IFRS Statement

Bloomsbury Publishing PLC 19 August 2005 19 August 2005 Bloomsbury Publishing Plc Bloomsbury Publishing Plc ('Bloomsbury' or 'The Group') is today presenting its financial statements prepared in accordance with IFRS for the six months ended 30 June 2004 and the year ended 31 December 2004. The impact of the transition to IFRS on key performance measures is as follows: 30 June 30 June 31 31 December December 2004 2004 2004 2004 UK UK GAAP IFRS GAAP IFRS Operating profit (before goodwill Â£3.2m Â£3.1m Â£15.1m Â£14.9m amortisation) Operating profit (after goodwill Â£2.8m Â£3.1m Â£14.4m Â£14.9m amortisation) Profit before tax (before goodwill Â£4.3m Â£4.2m Â£16.9m Â£16.7m amortisation) Profit before tax (after goodwill Â£3.9m Â£4.2m Â£16.2m Â£16.7m amortisation) Basic earnings per share (after goodwill 4.28p 4.68p 17.19p 17.98p amortisation) Diluted earnings per share (after goodwill 4.15p 4.54p 16.88p 17.66p amortisation) Shareholders' equity Â£62.1m Â£62.8m Â£70.7m Â£73.1m The changes in accounting policies which have the most significant effects on the restated results for the year ended 31 December 2004 are: - The cessation of goodwill amortisation. - The recognition of a charge against income for the cost of share options held by directors and employees. - The recognition of the defined benefit pension scheme deficit and the related deferred tax asset on the balance sheet. - The recognition of dividends only when they have been declared or paid. Bloomsbury will be publishing its interim results for the six months ended 30 June 2005, reported under IFRS, on 13 September 2005. Enquiries: Colin Adams, Group Finance Director Bloomsbury Publishing Plc 020-7494-2111 RESTATEMENT OF FINANCIAL INFORMATION FOR 2004 UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS THE CHANGE TO IFRS For all accounting periods up to and including the year ended 31 December 2004, Bloomsbury has prepared its consolidated financial statements under UK generally accepted accounting policies (UK GAAP). For accounting periods from 1 January 2005, the group is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS)as adopted by the European Union (EU). Bloomsbury's first results on this basis will be its interim results for the six months ended 30 June 2005 and the group's first annual report under IFRS will be for the year ending 31 December 2005. As comparative figures are also provided, the effective date for transition to IFRS was 1 January 2004. This summary shows the effect of the change from UK GAAP to IFRS on the group's financial statements, including details of significant changes in accounting policies, restated income statements, balance sheets and cash flow statements for the six months ended 30 June 2004 and the year ended 31 December 2004 and reconciliations of profit and equity for those periods. BASIS OF PREPARATION IFRS 1, 'First time adoption of International Financial Reporting Standards', sets out the procedures to be followed when a company prepares its financial statements under IFRS for the first time. As a general rule there is a requirement to apply the revised accounting policies under IFRS retrospectively from the date of transition to IFRS. However, some exceptions are permitted under IFRS 1 to assist companies with the transition to IFRS. Where the group has taken advantage of these exemptions, reference is made to these in the appropriate section. This financial information has been prepared in accordance with IFRS published before 31 December 2004 as endorsed by the EU. As required by IFRS 1, no adjustments have been made for any changes in estimates made at the time that the UK GAAP financial statements for the periods were approved and the changes therefore reflect only changes in accounting policies necessary to comply with IFRS. Subject to any changes to IFRS before publication of the Group's results, the financial information presented here is expected to form the basis for the comparative figures when reporting results for 2005. SUMMARY OF THE IMPACT OF IFRS ON BLOOMSBURY Based on the accounting policies set out in Appendix 1, the impact of the adoption of IFRS on the Group's key performance indicators is as follows: 30 June 30 June 31 31 December December 2004 2004 2004 2004 UK UK GAAP IFRS GAAP IFRS Operating profit (before goodwill Â£3.2m Â£3.1m Â£15.1m Â£14.9m amortisation) Operating profit (after goodwill Â£2.8m Â£3.1m Â£14.4m Â£14.9m amortisation) Profit before tax (before goodwill Â£4.3m Â£4.2m Â£16.9m Â£16.7m amortisation) Profit before tax (after goodwill Â£3.9m Â£4.2m Â£16.2m Â£16.7m amortisation) Basic earnings per share (after goodwill 4.28p 4.68p 17.19p 17.98p amortisation) Diluted earnings per share (after 4.15p 4.54p 16.88p 17.66p goodwill amortisation) Shareholders' equity Â£62.1m Â£62.8m Â£70.7m Â£73.1m Reconciliations between the income statements and shareholders' equity presented under UK GAAP and their IFRS equivalents are shown in Appendix 3. The main changes in accounting policies for the Group as a result of the adoption of IFRS are: - Goodwill frozen at 1 January 2004 and thereafter subject to impairment reviews at each reporting period end instead of systematic amortisation (IFRS 3). - Recognition in the income statement of a charge for share based payment relating to share options (IFRS 2). - Pension scheme deficit included on the balance sheet (IAS 19) and recognition of the related deferred tax asset (IAS 12). - Goodwill on overseas subsidiaries retranslated at each period end at closing exchange rates (IAS 21). - Dividends not recognised until declared or paid (IAS 10). EFFECT OF CHANGES IN ACCOUNTING POLICIES ON THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2004 AND THE YEAR ENDED 31 DECEMBER 2004 Full reconciliations of the results for the six months ended 30 June 2004 and the year ended 31 December 2004 and the equity at those dates between UK GAAP and IFRS are set out in Appendix 3. The main changes are explained below. IFRS 3 - BUSINESS COMBINATIONS IFRS 3 requires that goodwill on acquisitions should be capitalised at cost and subject to impairment reviews at each reporting date. Amortisation of goodwill is not permitted. Bloomsbury has taken advantage of the option to apply IFRS 3 prospectively from the date of transition to IFRS (1 January 2004), rather than restate earlier business combinations. Goodwill has therefore been frozen at net book value at 1 January 2004 and goodwill which was amortised in 2004 under UK GAAP has been written back. In respect of the acquisition of Walker Publishing Company Inc. on 31 December 2004, the goodwill arising on the acquisition has been reassessed and other identifiable intangible fixed assets, included within goodwill under UK GAAP, have been separated out in accordance with the principles of IFRS 3 and IAS 38. These intangible assets, which comprise only publishing rights with a fair value of Â£354,000 at the date of acquisition, will be subject to systematic amortisation charges in accordance with IAS 38, with the unallocable balance, representing the goodwill on the acquisition, being subject to periodic impairment reviews. As the acquisition of Walker Publishing Company Inc. took place on 31 December 2004, no amortisation was charged in the UK GAAP accounts in 2004 and there is therefore no effect on the reported profit for that year. The effect on operating profit for the year ended 31 December 2004 of the adoption of IFRS 3 is an increase of Â£675,000, representing the elimination of the goodwill amortisation charge. There is no goodwill impairment charge for 2004. As the amortisation charge in 2004 was in respect of goodwill not eligible for tax relief, the writing back of the amortisation does not result in any change to the tax charge. IFRS 2 - SHARE BASED PAYMENT The IFRS income statement includes a charge under IFRS 2 for employee share options granted after 7 November 2002. The fair value has been calculated using the Black Scholes model with the resulting charge spread over the vesting period. The charge for the year ended 31 December 2004 is Â£152,000 and the cumulative charge to that date is Â£217,000. Corporation tax relief is given at the time that options are exercised on the difference between the exercise price and the market value of the shares at that date. Consequently the share based payment charge gives rise to a temporary difference, in respect of which a deferred tax asset has been recognised. IAS 19 - EMPLOYEE BENEFITS Under UK GAAP, the Group had been making disclosures in its financial statements for a number of years under the transitional provisions of Financial Reporting Standard 17, but had not yet applied FRS 17 in full at 31 December 2004. IAS 19 is broadly similar to FRS 17, in that it requires surpluses or deficits on defined benefit pension schemes to be recognised on the balance sheet. IAS 19 permits a number of options for the recognition of actuarial gains and losses. Bloomsbury has decided to recognise any variations in full in the income statement. The impact of the Group balance sheet at 31 December 2004 is to recognise a gross pensions deficit of Â£102,000 and a related deferred tax asset of Â£31,000. The profit before taxation for the year ended 31 December 2004 is reduced by Â£10,000 and there is a deferred tax credit of Â£4,000 for the year. IAS 21 - THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES Under UK GAAP, Bloomsbury chose to fix acquired overseas goodwill in sterling at the exchange rate ruling on the dates of the relevant acquisitions. Under IAS 21, goodwill must be denominated in local currencies and retranslated into sterling at each reporting date at closing exchange rates. The effect of this change is to increase the carrying value of goodwill in the Group balance sheet at 31 December 2004 by Â£4,000. Under IAS 21, translation differences in respect of the company's investment in overseas subsidiary companies are included as a separate reserve within shareholders' equity. In accordance with the exemption in paragraph 22 of IFRS 1, the company has deemed the opening balance on the translation reserve at 1 January 2004 to be zero. IAS 10 - EVENTS AFTER THE BALANCE SHEET DATE Under IAS 10 only dividends declared before the balance sheet date may be included in the financial statements as a liability. As the final dividend for 2004 was declared at the annual general meeting on 30 June 2005, this has been removed from the financial statements at 31 December 2004, increasing net assets by Â£1,773,000. IAS 7 - CASH FLOW STATEMENTS The format of the cash flow statement is different under IAS 7 from its UK GAAP equivalent, FRS 1. Cash flows are now shown under the three broad headings of Operating, Investing and Financing Activities and some cash flows have been reclassified as a result. CONCLUSION Adoption of IFRS has not had a significant effect on Bloomsbury's reported results and has had no effect on its cash flows for the six months ended 30 June 2004, or for the year ended 31 December 2004. There has also been no significant effect on shareholders' equity at those dates. APPENDIX 1 - ACCOUNTING POLICIES UNDER IFRS (a) ACCOUNTING CONVENTION The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). (b) GOODWILL AND INTANGIBLE ASSETS Goodwill, being the excess of the cost of acquisition over the fair value of assets acquired, is capitalised as an intangible asset. In accordance with IFRS 3, goodwill has been frozen at its net book value at 1 January 2004 and is not amortised, but instead is subject to annual impairment reviews. Any impairment losses are recognised immediately in the income statement. Negative goodwill is credited to the income statement in the period in which it arises. Other intangible assets are capitalised and amortised over their expected useful lives at the following rates: Publishing Rights - 10% (c) TURNOVER Turnover represents the amount derived from the provision of goods, services and rights falling within the Group's ordinary activities, after deduction of trade discounts, value added tax and anticipated returns. Turnover from book publishing is recognised from the date of invoice. Turnover from the sale of publishing and distribution rights, including film, paperback, electronic, overseas publishing rights and sponsorship, is recognised at the time such sales are achieved. (d) STOCKS AND WORK IN PROGRESS Stocks include paper, sheets and bound stock. The cost of work in progress and finished stock represents the amounts invoiced to the Group for paper, origination, printing and binding. Stocks are valued at the lower of cost and net realisable value. (e) DEPRECIATION Property, plant and equipment are depreciated in order to write down their cost by equal annual instalments over their expected useful lives at the following rates: Freehold buildings 2% per annum Short leasehold improvements 7-17% per annum Furniture and fittings 10% per annum Computer equipment 20% per annum Other office equipment 20% per annum Motor vehicles 25% per annum Freehold land is not depreciated. Depreciation is pro-rated in the years of acquisition and disposal of assets. (f) ROYALTY ADVANCES TO AUTHORS Advances to authors are written off to the extent that they are not covered by anticipated future sales or firm contracts for subsidiary rights receivable. (g) DEFERRED TAXATION Provision is made for deferred taxation on all temporary differences between the carrying amount and the tax bases of assets and liabilities. Deferred tax assets are only included in the financial statements where recovery is more likely than not. Deferred taxation is measured on a non-discounted basis. (h) FOREIGN CURRENCIES Assets and liabilities in foreign currencies are translated into sterling at closing rates of exchange at the balance sheet date. Income statements and cash flows of overseas subsidiary companies are translated into sterling at average exchange rates for the year. Exchange differences arising from the retranslation of opening net assets and income statements at closing rates of exchange are dealt with as movements in equity. All other exchange differences are charged or credited to the income statement. (i) OPERATING LEASES Operating lease rentals are recharged to the income statement as they fall due. (j) PENSION COSTS Pension costs relating to defined contribution pension schemes are charged to the income statement in the period for which contributions are payable. Until 1997 a subsidiary company operated a defined benefits scheme. The liability in respect of the defined benefits scheme is the present value of the defined benefit obligations at the balance sheet date, calculated using the projected unit credit method, less the fair value of the scheme's assets. In accordance with IFRS 1, the Group has recognised the pension liability in full as at 1 January 2004. The current service cost, interest on scheme liabilities and all actuarial gains and losses are recognised in the income statement. (k) SHARE-BASED PAYMENT Charges for employees' services received in exchange for share-based payment have been made for all share options granted after 7 November 2002 in accordance with IFRS 2. Options granted under the Group's share option schemes are equity settled. The fair value of such options has been calculated using the Black Scholes model, based on publicly available market data, and is charged to the income statement over the vesting period. (l) CONSOLIDATION The consolidated financial statements comprise the accounts of the Company and its subsidiaries at the year end. The results of the subsidiaries are accounted for in the income statement from the date of acquisition. APPENDIX 2 - CONSOLIDATED INCOME STATEMENTS, BALANCE SHEETS AND CASH FLOW STATEMENTS UNDER IFRS CONSOLIDATED INCOME STATEMENTS 6 months ended Year ended 30 June 2004 31 December 2004 Â£'000 Â£'000 Revenue 30,937 84,449 Cost of sales (16,883) (42,270) Gross profit 14,054 42,179 Marketing and distribution costs (4,065) (11,377) Administrative expenses (6,906) (15,854) Operating profit 3,083 14,948 Profit on sale of property, plant and equipment in continuing operations 1,091 1,076 Loss on sale of publishing assets (79) (77) Reorganisation costs in continuing operations (456) (582) Profit before investment income 3,639 15,365 Investment income 857 1,826 Finance costs (306) (494) Profit before taxation 4,190 16,697 Income tax expense (890) (3,956) Profit for the period 3,300 12,741 Basic earnings per share 4.68p 17.98p Diluted earnings per share 4.54p 17.66p CONSOLIDATED BALANCE SHEETS 30 June 2004 31 December 2004 Â£'000 Â£'000 ASSETS Non-current assets Property, plant and equipment 822 776 Goodwill 11,366 13,872 Publishing rights - 354 Total non-current assets 12,188 15,002 Current assets Inventories 14,735 11,614 Trade and other receivables 25,308 43,468 Cash and cash equivalents 32,388 29,120 Total current assets 72,431 84,202 TOTAL ASSETS 84,619 99,204 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 884 894 Share premium 34,626 35,763 Capital redemption reserve 20 20 Share based payment reserve 141 217 Translation reserve (60) 2 Retained earnings 27,148 36,206 Total equity 62,759 73,102 Non-current liabilities Deferred tax 3 - Employee benefits 97 102 Total non-current liabilities 100 102 Current liabilities Trade and other payables 19,596 22,792 Short-term borrowings 1,064 445 Current tax payable 1,100 2,763 Total current liabilities 21,760 26,000 Total liabilities 21,860 26,102 TOTAL EQUITY AND LIABILITIES 84,619 99,204 CONSOLIDATED CASH FLOW STATEMENTS 6 months ended Year ended 31 30 June 2004 December 2004 Â£'000 Â£'000 Cash flows from operating activities Net profit before tax 4,190 16,697 Adjustments for: Depreciation of property, plant and equipment 162 323 Profit on sale of property, plant and equipment (1,091) (1,076) Share based payment charges 76 152 Investment income (857) (1,826) Finance costs 306 494 2,786 14,764 (Increase) / decrease in inventories (2,289) 1,162 Decrease / (increase) in trade and other receivables 5,138 (10,955) Decrease in trade and other payables (3,876) (605) Cash generated from operations 1,759 4,366 Income taxes paid (1,624) (3,707) Net cash inflow from operating activities 135 659 Cash flows from investing activities Purchase of property, plant and equipment (90) (210) Proceeds from sale of property, plant and equipment 1,415 1,412 Purchase of subsidiaries (7) (3,296) Sale of publishing assets 111 111 Interest received 857 1,669 Cash acquired with subsidiaries - 50 Net cash generated from / (used in) investing activities 2,286 (264) Cash flows from financing activities Share options exercised 584 1,607 Equity dividends paid - (1,558) Interest paid (6) (32) Repayment of loans (83) (764) Net cash generated from / (used in) financing activities 495 (747) Net increase (decrease) in cash and cash equivalents 2,916 (352) Cash and cash equivalents at beginning of period 29,472 29,472 Cash and cash equivalents at end of period 32,388 29,120 APPENDIX 3 - RECONCILIATIONS TO UK GAAP FINANCIAL STATEMENTS INCOME STATEMENT RECONCILIATIONS 1. Six months ended 30 June 2004 UK GAAP Adjustments to IFRS comply with IFRS Â£'000 Â£'000 Â£'000 Revenue 30,937 - 30,937 Cost of sales (16,883) - (16,883) Gross profit 14,054 - 14,054 Marketing and distribution costs (4,065) - (4,065) Administrative expenses (6,830) (76) (i) (6,906) Goodwill amortisation (337) 337 (ii) - Operating profit 2,822 261 3,083 Profit on sale of property, plant and equipment in continuing operations 1,091 - 1,091 Loss on sale of publishing assets (79) - (79) Reorganisation costs in continuing operations (456) - (456) Profit before investment income 3,378 261 3,639 Investment income 857 - 857 Finance costs (301) (5) (iii) (306) Profit before taxation 3,934 256 4,190 Income tax expense (914) 24 (iv) (890) Profit for the period 3,020 280 3,300 Basic earnings per share 4.28p 0.40p 4.68p Diluted earnings per share 4.15p 0.39p 4.54p 2. Year ended 31 December 2004 UK GAAP Adjustments to IFRS comply with IFRS Â£'000 Â£'000 Â£'000 Revenue 84,449 - 84,449 Cost of sales (42,270) - (42,270) Gross profit 42,179 - 42,179 Marketing and distribution costs (11,377) - (11,377) Administrative expenses (15,702) (152) (i) (15,854) Goodwill amortisation (675) 675 (ii) - Operating profit 14,425 523 14,948 Profit on sale of property, plant and equipment in 1,076 - 1,076 continuing operations Loss on sale of publishing assets (77) - (77) Reorganisation costs in continuing operations (582) - (582) Profit before investment income 14,842 523 15,365 Investment income 1,826 - 1,826 Finance costs (484) (10)(iii) (494) Profit before taxation 16,184 513 16,697 Income tax expense (4,005) 49 (iv) (3,956) Profit for the period 12,179 562 12,741 Basic earnings per share 17.19p 0.79p 17.98p Diluted earnings per share 16.88p 0.78p 17.66p (i) Adjustment to comply with IFRS2 (ii) Adjustment to comply with IFRS3 (iii) Adjustment to comply with IAS 19 (iv) Deferred tax asset in respect of adjustments (i) and (iii) EQUITY RECONCILIATIONS 1. At 1 January 2004 Share Share Capital Share Translation Retained Total capital premium redemption based reserve earnings reserve payment reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Previously reported under UK GAAP 876 33,967 20 - - 23,958 58,821 Change in accounting policy to company - - - - - 1,175 1,175 with IAS 10 (Dividends) Change in accounting policy to comply - - - 65 - (65) - with IFRS 2 (Share options) Deferred tax asset in respect of share - - - - - 20 20 based payment charge (IAS 12) Change in accounting policy to comply - - - - - (65) (65) with IAS 19 (Employee benefits) Restated under IFRS 876 33,967 20 65 - 25,023 59,951 EQUITY RECONCILIATIONS 2. At 30 June 2004 Share Share Capital Share Translation Retained Total capital premium redemption based reserve earnings reserve payment reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Previously reported under UK GAAP 884 34,626 20 - - 26,549 62,079 Reallocation of translation differences on - - - - (60) 60 - equity of overseas subsidiaries to translation reserve (IAS 21) Change in accounting policy to comply with - - - - - 369 369 IAS 10 (Dividends) Change in accounting policy to comply with - - - 141 - (141) - IFRS 2 (Share options) Deferred tax asset in respect of share based - - - - - 42 42 payment charge (IAS 12) Change in accounting policy to comply with - - - - - 337 337 IFRS 3 (Goodwill) Change in accounting policy to comply with - - - - - (68) (68) IAS 19 (Employee benefits) Restated under IFRS 884 34,626 20 141 (60) 27,148 62,759 EQUITY RECONCILIATIONS 3. At 31 December 2004 Share Share premium Capital Share Translation Retained Total capital redemption based reserve earnings reserve payment reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Previously reported under UK GAAP 894 35,763 20 - - 33,979 70,656 Reallocation of translation - - - - (2) 2 - differences on equity of overseas subsidiaries to translation reserve (IAS 21) Change in accounting policy to comply - - - - - 1,773 1,773 with IAS 10 (Dividends) Change in accounting policy to comply - - - 217 - (217) - with IFRS 2 (Share options) Deferred tax asset in respect of share - - - - - 65 65 based payment charge (IAS 12) Change in accounting policy to comply - - - - - 675 675 with IFRS 3 (Goodwill) Change in accounting policy to comply - - - - - (71) (71) with IAS 19 (Employee benefits) Change in accounting policy to comply - - - - 4 - 4 with IAS 21 (Goodwill on acquisition of overseas subsidiaries) Restated under IFRS 894 35,763 20 217 2 36,206 73,102 This information is provided by RNS The company news service from the London Stock Exchange

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