RNS Number:6194E
London Security PLC
28 September 2007
Chairman's Statement
These are the Group's first consolidated financial statements that have been
prepared in accordance with IFRS. The Group's transition date for adoption of
IFRS is 1 January 2006. An analysis of the financial impact of adopting IFRS can
be found in Note 8.
Financial highlights
Financial highlights of the unaudited results for the six months ended 30 June
2007 compared with the restated first half of 2006 are as follows:
* Turnover of #32.8 million (2006: #33.4 million)
* Operating profit of #8.1 million (2006: #6.6 million)
* Profit on ordinary activities before taxation of #7.3 million (2006:
#5.7 million)
* Earnings per share of 41.0p (2006: 31.0p)
Trading and prospects
The financial highlights above illustrate that 2007 has been a period of profit
improvement for the Group. The Group's operating profit has increased by #1.5
million (23%), despite a decline in turnover of #0.6 million (2%). This
improvement is largely due to the full year effect of various initiatives
implemented in 2006, as explained in the 2006 Report and Accounts. The operating
profit improvement continues the trend experienced in the second half of 2006.
In mainland Europe, the Group is introducing a new range of products enabling
the Group's evolution from solely an extinguisher supplier to the customers'
safety partner.
In the UK, we have carried out a cost review, following which cost efficiencies
were successfully implemented in our commercial network.
It remains a principal aim of the Group to grow through acquisition.
Acquisitions are being sought throughout Europe and, in the first nine months of
2007, we have continued to acquire fire protection businesses.
J.G. Murray
Chairman
28 September 2007
Six months Six months Year to
to 30 June to 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
------------------------------ ------- -------- --------
Revenue 32,815 33,396 64,426
Cost of sales (5,308) (6,197) (11,719)
------- -------- --------
Gross profit 27,507 27,201 52,707
Distribution costs (11,294) (12,779) (24,490)
Administrative expenses (8,134) (7,781) (15,481)
------- -------- --------
Operating profit 8,079 6,641 12,736
------------------------ -------- ------- -------- --------
Operating profit before
depreciation 8,983 7,675 14,723
Depreciation (904) (1,034) (1,987)
Operating profit 8,079 6,641 12,736
------------------------ -------- ------- -------- --------
Finance income 113 64 692
Finance costs (923) (1,028) (2,165)
------- -------- --------
Finance costs - net (810) (964) (1.473)
------- -------- --------
Profit before income tax 7,269 5,677 11,263
Income tax expense (2,215) (1,859) (3,647)
------- -------- --------
Profit for the period 5,054 3,818 7,616
------- -------- --------
All profit for the period is
attributable to equity
shareholders
Earnings per share
Basic and diluted 41.0p 31.0p 61.9p
------- -------- --------
As at As at As at
30 June 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
-------------------------------- ------- ------- -------
Assets
Non Current Assets
Property, plant & equipment 7,246 7,629 7,053
Intangible assets 47,090 46,825 46,825
Deferred tax asset 1,258 1,310 1,258
Derivative financial instruments 132 - -
------- ------- -------
55,726 55,764 55,136
------- ------- -------
Current Assets
Inventories 4,990 5,328 4,593
Trade & other receivables 15,605 15,766 14,746
Cash & cash equivalents 10,249 6,658 8,676
------- ------- -------
30,844 27,752 28,015
------- ------- -------
Total Assets 86,570 83,516 83,151
------- ------- -------
Liabilities
Current Liabilities
Trade & other payables (12,932) (12,272) (11,788)
Income tax liabilities (2,295) (2,470) (2,174)
Borrowings (5,071) (5,204) (5,051)
Provision for liabilities & charges (166) - (350)
------- ------- -------
(20,464) (19,946) (19,363)
------- ------- -------
Non Current Liabilities
Trade & other payables - - (54)
Borrowings (27,964) (33,478) (30,395)
Derivative financial instruments - - (140)
Deferred tax liabilities (34) (189) (46)
Retirement benefit obligations (4,167) (4,375) (4,133)
Provision for liabilities & charges (130) (157) (157)
------- ------- -------
(32,295) (38,199) (34,925)
------- ------- -------
Total Liabilities (52,759) (58,145) (54,288)
------- ------- -------
Net Assets 33,811 25,371 28,863
------- ------- -------
Shareholders' equity
Ordinary shares 123 123 123
Merger reserve 2,033 2,033 2,033
Other reserves (266) 83 (257)
Retained earnings 31,921 23,132 26,964
------- ------- -------
Total Shareholders' equity 33,811 25,371 28,863
------- ------- -------
Six months Six months Year ended
to 30 June to 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
------------------------------ -------- -------- --------
Cash flows from operating activities
Cash generated from operations 8,361 6,425 14,380
Interest paid (1,017) (962) (1,866)
Income tax paid (2,150) (2,214) (3,307)
-------- -------- --------
Net cash generated from operating
activities 5,194 3,249 9,207
-------- -------- --------
Cash flows from investing activities
Acquisition of subsidiary undertaking - - (248)
Purchases of property, plant and
equipment (1,289) (981) (1,836)
Proceeds from sale of property, plant
and equipment 238 187 650
Purchases of intangible assets (272) (32) (32)
Interest received 113 64 147
-------- -------- --------
Net cash used in investing activities (1,210) (762) (1,319)
-------- -------- --------
Cash flows from financing activities
Repayments of borrowings (2,366) (2,540) (5,858)
Capital repayment of finance leases (45) (66) (131)
Equity dividends paid - (1,476) (1,476)
-------- -------- --------
Net cash used in financing activities (2,411) (4,082) (7,465)
-------- -------- --------
-------- -------- --------
Net increase/(decrease) in cash in the
period 1,573 (1,595) 423
Cash and cash equivalents at beginning
of the period 8,676 8,253 8,253
-------- -------- --------
Cash and cash equivalents at the end
of the period 10,249 6,658 8,676
-------- -------- --------
Six months Six months Year ended
to 30 June to 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
------------------------------ -------- -------- --------
Profit for the financial period 5,054 3,818 7,616
Currency translation differences on
foreign currency net investments (9) 83 (259)
Actuarial gain recognised in pension
scheme (Note 6) - - 52
Movement on deferred tax relating to
pension scheme - - (16)
------------------------------ -------- -------- --------
Net (losses)/gains not recognised in
the income statement (9) 83 (223)
------------------------------ -------- -------- --------
Total recognised income for the year
attributable to equity shareholders 5,045 3,901 7,393
------------------------------ -------- -------- --------
1 General Information
London Security plc is a leader in Europe's fire security industry, providing
fire protection for over 200,000 customers through a local presence in the
United Kingdom, Belgium, the Netherlands, Austria and Switzerland.
The Company is a public limited liability company incorporated and domiciled in
England. The registered office is Wistons Lane, Elland, West Yorkshire HX5 9DS.
The Company has its primary listing on the Alternative Investment Market (AIM)
of the London Stock Exchange.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statement are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
Prior to 2007, the group prepared its audited financial statements and unaudited
interim financial statements under UK Generally Accepted Accounting Principles
('UK GAAP'). From 1 January 2007, the group is required to prepare its annual
consolidated financial statements in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union and implemented in
the UK and those parts of the Companies Act 1985 applicable to companies
reporting under IFRS. The date of transition to IFRS for the group was 1 January
2006 and the group prepared its opening IFRS balance sheet as at that date.
This interim financial report has been prepared in accordance with the
accounting policies described below. The IFRS and International Financial
Reporting Interpretations Committee ('IFRIC') interpretations that will be
applicable as at 31 December 2007, including those that will be applicable on an
optional basis, are not yet known with certainty at the time of preparing this
report, however, no significant changes are expected between the accounting
policies adopted in preparing this report and those that will be adopted in the
2007 audited financial statements.
The comparative figures in respect of 2006 have been restated to reflect the
revised accounting policies. Reconciliations and explanations of the effect of
adopting IFRS compliant accounting policies on the group's equity (net assets),
profits and cash flows are provided in note 8 in this report.
This interim financial report has been prepared under the historical cost
convention, as modified by the accounting for derivative financial instruments
at fair value through profit or loss. In addition, this interim financial report
does not comply with IAS 34 'Interim Financial Reporting', which is not
currently required to be applied under the AIM Rules.
The financial information included in this interim financial report for the six
months ended 30 June 2007 does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985 and is unaudited. The restated comparative
figures for 2006 are also unaudited. A copy of the group's statutory accounts
for the year ended 31 December 2006, which were prepared in accordance with UK
GAAP, and on which the auditors gave an unqualified opinion and did not make a
statement under section 237 of the Companies Act 1985, has been filed with the
Registrar of Companies.
This interim financial report will be published on the company's website, in
addition to the paper version posted to shareholders. The maintenance and
integrity of the London Security plc website is the responsibility of the
directors. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Group has taken advantage of the following exemptions on transition to IFRS
as permitted by paragraph 13 of IFRS 1:
* The requirements of IFRS 3 - Business Combinations - have not been
applied to business combinations that occurred before the date of transition to
IFRS.
* The carrying values of freehold properties are based on previously
adopted UK GAAP valuations and these are now taken as deemed cost on transition
to IFRS.
* The foreign exchange translation reserve has been set to nil on
transition to IFRS.
2.2 Consolidation
Subsidiaries are all entities (including special purpose entities) over which
the Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another
entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control
ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments. The directors are of the opinion that there is
one operation, the provision and maintenance of fire protection equipment,
operating in one geographical market, Europe.
2.4 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in pounds sterling, which is the Company's functional
and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except
when deferred in equity as qualifying cash flow hedges and qualifying net
investment hedges.
(c) Group companies
The results and financial position of all the group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
(i) assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are
translated at average exchange rates; and
(iii) all resulting exchange differences are recognised as a
separate component of equity, and are reported within the Statement of
Other Recognised Income and Expense.
In accordance with IFRS 1, the translation reserve has been set at zero at the
date of transition to IFRS.
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations, and of borrowings and other currency
instruments designated as hedges of such investments, are taken to shareholders'
equity. When a foreign operation is sold, exchange differences that were
recorded in equity are recognised in the income statement as part of the gain or
loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
2.5 Property, plant and equipment
Property is carried at deemed cost at the date of transition to IFRS based on
the previous UK GAAP valuations. Plant and equipment held at the date of
transition and subsequent additions to property, plant and equipment are stated
at purchase cost including directly attributable costs, less accumulated
depreciation.
Costs are recognised when it is probable that future economic benefits
associated with the items will flow to the Group and the costs of the item can
be measured reliably.
Land is not depreciated. Depreciation on other assets is calculated using the
straight-line method to allocate their cost over their estimated useful lives,
as follows:
- Buildings 2-6%
- Plant, Machinery and vehicles 10-33%
- Fixtures, fittings and equipment 10%
- Share in aircraft 5%
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in the income statement.
2.6 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired subsidiary/
associate at the date of acquisition. Goodwill on acquisition of subsidiaries is
included in 'intangible assets'. Separately recognised goodwill is tested
annually for impairment and carried at cost less accumulated impairment losses.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell, and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately indentifiable cash flows.
Impairment losses on goodwill are not reversed. Gains and losses on the disposal
of an entity include the carrying amount of goodwill relating to the entity
sold.
(b) Trademarks and licences
Trademarks and licences are shown at historical cost. Trademarks and licences
have a finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost
of trademarks and licences over their estimated useful lives (15-20 years).
(c) Computer software
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives (three to five years).
(d) Service contracts
Acquired service contracts are capitalised on the basis of the costs incurred to
acquire. Amortisation is calculated using the straight-line method to allocate
the cost of the contracts over 20 years.
2.7 Derivative financial instruments and hedging activities
The Group's borrowings of #33.0 million (#24.2 million denominated in Euros and
#8.8 million denominated in Sterling) are subject to floating rates based on
LIBOR and EURIBOR plus a margin of between 0.6% and 1.5%. The Group uses
financial derivatives to cap the total exposure to LIBOR to a maximum of 5.5%
and EURIBOR to a maximum of 4.25%. The caps took effect from September 2006
until the loans are repaid in June 2010.
The Group's policy is not to hedge its international assets with respect to
foreign currency balance sheet translation exposure, nor against foreign
currency transactions. The Group does not enter into any forward exchange
contracts and it does not use financial instruments for speculative purposes.
Derivative financial instruments are initially measured at cost, and are
re-measured at fair value at the balance sheet date with any valuation
adjustment being reflected in the income statement.
2.8 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in, first-out (FIFO) method. The cost of finished
goods and work in progress comprises, raw materials, direct labour, other direct
costs and related production overheads. Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable
selling expenses. Provision is made for obsolete, slow moving or defective items
where appropriate
2.9 Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments
are considered indicators that the trade receivable is impaired. The amount of
the provision is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the effective
interest rate. The amount of the provision is recognised in the income statement
within 'administrative expenses'.
2.10 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
2.11 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Where the Company purchases its own shares, the consideration paid, including
any directly attributable incremental costs (net of income taxes) is deducted
from equity attributable to the Company's equity holders until the shares are
cancelled.
2.12 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
2.13 Deferred income tax
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
2.14 Employee benefits
Pension obligations
Group companies operate various pension schemes. The schemes are generally
funded through payments to insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans. A defined contribution plan is a pension
plan under which the Group pays fixed contributions into a separate entity. The
Group has no legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods. A defined benefit
plan is a pension plan that is not a defined contribution plan. Typically,
defined benefit plans define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age,
years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets, together with adjustments
for unrecognised actuarial gains or losses and past service costs. The defined
benefit obligation is calculated triennially by independent actuaries using the
projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the
currency in which the benefits will be paid and that have terms to maturity
approximating to the terms of the related pension liability.
The interest cost and the expected return on the assets are shown within finance
cost and finance income respectively within the income statement. Actuarial
gains and losses are recognised immediately in the consolidated Statement of
Recognised Income and Expense. Net defined benefit pension scheme deficits are
presented separately on the balance sheet within non current liabilities before
tax relief. The attributable deferred tax asset is included within deferred tax,
and is subject to the recognition criteria as set out in the accounting policy
on deferred taxation.
For defined contribution plans, the Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee
benefit expense when they are due.
2.15 Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is more likely than not that an
outflow of resources will be required to settle the obligation; and the amount
has been reliably estimated. Provisions are not recognised for future operating
losses.
2.16 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for
the sale of goods and services in the ordinary course of the Group's activities.
Revenue is shown, net of value-added tax, estimated returns, rebates and
discounts and after eliminated sales within the Group. Revenue is recognised as
follows:
(a) Outright sale of equipment
Revenue from the outright sale of equipment is recognised upon delivery to the
customer.
(b) Installation and service
Revenue from the installation and servicing of equipment is recognised when the
installation or service has been performed.
(c) Maintenance
Revenue from the provision of maintenance services is recognised over the term
of the maintenance contract on a pro rata basis with the unexpired portion held
in deferred income.
(d) Equipment leases
Revenue from the equipment leased to customers under an operating lease is
recognised over the term of the lease on a pro rata basis.
(e) Interest income
Interest income on any short term deposit is recognised in the income statement
as it accrues.
2.17 Leases
Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
2.18 Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability
in the Group's financial statements in the period in which the dividends are
approved by the Company's shareholders.
3. Financial risk management
3.1 Financial risk factors
The Board considers foreign currency translation exposure and interest rates to
be the only potential financial risks. Risk management is carried out under
treasury policies and guidelines authorised and reviewed by the Board of
Directors.
(a) Foreign exchange risk
The Group has certain investments in foreign operations, whose net assets are
exposed to foreign currency translation risk. Currency exposure arising from the
net assets of the Group's foreign operations is managed primarily through
borrowings denominated in the relevant foreign currencies.
(b) Interest rate risk
The Group's interest rate risk arises from long-term borrowings. These
borrowings were issued at variable rates based on EURIBOR and LIBOR and expose
the Group to cash flow interest rate risk.
The Group manages its cash flow interest rate risk by using interest rate caps.
The effect of these caps is to limit the Group's exposure to EURIBOR to a
maximum of 4.25% and LIBOR to a maximum of 5.5%. The caps took effect from
September 2006 until the loans are repaid in June 2010.
3.2 Fair value estimation
The fair value of interest rate caps is calculated as the present value of the
estimated future cash flows.
The nominal value less impairment provision of trade receivables and payables
are assumed to approximate their fair values.
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities within the
next financial year are discussed below.
(a) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with its accounting policy. The recoverable amounts of
cash-generating units have been determined based on value-in-use calculations
(b) Pension scheme assumptions and mortality tables
The carrying value of the defined benefit pension scheme is valued using
actuarial valuations. These valuations are based on assumptions including the
selection of the most appropriate mortality table for the profile of the members
in the scheme and the financial assumptions concerning discount rates and
inflation. All these are estimates of future events, and are therefore
uncertain. The choices are based on advice received from the scheme's actuaries
which are checked from time to time with benchmark surveys.
5. Earnings per share
The calculation of basic earnings per ordinary share is based on the profit on
ordinary activities after taxation of #5,054,000 (2006: #3,818,000) and on
12,294,798 (2006: 12,323,198) ordinary shares, being the weighted average number
of ordinary shares in issue during the period.
For diluted earnings per ordinary share, the weighted average number of shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. The revised weighted average number of shares is 12,294,798 (2006:
12,323,198). After taking into account the effect of dilutive securities, the
basic EPS and adjusted EPS figures are unaltered.
Six months Six months Year ended
to 30 June to 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
------------------------------ -------- -------- --------
Profit on ordinary activities after
taxation 5,054 3,818 7,616
------------------------------ -------- -------- --------
Basic earnings per ordinary share 41.0p 31.0p 61.9p
------------------------------ -------- -------- --------
6. Actuarial valuation of pension scheme
In common with many other companies, the Group has not prepared an actuarial
valuation of pension scheme assets and liabilities for the 2007 interim
statement. In accordance with IAS19 such a valuation will be prepared for the
purposes of the Group's 2007 Report and Accounts.
7. Consolidated statement of changes in equity
Six months Six months Year ended
to 30 June to 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
------------------------------ -------- -------- --------
Profit for the financial period 5,054 3,818 7,616
Dividends - (1,476) (1,476)
Currency translation differences on
foreign currency net investments (9) 83 (259)
Purchase of own shares (97) - -
Actuarial gain recognised in pension
scheme (Note 6) - - 52
Movement on deferred tax relating to
pension scheme - - (16)
------------------------------ -------- -------- --------
Net increase in shareholders' funds 4,948 2,425 5,917
Shareholders' funds at the beginning
of the period 28,863 22,946 22,946
------------------------------ -------- -------- --------
Shareholders' funds at the end of the
period 33,811 25,371 28,863
------------------------------ -------- -------- --------
8. Explanation of transition to IFRS
The following analysis explains the financial impact of the Group's adoption of
IFRS. The date of transition was
1 January 2006.
Reconciliation of equity as at 1 January 2006 (date of transition to IFRS)
Category Note Previous Effect of IFRS IFRS
GAAP Transition
#'000 #'000 #'000
Assets
Non Current Assets
Property, plant &
equipment (i) 7,823 (59) 7,764
Intangible assets (e), (i) 46,230 528 46,758
Deferred tax asset (a) - 1,310 1,310
Derivative financial - - -
instruments ---------- ------------- --------
54,053 1,779 55,832
---------- ------------- --------
Current Assets
Inventories 4,897 - 4,897
Trade & other
receivables (i) 15,676 (469) 15,207
Cash & cash
equivalents 8,253 - 8,253
---------- ------------- --------
28,826 (469) 28,357
---------- ------------- --------
Total Assets 82,879 1,310 84,189
---------- ------------- --------
Liabilities
Current Liabilities
Trade & other
payables (d) (15,247) 2,856 (12,391)
Current tax
liabilities (d) - (2,856) (2,856)
Borrowings (5,330) - (5,330)
---------- ------------- --------
(20,577) - (20,577)
---------- ------------- --------
Non Current Liabilities
Trade & other payables - - -
Borrowings (35,958) - (35,958)
Deferred tax
liabilities (b) - (189) (189)
Retirement benefit
obligations (a) (2,999) (1,310) (4,309)
Provision for
liabilities &
charges (b) (399) 189 (210)
---------- ------------- --------
(39,356) (1,310) (40,666)
---------- ------------- --------
Total Liabilities (59,933) (1,310) (61,243)
---------- ------------- --------
Net Assets 22,946 - 22,946
---------- ------------- --------
Shareholders' Equity
Ordinary shares 123 - 123
Merger reserve 2,033 - 2,033
Retained earnings 20,790 - 20,790
---------- ------------- --------
Total Shareholders'
Equity 22,946 - 22,946
---------- ------------- --------
Reconciliation of equity as at 31 December 2006 (date of last UK GAAP
statements)
Category Note Previous Effect of IFRS IFRS
GAAP Transition
#'000 #'000 #'000
Assets
Non Current Assets
Property, plant &
equipment (i) 7,103 (50) 7,053
Intangible assets (e), (i) 43,260 3,565 46,825
Deferred tax asset (a) - 1,258 1,258
---------- ------------- --------
50,363 4,773 55,136
---------- ------------- --------
Current Assets
Inventories 4,593 - 4,593
Trade & other
receivables (i) 15,148 (402) 14,746
Cash & cash
equivalents 8,676 - 8,676
---------- ------------- --------
28,417 (402) 28,015
---------- ------------- --------
Total Assets 78,780 4,371 83,151
---------- ------------- --------
Liabilities
Current
Liabilities
Trade & other
payables (d) (13,962) 2,174 (11,788)
Current tax
liabilities (d) - (2,174) (2,174)
Borrowings (5,051) - (5,051)
Provision for
liabilities &
charges (c) - (350) (350)
---------- ------------- --------
(19,013) (350) (19,363)
---------- ------------- --------
Non Current
Liabilities
Trade & other
payables (54) - (54)
Borrowings (30,395) - (30,395)
Derivative financial
instruments (h) - (140) (140)
Deferred tax
liabilities (b) - (46) (46)
Retirement benefit
obligations (a) (2,875) (1,258) (4,133)
Provision for
liabilities &
charges (b),(c) (553) 396 (157)
---------- ------------- --------
(33,877) (1,048) (34,925)
---------- ------------- --------
Total Liabilities (52,890) (1,398) (54,288)
---------- ------------- --------
Net Assets 25,890 2,973 28,863
---------- ------------- --------
Shareholders'
Equity
Ordinary shares 123 - 123
Merger reserve 2,033 - 2,033
Other reserves
(translation) (g) - (257) (257)
Retained earnings (e),(g),(h) 23,734 3,230 26,964
---------- ------------- --------
Total Shareholders'
Equity 25,890 2.973 28,863
---------- ------------- --------
Reconciliation of profit for the year ended 31 December 2006 (date of last UK
GAAP statements)
Category Note Previous Effect of IFRS IFRS
GAAP Transition
#'000 #'000 #'000
Revenue 64,426 - 64,426
Cost of sales (11,719) - (11,719)
---------- ------------- --------
Gross profit 52.707 - 52,707
Distribution costs (24,490) - (24,490)
Administrative
expenses (e) (18,594) 3,113 (15,481)
---------- ------------- --------
Operating profit 9,623 3,113 12,736
------------------- ------ ---------- ------------- --------
EBITDA 14,723 - 14,723
Depreciation (1,987) - (1,987)
Amortisation of
goodwill (3,113) (3,113) -
Operating profit 9,623 - 12,736
------------------- ------ ---------- ------------- --------
Finance income (f) - 692 692
Finance costs (f),(h) (1,333) (832) (2,165)
---------- ------------- --------
Finance costs - net (1,333) (140) (1,473)
---------- ------------- --------
Profit before
income 8,290 2,973 11,263
tax
Income tax expense (3,647) - (3,647)
---------- ------------- --------
Profit for the year 4,643 2,973 7,616
---------- ------------- --------
Six months to 30 June 2006
Reconciliation of equity as at 30 June 2006
Category Note Previous Effect of IFRS IFRS
GAAP Transition
#'000 #'000 #'000
Assets
Non Current Assets
Property, plant &
equipment (i) 7,676 (47) 7,629
Intangible assets (e), (i) 44,710 2,115 46,825
Deferred tax asset (a) - 1,310 1,310
---------- ------------- --------
52,386 3,378 55,764
---------- ------------- --------
Current Assets
Inventories 5,328 - 5,328
Trade & other
receivables (i) 16,268 (502) 15,766
Cash & cash
equivalents 6,658 - 6,658
---------- ------------- --------
28,254 (502) 27,752
---------- ------------- --------
Total Assets 80,640 2,876 83,516
---------- ------------- --------
Liabilities
Current Liabilities
Trade & other
payables (d) (14,742) 2,470 (12,272)
Current tax
liabilities (d) - (2,470) (2,470)
Borrowings (5,204) - (5,204)
---------- ------------- --------
(19,946) - (19,946)
---------- ------------- --------
Non Current
Liabilities
Borrowings (33,478) - (33,478)
Deferred tax
liabilities (b) - (189) (189)
Retirement benefit
obligations (a) (3,065) (1,310) (4,375)
Provision for
liabilities &
charges (b) (346) 189 (157)
---------- ------------- --------
(36,889) (1,310) (38,199)
---------- ------------- --------
Total Liabilities (56,835) (1,310) (58,145)
---------- ------------- --------
Net Assets 23,805 1,566 25,371
---------- ------------- --------
Shareholders' Equity
Ordinary shares 123 - 123
Merger reserve 2,033 - 2,033
Other reserves
(translation) (g) - 83 83
Retained earnings 21,649 1,483 23,132
---------- ------------- --------
Total Shareholders'
Equity 23,805 1,566 25,371
---------- ------------- --------
Six months to 30 June 2006
Reconciliation of profit for the six months ended 30 June 2006
Category Note Previous GAAP Effect of IFRS IFRS
Transition
#'000 #'000 #'000
Revenue 33,398 - 33,398
Cost of sales (6,197) - (6,197)
---------- ------------- --------
Gross profit 27,201 - 27,201
Distribution costs (12,779) - (12,779)
Administrative
expenses (e) (9.347) 1,566 (7,781)
---------- ------------- --------
Operating profit 5,075 1,566 6,641
------------------- ------ ---------- ------------- --------
EBITDA 7,675 - 7,675
Depreciation (1,034) - (1,034)
Amortisation of
goodwill (1,566) (1,566) -
Operating profit 5,075 - 6,641
------------------- ------ ---------- ------------- --------
Finance income (f) - 64 64
Finance costs (f) (964) (64) (1,028)
---------- ------------- --------
Finance costs - net (964) - (964)
---------- ------------- --------
Profit before income
tax 4,111 1,566 5,677
Income tax expense (1,859) - (1,859)
---------- ------------- --------
Profit for the
period 2,252 1,566 3,818
---------- ------------- --------
Notes
(a) IAS 19 - Employee Benefits
IAS 19 requires pension assets or liabilities and the associated deferred tax
balance to be presented separately on the balance sheet. Under FRS 17 these
balances were presented net.
(b)(d) IAS 12 - Income Taxes
IAS 12 is conceptually different to UK GAAP and deferred tax is recognised on
"temporary differences" rather than "timing differences".
Timing differences, which focus on profit and loss movements, represent the
difference between the taxable amount and the pre-tax accounting profit that
originate in one reporting period and reverse in one or more subsequent periods.
Temporary differences, which focus on balance sheet movements, are the
differences between the carrying amount of an asset or liability in the balance
sheet and its tax base.
In many cases the deferred tax position will be the same under both IAS 12 and
FRS 19.
IAS 12 requires current tax liabilities, deferred tax liabilities, and deferred
tax assets to be disclosed separately on the face of the balance sheet.
(c) IAS 37 - Provisions, contingent liabilities and contingent assets
IAS 37 requires provisions to be separately identified on the face of the
balance sheet analysed between current and non current liabilities.
(e) (i) IFRS 3 - Business Combinations
IFRS 3 has been applied prospectively from 1 January 2006.
IFRS 3 has a strict definition of what constitutes a business within the context
of a business combination. IFRS 3 requires that all the acquiree's intangible
assets at the acquisition date should be recognised separately in the
consolidated financial statements if they meet the definition of an intangible
asset in IAS 38 (Intangible Assets) and if their fair value can be measured
reliably.
Under IAS 38, there is a rebuttable presumption that the intangible asset's fair
value can be measured reliably if it has a finite useful life.
Application of IFRS 3 resulted in no change to the split of intangibles and
goodwill attributable to acquisitions post 1 January 2006.
Under both IFRS and UK GAAP, goodwill arising on an acquisition is treated as an
asset; however, under IFRS goodwill is not amortised, instead, it is subject to
an annual impairment review. On transition, the group was required to review the
carrying value of goodwill for impairment which showed that no impairment loss
had occurred.
(f) IAS 1 - Presentation of Financial Statements
IAS 1 requires interest paid and received to be shown separately on the face of
the income statement and reclassified as finance costs and finance income.
(g) IAS 21 - The Effects of Changes in Foreign Exchange Rates
IAS 21 requires exchange differences on a monetary item forming part of a
reporting entity's net investment in a foreign operation to be recognised in a
separate component of equity in the reporting entity's consolidated financial
statements.
(h) IAS 39 - Financial Instruments: Recognition and Measurement
IAS 39 covers the recognition, measurement and derecognition of financial
instruments. In accordance with IAS 39 the fair value of interest rate caps has
been recognised.
The group has re-assessed its provisioning policies in accordance with IAS 39.
There is no change on adoption, and provisions continue to be calculated based
on experience, and the provisioning level will continue to be reassessed as
experience emerges.
(i) The cashflow statement has been reclassified in line with IFRS 1 and IAS 7.
This information is provided by RNS
The company news service from the London Stock Exchange
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