Transition Statement
Sutton Harbour Holdings PLC
29 November 2007
Sutton Harbour Holdings plc
('Sutton Harbour' or the 'Company')
Transition Statement to Adopted International Financial Reporting Standards
Introduction
The Group's interim financial statements for the period ended 30 September 2007
have been prepared in accordance with Adopted International Financial Reporting
Standards ('Adopted IFRSs') for the first time.
This statement explains the Group's approach to Adopted IFRS, the new accounting
policies in accordance with Adopted IFRS and the impact that the adoption of
Adopted IFRS has had on the Group's financial statements.
In accordance with the AIM rules, all AIM listed companies must prepare and
present their consolidated financial statements for financial periods commencing
on or after 1 January 2007 in accordance with IFRSs as adopted by the European
Union. The first set of financial statements that the Group will need to
prepare under Adopted IFRS will be for the year commenced 1 April 2007. The
interim statements for the period ended 30 September 2007 are also required to
be prepared under Adopted IFRS. Comparative numbers will also be needed and an
opening balance sheet prepared as at 1 April 2006, the Group's date of
transition to Adopted IFRS.
The Adopted IFRS accounting policies set out below have been applied in
preparing the interim financial statements for the period ended 30 September
2007, the comparative information presented in the interim financial statements
for both the period ended 30 September 2006 and the year ended 31 March 2007 and
in the preparation of the opening balance sheet at 1 April 2006.
In preparing its opening Adopted IFRS balance sheet, the Group has adjusted
amounts reported previously in financial statements prepared in accordance with
its old basis of accounting (UK GAAP). An explanation of how the transition
from UK GAAP to Adopted IFRSs has affected the Group's financial position,
financial performance and cash flows is set out in the tables and notes that
follow.
Accounting policies under Adopted IFRS
Sutton Harbour Holdings plc (the 'Company') is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the 'Group') and equity account the
Group's interest in associates.
The Group financial statements have been prepared and approved by the directors
in accordance with International Financial Reporting Standards as adopted by the
EU ('Adopted IFRSs'). The Company has elected to prepare its parent company
financial statements in accordance with UK GAAP.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in the Group interim financial
statements for the period ended 30 September 2007 and in preparing an opening
Adopted IFRS balance sheet at 1 April 2006 for the purposes of the transition to
Adopted IFRSs.
Judgements made by the directors, in the application of these accounting
policies that have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are discussed in
note 1 of the interim financial statements. Estimates and judgements have not
been changed since the signing of the previous UK GAAP financial statements.
Transition to Adopted IFRSs
The Group is preparing its financial statements in accordance with Adopted IFRS
for the first time and consequently has applied IFRS 1 'First-time Adoption of
International Financial Reporting Standards'. An explanation of how the
transition to Adopted IFRSs has affected the reported financial position,
financial performance and cash flows of the Group is provided below.
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in
the transition period. The following exemption has been taken in the financial
statements:
- Share-based payments - IFRS 2 'Share-based Payment' is being applied only
to equity instruments that were granted after 7 November 2002 that had not
vested by 1 April 2006.
Measurement convention
The financial statements are prepared on the historical cost basis except that
the following assets and liabilities are stated at their fair value: derivative
financial instruments, financial instruments classified as fair value through
the profit or loss and investment property. Non-current assets held for sale
are stated at the lower of previous carrying amount and fair value less costs to
sell.
Basis of consolidation
The consolidated accounts include the accounts of Sutton Harbour Holdings plc
and entities controlled by the Company (its subsidiaries) at each reporting
date. Control exists when the Group has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account. The financial
statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
Associates
Associates are those entities in which the Group has significant influence, but
not control, over the financial and operating policies. The consolidated
financial statements include the Group's share of the total recognised income
and expense of associates on an equity accounted basis, from the date that
significant influence commences until the date that significant influence
ceases. When the Group's share of losses exceeds its interest in an associate,
the Group's carrying amount is reduced to nil and recognition of further losses
is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of an associate. The Group
has a 62% holding in LIFT Investments Limited which, in turn, has a 60% holding
in ReSound (Health) Limited, ReSound (Mount Gould) Limited and ReSound
(Cattedown) Limited. Although the Group has a 62% holding in LIFT Investments
Limited, it only has 50% of the voting rights of the company. The investment in
LIFT Investments Limited has therefore been treated as an associate in
accordance with IAS 28 'Investments in Associates'. The loan to the associate
company is considered to be part of the investment.
Property, plant and equipment
Plant and machinery, fixtures and fittings and aircraft at the date of
transition to Adopted IFRS are stated at cost less accumulated depreciation and
impairment losses.
Land and buildings were revalued under UK GAAP and the Group has elected to keep
revaluing these assets to fair value under Adopted IFRS. At the date of
transition, these assets have been brought onto the balance sheet at fair value.
Property, plant and equipment can be divided into the following classes:
- Freehold land and buildings
- Long leasehold land and buildings
- Freehold investment property in the course of construction
- Plant and machinery
- Fixtures and fittings
- Aircraft
Freehold and long leasehold land and buildings
Freehold and long leasehold land and buildings fall into three categories:
i) Freehold properties that are mainly owner occupied, or that are
an integral part of the Group's harbour operations
ii) Specialised freehold properties that are an integral part of the
Group's harbour operations (fish market, harbour lock and quays)
iii) Leasehold properties that are mainly owner occupied and are an
integral part of the Group's airport operations.
The properties are initially recorded at cost and are subsequently revalued and
stated at their fair value less accumulated depreciation and impairment losses.
Fair value is based on regular valuations by either an external independent
valuer or an internal valuer and is determined from market-based evidence by
appraisal. Specialised properties have no market-based value because of their
specialised nature. A depreciated replacement cost valuation is used instead.
Valuations are performed with sufficient regularity to ensure that the fair
value of a revalued asset does not differ materially from its carrying amount.
The latest revaluation was incorporated in the accounts for the year ended 31
March 2006. This valuation was an internal valuation. The valuation was
undertaken in accordance with the Valuation and Appraisal Manual of the Royal
Institution of Chartered Surveyors. A full external independent valuation
performed by Stratton Creber Commercial was incorporated in the accounts for the
year ended 31 March 2004. Both valuations were carried out by RICS qualified
surveyors.
Any revaluation surplus is credited to the revaluation reserve except to the
extent that it reverses a decrease in the carrying value of the same asset
previously recognised in the income statement, in which case the increase is
recognised in the income statement. Any revaluation deficits are recognised in
the income statement, except to the extent of any existing surplus in respect of
that asset in the revaluation reserve.
Freehold investment property in the course of construction
Property that is being constructed for future use as investment property is
accounted for as property, plant and equipment until it is ready for use, at
which time it is remeasured to fair value and reclassified as investment
property. Any gain or loss arising on remeasurement is recognised in the income
statement.
Plant and machinery, fixtures and fittings and aircraft
Plant and machinery, fixtures and fittings and aircraft are all stated at cost
less accumulated depreciation and impairment losses.
Leased assets
Leases in which the Group assumes substantially all the risks and rewards of
ownership of the leased asset are classified as finance leases. Where buildings
are held under finance leases the accounting treatment of leases of any
associated land is considered separately from that of the buildings. Leased
assets acquired by way of finance lease are stated initially 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, less accumulated depreciation and impairment
losses. Leased properties are subsequently revalued to their fair value.
The treatment of assets held under operating leases where the lessor maintains
the risks and rewards of ownership is described in the operating lease payments
accounting policy below.
Depreciation
Depreciation is charged to the income statement over the estimated useful lives
of each part of an item of property, plant and equipment. Where parts of an item
of property, plant and equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment. Land is not
depreciated. The Group have a policy of depreciating freehold buildings but the
charge is not material so is not included in the financial statements. The
estimated useful lives and depreciation basis of assets are as follows:
leasehold buildings (straight line) remaining period of lease
plant and machinery (reducing balance)10% to 25%
fixtures and fittings (straight line) 10 - 25 years
rotable aircraft components (straight line) 10 years
dash 8 aircraft (straight line) 6 years
dash 8 maintenance (straight line) over period until next overhaul
The cost of major maintenance overhauls on owned aircraft is capitalised to the
balance sheet and amortised over the period until the next overhaul.
For aircraft held under operating leases, provision is made for major
maintenance overhauls based on estimated costs.
Intangible assets
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses. Amortisation is charged to the
income statement on a straight-line basis over the estimated useful lives of the
assets. The estimated useful lives are as follows:
Landing rights 20 years
Licences 20 years
Investment property
Investment properties are properties which are held either to earn rental income
and/or for capital appreciation. Investment properties are initially measured at
cost and subsequently revalued to fair value which reflects market conditions at
the balance sheet date. Any gains or losses arising from changes in fair value
are recognised in the income statement in the period in which they arise. Fair
value is the estimated amount for which a property could be exchanged on the
date of valuation between a willing buyer and a willing seller, in an arm's
length transaction, after proper marketing, in which both parties had acted
knowledgeably, prudently and without compulsion.
Some properties are held both to earn rental income and for the supply of goods
and services and administration purposes. Where the different portions of the
property cannot be sold separately, the property is accounted for as an
investment property only if an insignificant portion is held for the production
and supply of goods and services and administration purposes.
The portfolio is valued on an annual basis by either an internal valuer or an
external independent valuer, both of whom are RICS qualified. The valuer will
also have recent experience in the location and category of property being
valued.
The valuations, which are supported by market evidence, are prepared by
considering the aggregate of the net annual rents receivable from the properties
and where relevant, associated costs. A yield which reflects the specific risks
inherent in the net cash flows is then applied to the net annual rentals to
arrive at the property valuation.
Rental income from investment property is accounted for as described in the
revenue accounting policy.
Investment property that is redeveloped for continued future use as an
investment property remains classified as an investment property while the
redevelopment is being carried out. While redevelopment is taking place, the
property will continue to be valued on the same basis as an investment property.
All tenant leases have been examined to determine if there has been any transfer
of the risks and rewards of ownership from the Group to the tenant in accordance
with IAS 17 'Leases'. All tenant leases were determined to be operating leases.
Accordingly, all the Group's leased properties are classified as investment
properties and included in the balance sheet at fair value.
In accordance with IAS 40 'Investment Property', no depreciation is provided in
respect of investment properties.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories and bringing them to their existing location and
condition.
Inventories - land and properties held for resale
Land identified for development and sale, and properties under construction or
development and held for resale, are included in current assets at the lower of
cost and net realisable value. Cost includes all expenditure related directly to
specific projects and an allocation of fixed and variable overheads incurred in
the Group's contract activities based on normal operating capacity.
Construction contract debtors
Construction contract debtors are stated at cost plus profit recognised to date
(see the revenue accounting policy) less a provision for foreseeable losses and
less progress billings.
Cash and cash equivalents
Cash in the balance sheet comprises cash at bank and in hand. Bank overdrafts
that are repayable on demand and form an integral part of the Group's cash
management are included as a component of cash and cash equivalents for the
purpose only of the statement of cash flows. Offset arrangements across group
businesses are applied to arrive at the net overdraft figure.
Non-current assets held for sale
A non-current asset or a group of assets containing a non-current asset is
classified as held for sale if its carrying amount will be recovered principally
through sale rather than through continuing use, it is available for immediate
sale and sale is highly probable within one year. Immediately before
classification as held for sale the asset is remeasured and thereafter measured
at the lower of carrying amount and fair value less costs to sell with any
adjustments taken to the income statement.
Impairment
The carrying amounts of the Group's assets other than investment property and
inventories are considered at each balance sheet date to determine whether there
is any indication of impairment. If any such indication exists, the asset's
recoverable amount is estimated. Where the carrying amount of an asset exceeds
its recoverable amount it is impaired and is written down to its recoverable
amount. Impairment losses are recognised in the income statement.
The recoverable amount of the Group's financial assets is calculated as the
present value of estimated future cash flows, discounted at the original
effective interest rate (i.e., the effective interest rate computed at initial
recognition of these financial assets). The recoverable amount of non-financial
assets is the higher of their fair value less costs to sell and their value in
use. Value in use is the present value of the future cash flows expected to be
derived from the asset.
No indication of impairment existed at the date of transition, 1 April 2006, and
no assets have been impaired since that date.
Derivative financial instruments and hedging
Derivative financial instruments, comprising foreign exchange derivatives and
fuel hedging derivatives are recognised at fair value. Derivatives are carried
as assets when the fair value is positive and as liabilities when the fair value
is negative. The fair value of forward exchange and fuel hedging contracts is
their quoted market price at the balance sheet date.
The gain or loss on remeasurement to fair value is recognised immediately in
profit or loss. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the item
being hedged. For those derivatives designated as hedges and for which hedge
accounting is desired, the hedging relationship is documented at its inception.
This documentation identifies the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how effectiveness will be
measured throughout its duration. Such hedges are expected at inception to be
highly effective.
- Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the
variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the
derivative financial instrument is recognised directly in the hedging reserve.
Any ineffective portion of the hedge is recognised immediately in the income
statement.
The Group does not have any hedges that qualify for cash flow hedge accounting.
- Fair value hedges
It is not the Group's policy to use fair value hedges.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis.
Own shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised as
a deduction from equity.
Revenue
Revenue comprises the fair value of the consideration received or receivable,
net of value-added-tax, rebates and discounts. Revenue is recognised once the
value of the transaction can be reliably measured and the significant risks and
rewards of ownership have been transferred. The following criteria must also be
met before revenue is recognised:
Rent and marina and berthing fees
Rent and marina and berthing fees are typically invoiced in advance and are
accounted for as deferred income and recorded to revenue during the period to
which they relate.
Lease incentives and costs associated with entering into tenant leases are
amortised over the lease term.
Other marine related revenue
Fuel sales, landing dues and other ancillary incomes, are recorded to revenue at
the point of sale.
Airline
Advance flight bookings, net of passenger taxes, are treated as deferred income
in the balance sheet until the service has been provided, at which point the
income is recognised as revenue in the income statement. Ancillary income
including credit card fees, excess baggage charges, sporting equipment fees,
change fees, in-flight sales of food and beverages, commissions received from
products and services sold such as hotel and car hire and travel insurance less
chargebacks, are recognised in revenue on the date that the right to receive the
consideration occurs. For commission received on hotel bookings and car hire,
the date that the right to receive the consideration occurs is the date that the
hotel or car booking becomes non-refundable. As the airline is acting as an
agent, the only revenue recognised on these bookings is the commission earned.
Airport
The majority of airport income is received from aircraft landing fees and fuel
sales. Fuel sales are recognised at the point of sale. Aircraft landing fees
are levied as the aircraft lands and are recognised as income immediately.
Construction contracts and project management services
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
at the balance sheet date. The stage of completion of a contract is determined
by an internal survey of the work performed. Where the contract outcome cannot
be measured reliably, revenue is recognised only to the extent of the expenses
recognised that are recoverable. When it is probable that total contract costs
will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
This policy also covers the treatment of profit arising from the provision of
project management services. The stage of completion is determined by reference
to achievement of milestone events. Fees for management services may be
recognised to the extent that they are non-refundable and the milestone events
which triggered them becoming receivable have passed.
Property sales
Revenue from property sales is recognised when the significant risks and rewards
of ownership and effective control of the asset have passed to the buyer. This
will be at the point of legal completion.
Government grants
Government grants are recognised when there is reasonable assurance that the
grant will be received and that the Group will comply with all conditions
associated with the grant. Government grants in respect of capital expenditure
are credited to a deferred income account and released to the income statement
over the estimated useful economic lives of the assets to which they relate.
Grants of a revenue nature are credited to income so as to match them with the
expenditure to which they relate.
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease
expense over the term of the lease.
Net financing costs
Net financing costs comprise interest payable and interest receivable on funds
invested. Interest income and interest payable is recognised in profit or loss
as it accrues, using the effective interest method. The fair value movement of
derivative financial instruments and the ineffective portion of cash flow hedges
are also included within net financing costs.
Borrowing costs
Borrowing costs are capitalised on qualifying assets. A qualifying asset is one
that takes more than twelve months to complete. The borrowing rate applied is
that specifically applied to fund the development. In the case of bank
borrowings this is the weighted average cost of debt capital. Capitalisation
ceases when substantially all the activities that are necessary to get the
property ready for use are complete.
Employee benefits: defined contribution plans
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement as incurred.
Employee benefits: share-based payment transactions
The share option programme allows Group employees to acquire shares of the
ultimate parent company; these awards are granted by the ultimate parent. The
share-based payments are all equity-settled and are measured at fair value. The
fair value of options granted is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using
the Black-Scholes option pricing model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest
except where forfeiture is due only to share prices not achieving the threshold
for vesting.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the income statement.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
For aircraft held under operating leases, provision is made for major
maintenance overhauls that are contractually required based on estimated costs.
Taxation
Tax on the profit for the year comprises current and deferred tax. 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.
Current tax is the expected tax payable on the taxable profit for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
Deferred tax is recognised on all temporary differences except:
- on the initial recognition of goodwill; or
- on the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction,
affects neither accounting profit nor taxable profit.
Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability at
that date if they have been declared. Unpaid dividends that have not yet been
declared are disclosed in the notes to the financial statements.
Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares including share options granted to
employees.
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing related products or services (business segment), or in providing
products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those of
other segments. The Group's primary format for segment reporting is based on
business segments.
Restatement of the opening Consolidated Balance Sheet as at 1 April 2006
--------------1 April 2006--------------
UK GAAP Effect of Adopted
transition to IFRSs
Adopted IFRSs
Note £000 £000 £000
Non-current assets
Property, plant and equipment a 42,008 42,008
Intangible assets 611 611
Investment property 14,651 14,651
Investment in joint venture
Share of gross assets l 7,952 (7,952) -
Share of gross liabilities l (8,006) 8,006 -
Investment in associate b,l - 717 717
Other financial assets c - 130 130
57,216 901 58,117
Current assets
Inventories 3,145 3,145
Trade and other receivables b 4,939 (771) 4,168
Cash and cash equivalents 4 4
Non-current assets held for sale - -
8,088 (771) 7,317
Total assets 65,304 130 65,434
Current liabilities
Bank overdraft c,d 6,399 (896) 5,503
Other interest-bearing loans and borrowings d - 1,026 1,026
Trade and other payables e,l 4,033 4,033
Deferred income 3,240 3,240
Deferred government grants 35 35
Tax payable n 348 348
14,055 130 14,185
Non-current liabilities
Other interest-bearing loans and borrowings 10,532 10,532
Deferred income 10 10
Deferred government grants 293 293
Deferred tax liabilities m 2,396 3,698 6,094
13,231 3,698 16,929
Total liabilities 27,286 3,828 31,114
Net assets 38,018 (3,698) 34,320
Equity and reserves
Share capital 6,086 6,086
Share premium 2,797 2,797
Revaluation reserve m 13,056 (2,134) 10,922
Investment property revaluation reserve h 9,435 (9,435) -
Other reserves o,p 274 (23) 251
Retained earnings h,m,p 6,370 7,894 14,264
Total equity 38,018 (3,698) 34,320
Restatement of the comparative Consolidated Balance Sheet as at
30 September 2006
--------30 September 2006---------
UK GAAP Effect of Adopted
transition to IFRSs
Adopted IFRSs
Note £000 £000 £000
Non-current assets
Property, plant and equipment a,i 32,684 32,684
Intangible assets 594 594
Investment property i,j 14,736 14,736
Investment in joint venture
Share of gross assets l 8,362 (8,362) -
Share of gross liabilities l (8,419) 8,419 -
Investment in associate b,l - 799 799
Other financial assets c - 130 130
47,957 986 48,943
Current assets
Inventories i 15,804 (11,400) 4,404
Trade and other receivables b 4,575 (856) 3,719
Cash and cash equivalents 3 3
Non-current assets held for sale j - 13,600 13,600
20,382 1,344 21,726
Total assets 68,339 2,330 70,669
Current liabilities
Bank overdraft c,d 9,294 (1,735) 7,559
Other interest-bearing loans and borrowings d - 1,865 1,865
Trade and other payables e,f,l 2,606 (19) 2,587
Deferred income 2,739 2,739
Deferred government grants g 4 18 22
Tax payable n 618 618
15,261 129 15,390
Non-current liabilities
Other interest-bearing loans and borrowings 11,120 11,120
Deferred government grants g 391 (18) 373
Provisions f - 19 19
Deferred tax liabilities m 2,692 4,189 6,881
14,203 4,190 18,393
Total liabilities 29,464 4,319 33,783
Net assets 38,875 (1,989) 36,886
Equity and reserves
Share capital 6,086 6,086
Share premium 2,797 2,797
Revaluation reserve m 13,056 (2,093) 10,963
Investment property revaluation reserve h 9,435 (9,435) -
Other reserves o,p 314 (63) 251
Retained earnings h,i,m,p 7,187 9,602 16,789
Total equity 38,875 (1,989) 36,886
Restatement of the comparative Consolidated Balance Sheet as at 31 March 2007
-----------31 March 2007----------
UK GAAP Effect of Adopted IFRSs
transition
to Adopted
IFRSs
Note £000 £000 £000
Non-current assets
Property, plant and equipment a 33,342 33,342
Intangible assets 576 576
Investment property 15,923 15,923
Investment in joint venture
Share of gross assets l 8,956 (8,956) -
Share of gross liabilities l (9,023) 9,023 -
Investment in associate b,l - 828 828
Other financial assets c - 130 130
49,774 1,025 50,799
Current assets
Inventories 3,898 3,898
Trade and other receivables b 6,377 (895) 5,482
Cash 6 6
Non-current assets held for sale - -
Derivatives k - 14 14
10,281 (881) 9,400
Total assets 60,055 144 60,199
Current liabilities
Bank overdraft c,d 7,000 (939) 6,061
Other interest-bearing loans and borrowings d - 1,069 1,069
Trade and other payables e,f 3,778 (40) 3,738
Deferred income 3,336 3,336
Deferred government grants g 3 18 21
Tax payable n 306 306
Derivatives k - 7 7
14,423 115 14,538
Non-current liabilities
Other interest-bearing loans and borrowings 2,293 2,293
Deferred government grants g 351 (18) 333
Provisions f - 40 40
Deferred tax liabilities m 2,828 3,383 6,211
5,472 3,405 8,877
Total liabilities 19,895 3,520 23,415
Net assets 40,160 (3,376) 36,784
Equity and reserves
Share capital 6,112 6,112
Share premium 2,843 2,843
Revaluation reserve m 13,056 (2,019) 11,037
Investment property revaluation reserve
h 9,435 (9,435) -
Other reserves o,p 348 (97) 251
Retained earnings h,k,m,p 8,366 8,175 16,541
Total equity 40,160 (3,376) 36,784
Notes to the restatement of equity from UK GAAP to Adopted IFRS:
Presentation adjustments:
a) Under Adopted IFRS, paintings and antiques held by the Group have been
reclassified as property, plant and equipment.
b) The loan to the associate company of £895,000 as at 31 March 2007 (30
September 2006: £856,000, 1 April 2006: £771,000) has been reclassified from
debtors due in more than one year to investment in associate within non-current
assets.
c) The Group has given guarantees and placed a bond in favour of BEC
Aviations to the sum of £130,000. Previously, the bond was shown as a deduction
from bank overdrafts. The bond has now been shown within non-current financial
assets.
d) Under Adopted IFRS, loans of £1,069,000 as at 31 March 2007 (30 September
2006: £1,865,000, 1 April 2006: £1,026,000) are disclosed separately from bank
overdrafts. Under UK GAAP, they were shown together under the caption 'bank
overdraft and loans'.
e) Under Adopted IFRS, trade and other payables includes trade creditors,
accruals, VAT and social security costs and other creditors. Deferred income
and corporation tax payable are shown separately on the face of the balance
sheet.
f) Provisions for aircraft maintenance overhauls were previously included
within accruals. It has been decided it is more appropriate to show them
separately as provisions on the face of the balance sheet.
g) Deferred government grants have been split between current liabilities
and non-current liabilities.
Numerical adjustments:
h) Under Adopted IFRS, the surplus or deficit arising on the revaluation of
investment properties is recorded in the income statement as opposed to the
investment property revaluation reserve under UK GAAP. The investment property
revaluation reserve under UK GAAP is therefore aggregated with retained earnings
under Adopted IFRS.
i) Under Adopted IFRS, an investment property in the course of construction
should be classified as property, plant and equipment in accordance with IAS 16
'Property, Plant and Equipment' until construction is complete. Accordingly,
£11,400,000 has been reclassified from inventories to property, plant and
equipment in the six months to 30 September 2006.
When an investment property is ready for use, it is reclassified from property,
plant and equipment to investment property and remeasured to fair value. Any
surplus or deficit on remeasurement is recorded in the income statement. A
completed investment property of cost £11,400,000 was moved from property, plant
and equipment to investment property in the six months to 30 September 2006.
The property was then remeasured to it's fair value of £13,600,000 and the
£2,200,000 surplus was recorded in the income statement.
j) Under Adopted IFRS, certain assets held for sale meet the definition of
non-current asset held for sale. Accordingly, in the period to 30 September
2006, £13,600,000 has been reclassified from investment property to non-current
asset held for sale.
k) The fair value of derivatives has been recorded in the financial
statements for the year ended 31 March 2007. A financial asset of £14,000 and a
financial liability of £7,000 have been recorded in the balance sheet with the
corresponding £14,000 gain and £7,000 loss being shown in the income statement
within financial income and financial expense respectively. Under UK GAAP, the
fair values were disclosed but not included in the financial statements as the
values were immaterial. Under Adopted IFRS, it has been decided to include the
fair values in the financial statements.
l) Under UK GAAP, the Group's investment in LIFT Investments Limited was
treated as a joint venture. For an investment to be classified as a joint
venture, UK GAAP requires that 'decisions on financial and operating policies
essential of that venture must require each venturer's consent'. All decisions
made by the Board of the LIFT Investments Limited are, as a matter of fact, made
on a unanimous basis.
Although the Group's economic interest in Lift is 62%, the unanimous voting
arrangements that in fact operated at board level meant that under FRS 9 '
Associates and joint ventures' it was appropriate to regard the interest as a
joint venture for UK GAAP purposes. However, Adopted IFRS focuses more on the
precise terms of relevant agreements to establish whether control, joint control
or significant influence exists. Accordingly it is necessary to examine the
terms of the LIFT shareholder agreement to determine the appropriate accounting
treatment. As the terms of the shareholder agreement provide for majority
voting on key decisions affecting the business, and the Group has 50% of the
voting rights, it has neither control nor joint control under Adopted IFRS. It
has significant influence and hence has been treated as an associated company.
As at 1 April 2006, 30 September 2006, 31 March 2007 and 30 September 2007, the
associate was in a net liability position. The Group's share of the associate's
net liabilities has been shown as a deduction from the loan to the associate,
which is considered as part of the investment in the associate. The Group's
share of the associate's losses have been shown as one line in the income
statement under Adopted IFRS.
m) Under Adopted IFRS, deferred tax liabilities are provided on the gain
that would crystallise if an investment property or other asset was sold. UK
GAAP required that this potential liability was disclosed but not provided in
the balance sheet. The deferred taxation on investment property is recorded in
the income statement and the deferred taxation on property, plant and equipment
is charged to the revaluation reserve. The revaluation reserve has been
preserved for owner-occupied property carried at revalued amount. The amount of
this reserve on transition was the difference between the fair value and the
Adopted IFRS cost.
n) Current tax is still calculated based on the UK GAAP profit. There is
therefore no adjustment made to the current tax charge in the income statement
or the corporation tax liability in the balance sheet in translating the
accounts to Adopted IFRS.
o) Under UK GAAP, a merger reserve and a capital reserve were created on the
acquisition of a subsidiary. Under Adopted IFRS, the two merger reserves have
been combined. No adjustment has been made to them, as they arose on business
combinations that were not required to be restated on transition.
p) Under UK GAAP, the share-based payment reserve was shown within other
reserves. Under Adopted IFRS, the share-based payment reserve has been
aggregated with retained earnings.
Reconciliation of shareholders equity from UK GAAP to Adopted IFRS
Note As at 1 As at 30 As at 31
April September March
2006 2006 2007
£'000 £'000 £'000
Shareholders equity under UK GAAP 38,018 38,875 40,160
Fair value adjustments of investment property a - 2,200 -
Fair value movement on financial instruments b - - 7
Deferred taxation on properties that was not provided for
under UK GAAP c (3,698) (4,189) (3,383)
Shareholders equity under Adopted IFRS 34,320 36,886 36,784
Notes to the reconciliation of shareholders equity from UK GAAP to Adopted IFRS:
a) See note i above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
b) See note k above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
c) See note m above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
Restatement of the Consolidated Income Statement for the six months to 30
September 2006
UK GAAP Effect of Adopted IFRSs
transition to
Note Adopted IFRSs
£000 £000 £000
Revenue a 16,774 (146) 16,628
Less share of joint ventures revenue a (146) 146 -
Group revenue 16,628 - 16,628
Cost of sales e,f (13,707) (7) (13,714)
Gross profit 2,921 (7) 2,914
Other operating income f - 11 11
Administrative expenses (503) (503)
Other operating expenses e - (4) (4)
Fair value adjustments of investment property b - 2,200 2,200
Share of operating loss in joint ventures a (4) 4 -
Operating profit before net financing costs 2,414 2,204 4,618
Financial income 60 60
Financial expense (472) (472)
Share of financial expense of joint venture a - - -
Net financing costs (412) - (412)
Share of loss of associate using the equity
accounting method a - (4) (4)
Profit before tax 2,002 2,200 4,202
Taxation c (600) (533) (1,133)
Profit for the period attributable to the equity
shareholders 1,402 1,667 3,069
Restatement of the Consolidated Income Statement for the year to 31 March 2007
UK GAAP Effect of Adopted IFRSs
transition to
Note Adopted IFRSs
£000 £000 £000
Revenue a 30,688 (499) 30,189
Less share of joint ventures revenue a (499) 499 -
Group revenue 30,189 - 30,189
Cost of sales f (26,297) (22) (26,319)
Gross profit 3,892 (22) 3,870
Other operating income f - 22 22
Administrative expenses (954) (954)
Other operating expenses g - (59) (59)
Fair value adjustments of investment property g - 2,200 2,200
Share of operating profit in joint ventures a 288 (288) -
Profit on sale of fixed assets g 2,141 (2,141) -
Operating profit before net financing costs 5,367 (288) 5,079
Financial income d 105 14 119
Financial expense d (958) (7) (965)
Share of financial expense of joint venture a (302) 302 -
Net financing costs (1,155) 309 (846)
Share of loss of associate using the equity
accounting method a - (14) (14)
Profit before tax 4,212 7 4,219
Taxation c (1,266) 200 (1,066)
Profit for the period attributable to the equity
shareholders 2,946 207 3,153
Notes to the restatement of profit from UK GAAP to Adopted IFRS:
a) See note l above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
b) See note i above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
c) See note m above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
d) See note k above in the notes to the restatement of equity from UK GAAP to
Adopted IFRS.
e) Loss on sale of fixed assets of £4,000 has been shown separately from cost
of sales for the six month period to 30 September 2006.
f) The release of government grants to the income statement has been shown
separately from cost of sales.
g) Profit on sale of fixed assets totalling £2,141,000 as at 31 March 2007
has been split between fair value adjustments of investment property of
£2,200,000 and a loss on sale of fixed assets of £59,000 shown within other
operating expenses. The fair value adjustment to investment property of
£2,200,000 is discussed in note i above in the notes to the restatement of
equity from UK GAAP to Adopted IFRS.
Explanation of material adjustments to the cash flow statement comparatives for
31 March 2007
The transition from UK GAAP to Adopted IFRS has no effect upon the reported cash
flows generated by the Group. The Adopted IFRS cash flow statement is presented
in a different format from that required under UK GAAP with cash flows split
into three categories of activities - operating activities, investing activities
and financing activities.
In preparing the cash flow statement under Adopted IFRS, cash and cash
equivalents include cash at bank and bank overdrafts. The Group has given
guarantees and placed a bond in favour of BEC Aviations to the sum of £130,000.
Under UK GAAP, the bond was classified as part of bank overdrafts. Under
Adopted IFRS, the bond does not meet the definition of cash and cash equivalents
and therefore has not been included within cash and cash equivalents in the cash
flow statement.
Key differences for Sutton Harbour Holdings plc between UK GAAP and Adopted IFRS
This section sets out the main impacts of Adopted IFRS. This information has
not been audited and is provided for information purposes only.
Investment property revaluations
Under UK GAAP, any surplus or deficit arising from the revaluation of investment
properties was recorded in the investment property revaluation reserve on the
balance sheet.
Under Adopted IFRS, any surplus or deficit arising from the revaluation of
investment properties is recorded directly in the income statement.
The investment property portfolio was last revalued as at 31 March 2006
increasing the investment property revaluation reserve to £9,435,000. This
reserve has been aggregated with retained earnings under Adopted IFRS and has
increased the retained earnings reserve by £9,435,000.
All future revaluations of the investment property portfolio will be recorded
directly in the income statement. This may lead to future profits being more
volatile.
Treatment of the sale of the office building occupied by the Department for Work
and Pensions
Under UK GAAP, the building was held at cost during construction. When it was
ready for use it was reclassified as an investment property. The property was
held as an investment property for a short period of time during which the
investment property portfolio was not revalued. The decision was then made to
sell the building and in the second six months of the year the building was sold
for a profit of £2,200,000. The profit was shown in the profit and loss account
in the second half of the year as 'profit on sale of fixed assets'.
Under Adopted IFRS, the building is held at cost in accordance with IAS 16 '
Property, Plant and Equipment' while being constructed. Once the property is
ready for use it is transferred to investment property and, in accordance with
IAS 40 'Investment Property', is remeasured to it's fair value of £13,600,000.
The fair value uplift of £2,200,000 is recorded in the income statement in the
first six months of the year as 'fair value adjustments of investment property'.
The transition from UK GAAP to Adopted IFRS has had the effect of bringing the
profit from the sale of the building of £2,200,000 forward from the second half
of the year ended 31 March 2007 to the first six months of the year. The profit
has also been reclassified from 'profit on the sale of fixed assets' to 'fair
value adjustments of investment property'.
Deferred taxation
Under Adopted IFRS, deferred tax liabilities are provided on the gain that would
crystallise if an investment property or other asset was sold. UK GAAP required
that this potential liability was disclosed but not provided in the balance
sheet. The deferred taxation on investment properties is recorded in the income
statement and the deferred taxation on property, plant and equipment is charged
to the revaluation reserve.
This has had the effect of increasing the deferred tax liability in the balance
sheet from £2,828,000 under UK GAAP to £6,211,000 under Adopted IFRS as at 31
March 2007.
Treatment of the Group's investment in LIFT Investments Limited
Under UK GAAP, the investment in LIFT Investments Limited was treated as a joint
venture. The Group's share of the joint ventures gross assets and gross
liabilities was disclosed on the face of the balance sheet and the Group's share
of the joint ventures operating profit and interest payable was shown on the
face of the profit and loss account.
Under Adopted IFRS, for the reasons explained above, the investment is treated
as an associate. The Group's share of the associates losses is shown on the
face of the income statement. This loss reduces the Group's interest in the
associate on the face of the balance sheet.
This information is provided by RNS
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