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Elementis PLC (ELM)

  Print      Mail a friend       Annual reports

Thursday 31 March, 2005

Elementis PLC

IFRS statement

Elementis PLC
31 March 2005


31 March 2005

                                 ELEMENTIS plc

       STATEMENT ON THE TRANSITION TO INTERNATIONAL ACCOUNTING STANDARDS


Introduction

Elementis plc will be reporting its financial results in accordance with
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) with effect from 1 January 2005. This statement presents the
results for the six months ended 30 June 2004 and the year ended 31 December
2004 restated to an IFRS basis.

2004 Full Year Highlights

   • Sales unchanged at £389.2 million
   • Underlying operating profit of £11.5 million1 (UK Gaap: £11.8 million)
   • Profit before tax of £3.3 million (UK Gaap: loss of £7.8 million)
   • Underlying earnings per share 1.3p (UK Gaap: 1.4p)
   • Group cash flow and net year end borrowings unchanged
   • Net assets increased by £11.4 million and net year end gearing 29 per
     cent2 (UK Gaap: 30 per cent)
     
1.   Exceptional items are not defined under IFRS. Underlying profits exclude 
     those items classified as exceptional under UK Gaap, together with any
     goodwill amortisation charged under UK Gaap.

2.   The ratio of net borrowings to shareholders' funds plus net borrowings.

Brian Taylorson, Finance Director of Elementis plc, said:
'The main impact of the transition to IFRS is that goodwill arising on
acquisition will no longer be amortised over 20 years. Profit before taxation in
2004 is increased by £11.1 million mainly due to this change. Underlying
earnings per share which excluded goodwill amortisation and items classified as
exceptional under UK Gaap is 1.3 pence per share under IFRS compared to
1.4 pence per share under UK Gaap'.

                                - Ends -

On 31 March 2005 at 14.30 BST, Elementis will be holding a conference call for
analysts and investors to discuss the implications of the transition to IFRS on
the reported results. The conference call will be hosted by Brian Taylorson,
Finance Director, and Stuart Kilpatrick, Group Financial Controller, and UK and
international callers can participate by calling +44 (0)1452 561263. Should you
be unable to attend this conference call, a replay facility will be available
for 7 days on 0845 245 5205 from the UK or on +44 (0)1452 550 000
internationally, access code 491 0800#.

Enquiries

Elementis                                        +44 (0)1784 227000
Brian Taylorson Finance Director
Hilary Reid Evans Head of Investor Relations and Corporate Communications

Brunswick                                        +44 (0)20 7404 5959
Kate Holgate
Wendel Verbeek
Laure Korenian-Chabert

Restatement of financial information for International Accounting Standards and
International Financial Reporting Standards

Introduction

Elementis plc currently prepares its primary financial statements under UK
Generally Accepted Accounting Practice (UK GAAP). From 1 January 2005 the Group
is required to prepare its consolidated financial statements in accordance with
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS)* and Interpretations as adopted by the European Union (EU). The
first results prepared under IFRS will be the Group's interim results for the
six months ending 30 June 2005. The Group's first Annual Report under IFRS will
be for 2005.

Basis of preparation

The restated financial information has been prepared in accordance with IFRS
under the assumption that all existing standards in issue from the International
Accounting Standards Board (IASB) will be fully endorsed by the EU. The failure
of the EU to endorse all of these standards for financial reporting in 2005
could result in changes to the financial information presented in this document.
The financial information for the six months ended 30 June 2004 and for the full
year ended 31 December 2004, as prepared on the above basis, is unaudited.


IFRS 1 exemptions

IFRS 1 'First Time Adoption of International Financial Reporting Standards',
determines that the transition date for Elementis plc will be 1 January 2004. It
permits those companies adopting IFRS for the first time to take certain
exemptions from the full requirements of IFRS during the transition period.
Elementis plc has taken the following key exemptions:
     
   • Business combinations

     The Group has not restated business combinations prior to the transition 
     date to an IFRS basis.

   • Financial Instruments

     The Group has taken the exemption not to restate comparatives for IAS 32 
     and IAS 39. As a result, the information in this restatement and the 
     comparative information in the 2005 Financial Statements will be presented 
     on the existing UK GAAP basis.

   • Cumulative translation differences

     Under IAS 21, on disposal of a business, the cumulative amount of exchange
     differences previously recognised directly in equity for that business are
     charged or credited to the income statement as part of the profit or loss 
     on disposal. The Group has adopted the exemption allowing these cumulative
     translation differences to be reset to zero at the transition date.

   • Share based payments

     The Group has adopted the exemption to apply IRFS 2 'Share-based payments' 
     only to awards made after 7 November 2002.


* References to IFRS throughout this document refer to the application of
International Accounting Standards and International Financial Reporting
Standards.


Accounting policy changes
     
(a)  IFRS 2 Share Based Payments

     In accordance with IFRS 2, Elementis is required to recognise a charge to
     operating profit representing the fair value of share options granted to
     employees. The fair value has been calculated using a binomial valuation 
     model and is charged to the income statement over the relevant vesting 
     period. The charge is adjusted to reflect actual and expected levels of 
     vesting, and for the expected achievement of any non-market performance 
     conditions attached to each option. The impact in 2004 is a charge of £0.1 
     million for the six months ended 30 June 2004 and £0.2 million for the year 
     ended 31 December 2004.

(b)  IAS 19 Employee Benefits

     Elementis fully adopted FRS 17 'Retirement Benefits' for the year ended
     31 December 2002. The Group's policy under FRS 17 is to recognise any 
     actuarial gains and losses in full immediately in the statement of 
     recognised gains and losses.

     There is an option to account for actuarial gains and losses in this way 
     within the IASB exposure draft 'Actuarial Gains and Losses, Group Plans and
     Disclosures'. The draft was adopted by the IASB in December 2004 and is
     effective from 1 January 2006 with earlier adoption allowed. Elementis will
     apply the revised standard voluntarily from the transition date. There is
     therefore no operating profit impact of the transition to IFRS in respect 
     of pensions and post retirement benefits.

     Under FRS 17 deferred tax assets and liabilities are netted against the 
     gross pension asset and liability. They are classified separately under 
     IFRS and as a result £25.8 million has been transferred from the pension 
     liability reported under UK GAAP at 31 December 2003. At 30 June 2004 the 
     transfer to deferred tax assets was £26.0 million and at 31 December 2004 
     the transfer was £16.9 million.

(c)  IFRS 3 Business Combinations

     IFRS 3 prohibits merger accounting and the amortisation of goodwill. The
     standard requires goodwill to be carried at cost with an annual impairment
     review.

     Under the transitional arrangements of IFRS 1:

     • All prior business combination accounting is frozen at the transition
       date; and
     • The value of goodwill is frozen at 1 January 2004 and treated as cost
       from that date.

     The impact of removing the amortisation charge is to increase operating 
     profit by £11.4 million in the year ended 31 December 2004 and by £5.6 
     million for the six months ended 30 June 2004. There are no net associated 
     tax impacts in either period. However the tax benefit from the amortisation 
     of goodwill in the computation of US taxable profits continues to accrue 
     and this increases earnings per share before goodwill amortisation and 
     exceptionals by 0.1 pence in the six months ended 30 June 2004 and by nil 
     in the full year. Basic earnings per share included this tax benefit under 
     UK GAAP.

(d)  IAS 32 and IAS 39 Financial Instruments

     IAS 32 and IAS 39 address the accounting for, and financial reporting of,
     financial instruments. IAS 32 covers disclosure and presentation whilst IAS 
     39 covers recognition and measurement. The general principle of IAS 39 is 
     that financial assets should be recognised at fair value and financial 
     liabilities should be recognised at amortised cost although the IASB 
     version has an option to fair value financial liabilities. Accounting for 
     the movements in fair value is dependant on the designation of the relevant 
     financial instrument and whether hedge accounting is applied. Under the 
     transitional rules of IFRS 1, Elementis will adopt IAS 32 and IAS 39 with 
     effect from 1 January 2005.

     These standards impact Elementis in the following areas:

     (i)  Transactional hedging

          Elementis uses forward foreign currency contracts to hedge transaction 
          exposures where appropriate. It is unlikely that this process would 
          qualify for hedge accounting under IAS 39 which means that all 
          exchange differences would be taken to the profit and loss account. At 
          30 June 2004 and 31 December 2004 there were no forward contracts 
          outstanding and therefore there would be no adjustment to the reported 
          results in applying IAS 39 for transactional hedging.
          
    (ii)  Balance sheet hedging

          Elementis borrows in USD and Euros to hedge the translation exposures 
          on its overseas net assets. IFRS will require formal documentation of 
          the hedge and regular monitoring to ensure that the hedge is effective 
          and for hedge accounting to be available. With the documentation and 
          monitoring in place, it is anticipated that all exchange gains or 
          losses will be matched in equity against the gains or losses on the 
          overseas net assets.

   (iii)  Embedded derivatives

          Embedded derivatives arise in loan instruments, leases or commercial 
          contracts.  Embedded derivatives occur in contracts that incorporate 
          either implicit or explicit terms that result in the contract behaving 
          like a derivative. Where a contract includes an embedded derivative 
          which is not closely related to the host contract, the derivative 
          element must be accounted separately from the host contract.

          Elementis has a number of commercial contracts which are settled in a 
          currency that is not the primary currency in which either party 
          operates or the currency in which the goods traded are routinely 
          denominated. These are embedded derivatives which will require 
          separation. In effect this means that the foreign currency gain or 
          loss between the date of order and the date of the transaction
          will be recognised in the income statement. The foreign currency gain 
          or loss between the transaction date and the settlement date will 
          continue to be recognised under IFRS as it currently is under UK GAAP. 
          Given the relatively short time period between order and delivery in 
          most businesses, the impact is not expected to be material.

    (iv)  Disclosure of B shares

          Due to the preferential rights attached to the redeemable B shares, 
          under IFRS they will be classified as debt and the preference 
          dividends paid classified as interest with effect from 1 January 2005. 
          Under current UK GAAP the B shares are classified as equity and 
          preference dividends are disclosed within dividends The net book value 
          of the B shares at 31 December 2004 was £2.2 million.

(e)  IAS 12 Income Taxes
     
     IAS 12 changes the methodology used to calculate deferred tax on unrealised
     profit on inter-company sales. Under IFRS deferred tax is calculated at the
     receiving company's tax rate whilst under UK GAAP, deferred tax is 
     calculated at the supplying company's tax rate. In respect of unrealised 
     profit on inter-company sales, deferred tax assets have been increased by 
     £0.1 million at 31 December 2004, and by £nil at 30 June 2004 and 31 
     December 2003 respectively.

     Under IAS 12, deferred tax is always recognised on the difference between 
     the book value of any revalued non-monetary assets and their tax base. 
     Under UK GAAP deferred tax would only be provided if there was an intention 
     to dispose of the asset. A subsidiary company of Elementis plc carries a 
     non-sterling denominated investment and revalues it to the closing exchange 
     rate at each period end. This gives rise to a deferred tax liability of 
     £3.6 million at 31 December 2003, £0.7 million at 30 June 2004 and £4.0 
     million at 31 December 2004. The recognition of this liability enables the 
     same subsidiary to account for an equal and opposite deferred tax asset in 
     respect of previously unrecognised capital losses and there is therefore no 
     impact on the income statement. There is no impact on the balance sheet as 
     the asset and liability net off within deferred tax liabilities.


(f)  IAS 38 Intangible Assets
     
     Under IAS 38 Elementis is required to capitalise intangible assets subject 
     to certain specified criteria. The Group's policy under UK GAAP in respect 
     of research and development expenditure was to expense such costs. Under 
     IAS 38 research expenditure is expensed whereas development costs must be 
     capitalised where the criteria have been met. Following a review of the 
     Group's research and development expenditure over the last five years, no 
     material development costs met the IAS38 criteria and therefore no 
     adjustment was required under IFRS.

     Under IAS 38 there is a rebuttable presumption that the fair value of an
     intangible asset can be measured reliably on the acquisition of a business.
     IAS 38 has been applied to the acquisition accounting for Sasol Servo BV, 
     which was acquired on 30 June 2004 and an intangible asset of £0.6 million 
     has been recognised at that date and £0.5 million recognised at 31 December 
     2004. The intangible asset relates to a favourable supply contract, whereby 
     the business can purchase raw materials at below market price from a 
     supplier.

     Amortisation of intangible assets under IAS 38 for the six months ended 30 
     June 2004 was £nil and £0.1 million for the full year. There was no effect 
     on the tax charge of this change in accounting policy.

(g)  IFRS 5 Non current assets held for sale

     IFRS 5 requires, subject to certain criteria, non current assets held for 
     sale to be presented separately in the balance sheet at fair value less 
     costs to sell. Non current assets held for sale are not depreciated. As a 
     result £3.4 million was transferred from non current assets to current 
     assets at 30 June 2004 and £0.4 million at 31 December 2004 (31 December 
     2003 : £nil).

     There was no impact on the income statement in the six months ended 30 June 
     2004 or in the full year.

(h)  IAS 14 Segmental Reporting

     Both UK GAAP and IFRS require statutory segmental reporting to match the
     internal reporting structure. Under UK GAAP, there is an exemption if the
     disclosure of a particular segment is considered by the directors to be
     prejudicial to the interests of the Company. Under IFRS there is no 
     exemption and as a result, Elementis will be required to disclose segmental 
     information for the Pigments business separately from the Specialties 
     business, with effect from 1 January 2005.

Conclusion

The IFRS information in this document has been prepared on the basis set out
above and, in particular, is subject to the completion of the EU endorsement
process. The financial information presented sets out the adjustments between UK
GAAP and IFRS for Elementis plc based on the information currently available.
The financial information should not be used as indicators of future adjustments
between UK GAAP and IFRS due to the risk and uncertainty surrounding events in
the future. Net assets are impacted on the restatement from UK GAAP to IFRS, but
there is no impact upon the underlying cash balances within the business.

The overall impact on earnings per share as set out below:
-------------------------------------------------------------------------------
                                                      Six months          Year
                                                           ended         ended
                                                         30 June   31 December
                                                            2004          2004
                                                           pence         pence
--------------------------------------------------------------------------------
Basic and diluted
                                                          --------      --------
IFRS                                                         0.6           0.8
                                                          --------      --------
UK GAAP                                                     (0.7)         (1.8)
                                                          --------      --------

Basic and diluted before goodwill amortisation and
exceptionals                                              --------      --------

IFRS                                                         0.7           1.3
                                                          --------      --------
UK GAAP                                                      0.6           1.4
                                                          --------      --------



Summarised Consolidated Income Statement
--------------------------------------------------------------------------------
                                                           IFRS           IFRS
                                               Six months ended     Year ended
                                                        30 June    31 December
                                                           2004           2004
                                                      Unaudited      Unaudited
                                                       £million       £million
--------------------------------------------------------------------------------

Turnover                                                  176.8          389.2
                                                      -----------     ----------

Operating profit
- before exceptionals                                       5.6           11.5
- exceptionals                                             (1.0)          (2.6)
                                                      -----------     ----------
Operating profit                                            4.6            8.9
Net finance costs                                          (2.6)          (5.6)
                                                      -----------     ----------
Profit before tax                                           2.0            3.3
Taxation                                                    0.4            0.1
                                                      -----------     ----------
Profit after tax                                            2.4            3.4
Minority interest                                             -              -
                                                      -----------     ----------
Net profit for the period                                   2.4            3.4
                                                      ===========     ==========

                                                      -----------     ----------
Basic and diluted earnings per share                        0.6p           0.8p
                                                      -----------     ----------
Basic and diluted earnings per share before
exceptionals                                                0.7p           1.3p
                                                      -----------     ----------



Summarised Consolidated Balance Sheet
-------------------------------------------------------------------------------
                                                            IFRS         IFRS
                                                         30 June  31 December
                                                            2004         2004
                                                       Unaudited    Unaudited
                                                        £million     £million
-----------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment                              171.8        173.0
Goodwill and intangible assets                             163.8        155.7
Other investments                                            3.8          1.9
Deferred tax assets                                         26.0         16.9
                                                          --------     --------
                                                           365.4        347.5
                                                          --------     --------
Current assets
Inventories                                                 66.3         68.3
Trade and other receivables                                 91.9         84.0
Cash and cash equivalents                                   32.4         11.5
Assets classified as held for sale                           6.7          3.7
                                                          --------     --------
                                                           197.3        167.5
                                                          --------     --------
Total assets                                               562.7        515.0
                                                          --------     --------

LIABILITIES
Current liabilities
Short term borrowings and overdrafts                         8.7          4.4
Other creditors                                             65.4         79.8
Liabilities classified as held for sale                      1.3          1.3
                                                          --------     --------
                                                            75.4         85.5
                                                          --------     --------
Non-current liabilities
Loans                                                      129.9         97.3
Deferred tax liabilities                                     0.9          2.9
Retirement benefit obligations                              79.7         81.4
Provisions                                                  23.4         22.4
Government grants                                            2.4          2.4
                                                          --------     --------
                                                           236.3        206.4
                                                          --------     --------
Total liabilities                                          311.7        291.9
                                                          --------     --------
Net assets                                                 251.0        223.1
                                                          --------     --------

EQUITY
Capital and reserves attributable to equity holders
Share capital                                               23.6         23.8
Share premium account                                        1.2          1.2
Other reserves                                              66.9         71.5
Retained earnings                                          157.4        124.8
                                                          --------     --------
                                                           249.1        221.3
Minority equity interests                                    1.9          1.8
                                                          --------     --------
Total equity and reserves                                  251.0        223.1
                                                          --------     --------


-----------------------------------------------------------------------------------------
Reconciliation of Profit
For the six months ended
30 June 2004
-----------------------------------------------------------------------------------------
                   Previously        IFRS 2         IFRS 3    Total effect     Restated
                     reported   Share based       Business   of transition   under IFRS
                     under UK      payments   combinations         to IFRS    Unaudited
                         GAAP           (a)            (c)
-----------------------------------------------------------------------------------------
                     £million      £million       £million        £million     £million
-----------------------------------------------------------------------------------------

Sales                   176.8             -              -               -        176.8
                       --------      --------      ---------        --------     --------

Operating profit:
                       --------      --------      ---------        --------     --------
- before
goodwill                  5.7          (0.1)             -            (0.1)         5.6
amortisation &
exceptionals           --------      --------      ---------        --------     --------
- goodwill
amortisation             (5.6)            -            5.6             5.6            -
                       --------      --------      ---------        --------     --------
- exceptionals           (1.0)            -              -               -         (1.0)
                       --------      --------      ---------        --------     --------

Operating
(loss)/profit            (0.9)         (0.1)           5.6             5.5          4.6
                       --------      --------      ---------        --------     --------
Net finance
costs                    (2.6)            -              -               -         (2.6)
                       --------      --------      ---------        --------     --------

(Loss)/profit
before tax               (3.5)         (0.1)           5.6             5.5          2.0
                       --------      --------      ---------        --------     --------

Taxation                  0.4             -              -               -          0.4
                       --------      --------      ---------        --------     --------

(Loss)/profit
after tax                (3.1)         (0.1)           5.6             5.5          2.4
                       --------      --------      ---------        --------     --------

Minority                    -             -              -               -            -
interest               --------      --------      ---------        --------     --------
(Loss)/profit
for the period           (3.1)         (0.1)           5.6             5.5          2.4
                       --------      --------      ---------        --------     --------

(Loss)/earning
s per share              (0.7)p           -            1.3             1.3          0.6p
                       --------      --------      ---------        --------     --------
Earnings per
share before
goodwill
amortisation &
exceptionals              0.6p            -            0.1             0.1          0.7p
                       --------      --------      ---------        --------     --------



Reconciliation of Equity as at 30 June 2004
---------------------------------------------------------------------------------------------------------------------
                   Previously             Re-        IFRS 12         IFRS 3       IFRS 5   Total effect     Restated
               reported under classifications   Shared based       Business  Non-current  of transition   under IFRS
                      UK GAAP                       payments   combinations       assets        to IFRS    Unaudited
                                                         (a)            (c)          (g)
---------------------------------------------------------------------------------------------------------------------
                     £million        £million       £million       £million    £million       £million     £million
---------------------------------------------------------------------------------------------------------------------
ASSETS
Non-Current
assets
Property,
plant &
equipment               175.2               -              -              -        (3.4)          (3.4)       171.8
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Goodwill &
intangible
assets                  158.2               -              -            5.6                        5.6        163.8
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Other
investments               3.8               -              -              -           -              -          3.8
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Deferred tax
assets                      -            26.0              -              -           -           26.0         26.0
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
                        337.2            26.0              -            5.6        (3.4)          28.2        365.4
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Current
Assets                ---------       ---------      ---------      ---------   ---------      ---------    ---------
Inventories              68.1               -              -              -        (1.8)          (1.8)        66.3
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Trade & other
receivables              93.4               -              -              -        (1.5)          (1.5)        91.9
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Short term
investments,
cash & cash
equivalents              32.4               -              -              -           -              -         32.4
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Non current
assets held
for sale                    -               -              -              -         6.7            6.7          6.7
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
                        193.9               -              -              -         3.4            3.4        197.3
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Total assets            531.1            26.0              -            5.6           -           31.6        562.7
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------

LIABILITIES
Current
liabilities
Short term
borrowings
overdrafts &
current
instalments of
loans                    (8.7)              -              -              -           -              -         (8.7)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Other
creditors               (66.6)              -              -              -         1.2            1.2        (65.4)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Liabilities
held for sale               -               -              -              -        (1.3)          (1.3)        (1.3)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
                        (75.3)              -              -              -        (0.1)          (0.1)       (75.4)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Non-current
liabilities
Loans                  (129.9)              -              -              -           -              -       (129.9)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Net pension
liability               (53.7)          (26.0)             -              -           -          (26.0)       (79.7)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Provisions              (24.4)            0.9              -              -         0.1            1.0        (23.4)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Government
Grants                   (2.4)              -              -              -           -              -         (2.4)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Deferred tax
liabilities                 -            (0.9)             -              -           -           (0.9)        (0.9)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
                       (210.4)          (26.0)             -              -         0.1          (25.9)      (236.3)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Total
liabilities            (285.7)          (26.0)             -              -           -          (26.0)      (311.7)
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Net assets              245.4               -              -            5.6           -            5.6        251.0
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------

EQUITY
Capital &
reserves
attributable to
equity
holders
Share capital            23.6               -              -              -           -              -         23.6
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Share premium             1.2               -              -              -           -              -          1.2
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Capital
redemption
reserve                  66.9               -              -              -           -              -         66.9
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Profit & loss
account                 151.8               -              -            5.6           -            5.6        157.4
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
                        243.5               -              -            5.6           -            5.6        249.1
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Minority
equity
interests                 1.9               -              -              -           -              -          1.9
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
Total equity &
reserves                245.4               -              -            5.6           -            5.6        251.0
                      ---------       ---------      ---------      ---------   ---------      ---------    ---------
      

Reconciliation of Profit
For the year ended 31 December 2004
--------------------------------------------------------------------------------------------------------------------   
                 Previously   Reclassification  IFRS 2         IFRS 3       IAS 38     IAS 12        Total
                   reported                      Share       Business   Intangible     Income    effect of     Restated
                      under                      based   combinations       assets        tax   transition   under IFRS
                    UK Gaap                   payments                                             to IFRS    Unaudited
                                                   (a)            (c)          (f)        (e)
-----------------------------------------------------------------------------------------------------------------------
                   £million        £million   £million       £million     £million   £million     £million     £million
-----------------------------------------------------------------------------------------------------------------------


Sales                 389.2               -          -              -            -          -            -        389.2
                     --------      ----------   --------       --------      -------     ------      -------    -------

Operating
profit:              --------      ----------   --------       --------      -------     ------      -------    -------
- before
goodwill               11.8                       (0.2)             -         (0.1)         -         (0.3)        11.5
amortisation &
exceptionals         --------      ----------   --------       --------      -------     ------      -------     ------
- goodwill
amortisation          (11.4)              -          -           11.4            -          -         11.4            -
                     --------      ----------   --------       --------      -------     ------      -------     ------
- exceptionals         (2.9)            0.3          -              -            -          -          0.3         (2.6)
                     --------      ----------   --------       --------      -------     ------      -------     ------

Operating
(loss)/profit          (2.5)            0.3       (0.2)          11.4         (0.1)         -         11.4          8.9
                     --------      ----------   --------       --------      -------     ------      -------     ------
Non operating
exceptionals            0.3            (0.3)         -              -            -          -         (0.3)           -
                     --------      ----------   --------       --------      -------     ------      -------     ------
Net finance
costs                  (5.6)              -          -              -            -          -            -         (5.6)
                     --------      ----------   --------       --------      -------     ------      -------     ------

(Loss)/profit
before tax             (7.8)              -       (0.2)          11.4         (0.1)         -         11.1          3.3
                     --------      ----------   --------       --------      -------     ------      -------     -------

Taxation                  -               -          -              -            -        0.1          0.1          0.1
                     --------      ----------   --------       --------      -------     ------      -------     -------

(Loss)/profit
after tax              (7.8)              -       (0.2)          11.4         (0.1)       0.1         11.2          3.4
                     --------      ----------   --------       --------      -------     ------      -------     -------

Minority                  -               -          -              -            -          -            -            -
interest             --------      ----------   --------       --------      -------     ------      -------     -------
(Loss)/profit
for the year           (7.8)              -       (0.2)          11.4         (0.1)       0.1         11.2          3.4
                     --------      ----------   --------       --------      -------     ------      -------     -------

(Loss)/earning
s per share            (1.8)p             -          -            2.6            -          -          2.6          0.8p
                     --------      ----------   --------       --------      -------     ------      -------     -------
Earnings per
share before
goodwill
amortisation &
exceptionals            1.4p              -       (0.1)             -            -          -         (0.1)         1.3p
                     --------      ----------   --------       --------      -------     ------      -------     -------




Reconciliation of Equity as at 31 December 2004
-----------------------------------------------------------------------------------------------------------------------
         Previously  Re-               IFRS 2       IFRS 3     IAS 38    IAS 12      IFRS 5   Total effect  Restated
     reported under  classifications Share based  Business  Intangible   Income  Non-current of transition  under
            UK GAAP                   payments  combinations     assets      tax      assets  to IFRS       IFRS     
                                          (a)         (b)         (f)        (e)         (g)                Unaudited
-----------------------------------------------------------------------------------------------------------------------
           £million      £million    £million     £million   £million   £million    £million   £million     £million
-----------------------------------------------------------------------------------------------------------------------
ASSETS
Non-Current
assets
Property,
plant &
equipment     173.4            -           -              -          -          -         (0.4)       (0.4)       173.0
              ---------------------------------------------------------------------------------------------------------
Goodwill &
intangible
assets        144.4            -           -           11.4       (0.1)         -           -         11.3        155.7
              ---------------------------------------------------------------------------------------------------------

Other
investments     1.9            -           -              -          -          -           -            -          1.9
              ---------------------------------------------------------------------------------------------------------
Deferred tax
assets            -         16.9           -              -          -          -           -         16.9         16.9
-----------------------------------------------------------------------------------------------------------------------
              319.7         16.9           -           11.4       (0.1)         -        (0.4)        27.8        347.5
-----------------------------------------------------------------------------------------------------------------------

Current
Assets                     
Inventories    70.1            -           -              -          -          -        (1.8)        (1.8)        68.3
               --------------------------------------------------------------------------------------------------------

Trade & other
receivables    85.5            -           -              -          -          -        (1.5)        (1.5)        84.0
              ---------------------------------------------------------------------------------------------------------
Short term
investments,
cash & cash
equivalents    11.5            -           -              -          -          -           -            -         11.5
              ----------------------------------------------------------------------------------------------------------
Non current
assets held
for sale          -            -           -              -          -          -         3.7           3.7         3.7
              ---------------------------------------------------------------------------------------------------------
              167.1            -           -              -          -          -         0.4           0.4       167.5
              ---------------------------------------------------------------------------------------------------------

Total assets  486.8         16.9           -           11.4       (0.1)         -           -          28.2       515.0
              ---------------------------------------------------------------------------------------------------------


LIABILITIES
Current
liabilities
Short term
borrowings
overdrafts &
current
instalments of
loans         (4.4)            -           -              -          -          -           -           -        (4.4)
             ----------------------------------------------------------------------------------------------------------

Other
creditors    (81.0)            -           -              -          -          -         1.2         1.2        (79.8)
             ----------------------------------------------------------------------------------------------------------
Liabilities
held for sale     -            -           -              -          -          -        (1.3)       (1.3)        (1.3)
             ----------------------------------------------------------------------------------------------------------
             (85.4)            -           -              -          -          -        (0.1)       (0.1)       (85.5)
             ----------------------------------------------------------------------------------------------------------
Non-current
liabilities
Loans        (97.3)            -           -              -          -          -           -           -        (97.3)
             ----------------------------------------------------------------------------------------------------------
Net pension
liability    (64.5)        (16.9)          -              -          -          -           -       (16.9)       (81.4)
             ----------------------------------------------------------------------------------------------------------
Provisions   (25.5)          3.0           -              -          -          -         0.1         3.1        (22.4)
             ----------------------------------------------------------------------------------------------------------
Government
Grants        (2.4)            -           -              -          -          -           -           -         (2.4)
              --------------------------------------------------------------------------------------------------------
Deferred tax
liabilities      -          (3.0)          -              -          -        0.1           -        (2.9)        (2.9)
              ---------------------------------------------------------------------------------------------------------
             (189.7)       (16.9)          -              -          -        0.1         0.1       (16.7)      (206.4)
            -----------------------------------------------------------------------------------------------------------
Total
liabilities  (275.1)       (16.9)          -              -          -        0.1           -       (16.8)      (291.9)
             ----------------------------------------------------------------------------------------------------------
Net assets    211.7            -           -           11.4       (0.1)       0.1           -        11.4        223.1
             ---------------------------------------------------------------------------------------------------------

EQUITY
Capital &
reserves
attributable to
equity
holders
Share capital 23.8             -           -              -          -          -           -           -          23.8
              ---------------------------------------------------------------------------------------------------------

Share premium  1.2             -           -              -          -          -           -           -           1.2
              ---------------------------------------------------------------------------------------------------------
Capital
redemption
reserve       71.5             -           -              -          -          -           -           -          71.5
              ---------------------------------------------------------------------------------------------------------
Profit & loss
account      113.4             -           -           11.4       (0.1)       0.1           -         11.4        124.8
             ----------------------------------------------------------------------------------------------------------
             209.9             -           -           11.4       (0.1)       0.1           -         11.4        221.3
             ----------------------------------------------------------------------------------------------------------
Minority
equity
interests      1.8             -           -              -          -          -           -           -           1.8
             ----------------------------------------------------------------------------------------------------------
Total equity & 
reserves      211.7            -           -           11.4       (0.1)       0.1           -         11.4        223.1
              ---------------------------------------------------------------------------------------------------------




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