IFRS Restatement

Braemar Seascope Group PLC 19 October 2005 BRAEMAR SEASCOPE GROUP PLC Adoption of International Financial Reporting Standards 19 October 2005 Braemar Seascope Group PLC ('the Group') is preparing for the adoption of International Financial Reporting Standards (IFRS) as its primary accounting basis for the year ended 28 February 2006. As part of this transition, Braemar Seascope is presenting unaudited financial information prepared in accordance with IFRS for the year ended 28 February 2005 and six months ended 31 August 2004. This regulatory news release explains how formerly published financial statements prepared under UK GAAP are reported under IFRS and provides the appropriate reconciliations from UK GAAP to IFRS. The Group's interim results for the six months ending 31 August 2005 will be published on 25 October 2005. The interim results including all relevant comparatives will be prepared in accordance with applicable IFRS. IFRS does not affect the underlying business performance of the Group and has no impact on cash generated from operations. The principal changes to Braemar Seascope Group PLC's financial information under UK GAAP arising from the adoption of IFRS are as a result of: â€¢The requirement not to amortise goodwill â€¢The recognition of other intangible assets arising on acquisition â€¢The inclusion of a fair value cost associated with employee share options â€¢A change in accounting for foreign exchange KEY POINTS â€¢Reported pre tax profit for the year to 28 February 2005 increases by Â£1.0m to Â£8.1m â€¢Reported earnings per share for the year to 28 February 2005 increases from 23.67 pence to 29.50 pence â€¢Reported net assets at 28 February 2005 increases to Â£28.0m from Â£25.0m â€¢No impact on cash flows For further information please contact: James Kidwell, Group Finance Director (+44) (0) 207 535 2881 This announcement together with other information regarding Braemar Seascope Group PLC can be found at: www.braemarseascope.com 1. INTRODUCTION In accordance with European Regulations for listed entities, Braemar Seascope Group PLC is required to adopt International Financial Reporting Standards ('IFRS') for its consolidated accounts for accounting periods commencing 1 March 2005. The Group's first published interim statements under IFRS will be the results for the six months to 31 August 2005. These will be published on 25 October 2005. In advance of the publication of future results on an IFRS basis, we set out below an unaudited restatement of financial statements which were previously reported under UK Generally Accepted Accounting Principles ('UK GAAP'), together with a summary and explanations of the major changes. These adjustments are explained in detail in later sections of this document. The information, which is unaudited, has been prepared by management using its best knowledge, judgement and interpretation of the expected standards and accounting policies that will be adopted when the Group prepares its first complete set of IFRS accounts as at 28 February 2006. It should be noted that only a complete set of accounts comprising an income statement, a balance sheet, a cash flow statement, a statement of recognised income and expense together with comparative financial information and explanatory notes can provide a fair presentation of the Group's financial position and operating performance. This financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 (as amended). The major accounting changes which are required by the introduction of IFRS are: â€¢Goodwill will no longer be amortised through the income statement and is instead included at cost less impairment charges and is subject to an annual impairment review. The amortisation for the year ended 28 February 2005 under UK GAAP is reversed as part of the IFRS restatement. â€¢On acquisition the excess of consideration over net assets acquired is required to be allocated over a larger, more defined list of intangible assets, with the unallocated balance representing goodwill. Intangible assets, other than goodwill, are amortised through the income statement over their expected useful economic life. â€¢The fair value of share-based payments is recorded as an expense in the income statement, spread over the vesting period. Under UK GAAP there was no charge to profit because executive share options were issued at market value and Save As You Earn options were exempt any charge. â€¢The fair value of outstanding derivative forward currency contracts is required to be included in the balance sheet and the movement in the period included either in the income statement (where hedge accounting has not been applied or to the extent that it has become ineffective) or in equity (where hedge accounting has been applied and remains effective). â€¢Under UK GAAP trade debtors were valued at the contracted rate of exchange (rather than at the closing rate of exchange) to the extent that they were covered by a forward foreign exchange contract. Under IFRS all assets and liabilities are translated at the closing spot rate of exchange. â€¢Under UK GAAP the share of a joint venture's tax charge was reflected as part of the Group's tax charge. Under IFRS the share of the joint venture's post tax result is reflected as part of the Group's profit before tax. There are also significant changes in the presentation of the financial statements including the presentation of the results of equity accounted joint ventures. 2. BASIS OF PREPARATION The unaudited financial information in the statements set out below has been prepared in accordance with the International Accounting Standards ('IAS') and International Financial Reporting Standards ('IFRS') expected to apply to the Group at 28 February 2006. Certain standards are still subject to change. The European Union has not yet adopted all of the IFRS (including amendments to IAS 19 'Employee Benefits' and IAS 39 'Financial Instruments: Recognition and Measurement') consequently on adoption of these standards there may be further changes to the figures provided in this document. Further IFRS may be introduced between now and the finalisation of the 2006 Report and Accounts. As a result there may be further changes when the Group prepares its first full year IFRS financial statements. The Group's significant accounting policies under IAS and IFRS are set out in section 9 of this document. The Group has taken advantage of certain exemptions permitted under IFRS 1 - First-time adoption of IFRS - and these are set out in section 11 of this document. 3. OVERALL IMPACT OF CHANGES The table below summarise the impact of IFRS. Further details are given in sections 4,5 and 6. Year ended 28 February 2005 ----------------------- IFRS UK GAAP (unaudited) Â£000 Â£000 Revenue 45,203 45,057 Operating profit 7,790 6,566 Profit before tax 8,130 7,120 Profit after tax 5,432 4,358 Earnings per share (pence) 29.50 23.67 Net assets 27,985 25,012 4. KEY INCOME STATEMENT AND BALANCE SHEET ADJUSTMENTS This section describes the accounting and financial reporting changes which affect the Group's consolidated income statement and balance sheet in transition from UK GAAP to IFRS. The financial impact of each change is set out is sections 5 and 6 respectively. (a) Goodwill and business combinations Under UK GAAP goodwill was capitalised and amortised over 20 years. The Group has taken the exemption under IFRS 1 for Business Combinations. As a result the net book value of goodwill under UK GAAP has been used as the deemed cost at the date of transition. Under IFRS 3 goodwill is no longer amortised but is subject to an annual impairment review. The impact on the Group's financial statements of this policy is that all goodwill previously amortised in the year ended 28 February 2005 has been written back to the balance sheet and income statement. (b) Share-based payments IFRS 2 - Share-Based Payments - requires that the Group calculate the fair value at the date of grant of awards of share options made to directors and employees. The fair value is then amortised in the income statement over the vesting period of the options with a corresponding credit to equity. In applying the provisions of IFRS 2 - Share based payments, the group has adopted the exemption to apply this standard only to awards granted after 7 November 2002 and vesting after 28 February 2004. No charge is recognised in respect of awards granted prior to that date. Deferred taxation is provided in respect of the charge. (c ) Foreign exchange Under IAS 21 - the effects of changes in foreign exchange rates - trade debtors are translated at the prevailing rate of exchange at the balance sheet date. Under SSAP 20 trade debtors were permitted to be translated at the contract rate to the extent that they were covered by forward foreign exchange contracts. The adjustment to revalue the trade debtor under IFRS is reflected in income within the income statement. Under IFRS, a foreign currency translation reserve in respect of the conversion of foreign currency denominated investments is required to be separately measured and included in foreign currency translation differences in the equity and reserves section of the balance sheet. Therefore there is an adjustment to reclassify these translation differences out of the profit and loss reserve. (d) Reclassifications - Income Statement Under UK GAAP, the profit on sale of investments is shown as an exceptional item below operating profit whereas under IFRS this is reflected as an other gain within operating profit. Under UK GAAP, the Group's share of profits of associates and joint ventures for the year to 28 February 2005 is shown before tax of Â£107,000 which is included in the taxation charge. Under IFRS, the Group's share of profits is reported after tax with no amount in the taxation charge. - Balance sheet Under UK GAAP certain assets, which are expected to be recovered after more than one year, and other non-current assets were shown as part of current assets and shown separately as to their long term nature in a note to the accounts. Under IFRS these are reflected within non-current assets. (e) Financial Instruments Under UK GAAP the mark-to-market value of outstanding derivative contracts was not recognised in the balance sheet. Under IAS 39 - Financial Instruments: recognition and measurement - the mark-to-market value of derivative contracts is recognised in the balance sheet as an asset or liability. Where it can be demonstrated that a derivative is an effective hedge the value is recognised within a hedging reserve or, if ineffective, within the income statement. Deferred tax is provided in respect of the gain or loss. (f) Taxation UK GAAP required deferred taxation to be recognised on timing differences whereas IFRS requires that deferred taxation is provided on all temporary differences including the revaluation of non-monetary assets and on un-remitted overseas earnings to the extent that a tax charge is foreseeable. Under UK GAAP, deferred tax assets and liabilities were shown on a net basis. IFRS requires separate disclosure of deferred tax assets and liabilities. Deferred tax assets are reclassified as long-term assets to the extent they are recoverable after more than one year. (g) Dividend recognition Under IAS10 - Events After the Balance Sheet Date - dividends are not recognised until they are approved. The final and interim dividends approved after the end of the relevant accounting period have therefore been reversed, resulting in an increase in net assets at the end of each accounting period. Dividends will no longer be shown as appropriations on the face of the income statement but instead will be shown within the analysis of movements on reserves. (h) Other intangible assets. From 1 March 2004, business acquisitions have been accounted for in accordance with IFRS 3 - Business Combinations - which requires the acquirer to allocate the purchase price across the identifiable assets and liabilities. As a result an intangible asset has been recognised on the acquisition of Braemar Seascope Pty Limited (formerly Seawise Australia Pty Limited). Under IAS 38 - Intangible Assets - the Group is required to capitalise the fair value of the forward order book and to amortise it over its estimated useful life. In respect of the purchase Braemar Seascope Pty Limited the Group has capitalised the forward order book at a value of Â£215,000 with a resulting reduction in the value of goodwill. The expected life of the forward order book is up to two years. 5. RESTATED INCOME STATEMENT Braemar Seascope Group PLC Consolidated income statement Year to 6 months to 28-Feb-05 31-Aug-04 Â£000 Â£000 Revenue 45,203 17,439 ---------- --------- Operating costs (37,535) (14,297) Other gains 123 - ---------- --------- (37,412) (14,297) ---------- --------- Operating profit 7,790 3,142 Finance income 28 5 Finance costs (53) (50) Share of profit from joint ventures 365 171 ---------- --------- Profit before tax 8,130 3,268 Taxation (2,699) (1,063) ---------- --------- Profit for the period attributable to shareholders 5,432 2,205 ---------- --------- Earnings per share Basic - pence 29.50 11.89 Diluted - pence 28.59 11.78 Braemar Seascope Group PLC Consolidated income statement Six months to 31 August 2004 Year to 28 February -------------------- 2005 --- -------- --------------- UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Revenue 17,526 (087) 17,439 45,057 146 45,203 ------- -------- ------- ------- -------- -------- Operating costs (14,806) 509 (14,297) (38,491) 956 (37,535) Other gains - - - - 123 123 ------- -------- ------- ------- -------- -------- (14,806) 509 (14,297) (38,491) 1,079 (37,412) ------- -------- ------- ------- -------- -------- Operating profit 2,720 422 3,142 6,566 1,225 7,791 Profit on sale of investments - - - 123 (123) - Finance income 5 - 5 28 - 28 Finance (50) - (50) (53) - (53) costs Share of profit from joint ventures 223 (52) 171 456 (91) 365 ------- -------- ------- ------- -------- -------- Profit before tax 2,898 370 3,268 7,120 1,011 8,131 Taxation (1,141) 78 (1,063) (2,762) 63 (2,699) ------- -------- ------- ------- -------- -------- Profit for the period 1,757 448 2,205 4,358 1,074 5,432 ------- -------- ------- ------- -------- -------- Earnings per share Basic - 9.47 2.42 11.89 23.67 5.83 29.50 pence Diluted - pence 9.39 2.39 11.78 22.94 5.65 28.59 IFRS Income statement adjustments for the six months ended 31 August 2004 Goodwill Share Foreign Reclass- Total Amortisation Options Exchange ification IFRS (a) (b) (c) (d) Adjustments Â£000 Â£000 Â£000 Â£000 Â£000 Revenue - - (87) - (87) --------- ------- -------- -------- --------- Operating costs 548 (39) - - 509 --------- ------- -------- -------- --------- 548 (39) - - 509 --------- ------- -------- -------- --------- Operating profit 548 (39) (87) - 422 Finance income - - - - - Finance costs - - - - - Share of profit from joint ventures - - - (52) (52) --------- ------- -------- -------- --------- Profit before tax 548 (39) (87) (52) 370 Taxation - - 26 52 78 --------- ------- -------- -------- --------- Profit for the period 548 (39) (61) - 448 --------- ------- -------- -------- --------- IFRS Income statement adjustments for the year ended 28 February 2005 Goodwill Share Foreign Reclass- Total Amortisation Options Exchange ification IFRS (a) (b) (c) (d) Adjustments Â£000 Â£000 Â£000 Â£000 Â£000 Revenue - - 146 - 146 --------- ------- -------- -------- --------- Operating costs 1,034 (78) - - 956 Other gains - - - 123 123 --------- ------- -------- -------- --------- 1,034 (78) - 123 1,079 --------- ------- -------- -------- --------- Operating profit 1,034 (78) 146 123 1,224 Profit on sale of investments - - - (123) (123) Finance income - - - - - Finance costs - - - - - Share of profit from joint ventures 16 - - (107) (91) --------- ------- -------- -------- --------- Profit before tax 1,050 (78) 146 (107) 1,010 Taxation - - (44) 107 63 --------- ------- -------- -------- --------- Profit for the period 1,050 (78) 102 - 1,074 --------- ------- -------- -------- --------- 6. RESTATED BALANCE SHEET Braemar Seascope Group PLC Consolidated Balance Sheet As at 28 February 2005 As at ----------------- 28-Feb-05 31-Aug-04 ASSETS Â£000 Â£000 Non-current assets Property, plant and equipment 4,960 4,911 Goodwill 21,587 18,537 Other intangible assets 215 - Investments 1,555 1,625 Deferred tax assets 262 250 Other receivables 95 107 --------- ---------- 28,674 25,430 Current assets Trade and other receivables 11,688 9,729 Financial instruments - - Restricted cash 4,434 8,329 Cash and cash equivalents 9,606 4,894 --------- ---------- 25,728 22,952 --------- ---------- Total assets 54,402 48,382 --------- ---------- LIABILITIES Current liabilities Trade and other payables 17,170 11,633 Current tax payable 1,556 1,161 Short term borrowings 3,067 3,830 Finance leases 39 - Client monies held as escrow agent 4,434 8,329 --------- ---------- 26,266 24,953 Provisions 151 121 --------- ---------- Total liabilities 26,417 25,074 --------- ---------- Total assets less total liabilities 27,985 23,308 --------- ---------- EQUITY Share capital 1,945 1,862 Capital redemption reserve 396 396 Share premium 7,505 7,506 Shares to be issued (637) (65) Merger reserve 21,346 18,302 Hedging reserve - - Translation reserve (8) - Other reserves 100 61 Retained earnings (2,661) (4,754) --------- ---------- Total equity 27,985 23,308 --------- ---------- Braemar Seascope Group PLC Consolidated Balance Sheets At 31 August 2004 At 28 February 2005 ------------- --- ------ ------------- --- ------ UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS ASSETS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-current assets Property, plant and equipment 4,911 - 4,911 4,960 - 4,960 Goodwill 17,997 540 18,537 20,768 819 21,587 Other intangible assets - - - - 215 215 Investments 1,617 8 1,625 1,539 16 1,555 Deferred tax assets - 250 250 - 262 262 Other receivables - 107 107 - 95 95 ------- -------- ------- ------- -------- ------- 24,525 905 25,430 27,267 1,407 28,674 Current assets Trade and other receivables 9,961 (232) 9,729 11,688 - 11,688 Deferred tax assets 180 (180) - 262 (262) - Other non-current assets 107 (107) - 95 (95) - Restricted cash 8,329 - 8,329 4,434 - 4,434 Cash and cash equivalents 4,894 - 4,894 9,606 - 9,606 ------- -------- ------- ------- -------- ------- 23,471 (519) 22,952 26,085 (357) 25,728 ------- -------- ------- ------- -------- ------- Total assets 47,996 386 48,382 53,352 1,050 54,402 ------- -------- ------- ------- -------- ------- LIABILITIES Current liabilities Trade and other payables 12,746 (1,113) 11,633 19,093 (1,923) 17,170 Current tax payable 1,161 - 1,161 1,556 - 1,556 Short term borrowings 3,830 - 3,830 3,067 - 3,067 Finance leases - 39 - 39 Client monies held as escrow agent 8,329 - 8,329 4,434 - 4,434 ------- -------- ------- ------- -------- ------- 26,066 (1,113) 24,953 28,189 (1,923) 26,266 Provisions 121 - 121 151 - 151 Total liabilities 26,187 (1,113) 25,074 28,340 (1,923) 26,417 ------- -------- ------- ------- -------- ------- Total assets less total liabilities 21,809 1,499 23,308 25,012 2,973 27,985 ------- -------- ------- ------- -------- ------- EQUITY Share capital 1,862 - 1,862 1,945 - 1,945 Capital redemption reserve 396 - 396 396 - 396 Share premium 7,506 - 7,506 7,505 - 7,505 Shares to be issued (65) - (65) (637) - (637) Merger reserve 18,302 - 18,302 21,346 - 21,346 Translation reserve - - - - (8) (8) Other reserves - 61 61 - 100 100 Retained earnings (6,192) 1,438 (4,754) (5,543) 2,882 (2,661) ------- -------- ------- ------- -------- ------- Total equity 21,809 1,499 23,308 25,012 2,973 27,985 ------- -------- ------- ------- -------- ------- IFRS adjustments to 28 February 2005 balance sheet Goodwill Share Foreign Reclass- Dividend Other Total Amortisation Options Exchange ification accrual Intangibles IFRS Notes (a) (b ) (c) (d) (g) (h) Adjustments ASSETS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-current assets Property, - plant and equipment Goodwill 1,034 (215) 819 Other intangible assets 215 215 Investments 16 16 Deferred tax assets 262 262 Other receivables 95 95 --------- ------- -------- ------- -------- -------- --------- 1,050 - - 357 - - 1,407 Current assets Trade and - other receivables Deferred tax assets (262) (262) Other non-current assets (95) (95) Restricted - cash Cash and cash - equivalents --------- ------- -------- ------- -------- -------- --------- - - - (357) - - (357) --------- ------- -------- ------- -------- -------- --------- Total assets 1,050 - - - - - 1,050 --------- ------- -------- ------- -------- -------- --------- LIABILITIES Current liabilities Trade and other payables (1,923) (1,923) Current tax - payable Short term - borrowings Finance - leases Client monies - held as escrow --------- ------- -------- ------- -------- -------- --------- agent - - - - (1,923) - (1,923) Provisions - --------- ------- -------- ------- -------- -------- --------- Total liabilities - - - - (1,923) - (1,923) --------- ------- -------- ------- -------- -------- --------- Total assets less total liabilities 1,050 - - - 1,923 - 2,973 --------- ------- -------- ------- -------- -------- --------- EQUITY Share - capital Capital - redemption reserve Share - premium Shares to be - issued Merger - reserve Translation reserve (8) (8) Other reserves 100 100 Retained earnings 1,050 (100) 8 1,923 2,881 --------- ------- -------- ------- -------- -------- --------- Total equity 1,050 - - - 1,923 - 2,973 IFRS adjustments to 31 August 2004 balance sheet Goodwill Share Foreign Reclass- Dividend Total Amortisation Options Exchange ification accrual IFRS Notes (a) (b ) (c) (d) (g) Adjustments ASSETS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Non-current assets Property, - plant and equipment Goodwill 540 540 Other - intangible assets Investments 8 8 Deferred tax assets 70 180 250 Other receivables 107 107 548 - 70 287 - 905 Current assets Trade and other receivables (232) (232) Deferred tax assets (180) (180) Other non-current assets (107) (107) Restricted - cash Cash and cash - equivalents - - (232) - - (519) Total assets 548 - (163) - - 385 LIABILITIES Current liabilities Trade and other payables (1,113) (1,113) Current tax - payable Short term - borrowings Finance - leases Client monies - held as escrow agent - - - - (1,113) (1,113) Provisions - Total liabilities - - - - (1,113) (1,113) Total assets less total liabilities 548 - (163) - 1,113 1,498 EQUITY Share - capital Capital - redemption reserve Share - premium Shares to be - issued Merger - reserve Translation - reserve Other reserves 61 61 Retained earnings 548 (61) (163) 1,113 1,438 Total equity 548 - (163) - 1,113 1,498 7. RESTATED CASH FLOW STATEMENT Braemar Seascope Group PLC Consolidated Cash Flow Statement Year to Half year to 28-Feb-05 31-Aug-04 Â£000 Â£000 Cash flows from operating activities Cash generated from operations 11,044 1,622 Interest received 26 3 Interest paid (52) (20) Tax paid (2,448) (884) --------- --------- Net cash generated from operating activities 8,570 721 --------- --------- Cash flows from investing activities Dividends from joint ventures - - Acquisition of subsidiary, net of cash acquired (1,026) - Purchase of property, plant and equipment (175) (102) Proceeds from sale of property, plant and equipment 11 - Purchase of investments (21) (26) Proceeds from sale of investment 386 - Other long term assets 8 (4) --------- --------- Net cash used in investing activities (817) (132) --------- --------- Cash flows from financing activities Proceeds from issue of ordinary shares 1 1 Dividends paid (2,597) (1,484) Purchase of own shares (572) - Payment of principal under finance leases (2) - Other (2) - --------- --------- Net cash used in financing activities (3,172) (1,483) --------- --------- --------- --------- Increase/(decrease) in cash and cash equivalents 4,581 (894) --------- --------- Cash and cash equivalents at beginning of the period 1,958 1,958 Foreign exchange differences - - --------- --------- Cash and cash equivalents at end of the period 6,539 1,064 --------- --------- Balance sheet analysis of cash and cash equivalents Cash and cash equivalents 9,606 4,894 Short term borrowings (3,067) (3,830) --------- --------- 6,539 1,064 --------- --------- Braemar Seascope Group PLC Consolidated Cash flow Year ended 28 6 months ended February 2005 31 August 2004 ----------------- ------------------ UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Cash flows from operating activities Cash generated from operations 11,052 (8) 11,044 1,618 4 1,622 Interest received 26 - 26 3 - 3 Interest paid (52) - (52) (20) - (20) Tax paid (2,448) - (2,448) (884) - (884) ------- -------- ------- -------- -------- ------- Net cash from operating activities 8,578 (8) 8,570 717 4 721 ------- -------- ------- -------- -------- ------- Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (1,026) - (1,026) - - - Purchase of fixed assets (175) - (175) (102) - (102) Proceeds from sale of fixed assets 11 - 11 - - - Purchase of investments (21) - (21) (26) - (26) Proceeds from sale of investment 386 - 386 - - - Other long term assets - 8 8 - (4) (4) ------- -------- ------- -------- -------- ------- Net cash used in investing activities (825) 8 (817) (128) (4) (132) ------- -------- ------- -------- -------- ------- Cash flows from financing activities Proceeds from issue of ordinary shares 1 - 1 1 - 1 Dividends paid (2,597) - (2,597) (1,484) - (1,484) Purchase of own shares (572) - (572) - - - Payment of principal under finance leases (2) - (2) - - - Other (2) - (2) - - - ------- -------- ------- -------- -------- ------- Net cash used in financing activities (3,172) - (3,172) (1,483) - (1,483) ------- -------- ------- -------- -------- ------- Net increase in cash and bank overdrafts 4,581 - 4,581 (894) 0 (894) Cash and cash equivalents at beginning of the period 1,958 - 1,958 1,958 - 1,958 Exchange gains/ - - - - - - losses ------- -------- ------- -------- -------- ------- Cash and cash equivalents at end of the period 6,539 - 6,539 1,064 0 1,064 ------- -------- ------- -------- -------- ------- Notes: (a) Under UK GAAP the movement in other long-term debtors was shown as part of working capital within operating cash flows whereas under IFRS it is shown within investing cash flows. 8. SEGMENTAL INFORMATION Segmental Information Six months to 31 August 2004 Year to 28 February 2005 -------------------- --------------------- Revenue UK Effect of IFRS UK Effect of IFRS GAAP transition GAAP transition to IFRS to IFRS Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Shipbroking 13,364 (87) 13,277 32,274 146 32,420 Ship agency, forwarding & logistics 2,100 - 2,100 8,461 - 8,461 Technical shipping support 2,062 - 2,062 4,322 - 4,322 -------- -------- -------- -------- -------- -------- 17,526 (87) 17,439 45,057 146 45,203 -------- -------- -------- -------- -------- -------- Operating profit Shipbroking 3,421 (126) 3,295 8,673 190 8,863 Ship agency, forwarding & logistics (226) - (226) (282) (931) (1,213) Technical shipping support 73 - 73 140 - 140 Goodwill amortisation (548) 548 - (1,078) 1,078 - Exceptional impairment (887) 887 - -------- -------- -------- -------- -------- -------- 2,720 422 3,142 6,566 1,224 7,790 -------- -------- -------- -------- -------- -------- Net assets As at As at As at As at As at As at 31-Aug-04 31-Aug-04 31-Aug-04 28-Feb-05 28-Feb-05 28-Feb-05 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Shipbroking 19,068 1,458 20,526 22,881 2,957 25,838 Ship agency, forwarding & logistics 1,171 24 1,195 376 - 376 Technical shipping support 988 8 996 996 - 996 Share of joint 582 8 590 759 16 775 ventures -------- -------- -------- -------- -------- -------- 21,809 1,498 23,307 25,012 2,973 27,985 -------- -------- -------- -------- -------- -------- Segment adjustments Revenue - The adjustments are in respect of foreign exchange adjustments - see 4 (c) above. Operating Profit - The Shipbroking adjustments are in respect of foreign exchange, the cost of share options and reclassifications into operating profit - see 4 (b) and (d) above. - The Ship agency, forwarding & logistics adjustment is in respect of a goodwill impairment charge. - Goodwill amortisation charged under UK GAAP has been reversed. Net assets - The shipbroking adjustments in the year to 28 Feb 2005 are in respect of goodwill amortisation (Â£1,034,000), the cost of share options (Â£70,000), financial instruments (Â£1,076,000) and dividends (Â£1,923,000). 9. RECONCILIATION OF NET ASSETS/EQUITY AT 1 MARCH 2004 Â£000 Net assets at 1 March 2004 under UK GAAP 21,164 Reversal of proposed final dividend 1,491 Foreign exchange translation of debtors (102) Net assets at 1 March 2004 under IFRS 22,553 10. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting and consolidation The financial statements will be prepared in accordance with IFRS for the first time for accounting periods commencing from 1 March 2005. They will be prepared on the historical cost basis, except for the derivative financial instruments which are measured at fair value. The principal accounting policies expected to be adopted in the preparation of the 2005/6 Group accounts under IFRS are set out below. The consolidated accounts incorporate the accounts of Braemar Seascope Group PLC and all its subsidiary undertakings made up to 28 February each year. The results of companies acquired or disposed of during the year are included in the group from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Revenue recognition Revenue consists of commission arising from tanker and dry cargo charter broking, sale and purchase broking, offshore broking, financial consultancy arrangement fees and fees for the supply of technical and agency services. The policies for accounting for revenue are as follows: Shipbroking - income is recognised when the company has a contractual entitlement to commission, normally the point at which there is completion of contractual terms between the principals of a transaction. Technical services - fee income is recognised as invoiced for work performed and /or in accordance with the agreement. Agency, forwarding and logistics - agency income is recognised at the point when the ship sails from the port. Forwarding and logistics income is recognised on a shipment basis. Where the Group acts as a principal rather than as agent, the turnover and costs are shown gross. Goodwill On the acquisition of a business, fair values are attributed to the net assets (including any identifiable intangible assets) acquired. Goodwill arises where the fair value of the consideration given exceeds the fair value of the net assets acquired. Goodwill is recognised as an asset and is reviewed for impairment at least annually. Impairments are recognised immediately in the income statement. Goodwill is allocated to cash generating units for the purpose of impairment testing. On the disposal of a business, goodwill relating to that business remaining on the balance sheet is included in the determination of the profit or loss on disposal. Goodwill written off to reserves prior to 1998 has not been reinstated and will not be included in determining any subsequent profit or loss on disposal. As permitted by IFRS1 goodwill on acquisitions arising prior to 1 March 2004 has been retained at prior amounts and will be tested annually for impairment. Other intangible assets Intangible assets acquired as part of a business combination are stated in the balance sheet at their fair value at the date of acquisition less accumulated amortisation. The amortisation of the carrying value of the forward order book is charged to the income statement concurrent with the subsequent recognition of the income. The carrying values of intangible assets are reviewed for impairment when there is an indication that they may be impaired. Leasing A finance lease is a lease that transfers substantially all the risks and rewards of ownership of an asset. Assets acquired under finance leases are recorded in the balance sheet as property, plant and equipment at their fair value and depreciated over the shorter of their estimated useful lives and their lease terms. Obligations under such agreements are included in liabilities net of the finance charge allocated to future periods. All other leases are operating leases, and the rental of these is charged to the income statement as incurred over the life of the lease. Operating lease income is recognised in the income statement as it is earned. Foreign currencies The functional currency of the Group is pounds Sterling. Transactions in currencies other than pounds Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the income statement. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts (see below for details of the Group's accounting policies in respect of such derivative financial instruments). Assets and liabilities of overseas subsidiaries and associates are translated into pounds Sterling at the exchange rates ruling at the balance sheet date. Trading results are translated at the average rates for the period. Exchange differences arising on the consolidation of the net assets of overseas subsidiaries are dealt with through the foreign currency translation reserve, whilst those arising from trading transactions are dealt with in the income statement. On disposal of a business, the cumulative exchange differences previously recognised in the foreign currency translation reserve relating to that business are transferred to the income statement as part of the gain or loss on disposal. Deferred taxation Full provision is made for deferred taxation on all taxable temporary differences. Deferred tax assets and liabilities are recognised separately on the balance sheet. Deferred tax assets are recognised only to the extent that they are expected to be recoverable. Deferred taxation is recognised in the income statement unless it relates to taxable transactions taken directly to equity, in which case the deferred tax is also recognised in equity. The deferred tax is released to the income statement at the same time as the taxable transaction is recognised in the income statement. Deferred taxation on un-remitted overseas earnings is provided for to the extent a tax charge is foreseeable. Property, plant and equipment Property, plant and equipment are shown at historical cost less accumulated depreciation and any impairment value. Depreciation is provided at rates calculated to write off the cost, less estimated residual value of each asset, on a straight line basis over its expected useful life as follows (except for long leasehold interests which are written off against the remaining period of the lease): Motor Vehicles - three years Computers - four years Fixtures and equipment - four years Investments Investments in associates and joint ventures are accounted for under the equity method of accounting. Investments are carried in the balance sheet at cost plus post acquisition changes in the Group's share in the net assets of associates and joint ventures, less any impairment in value. The income statement reflects the Group's share of the results of the operations of associates and joint ventures. Derivative financial instruments and hedging - adopted from 1 March 2005 Derivatives are initially recognised at fair value and are subsequently re-measured at their fair value at each balance sheet date. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if it is, the nature of the item being hedged. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the income statement. The Group designates derivatives that qualify for hedge accounting as a cash flow hedge where there is a high probability of the forecast transactions arising. The effective portion of changes in the fair value of these derivatives are recognised in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Amounts accumulated in equity are dealt with in the income statement at the same time as the gains or losses on the hedged items. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were reported in equity are immediately transferred to the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement. The fair value of forward foreign exchange contracts which are traded in active markets is based on quoted market prices at the balance sheet date. Share based payments The fair value at the date of grant of share based remuneration, principally share options, is calculated using a binomial pricing model and charged to the income statement on a straight line basis over the vesting period of the award. The charge to the income statement takes account of the estimated number of shares that will vest. All share-based remuneration is equity settled. In accordance with the IFRS transitional provisions, IFRS2 has been applied to grants of executive share options issued after 7 November 2002 that had not vested as of 1 January 2005. No charge is recognised for grants or share options vested prior to those respective dates. Commissions payable Commissions payable to clients are recognised in trade creditors due within one year on the earlier of the date of invoicing or the date of receipt of cash. Pension scheme arrangements The Group operates several defined contribution pension schemes. The assets of the schemes are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Segmental analysis The Group's primary segmental analysis is based on its three business segments: Shipbroking; Ship agency, forwarding and logistics; and Technical shipping support. The secondary analysis will be presented according to geographic markets comprising UK and the Far East (including Australia). This is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting. 11. IFRS 1 EXEMPTIONS Braemar Seascope Group PLC has taken the following exemptions, as permitted by IFRS 1, in the transition to IFRS: (a) Business combinations The accounting for acquisitions that occurred prior to the transition date of 1 March 2004 has not been restated. (b) Tangible fixed assets The Group has chosen not to restate property, plant and equipment to fair value at the date of transition. These are carried at historic cost which has been taken as the effective cost for IFRS purposes. (c ) Share based payments The Group has elected to apply the exemption whereby IFRS 2 only applies to share options granted after 7 November 2002 but that have not vested by 1 March 2005. (d) Financial Instruments The Group has taken advantage of the exemption under IAS 32 & 39 that enables the Group to only apply these standards from 1 March 2005. Accordingly, any hedging gains or losses at 1 March 2004 and 28 February 2005 remain off balance sheet. This information is provided by RNS The company news service from the London Stock Exchange

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