Statement re IFRS

Adventis Group PLC 19 August 2005 19 August 2005 ADVENTIS GROUP PLC EARLY ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) Adventis Group plc ('Adventis' or 'the Group'), the specialist multi-media marketing and advertising agency, announces that from 1 January 2005, the Group will 'early adopt' and prepare its consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the European Union ('EU') and applicable to all AIM quoted companies for financial reporting periods beginning on or after 1 January 2007. The Group's first results to be published under IFRS will be for the six months to 30 June 2005. The comparative information in those financial statements must be restated to IFRS. This report is to inform shareholders of the impact on the Group's financial position and results for 2004 due to the change from reporting under UK General Accepted Accounting Principles (UK GAAP) to IFRS. The information presented in this document sets out the adjustments between the audited UK GAAP prepared financial statements for 2004 and unaudited restated IFRS results for the same period. The IFRS standards that principally affect adjustments between UK GAAP and IFRS are: * IFRS 2 Share Based Payment * IAS 38 Intangible Assets * IAS 12 Income Taxes * IAS 10 Events After the Balance Sheet Date - covering dividends Highlights, unaudited restated IFRS numbers * 2004 Group turnover unchanged * 2004 Group profit before tax £0.564m (UK GAAP - £0.559m) * Earnings per share unchanged * Net assets of the Group £5.849m (UK GAAP - £5.790m) Enquiries: Charles Phillpot, Chief Executive John Depasquale Allan Collins, Financial Director Seymour Pierce Limited Adventis Group plc Tel: 0207 107 8010 Tel: 020 7034 4750 Sarah Gestetner / Justin Griffiths Citigate Dewe Rogerson Tel: 020 7638 9571 1. Basis of Preparation The numbers set out under IFRS in this document have been prepared on the basis of current interpretation and application of IFRS Standards as at July 2005, subject to the exemptions set out below. However, if the International Accounting Standards Board make changes to the standards and interpretations before 31 December 2005, then the figures will be amended in the first full IFRS accounts to be published in March 2006. IFRS 1, First Time Adoption of International Financial Reporting Standards, outlines how to apply IFRS to the consolidated financial statements for the first time. The Group's transition date is 1 January 2004 and the standard permits certain exemptions from the full requirements of IFRS as at that date. The Group has taken the following key exemptions or options as at transition: a) Business combinations IFRS 3, Business Combinations: The Group has taken the option not to restate any business combinations that were recorded by the Group before the date of transition. b) Fair value or revaluation at deemed cost The Group has decided that property, plant and equipment are to remain recorded at their historical cost and has not restated these items at their fair value. 2. Transition Explanations Following the decision to take the exemptions noted above there are no adjustments required to Shareholders Funds on transition to IFRS as at 1 January 2004. 3.1 Effect of the change to IFRS on the Income Statement for the year ended 31 December 2004 (unaudited) ------- ----- ------- UK GAAP IFRS3 IFRS3 IFRS 2 Total IFRS 12 IAS 21 Negative Share impact 12 months based months to Goodwill Goodwill payment of to 31.12.04 IFRS 31.12.04 Notes '000 '000 '000 '000 '000 '000 ------------------ ----- ------- ------- ------- ------- ------ ------- Revenue 12,087 12,087 ------- ------- ------- ------- ------ ------- Total revenue 12,087 12,087 ------------------ ----- ======= ======= ======= ======= ====== ======= Staff costs (2,432) (2,432) Depreciation expense (61) (61) Amortisation of Goodwill/Intan gibles 3.3a (17) 17 17 0 Amortisation of Negative Goodwill 3.3a 3 (3) (3) 0 Other expenses 3.3b (8,955) (13) (13) (8,968) ------- ------- ------- ------- ------ ------- Total expenses (11,462) 17 (3) (13) 1 (11,461) ------- ------- ------- ------- ------ ------- Operating profit 625 17 (3) (13) 1 626 Finance costs - net 148 148 Profit before tax 773 17 (3) (13) 1 774 Income tax expense (214) 4 4 (210) ------- ------- ------- ------- ------ ------- Profit for the period 559 17 (3) (9) 5 564 ------- ------- ------- ------- ------ ------- 3.2 Effect of the change to IFRS on the Balance Sheet as at 31 December 2004 (unaudited) ------- ----- ------- IFRS 2 UK IFRS3 IFRS3 Share Total GAAP IAS21 Negative based IAS10 impact IFRS 31.12.2004 Goodwill Goodwill payment Dividend of 31.12.2004 IFRS Note '000 '000 '000 '000 '000 '000 '000 ---------------- ---- ------- ------ ------ ------ ------ ----- ------- ASSETSNon-current assets Property, plant and equipment 184 184 Goodwill 3.3a 200 17 42 59 259 ------- ------ ------ ------ ------ ----- ------- 384 17 42 59 443 ------- ------ ------ ------ ------ ----- ------- Current assets Work in progress 5 5 Trade and other receivables 2,218 2,218 Cash and cash equivalents 3,183 3,183 ------- ------ ------ ------ ------ ----- ------- 5,406 5,406 ------- ------ ------ ------ ------ ----- ------- Total assets 5,790 17 42 59 5,849 ------- ------ ------ ------ ------ ----- ------- EQUITY Capital & reserves attributable to equity holders of the parent Share capital 79 79 Other reserves 2,783 2,783 Retained earnings 3.3a 1,034 17 42 (9) 130 180 1,214 ------- ------ ------ ------ ------ ----- ------- 3,896 17 42 (9) 130 180 4,076 Minority interest 1 1 ------- ------ ------ ------ ------ ----- ------- Total equity 3,897 17 42 (9) 130 180 4,077 ---------------- ----- ======= ====== ====== ====== ====== ===== ======= LIABILITIES Non-current liabilities Creditors due after one year 10 10 Provisions for liabilities and charges 5 5 ------- ------ ------ ------ ------ ----- ------- 15 15 ------- ------ ------ ------ ------ ----- ------- Current Liabilities Payables/credi tors due < 1 year 3.3d 1,712 (130) (130) 1,582 Current income tax liabilities 157 (4) (4) 153 Borrowings 9 9 Provisions for liabilities and charges 3.3b 0 13 13 13 -------- ------- ------- ------- ------- ------ -------- 1,878 9 (130) (121) 1,757 -------- ------- ------- ------- ------- ------ -------- Total liabilities 1,893 9 (130) (121) 1,772 ======== ======= ======= ======= ======= ====== ======== -------- ------- ------- ------- ------- ------ -------- Total equity and liabilities 5,790 17 42 0 0 59 5,849 -------------- -------- ------- ------- ------- ------- ------ -------- 3.3 Explanation of Adjustments for the year ended December 2004 a) IAS 38 Intangible Assets IAS 38 requires an intangible asset with a finite useful life to be amortised over its expected life and tested for impairment whenever there is an indication that the intangible asset may be impaired (such as if losses are made). Goodwill represents the remaining unidentifiable intangible assets of an acquisition after deducting the identifiable intangibles. Goodwill is not amortised from transition and is subject to annual impairment testing. Goodwill amortisation under UK GAAP of £14,000, which includes a charge of £17,000 and a release of £3,000 (against negative goodwill), for the year has been reversed. This increases the profit before and after tax by £14,000. Under the transitional arrangements the total value of negative Goodwill as at 1 January 2004, £45,000, has been written back to reserves. b) IFRS 2 Share Based Payment The following adjustments have been made for the year to 31 December 2004: UK GAAP IFRS 2 Total adjustment Share Option Schemes - (13,000) (13,000) Impact on profit before tax - (13,000) (13,000) Tax - 4,000 4,000 Impact on profit after tax - (9,000) (9,000) This adjustment decreases profit after tax by £9,000. c) IAS 12 Deferred Tax The deferred tax liability on undistributed reserves remain unchanged for the year. d) IAS 10 Events After the Balance Sheet Date The final dividend in respect of 2004 of £130,000 is not recognised at the balance sheet date under IFRS. 4. Earnings Per Share Due to the small scale of the adjustment the basic and diluted earnings per share as at 31 December 2004 remain unchanged. 5. Accounting Policies to be adopted from 1 January 2005 Basis of Accounting The Group accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The 2005 financial statements will be the Group's first consolidated financial statements prepared under IFRS, with a transition date of 1 January 2004. Consequently, the comparative figures for 2004 and the Group's balance sheet as at 1 January 2004 have been restated to comply with IFRS. In addition, IFRS1, First time adoption of International Financial Reporting Standards allows certain exemptions from retrospective application of IFRS in the opening balance sheet for 2004 and where these have been used they are explained in the accounting policies below. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investment properties and financial assets. Consolidation The consolidated Accounts include the Accounts of the Company and its subsidiary undertakings, together with the Group's share of results of its associates and joint ventures. A subsidiary is an entity controlled by the Group, where control is the power to govern the financial and operating policies of the entity, so as to obtain benefit from its activities. The results of subsidiary undertakings acquired during the period are included from the date of acquisition of a controlling interest at which date, for the purpose of consolidation, the purchase consideration is allocated between the underlying net assets acquired, including intangible assets other than goodwill, on the basis of their fair value. The results of the subsidiary undertakings that have been sold during the year are included up to date of disposal. The profit or loss is calculated by reference to the net asset value at the date of disposal, adjusted for purchased goodwill previously included on the balance sheet.F.Wray@numiscorp.com Inter company balances and transactions, and any unrealised gains arising from inter company transactions, are eliminated in preparing the consolidated financial statements. Associates Associates comprise investments in undertakings, which are not subsidiary undertakings, where the Group's interest in the equity capital is long term and over whose operating and financial policies the Group exercises a significant influence. They are accounted using the equity method. Joint Ventures A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, which exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the venturer's. The Group's joint ventures are accounted for using the equity method. Goodwill Goodwill arising on acquisition is capitalised and subject to annual impairment reviews. Goodwill represents the excess of the cost of acquisition of a subsidiary or associate over the Group's share of the fair value of identifiable net assets acquired. Goodwill is stated at cost less accumulated impairment losses. Goodwill acquired from 1 May 1998 to 31 December 2003 was capitalised and amortised over its useful economic life. As permitted under IFRS1, in respect of acquisitions prior to 1 January 2004, the classification and accounting treatment of business combinations has not been amended on transition to IFRS. Goodwill previously written off direct to reserves under UK GAAP is not recycled to the income statement on the disposal of the subsidiary or associate to which it relates. Goodwill in respect of subsidiaries is included in intangible assets. In respect of associates, goodwill is included in the carrying value of the investment in the associated company. Turnover Turnover represents commissions and fees receivable excluding VAT. Share-Based Payments The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. For cash-settled share-based payments, which have not vested at 1 January 2005, a liability equal to the portion of the service received is recognised at the current fair value determined at each balance sheet date. The fair value of equity-settled share based payments is measured by the use of Actuarial Binomial option pricing model. The fair value of cash-settled share based payments is measured using the method considered to be most appropriate. Property, Plant and Equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Provision for depreciation is made at rates calculated on a straight-line basis to write-off the assets over their estimated useful lives as follows: Years Leasehold property (less than 50 years) over unexpired term of lease Furniture & office equipment 15% reducing balance Computer equipment 33% reducing balance Intangible Assets other than Goodwill Intangible assets acquired as part of business combinations are valued at fair value on acquisition and amortised over the useful life. The useful lives of these assets are determined on a case by case basis. The useful life of such intangible assets currently ranges from 5 to 10 years. Amortisation charges are spread over the period of the assets useful life. Computer software is carried at cost less accumulated amortisation and is amortised on a straight-line basis over a period ranging from three to five years. Accounting for Leases Assets financed by leasing agreements which give rights approximating to ownership (finance leases) are capitalised in property, plant and equipment. Finance lease assets are initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, then depreciated over their estimated useful lives. The capital elements of future obligations under finance leases are included as liabilities in the balance sheet. Leasing payments comprise capital and finance elements and the finance element is charged to the income statement. The annual payments under all other lease agreements, known as operating leases, are charged to the income statement on a straight line basis over the lease term. Work in Progress Work in progress is stated at the lower of cost and net realisable value. Cost includes an appropriate proportion of overheads. Taxation Taxation is that chargeable on the profits for the period, together with deferred taxation. Deferred taxation is provided in full on temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that it will not reverse in the foreseeable future. A deferred tax asset is recognised only to the extent that is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets and liabilities are not discounted. Deferred tax is determined using the tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Impairment of Assets Assets that have indefinite useful lives are tested annually for impairment, while assets that are subject to amortisation are reviewed for impairment whenever events indicate that the carrying amount may not be recoverable. An impairments loss is recognised to the extent that the carrying value exceeds the higher of the asset's fair value less cost to sell and its value in use. Pension Costs The Group operates a defined contribution individual pension plans. Contributions in respect of defined contribution pension schemes are charged to the income statement when they are payable. Foreign Currency Translation Foreign currency transactions are initially recorded at the exchange rate ruling at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end rates of exchange are recognised in the income statement. Dividends Final dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders, while interim dividend distributions are recognised in the period in which the dividends are declared. Segmental Analysis A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. Repurchase of Share Capital When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a charge to equity. Repurchased shares which are not cancelled are classified as treasury shares and presented as a deduction from total equity. This information is provided by RNS The company news service from the London Stock Exchange

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