Adoption of IFRS

Shanks Group PLC 17 October 2005 17 October 2005 Company Announcement Shanks Group plc Adoption of International Financial Reporting Standards From 1 April 2005, the Group has adopted International Financial Reporting Standards (IFRS). Accordingly, the interim results for the six months ended 30 September 2005 will be presented under IFRS. This announcement explains the key presentational changes and accounting policy adjustments that arise from the first time adoption of IFRS by the Group. It also details how the results for the year ended 31 March 2005 would have appeared had they been prepared under IFRS. The adoption of IFRS has no impact on the Group's cash flows, its ability to pay dividends or the manner in which the Group's operations are run. The IFRS adjustments and financial information are provisional and unaudited. The UK GAAP information used in this report is based on the Group's statutory financial statements for the year ended 31 March 2005, which contained an unqualified report from the Group's auditors. Ends For further information please contact: Fraser Welham, Group Finance Director Shanks Group plc, telephone +44 (0) 1628 524523 Ginny Pulbrook, Executive Director Citigate Dewe Rogerson, telephone +44(0) 20 7282 2945 Shanks Group plc Adoption of International Financial Reporting Standards 17 October 2005 Contents 1 Introduction 2 Overview 3 Financial Highlights for the Year Ended 31 March 2005 4 First Time Adoption of IFRS and Changes in Accounting Policies 5 Financial Statements under IFRS for the Year Ended 31 March 2005 • Consolidated Income Statement • Consolidated Balance Sheet • Consolidated Cash Flow Statement • Consolidated Statement of Recognised Income and Expense • Consolidated Statement of Changes in Equity 6 Selected Notes to the IFRS Financial Statements Appendices A Consolidated Income Statement for the Year Ended 31 March 2005 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption B Consolidated Balance Sheet at 31 March 2005 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption C Consolidated Balance Sheet at 31 March 2004 • Effect of IAS1 - Presentation of Financial Statements • Adjustments arising from IFRS adoption D UK GAAP to IFRS Reconciliation of Financial Highlights 1 Introduction From 1 April 2005, Shanks Group plc is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). Previously, the Group had reported its results under United Kingdom Generally Accepted Accounting Principles (UK GAAP). Accordingly, the interim results for the six months ended 30 September 2005 will be presented under IFRS. This report explains the key presentational changes and accounting policy adjustments that arise from the first time adoption of IFRS by the Group. Part of the move to IFRS involves the restatement of comparative figures. This report details how the results for the year ended 31 March 2005 would have appeared had they been prepared under IFRS. The Directors are responsible for the preparation of the restated financial information. This report was approved by the Audit Committee of the Board on 30 September 2005. The IFRS adjustments and financial information are provisional and unaudited. The UK GAAP information used in this report is based on the Group's statutory financial statements for the year ended 31 March 2005, which contained an unqualified report from the Group's auditors. 2 Overview The adoption of IFRS has no impact on the Group's cash flows, its ability to pay dividends or the manner in which the Group's operations are run. The major impact of the adoption of IFRS on the Group's reported results are: • the presentation of the results relating to discontinued activities; • the reclassification of certain elements of goodwill to intangible assets which are subject to amortisation over their useful lives. The remaining goodwill is no longer amortised but is subject to annual impairment reviews; • the net deficit of the Group's UK pension scheme is now consolidated into the Group's balance sheet. The change in the basis for recognising future pension liabilities gives rise to an increased pension charge; • the cost of share based payments to employees is charged to profits; • the Group has various integrated waste management contracts with certain UK local authorities concluded under the Private Finance Initiative (PFI). It is also bidding for further contracts. At the financial close of a PFI contract, the price of the service is determined, inter alia, by the long term interest rate available in the market. The Group therefore protects its risk by entering into an interest rate swap to match its future cash inflows and outflows. Under IFRS we are required to revalue these swaps at current market value irrespective of the commercial reasons for entering into them. Revaluation of these swaps can lead to large accounting gains or losses but does not affect the long term profitability of the contract as the Group has matched its long term revenue and costs. Whilst IFRS does allow these gains and losses to be taken directly to reserves, it is on the proviso that onerous verification requirements are fulfilled. The Group believes it is not worth expending significant resources fulfilling these requirements in respect of an item that does not reflect the commercial reality. In future accounting for changes in the market value could therefore cause major fluctuations to our reported profits. These will be excluded from our 'Headline Profit'. If these swaps had been included at market value at 31 March 2005 a cumulative accounting loss of £3.7m would have been recognised under IAS39. These have not been recognised in the restated comparatives as IFRS1 exempts the Group from restating comparative information when adopting IAS39; • certain leases classified as operating under UK GAAP are now classified as finance, increasing fixed assets and net debt accordingly; • joint venture investments are proportionately consolidated resulting in our share of assets and liabilities, including debt, being consolidated on a line basis; • dividends are now only included in the accounts once approved; and • deferred tax is now provided in respect of revalued properties even if there is little likelihood of the revaluation crystallizing. Set out below is a reconciliation between UK GAAP and IFRS of selected 2004/5 financial highlights: Adjusted earnings Profit Headline per before profit share tax Net assets Net debt Year ended 31 March 2005 £m pence £m £m £m ___________________________________________________________________________________________________________ As reported under UK GAAP 33.3 9.4 64.4 194.7 (162.3) Discontinued activities (3.0) (0.8) (54.1) - - ___________________________________________________________________________________________________________ UK GAAP - continuing 30.3 8.6 10.3 194.7 (162.3) Intangible/goodwill amortisation (0.2) (0.1) 9.4 9.4 - Pensions (0.7) (0.2) (0.7) (18.9) - Share based payments - - (0.1) - - Leases 0.1 - 0.1 0.1 (9.6) Joint ventures - - - - (1.5) Dividends - - - 8.9 - Deferred tax - - - (2.9) - ___________________________________________________________________________________________________________ As reported under IFRS 29.5 8.3 19.0 191.3 (173.4) ___________________________________________________________________________________________________________ 3 Financial Highlights for the Year Ended 31 March 2005 The table below sets out all of the Group's previously reported financial highlights and their corresponding equivalents as if they had been presented under IFRS: IFRS UK GAAP Year ended 31 Year ended 31 March 2005 March 2005 ________________________________________________________________________________________________________ Revenues £476m £504m Headline profit (Notes 1 and 2) £29.5m £33.3m Exceptional item - restructuring costs (Note 3) £(10.5)m £(10.4)m Exceptional item - disposal of operations (Note 3) - £51.5m Goodwill amortisation - £(10.0)m Profit on ordinary activities before tax £19.0m £64.4m Profit on continuing businesses before interest, exceptional items, goodwill amortisation and tax £38.6m £38.3m Adjusted basic earnings per share 8.3p 9.4p Basic earnings per share 32.9p 25.7p Net assets £191m £195m Core Business net debt (Note 4) £109m £99m PFI Companies net debt £63m £63m Total Group net debt (Note 4) £172m £162m EBITDA (Note 5) £72m £83m ________________________________________________________________________________________________________ Notes: 1 UK GAAP: Profit before exceptional items, goodwill amortisation and tax (including discontinued activities). 2 IFRS: Profit from continuing activities before exceptional items, changes in fair value of financial instruments and tax. 3 IFRS does not use the term 'exceptional items'. Significant non-recurring operating income and expenses may be shown on the face of the income statement. The Group considers these items as exceptional for the purposes of determining Headline Profit. 4 Excluding share of net debt of joint ventures. 5 EBITDA excluding exceptional items (and discontinued activities under IFRS). To assist in the understanding of the nature and effect of specific IAS/IFRS applications, the previously reported UK GAAP information is reconciled to the IFRS-based financial highlights in Appendix D. 4 First Time Adoption of IFRS and Changes in Accounting Policies The financial information has been prepared in accordance with IFRS, including interpretations issued by the International Accounting Standards Board (IASB) and its committees. These are subject to ongoing review and endorsement by the European Commission and are subject to change. Consequently, information within this document may require updating for any subsequent amendments to IFRS and its interpretations. IFRS1 First-time adoption of IFRS IFRS1 sets out the rules that the Group is following for the first consolidation under IFRS. It requires that the IFRS accounting policies to be applied for the first consolidation as at 31 March 2006 are determined and then applied retrospectively to the opening balance sheet at 31 March 2004 (the transition date). IFRS1 contains certain optional exemptions to assist the Group in its transition to IFRS. Significant instances where the Group has opted for these exemptions together with other changes in accounting policy required through the adoption of IFRS are described below. IAS1 Presentation of financial statements IAS1 sets out the basis on which the Group's financial statements are to be presented. The most significant change to presentation made to the Income Statement is in respect of the position of the profits of discontinued activities and the profit on their disposal. These are now included on an after tax basis below profit after tax on continuing activities. For the balance sheet the most significant change is in respect of deferred tax where certain deferred tax assets are no longer netted from deferred tax liabilities. IFRS3 Business combinations Acquisitions that took place after the transition date must be accounted for under IFRS. The Group has taken advantage of the exemption given in IFRS1 to not restate acquisitions made prior to the transition date on an IFRS basis. The Group has applied the exemption given in IFRS1 to treat the net book value of goodwill as deemed cost as at the transition date. This exemption extends to amounts written off directly to reserves. Consequently, on disposal of operations, there is no requirement to reinstate any associated goodwill previously written off to reserves. Amortisation of goodwill under UK GAAP is replaced by an annual impairment review under IFRS3. IAS38 Intangible assets The transition to IFRS will affect the classification of costs associated with the 25 year PFI waste management contracts won after the transition date. Under UK GAAP costs in excess of the fair value of net assets taken over were classified as goodwill, recognised in the balance sheet at cost and amortised over 25 years. Under IAS38, these costs will be re-classified as contract rights. These will be recognised at cost in the balance sheet as intangible assets and amortised over 25 years. IAS19 Employee benefits Previously the Group has accounted for pensions under SSAP 24 - Pension Costs and had adopted the transitional arrangements of FRS 17 - Retirement Benefits. IAS19 (like FRS 17) requires the Group to consolidate its proportion of the assets, liabilities and returns of the defined benefit schemes in which the Group participates. It also changes the basis for recognising the cost of future pension liabilities. The net pension deficit is included within liabilities with the corresponding deferred tax asset included in assets. Actuarial gains and losses on the pension scheme will be taken in the year they arise through the Statement of Recognised Income and Expense from the transition date. IAS21 The effect of changes in foreign exchange rates Under IAS21 cumulative exchange rate variances on the net investment in foreign operations are recognised in a separate equity reserve. The Group has elected to set these exchange differences to zero at the transition date, as permitted under IFRS1. The Group intends to apply the principles of IAS39 on hedge accounting for intercompany loans denominated in euros and reported in subsidiaries that have a sterling functional currency. As a result, exchange rate variances arising on these loans will be reflected in reserves. IFRS2 Share based payments IFRS2 requires measurement of share based transactions with employees at fair value at the date of grant. This value forms the basis of the charge to the income statement over the period between grant and exercise. The fair values of the various incentive or share plans have been calculated using appropriate valuation models. Under a transitional exemption covering first-time adoption, this applies only to options granted after 7 November 2002. IAS39 Financial instruments - recognition and measurement; and IAS32 Financial instruments - disclosure and presentation The Group will take advantage of the IFRS1 provision that allows Companies not to restate comparative information under IAS32 and IAS39. These standards will therefore be applied prospectively from 31 March 2005. The Group has various integrated waste management contracts with certain UK local authorities concluded under the Private Finance Initiative (PFI). It is also bidding for further contracts. At the financial close of a PFI contract, the price of the service is determined, inter alia, by the long term interest rate available in the market. The Group therefore protects its risk by entering into an interest rate swap to match its future cash inflows and outflows. Under IFRS we are required to revalue these swaps at current market value irrespective of the commercial reasons for entering into them. Revaluation of these swaps can lead to large accounting gains or losses but does not affect the long term profitability of the contract as the Group has matched its long term revenue and costs. Whilst IFRS does allow these gains and losses to be taken directly to reserves, it is on the proviso that onerous verification requirements are fulfilled. The Group believes it is not worth expending significant resources fulfilling these requirements in respect of an item that does not reflect the commercial reality. In future accounting for changes in the market value could therefore cause major fluctuations to our reported profits. These will be excluded from our 'Headline Profit'. If these swaps had been included at market value at 31 March 2005 a cumulative accounting loss of £3.7m would have been recognised under IAS39. These have not been recognised in the restated comparatives as IFRS1 exempts the Group from restating comparative information when adopting IAS39. IAS31 Interest in joint ventures IAS31 gives a choice for accounting for joint ventures under either the equity method or the preferred method of proportional consolidation. The Group has opted to use proportional consolidation, which requires line by line consolidation of the Group's share of income and expenditure and the share of assets and liabilities. This change has no effect on the Group's consolidated profits after tax and net assets. IAS17 Leases The definition of a finance lease under IAS17 differs to that under UK GAAP. Accordingly, a number of operating leases are now accounted for as finance leases under IFRS. The relevant asset is recognised as part of tangible fixed assets and a corresponding finance lease creditor included in net debt. IAS10 Events after the balance sheet date Under IAS 10 dividends declared after the period end do not represent a present obligation under IAS37 - Provisions, Contingent Liabilities and Contingent Assets as it is subject to approval. The accrual for the final dividend under UK GAAP is reversed for IFRS purposes and accounted for in the subsequent reporting period. IAS12 Income taxes Provision for deferred tax has to be included where assets are held at values different to the tax base cost. Whilst the Group does not revalue property, certain properties were held at valuation prior to acquisition by the Group. Under UK GAAP no deferred tax provision was included, as there was no intention to dispose of the properties. IFRS requires provision irrespective of any plans for the property's use. 5 Financial Statements under IFRS for the Year Ended 31 March 2005 Consolidated Income Statement year ended 31 March 2005 (unaudited) Joint Group ventures Total Note £m £m £m _____________________________________________________________________________________________________________ Continuing operations: Revenue 5(a) 465.7 10.2 475.9 Cost of sales - ongoing (379.1) Cost of sales - restructuring costs 5(a) (5.2) _________ Cost of sales (384.3) (5.6) (389.9) _____________________________________________________________________________________________________________ Gross profit 81.4 4.6 86.0 Administrative expenses - ongoing (49.9) Administrative expenses - restructuring costs 5(a) (5.3) _________ Administrative expenses (55.2) (2.7) (57.9) _____________________________________________________________________________________________________________ Operating profit 5(a) 26.2 1.9 28.1 Finance charges - interest (8.3) (0.2) (8.5) Finance charges - other (0.6) - (0.6) _____________________________________________________________________________________________________________ Profit before tax 17.3 1.7 19.0 Tax (6.3) (0.6) (6.9) _____________________________________________________________________________________________________________ Profit for the year from continuing operations 5(a) 11.0 1.1 12.1 Discontinued operations: Profit for the year from discontinued operations 5(a) 65.0 - 65.0 _____________________________________________________________________________________________________________ Profit for the year 5(a) 76.0 1.1 77.1 _____________________________________________________________________________________________________________ Earnings per share 5(b) - basic 32.9p - diluted 32.9p Earnings per share from continuing operations 5(b) - basic 5.2p - diluted 5.2p _____________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2005 (unaudited) Share of Share of joint joint Group ventures Total Group ventures Total 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m ___________________________________________________________________________________________________________________ Non-current assets Intangible assets 160.7 - 160.7 185.8 - 185.8 Property, plant and equipment 238.2 12.1 250.3 365.0 11.9 376.9 Loans to joint ventures 3.2 - 3.2 3.9 - 3.9 Other investments 1.0 - 1.0 1.1 - 1.1 Deferred tax assets 14.2 - 14.2 9.1 - 9.1 ___________________________________________________________________________________________________________________ 417.3 12.1 429.4 564.9 11.9 576.8 ___________________________________________________________________________________________________________________ Current assets Inventories 9.1 0.2 9.3 8.1 0.1 8.2 Trade and other receivables 111.4 2.4 113.8 136.2 1.7 137.9 Current tax assets 3.0 - 3.0 1.2 - 1.2 Cash and cash equivalents 32.1 0.4 32.5 30.3 0.5 30.8 ___________________________________________________________________________________________________________________ 155.6 3.0 158.6 175.8 2.3 178.1 ___________________________________________________________________________________________________________________ Total assets 572.9 15.1 588.0 740.7 14.2 754.9 ___________________________________________________________________________________________________________________ Current liabilities Borrowings (3.1) (0.9) (4.0) (17.7) (0.9) (18.6) Trade and other payables (123.1) (2.6) (125.7) (153.8) (2.9) (156.7) Current tax liabilities (3.7) (0.5) (4.2) (2.4) (0.2) (2.6) Provisions (11.2) - (11.2) (1.9) - (1.9) ___________________________________________________________________________________________________________________ (141.1) (4.0) (145.1) (175.8) (4.0) (179.8) ___________________________________________________________________________________________________________________ Non-current liabilities Borrowings (200.9) (1.0) (201.9) (332.3) (1.5) (333.8) Other non-current liabilities (0.1) (2.5) (2.6) (8.4) (2.5) (10.9) Deferred tax liabilities (15.4) (0.2) (15.6) (21.8) (0.1) (21.9) Provisions (12.8) (1.8) (14.6) (54.8) (1.4) (56.2) Retirement benefit obligations (16.9) - (16.9) (28.2) - (28.2) ___________________________________________________________________________________________________________________ (246.1) (5.5) (251.6) (445.5) (5.5) (451.0) ___________________________________________________________________________________________________________________ Total liabilities (387.2) (9.5) (396.7) (621.3) (9.5) (630.8) ___________________________________________________________________________________________________________________ Net assets 185.7 5.6 191.3 119.4 4.7 124.1 ___________________________________________________________________________________________________________________ Equity Share capital 23.4 23.4 Share premium 93.2 93.1 Exchange reserve 3.1 - Retained earnings 71.6 7.6 ___________________________________________________________________________________________________________________ Total equity 191.3 124.1 ___________________________________________________________________________________________________________________ Consolidated Cash Flow Statement year ended 31 March 2005 (unaudited) Dis- Continuing continued Total Note £m £m £m __________________________________________________________________________________________________________________ Net cash from operating activities 5(d) 29.4 28.2 57.6 __________________________________________________________________________________________________________________ Investing activities Interest paid (13.2) (2.3) (15.5) Interest received 2.2 - 2.2 Purchases of property, plant and equipment (66.9) (2.7) (69.6) Disposal of property, plant and equipment 6.8 - 6.8 Acquisition of subsidiary (3.9) - (3.9) Disposal of subsidiary and other businesses 189.4 - 189.4 Movements in loans and dividends received from joint ventures 0.8 - 0.8 ___________________________________________________________________________________________________________________ Net cash used in investing activities 115.2 (5.0) 110.2 ___________________________________________________________________________________________________________________ Financing activities Proceeds from issue of shares 0.1 Dividends paid (13.3) Repayment of borrowings (151.3) Increase in obligations under finance leases 0.9 Repayments of obligations under finance leases (2.5) __________________________________________________________________________________________________________________ Net cash flow from financing activities (166.1) ___________________________________________________________________________________________________________________ Net increase in cash and cash equivalents 1.7 Cash and cash equivalents at beginning of year 30.8 ___________________________________________________________________________________________________________________ Cash and cash equivalents at end of year 32.5 ___________________________________________________________________________________________________________________ Consolidated Statement of Recognised Income and Expense year ended 31 March 2005 (unaudited) 2005 £m ___________________________________________________________________________________________________________________ Exchange gain on translation of foreign operations 3.1 Actuarial gain on defined benefit pension schemes 0.1 Share based payments 0.1 ___________________________________________________________________________________________________________________ Net income recognised directly in equity 3.3 Profit for the period 77.1 ___________________________________________________________________________________________________________________ Total recognised income and expense for the period 80.4 ___________________________________________________________________________________________________________________ Consolidated Statement of Changes in Equity year ended 31 March 2005 (unaudited) Share Share Exchange Retained capital premium reserve earnings Total Note £m £m £m £m £m _____________________________________________________________________________________________________________________ Balance at 31 March 2004 23.4 93.1 - 7.6 124.1 Issue of share capital - 0.1 - - 0.1 Exchange gain on translation of foreign operations - - 3.1 - 3.1 Profit for the year - - - 77.1 77.1 Actuarial gain on defined benefit pension schemes - - - 0.1 0.1 Share based payments - - - 0.1 0.1 Dividends 5(c) - - - (13.3) (13.3) _____________________________________________________________________________________________________________________ Balance at 31 March 2005 23.4 93.2 3.1 71.6 191.3 _____________________________________________________________________________________________________________________ 6 Selected Notes to the IFRS Financial Statements (a) Segmental analysis The Group operates in one segment, Waste Management, in the United Kingdom, Belgium and the Netherlands. United Central Kingdom Belgium Netherlands Services Total Year ended 31 March 2005 £m £m £m £m £m ___________________________________________________________________________________________________________________ Continuing operations: Revenue - group 161.7 100.9 203.1 - 465.7 Revenue - joint ventures 8.9 1.3 - - 10.2 ___________________________________________________________________________________________________________________ Revenue - total 170.6 102.2 203.1 - 475.9 ___________________________________________________________________________________________________________________ Trading profit - group (0.7) 16.5 24.3 (3.4) 36.7 Trading profit - joint ventures 1.8 0.1 - - 1.9 Restructuring costs (see below) (10.5) - - - (10.5) ___________________________________________________________________________________________________________________ Operating profit - total (9.4) 16.6 24.3 (3.4) 28.1 ___________________________________________________________________________________________________________________ Finance charges - group interest (8.3) Finance charges - joint venture interest (0.2) Finance charges - other (0.6) ___________________________________________________________________________________________________________________ Finance charges - total (9.1) ___________________________________________________________________________________________________________________ Profit before tax 19.0 Tax (6.9) ___________________________________________________________________________________________________________________ Profit for the year from continuing operations 12.1 ___________________________________________________________________________________________________________________ Discontinued operations (United Kingdom): Revenue - group 37.9 ___________________________________________________________________________________________________________________ Operating profit 5.4 Profit on disposal of operations 59.8 Finance charges - group interest (2.3) Finance charges - other (0.5) ___________________________________________________________________________________________________________________ Profit before tax 62.4 Tax 2.6 ___________________________________________________________________________________________________________________ Profit for the year from discontinued operations 65.0 ___________________________________________________________________________________________________________________ Profit for the year 77.1 ___________________________________________________________________________________________________________________ The restructuring costs of £10.5m relate to the integration and reorganisation of the Group's business in the United Kingdom, following the sale of the landfill and power business. It includes £3.3m for the impairment of tangible and intangible fixed assets. The remaining charge relates to redundancies and other closure costs. This charge reduces the tax charge by £3.1m. (b) Earnings per share The calculation of the basic and diluted earnings per share for the Group is based on the following data: Continuing Discontinued Year ended 31 March 2005 operations operations Total ________________________________________________________________________________________________________________________ Number of shares: Weighted average number of ordinary shares for the purposes of basic earnings per share 234.1 Effect of share options in issue 0.6 ________________________________________________________________________________________________________________________ Weighted average number of ordinary shares for the purposes of diluted earnings per share 234.7 ________________________________________________________________________________________________________________________ Calculation of basic and adjusted basic earnings per share: Earnings for the purposes of basic earnings per share being profit for the year (£m) 12.1 65.0 77.1 Discontinued operations (£m) - (65.0) (65.0) Restructuring costs (net of tax) (£m) 7.4 - 7.4 ________________________________________________________________________________________________________________________ Earnings for the purposes of adjusted basic earnings per share (£m) 19.5 - 19.5 ________________________________________________________________________________________________________________________ Basic earnings per share (pence) 5.2p 27.7p 32.9p Adjusted basic earnings per share (pence) 8.3p - 8.3p ________________________________________________________________________________________________________________________ Calculation of diluted earnings per share: Earnings for the purposes of basic earnings per share being profit for the year (£m) 12.1 65.0 77.1 Effect of dilutive potential ordinary shares (£m) - - - ________________________________________________________________________________________________________________________ Earnings for the purposes of diluted earnings per share (£m) 12.1 65.0 77.1 ________________________________________________________________________________________________________________________ Diluted earnings per share (pence) 5.2p 27.7p 32.9p ________________________________________________________________________________________________________________________ (c) Dividends Year ended 31 March 2005 £m ________________________________________________________________________________________________________________________ Amounts recognised as distributions to ordinary shareholders in the year: Final dividend paid for the year ended 31 March 2004 of 3.8p per share 8.9 Interim dividend paid for the year ended 31 March 2005 of 1.9p per share 4.4 ________________________________________________________________________________________________________________________ 13.3 ________________________________________________________________________________________________________________________ Proposed final dividend for the year ended 31 March 2005 of 3.8p per share, subject to approval of shareholders at the AGM 8.9 ________________________________________________________________________________________________________________________ (d) Net cash from operating activities Pre- exceptional Exceptional Total Dis- continuing continuing continuing continued Total Year ended 31 March 2005 £m £m £m £m £m ________________________________________________________________________________________________________________________ Profit from continuing operations 38.6 (10.5) 28.1 - 28.1 Profit from discontinued operations - - - 5.4 5.4 Amortisation of intangible assets 0.6 - 0.6 - 0.6 Impairment loss on intangible assets - 0.5 0.5 - 0.5 Depreciation of property, plant and equipment 34.8 - 34.8 5.8 40.6 Impairment loss on property, plant and equipment - 2.8 2.8 - 2.8 Gain on disposal of property, plant and equipment (1.4) - (1.4) - (1.4) Increase/(decrease) in provisions (13.5) 0.6 (12.9) 6.1 (6.8) Share based payments - 0.1 0.1 - 0.1 ________________________________________________________________________________________________________________________ Operating cash flows before movements in working capital 59.1 (6.5) 52.6 17.3 69.9 (Increase)/decrease in inventories (2.4) - (2.4) - (2.4) (Increase)/decrease in receivables (5.0) - (5.0) 1.2 (3.8) Increase/(decrease) in payables (9.1) 2.8 (6.3) 9.7 3.4 ________________________________________________________________________________________________________________________ Cash generated by operations 42.6 (3.7) 38.9 28.2 67.1 Income taxes paid (9.5) - (9.5) - (9.5) ________________________________________________________________________________________________________________________ Net cash from operating activities 33.1 (3.7) 29.4 28.2 57.6 ________________________________________________________________________________________________________________________ APPENDIX A Consolidated Income Statement for the year ended 31 March 2005 Effect of IAS1 - Presentation of Financial Statements Discontinued Exceptional UK GAAP balances operations items UK GAAP balances in UK GAAP format £m £m £m £m in IFRS format ________________________________________________________________________________________________________________________ Continuing operations: Turnover 503.6 (37.9) - 465.7 Revenue Cost of sales (409.4) 30.5 (5.2) (384.1) Cost of sales ________________________________________________________________________________________________________________________ Gross profit 94.2 (7.4) (5.2) 81.6 Gross profit Administrative expenses (52.0) 1.6 (5.2) (55.6) Administrative expenses Goodwill amortisation (10.0) 0.4 - (9.6) Goodwill amortisation Share of operating profits of joint ventures 1.9 - - 1.9 Share of results of joint ventures Exceptional operating costs (10.4) - 10.4 - - ________________________________________________________________________________________________________________________ Total operating profit 23.7 (5.4) - 18.3 Operating profit Non-operating exceptional items - disposal of operations 51.5 (51.5) - - - ________________________________________________________________________________________________________________________ Profit before finance Profit before finance charges and charges and tax 75.2 (56.9) - 18.3 tax Finance charges - interest (9.7) 2.3 - (7.4) Finance charges - interest Finance charges - other (1.1) 0.5 - (0.6) Finance charges - other ________________________________________________________________________________________________________________________ Profit on ordinary activities before tax 64.4 (54.1) - 10.3 Profit before tax Tax (4.2) (2.9) - (7.1) Tax ________________________________________________________________________________________________________________________ (57.0) - 3.2 Profit for the year from continuing operations Discontinued operations: 57.0 - 57.0 Profit for the year from discontinued operations ________________________________________________________________________________________________________________________ Profit on ordinary activities after tax and profit for the year 60.2 - - 60.2 Profit for the year _______________________________________________________________________ Dividends (13.3) _________________________________________________ Retained profit transferred to reserves 46.9 _________________________________________________ Consolidated Income Statement - adjustments arising from IFRS adoption year ended 31 March 2005 (unaudited) IFRS3 IAS31 IFRS2 Goodwill Share Share and of joint IAS19 IAS17 based UK GAAP intangibles ventures Pensions Leasing payments IFRS £m £m £m £m £m £m £m ________________________________________________________________________________________________________________________ Continuing operations: Revenue 465.7 - 10.2 - - - 475.9 Cost of sales (384.1) (0.2) (5.6) - - - (389.9) ________________________________________________________________________________________________________________________ Gross profit 81.6 (0.2) 4.6 - - - 86.0 Administrative expenses (55.6) - (2.7) (0.1) 0.6 (0.1) (57.9) Goodwill amortisation (9.6) 9.6 - - - - - Share of results of joint ventures 1.9 - (1.9) - - - - ________________________________________________________________________________________________________________________ Operating profit before finance charges and tax 18.3 9.4 - (0.1) 0.6 (0.1) 28.1 Finance charges - interest (7.4) - - (0.6) (0.5) - (8.5) Finance charges - other (0.6) - - - - - (0.6) ________________________________________________________________________________________________________________________ Profit before tax 10.3 9.4 - (0.7) 0.1 (0.1) 19.0 Tax (7.1) - - 0.2 - - (6.9) ________________________________________________________________________________________________________________________ Profit for the year from continuing operations 3.2 9.4 - (0.5) 0.1 (0.1) 12.1 Discontinued operations: Profit for the year from discontinued operations 57.0 7.3 - 0.7 - - 65.0 ________________________________________________________________________________________________________________________ Profit for the year 60.2 16.7 - 0.2 0.1 (0.1) 77.1 ________________________________________________________________________________________________________________________ APPENDIX B Consolidated Balance Sheet at 31 March 2005 (unaudited) Effect of IAS1 - Presentation of Financial Statements Deferred Current UK GAAP balances Provisions tax tax UK GAAP balances in UK GAAP format £m £m £m £m £m in IFRS format ________________________________________________________________________________________________________________________ Fixed assets Non-current assets Intangible assets 150.1 - - - 150.1 Intangible assets Tangible assets 229.5 - - - 229.5 Property, plant and equipment Investment in joint ventures 8.8 - - - 8.8 Interests in joint ventures Other unlisted investments 1.0 - - - 1.0 Other investments - 6.1 - 6.1 Deferred tax assets ________________________________________________________________________________________________________________________ Total fixed assets 389.4 - 6.1 - 395.5 ________________________________________________________________________________________________________________________ Current assets Current assets Stocks 9.1 - - - 9.1 Inventories Debtors 124.7 - - (3.0) 121.7 Trade and other receivables - - 3.0 3.0 Current tax assets Cash at bank and in hand 32.1 - - - 32.1 Cash and cash equivalents ________________________________________________________________________________________________________________________ 165.9 - - - 165.9 ________________________________________________________________________________________________________________________ 561.4 Total assets ________________________________________________________________________________________________________________________ Creditors: due within 1 year Current liabilities Borrowings (0.7) - - - (0.7) Borrowings Other creditors (135.7) - - 3.7 (132.0) Trade and other payables - - (3.7) (3.7) Current tax liabilities (11.2) - - (11.2) Provisions ________________________________________________________________________________________________________________________ (136.4) (11.2) - - (147.6) ________________________________________________________________________________________________________________________ Net current assets 29.5 ________________________________________________________________________________________________________________________ Total assets less current liabilities 418.9 ________________________________________________________________________________________________________________________ Creditors: due after 1 year Non-current liabilities Borrowings (193.7) - - - (193.7) Borrowings Other creditors (0.1) - - - (0.1) Other non-current liabilities - (12.5) - (12.5) Deferred tax liabilities (12.8) - - (12.8) Provisions ________________________________________________________________________________________________________________________ (193.8) (12.8) (12.5) - (219.1) Provisions for liabilities and charges (30.4) 24.0 6.4 - - ________________________________________________________________________________________________________________________ (366.7) Total liabilities ________________________________________________________________________________________________________________________ Net assets 194.7 - - - 194.7 Net assets ________________________________________________________________________________________________________________________ Capital and reserves Equity Called up share capital 23.4 - - - 23.4 Share capital Share premium account 93.2 - - - 93.2 Share premium Profit and loss account 78.1 - - - 78.1 Retained earnings ________________________________________________________________________________________________________________________ Equity shareholders' funds 194.7 - - - 194.7 Total equity ________________________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2005 (unaudited) Adjustments arising from IFRS adoption IFRS3 IAS31 Goodwill Share IAS19 IAS12 UK and IAS10 of joint Employee IAS17 IAS21 Income GAAP intangibles Dividends ventures benefits Leases Exchange taxes IFRS £m £m £m £m £m £m £m £m £m ________________________________________________________________________________________________________________________ Non-current assets Intangible assets 150.1 10.6 - - - - - - 160.7 Property, plant and equipment 229.5 (1.0) - 12.1 - 9.7 - - 250.3 Investment in joint ventures 5.6 - - (5.6) - - - - - Loans to joint ventures 3.2 - - - - - - - 3.2 Other investments 1.0 - - - - - - - 1.0 Deferred tax assets 6.1 - - - 8.1 - - - 14.2 ________________________________________________________________________________________________________________________ 395.5 9.6 - 6.5 8.1 9.7 - - 429.4 ________________________________________________________________________________________________________________________ Current assets Inventories 9.1 - - 0.2 - - - - 9.3 Trade and other receivables 121.7 (0.2) - 2.4 (10.1) - - - 113.8 Current tax assets 3.0 - - - - - - - 3.0 Cash and cash equivalents 32.1 - - 0.4 - - - - 32.5 ________________________________________________________________________________________________________________________ 165.9 (0.2) - 3.0 (10.1) - - - 158.6 ________________________________________________________________________________________________________________________ Total assets 561.4 9.4 - 9.5 (2.0) 9.7 - - 588.0 ________________________________________________________________________________________________________________________ Current liabilities Borrowings (0.7) - - (0.9) - (2.4) - - (4.0) Trade and other payables (132.0) - 8.9 (2.6) - - - - (125.7) Current tax liabilities (3.7) - - (0.5) - - - - (4.2) Provisions (11.2) - - - - - - - (11.2) ________________________________________________________________________________________________________________________ (147.6) - 8.9 (4.0) - (2.4) - - (145.1) ________________________________________________________________________________________________________________________ Non-current liabilities Borrowings (193.7) - - (1.0) - (7.2) - - (201.9) Other non-current liabilities (0.1) - - (2.5) - - - - (2.6) Deferred tax liabilities (12.5) - - (0.2) - - - (2.9) (15.6) Provisions (12.8) - - (1.8) - - - - (14.6) Retirement benefit obligations - - - (16.9) - - - (16.9) ________________________________________________________________________________________________________________________ (219.1) - - (5.5) (16.9) (7.2) - (2.9) (251.6) ________________________________________________________________________________________________________________________ Total liabilities (366.7) - 8.9 (9.5) (16.9) (9.6) - (2.9) (396.7) ________________________________________________________________________________________________________________________ Net assets 194.7 9.4 8.9 - (18.9) 0.1 - (2.9) 191.3 ________________________________________________________________________________________________________________________ Equity Share capital 23.4 - - - - - - - 23.4 Share premium 93.2 - - - - - - - 93.2 Exchange reserve - - - - - 0.1 3.1 (0.1) 3.1 Retained earnings 78.1 9.4 8.9 - (18.9) - (3.1) (2.8) 71.6 ________________________________________________________________________________________________________________________ Total equity 194.7 9.4 8.9 - (18.9) 0.1 - (2.9) 191.3 ________________________________________________________________________________________________________________________ APPENDIX C Consolidated Balance Sheet at 31 March 2004 (unaudited) Effect of IAS1 - Presentation of Financial Statements Deferred Current UK GAAP balances Provisions tax tax UK GAAP balances in UK GAAP format £m £m £m £m £m in IFRS format _______________________________________________________________________________________________________________________ Fixed assets Non-current assets Intangible assets 183.8 - - - 183.8 Intangible assets Tangible assets 356.2 - - - 356.2 Property, plant and equipment Investment in joint ventures 8.6 - - - 8.6 Interests in joint ventures Other unlisted investments 1.1 - - - 1.1 Other investments - 0.9 - 0.9 Deferred tax assets _____________________________________________________________________________________________________________________ Total fixed assets 549.7 - 0.9 - 550.6 _______________________________________________________________________________________________________________________ Current assets Current assets Stocks 8.1 - - - 8.1 Inventories Debtors 137.7 - - (1.2) 136.5 Trade and other receivables - - 1.2 1.2 Current tax assets Cash at bank and in hand 30.3 - - - 30.3 Cash and cash equivalents _______________________________________________________________________________________________________________________ 176.1 - - - 176.1 _______________________________________________________________________________________________________________________ 726.7 Total assets _______________________________________________________________________________________________________________________ Creditors: due within 1 year Current liabilities Borrowings (15.8) - - - (15.8) Borrowings Other creditors (165.9) - - 2.4 (163.5) Trade and other payables - - (2.4) (2.4) Current tax liabilities (1.9) - - (1.9) Provisions _______________________________________________________________________________________________________________________ (181.7) (1.9) - - (183.6) _______________________________________________________________________________________________________________________ Net current liabilities (5.6) _______________________________________________________________________________________________________________________ Total assets less current liabilities 544.1 _______________________________________________________________________________________________________________________ Creditors: due after 1 year Non-current liabilities Borrowings (323.6) - - - (323.6) Borrowings Other creditors (8.4) - - - (8.4) Other non-current liabilities - (19.0) - (19.0) Deferred tax liabilities (54.8) - - (54.8) Provisions _______________________________________________________________________________________________________________________ (332.0) (54.8) (19.0) - (405.8) Provisions for liabilities and charges (74.8) 56.7 18.1 - - _______________________________________________________________________________________________________________________ (589.4) Total liabilities _______________________________________________________________________________________________________________________ Net assets 137.3 - - - 137.3 Net assets _______________________________________________________________________________________________________________________ Capital and reserves Equity Called up share capital 23.4 - - - 23.4 Share capital Share premium account 93.1 - - - 93.1 Share premium Profit and loss account 20.8 - - - 20.8 Retained earnings _______________________________________________________________________________________________________________________ Equity shareholders' funds 137.3 - - - 137.3 Total equity _______________________________________________________________________________________________________________________ Consolidated Balance Sheet at 31 March 2004 (unaudited) Adjustments arising from IFRS adoption IFRS3 IAS31 Goodwill Share IAS19 IAS12 UK and IAS10 of joint Employee IAS17 Income GAAP intangibles Dividends ventures benefits Leases taxes IFRS £m £m £m £m £m £m £m £m ________________________________________________________________________________________________________________________ Non-current assets Intangible assets 183.8 2.0 - - - - - 185.8 Property, plant and equipment 356.2 (1.7) - 11.9 - 10.5 - 376.9 Investment in joint ventures 4.7 - - (4.7) - - - - Loans to joint ventures 3.9 - - - - - - 3.9 Other investments 1.1 - - - - - - 1.1 Deferred tax assets 0.9 - - - 8.2 - - 9.1 ________________________________________________________________________________________________________________________ 550.6 0.3 - 7.2 8.2 10.5 - 576.8 ________________________________________________________________________________________________________________________ Current assets Inventories 8.1 - - 0.1 - - - 8.2 Trade and other receivables 136.5 (0.3) - 1.7 - - - 137.9 Current tax assets 1.2 - - - - - - 1.2 Cash and cash equivalents 30.3 - - 0.5 - - - 30.8 ________________________________________________________________________________________________________________________ 176.1 (0.3) - 2.3 - - - 178.1 ________________________________________________________________________________________________________________________ Total assets 726.7 - - 9.5 8.2 10.5 - 754.9 ________________________________________________________________________________________________________________________ Current liabilities Borrowings (15.8) - - (0.9) - (1.9) - (18.6) Trade and other payables (163.5) - 8.9 (2.9) 0.8 - - (156.7) Current tax liabilities (2.4) - - (0.2) - - - (2.6) Provisions (1.9) - - - - - - (1.9) ________________________________________________________________________________________________________________________ (183.6) - 8.9 (4.0) 0.8 (1.9) - (179.8) ________________________________________________________________________________________________________________________ Non-current liabilities Borrowings (323.6) - - (1.5) - (8.7) - (333.8) Other non-current liabilities (8.4) - - (2.5) - - - (10.9) Deferred tax liabilities (19.0) - - (0.1) - - (2.8) (21.9) Provisions (54.8) - - (1.4) - - - (56.2) Retirement benefit obligations - - - - (28.2) - - (28.2) ________________________________________________________________________________________________________________________ (405.8) - - (5.5) (28.2) (8.7) (2.8) (451.0) ________________________________________________________________________________________________________________________ Total liabilities (589.4) - 8.9 (9.5) (27.4) (10.6) (2.8) (630.8) ________________________________________________________________________________________________________________________ Net assets 137.3 - 8.9 - (19.2) (0.1) (2.8) 124.1 ________________________________________________________________________________________________________________________ Equity Share capital 23.4 - - - - - - 23.4 Share premium 93.1 - - - - - - 93.1 Retained earnings 20.8 - 8.9 - (19.2) (0.1) (2.8) 7.6 ________________________________________________________________________________________________________________________ Total equity 137.3 - 8.9 - (19.2) (0.1) (2.8) 124.1 ________________________________________________________________________________________________________________________ APPENDIX D UK GAAP to IFRS Reconciliation of Financial Highlights For the year ended 31 March 2005 (i) Revenues £m ________________________________________________________________________________ Group turnover under UK GAAP 503.6 IAS1 - Discontinued activities (37.9) ________________________________________________________________________________ Group turnover on continuing activities under UK GAAP 465.7 IAS31 - Share of joint ventures 10.2 ________________________________________________________________________________ Group revenues under IFRS 475.9 ________________________________________________________________________________ (ii) Headline profit £m ________________________________________________________________________________ Headline profit under UK GAAP 33.3 IAS1 - Discontinued activities (3.0) ________________________________________________________________________________ Headline profit on continuing activities under UK GAAP 30.3 Include intangible amortisation (contract rights) (0.2) IAS19 - Employee benefits (0.7) IAS17 - Leases 0.1 ________________________________________________________________________________ Headline profit under IFRS 29.5 ________________________________________________________________________________ IFRS Headline Profit represents profit from continuing activities before exceptional items, changes in fair value of financial instruments and tax. (iii) Exceptional items Those items separately disclosed on the face of the IFRS income statement due to their size and incidence are considered exceptional for the purposes of determining Headline Profit. £m ________________________________________________________________________________ Exceptional operating costs - restructuring (10.4) Non-operating exceptional costs - disposal of business 51.5 ________________________________________________________________________________ Exceptional items under UK GAAP 41.1 IAS1 - Discontinued activities (51.5) IFRS2 - Share based payments (0.1) ________________________________________________________________________________ Restructuring costs shown on the face of the Consolidated Income Statement under IFRS (10.5) ________________________________________________________________________________ (iv) Intangibles/goodwill amortisation £m ________________________________________________________________________________ Goodwill amortisation under UK GAAP (10.0) IAS1 - Discontinued activities 0.4 ________________________________________________________________________________ Goodwill amortisation on continuing activities under UK GAAP (9.6) Include intangible amortisation under UK GAAP (0.4) IFRS3 - Business combinations 9.4 ________________________________________________________________________________ Intangibles amortisation under IFRS (0.6) ________________________________________________________________________________ Intangibles amortisation is included in the IFRS based Headline Profit. (v) Profit before tax £m ________________________________________________________________________________ Profit before tax under UK GAAP 64.4 IAS1 - Discontinued activities (54.1) ________________________________________________________________________________ Profit before tax on continuing activities under UK GAAP 10.3 IFRS3 - Business combinations 9.4 IAS19 - Employee benefits (0.7) IFRS2 - Share based payments (0.1) IAS17 - Leases 0.1 ________________________________________________________________________________ Profit before tax under IFRS 19.0 ________________________________________________________________________________ (vi) Profit on continuing businesses before interest, exceptional items, goodwill amortisation and tax £m ________________________________________________________________________________ Profit on continuing businesses before interest, exceptional items, goodwill amortisation and tax under UK GAAP 38.3 Include intangible amortisation (contract rights) (0.2) IAS19 - Employee benefits (0.1) IAS17 - Leases 0.6 ________________________________________________________________________________ Profit on continuing businesses before interest, exceptional items and tax under IFRS 38.6 ________________________________________________________________________________ (vii) Adjusted basic earnings per share Earnings Earnings £m Pence per share ________________________________________________________________________________ Adjusted basic earnings under UK GAAP 21.9 9.4 IAS1 - Discontinued activities (net of tax) (1.8) (0.8) ________________________________________________________________________________ Adjusted basic earnings on continuing activities under UK GAAP 20.1 8.6 Include intangible amortisation of contract rights under UK GAAP (net of tax) (0.2) (0.1) IAS19 - Employee benefits (net of tax) (0.5) (0.2) IAS17 - Leases (net of tax) 0.1 - ________________________________________________________________________________ Adjusted basic earnings under IFRS 19.5 8.3 ________________________________________________________________________________ (viii) Basic earnings per share Earnings Earnings £m Pence per share ________________________________________________________________________________ Basic earnings under UK GAAP 60.2 25.7 IFRS3 - Business combinations 16.7 7.1 IAS19 - Employee benefits (net of tax) 0.2 0.1 IFRS2 - Share based payments (0.1) - IAS17 - Leases (net of tax) 0.1 - ________________________________________________________________________________ Basic earnings under IFRS 77.1 32.9 ________________________________________________________________________________ (ix) Net assets 31 March 2005 £m ________________________________________________________________________________ Net assets under UK GAAP 194.7 IFRS3 - Business combinations (net of tax) 9.4 IAS10 - Events after the balance sheet date 8.9 IAS19 - Employee benefits (net of tax) (18.9) IAS17 - Leases (net of tax) 0.1 IAS12 - Deferred tax (2.9) ________________________________________________________________________________ Net assets under IFRS 191.3 ________________________________________________________________________________ (x) Debt Share of joint Principal ventures debt PFICOs Total £m £m £m £m ________________________________________________________________________________ Net debt under UK GAAP - (99.5) (62.8) (162.3) IAS31 - Accounting for Investments (1.5) - - (1.5) IAS17 - Leases - (9.6) - (9.6) ________________________________________________________________________________ Net debt under IFRS (1.5) (109.1) (62.8) (173.4) ________________________________________________________________________________ (xi) Earnings before interest, tax, depreciation and amortisation (EBITDA) Pre- exceptional Exceptional Total Dis- continuing continuing continuing continued Total £m £m £m £m £m _________________________________________________________________________________________________________________ EBITDA under UK GAAP presentation 83.4 (7.1) 76.3 - 76.3 IAS1 Presentation changes: Operating profits on discontinued activities (5.4) - (5.4) 5.4 - Depreciation on discontinued activities (5.8) - (5.8) 5.8 - Provisions for aftercare and site restoration (3.1) - (3.1) - (3.1) Profit on sale of fixed assets (1.4) - (1.4) - (1.4) __________________________________________________________________________________________________________________ EBITDA under UK GAAP - IFRS presentation 67.7 (7.1) 60.6 11.2 71.8 IAS31 - Share of joint ventures depreciation 1.5 - 1.5 - 1.5 IAS17 - Leases 2.6 - 2.6 - 2.6 IAS19 - Employee benefits (0.1) - (0.1) - (0.1) IFRS2 - Share based payments - (0.1) (0.1) - (0.1) __________________________________________________________________________________________________________________ EBITDA under IFRS 71.7 (7.2) 64.5 11.2 75.7 __________________________________________________________________________________________________________________ Profit from continuing operations under IFRS 38.6 (10.5) 28.1 - 28.1 Profit from discontinued operations - - - 5.4 5.4 Amortisation of intangible assets 0.6 - 0.6 - 0.6 Impairment loss on intangible assets - 0.5 0.5 - 0.5 Depreciation of property, plant and equipment 33.9 - 33.9 5.8 39.7 Impairment loss on property, plant and equipment - 2.8 2.8 - 2.8 Gain on disposal of property, plant and equipment (1.4) - (1.4) - (1.4) __________________________________________________________________________________________________________________ EBITDA under IFRS 71.7 (7.2) 64.5 11.2 75.7 __________________________________________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock Exchange

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