is to accelerate the current level of sales momentum, whilst at the same time converting additional opportunities to further reduce the cost base. Labels & Plastics Macfarlane Group's Labels and Plastic injection-moulding businesses operate from locations in the UK, Ireland and Sweden and provide high quality self-adhesive labels and plastic closures primarily for a range of major international customers in the FMCG sector. Both businesses provide innovative solutions with a high design component and strong emphasis on quality and service delivery. The first half of 2005 has seen the Labels business produce a creditable performance despite pressure from customers to reduce prices and delivery times. Management has taken action to reduce costs and increase capacity in order to meet customer requirements and maintain performance. A significant new customer for the ReSeal-It product will provide an opportunity to grow label sales on the Continent. The Plastics business achieved significantly increased volumes primarily due to successfully securing a major new customer. The business reduced its losses significantly, helped by the reduction in raw material prices and control of overheads and was strongly cash generative in the first six months. Further progress is expected in the second half of the year. Packaging Manufacture UK and Overseas Macfarlane's Packaging Manufacturing business currently operates from two UK sites at Grantham and Westbury. The business manufactures a range of custom designed packaging solutions to improve product storage, protection and presentation. Customers benefit from the ability to cost effectively source low volume, custom designed packaging solutions through flexible design and assembly capability. Progress in improving the performance of this business has been achieved in the first half of 2005 and there are more actions planned in the second half to continue this improvement. Our International operations comprise packaging manufacturing and distribution operations in the US and in Hungary, which are strategically positioned to service key customers. The businesses provide tailored packaging solutions to key international customers using Macfarlane design and assembly know-how. These businesses also enhance our relationships with key global strategic suppliers. Our US operations have achieved strong sales growth in the first half of the year, with a number of significant new business wins. The new management team has addressed a number of historic issues and is now achieving good levels of profitability at both US sites. Our operation in Hungary again traded strongly in the first half of 2005, with profits ahead of those achieved last year and a major customer contract retained. Reporting under International Financial Reporting Standards (IFRS) For the first time our results are reported in accordance with International Financial Reporting Standards. Previously the Group reported under UK Generally Accepted Accounting Principles (UK GAAP). This commentary highlights the key changes that have arisen due to the transition from reporting under UK GAAP to reporting under IFRS. The Group's date of transition to IFRS is 1 January 2004, which is the beginning of the comparative period for the 2005 financial year. Therefore the opening balance for IFRS purposes is that reported at 31 December 2003 as amended for changes due to IFRS. This interim financial report is the first to be prepared under IFRS. The comparative figures are presented on the same basis and are therefore restated from those previously reported under UK GAAP. To help understand the impact of the transition, reconciliations have been produced to show the changes made to statements previously reported under UK GAAP in arriving at the equivalent statements under IFRS. The following five reconciliations are included in note 12 to this report. (i) Balance sheet as at 1 January 2004. (ii) Income statement for the year to 31 December 2004. (iii) Balance sheet as at 31 December 2004. (iv) Income statement for the six months to 30 June 2004. (v) Balance sheet as at 30 June 2004. The income statement for the six months ended 30 June 2005 and the balance sheet at that date are reported under IFRS. As they have not previously been reported under UK GAAP, no reconciliation to IFRS is provided. Key accounting policy changes are included within this report. A full set of IFRS accounting policies will be published in the Group's report and accounts for the year to 31 December 2005. 31 December 2004 The net effect of presenting the December 2004 full year financial statements under IFRS rather than UK GAAP is to increase the profit before tax from continuing operations previously reported from Â£1.9 million to Â£2.4 million as set out in the reconciliation in Note 12 (ii). The increase arises from adding back goodwill amortisation of Â£0.9 million offset by charges for share options and increased pension scheme charges of Â£0.4 million. Net assets at 31 December 2004 reduced from Â£38.0 million to Â£26.6 million as set out in the reconciliation in Note 12 (iii). This reduction is a result of absorbing the pension scheme deficit of Â£17.4 million on to the balance sheet with offsets for deferred tax on the pension scheme deficit, adding back goodwill and share option charges of Â£6.0 million. 30 June 2004 The comparative information for June 2004 has also been restated for IFRS, resulting in an increase in the profit before tax from continuing operations previously reported from Â£2.2 million to Â£2.3 million as set out in the reconciliation in Note 12 (iv). The increase arises from adding back goodwill amortisation of Â£0.5 million offset by charges for share options, holiday pay and increased pension scheme charges of Â£0.4 million. Net assets at 30 June 2004 reduced from Â£39.9 million to Â£28.7 million as set out in the reconciliation in Note 12 (v). This reduction is a result of absorbing the pension scheme deficit of Â£16.4 million on to the balance sheet with offsets for deferred tax on the pension scheme deficit, adding back goodwill and share option and holiday pay charges of Â£5.2 million. The changes for both periods have no impact on the cash flows previously reported. Bringing the pension scheme deficit on to the balance sheet eliminated distributable reserves. As a result a capital restructuring process was undertaken, which concluded satisfactorily in September 2005, to have the share premium account and capital redemption reserve cancelled and effectively reinstated as distributable reserves. The effect of the restructuring was to create distributable reserves in the parent company and to prevent any constraint on the Group's ability to pay dividends in future. INDEPENDENT REVIEW REPORT TO MACFARLANE GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2005, which comprises the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 2, the next annual financial statements of the Group will be prepared in accordance with International Financial Reporting Standards as adopted for use in the EU. Accordingly, the interim report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules. The accounting policies are consistent with those that the directors intend to use in the annual financial statements. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2005. Deloitte & Touche LLP Chartered Accountants Glasgow 6 September 2005 MACFARLANE GROUP PLC CONSOLIDATED INCOME STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2005 Six months to Six months to Year to 31 30 June 2005 30 June December 2004 2004 (As restated (As restated for IFRS) for IFRS) Note Â£000 Â£000 Â£000 Continuing operations Revenue 63,941 61,653 126,075 Cost of sales (42,520) (40,999) (84,237) --------- -------- --------- Gross profit 21,421 20,654 41,838 Distribution expenses (3,174) (3,524) (6,927) Administrative expenses (17,454) (17,770) (34,758) Other operating income 47 5 73 --------- -------- --------- Profit/(loss) before gain on disposal of properties 840 (635) 226 Gain on disposal of properties 3 1,335 3,845 3,845 --------- -------- --------- Profit from operations 2,175 3,210 4,071 Investment income 22 29 94 Finance costs 4 (616) (922) (1,772) --------- -------- --------- Profit before tax 1,581 2,317 2,393 Tax 5 (96) 5 26 --------- -------- --------- Profit for the period from continuing operations 8 1,485 2,322 2,419 Discontinued operations 7 Loss for the period from discontinued operations - (824) (1,255) Loss on disposal of discontinued operations - - (1,400) --------- -------- --------- Profit/(loss) for the period 8 1,485 1,498 (236) ========= ======== ========= Earnings/(loss) per ordinary share of 25p 8 From continuing operations Basic 1.32p 2.06p 2.15p ========= ======== ========= Diluted 1.31p 2.06p 2.15p ========= ======== ========= From continuing and discontinued operations Basic 1.32p 1.33p (0.21p) ========= ======== ========= Diluted 1.31p 1.33p (0.21p) ========= ======== ========= MACFARLANE GROUP PLC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) SIX MONTHS ENDED 30 JUNE 2005 Six months to Six months to Year to 31 30 June 2005 30 June December 2004 2004 (As restated (As restated for IFRS) for IFRS) Note Â£000 Â£000 Â£000 Exchange difference on translation of foreign operations (341) (472) (180) Actuarial (losses)/gains on defined benefit pension schemes 10 (150) 1,128 222 Tax on items taken directly to equity 45 (338) (67) --------- -------- --------- Net (loss)/profit recognised directly in equity (446) 318 (25) Profit/(loss) for the period 1,485 1,498 (236) --------- -------- --------- Total recognised income and expense for the period 1,039 1,816 (261) ========= ======== ========= MACFARLANE GROUP PLC CONSOLIDATED BALANCE SHEET AT 30 JUNE 2005 (UNAUDITED) As at 31 As at As at December 30 June 30 June 2004 2005 2004 (As restated (As restated for IFRS) for IFRS) Non-current assets Note Â£000 Â£000 Â£000 Goodwill 17,054 17,054 17,054 Property, plant and equipment 15,943 18,699 17,601 Investment property 1,701 1,701 1,701 Other receivables 867 3,463 2,242 Deferred tax assets 10 5,272 4,905 5,227 --------- --------- -------- Total non-current assets 40,837 45,822 43,825 --------- --------- -------- Current assets Inventories 8,407 9,850 8,689 Trade and other receivables 29,205 30,433 28,611 Cash and cash equivalents 1,798 1,951 2,018 --------- --------- -------- Total current assets 39,410 42,234 39,318 Non current assets classified as held for sale - 3,580 3,580 --------- --------- -------- 39,410 45,814 42,898 --------- --------- -------- --------- --------- -------- Total assets 80,247 91,636 86,723 ========= ========= ======== Current liabilities Trade and other payables 23,266 26,441 26,777 Tax liabilities 653 0 595 Obligations under finance leases 497 446 479 Bank overdrafts and loans 10,244 19,042 14,226 --------- --------- -------- Total current liabilities 34,660 45,929 42,077 --------- --------- -------- Net current assets/(liabilities) 4,750 (3,695) (2,759) --------- --------- -------- Non current liabilities Retirement benefit obligations 10 17,574 16,350 17,424 Deferred tax liabilities 213 203 214 Obligations under finance leases 120 436 367 --------- --------- -------- Total non-current liabilities 17,907 16,989 18,005 --------- --------- -------- --------- --------- -------- Total liabilities 52,567 62,918 60,082 ========= ========= ======== --------- --------- -------- Net assets 27,680 28,718 26,641 ========= ========= ======== Equity Share capital 28,755 28,755 28,755 Capital redemption reserve 2,952 2,952 2,952 Share premium 7,547 7,547 7,547 Revaluation reserve 274 275 274 Own shares held by employee share trust (1,406) (1,406) (1,406) Translation reserve (521) (472) (180) Retained earnings (9,921) (8,933) (11,301) --------- --------- -------- Total equity 11 27,680 28,718 26,641 ========= ========= ======== MACFARLANE GROUP PLC CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2005 Six months to Six months to Year to 31 30 June 30 June December Note 2005 2004 2004 Â£000 Â£000 Â£000 Net cash from operating activities 9 (1,090) (2,933) 2,170 -------- --------- --------- Investing activities Interest received 13 39 93 Proceeds on disposal of property, plant and equipment 5,122 4,870 6,563 Purchases of property, plant and equipment (54) (2,194) (3,925) -------- --------- --------- Net cash from investing activities 5,081 2,715 2,731 -------- --------- --------- Financing activities Dividends paid - (844) (844) Repayments of obligations under finance leases (229) (233) (469) (Decrease)/inc rease in bank overdrafts (3,982) 1,220 (3,596) -------- --------- --------- Net cash (used in)/from financing activities (4,211) 143 (4,909) -------- --------- --------- Net decrease in cash and cash equivalents (220) (75) (8) Cash and cash equivalents at beginning of period 2,018 2,026 2,026 -------- --------- --------- Cash and cash equivalents at end of period 1,798 1,951 2,018 ======== ========= ========= MACFARLANE GROUP PLC SIX MONTHS ENDED 30 JUNE 2005 NOTES TO THE CONSOLIDATED ACCOUNTS (UNAUDITED) 1. General information The information for the year ended 31 December 2004 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified pursuant to Section 235 of the Companies Act 1985 and did not contain a statement under sub-section 237 of that Act. 2. Summary of accounting policies The following accounting policies have been applied consistently for items which are considered to be material in relation to the financial statements. (a) Basis of preparation These interim financial statements for the six months ended 30 June 2005 have been prepared in accordance with International Financial Reporting Standards (IFRS) for the first time, and are covered by IFRS1, 'First-time Adoption of IFRS' as they are part of the period covered by the group's first IFRS financial statements for the year ending 31 December 2005. These interim financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective, or issued and early adopted at the time of preparing these statements. The IFRS standards and IFRIC interpretations that will be applicable at 31 December 2005, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. The policies set out below have been consistently applied to all the periods presented, and comparative figures in respect of 2004 have been restated to reflect IFRS adjustments. Disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS for the comparative prior period are given in note 12. The Group has opted not to prepare the Interim Financial Information under IAS 34, 'Interim Financial Reporting'. The interim financial statements have been prepared on the historical cost basis as modified by the revaluation of certain group properties. (b) Application of IFRS 1 The Group's financial statements for the year ended 31 December 2005 will be the first financial statements to be prepared under IFRS. These interim financial statements have been prepared as disclosed in this note including the options set out in IFRS 1. Under the first time adoption provisions set out in IFRS 1, the Group is required to establish its IFRS accounting policies as at 1 January 2005 and apply these retrospectively in the determination of prior period comparatives from 1 January 2004, the date of transition. There are a number of exemptions available to this principle and the most significant to the group are set out below: IFRS 2. 'Share Based Payments' The Group has elected to apply this standard to all share-based awards granted since 7 November 2002 but that had not vested at 1 January 2005. IFRS 3. 'Business Combinations' The Group has elected not to restate business combinations prior to the date of transition. IAS 16. 'Property, Plant & Equipment' The Group has elected to retain the existing base cost of its property, plant and equipment and not to revalue to fair value. IAS 19. 'Employee Benefits' The Group has elected to recognise all cumulative actuarial gains and losses in relation to the employee benefit schemes at the date of transition. In subsequent periods all actuarial gains and losses will be recognised in full in the period in which they occur in the statement of recognised income and expense. IAS 21. 'The Effects of Changes in Foreign Exchange Rates' The Group has elected to deem that cumulative exchange differences are nil at the date of transition. (c) Basis of consolidation The consolidated income statement and balance sheet include the financial statements of the parent company and all its subsidiaries (all of which are wholly owned) made up to the end of the financial period. Transactions between group companies are eliminated on consolidation. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or disposal, as appropriate. (d) Goodwill Goodwill, representing the excess of the cost of acquisition over the net fair values of the indentifiable assets and liabilities of the acquired subsidiary, was written off to reserves in respect of acquisitions up to 31 December 1997. From 1 January 1998, goodwill is initially recognised as an non-current asset at amortised carrying value under GAAP at the transition date. Goodwill is allocated to cash generating units for the purpose of impairment testing. The carrying value of goodwill is tested annually for impairment and subsequently carried at carrying value at the transition date less any accumulated impairment losses. The consolidated profit or loss on disposal of a subsidiary is the difference between the net proceeds of sale and the Group's share of the subsidiary's net assets together with any attributable goodwill originally written off on acquisition or the carrying value of any goodwill at the date of disposal. (e) Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. (f) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided to third parties in the normal course of business, net of discounts, VAT and other sales related taxes. Sales of goods are recognised when goods are delivered and title has passed. (g) Leasing Leases are classed as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. The cost of assets held under finance leases is included in tangible assets and depreciation provided in accordance with the Group's accounting policy for the class of asset concerned. Interest costs are charged over the lease term and future obligations included in creditors. (h) Foreign currencies The financial statements of each subsidiary are presented in the currency of the primary economic environment in which the business operates (its functional currency). For the purpose of the Group financial statements, the results and the financial position of each business are expressed in sterling, being the Group's functional and presentation currency. Exchange differences arising on the settlement and retranslation of monetary items on an ongoing basis are included in the profit or loss for the period. For the purposes of preparing the Group's financial statements, the assets and liabilities denominated in foreign currencies and financial statements of foreign subsidiaries are translated into sterling at the rates of exchange prevailing on the balance sheet date. Exchange differences arising in the consolidated accounts on the retranslation at closing rates of the Group's net investments in foreign subsidiary companies and on foreign currency borrowings to the extent that they hedge the Group's investment in such operations are recorded as movements on the Group's translation reserve and reported in the statement of recognised income and expense. Such translation differences are recognised in the profit or loss in the period in which the foreign business is disposed of. (i) Retirement benefit costs Payments made to defined contribution retirement benefit schemes are charged as an expense as they fall due. For defined benefit retirement benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out triennially and updated at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur in the statement of recognised income and expense. Past service cost is recognised immediately to the extent that benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of the scheme assets. The obligations are measured on an actuarial basis and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. (j) Share-based payments The Group has applied the requirements of IFRS2 'Share-Based Payments' and in accordance with the transitional provisions IFRS2 has been applied to all grants of equity instruments after 7 November 2002. Equity settled share based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share based payments is expensed as an employee benefits expense on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. The fair value is determined by the use of a binomial model. (k) Taxation 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 net 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 excludes items that are never taxable or deductible. The Group'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 expected to be payable or recoverable on 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. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 in 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. Deferred tax assets and liabilities are not discounted. (l) Property, plant and equipment Property, plant and equipment are stated at cost to the Group except in the case of certain properties, which are stated at valuations by professional valuers. The Group adopted the transitional provisions of FRS 15 in 2002 and has frozen the valuations at modified historic cost. No depreciation is provided on land. Depreciation is charged so as to write off the cost or valuation of the assets, less estimated residual values, by equal annual instalments over their estimated useful lives. The rates of depreciation vary between 2% - 5% per annum on buildings and 7% - 33% per annum on plant, vehicles and fittings. (m) Investment properties Investment properties, which are properties held to earn rentals and/or capital appreciation, are stated at cost at the balance sheet date. (n) Inventories Inventories are consistently valued at the lower of cost and net realisable value. Such cost is determined by average cost and is stated less any provisions required for obsolescence. In the case of work in progress and finished goods, cost comprises direct cost and attributable overheads. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal. (o) Financial instruments (i) Trade receivables do not carry interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. (ii) Interest-bearing bank overdrafts are recorded at the proceeds received, net of direct issue costs. (iii) Trade payables are not interest bearing and are stated at their nominal value. 3. Trading profit/(loss) Six months to Six Months to Year to 31 30 June 30 June December 2004 2005 2004 (As restated (as restated for IFRS) for IFRS) Â£000 Â£000 Â£000 Profit before tax from continuing operations 1,581 2,317 2,393 Loss for the period from discontinued operations - (824) (2,655) Gain on disposal of properties (see below) (1,335) (3,845) (3,845) -------- -------- -------- Trading profit/(loss) 246 (2,352) (4,107) ======== ======== ======== Two properties were sold in February 2005 for a combined consideration of Â£4.6 million. On 4 February 2005, the Group sold its vacant premises at Govan near Glasgow for a consideration after attributable expenses of Â£2.7 million. The disposal gave rise to a gain of Â£1.3 million. On the same date, the Group disposed of a six-bay distribution site in Grantham, with the company, as part of the disposal, taking a lease for the two bays from which its Grantham Distribution business operates. Sale proceeds from the Grantham site of Â£1.9 million after attributable expenses equated to book value. During the first half of 2004, the Group sold its vacant premises in Braehead near Glasgow at a gain of Â£3.8 million. 4. Finance costs Six months to Six Months to Year to 31 30 June 30 June December 2004 2005 2004 (As restated (as restated for IFRS) for IFRS) Â£000 Â£000 Â£000 Interest on bank loans and overdrafts (367) (623) (1,183) Interest on obligations under finance leases (26) (41) (72) Interest cost of pension scheme liabilities (1,371) (1,367) (2,734) -------- -------- -------- Total interest expense (1,764) (2,031) (3,989) Expected return on pension scheme assets 1,148 1,109 2,217 -------- -------- -------- (616) (922) (1,772) ======== ======== ======== 5. Taxation Six months to Six Months to Year to 31 30 June 30 June December 2004 2005 2004 (As restated (as restated for IFRS) for IFRS) Current tax Â£000 Â£000 Â£000 UK corporation tax Overseas taxation (96) (45) (99) Prior year - - 24 -------- -------- -------- Current tax (96) (45) (75) Deferred tax - 50 101 -------- -------- -------- Total (96) 5 26 ======== ======== ======== Corporation tax has been provided for the period to 30 June 2005, reflecting the expected tax rate for the full year on overseas earnings. No tax has been provided on the UK results, reflecting the expected tax rate for the full year. 6. Dividends Six months to Six Months to Year to 31 30 June 30 June December 2004 2005 2004 Â£000 Â£000 Â£000 Amounts recognised as distributions to equity holders in the period Special interim dividend in respect of the year ended 31 December 2004 - 844 844 ======== ======== ======== Dividends are not payable on shares held in the employee share trust. 7. Discontinued operations The directors of the Company's subsidiary Tom Brands Electrical Services Limited petitioned for the appointment of a provisional liquidator on 26 October 2004 to realise the assets of the business. An exceptional cost of Â£1.4 million was incurred in the second half of 2004 as a result of this exit. The trading activities of the Brands business have been disclosed as discontinued activities in these financial statements and the relevant information for the comparative periods is as follows:- Six Months to Year to 31 30 June December 2004 2004 Â£000 Â£000 Revenue 869 1,295 Cost of sales (416) (534) -------- -------- Gross profit 453 761 Net expenses (1,277) (2,016) -------- -------- Pre and post-tax loss from discontinued operations (824) (1,255) ======== ======== Cash outflows in respect of the discontinued operations for operating activities amounted to Â£nil for the six months ended 30 June 2005, Â£730,000 for the six months ended 30 June 2004 and Â£1,156,000 for the year ended 31 December 2004. There were no cash flows in respect of investing and financing activities for these respective periods. 8. Earnings/(loss) per share Six months to Six Months to Year to 31 30 June 30 June December 2004 2005 2004 (As restated (as restated for IFRS) for IFRS) Â£000 Â£000 Â£000 Earnings Earnings from continuing operations for the purposes of earnings per share being net profit attributable to equity holders of the parent 1,485 2,322 2,419 -------- -------- -------- Earnings from continuing and discontinued operations for the purposes of earnings per share being net profit attributable to equity holders of the parent 1,485 1,498 (236) -------- -------- -------- Weighted average number of ordinary shares in issue '000 115,019 115,019 115,019 Own shares in Employee Share Ownership Trusts '000 (2,491) (2,491) (2,491) -------- -------- -------- Weighted average number of shares in issue for the 112,528 112,528 112,528 purposes of basic earnings per share '000 Effect of dilutive potential ordinary shares due to share options 620 26 69 -------- -------- -------- Weighted average number of shares in issue for the purposes of diluted earnings per share '000 113,148 112,554 112,597 ======== ======== ======== 9. Notes to the cash flow Six months to Six Months Year to 31 statement 30 June to 30 June December 2005 2004 2004 Â£000 Â£000 Â£000 Profit from operations Co ntinuing operations 2,175 3,210 4,071 Discontinued operations - (824) (1,255) -------- -------- -------- Profit from operations 2,175 2,386 2,816 Adjustments for: Depreciation of property, plant and equipment 1,521 1,658 3,407 Gain on disposal of property, plant and equipment (1,382) (3,968) (3,911) -------- -------- -------- Operating cash flows before movements in working capital 2,314 76 2,312 Decrease in inventories 282 69 1,205 Decrease/(increase) in receivables 788 (5,194) (437) (Decrease)/increase in payables (3,891) 2,985 36 -------- -------- -------- Cash generated by operations (507) (2,064) 3,116 Income taxes (paid)/received (38) (84) 744 Interest paid (545) (785) (1,690) -------- -------- -------- Net cash from operating activities (1,090) (2,933) 2,170 ======== ======== ======== Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. Six months to Six Months Year to 31 30 June to 30 June December 2005 2004 2004 Movement in net debt Â£000 Â£000 Â£000 (Decrease) in cash and cash equivalents in the period (220) (75) (8) Decrease/(increase) in bank overdrafts 3,982 (1,220) 3,596 Cash flows from debt and lease financing 229 233 469 Loan notes issue in the period - - (200) -------- -------- -------- Movement in net debt in the year 3,991 (1,062) 3,857 Opening net debt (13,054) (16,911) (16,911) -------- -------- -------- Closing net debt (9,063) (17,973) (13,054) ======== ======== ======== Net debt comprises:- Cash and cash equivalents 1,798 1,951 2,018 Bank overdrafts and loans (10,244) (19,042) (14,226) Obligations under finance leases (617) (882) (846) -------- -------- -------- Closing net debt (9,063) (17,973) (13,054) ======== ======== ======== 10. Pension scheme creditor The figures below have been based on the provisional results of the triennial actuarial valuation as at 1 May 2005, updated to 30 June 2005. The figures for 30 June 2004 and 31 December 2004 were based on an actuarial valuation at 1 May 2002 updated to the respective period ends. The assets in the scheme, the net liability position of the scheme as calculated under IAS 19 and the principal assumptions were: 30 June 30 June 31 December 2005 2004 2004 Â£000 Â£000 Â£000 Fair value of assets 37,294 33,056 35,121 Present value of scheme liabilities (54,868) (49,406) (52,545) -------- -------- --------- Pension scheme deficit (17,574) (16,350) (17,424) Deferred tax asset 5,272 4,905 5,227 Pension scheme deficit net of related deferred tax asset (12,302) (11,445) (12,197) ======== ======== ========= The scheme's liabilities were calculated on the following bases as required under IAS 19: Assumptions 30 June 2005 30 June 2004 31 December 2004 Discount rate 5.00% 5.75% 5.25% Rate of increase in salaries 2.50% 4.25% 2.75% Rate of increase in pensions in payment 3% or 5% 3% or 5% 3% or 5% for fixed for fixed for fixed increases increases increases or 2.75% for or 2.75% for or 2.75% for LPI LPI LPI Inflation assumption 2.50% 3.00% 2.75% Six months to Six Months to Year to 31 30 June 30 June December 2005 2004 2004 (As (As restated restated for for IFRS) IFRS) Analysis of amounts charged in administrative expenses Â£000 Â£000 Â£000 Current service costs 152 219 438 ======== ======== ======== Analysis of amount charged to net finance costs Expected return on pension scheme assets 1,148 1,109 2,217 Interest cost of pension scheme liabilities (1,371) (1,367) (2,734) -------- -------- -------- Net cost (223) (258) (517) ======== ======== ======== Analysis of the actuarial (loss)/gain shown in the statement of recognised income and expense Â£000 Â£000 Â£000 Actual return less expected return on scheme assets 1,433 (548) 814 Experience gains & losses arising on scheme liabilities (318) (1) 338 Changes in assumptions underlying the present value of the scheme's liabilities (1,265) 1,677 (930) -------- -------- -------- Actuarial (loss)/gain (150) 1,128 222 ======== ======== ======== Movement in scheme deficit Â£000 Â£000 Â£000 At start of period (17,424) (17,312) (17,312) Current service cost (152) (219) (438) Contributions 375 311 621 Net finance costs (223) (258) (517) Actuarial (loss)/gain in the period (150) 1,128 222 -------- -------- -------- At end of period (17,574) (16,350) (17,424) ======== ======== ======== 11. Reconciliation of movements in Six months Six Months Year to 31 equity to 30 June to 30 June December 2004 2005 2004 (As restated (As restated for IFRS) for IFRS) Â£000 Â£000 Â£000 Profit/(loss) for the period 1,485 1,498 (236) Dividends to equity holders in the period - (844) (844) Exchange differences on translation of foreign operations (341) (472) (180) Actuarial (losses)/gains on pension schemes (150) 1,128 222 Taxation on items taken direct to equity 45 (338) (67) -------- -------- -------- Movements in equity in the period 1,039 972 (1,105) Opening equity 26,641 27,746 27,746 -------- -------- -------- Closing equity 27,680 28,718 26,641 ======== ======== ======== 12. Explanation of transition to IFRS The balance sheet reconciliation at 1 January 2004 (date of transition to IFRS) and at 31 December 2004 (date of last UK GAAP statements) and the reconciliation of profit for IFRS1 are shown on the following pages. The balance sheet reconciliation at 30 June 2004 and the reconciliation of profit for the six months to 30 June 2004 have also been included to enable a comparison of the 2005 interim figures with those published in the corresponding period of the previous financial year. IFRS1 'First Time Adoption of International Financial Reporting Standards' sets out the approach to be followed when IFRS are applied for the first time. The major policy choices with an impact on results are noted below. Goodwill Under UK GAAP, goodwill was amortised over its useful economic life. Under IFRS3 'Business Combinations' goodwill is no longer amortised but held at carrying value with impairment reviews being undertaken annually or when there is an indication that the carrying value has been reduced. Under IFRS1 the Group has applied the change from the date of transition as opposed to full application to all business combinations prior to that date. As a result, goodwill arising from previous acquisitions is recorded initially in the opening balance sheet at the amortised carrying value under UK GAAP on that date. The goodwill on the balance sheet at the date of transition was Â£17.1 million. The impact on the 31 December 2004 income statement is a reversal of the amortisation previously charged under UK GAAP of Â£0.9 million. Goodwill was tested for impairment at 1 January 2004 and 31 December 2004 in accordance with IFRS and no adjustment deemed necessary. Employee benefits Under UK GAAP, the transitional provisions of FRS17 'Retirement Benefits' required the pension deficit to be shown as a memorandum disclosure in the notes to the accounts for periods up to 31 December 2004 rather than accounted for on the balance sheet. IAS19 'Employee Benefits' permits the operating and financing costs of the defined benefit pension schemes to be shown separately in the consolidated income statement and requires the pension deficit be shown on the face of the balance sheet. IAS19 also allows a number of options for the recognition of actuarial gains and losses. The Group has adopted the approach of recognising the full pension deficit at the date of transition. The overall impact of recognising the pension deficit, net of incorporating the related deferred tax asset, is a reduction in net assets of Â£12.1 million at 31 December 2003, Â£11.5 million at 30 June 2004 and Â£12.2 million at 31 December 2004. Actuarial gains and losses have been recognised in full in the consolidated statement of recognised income and expense on the assumption that the EU will endorse the revised version of IAS19 during 2005. IAS19 requires the recording of a holiday pay accrual. The holiday year of the Group is the calendar year and no holidays can be carried forward. Consequently no accrual is required at the year-end. Accruals of Â£160,000 and Â£140,000 have been made at June 2004 and June 2005 respectively. Share-based payments Under UK GAAP, no charge was made to the profit and loss account for the value of options granted to employees as options were granted at their intrinsic value. Under IFRS2 'Share-Based Payments' a charge is made reflecting the fair value of options granted since 7 November 2002, adjusted to reflect the actual and expected levels of vesting, which is applying the exemption permitted under IFRS1. The impact has been a charge to operating profit for the six months to 30 June 2004 of Â£12,000 and a charge of Â£32,000 in the year to 31 December 2004. Foreign Exchange Under IFRS, translation differences arising from the date of transition to IFRS that are permitted to be taken to reserves must be tracked in a separate foreign exchange reserve. The Group has elected to take the exemption, permitted under the transitional rules of not applying IAS 21 'The Effect of Changes in Foreign Exchange Rates' retrospectively; this has permitted the Group to absorb its foreign exchange gains and losses for the period to 31 December 2003 in retained earnings. Non-current Assets Held for Sale Under IFRS5 'Non-current Assets Held for Sale and Discontinued Operations' the Group reclassified the values of surplus properties from 'Property, plant and equipment' to 'Non current assets classified as held for sale' on the balance sheet. The reclassifications made relate to Group's properties at Braehead, Govan and Grantham, which were sold in March 2004, February 2005 and February 2005 respectively. (i) Unaudited balance sheet reconciliation at 1 January 2004 UK GAAP Â£000 IAS 19 Employee IFRS 2 Reclassify IFRS benefits Â£000 Share based Â£000 Â£000 payments Â£000 Non-current assets Goodwill 17,054 17,054 Property, plant and equipment 28,613 (7,686) 20,927 Investment property 0 1,701 1,701 Other receivables 0 838 838 Deferred tax assets 0 5,193 5,193 --------- -------- -------- -------- --------- Total non-current assets 45,667 5,193 0 (5,147) 45,713 --------- -------- -------- -------- --------- Current assets Inventories 9,919 9,919 Trade and other receivables 28,901 (838) 28,063 Cash and cash equivalents 2,026 2,026 --------- -------- -------- -------- --------- Total current assets 40,846 (838) 40,008 Non-current assets held for sale 0 5,985 5,985 --------- -------- -------- -------- --------- 40,846 0 0 5,147 45,993 --------- -------- -------- -------- --------- --------- -------- -------- -------- --------- Total assets 86,513 5,193 0 0 91,706 --------- -------- -------- -------- --------- Current liabilities Trade and other payables 27,526 (5) 27,531 Tax liabilities 0 0 Obligations under finance leases 432 432 Bank overdrafts and loans 17,822 17,822 --------- -------- -------- -------- --------- Total current liabilities 45,780 0 (5) 0 45,785 --------- -------- -------- -------- --------- Non current liabilities Retirement benefit obligations 0 (17,312) 17,312 Deferred tax liabilities 180 180 Obligations under finance leases 683 683 --------- -------- -------- -------- --------- Total non-current liabilities 863 (17,312) 0 0 18,175 --------- -------- -------- -------- --------- --------- -------- -------- -------- --------- Total liabilities 46,643 (17,312) (5) 63,960 --------- -------- -------- -------- --------- --------- -------- -------- -------- --------- Net assets 39,870 (12,119) (5) 0 27,746 ========= ======== ======== ======== ========= Equity Share 28,755 28,755 capital Capital redemption reserve 2,952 2,952 Share 7,547 7,547 premium Revaluation reserve 279 279 Own shares (1,406) (1,406) Retained earnings 1,743 (12,119) (5) (10,381) --------- -------- -------- -------- --------- Total equity 39,870 (12,119) (5) 0 27,746 ========= ======== ======== ======== ========= (ii) Unaudited income statement reconciliation for the year to 31 December 2004 UK GAAP Â£000 IAS 19 Employee IFRS 2 IFRS 3 Business IFRS benefits Combination Â£000 Share based Â£000 Â£000 payments Â£000 Continuing operations Revenue 126,075 126,075 Cost of (84,237) (84,237) sales --------- -------- -------- -------- --------- Gross profit 41,838 41,838 Distribution expenses (6,927) (6,927) Administrative expenses (35,799) 183 (32) 890 (34,758) Other operating income 73 73 --------- -------- -------- -------- --------- Profit/(loss) before gain on disposal of properties (815) 183 (32) 890 226 Gain on disposal of properties 3,845 3,845 --------- -------- -------- -------- --------- Profit from operations 3,030 183 (32) 890 4,071 Investment income 94 94 Finance (1,255) (517) (1,772) costs --------- -------- -------- -------- --------- Profit before tax 1,869 (334) (32) 890 2,393 Tax (75) 101 26 --------- -------- -------- -------- --------- Profit for the period from continuing operations 1,794 (233) (32) 890 2,419 Discontinued operations Loss for the period from discontinued operations (1,255) (1,255) Loss on disposal of discontinued operations (1,400) (1,400) --------- -------- -------- -------- --------- Loss for the period (861) (233) (32) 890 (236) ========= ======== ======== ======== ========= (iii) Unaudited balance sheet reconciliation at 31 December 2004 UK GAAP Â£000 IAS 19 Employee IFRS 2 IFRS 3 Business Reclassify IFRS benefits Combination Â£000 Share based Â£000 Â£000 Â£000 payments Â£000 Non-current assets Goodwill 15,994 1,060 17,054 Property, plant and equipment 22,882 (5,281) 17,601 Investment property 0 1,701 1,701 Other receivables 0 2,242 2,242 Deferred tax assets 0 5,227 5,227 ------- -------- -------- --------- -------- --------- Total non-current assets 38,876 5,227 0 1,060 (1,338) 43,825 ------- -------- -------- --------- -------- --------- Current assets Inventories 8,689 8,689 Trade and other receivables 30,853 (2,242) 28,611 Cash and cash equivalents 2,018 2,018 ------- -------- -------- --------- -------- --------- Total current assets 41,560 (2,242) 39,318 Non-current assets held for sale 0 3,580 3,580 ------- -------- -------- --------- -------- --------- 41,560 0 0 0 1,338 42,898 ------- -------- -------- --------- -------- --------- ------- -------- -------- --------- -------- --------- Total 80,436 5,227 0 1,060 0 86,723 assets ------- -------- -------- --------- -------- --------- Current liabilities Trade and other 26,570 (37) (170) 26,777 payables Tax liabilities 595 595 Obligations under finance leases 479 479 Bank overdrafts and 14,226 14,226 loans ------- -------- -------- --------- -------- --------- Total current liabilities 41,870 0 (37) (170) 0 42,077 ------- -------- -------- --------- -------- --------- Non current liabilities Retirement benefit obligations 0 (17,424) 17,424 Deferred tax liabilities 214 214 Obligations under finance leases 367 367 ------- -------- -------- --------- -------- --------- Total non-current liabilities 581 (17,424) 0 0 0 18,005 ------- -------- -------- --------- -------- --------- ------- -------- -------- --------- -------- --------- Total liabilities 42,451 (17,424) (37) (170) 0 60,082 ------- -------- -------- --------- -------- --------- ------- -------- -------- --------- -------- --------- Net assets 37,985 (12,197) (37) 890 0 26,641 ======= ======== ======== ========= ======== ========= Equity Share 28,755 28,755 capital Capital redemption reserve 2,952 2,952 Share 7,547 7,547 premium Revaluation reserve 274 274 Own shares (1,406) (1,406) Translation reserve 0 (180) (180) Retained earnings (137) (12,197) (37) 890 180 (11,301) ------- -------- -------- --------- -------- --------- Total 37,985 (12,197) (37) 890 0 26,641 equity ======= ======== ======== ========= ======== ========= (iv) Unaudited income statement reconciliation for the six months to 30 June 2004 UK GAAP Â£000 IAS 19 Employee IFRS 2 IFRS 3 Business IFRS benefits Combination Â£000 Share based Â£000 Â£000 payments Â£000 Continuing operations Revenue 61,653 61,653 Cost of (40,999) (40,999) sales -------- -------- -------- --------- --------- Gross profit 20,654 20,654 Distribution expenses (3,524) (3,524) Administrative expenses (18,174) (68) (12) 484 (17,770) Other operating income 5 5 -------- -------- -------- --------- --------- Profit/(loss) before gain on disposal of properties (1,039) (68) (12) 484 (635) Gain on disposal of properties 3,845 3,845 -------- -------- -------- --------- --------- Profit from operations 2,806 (68) (12) 484 3,210 Investment income 29 29 Finance (664) (258) (922) costs -------- -------- -------- --------- --------- Profit before tax 2,171 (326) (12) 484 2,317 Tax (45) 50 5 -------- -------- -------- --------- --------- Profit for the period from continuing operations 2,126 (276) (12) 484 2,322 Discontinued operations Loss for the period from discontinued operations (824) (824) -------- -------- -------- --------- --------- Profit for the period 1,302 (276) (12) 484 1,498 ======== ======== ======== ========= ========= (v) Unaudited balance sheet reconciliation at 30 June 2004 UK GAAP Â£000 IAS 19 Employee IFRS 2 IFRS 3 Business Reclassify IFRS benefits Combination Â£000 Share based Â£000 Â£000 Â£000 payments Â£000 Non-current assets Goodwill 16,570 484 17,054 Property, plant and equipment 23,980 (5,281) 18,699 Investment property 0 1,701 1,701 Other receivables 0 3,463 3.463 Deferred tax assets 0 4,905 4,905 ------- -------- ------- -------- ------- -------- Total non-current assets 40,550 4,905 0 484 (117) 45,822 ------- -------- ------- -------- ------- -------- Current assets Inventories 9,850 9,850 Trade and other receivables 33,896 (3,463) 30,433 Cash and cash equivalents 1,951 1,951 ------- -------- ------- -------- ------- -------- Total current assets 45,697 (3,463) 42,234 Non-current assets held for sale 0 3,580 3,580 ------- -------- ------- -------- ------- -------- 45,697 0 0 0 117 45,814 ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- Total 86,247 4,905 0 484 0 91,636 assets ------- -------- ------- -------- ------- -------- Current liabilities Trade and other 26,264 (160) (17) 26,441 payables Tax liabilities 0 0 Obligations under finance leases 446 446 Bank overdrafts and 19,042 19,042 loans ------- -------- ------- -------- ------- -------- Total current liabilities 45,752 (160) (17) 0 0 45,929 ------- -------- ------- -------- ------- -------- Non current liabilities Retirement benefit obligations 0 (16,350) 16,350 Deferred tax liabilities 203 203 Obligations under finance leases 436 436 ------- -------- ------- -------- ------- -------- Total non-current liabilities 639 (16,350) 0 0 0 16,989 ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- Total liabilities 46,391 (16,510) (17) 0 0 62,918 ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- -------- Net assets 39,856 (11,605) (17) 484 0 28,718 ======= ======== ======= ======== ======= ======== Equity Share 28,755 28,755 capital Capital redemption reserve 2,952 2,952 Share 7,547 7,547 premium Revaluation reserve 275 275 Own shares (1,406) (1,406) Translation reserve 0 (472) (472) Retained earnings 1,733 (11,605) (17) 484 472 (8,933) ------- -------- ------- -------- ------- -------- Total 39,856 (11,605) (17) 484 0 28,718 equity ======= ======== ======= ======== ======= ======== This information is provided by RNS The company news service from the London Stock Exchange

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