Half-yearly Report
CORSIE GROUP PLC
INTERIM RESULTS
The Board of Corsie Group plc ("Corsie" or the "Group"), the AIM listed
specialist in the assembly and sale of products and services to the leisure
market, today announces interim results for the half year to 30 June 2007.
FINANCIAL HIGHLIGHTS
* Profit after tax from continuing operations up 28% to £154,000 (2006: £120,000)
* Sales from continuing operations up 12% to £2.22m (2006: £1.99m)
* Gross profit up 25% to £994,000 (2006: £798,000)
* Improved gross margins of 44.7% (2006: 40%)
* Improved balance sheet and inventory levels
* Continued investment in sales and marketing
CORPORATE HIGHLIGHTS
* Robust order book which is expected to strengthen further in the second half
* £500,000 equity raised in February to increase working capital
* Distribution agreement for Jackie Chan Green Tea (signed after the end of
the period under review)
* Fully comprehensive Investor Relations section to Group's website launched
Commenting on the results, David Mathewson, Chairman of Corsie, said:
"Following the move to Haddington, the business is well placed to support
substantial growth and deliver increased shareholder value. The Board expects
the business to enjoy another period of growth and looks forward to the future
with confidence."
Enquiries:
Corsie Group plc Tel: 01620 828 940
Richard Corsie, MBE, Chief Executive
www.corsiegroup.com
City Financial Associates Limited Tel: 020 7492 4777
James Caithie
Bishopsgate Communications Ltd Tel: 020 7562 3350
Dominic Barretto
Jenni Herbert
CHIEF EXECUTIVE'S REPORT
I am pleased to report to shareholders today on the continued growth of your
Group, which shows marked improvements throughout all divisions compared with
the same period last year.
Corsie's business operates in four distinct markets; sports, leisure, health
and beauty.
In June, Corsie announced that its ordinary shares and warrants had been
admitted to trading on PLUS. Corsie's principal trading facility will continue
to be AIM, and the Board believes that this new avenue of exposure on PLUS will
offer opportunities to increase the Group's liquidity and broaden the
shareholder base.
Financials
Profit after tax from continuing operations (excluding the exceptional gain of
£1.07m highlighted in the period to June 2006) increased from £120,000 to £
154,000 representing a 28% improvement over the same period last year. Sales
from continuing operations increased 12% to £2.22m. Gross profit increased by
25% to £994,000 (2006: £798,000) assisted by a much improved gross margin of
44.7% (2006: 41%).
Balance sheet
The balance sheet for the period shows a marked improvement over the previous
12 months, following the equity fundraising in February and the exceptional
gains from the legacy leasehold premises. This has been achieved while the
Board continues to invest in a number of key areas within the business.
Inventory levels were increased in the period under review to fulfil
anticipated growth, investment in sales and marketing increased in the period,
and we also completed the necessary investment in new premises which provides
the platform to deliver substantial growth.
Exceptional items - Legacy leases
On 7th August the Group announced that its two legacy property leases in Derby
and Musselburgh had now been settled in full. Both leases were fully provided
for in the balance sheet which will result in a one off (non cash) gain of £
328,250 this financial year. £178,250 has been released in the accounts to
June. The balance of £150,000 will be released in the second half to reflect
the timing of the second deed of surrender.
Trading
All trading divisions made good progress in the first half and contributed
positively to the Group overhead with the exception of our Spa division. This
division was loss making during the first half, but monthly losses are reducing
and the Board anticipates a monthly breakeven position to be reached in the
second half.
The Sports division, which showed an excellent first half, is anticipated to
deliver a record year, exceeding the board's expectations at the start of the
year.
The Group's Surfaces division performed in line with management expectations
during the first half. Surfaces has a record order book moving into the second
half which should convert to strong sales and good cash generation.
Kaloss International Limited ("Kaloss"), a distributor and wholesaler of health
and beauty products, acquired last September for a cash consideration of £
389,000, continues to make good progress in its respective markets and has
contributed positively in the period.
Green Tea Zero Ltd
On 17th August the Board announced that it had signed a distribution agreement
with Teatech to distribute Jackie Chan Green Tea. A new company (Green Tea Zero
Ltd) has been incorporated to handle the distribution agreement for the UK and
Ireland. Corsie will hold a 76% controlling stake in Green Tea Zero Ltd which
will be managed from Corsie's head office in Haddington.
Jackie Chan Green Tea has been received well in the U.S. market to date, where
it has been distributed by TeaTech and the Board believes it is capable of
substantial growth in the UK through high street retail stores and
supermarkets. Negotiations have already been opened with major UK high street
food chains, and the Board is hopeful that positive outcomes from these
negotiations will be reached in due course.
The Board continues to review new distribution agreements that are capable of
delivering substantial growth and profit improvement as they believe this is an
excellent and cost effective way to improve revenue streams.
New IR website
In line with AIM Rule 26, the Company announced on 7 August that it had
launched a fully comprehensive Investor Relations section to its website.
Visitors can access the site at www.corsiegroup.com.
Outlook
Following the move to Haddington, the business is well placed to support
substantial growth and deliver increased shareholder value. The Group has a
robust order book moving into the second half which is expected to deliver a
strong financial performance.
Your Board's strategy to increase revenue through selective acquisitions and
new distribution agreements still remains a key driver.
Group unaudited income statement
for the period ended 30 June 2007
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
(unaudited) (unaudited) (unaudited)
restated restated
£'000 £'000 £'000
Revenue 2,220 1,995 3,654
Cost of sales 1,226 1,197 2,272
Gross profit 994 798 1,382
Operating charges 776 607 1,712
Other operating income (10) (14) (29)
Operating profit/(loss) 228 205 (301)
Exceptional items 178 1,069 1,299
Finance income 0 0 0
Finance costs (74) (85) (177)
Profit for the year before tax 332 1,189 821
Tax expense 0 0 (366)
Profit for the year 332 1,189 1,187
Earnings per ordinary share
- basic and diluted 0.002 0.014 0.008
All results relate to continuing operations.
Group unaudited balance sheet
as at 30 June 2007
6 months 6 months Year ended
ended 30 ended 30 June 31 December
June 2007 2006 2006
(unaudited) (unaudited) (unaudited)
restated restated
£'000 £'000 £'000
Non-current assets
Goodwill 377 357 397
Intangible assets 102 0 115
Property, plant and equipment 468 127 203
Deferred tax assets 0 0 0
947 484 715
Current assets
Inventories 1,337 571 1,459
Trade and other receivables 1,887 1,497 622
Cash and cash equivalents 493 879 304
3,717 2,947 2,385
Total assets 4,664 3,431 3,100
Current liabilities
Trade and other payables 3,685 2,610 2,979
Income tax payable 0 0 0
Borrowings 0 0 0
3,685 2,610 2,979
Non-current liabilities
Borrowings 1,279 1,574 1,228
Deferred tax liabilities 0 366 0
1,279 1,940 1,228
Total liabilities 4,964 4,550 4,207
Net assets (300) (1,119) (1,107)
Equity
Called up share capital 667 167 167
Share premium account 931 956 956
Other reserves 483 435 483
Retained earnings (2,381) (2,677) (2,713)
Total equity (300) (1,119) (1,107)
Group unaudited cash flow statement
for the period ended 30 June 2007
6 months 6 months Year ended
ended 30 ended 30 June 31 December
June 2007 2006 2006
(unaudited) (unaudited) (audited)
restated restated
£'000 £'000 £'000
Net cash inflow/outflows from (481) (1,481) (325)
operating activities
Cash flows from investing
activities
Interest received 0 0 0
Purchase of property, plant and (7) (26) (94)
equipment
Purchase of intangible assets 0 0 (100)
Sale of property, plant and 0 2 2
equipment
Acquisition of subsidiary 0 0 (389)
undertakings
Cash acquired with subsidiary 0 0 0
undertaking
Net cash inflow/outflows from (7) (24) (581)
investing activities
Cash flows from financing
activities
Interest paid (74) (85) (177)
Cash received from issue of shares 475 1,041 1,022
Repayment of borrowings 0 0 (175)
Net cash inflow/outflows from 401 956 670
financing activities
Net decrease cash and cash (87) (549) (236)
equivalents
1. General information
The interim financial information does not constitute statutory accounts for
the purpose of section 240 of the Companies Act 1985. The figures for the year
ended 31 December 2006 have been extracted from the Group audited accounts for
that year as adjusted for the implementation of International Financial
Reporting Standards ("IFRS"). IFRS implementation adjustments, reconciliations
of profit and equity, and related narrative explanations are included within
note 8.
The interim financial information has been prepared using the same accounting
policies and estimation techniques that are expected to apply at the year end.
The financial information comprises the financial information of Corsie Group
plc (the "Group") for the 6 months to 30 June 2007 ("2007"). The following
financial information comprises the accounts of Corsie Group plc an AIM listed
company incorporated in the United Kingdom under the Companies Act 1985, and
its wholly owned subsidiaries, as detailed in note [2] ("the Group").
The principal activity of the Group is the sale and distribution of bowls
related products, the supply and maintenance of sport surfaces and the supply
of essences to the leisure and wellbeing market.
2. Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the European
Union as they apply to the financial statements of the Group for the year
ending 31 December 2007 and applied in accordance with the Companies Act 1985.
The accounting policies which follow set out those policies which will apply in
preparing the financial statements for the year ending 31 December 2007.
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial
statements in accordance with United Kingdom generally accepted accounting
practice (UK GAAP).
These financial statements, for the 6 months 30 June 2007, are the first the
Group is required to
prepare in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the
European Union (EU). Refer to note 8 for further details of the transition to
IFRS.
The Group undertook a group reorganisation on 5 June 2006. Under this
arrangement Corsie Group plc acquired the whole of the issued share capital of
Company 91 Limited, formerly Corsie Group Limited by way of a share for share
exchange. Corsie Group plc and Company 91 Limited, formerly Corsie Group
Limited were controlled, and continued to be controlled, by the same
individual. A business combination involving entities or businesses under
common control is a business combination in which all of the combining entities
or businesses are ultimately controlled by the same party or parties both
before and after the business combination, and that control is not transitory.
Accordingly, the pooling of interest method has been used to account for the
reorganisation with the result that the consolidated financial statements are
presented as if the entities had always been combined, reflecting the carrying
values of each of the entities and including comparative figures for all of the
entities acquired by Corsie Group plc.
The consolidated financial information shows the results, cash flows and
balance sheet positions as if the Group had transitioned to IFRS on 1 January
2006.
The consolidated financial information has been prepared on a going concern
basis under the historical cost convention, except for goodwill where fair
value is used. The Group financial information is presented in pounds sterling
and all values are rounded to the nearest thousand (£'000) unless otherwise
indicated.
The following standards and interpretations have not been applied in the
consolidated financial information as, although in issue at the date of
preparation, they were not effective for the periods covered by these
consolidated financial information:
IFRS 8 `Operating Segments' effective periods beginning on or after 1 January
2009;
IFRIC 12 `Service Concession Arrangements' effective periods beginning on or
after 1 January 2008;
IFRIC 13 `Customer Loyalty Programmes' effective periods beginning on or after
1 July 2008; and
IFRIC 14 `IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction' effective periods beginning on or after 1
January 2008.
The directors anticipate that the adoption of these standards and
interpretations on or after 31 December 2007 will have no material impact on
the financial statements of the Group.
Basis of consolidation
The consolidated financial information consolidates the financial information
of Corsie Group plc and its subsidiary undertakings drawn up to 31 December
2007. The financial statements, which have been prepared using the pooling of
interest method as described in the basis of preparation which present the
results of the Group as if Corsie Group plc had been in existence and had owned
Company 91 Limited, formerly Corsie Group Ltd and its subsidiaries for the
whole period under review. The results of each subsidiary are included for the
whole period in the year it joins the Group.
Subsidiaries are fully consolidated until the date that such control ceases.
All intra-group balances, transactions, income and expenses and profits and
losses resulting from intra-group transactions that are recognised in assets,
are eliminated in full.
In the company's financial statements investments in subsidiary undertakings
are stated at cost unless, in the opinion of the directors, there has been an
impairment in their value, in which case they are immediately written down to
their estimated recoverable amount.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales related
taxes.
Revenue on the sale of goods is recognised once goods have been despatched.
Revenue from the rendering of services is recognised in full as soon as all
obligations to the customer are satisfied. Deferred income is recognised for
amounts invoiced for contracts not compete at year end.
Goodwill
Business combinations on or after 31 December 2005 are accounted for under IFRS
3 using the acquisition accounting method. This involves recognising
identifiable assets (including previously unrecognised intangible assets) and
liabilities (including contingent liabilities and excluding future
restructuring) of the acquired business at fair value. 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. Following initial recognition,
goodwill is measured at cost less any accumulated impairment losses.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is fair
value as at the date of acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and any
accumulated impairment losses. Intangibles assets with finite lives are
amortised over the useful economic life on a straight line basis and assessed
for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation method are reviewed at
least at each financial year end. The amortisation expense on intangible assets
is recognised in the income statement.
Amortisation rates applied by the group are:
Customer base 5 years
Software 5 years
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and any accumulated impairment in value. Such cost includes the cost of
replacing part of the plant and equipment when that cost is incurred, if the
recognition criteria are met.
Depreciation is calculated to write off the cost less estimated residual value
of all tangible assets over their expected useful economic life on a straight
line basis. The rates generally applicable are:
Plant and machinery 10 - 20 % straight line
Equipment and fittings 10 - 20 % straight line
Motor vehicles 25 % straight line
Impairment of tangible assets and intangible assets with finite lives
At each balance sheet date, the Group reviews the carrying amounts of its
tangible assets and intangible assets with finite lives to determine whether
there is any indication that those assets have suffered an impairment loss. If
any such indication exists, or when annual impairment testing for an asset is
required, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Goodwill is tested on an
annual basis regardless of whether any indicators of impairment exist. Where
the asset does not generate cash flows that are independent from other assets,
the Group estimates the recoverable amount of the cash-generating unit to which
the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised as income immediately.
Inventories
Raw materials and finished goods
Inventories are stated at the lower of cost and net realisable value. Net
realisable value represents the estimated selling price less all estimated
costs of completion and selling costs.
Work in progress
Work in progress is valued on the basis of direct costs plus attributable
overheads based on normal levels of activity. Provision is made for any
foreseeable losses where appropriate. No element of profit is included in the
valuation of work in progress.
Financial assets
Financial assets are cash or a contractual right to receive cash or another
financial asset from another entity or to exchange financial assets or
financial liabilities with another entity under conditions that are potentially
favourable to the entity. In addition, contracts that result in another entity
delivering a variable number of its own equity instruments are financial
assets.
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. The amount of the write-down is
determined as the difference between the asset's carrying amount and the
present value of estimated future cash flows.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in
hand. For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above.
Overdrafts
Bank overdrafts are shown within borrowings in current financial liabilities.
Bank overdrafts form part of net cash and cash equivalents for purposes of the
Cash Flow Statement.
Leases
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 corresponding liability being
recognised for the lower of the fair value of the leased asset and 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.
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight line basis over the period of the lease.
Taxation
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 undisclosed 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 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.
Foreign currency
Monetary assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at the rate of
exchange ruling at the date of the transaction. Exchange differences are taken
into account in arriving at the operating profit.
Financial liabilities
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into.
A financial liability exists where there is a contractual obligation to deliver
cash or another financial asset another entity, or to exchange financial assets
or financial liabilities under potentially unfavourable conditions. In addition
contracts which result in the Group delivering a variable number of its own
equity instruments are financial liabilities. Equity containing such
obligations are classified as financial liabilities.
Trade and other payables
Trade payables are recognised and carried at their original invoiced value.
Where the time value of money is material, payables are carried at amortised
cost.
Interest bearing loans and borrowing costs
Obligations for loans and borrowings are recognised when the Group becomes
party to the related contracts and are measured initially 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. Amortised cost is calculated by taking into
account any discounted or premium on settlement. Issue costs in relation to
term loans are deducted from the loan proceeds and are charged to the income
statement at constant rate over the term of the loan to which they relate.
Retirement benefit costs
The Group operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the company. Payments to
defined contribution retirement benefit schemes are charged as an expense as
they fall due.
Share based payments
IFRS 2 requires the recognition of equity settled share based payments at fair
value at the date of the grant and the recognition of liabilities for cash
settled share based payments at the current fair value at each balance sheet
date. All equity settled share based payments are ultimately recognised as an
expense in the profit and loss account with a corresponding credit to `other
reserves'.
If vesting periods or other non market vesting conditions apply, the expense is
allocated over the vesting period based on the best available estimate of the
number of share options expected to vest. Estimates are revised subsequently if
there is any indication that the number of share options expected to vest
differs for previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period.
Upon exercise of share options, the proceeds received net of attributable
transaction costs are credited to share capital and where appropriate, share
premium.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of the group after deducting all of its liabilities. Equity instruments
issued by the Company are recorded at the proceeds received, net of direct
issue costs. Dividends and distributions relating to equity instruments are
debited direct to equity.
Exceptional items
The Group presents as exceptional items on the face of the income statement,
those material items of income and expense which, because of the nature and
expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the year, so as to facilitate comparison with prior
periods and to assess better trends in financial performance.
3. Critical accounting assumptions and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, which are described
in note 2, management has made the following judgements that have the most
significant effect on the amounts recognised in the financial statements.
Intangible assets have been calculated on the basis of customers inherited at
the time of acquisition. It is assumed that this to be amortised over 5 years.
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are as below:
Impairment of goodwill calculation.
Estimated residual values of all tangible assets.
4. Earnings per share
Basic earnings per ordinary 0.1p share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period, which was 167,041,667 (2006:
145,599,544).
Profit for Weighted Earnings
the year average per share
number of
shares
£'000 £
Year to 31 December 2006 1,187 145,599,544 0.008
Period to 30 June 2006 1,189 86,228,499 0.014
Period to 30 June 2007 332 167,041,667 0.002
There is no dilutive effect on the earnings per share as the average market
price of the ordinary shares during the period was less than the exercise price
of the options and warrants.
5. Reserves
Share Share Other Retained
capital premium reserves earnings Total
£'000 £'000 £'000 £'000 £'000
At 30 June 2006 167 956 435 (2,677) (1,119)
Retained profit for the year 0 0 0 (36) (36)
Share options 0 0 48 0 48
Purchase of ordinary shares 0 0 0 0 0
Issue of shares 0 0 0 0 0
Transfer to share premium account 0 0 0 0 0
Transfer to retained earnings 0 0 0 0 0
At 31 December 2006 167 956 483 (2,713) (1,107)
Retained profit for the year 0 0 0 332 332
Share options 0 0 0 0 0
Issues of shares 500 (25) 0 0 475
At 30 June 2007 667 931 483 (2,381) (300)
6. Reconciliation of cash flow from operating activities
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
(unaudited) (unaudited) (audited)
restated restated
£'000 £'000 £'000
Operating profit 228 205 (301)
Adjustments for:
Exceptional items discontinued 0 0 (15)
operations
Depreciation of property, plant and 31 16 30
equipment
Amortisation of intangibles 13 0 7
Share option charge 0 0 48
272 221 (231)
Decrease/(increase) in inventories 122 (10) (636)
Decrease/ (increase)/ in receivables (1,265) (1,254) (290)
(Decrease)/increase in payables 390 (438) 931
(Decrease)/increase in provisions 0 0 0
Cash flow generated from operating (481) (1,481) (226)
activities
Income taxes paid 0 0 (99)
Net cash flow from operating (481) (1,481) (325)
activities
7. Reconciliation of net cash flow to movement in net debt
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2007 June 2006 2006
(unaudited) (unaudited) (audited)
restated restated
£'000 £'000 £'000
Increase/(decrease) in cash in the (87) (549) (236)
period
Net cash (inflow)/outflow from 0 0 175
(increase)/decrease in debt
Change in net debt resulting from (87) (549) (61)
cash flows
Non-cash movement 0 1,101 1,101
(87) 552 1,040
Net debt at 1 January (2,195) (3,235) (3,235)
Net debt at 31 December (2,282) (2,683) (2,195)
8. Transition to IFRS
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial
statements in accordance with United Kingdom generally accepted accounting
practice (UK GAAP).
These financial statements, for the period ended 30 June 2007, are the first
the Group is required to
prepare in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the
European Union (EU).
Accordingly, the Group has prepared financial statements which comply with
IFRSs applicable for
periods beginning on or after 1 January 2006 and the significant accounting
policies meeting those
requirements are described in note 2.
In preparing these financial statements, the Group has started from an opening
balance sheet as at 1 January 2006, the Group's date of transition to IFRSs,
and made those changes in accounting policies and other restatements required
by IFRS 1 for the first-time adoption of IFRSs. This note explains the
principal adjustments made by the Group in restating its UK GAAP balance sheet
as at 1 January 2006 and its previously published UK GAAP financial statements
for the period ended 30 June 2006, and the year ended 31 December 2006.
Exemptions applied
IFRS 1 allows first-time adopters certain exemptions from the general
requirement to apply IFRSs as
effective for December 2005 year ends retrospectively. The Group has taken the
following exemptions:
* IFRS 3 Business Combinations has not been applied to acquisitions of
subsidiaries or of interests in associates and joint ventures that occurred
before 1 January 2006.
Restatement of equity at 1 January 2006
2006
£'000
Equity under UK GAAP (3,904)
Adjustments for:
General bad debt provision 4 4
Restated equity under IFRS (3,900)
1. Only specific bad debts can be provided for under IFRS
Restatement of equity at 30 June 2006
2006
£'000
Equity under UK GAAP (1,141)
Adjustments for:
IAS 18 revenue recognition for contracts 18
General bad debt provision 14
IAS 38 amortisation policy on goodwill 12
IAS 19 half year bonus provision (22) 22
Restated equity under IFRS (1,119)
1. IAS 18 requires when obligations for customer are satisfied revenue is
recognised
2. Only specific bad debts can be provided for under IFRS
3. Bonuses paid at year end have still to be provided for at six months
4. IAS 38 requires that goodwill in no longer amortised but instead reviewed for impairment.
Restatement of equity at 31 December 2006
2006
£'000
Equity under UK GAAP (1,139)
Adjustments for:
IAS 18 revenue recognition for contracts (2)
IAS 17 rent free adjustment (8)
General bad debt provision 18
IAS 38 amortisation after intangible (1)
reclassification
IAS 38 amortisation policy on goodwill 25 32
Restated equity under IFRS (1,107)
5. IAS 18 requires when obligations for customer are satisfied revenue is
recognised
6. IAS 17 requires that rent (even for rent free periods) is still to be
provided
7. Only specific bad debts can be provided for under IFRS
8. IAS 38 requires that goodwill in no longer amortised but instead reviewed
for impairment.
Restatement of profit for the period to 30 June 2006
2006
£'000
Profit under UK GAAP (2,699)
Adjustments for:
IAS 18 revenue recognition for contracts 16
General bad debt provision 14
IAS 19 half year bonus provision (22)
IAS 38 amortisation after intangible 2
reclassification
IAS 38 amortisation policy on goodwill 12 22
Profit under IFRS (2,677)
1. IAS 18 requires when obligations for customer are satisfied revenue is
recognised
2. Only specific bad debts can be provided for under IFRS
3. Bonuses paid at year end have still to be provided for at six months
4. IAS 38 requires that goodwill in no longer amortised but instead reviewed
for impairment.
Restatement of profit for the year to 31 December 2006
2006
£'000
Profit under UK GAAP (2,745)
Adjustments for:
IAS 18 revenue recognition for contracts (2)
IAS 17 rent free adjustment (8)
General bad debt provision 18
IAS 38 amortisation policy on goodwill 24 32
Profit under IFRS (2,713)
5. IAS 18 requires when obligations for customer are satisfied revenue is
recognised
6. IAS 17 requires that rent (even for rent free periods) is still to be
provided
7. Only specific bad debts can be provided for under IFRS
8. IAS 38 requires that goodwill in no longer amortised but instead reviewed
for impairment.
Explanation of material adjustments to the cash flow statement for 2006
30 June 2006
Inventories (WIP) reduced by £26k re IAS 18.
Trade and other receivables increased by £69k re IAS 18 and £11k re specific
bad debt recognition.
Trade and other payables increased by £22k re bonuses provision, £32k adjusted
re IAS 18 but also reduced by £6k for a general stock provision.
Amortisation reduced by £12k re IAS 38 amortisation policy.
31 December 2006
Inventory (WIP) reduced by £24k re IAS 18.
Trade and other receivables increased by £28k re IAS 18 and £21k re specific
bad debt recognition.
Trade and other payables increased by £16k due to IAS 17 and IAS 18
adjustments.
Purchase of intangible and tangible assets amended to reflect reclassification
under new IFRS guidelines.
Amortisation reduced by £25k re IAS 38 amortisation policy.
Wednesday, 18th December 2024
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