RNS Number:3754Z
Sinclair (William) Holdings PLC
06 March 2006
WILLIAM SINCLAIR HOLDINGS plc
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
William Sinclair Holdings plc today releases audited restated financial
information for the year ended 30 June 2005 and unaudited restated financial
information for the six months ended 31 December 2004 under International
Financial Reporting Standards (IFRS).
William Sinclair Holdings previously prepared its 2004/05 consolidated accounts
under UK Generally Accepted Accounting Principles (UK GAAP). These accounts were
published in September 2005. William Sinclair Holdings' first set of accounts
published under IFRS will be the Interim Report for the six months ended 31
December 2005. These Interim Results are scheduled for release on 16 March 2006.
The principal adjustments from UK GAAP to IFRS are as follows:
* The recognition of the pension scheme deficit on the balance sheet of
the Group
* Provision for deferred tax on revaluation surpluses and other changes
in the calculation of deferred tax
* The timing of the recognition of dividends
* The accrual for holiday pay
* The accounting for software
* The transitional adjustment of goodwill amortisation
* Changes in foreign exchange policies
* The recognition of a fair value charge for share based payments
* Revenue recognition of customer incentives
* There is no impact on the Group's net cash flows
The impact on the Group's previously published results is as follows:
Audited Unaudited
Year to Six months to
30 June 2005 31 December 2004
UK GAAP IFRS UK GAAP IFRS
Turnover #'000 42,707 41,453 13,265 12,884
Operating profit/ #'000 792 972 (1,409) (1,234)
(loss)
Profit/(Loss) #'000 574 543 (1,480) (1,398)
before tax
Profit/(Loss) after #'000 393 419 (1,006) (935)
tax
Earnings/(Loss) per p 2.4 2.5 (6.1) (5.6)
share
Net assets #'000 17,931 11,509 14,486 8,896
There is no change to the Group's underlying operations or net cash flow under
IFRS. The restated financial information with commentary and explanations is
attached to this announcement.
Peter Williams,
William Sinclair Holdings plc
CONTENTS
1. Introduction 3
2. Basis of Preparation 3
3. Summary of Impact 4
4. Explanation of Significant Adjustments 4
5. Accounting Policies 6
Restated Financial Information
Consolidated Income Statement 13
Consolidated Statement of Recognised Income and Expense 13
Consolidated Balance Sheet 14
Appendices
i. Reconciliation of equity at 1 July 2004 15
ii. Reconciliations of profit, statement of recognised income and 16
expense, and equity for the six months ended 31 December 2004
iii. Reconciliations of profit, statement of recognised income and 18
expense, and equity for the year ended 30 June 2005
iv. Reconciliation of movement to equity 20
v. Independent Auditors' Report 21
1 Introduction
William Sinclair Holdings plc and its subsidiary companies ("the Group") have
previously prepared consolidated financial statements under UK Generally
Accepted Accounting Principles ("UK GAAP"). Following an EC directive issued in
July 2002, the Group is required to prepare its consolidated accounts for 2005/6
onwards in accordance with International Financial Reporting Standards ("IFRS"
*).
The Group's first annual report under IFRS will be for the financial year ending
30 June 2006 and its first interim results will be for the six months ended 31
December 2005. The Group's date of transition to IFRS is 1 July 2004, being the
start of the previous period which will be presented as comparative information.
This document sets out the changes in accounting policy arising from the
adoption of IFRS and presents restated information for the opening balance sheet
at 1 July 2004, the six months ended 31 December 2004 and the year ended 30 June
2005, which were previously published under UK GAAP.
The information contained in these financial statements does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. A copy
of the statutory accounts reported under UK GAAP for the year ended 30 June 2005
and 30 June 2004 have been filed with the Registrar of Companies and the
auditors' reports on those accounts were unqualified.
* IFRS means all extant IFRS's, International Accounting Standards ("IAS's") and
interpretative guidance issued by IFRIC.
2 Basis of Preparation
Basis of accounting
The restated financial information contained in this document has been prepared
in accordance with the IFRS accounting policies set out at section 5 below.
The financial information has been prepared on the basis of IFRS expected to be
in effect for the year ending 30 June 2006. The IFRS in effect at that date may
differ owing to decisions taken by the EC on endorsement, interpretative
guidance issued by the International Accounting Standards Board (IASB) or the
International Financial Reporting Interpretations Committee (IFRIC) and the
requirements of company legislation.
The reported results of William Sinclair Holdings plc may change as a result of
future changes to IFRS.
In accordance with IFRS 1 First Time Adoption of International Financial
Reporting Standards the Group has elected not to restate comparative information
for the impact of IAS 32 and IAS 39, Financial Instruments. For the Group's
interim results for the six months ended 31 December 2005, the opening balance
sheet as at 1 July 2005 will be restated in accordance with the requirements of
these standards.
First time adoption of IFRS
In preparing the Group's IFRS balance sheet at 1 July 2004, the Group has
followed the requirements of IFRS 1, which in general requires the full
retrospective adoption of IFRS accounting policies. However, IFRS 1 contains
certain mandatory exceptions and certain optional exemptions from this
principle. The following optional exemptions from full retrospective adoption of
IFRS have been adopted:
(a) Business combinations: The Group has chosen not to restate business
combinations prior to the transition date of 1 July 2004 on an IFRS 3 basis.
(b) Cumulative translation differences: One of the requirements of IAS21 The
Effects of changes in Foreign Exchange Rates is that exchange differences
arising on the retranslation of the results and net assets of overseas
operations must be held as a separate component of equity and on a subsequent
disposal of an overseas operation, the cumulative amount of exchange differences
previously recognised directly in equity for that operation are to be
transferred to the income statement as part of the profit or loss on disposal.
The Group has adopted the exemption allowing cumulative translation differences
to be reset to zero at the transition date.
(c) Share based payments: The Group has chosen to adopt the exemption to apply
IFRS2 Share Based Payments only to equity settled awards granted after 7
November 2002 that have not fully vested before 1 January 2005.
(d) The Group has taken the exemption not to restate comparatives for IAS32
Financial Instruments: Disclosure and Presentation and IAS 39 Financial
Instruments: Recognition and Measurement and this standard has been applied
prospectively from 1 July 2005.
3 Summary of Impact
Unaudited Audited
Six months to Year to
31 December 2004 30 June 2005
UK GAAP IFRS UK GAAP IFRS
Operating (loss)/ #'000 (1,409) (1,234) 792 972
profit
(Loss)/Profit #'000 (1,480) (1,398) 574 543
before tax
(Loss)/Profit after #'000 (1,006) (935) 393 419
tax
(Loss)/Earnings per p (6.1) (5.6) 2.4 2.5
share
Net assets #'000 14,486 8,896 17,931 11,509
The changes having the most significant impact on the restated figures are as
follows:
* The recognition of the pension scheme deficit on the balance sheet of
the Group
* Provision for deferred tax on revaluation surpluses and other changes in
the calculation of deferred tax
* The timing of the recognition of dividends
* The accrual for holiday pay
* The accounting for software
* The transitional adjustment of goodwill amortisation
* Changes in foreign exchange policies
* The recognition of a fair value charge for share based payments
* Revenue recognition of customer incentives
* There is no impact on the Group's net cash flows
4 Explanation of Significant Adjustments
The significant adjustment made to restate figures are as follow:-
4.1 IAS 38 Intangibles
Under IAS 38 the costs of software which is not an integral part of the hardware
on which it operates should be disclosed separately as an intangible asset. The
impact of this at 30 June 2005 is that assets with a net book value of #100,000,
previously included as tangible fixed assets, are now disclosed as intangible
non-current assets (31 December 2004 - #108,000).
4.2 IFRS 1 First-time adoption of International Financial Reporting Standards
and IFRS 3 Business combinations
The Group has chosen not to restate business combinations prior to the
transition date of 1 July 2004 on an IFRS 3 basis. On first time adoption, IFRS
1 extends this exemption to joint ventures. The carrying value of goodwill has
thus been frozen at 1 July 2004. Goodwill arising on acquisition is no longer
amortised but is instead subjected to annual impairment tests. The carrying
value of goodwill was tested as at the transition date of 1 July 2004 and as at
30 June 2005 and no impairment was identified. The impact on the Group's income
statement is to increase operating profit by #29,000 in the six months to 31
December 2004 and #58,000 for the year ended 30 June 2005 and to increase equity
by the same amounts.
4.3 IAS 21 The effects of changes in foreign exchange rates
Under IAS 21 the fair value of the Group's foreign currency contracts, entered
into to hedge foreign currency cashflow exposure, is included on the balance
sheet with movements from one period end to the next reflected in the Income
Statement. The fair value of such contracts has been included in the balance
sheet as an asset of #29,000 at 1 July 2004 and as a liability of #41,000 by 30
June 2005. The value was nil at 31 December 2004. The impact before tax is
therefore a charge to the Income Statement of #70,000 in the year to 30 June
2005.
Foreign currency debtors and creditors have been restated at the closing rate in
accordance with IAS 21. The effect of this has been no change in net assets at 1
July 2004 and at 31 December 2004 and an increase in net assets and income for
the year ended 30 June 2005 of #17,000.
4.4 IAS 10 Events after the balance sheet date
Under IAS 10 dividends are provided for when declared and approved. The effect
is that dividends are typically recognised later under IFRS than under UK GAAP.
In addition, dividends will be shown as a movement in equity instead of through
the income statement. The impact for the year ended 30 June 2004 is to increase
net assets by #372,000, for the six months ended 31 December 2004 is to increase
net assets by #166,000 and for the year ended 30 June 2005 is to increase net
assets by #331,000.
4.5 IAS 12 Income taxes
Under UK GAAP, deferred tax is recognised on all timing differences that have
originated but not reversed at the balance sheet date, subject to various
exemptions.
Under IAS 12 deferred tax is recognised in respect of all temporary differences
at the balance sheet date between the tax base of assets and liabilities and
their carrying value for reporting purposes.
The main components of the change in deferred tax provision at transition are:
* Differences between the tax base and carrying value of properties
resulting from their revaluations and, for example, where previous capital
gains have been rolled-over, and
* The tax credit that results from the deemed pension contribution when
the pension scheme deficit is taken on to the balance sheet.
In addition various adjustments made to the financial statements on transition
to IFRS result in related adjustments to deferred tax.
The overall impact for the year ended 30 June 2005 is to lower the tax charge by
#15,000 and to convert the provision for deferred taxation to an asset of
#83,000. The impact for the period ended 31 December 2004 is to increase the tax
charge by #17,000 and to convert the provision for deferred taxation into an
asset of #739,000. The movement in these deferred taxation assets is primarily
the result of the revaluation of properties as at 30 June 2005.
A further change under this heading is that the Group's share of income from
joint ventures is now disclosed net of the related tax charge of #42,000 for the
year ended 30 June 2005 and #6,000 for the period ended 31 December 2004, with a
corresponding reduction in the disclosed figures for the Group's tax charge.
4.6 IAS 19 Employee benefits
IAS 19 requires a liability to be recognised for future benefits payable to
employees as a result of past service. The impact on the Group is that the
deficit in the Group defined benefit pension scheme must be recognised. This
deficit was calculated at #6,524,000 at 30 June 2004, #7,009,000 at 31 December
2004 and #7,249,000 at 30 June 2005. While the assets of the fund performed well
in the period, reductions in the relevant interest rates meant the discount
factor applied to future liabilities was lower at the year end than at the start
of the year and hence the discounted liability has increased.
When the deficit is included in the balance sheet the tax credit which would
result from the deemed contribution to the scheme is recognised (at 30%) through
the deferred tax account. The net impact on the balance sheet at 31 December
2004 is #4,906,000 and at 30 June 2005 is #5,074,000.
In addition, the adoption of IAS 19 has resulted in an adjustment to derecognise
the SSAP 24 pension asset, having a net effect on the balance sheet of nil at 31
December 2004 and a decrease in net assets of #60,000 at 30 June 2005. The net
profit and loss account impact is #9,000 in the year ended 30 June 2005 and
#14,000 for the period ended 31 December 2004.
A further requirement of the standard is that holiday pay accrued but not taken
at the balance sheet date should be provided for in the financial statements.
The Group operates a holiday year in line with the calendar year which means
that there are no amounts to accrue at 31 December but that there may be at 30
June each year. Typically employees take more holidays in the quieter second
half of the year as this suits the seasonal nature of the Group's activities.
However, despite this making economic sense, the Group is required to accrue for
untaken holiday at 30 June each year. The impact of this on the balance sheet at
both 1 July 2004 and at 30 June 2005 was to reduce net assets by #76,000. A
credit of #76,000 is recorded in the period ended 31 December 2004.
4.7 IFRS2 Share based payments
Under UK GAAP share options were expensed at their intrinsic value except that
options granted under SAYE schemes were exempt.
In accordance with IFRS 2 the Group has recognised a charge to income in respect
of outstanding employee share options granted after 7 November 2002 which had
not fully vested as at 1 January 2005. The charge is calculated at the fair
value of these options calculated using the Black Scholes model and spread over
the vesting period. Allowance is made for that proportion of options anticipated
to lapse.
Deferred tax is recognised on the basis of intrinsic value which is the
difference between the market price of William Sinclair Holdings plc shares at
each balance sheet date and the exercise price. Accordingly the tax effect does
not correlate with the profit and loss account charge. Deferred tax assets on
employee share options were not previously recognised.
As the options were granted in March 2005 there is no impact for the six months
ended 31 December 2004.
The impact for the year ended 30 June 2005 is to reduce operating profit by
#6,000 and to reduce the deferred tax charge by #2,000.
4.8 IAS 18 Revenue
The Group operates a number of incentive schemes to encourage customers to
increase their purchases from the Group and to pay invoices promptly. Under IAS
18 the cost of these schemes should be shown as a deduction from the turnover
with these customers rather than as an operating expense. The impact of this
change is to reduce both turnover and operating expenses by #381,000 in the six
months to 31 December 2004 and by #1,254,000 in the year to 30 June 2005.
5 Accounting Policies
Basis of preparation
The restated financial information contained in this document has been prepared
on the basis of IFRS expected to be in effect for the year ending 30 June 2006
and by applying the requirements of IFRS 1, as described in section 2 above.
A summary of the principal accounting policies, which have been consistently
applied throughout the year and the preceding year, is set out below.
The Group and company financial statements are presented in Sterling and all
values are rounded to the nearest thousand pounds (#000) except when otherwise
indicated.
Basis of consolidation
The Group financial statements consolidate the financial statements of William
Sinclair Holdings plc and the entities it controls (its subsidiaries) drawn up
to 30 June each year.
Subsidiaries are consolidated from the date of their acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases. Control comprises the power to govern the
financial and operating policies of the entity so as to obtain benefit from its
activities and is achieved through direct or indirect ownership of voting
rights, currently exercisable or convertible potential voting rights, or by way
of contractual agreement. The financial statements of subsidiaries are prepared
for the same reporting year as the parent company under UK GAAP and adjusted for
IFRS on consolidation. All inter-company balances and transactions, including
unrealised profits arising from them, are eliminated.
Interests in joint ventures
The Group has interests in three joint ventures. These take the form of
agreements to share control over other entities and commercial collaborations.
The joint ventures are established through an interest in a company, the Group
recognises its interest in the entity's assets and liabilities using the equity
method of accounting. Under the equity method, the interest in the joint venture
is carried in the balance sheet at cost plus post-acquisition changes in the
Group's share of its net assets less any impairment in value of individual
investments. The Group income statement reflects the share of the jointly
controlled entity's results after tax.
Financial statements of all material, jointly controlled entities are prepared
for the same reporting period as the Group. Where necessary, adjustments are
made to bring the accounting policies used into line with those of the Group.
Adjustments are also made in the Group's financial statements to eliminate the
Group's share of unrealised gains and losses on transactions between the Group
and its jointly controlled entities.
Foreign currencies
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency rate of exchange ruling at the
balance sheet date. All differences are taken to the income statement except for
differences on monetary assets and liabilities that form part of the Group's net
investment in a foreign operation. These are taken directly to equity until the
disposal of the net investment, at which time they are recognised in profit or
loss.
The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date. Income and expenses are
translated at weighted average exchange rates for the year. The resulting
exchange differences are taken directly to a separate component of equity. On
disposal of a foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised in the income
statement.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
Goodwill
Business combinations for which the agreement date is on or after 1 July 2004
are accounted for under IFRS 3 using the purchase method. Any excess of the cost
of the business combination over the Group's interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities is recognised in
the balance sheet as goodwill and is not amortised. To the extent that the net
fair value of the acquired entity's identifiable assets, liabilities and
contingent liabilities is greater than the cost of the investment, a gain is
recognised immediately in the income statement. Goodwill recognised as an asset
as at 30 June 2004 is recorded at its carrying amount under UK GAAP and is not
amortised. Any goodwill asset arising on the acquisition of equity accounted
entities is included within the cost of those entities.
After initial recognition, goodwill is stated at cost less any accumulated
impairment losses, with the carrying value being reviewed for impairment at
least annually and whenever events or changes in circumstances indicate that the
carrying value may be impaired. For the purpose of impairment testing, goodwill
is allocated to the related cash-generating units monitored by management,
usually at business segment level or statutory company level as the case may be.
Where the recoverable amount of the cash-generating unit is less than its
carrying amount, including goodwill, an impairment loss is recognised in the
income statement. The carrying amount of goodwill allocated to a cash-generating
unit is taken into account when determining the gain or loss on disposal of the
unit, or of an operation within it. Goodwill arising on acquisitions prior to 30
June 1998 remains set off directly against reserves even if the related
investment becomes impaired or the business is disposed of.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
accumulated impairment losses.
Intangible assets acquired separately from a business are carried initially at
cost. An intangible asset acquired as part of a business combination is
recognised outside goodwill if the asset is separable or arises from contractual
or other legal rights and its fair value can be measured reliably.
Intangible assets with a finite life are amortised on a straight line basis over
their expected useful lives, as follows:
* Computer software - 3-5 years;
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Property, including peat bogs, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and
accumulated impairment losses. Such costs include costs directly attributable to
making the asset capable of operating as intended. Borrowing costs attributable
to assets under construction are recognised as an expense as incurred.
Properties, including peat bogs, are recognised initially at cost and thereafter
carried at fair value less depreciation and impairment charged subsequent to the
date of the revaluation. Fair value is based on periodic valuations by an
external independent valuer and is determined from market-based evidence by
appraisal. Valuations are performed frequently enough to ensure that the fair
value of a revalued asset does not differ materially from its carrying amount.
Any revaluation surplus is credited to the revaluation reserve in equity except
to the extent that it reverses a decrease in the carrying value of the same
asset previously recognised in profit or loss, in which case the increase is
recognised in profit or loss. A revaluation deficit is recognised in profit or
loss, except to the extent of any existing surplus in respect of that asset in
the revaluation reserve.
A transfer is made from the revaluation reserve to retained earnings for the
difference between depreciation based on the carrying amount of the assets and
that based on the assets' original cost. Additionally, accumulated depreciation
as at revaluation date is eliminated against the gross carrying amount of the
asset and the net amount is restated to the revalued amount of the asset. Upon
disposal any revaluation reserve relating to the particular asset being sold is
transferred to retained earnings.
Depreciation is provided on all property, including peat bogs, plant and
equipment, other than freehold land, at rates calculated to write off the cost,
less estimated residual value based on prices prevailing at the balance sheet
date, of each asset evenly over its expected useful life as follows:
* Freehold properties - over 50 years
* Leasehold properties - over the lease term
* Plant and machinery - over 3 to 10 years
The carrying values of property, including peat bogs, plant and equipment are
reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable.
Leases
(i) Assets held under finance leases, which transfer to the Group substantially
all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease, with a corresponding liability being
recognised for the fair value of the leased asset or, if lower, the present
value of the minimum lease payments. Lease payments are apportioned between the
reduction of the lease liability and finance charges in the income statement so
as to achieve a constant rate of interest on the remaining balance of the
liability. Assets held under finance leases are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
(ii) Leases where the lessor retains substantially all the risks and rewards of
ownership are classified as operating leases. Lease payments are charged to the
income statement on a straight line basis over the term of the lease.
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an
asset may be impaired. If any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value in use. It is
determined for an individual asset unless the asset does not generate cash
inflows that are largely independent of those from other assets or Groups of
assets. Where the carrying amount of an asset exceeds its recoverable amount the
asset is considered impaired and is written down to its recoverable amount. In
assessing value in use the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Impairment losses of continuing operations are recognised in the income
statement in those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognised. If that is the case the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in profit or loss unless the asset is carried
at revalued amount, in which case the reversal is treated as a revaluation
increase. After such a reversal the depreciation charge is adjusted in future
periods to allocate the asset's revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
Inventories
Stocks are stated as the lower of cost and net realisable value.
Cost comprises the direct cost of production and attributable proportion of all
overheads appropriate to location and condition. Stocks of harvested peat
include the direct cost of production and overheads based on the long-run level
of harvest activity.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred to completion and disposal.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and
carried at the lower of their original invoiced value and recoverable amount.
Where the time value of money is material, receivables are carried at amortised
cost. Provision is made when there is objective evidence that the Group will not
be able to recover balances in full. Balances are written off when the
probability of recovery is assessed as being remote.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and in
hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly
attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation
of liabilities are recognised respectively in finance income and finance
expense.
Income taxes
The charge for taxation is based on the profits for the year and takes into
account taxation deferred because of temporary differences between the treatment
of certain items for taxation and for accounting purposes. Deferred tax is
provided, using the liability method, on temporary differences at the balance
sheet date between the tax base of assets and liabilities and their carrying
amounts for financial reporting purposes.
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and laws
that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
* where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a
business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss;
* in respect of taxable temporary differences associated with investments in
subsidiaries, associates and joint ventures, where the timing of the
reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future;
and
* deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax
losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis
at the tax rates that are expected to apply when the related asset is realised
or liability is settled, based on tax rates and laws enacted or substantively
enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in
equity and not in the income statement.
Income tax is charged or credited directly to equity if it relates to items that
are credited or charged to equity. Otherwise income tax is recognised in the
income statement.
Provisions
The costs of restoration of the Group's peat bogs are recognised as a liability
as the peat is harvested. Provision is made as each site is worked and an
obligation, as required by the planning consent, incurred. Where the effect of
the time value of money is material the provision is discounted.
Financial instruments
The Group uses derivative financial instruments such as foreign currency
contracts to hedge its cash flow risks associated with foreign currency. Such
derivative financial instruments are stated at fair value.
The fair value of forward contracts is calculated by reference to current
forward exchange rates for contracts with a similar maturity profile, any gains
or losses arising from changes in fair value are taken directly to net profit or
loss for the period.
Pensions
The Group operates a defined benefit pension scheme which was closed to new
entrants in 1996. The contributions of eligible employees and employing
companies are administrated in funds independent from the company's assets. The
scheme is funded on a going concern basis on the advice of external actuaries.
Contributions are charged to the income statement so as to spread the cost of
pensions over employees' working lives with the Group.
The cost of providing benefits under the defined benefit plan is determined
using the projected unit credit method, which attributes entitlement to benefits
to the current period (to determine current service cost) and to the current and
prior periods (to determine the present value of defined benefit obligation) and
is based on actuarial advice. Past service costs are recognised in profit or
loss on a straight-line basis over the vesting period or immediately if the
benefits have vested. When a settlement (eliminating all obligations for
benefits already accrued) or a curtailment (reducing future obligations as a
result of a material reduction in the scheme membership or a reduction in future
entitlement) occurs the obligation and related plan assets are remeasured using
current actuarial assumptions and the resultant gain or loss recognised in the
income statement during the period in which the settlement or curtailment
occurs.
The interest element of the defined benefit cost represents the change in
present value of scheme obligations resulting from the passage of time, and is
determined by applying the discount rate to the opening present value of the
benefit obligation, taking into account material changes in the obligation
during the year. The expected return on plan assets is based on an assessment
made at the beginning of the year of long-term market returns on scheme assets,
adjusted for the effect on the fair value of plan assets of contributions
received and benefits paid during the year. The difference between the expected
return on plan assets and the interest cost is recognised in the income
statement as other finance income or expense.
Actuarial gains and losses are recognised in full in the statement of recognised
income and expense in the period in which they occur.
The defined benefit pension asset or liability in the balance sheet comprises
the total for each plan of the present value of the defined benefit obligation
(using a discount rate based on high quality corporate bonds), less any past
service cost not yet recognised and less the fair value of plan assets out of
which the obligations are to be settled directly. Fair value is based on market
price information and in the case of quoted securities is the published bid
price.
The Group also operates a Group Personal Pension Plan, which is a defined
contribution scheme. Contributions to the scheme are charged against the income
statement as they arise.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates, VAT and other sales taxes or duty. Revenue on the sale of
goods is recognised when the significant risks and rewards of ownership of the
goods have passed to the buyer usually on dispatch of the goods.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
Equity settled share based payments
The company operates an executive share option scheme for certain senior
executives. Share options issued are exercisable subject to the attainment of
certain market-based performance criteria.
The fair value of options granted after 7 November 2002 is calculated using
mathematical models, including the Black-Scholes model, modified for the impact
of market-based performance criteria and the resulting cost is charged to the
income statement over the vesting period.
The company re-assesses its estimate of the number of options that are expected
to become exercisable at each balance sheet date as a result of changes in
non-market based performance conditions. Any adjustments to the original
estimates are recognised in the income statement.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions number of
equity instruments that will ultimately vest or in the case of an instrument
subject to a market condition, be treated as vesting as described above. The
movement in cumulative expense since the previous balance sheet date is
recognised in the income statement, with a corresponding entry in equity.
The Group has taken advantage of the transitional provisions of IFRS 2 in
respect of equity-settled awards so as to apply IFRS 2 only to those
equity-settled awards granted after 7 November 2002 that had not vested before 1
January 2005.
Consolidated Income Statement
Six months ended Year ended
31 December 2004 30 June 2005
Unaudited Audited
#'000 #'000
Turnover 12,884 41,453
Operating expenses (14,118) (40,481)
----------- ----------
Operating (loss)/profit (1,234) 972
Share of post tax profits of joint venture using the
equity method 13 75
Finance costs (119) (398)
Other finance costs - pensions (58) (116)
----------- ----------
(Loss)/profit before tax (1,398) 543
Taxation 463 (124)
----------- ----------
(Loss)/profit for the period attributable to
members of the parent company (935) 419
----------- ----------
Earnings per share:
Basic (5.6)p 2.5p
Diluted (5.6)p 2.5p
Consolidated Statement of Recognised Income and Expense
Six months ended Year ended
31 December 2004 30 June 2005
Unaudited Audited
#'000 #'000
Actuarial loss on deferred pension scheme (465) (823)
Revaluation of land and buildings - 2,376
Exchange differences on retranslation of foreign - -
investments
Tax on items taken directly to equity (145) (455)
----------- ----------
Net (expense) / income recognised directly in equity (320) 1,098
(Loss)/profit for the period (935) 419
----------- ----------
Total recognised income and expense for the period (1,255) 1,517
----------- ---------
Consolidated Balance Sheet
1 July 31 Dec 30 June
2004 2004 2005
#'000 #'000 #'000
Audited Unaudited Audited
Non-current assets
Property, plant and equipment 10,041 9,770 12,308
Computer software 116 108 100
Investments 1,516 1,551 1,591
Deferred tax asset 611 739 83
-------- -------- --------
12,284 12,168 14,082
-------- -------- --------
Current assets
Inventories 5,262 8,780 5,550
Trade and other receivables 10,914 9,329 12,403
Cash at bank and in hand 1,614 193 96
-------- -------- --------
17,790 18,302 18,049
-------- -------- --------
Total assets 30,074 30,470 32,131
-------- -------- --------
Current liabilities
Trade and other payables (12,359) (7,892) (11,242)
Interest bearing liabilities (207) (6,237) (1,124)
-------- -------- --------
Total current liabilities (12,566) (14,129) (12,349)
-------- -------- --------
Non-current liabilities
Provisions (282) (282) (146)
Retirement benefit provisions (6,524) (7,009) (7,249)
Interest bearing liabilities (179) (154) (878)
-------- -------- --------
Total non-current liabilities (6,985) (7,445) (8,273)
-------- -------- --------
-------- -------- --------
Total liabilities (19,551) (21,574) (20,622)
-------- -------- --------
-------- -------- --------
Net assets 10,523 8,896 11,509
-------- -------- --------
Equity
Called-up share capital 4,139 4,139 4,139
Capital redemption reserve 1,523 1,523 1,523
Revaluation reserve 1,191 1,191 2,855
Other reserves 176 176 176
Share-based payments - - 6
Profit and loss account 3,494 1,867 2,810
-------- -------- --------
Equity attributable to members of the 10,523 8,896 11,509
parent company
-------- -------- --------
APPENDIX I
Reconciliation of net assets and equity at 1 July 2004
Previously Pension SSAP24 Holiday Dividends Deferred Computer Foreign Def'd tax Restated
reported deficit Pension Pay IAS 10 Tax Software Exchange Disclosure under
under IAS 19 Adjustment IAS 19 IAS 12 IAS 38 IAS 21 IAS 12 IFRS
UK GAAP
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Non-current assets
Property, plant
and vehicles 10,157 (116) 10,041
Computer software 116 116
Investments 1,516 1,516
Deferred tax assets 611 611
------ --------
11,673 12,284
Current assets
Inventories 5,262 5,262
Trade and
other receivables 10,885 29 10,914
Cash at bank
and in hand 1,614 1,614
------ --------
17,761 17,790
Total assets 29,434 30,074
Current liabilities
Trade and other
payables (12,623) (108) 372 (12,359)
Tax liabilities -
Interest bearing
liabilities (207) (207)
------ -------
Total current
liabilities (12,830) (12,566)
Non-current liabilities
Deferred tax
liabilities (485) 1,957 32 (884) (9) (611) 0
Provisions (282) (282)
Retirement benefit
provisions (6,524) (6,524)
Interest bearing
liabilities (179) (179)
------ --------
Total non-current
liabilities (946) (6,985)
Total liabilities (13,776) (19,551)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net assets 15,658 (4,567) - (76) 372 (884) - 20 - 10,523
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Equity
Called-up share
capital 4,139 4,139
Capital redemption
reserve 1,523 1,523
Revaluation reserve 1,702 (511) 1,191
Other reserves 176 176
Share-based payments - -
Profit and
loss account 8,118 (4,567) (76) 372 (373) 20 3,494
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Equity attributable
to members of the
parent company 15,658 (4,567) - (76) 372 (884) - 20 - 10,523
APPENDIX II
Reconciliation of profit for the six months ended 31 December 2004 (Unaudited)
Previously Pension deficit Holiday Pay Income Tax First Time Revenue Foreign Restated
Reported under IAS 19 IAS 19 IAS 12 adoption IAS 18 Exchange under
UK GAAP IFRS 1 IAS 21 IFRS
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Turnover 13,265 (381) 12,884
Operating expenses (14,674) 38 108 29 381 (14,118)
------ ----- ----- ------ ----- ----- ----- -------
Operating loss (1,409) 38 108 - 29 - - (1,234)
Share of post tax profits
of joint ventures using
the equity method 19 (6) 13
Finance costs (90) (29) (119)
Other finance expenses
- pensions (58) (58)
------ ------ ----- ----- ----- ----- ------ -------
Loss before tax (1,480) (20) 108 (6) 29 - (29) (1,398)
Taxation 474 6 (32) 6 - - 9 463
------ ------ ------ ----- ----- ----- ------ -------
Loss for the period
attributable to members of
the parent company (1,006) (14) 76 0 29 - (20) (935)
Earnings per share:
Basic (6.1)p (5.6)p
Diluted (6.1)p (5.6)p
Reconciliation of statement of recognised income and expenses for the six months ended 31 December 2004 (Unaudited)
UK GAAP Employee SSAP24 Holiday Deferred Goodwill Property, Share Foreign Restated
Unaudited Benefits Pension Pay Tax Amortisation plant and based Exchange under
IAS 19 Adjustment IAS 19 IAS 12 IFRS 1 equipment payments IAS 21 IFRS
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Income and expense
recognised directly
in equity
Actuarial loss
on defined 0 (465) (465)
pension scheme
Revaluation of
land and 0 0
buildings
Exchange differences
on retranslation
of foreign 0 0
investments
Tax on items taken
directly to or
transferred 0 140 5 145
to equity
------- ---- ------ ------- ----- ----- ------ ----- ------ ----
Net income recognised
directly in equity 0 (325) - - 5 - - - - (320)
Loss for the
period (1,006) (14) - 76 - 29 - - (20) (935)
------- ---- ------ ------- ----- ----- ------ ---- ------ ----
Total recognised
income and expense
for the year (1,006) (339) - 76 5 29 - - (20) (1,255)
APPENDIX II (continued)
Reconciliation of net assets and equity at 31 December 2004 (Unaudited)
Previously Pension SSAP24 Holiday Dividends Deferred First Comp Foreign Def'd tax Restated
Reported deficit Pension Pay IAS 10 tax time software Exchange disclosure under
under IAS 19 Adjustment IAS 19 IAS 12 adoption IAS 38 IAS 21 IAS 12 IFRS
UK GAAP IFRS 1
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #,000 #'000
Non-current assets
Property, plant and
vehicles 9,878 (108) 9,770
Computer software 108 108
Investments 1,522 29 1,551
Deferred tax assets 739 739
--------- ------
11,400 12,168
Current assets
Inventories 8,780 8,780
Trade and other
receivables 9,329 9,329
Cash at bank
and in hand 193 193
--------- ------
18,302 18,302
--------- ------
Total assets 29,702 30,470
Current liabilities
Trade and other (8,058) 166 (7,892)
payables
Tax liabilities -
liabilities
Interest bearing
liabilities (6,237) (6,237)
--------- ------
Total current (14,295) (14,129)
--------- ------
Non-current liabilities
Deferred tax
liabilities (485) 2,103 (879) (739) 0
Provisions (282) (282)
Retirement benefit
provisions (7,009) (7,009)
Interest bearing
liabilities (154) (154)
--------- ------
Total non-current
liabilities (921) (7,445)
--------- ------
Total liabilities (15,216) (21,574)
--------- ------ ------ ------ ------ ------ ------ ------ ---- ------ ------
Net assets 14,486 (4,906) - - 166 (879) 29 - - - 8,896
--------- ------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Equity
Called-up share 4,139 4,139
capital
Capital redemption
reserve 1,523 1,523
Revaluation reserve 1,702 (511) 1,191
Other 176 176
reserves
Share-based - -
payments
Profit and
loss account 6,946 (4,906) 166 (368) 29 1,867
--------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Equity attributable
to members of the 14,486 (4,906) - - 166 (879) 29 - - - 8,896
parent company
APPENDIX III
Reconciliation of profit for the year ended 30 June 2005
Previously Pension SSAP24 Holiday Income First Share Revenue Foreign Restated
reported deficit Pension Pay Tax Time Based IAS 18 Exchange under
under IAS 19 Adjustment IAS 19 IAS 12 Adoption Payments IAS 21 IFRS
UK GAAP IFRS 1 IFRS 2
#'000 #'000 #'000 #'000 #,000 #'000 #'000 #'000 #'000 #'000
Turnover 42,707 (1,254) 41,453
Operating expenses (41,915) 214 (86) - 58 (6) 1,254 (40,481)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating profit 792 214 (86) - - 58 (6) - - 972
Share of post tax
profits of joint 117 (42) 75
ventures using the
equity method
Finance costs (335) (53) (398)
Other finance expenses
- pensions (116) (116)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Profit before tax 574 98 (86) - (42) 58 (6) - (53) 543
Taxation (181) (29) 26 - 42 2 16 (124)
------- ------ ------ ------ ------ ----- ------ ------ ----- ------
Profit for the period
attributable to members 393 69 (60) - - 58 (4) - (37) 419
of the parent company
Earnings per share:
Basic 2.4p 2.5p
Diluted 2.4p 2.5p
Reconciliation of statement of recognised income and expenses for the year ended 30 June 2005
UK GAAP Employee SSAP24 Holiday Deferred Goodwill Property, Share Foreign Restated
Unaudited Benefits Pension Pay Tax Amort'n plant and based Exchange under
IAS 19 Adjustment IAS 19 IAS 12 IFRS 1 equipment payments IAS 21 IFRS
IAS 16 IFRS 2
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Income and expense
recognised directly
in equity
Actuarial loss on
defined 0 (823) (823)
pension scheme
Revaluation of
land and 2,376 2,376
buildings
Tax on items taken
directly to or 0 247 10 (712) (455)
transferred to equity
----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income
recognised directly
in equity 2,376 (576) - - 10 - (712) - - 1,098
Profit for the year 393 69 (60) - - 58 - (4) (37) 419
----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total recognised
income and expense
for the year 2,769 (507) (60) - 10 58 (712) (4) (37) 1,517
APPENDIX III (continued)
Reconciliation of net assets and equity at 30 June 2005
Previously Pension SSAP24 Holiday Dividends Deferred First Share Comp Foreign Deferred Restated
reported deficit Pension Pay IAS 10 Tax time Based software Exchange tax under
under IAS 19 Adjustment IAS 19 IAS 12 adoption Payments IAS 38 IAS 21 IAS 12 IFRS
UK GAAP IFRS 1 IFRS 2
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #,000 #'000
Non-current assets
Property,
plant and
vehicles 12,408 (100) 12,308
Computer
software 100 100
Investments 1,533 58 1,591
Deferred tax
assets 83 83
------ ------
13,941 14,082
Current assets
Inventories 5,550 5,550
Trade and
other
receivables 12,489 (86) 12,403
Cash at bank
and in hand 96 96
------ ------
18,135 18,049
Total
assets 32,076 32,131
Current liabilities
Trade and
other (11,424) (108) 331 (24) (11,225)
payables
Tax
liabilities
Interest
bearing
liabilities (1,124) (1,124)
------ ------
Total
current (12,548) (12,349)
liabilities
Non-current liabilities
Deferred tax
liabilities (573) 2,175 26 32 (1,586) 2 7 (83) -
Provisions (146) (146)
Retirement
benefit
provisions (7,249) (7,249)
Interest
bearing
liabilities (878) (878)
------ ------
Total
non-current
liabilities (1,597) (8,273)
------ ------
Total
liabilities (14,145) (20,622)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net assets 17,931 (5,074) (60) (76) 331 (1,586) 58 2 - (17) - 11,509
Equity
Called-up
share 4,139 4,139
capital
Capital
redemption
reserve 1,523 1,523
Revaluation
reserve 4,078 (1,223) 2,855
Other 176 176
reserves
Share-based
payments 6 6
Profit and
loss account 8,015 (5,074) (60) (76) 331 (363) 58 (4) (17) 2,810
------ ------ ------ ------ ------ ------ ------ ------ - ----- ------ ------ ------
Equity
attributable
to members 17,931 (5,074) (60) (76) 331 (1,586) 58 2 - (17) - 11,509
of the
parent company
APPENDIX IV
Reconciliation of movement of equity under IFRS
Share Capital Capital Revaluation Foreign Other reserve Share based Retained Total
Redemption Reserve Exchange Payments Earnings
Reserve Reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 July 2004 4,139 1,523 1,191 176 - 3,494 10,523
2004
Total recognised
income and expense
for the six months (1,255) (1,255)
to 31 December 2004
Dividends (372) (372)
Share based payments - -
taken directly to
equity
------ ------ ------ ------ ------ ------ ------ ------
At 31 December 4,139 1,523 1,191 - 176 - 1,867 8,896
2004 ------ ------ ------ ------ ------ ------ ------ ------
At 1 July 2004 4,139 1,523 1,191 176 - 3,494 10,523
2004
Total recognised
income and expense
for the year ending
30 June 2005 1,664 (147) 1,517
Dividends (537) (537)
Share based payments
taken directly to 6 6
equity
------ ------ ------ ------ ------ ------ ------ ------
At 30 June 2005 4,139 1,523 2,855 - 176 6 2,810 11,509
2005 ------ ------ ------ ------ ------ ------ ------ ------
APPENDIX V
Independent Auditors' Report to the Directors of William Sinclair Holdings plc
We have audited the accompanying preliminary International Financial Reporting
Standards ("IFRS") financial statements of the Group for the year ended 30 June
2005 which comprise the opening IFRS Consolidated Balance Sheet as at 1 July
2004, the Consolidated Income Statement and the Consolidated Statement of
Recognised Income and Expense for the year ended 30 June 2005 and the
Consolidated Balance Sheet as at 30 June 2005, together with the related
accounting policies set out in Section 5 and the Appendices I and III.
This report is made solely to the Directors in accordance with our engagement
letter dated 11 January 2006. Our audit work has been undertaken so that we
might state to the Directors those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility or liability to anyone other than
the Directors for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
This preliminary IFRS financial statements are the responsibility of the Group's
directors and have been prepared as part of the Group's conversion to IFRS. They
have been prepared in accordance with the basis set out in section 2, which
describes how IFRS have been applied under IFRS 1, including the assumptions
management has made about the standards and interpretations expected to be
effective, and the policies expected to be adopted, when management prepares its
first complete set of IFRS financial statements as at 30 June 2006 .
Our responsibility is to express an independent opinion on the preliminary IFRS
financial statements based on our audit. We read the other information
accompanying the preliminary IFRS financial statements and consider whether it
is consistent with the preliminary IFRS financial statements. This other
information comprises the description of significant changes in accounting
policies in section 4 and the reconciliations from UK GAAP to IFRS set out in
Appendices I and III. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary opening IFRS balance sheet. Our responsibilities do not extend to
any other information.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the preliminary
IFRS financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the preliminary IFRS financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the preliminary IFRS financial
statements. We believe that our audit provides a reasonable basis for our
opinion.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that the basis of
preparation set out in section 2 explains why there is a possibility that the
preliminary IFRS financial statements may require adjustment before constituting
the first IFRS financial statements. Moreover, we draw attention to the fact
that, under IFRS, only a complete set of financial statements with comparative
financial information and explanatory notes can provide a fair presentation of
the Group's financial position, results of operations and cash flows in
accordance with IFRS.
Opinion
In our opinion, the preliminary IFRS financial statements for the year ended 30
June 2005 have been prepared, in all material respects, in accordance with the
basis set out in section 2, which describes how IFRS have been applied under
IFRS 1, including the assumptions management has made about the standards and
interpretations expected to be effective, and the policies expected to be
adopted, when management prepares its first complete set of IFRS financial
statements as at 30 June 2006.
Ernst & Young LLP
Lowgate House
P.O. Box 3
Lowgate
Hull
HU1 1JJ
2 March 2006
This information is provided by RNS
The company news service from the London Stock Exchange
END
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