Interim Results
Holders Technology PLC
18 July 2007
HOLDERS TECHNOLOGY PLC
ANNOUNCEMENT OF INTERIM RESULTS
FOR THE SIX MONTH PERIOD TO 31 MAY 2007
CHAIRMAN'S STATEMENT
Results and activities
The group made further progress in the six months to 31 May 2007 with revenue
growing by 4.7% to £9,458,000 (2006: £9,030,000) and pretax profit by 29.1% to
£541,000 (2006: £419,000).
AIM companies are required to adopt International Financial Reporting Standards
(IFRS) for accounting periods beginning after 1 January 2007. This means that
Holders Technology would only have been obliged to adopt IFRS for the accounting
period ending 30 November 2008, almost a year after the majority of AIM
companies will have transitioned. The board has therefore decided to adopt IFRS
in the current financial year.
The adoption of IFRS has had a small favourable impact on reported profitability
for Holders. The main change being that goodwill is not amortised under IFRS.
Instead goodwill is subject to being tested for impairment. The overall impact
of the adoption of IFRS on the reported profit for the 6 months to 31 May 2007
and 2006 was to increase reported profit by £16,000 in each case.
Our UK operations achieved strong growth in both revenue and profitability
whilst our Dutch and German subsidiaries saw more moderate growth in revenue but
improved profitability. The first half benefited from changes we made last year
to achieve cost reductions across the group, coupled with further efficiencies
arising from the considerable investment we have made in the IT systems of the
group. The impact of these improvements was in part offset by weakness in
Scandinavia.
Products have now been identified for our Chinese operation, which will allow it
to develop its business in Southern China and export Chinese-sourced materials
to Holders group companies; however the new products did not contribute
significantly to revenue in the first half. Our newly established Indian joint
venture is now trading and has attractive medium term prospects.
Earlier in this statement I made reference to the restructuring we put in place
last year and the benefits we are seeing from this. The drive to put this in
hand was, in part, to enable our small central corporate staff to devote more
attention to developing the group and identifying new product ranges.
Identifying opportunities, negotiating appropriate commercial terms and
qualifying new product lines with potential customers is necessarily a
protracted process but we have identified a number of attractive opportunities
further to develop our business.
Our balance sheet remains strong, with net cash reserves, and we are well placed
to fund appropriate opportunities as they occur.
To reflect the improved trading position in the first half of the year we are
increasing the interim dividend from 2.0p to 2.1p, which will be paid on 18
September 2007 to shareholders on the register on 24 August 2007. We expect the
second half of the year to see a continuation of the progress made in the first
half of the year thus leading to a satisfactory outcome for the year as a whole.
The interim financial statements were approved by the board on 18 July 2007 and
signed on its behalf by:
Rudolf W. Weinreich Holders Technology plc
Chairman and Chief Executive Devonshire House
Manor way
Borehamwood
Hertfordshire WD6 1QQ
18 July 2007
Enquiries:
Rudi Weinreich, Chairman and Chief Executive,
Holders Technology plc 020 8731 4336
Jim Shawyer, Finance Director,
Holders Technology plc 020 8731 4336
Website: www.holderstechnology.com
John Wakefield, Director, Corporate Finance,
Blue Oar Securities Plc 0117 9330020
CONSOLIDATED INTERIM INCOME STATEMENT
for the half-year ended 31 May 2007 (Unaudited)
Half-year Half-year Full-year
ended 31 ended 31 ended 30
May 2007 May 2006 Nov 2006
Notes £'000 £'000 £'000
Revenue 1 9,458 9,030 18,822
Operating profit 542 433 962
Deferred consideration arising on
sale of former subsidiary
- 6 39
Share of associates operating (loss)/profit - (25) (25)
Finance income 6 10 9
Finance expense (7) (5) (26)
Profit before taxation 541 419 959
Taxation 2 (200) (162) (390)
Profit after taxation 341 257 569
Attributable to:
Equity shareholders of the company 362 257 591
Minority interest (21) - (22)
341 257 569
Earnings per share 4 8.70p 6.20p 14.24p
Diluted earnings per share 4 8.22p 5.98p 13.59p
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY (UNAUDITED)
Capital Cumulative
Share Share redemption translation Retained Minority Total
capital premium reserve adjustment earnings interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 December 2005 414 1,525 1 - 2,883 247 5,070
Profit/(loss) for the - - - - 257 - 257
period
Dividends - - - - (114) - (114)
Currency translation - - - (40) - - (40)
differences
Balance at 31 May 2006 414 1,525 1 (40) 3,026 247 5,173
Profit/(loss) for the - - - - 334 (22) 312
period
Dividends - - - - (83) - (83)
Shares issued during the 2 6 - - - - 8
period
Currency translation - - - (44) - (31) (75)
differences
Share-based payment credit - - - - 8 - 8
Minority interest acquired - - - - - (49) (49)
Investments by minority - - - - - 17 17
interest
Balance at 30 November 2006 416 1,531 1 (84) 3,285 162 5,311
Profit/(loss) for the - - - - 362 (21) 341
period
Dividends - - - - (125) - (125)
Currency translation - - - 9 - - 9
differences
Share-based payment credit - - - - 12 - 12
Investments by minority - - - - - 10 10
interest
Balance at 31 May 2007 416 1,531 1 (75) 3,534 151 5,558
CONSOLIDATED INTERIM BALANCE SHEET AT 31 MAY 2007 (UNAUDITED)
Half-year Half-year Full-year
ended 31 ended 31 ended 30
May 2007 May 2006 Nov 2006
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 413 409 413
Property, plant and equipment 627 502 506
Investment in associate - 65 119
1,040 976 1,038
Current assets
Inventories 2,976 2,643 3,153
Trade and other receivables 3,676 4,218 2,844
Cash and cash equivalents 701 376 822
7,353 7,237 6,819
Liabilities
Current liabilities
Trade and other payables (2,020) (2,203) (1,678)
Borrowings (335) (410) (406)
Current tax liabilities (277) (241) (260)
(2,632) (2,854) (2,344)
Net current assets 4,721 4,383 4,475
Non-current liabilities
Borrowings - - (4)
Retirement benefit liability (99) (82) (94)
Deferred consideration (104) (104) (104)
(203) (186) (202)
Net assets 5,558 5,173 5,311
Shareholders' equity
Share capital 416 414 416
Share premium account 1,531 1,525 1,531
Capital redemption reserve 1 1 1
Retained earnings 3,534 3,026 3,285
Cumulative translation adjustment (75) (40) (84)
Equity attributable to the equity shareholders 5,407 4,926 5,149
Minority interests 151 247 162
5,558 5,173 5,311
CONSOLIDATED INTERIM CASH FLOW STATEMENT
for the half-year ended 31 May 2007 (Unaudited)
Half-year Half-year Full-year
ended 31 ended 31 ended 30
May 2007 May 2006 Nov 2006
£'000 £'000 £'000
Cash flows from operating activities
Operating profit 542 433 962
Share-based payment charge 12 - 8
Depreciation 98 69 208
Reduction in impairment re associate - - (35)
Currency translation 7 (26) (79)
(Gain)/loss on sale of tangible fixed assets - (15) 1
Movement in inventories 177 (19) (529)
Movement in trade and other receivables (835) (1,366) (29)
Movement in trade and other payables 357 615 76
Cash generated from/(used in) operations 358 (309) 583
Tax (paid)/recovered (180) 64 (96)
Net cash generated from/(used in) operations 178 (245) 487
Cash flows from investing activities
Disposal of investment in associate 119 - -
Increase in investment in existing subsidiary - - (54)
Deferred consideration arising on sale of former
subsidiary
- 6 39
Purchase of property, plant and equipment (217) (65) (244)
Proceeds from sale of property, plant and
equipment
- 18 29
Interest received 6 3 9
Net cash generated from/(used in) investing
activities
(92) (38) (221)
Cash flows from financing activities
Proceeds from issue of shares - - 8
Interest paid (7) (5) (26)
Equity dividends paid (125) (114) (197)
Finance lease principal repayments (6) (7) (16)
Net cash used in financing activities (138) (126) (231)
Net change in cash and cash equivalents (52) (409) 35
Cash and cash equivalents at start of period 418 383 383
Effect of exchange rate fluctuations on cash held - 7 -
Cash and cash equivalents at end of period 366 (19) 418
Notes:
1. Basis of preparation
The consolidated interim financial statements have been prepared in accordance with the AIM Rules for
Companies and on a basis consistent with the accounting policies set out in note 2 of the appendix
below, which will be applied when the group prepares its first set of annual financial statements in
accordance with International Financial Reporting Standards (IFRS) as adopted by the EU for the
financial year ending 30 November 2007.
These are the group's first interim financial statements prepared under IFRS and therefore IFRS 1 '
First-time Adoption of International Financial Reporting Standards' has been applied. An explanation of
how the transition to IFRS has affected the reported financial position and financial performance of the
group together with a summary of significant accounting policies is provided in an appendix to this
statement. This note includes reconciliations of equity and profit or loss for the comparative periods
under UK Generally Accepted Accounting Practices ('UK GAAP') to those reported for those periods under
IFRS.
As permitted, the group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these
interim financial statements and therefore the interim financial information is not in full compliance
with IFRS.
The adopted IFRS that will be effective in the annual financial statements for year ending 30 November
2007 are still subject to change and to additional interpretations and therefore cannot be determined
with complete certainty. Accordingly, the accounting policies for that annual period will be determined
finally only when the annual financial statements are prepared for the year ending 30 November 2007.
The preparation of interim financial statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates.
These interim financial statements have been prepared under the historical cost convention.
The board of Holders Technology plc approved this interim report on 18 July 2007.
2. The tax charge for the six months ended 31 May 2007 is calculated based on the tax rates applicable in
the country in which each company operates. The effective rate of tax is 37.0% (2006: 39.0%). Taxation
includes a charge of £76,000 (2006: £129,000) relating to overseas operations.
3. A final dividend of 3.0p per share on the total issued share capital of 4,159,551 10p ordinary shares
was paid on 22 May 2007 in respect of the year ended 30 November 2006.
An interim dividend payment of 2.1p per share (2006: 2.0p per share) will be payable on 18 September
2007 to shareholders on the register at 24 August 2007. The shares will go ex-dividend on 22 August.
The interim dividend was not approved by the board at 31 May 2007 and accordingly, has not been included
as a liability as that date.
4. The earnings per ordinary share (basic and diluted) for the six months ended 31 May 2007 have been
calculated by reference to the profit attributable to equity shareholders of £362,000 (2006: £257,000)
and on 4,159,551 ordinary shares (2006: 4,144,551) being the weighted average number of shares in issue
during the period. Diluted earnings per share is based on 4,404,551 ordinary shares (2006: 4,299,551),
being the weighted average number of ordinary shares after an adjustment of 245,000 shares (2006:
155,000) in relation to share options.
5. The interim financial statements are unaudited and do not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The auditors have not issued a review report on the
restated financial information for the six months ended 31 May 2006. The financial information for the
year ended 30 November 2006 has been derived from the published statutory accounts as restated by the
IFRS adjustments set out in note 3. A copy of the full accounts for that period, on which the auditors
issued an unqualified report that did not contain statements under Section 237 (2) or (3) of the
Companies Act 1985, has been delivered to the Registrar of Companies.
6. A copy of this interim report is being sent to shareholders and is available for inspection at the
company's registered office, Devonshire House, Manor Way Borehamwood, Herts WD6 1QQ.
Appendix 1
Restatement of Financial Information under International Financial Reporting
Standards
1. Introduction
Holders Technology plc has previously prepared consolidated financial statements
in accordance with UK Generally Accepted Accounting Practice ('UK GAAP').
Following a European Union Regulation issued in 2002, the group will now report
its consolidated figures under International Accounting Standards and
International Financial Reporting Standards (collectively IFRS) as adopted by
the European Union.
The group's first annual report under IFRS will be for year ending 30 November
2007 and these
financial statements will include restated figures under IFRS for the year ended
30 November 2006. The group's date of transition to IFRS is 1 December 2005,
being the start of the previous period that will be presented as comparative
information. The first 'IFRS' results announced are for the half-year ended 31
May 2007.
This document sets out the changes in accounting policies arising from the
adoption of IFRS and
presents restated information for the opening balance sheet at 1 December 2005,
the half-year ended 31 May 2006 and the year ended 30 November 2006 which were
previously published under UK GAAP.
Conversion to IFRS affects the group's reporting particularly in the area of
accounting for goodwill arising from acquisitions. This said, the adoption of
IFRS represents an accounting change only and does not change the cash flows of
the group or its operations.
2. Basis of preparation and summary of significant accounting policies
Basis of preparation
The interim financial statements have been prepared in accordance with the
accounting policies the company expects to adopt in its 2007 annual report.
These accounting policies are based on the IAS, IFRS and IFRIC interpretations
that the company expects to be applicable at that time. The IFRS and IFRIC
interpretations that will be applicable at 30 November 2007, including those
that will be applicable on an optional basis, are not known with certainty at
the time of preparing the interim financial statements.
The group's consolidated financial statements were prepared in accordance with
UK GAAP until 30 November 2006. The company has applied the same accounting
policies and methods of computation in the interim financial statements as those
published by the group within its 2006 Annual Report, except as explained in
notes 3 and 4 of this document, where the effects of changes in accounting
policies arising as a result of the adoption of IFRS are set out.
Reconciliations between previously reported financial statements prepared under
UK GAAP and the IFRS equivalents are presented for profit for the year ended 30
November 2006 and the six months ended 31 May 2006 and net assets as at 30
November 2006, 31 May 2006 and 1 December 2005. Further disclosures required by
IFRS 1 concerning the transition from UK GAAP to IFRS are also given in notes 3
and 4 of this document.
IFRS 1 provides certain optional exemptions from full retrospective application
of all accounting
standards effective at the company's reporting date. As discussed in more detail
in the relevant sections below, the company has taken advantage of the
exemptions relating to: business combinations, cumulative translation
differences and share-based payment transactions. The company has not taken
advantage of the available optional exemption relating to fair value measurement
of financial assets and financial liabilities at initial recognition.
Use of estimates
The preparation of financial statements in conformity with IFRS requires
management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
Principles of consolidation
The consolidated interim financial statements incorporate the interim financial
statements of the
company and all its subsidiaries. Intra-group transactions, including sales,
profits, receivables and payables, have been eliminated on the group
consolidation.
Subsidiaries
Subsidiaries are entities controlled by the company. Control exists when the
company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are
included from the date that control commences until the date that control
ceases.
Goodwill and business combinations
The results of subsidiaries acquired in the period are included in the income
statement from the date they are acquired. On acquisition, all of the
subsidiaries' assets and liabilities that exist at the date of acquisition are
recorded at their fair values reflecting their condition at that date.
All business combinations are accounted for by applying the purchase method.
Goodwill represents the excess of the fair value of the consideration paid on
acquisition of a business over the fair value of the assets, including any
intangible assets identified and liabilities acquired. Goodwill is not amortised
but is measured at cost less impairment losses. Impairment losses are
immediately recognised in the income statement and are not subsequently
reversed. In determining the fair value of consideration, the fair value of
equity issued is the market value of equity at the date of completion, and the
fair value of contingent consideration is based upon the extent to which the
directors believe performance conditions will be met and thus whether any
further consideration will be payable.
As permitted by IFRS 1, goodwill arising on acquisitions before 1 December 2005
(date of transition to IFRS) has been frozen at the UK GAAP amounts subject to
being tested for impairment at that date. Goodwill is tested for impairment
annually. The company performs its annual impairment review at the cash
generating unit level.
Impairment charges
The company considers at each reporting date whether there is any indication
that non-current assets are impaired. If there is such an indication, the
company carries out an impairment test by measuring an asset's recoverable
amount, which is the higher of its fair value less costs to sell and its value
in use (effectively the expected cash to be generated from using the asset in
the business). If the recoverable amount is less than the carrying amount an
impairment loss is recognised, and the asset is written down to its recoverable
amount.
Revenue recognition
Revenue comprises the value of sales of goods and services to third party
customers occurring in the period, stated exclusive of value added tax and net
of trade discounts and rebates.
Revenue on the sale of goods is recognised when substantially all of the risks
and rewards in the product have passed to the customer, which is usually upon
delivery to the customer.
Revenue is recognised to the extent that it is probable that the economic
benefits associated with the transaction will flow into the company.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The company
considers all highly liquid investments with original maturity dates of three
months or less to be cash equivalents. Bank overdrafts that are repayable on
demand and form an integral part of the group's cash management system are
included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
Trade and other receivables
Trade and other receivables do not carry interest and are stated at their
nominal value, as reduced by appropriate allowances for estimated irrecoverable
amounts. A provision for impairment of trade receivables is established when
there is evidence that the group will not be able to collect all amounts due
according to the original terms of these receivables. The amount of the
provision is the difference between the carrying value and the present value of
estimated future cash flows, discounted at the effective interest rate.
Impairment losses are recognised in the income statement.
Trade and other payables
Trade and other payables are not interest bearing and are stated at their
settlement amount.
Borrowings
Borrowings are recognised initially at proceeds received, net of transaction
costs. Subsequent measurement is at amortised cost. Finance charges, including
any premiums payable or discounts, and direct issue costs are recognised in the
income statement over the period of the borrowings using the effective interest
rate method.
Borrowings are classified as current liabilities unless the group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is
determined on a first-in-first-out basis, except in Germany, where an average
cost basis is used. Net realisable value is based on the estimated sales price
after allowing for all further costs of completion and disposal. Where
necessary, provision is made for obsolete, slow-moving and defective inventory.
Property, plant and equipment
The cost of items of property, plant and equipment is its purchase cost,
together with any incidental costs of acquisition.
Depreciation is calculated to write off assets over their expected useful lives.
Where there is evidence of impairment, fixed assets are written down to the
recoverable amount. No depreciation is provided on freehold land. Depreciation
is calculated at the following rates:
Freehold buildings 2% on cost
Leasehold buildings Over the period of the lease
Motor vehicles 20% on either cost or written down value
Plant and machinery 20% - 33% on either cost or written down value
Office equipment 25% on cost
Provision is made against the carrying value of items of property, plant and
equipment where an
impairment in value is deemed to have occurred.
Leased assets
Rentals payable under operating leases are charged to the income statement on a
straight line basis over the periods of the leases.
Assets held under finance leases are included in the balance sheet at cost less
depreciation in accordance with the company's normal accounting policies. The
present value of future rentals is shown as a liability. The interest element
of rental obligations is charged to the income statement over the period of the
lease in proportion to the balance of capital repayments outstanding.
Foreign currencies
In the consolidated financial statements, the net assets of the group's foreign
operations are translated at the rate of exchange at the balance sheet date.
Income and expense items are translated at the average rates for the period.
The resulting exchange differences are recognised in equity and included in the
translation reserve. Such translation differences are recognised in the income
statement on the disposal of the foreign operation. All other currency
differences are taken to the income statement. Differences between forward
exchange contract rates and the year end spot rate are taken to the income
statement. Profit and losses on holding foreign currency balances are treated
as a finance cost.
Derivative financial instruments
The group uses derivative financial instruments to hedge its exposure to foreign
exchange and interest rate risks arising from operational, financing and
investment activities. In accordance with its treasury policy, the group does
not hold or issue derivative financial instruments for trading purposes.
However, derivatives that do not qualify for hedge accounting are accounted for
as trading instruments.
Derivative financial instruments are recognised initially at cost. Subsequent to
initial recognition, derivative financial instruments are stated at fair value.
The gain or loss on re-measurement to fair value is recognised immediately in
the income statement. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the item
being hedged.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of the group after deducting all its liabilities. Equity instruments
issued by the company are recorded at the proceeds received, net of directly
attributable issue costs
Taxes
Current tax, including UK corporation tax and foreign tax, is provided at
amounts expected to be paid (or recovered) using the tax rates that have been
enacted or substantively enacted by the balance sheet date. For the purposes of
interim statements, the current tax charge is based upon a prudent expectation
of the likely full year position.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured using the tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when
the asset is realised or the liability settled.
Provision is not made for deferred tax on the unremitted earnings of foreign
subsidiaries where such remittances are not considered probable as the group's
policy is to reinvest profits to fund growth locally. Provision is made where
it is likely that dividends will be remitted within the foreseeable future.
A net deferred tax asset is recognised only when it is probable that suitable
taxable profits will be available in the foreseeable future from which the
reversal of the temporary differences can be deducted.
Employee share option scheme
The fair value of employee share plans is calculated using a Black Scholes
model. In accordance with IFRS 2 the resulting cost is charged to the income
statement over the vesting period of the plans. The value of the charge is
adjusted to reflect the expected and the actual levels of options vesting. IFRS
2 has been applied to all grants of equity instruments after 7 November 2002
that were unvested as of 1 December 2005, in accordance with the transitional
arrangements of IFRS 1.
The proceeds received, net of any directly attributable transaction costs, are
credited to share capital and share premium when the options are exercised.
Pension contributions
The group does not operate a pension scheme. Pension costs relate to group
contributions to the personal pension schemes of certain directors and
employees.
Investment income
Investment income relates to interest income, which is accrued on a time basis,
by reference to the principal outstanding and at the effective interest rate
applicable.
Dividends payable
Distributions to equity holders are disclosed as a component of the movement in
shareholders' equity. A liability is recorded for a final dividend when the
dividend is declared by the company's shareholders, and, for an interim
dividend, when the dividend is paid.
Provisions
A provision is recognised in the balance sheet when the group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
3. Explanation of transition to IFRS
The company's financial statements for the year ending 30 November 2007 will be
the first annual financial statements that comply with IFRS. The interim
financial statements have been prepared as described in note 2 of this document.
The company has applied IFRS 1 in preparing the interim financial statements.
The last financial statements under UK GAAP were for the year ended 30 November
2006 and the date of transition was therefore 1 December 2005. Presented below
is the reconciliation of profit for the year ended 30 November 2006 and the
reconciliations of equity at 1 December 2005, being the start of that period
('Transition Date') and at 30 November 2006 (date of last UK GAAP financial
statements) as required by IFRS 1. In addition, the reconciliation of equity at
31 May 2006 and the reconciliation of profit for the 6 month period ended 31 May
2006 have been included below as required by IFRS 1 to enable a comparison of
the 2007 interim figures with those published in the corresponding period of the
previous financial year. For explanations of the nature and effect of the
changes in accounting policies as a consequence of the transition to IFRS, refer
to note 4 of this document.
(i) Reconciliations of UK GAAP profit and loss account to IFRS income statement
Half-year ended 31 May 2006
(Date of corresponding interim financial statements)
UK Effect of
GAAP transition to IFRS IFRS
Unaudited Unaudited Unaudited
Notes £'000 £'000 £'000
Revenue 9,030 - 9,030
Cost of sales (6,729) - (6,729)
Gross Profit 2,301 - 2,301
Distribution costs (156) (156)
Administrative expenses a (1,743) 16 (1,727)
Other operating income 15 15
Operating profit 417 16 433
Deferred consideration arising on sale of former 6 - 6
subsidiary
Finance income 10 - 10
Finance expenses (5) - (5)
Share of loss of associate (25) - (25)
Profit before tax 403 16 419
Taxation (162) (162)
Profit after tax 241 16 257
Attributable to:
Equity shareholders of the company 241 16 257
Minority interests - - -
241 16 257
Year ended 30 November 2006
(End of last period presented under UK GAAP)
UK Effect of
GAAP transition to IFRS IFRS
Audited Unaudited Unaudited
Notes £'000 £'000 £'000
Revenue 18,822 - 18,822
Cost of sales (13,891) - (13,891)
Gross Profit 4,931 - 4,931
Distribution costs (446) (446)
Administrative expenses (3,592) 31 (3,561)
Other operating income 38 - 38
Operating profit 931 31 962
Deferred consideration arising on sale of former 39 - 39
subsidiary
Finance income 9 - 9
Finance expenses (26) - (26)
Share of loss of associate (25) - (25)
Profit before tax 928 31 959
Taxation (390) - (390)
Profit after tax 538 31 569
Attributable to:
Equity shareholders of the company 560 31 591
Minority interests (22) - (22)
538 31 569
(ii) Reconciliation of UK GAAP profit to IFRS profit
Half-year ended Year ended
31 May 30 November
2006 2006
£'000 £'000
Profit after tax as reported under UK GAAP 241 560
Adjustments for:
Goodwill not amortised subsequent to the a 16 31
Transition Date
Profit after tax as reported under IFRS 257 591
(iii) Reconciliations of equity at 1 December 2005 from UK GAAP to IFRS
UK Effect of
GAAP transition to IFRS IFRS
Audited Unaudited Unaudited
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill a 410 - 410
Property, plant and equipment 509 - 509
Investment in associate 103 - 103
1,022 - 1,022
Current assets
Inventories 2,624 - 2,624
Trade and other receivables 2,970 - 2,970
Cash and cash equivalents 734 - 734
6,328 - 6,328
Liabilities
Current liabilities
Trade and other payables (1,588) - (1,588)
Borrowings (367) - (367)
Current tax liabilities (133) - (133)
(2,088) - (2,088)
Net current assets 4,240 - 4,240
Non-current liabilities
Borrowings (6) - (6)
Retirement benefit liability (82) - (82)
Deferred consideration (104) - (104)
(192) - (192)
Net assets 5,070 - 5,070
Shareholders' equity
Share capital 414 - 414
Share premium account 1,525 - 1,525
Capital redemption reserve 1 - 1
Retained earnings a 2,883 - 2,883
Cumulative translation adjustment b - - -
Total equity attributable to the equity 4,823 - 4,823
shareholders
Minority interests 247 - 247
5,070 - 5,070
(iv) Reconciliations of equity at 30 November 2006 from UK GAAP to IFRS
UK Effect of
GAAP transition to IFRS IFRS
Audited Unaudited Unaudited
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill a 382 31 413
Property, plant and equipment 506 - 506
Investment in associate 119 - 119
1,007 31 1,038
Current assets
Inventories 3,153 - 3,153
Trade and other receivables 2,844 - 2,844
Cash and cash equivalents 822 - 822
6,819 - 6,819
Liabilities
Current liabilities
Trade and other payables (1,678) - (1,678)
Borrowings (406) - (406)
Current tax liabilities (260) - (260)
(2,344) - (2,344)
Net current assets 4,475 - 4,475
Non-current liabilities
Borrowings (4) - (4)
Retirement benefit liability (94) - (94)
Deferred consideration (104) - (104)
(202) - (202)
Net assets 5,280 31 5,311
Shareholders' equity
Share capital 416 - 416
Share premium account 1,531 - 1,531
Capital redemption reserve 1 - 1
Retained earnings a 3,170 115 3,285
Cumulative translation adjustment b - (84) (84)
Total equity attributable to the equity 5,118 31 5,149
shareholders
Minority interests 162 - 162
5,280 31 5,311
(v) Reconciliations of equity at 31 May 2006 from UK GAAP to IFRS
UK Effect of
GAAP transition to IFRS IFRS
Unaudited Unaudited Unaudited
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill a 393 16 409
Property, plant and equipment 502 - 502
Investment in associate 65 - 65
960 16 976
Current assets
Inventories 2,643 - 2,643
Trade and other receivables 4,218 - 4,218
Cash and cash equivalents 376 - 376
7,237 - 7,237
Liabilities
Current liabilities
Trade and other payables (2,203) - (2,203)
Borrowings (410) - (410)
Current tax liabilities (241) - (241)
(2,854) - (2,854)
Net current assets 4,383 - 4,383
Non-current liabilities
Borrowings - - -
Retirement benefit liability (82) - (82)
Deferred consideration (104) - (104)
(186) - (186)
Net assets 5,157 16 5,173
Shareholders' equity
Share capital 414 - 414
Share premium account 1,525 - 1,525
Capital redemption reserve 1 - 1
Retained earnings a 2,970 56 3,026
Cumulative translation adjustment b - (40) (40)
Total equity attributable to the equity 4,910 16 4,926
shareholders
Minority interests 247 - 247
5,157 16 5,173
(vi) Reconciliation of equity from UK GAAP to IFRS
1 December 31 May 30 November
2005 2006 2006
Notes £'000 £'000 £'000
Total equity as reported under UK GAAP 5,070 5,157 5,280
Adjustments for:
Goodwill not amortised subsequent to a - 16 31
transition date
Total equity as reported under IFRS 5,070 5,173 5,311
4. Explanation of adjustments.
The transition to IFRS resulted in the following changes in accounting policies:
a. Goodwill
Goodwill is not amortised under IFRS but is measured at cost less impairment
losses. Under UK GAAP, goodwill was amortised on a straight line basis over the
time that the group was estimated to benefit from it. The change does not
affect equity at 1 December 2005 because, as permitted by IFRS 1, goodwill
arising on acquisitions before 1 December 2005 (date of transition to IFRS) has
been frozen at the UK GAAP amounts subject to being tested for impairment at
that date, the results of which assessment indicated no such impairment.
Under UK GAAP, goodwill on acquisitions prior to 1 July 1998 was eliminated
directly against reserves. The gain or loss on the disposal of a previously
acquired business reflects the attributable amount of purchased goodwill in
respect of that business. As the group has opted not to restate business
combinations prior to the date of transition, the goodwill written off to
reserves under UK GAAP has been frozen and remains in reserves.
b. Other reserves
The group has adopted IAS 21 and discloses separately the exchange differences
arising on the translation of foreign subsidiaries' results as a component of
equity with effect from 1 December 2005. In order to eliminate the need to
retrospectively apply this requirement, the group took the exemption to set
cumulative translation differences to zero at the date of transition.
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