Interim Results

Pennant International Group PLC 24 September 2007 Pennant International Group plc Interim Results for the six months ended 30 June 2007 - further significant progress; revenues, earnings and dividend all increase again Pennant International Group plc ('Pennant' or 'the Company'), the AIM listed supplier of integrated logistic support solutions to the defence and industrial sectors, including simulation and training systems, technical data services and data management systems, announces Interim Results for the six months ended 30 June 2007. Revenues, earnings per share and dividend per share all improved over the same period last year. Highlights • Turnover up to £6.5million (2006: £5.7million) • Profit before tax up to £374,000 (2006: £354,000) • Earnings per share up to 1.1p (2006: 1.07p) • Interim Dividend per share up to 0.22p (2006: 0.2p) • All operating divisions profitable during period • Negotiations in hand to take contract for sale of property in Southampton unconditional • Several contracts increased and/or extended during period including: Hawk programmes for BAESystems; Data Services for Royal Navy Type 45 Destroyers; and the support contract for MOD equipments. In his statement to shareholders, Chairman Christopher Powell said: 'I am pleased to report further progress across all divisions during the period, reflected by an increased interim dividend payment to shareholders. Your Board will continue its strategy to improve shareholder value by concentrating on core strengths, identifying new customers and markets and building on established good relationships with existing customers.' Enquiries: Pennant International Group plc Tel: 01452 714881 Chris Snook, Chief Executive John Waller, Finance Director WH Ireland Tel: 0121 616 2101 Tim Cofman Winningtons Financial Tel: 0117 920 0092 Paul Vann/Tom Cooper Pennant International Group plc Chairman's Interim Statement I am pleased to report further progress during the period with both revenue and earnings ahead of the first half of 2006. Sale of Property in Southampton As previously reported, in February 2006 the Group exchanged contracts, conditional upon planning consent, for the sale of property in Southampton. Following the recent grant of planning permission, negotiations are now in hand to take the contract unconditional. The agreed price is not less than £747,000 and the profit on sale will be in excess of £325,000. Results and Dividend These are the first results presented in compliance with International Financial Reporting Standards ('IFRS'). The comparative figures for the period to June 2006 and the year to December 2006 have been restated using accounting policies consistent with IFRS. Turnover for the period was £6.5 million, a 14% increase over the period to June 2006. The gross margin was lower due to the mix of work and start up costs on a major contract. Profit before tax was £374,000 (June 2006: £354,000 - restated). Basic earnings per share were 1.10p (June 2006: 1.07p - restated). There was absorption of cash into working capital during the period reflecting the timing of certain milestone payments. This has resulted in a net outflow of cash from operations of £503,000 and an increase in net debt to £868,000. Substantial stage payments have since been approved and invoiced and working capital and net debt are expected to reduce substantially by the year end. Your board is declaring an increased interim cash dividend of 0.22p per share (2006: 0.20p). The dividend will be paid on 16 November 2007 to shareholders on the register at close of business on 19 October 2007. The shares are expected to go ex-dividend on 17 October 2007. Current Trading and Prospects All operating divisions were profitable during the period. • Work continued successfully on two major Hawk programmes for BaeSystems (both of which will continue into 2008) and on a major data services contract in the naval sector for the Type 45 destroyer. • Further training devices were added to the support contract with MOD; this growth enhances the annual revenues on this contract until 2011. • An aircraft marshalling trainer was successfully delivered to RAF Cosford.. • New sales were made of OmegaPS, the Group's suite of logistic support analysis software, which also brought additions to the associated annual support revenues. • Consultancy work around the implementation and maintenance of the OmegaPS suite continued to grow, particularly in Canada. • Work continued on significant contracts in the rail sector with Kawasaki and Siemens. • Further e-learning packages were delivered to the Department of Work and Pensions. Tendering activity was high, particularly in the training arena where there are some major new opportunities. Joint Venture Very little work is being outsourced by Airbus UK for the A380 civil aircraft, and as a result the joint venture continues to disappoint with a loss of £21,000 in the period. However, work has been won on the A400M military programme from another customer and further work is expected as work-share from our European grouping. Outlook Your Board will continue its strategy to improve shareholder value by concentrating on core strengths, identifying new customers and markets and building on established good relationships with existing customers. The Board remains confident about the Group's future prospects and continues to work to position the Group to create and take advantage of new opportunities. C C Powell Chairman PENNANT INTERNATIONAL GROUP plc CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2007 Notes Six months ended 30 Six months ended 30 Year ended 31 June 2007 June 2006 December 2006 £ £ £ Revenue 6,495,123 5,697,179 11,311,954 Cost of sales (4,225,355) (3,546,384) (7,196,241) Gross profit 2,269,768 2,150,795 4,115,713 Administrative expenses (1,832,645) (1,719,304) (3,375,013) Operating profit 437,123 431,491 740,700 Share of results of Joint Venture (20,720) (39,499) (67,119) 416,403 391,992 673,581 Finance costs (41,900) (38,989) (75,262) Finance income 96 1,248 7,368 Profit before taxation 374,599 354,251 605,687 Taxation 3 (30,000) (18,000) (47,087) Profit for the period 344,599 336,251 558,600 Earnings per share 4 Basic 1.10p 1.07p 1.77p Diluted 1.02p 0.98p 1.65p PENNANT INTERNATIONAL GROUP plc CONSOLIDATED BALANCE SHEET as at 30 June 2007 30 June 2007 30 June 2006 31 December 2006 £ £ £ Non-current assets Goodwill 902,373 903,959 904,228 Other intangible assets 30,115 51,609 43,008 Property plant and equipment 2,102,094 2,027,539 2,073,213 Interest in Joint Venture 69,307 42,647 60,027 Available-for-sale investments 6,135 6,135 6,135 Deferred tax asset 12,966 27,808 16,966 Total non-current assets 3,122,990 3,059,697 3,103,577 Current assets Inventories 90,297 149,444 112,939 Trade and other receivables 3,986,080 2,908,583 2,794,276 Cash and cash equivalents 278,802 761,542 909,609 Assets held for sale 372,522 372,522 372,522 Total current assets 4,727,701 4,192,091 4,189,346 Total assets 7,850,691 7,251,788 7,292,923 Current liabilities Trade and other payables 2,125,159 1,974,910 1,925,922 Current tax liabilities 24,729 31,114 52,791 Obligations under finance leases 0 2,000 412 Bank overdraft and loan 454,134 136,695 141,338 Total current liabilities 2,604,022 2,144,719 2,120,463 Net current assets 2,123,679 2,047,372 2,068,883 Non current liabilities Bank loan 692,770 839,566 763,952 Obligations under finance leases 0 6,106 2,386 Deferred tax liabilities 32,000 39,547 32,000 Total non-current liabilities 724,770 885,219 798,338 Total liabilities 3,328,792 3,029,938 2,918,801 Net assets 4,521,899 4,221,850 4,374,122 Equity Share capital 1,600,000 3,045,400 1,600,000 Share premium account 3,582,329 3,563,504 3,582,329 Retained earnings (631,128) (2,362,191) (744,302) Translation reserve (29,302) (24,863) (63,905) Total equity 4,521,899 4,221,850 4,374,122 PENNANT INTERNATIONAL GROUP plc CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2007 Notes Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £ £ £ Net cash from/(used in) operating activities 5 (502,715) 284,266 773,120 Investing activities Interest received 96 1,248 7,368 Proceeds on disposal of property, plant and equipment 0 0 4,507 Purchase of intangible assets (11,576) (4,574) (25,585) Purchase of property plant and equipment (120,639) (94,297) (213,005) Loan to Joint Venture (30,000) 0 (45,000) Net cash used in investing activities (162,119) (97,623) (271,715) Financing activities Dividends paid (125,828) (97,855) (161,490) Transactions in own shares (117,975) (26,974) (4,339) Repayment of borrowings (71,182) (70,091) (141,062) Repayment of obligations under finance leases (2,798) (5,013) (10,321) Increase/(decrease) in bank overdrafts 312,796 0 0 Net cash used in financing activities (4,987) (199,933) (317,212) Net (decrease)/increase in cash and cash equivalents (669,821) (13,290) 184,193 Cash and cash equivalents at beginning of period 909,609 797,676 797,676 Effect of foreign exchange rates 39,014 (22,844) (72,260) Cash and cash equivalents at end of period 278,802 761,542 909,609 PENNANT INTERNATIONAL GROUP plc NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2007 1. Accounting policies Basis of preparation The next annual financial statements of Pennant International Group plc ('the Group') will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU applied in accordance with the provisions of the Companies Act 1985. Accordingly, the interim financial information in this report has been prepared using accounting policies consistent with IFRS. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Committee (IFRIC) and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be applicable as at 31 December 2007. The principal accounting policies set out below have been consistently applied to all periods presented. IFRS transition IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. The interim financial information has been prepared on the basis of the following exemptions: • Business combinations prior to January 2006 have not been restated to comply with IFRS 3 'Business Combinations' • The Group has elected to deem the cumulative currency translation differences on its net investments in foreign operations to be £nil as at 1 January 2006. • The Group has elected to use a previous UK GAAP valuation of an item of Property, Plant and Equipment, before the date of transition to IFRS as deemed cost at the date of that valuation. • The Group has applied IFRS 2 'Share-based payments' except to those equity settled awards that were granted on or before 7 November 2002. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given at note 6 Non-statutory accounts The financial information for the year ended 31 December 2006 set out in this interim report does not comprise the Group's statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2006, which were prepared under UK GAAP, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either section 237 (2) or section 237 (3) of the Companies Act 1985. The financial information for the 6 months ended 30 June 2007 and 30 June 2006 is unaudited Basis of consolidation The financial information incorporates the results of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has power to govern the financial and operating policies of the investee entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the results of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Business combinations and goodwill On acquisition, the assets and liabilities and contingent liabilities of the subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of cost of acquisition below the fair value of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss account in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the profit and loss account and is not subsequently reversed. Interest in Joint Venture The results and assets and liabilities of joint ventures are incorporated using the equity methods of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post acquisition changes in the Group's share of the net assets of the joint venture less any impairment in the value of the individual investments. Losses of a joint venture in excess of the group's interest in that joint venture are not recognised. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided 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. Revenue from construction contracts is recognised in accordance with the Group's accounting policy on constructions contracts (see below). Construction contracts Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Foreign currency The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit and loss account for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such monetary items, any exchange component of the gain or loss is also recognised directly in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rate at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the group's translation reserve. Such translation differences are recognised as income and expense in the period in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from the net profits as reported on the income statement because it excludes items of income and 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 temporary differences and deferred tax assets are recognised to the extent that it is probable that the 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 the initial recognition of goodwill or from 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 liabilities are recognised for temporary differences arising on investments in subsidiaries, and interest in joint ventures, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount 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 at least 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 offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis. Share-based payment The group issues equity-settled share based payments to certain employees. Equity-settled share based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the date of grant is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured by use of the binomial model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural conditions. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to write off the cost of assets over their estimated useful lives on the following bases: Freehold land Nil Freehold buildings Net book value at 1 January 2007 being written off over 35 years on a straight line basis. (previously Short leasehold buildings 1% per annum on cost or valuation) Long leasehold buildings Plant and equipment 10% to 25% of written down value per annum Computers 331/3% of cost per annum Motor vehicles 25% of cost per annum Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Financial instruments Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables are measured at initial recognition at fair value, and subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the group will not be able to collect all amounts due. The amount of any provision is recognised in the income statement. Investments Available-for-sale investments are initially measured at cost, including transaction costs. At subsequent reporting dates available-for-sale investments are measured at fair value or cost where fair value is not readily ascertainable. Gains and losses arising from changes in fair value are recognised directly in equity until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss recognised previously in equity is included in the income statement for the period. Cash and cash equivalents Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity date of three months or less. Trade payables Trade payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest rate method. Financial liabilities Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definition of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Bank borrowings Interest bearing bank loans, overdrafts and other loans are recorded at the proceeds received, net of direct issue costs. Finance costs are accounted for on the accruals basis in the income statement using the effective interest rate. 2. Critical accounting judgements and key sources of estimation uncertainty The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimated and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were: Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. No provision for impairment was made in the period. 3. Taxation Six months ended 30 Six months ended 30 Year ended 31 June 2007 June 2006 December 2006 £ £ £ Current tax 26,000 18,000 51,855 Deferred tax 4,000 0 (4,768) Total expense for the period 30,000 18,000 47,087 4. Earnings per share Six months ended 30 Six months ended 30 Year ended 31 June 2007 June 2006 December 2006 £ £ £ Earnings Net profit attributable to equity shareholders 344,599 336,251 558,600 Number of shares Weighted average number of ordinary shares 31,426,167 31,557,786 31,611,500 Number of dilutive shares under option 2,247,500 2,757,500 2,207,500 Weighted average number of ordinary shares for the purpose of dilutive earnings per share 33,673,667 34,315,286 33,819,000 The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. 5. Cash generated from/(used in) operations Six months ended 30 Six months ended 30 Year ended 31 June 2007 June 2006 December 2006 £ £ £ Profit for the period 344,599 336,251 558,600 Share of results of Joint Venture 20,720 39,499 67,119 Finance income (96) (1,248) (7,368) Finance costs 41,900 38,989 75,262 Income tax expense 30,000 18,000 47,087 Share-based payment expense 12,378 8,000 17,965 Depreciation charge 117,401 92,000 191,935 Loss on sale of property, plant and equipment 0 0 2,092 Operating cash flows before movement in working capital 566,902 531,491 952,692 (Increase)/decrease in debtors (1,191,946) (630) 112,435 Decrease in inventories 22,642 51,388 87,893 Increase/(decrease) in creditors 199,237 (233,399) (282,387) Cash generated from/(used in) operations (403,165) 348,850 870,633 Tax paid (57,650) (25,595) (22,251) Interest paid (41,900) (38,989) (75,262) Net cash (used in)/generated from operations (502,715) 284,266 773,120 6. Transition to IFRS Pennant International Group plc reported under UK GAAP in its previously published financial statements for the year ended 31 December 2006. The analysis below shows a reconciliation of equity and profits as reported under UK GAAP as at 31 December 2006 to the revised equity and profits under IFRS as reported in these financial statements. In addition, there is a reconciliation of equity under UKGAAP to IFRS at the transition date for this company, being 1 January 2006. There is also a reconciliation of equity under UK GAAP to IFRS at the comparative interim date, being 30 June 2006. Reconciliation of equity Notes As at 31 As at 30 As at 1 December 2006 June 2006 January 2006 £ £ £ Equity shareholders' funds under UK GAAP 4,335,421 4,178,150 4,010,829 Adjustments: Goodwill (a) 66,974 25,375 0 Negative goodwill (b) 0 48,462 48,462 Assets held for resale (c) 3,726 1,863 0 Deferred tax (d) (32,000) (32,000) (32,000) Equity shareholders' funds under IFRS 4,374,121 4,221,850 4,027,291 Explanation of adjustments to equity (a) Goodwill Under UK GAAP, capitalise goodwill was amortised over its useful economic life. Under IFRS, this goodwill is no longer amortised but is tested at least annually for impairment. The impairment tests carried out by the Group have identified no impairment loss. The adjustments to the carrying amount of goodwill are as follows: 31 December 2006 30 June 2006 £ Reversal of amortisation 68,696 27,720 Currency translation differences (1,722) (2,345) 66,974 25,375 (b) Negative goodwill The Group carried negative goodwill of £48,462 in its balance sheet prepared under UK GAAP at 1 January 2006. This balance was credited to profit and loss account under UK GAAP in 2006. Under IFRS negative goodwill is written off immediately to profit and loss account. The balance carried at 1 January 2006 (the date of transition) has therefore been derecognised at that date and credited to retained earnings. The £48,462 credit to profit and loss account in 2006 under UK GAAP has been reversed in the income statement prepared under IFRS. (c) Assets held for resale IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations' requires that any asset held for sale is recognised as a current asset in the balance sheet. This has resulted in a reclassification between non-current assets and current assets of £372,522 at the date of transition being the carrying amount at 1 January 2006 of property in Southampton that is subject to a conditional contract for sale. IFRS 5 also requires that assets held for sale are not depreciated. Accordingly depreciation previously charged under UK GAAP has been reversed. (d) Deferred Tax Under UK GAAP deferred tax was provided on timing differences between the accounting and taxable profit (and income statement approach). Under IFRS, deferred tax is provided on temporary differences between the book carrying value and tax base of assets and liabilities (a balance sheet approach). Under UK GAAP the Group did not provide for deferred tax on the amount of the revaluation of certain property on the basis that there was no binding agreement to sell the property. Under IFRS the difference between the carrying amount of a re-valued asset and its tax base is deemed to be a temporary difference and gives rise to a deferred tax liability. Accordingly at the transition date a deferred tax provision of £32,000 has been setup and equity reduced by a corresponding amount. Reconciliation of profit for the year ended 31 December 2006 UK GAAP IAS 21 IAS 11 IFRS 3 IFRS 5 presented in Foreign Construction Goodwill Assets held Restated IFRS format exchange contracts for resale under IFRS Notes (c) Note (a) Note(b) & (d) Note (e) £ £ £ £ £ £ Revenue 11,262,322 152,319 (102,687) 11,311,954 Cost of sales (7,204,381) (94,547) 102,687 (7,196,241) Gross profit 4,057,941 57,772 0 4,115,713 Administration expenses (3,368,818) (30,155) 20,234 3,726 (3,375,013) Operating profit 689,123 27,617 0 20,234 3,726 740,700 Share of results of (67,119) (67,119) Joint venture 622,004 27,617 0 20,234 3,726 673,581 Finance costs (75,237) (25) (75,262) Finance income 7,258 110 7,368 Profit before tax 554,025 27,702 0 20,234 3,726 605,687 Taxation (44,334) (2,753) (47,087) Profit for the period 509,691 24,949 0 20,234 3,726 558,600 Reconciliation of profit for the six months ended 30 June 2006 IFRS 5 UK GAAP IAS 21 IAS 11 IFRS 3 Assets presented in Foreign Construction held for Restated IFRS format exchange contracts Goodwill resale under IFRS Notes (c) Note (a) Note(b) & (d) Note (e) £ £ £ £ £ £ Revenue 5,782,031 21,013 (105,865) 5,697,179 Cost of sales (3,640,938) (11,311) 105,865 (3,546,384) Gross profit 2,141,093 9,702 0 2,150,795 Administration expenses (1,742,511) (6,376) 27,720 1,863 (1,719,304) Operating profit 398,582 3,326 0 27,720 1,863 431,491 Share of results of Joint (39,499) (39,499) venture 359,083 3,326 0 27,720 1,863 391,992 Finance costs (38,984) (5) (38,989) Finance income 1,217 31 1,248 Profit before tax 321,316 3,352 0 27,720 1,863 354,251 Taxation (18,000) (18,000) Profit for the period 303,316 3,352 0 27,720 1,863 336,251 Explanation of adjustments to profit (a) Foreign currencies Under UK GAAP the profit and loss accounts of foreign subsidiaries were converted to pounds sterling for consolidation purposes at the year end rate. Under IFRS income and expenses have been translated at the average rate for the period. This change has resulted in an increase in group profits for the half year to June 2006 and for the full year to 31 December 2006 of £3,352 and £24,949 respectively. (b) Construction contracts Under UK GAAP the Group valued construction contracts by reference to the stage of contract activity at the balance sheet date as required by IFRS. However, for certain small contracts the Group adjusted the movement of amounts due from contract customers against cost of sales rather than revenue. In the IFRS income statement this movement has been transferred and accounted for as revenue in accordance with IAS11. This adjustment has no affect on profits. (c) Goodwill Under UK GAAP, capitalise goodwill was amortised over its useful economic life. Under IFRS, this goodwill is no longer amortised but is tested at least annually for impairment. The impairment tests carried out by the Group have identified no impairment loss and the amortisation provided under UK GAAP has been reversed. The adjustments to profits are as follows: 31 December 2006 30 June 2006 £ £ Reversal of amortisation 68,696 27,720 Reversal re negative goodwill (see (d) below) (48,462) 0 20,234 27,720 (d) Negative goodwill The Group carried negative goodwill of £48,462 in its balance sheet prepared under UK GAAP at 1 January 2006. This balance was credited to profit and loss account under UK GAAP in 2006. Under IFRS negative goodwill is written off immediately to profit and loss account. The balance carried at 1 January 2006 (the date of transition) has therefore been derecognised at that date and credited to retained earnings. The £48,462 credit to profit and loss account in 2006 under UK GAAP has been reversed in the income statement prepared under IFRS. (e) Assets held for resale IFRS 5 requires that assets held for sale are not depreciated. Accordingly depreciation previously charged under UK GAAP has been reversed. Explanation of adjustments to Cash flow statement The Group's cash flow statements are presented in accordance with IAS7. The statements present substantially the same information as that required under UK GAAP, with the following principal exceptions: • Under UK GAAP, cash flows are presented under nine standard headings, whereas IFRS requires the classification of cash flows resulting from operating, investing and financing activities. • The cash flows reported under IAS 7 relate to movements in cash and cash equivalents, which include short term liquid investments. Under UK GAAP, cash comprises cash in hand and deposits repayable on demand. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Pennant International Group (PEN)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today