Adoption of IFRS

Ricardo PLC 21 December 2005 21 December 2005 Ricardo plc Adoption of International Financial Reporting Standards ('IFRS') SUMMARY Ricardo plc, the leading UK independent automotive consultancy, has completed its assessment of the impact of IFRS on the Group's reported financial information. This document includes a commentary on the key issues and appendices reconciling the UK GAAP and IFRS financial statements for the year ended 30 June 2005 and the half year ended 31 December 2004. Commenting on the changes, Andrew Goodburn, Finance Director said: 'The net effect of conversion to IFRS on the Group's reported profits after tax for the year ended 30 June 2005 is minor. Under IFRS the amount of the deficit on the Group's defined benefit pension scheme is very similar to the FRS17 deficit previously reported, but this is now included within the balance sheet and therefore impacts Net Assets, and may cause some volatility in future movements in reserves. Conversion to IFRS has no impact on Ricardo's operational performance or ability to generate cash.' The key impacts can be summarised as follows: Year ended 30 June 2005 Net Assets Profit after tax* Basic EPS at 30 June 2005 £m £m pence £m Per UK GAAP 7.08 14.2 59.29 Impacts on profit before tax: Pensions (0.13) (36.79) Goodwill amortisation 1.00 1.00 Share Based Payments 0.04 0.02 Other impacts on profit before tax (0.02) (0.09) -------- 0.89 1.7 Tax impact (0.81) (1.6) 10.16 Ordinary Dividends impact 3.15 ----------------------------- ---------------- Per IFRS 7.16 14.3 36.74 ----------------------------- ---------------- *attributable to equity shareholders Further enquiries: Ricardo plc Andrew Goodburn, Finance Director Tel +44 (0)1273 455611 Gavin Anderson & Company Charlotte Stone / Fergus Wylie Tel +44 (0)20 7554 1400 INTRODUCTION As required by European Union law, the Group will prepare its financial statements under International Financial Reporting Standards ('IFRS') with effect from 1 July 2005. Previously the Group has applied United Kingdom Generally Accepted Accounting Principles ('UK GAAP'). The first financial statements that will be prepared for the Group under IFRS will be the interim financial statements for the six months to 31 December 2005. Standards currently in issue and adopted by the EU may be subject to change. Additionally, IFRS is currently being applied in the UK and in a large number of other countries almost simultaneously for the first time, and practice is continuing to evolve. Therefore, at this preliminary stage, the full financial effect of reporting under IFRS as it will be applied and reported on in the Group's first IFRS financial statements for the six months ended 31 December 2005 and for the year ended 30 June 2006 may be subject to change. During the assessment of the impact of IFRS on the Group and the preparation of this press release the Group has worked closely with its auditors, but these numbers are unaudited. A copy of this document will be available from the company's website at www.ricardo.com. COMMENTARY ON THE KEY ISSUES 1 First-time Adoption of IFRS (IFRS 1) IFRS 1 requires that IFRS is applied retrospectively to establish the Group's balance sheet at the date of transition, 1 July 2004, unless a permitted exemption is applied. Accordingly the Group has elected: • to recognise in full all actuarial gains and losses relating to defined benefit pension schemes both at 1 July 2004 and prospectively through the statement of recognised income and expense, • to deem cumulative translation differences for all foreign operations to be zero as at 1 July 2004, • not to apply IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement for the year ended 30 June 2005, and to adopt these standards with effect from 1 July 2005, • not to apply IFRS 2 Share-based Payments to share-based payments granted before 7 November 2002, and • not to apply IFRS 3 Business Combinations to business combinations that occurred before 1 July 2004. 2 Employee Benefits (IAS 19) Under UK GAAP, the Group accounted for its defined benefit pension scheme under SSAP 24 Accounting for Pension Costs, and published the transitional disclosures required under FRS 17 Retirement Benefits. Under SSAP 24, the cost of providing the defined benefit pension was charged against operating profit. This included the amortisation of the pension scheme surpluses and deficits over the remaining service lives of participating employees. IAS 19 covers all forms of employee benefits, in particular post retirement benefits and defined benefit pension schemes. Under IAS 19, the defined benefit pension scheme surplus or deficit is recognised as an asset or liability on the balance sheet, together with the related deferred tax asset or liability. The cost of providing pension benefits to employees relating to the current year's service is included in the income statement in arriving at operating profit, whilst the difference between the notional interest on scheme liabilities and the expected return on scheme assets is included within finance costs. The Group has elected to recognise the actuarial gains and losses in full in the period in which they occur in the statement of recognised income and expense. The impact of this on profit before tax for the year ended 30 June 2005 is a net reduction of £0.13m, comprised of an increase in operating profit of £0.90m, and an increase in finance costs of £1.03m. Net assets at 30 June 2005 are reduced by £36.79m before the impact of deferred tax, and by £25.76m net of the deferred tax impact. It should be noted that this is very similar to the impact that the application of FRS 17 under UK GAAP would have had to the comparatives for the year ended 30 June 2006 if the Group's accounts had remained under UK GAAP. 3 Intangible Assets (IAS 38) (a) Goodwill Under UK GAAP, goodwill arising on acquisition of businesses after 1 July 1998 was amortised on a straight line basis over its estimated useful life, which varied between five and twenty years. On transition to IFRS on 1 July 2004, amortisation ceased to be charged. Instead, annual reviews of goodwill are performed to test for potential impairment. Therefore, although it may be possible to carry goodwill for longer than the normal maximum amortisation period of 20 years under UK GAAP, there is the potential for increased volatility to be introduced to the income statement by way of impairment charges if the forecast cash flows are not sufficient to support the carrying value. Impairment tests have been carried out for goodwill at 1 July 2004 and have shown that there was no impairment. The impact of this on profit before tax for the year ended 30 June 2005 and net assets at 30 June is an increase of £1.00m, due to the reversal of the amortisation charge. There is a deferred tax impact of £0.04m reducing profit and net assets, for where UK corporation tax relief for amortisation of purchased goodwill is obtained. (b) Research and Development Under UK GAAP, the Group's accounting policy was to write off expenditure on research and development in the year in which it was incurred. Under IAS 38, development costs must be capitalised as intangible assets if they satisfy certain specified criteria. Research and development, both internally and customer funded, is an integral part of Ricardo's business. However, expenditure on research and development is predominantly aimed either at under-pinning the Group's expertise or satisfying a customer contract, rather than at launching new Ricardo products, and would therefore not normally meet the criteria for capitalisation under IAS 38. There is no impact of this on the Group's profit before tax for the year ended 30 June 2005 and net assets at 30 June, but the Group's accounting policies will be changed to accommodate the possibility of some development costs being capitalised under IAS 38 in the future. 4 Share-based Payments (IFRS 2) Under UK GAAP, the Group accounted for its share incentive plans in accordance with UITF 17. There was a charge to the profit and loss account in relation to its Long Term Incentive Plan ('LTIP') to spread the estimated fair value of the awards over the period to which the performance criteria related. There was no charge to the profit and loss account in relation to either its executive share option schemes or its savings related share option scheme. IFRS 2 requires an expense to be recorded in the income statement for all forms of share based payment granted after 7 November 2002 and not yet vested at 1 July 2005. The expense is based on the fair value of the award at the date the award is granted, and detailed guidance is given on how fair values should be calculated. The expense is spread over the period when the services are received. Accordingly, the Group's executive share options and LTIPs awarded after 7 November 2002 are now valued using appropriate valuation models and are recorded in the income statement. No savings related share options have been granted since 7 November 2002. The net impact of these changes on profit before tax for the year ended 30 June 2005 is an increase of £0.04m. 5 Income Taxes (IAS 12) Under UK GAAP, deferred tax had to be provided on timing differences except for certain items, such as unrealised revaluations or rolled over gains, which were not expected to reverse in the foreseeable future. Under IAS 12, deferred tax has to be provided on all temporary differences between the accounting and tax bases. Consequently deferred tax has been provided on the IFRS adjustments affecting net assets, as those adjustments are not expected to impact on the Group's corporation tax position for the year ended 30 June 2005. The impact of this on profit after tax for the year ended 30 June 2005 is a decrease of £0.81m, principally due to provision for tax on the gain on an inter group transfer of the ownership of the Group's main US subsidiary. The gain is expected to be rolled over, but a deferred tax provision is nonetheless required for this under IAS 12. The net impact on net assets at 30 June 2005 is an increase of £10.16m, principally due to the deferred tax asset for the deficit on the defined benefit pension scheme, partially offset by the deferred tax provision on the rolled over gain. 6 Post Balance Sheet Events (IAS 10) Under UK GAAP, proposed dividends were accrued by the Group in the accounting period to which they related. Under IAS 10, dividends must be recognised in the accounting period in which they are appropriately authorised and become no longer at the discretion of the entity. Furthermore, dividends must be taken directly to reserves rather than recognised within the income statement. A provision for a final ordinary dividend of £3.15m was provided in the financial statements for the year ended 30 June 2005 under UK GAAP. Under IFRS this accrual has been reversed, resulting in an increase in net assets at 30 June 2005 of the same amount. 7 Financial Instruments: Recognition and Measurement (IAS 39) IAS 39 will be adopted with effect from 1 July 2005, and therefore IAS 39 has no impact on the Group's profit before tax for the year ended 30 June 2005 and net assets at 30 June, however there are potential impacts going forwards. (a) Net investment in overseas subsidiaries The Group has foreign currency loans of €23m to hedge against the foreign exchange currency risk relating to the Group's net investment in its German operations. Hedge accounting will apply to this with effect from 4 October 2005, and therefore from that date differences arising on the translation of these foreign currency borrowings will be taken directly to reserves. No impact is expected on profit before tax for the period between 1 July 2005 and 4 October 2005. (b) Derivatives and hedge accounting Under UK GAAP where foreign exchange forward contracts were taken out to mitigate foreign exchange risks, these hedges were matched with the hedged items, allowing open forward contracts not to be held at a value in the balance sheet to the extent that they were hedges of future transactions such as payments from customers for long term contracts priced in foreign currencies. Under IAS 39, a similar accounting result can only be obtained if extensive hedge accounting documentation requirements and effectiveness tests are met. Open forward contracts must be accounted for at their fair market value at each balance sheet date. To the extent that the hedge accounting requirements are met, changes in the value of open forward contracts can be held in equity until the hedged item is realised. If the documentation requirements are not met, changes in the value of open forward contracts must be recognised in the Income Statement. The Group will continue to use foreign exchange forward contracts or other financial derivatives as part of its risk management strategy. However it may not be suitable for hedge accounting documentation to be put in place for all such contracts, or the strict hedge accounting criteria may not be met. This may lead to volatility in the Income Statement caused by gains or losses on a hedging instrument being recorded in a different accounting period to the gain or loss on the base transaction, the extent of which will not be known until the exchange rates affecting the values of the items are known at the relevant balance sheet date. (c) Embedded Derivatives Under IAS 39, where contracts are denominated in a currency other than the functional currency of the customer or supplier, it is normally necessary to treat the contract as having two separate elements: the 'host' contract which is deemed to be in the currency of the customer or supplier, and the 'embedded derivative' which introduces the third currency. If unrealised, the embedded derivative must then be accounted for at its fair market value at each balance sheet date, and changes in its value must be recognised in the Income Statement. Depending on the contracts and exchange rates at future balance sheet dates, this may also lead to volatility in the Income Statement. 8 Dividend Policy It is expected that the Group's conversion to IFRS will have no impact on the company's dividend policy. OTHER ISSUES Holiday accruals (Employee Benefits - IAS 19) The Group has reviewed its compliance with IAS 19 with regard to holiday accruals across the Group and as a result has increased its holiday accrual on transition to IFRS at 1 July 2004 by £0.23m. Software (Intangible Assets - IAS 38) Under UK GAAP, the Group included purchased software within Tangible Fixed Assets. Under IAS 38, software is included within the definition of intangible assets. The impact of this is that a balance sheet re-classification is required. There is no impact of this on the Group's profit before tax or net assets. Leases (IAS 17) Under UK GAAP, the Group's operating lease incentives received were amortised over the period from inception of the lease to the first open market rent review. Under IAS 17, such lease incentives must be amortised over the whole of the lease term. The impact of this on Profit before tax for the year ended 30 June 2005 is minimal at £0.01m. Net assets at 30 June 2005 are reduced by £0.10m before considering the tax impact. Borrowing Costs (IAS 23) Under UK GAAP, the Group has treated dividends on preference shares of £0.01m as an item not impacting on profit before tax. Under IAS 23 these will be treated as finance costs. Provisions (IAS 37) Under UK GAAP, the Group has accounted for warranty provisions within creditors falling due within one year due to their size. Under IAS 37 these will be disclosed as short term provisions. The impact of this is that a balance sheet re-classification is required. Cash Flow Statements (IAS 7) Under UK GAAP, the increase in cash in the year ended 30 June 2005 was £13.00m, and an exchange loss on cash of £0.26m included in a reconciliation in the notes to the accounts. Under IAS 7, the exchange loss will be included in the primary cash flow statement. The other changes to the cash flow statement are layout changes only. Therefore the net increase in cash and cash equivalents for the year ended 30 June 2005 under IFRS was £12.74m. This is expected to be analysed as follows: £m Net cash from operating activities 9.57 Net cash used in investing activities (6.10) Net cash generated from financing activities 9.53 Effects of exchange rate changes (0.26) ------ Net increase in cash and cash equivalents 12.74 ====== Half Year Results This commentary where relevant refers to impacts on the Group's profit before tax for the year ended 30 June 2005 and net assets at 30 June 2005. The key issues which have an impact on the Group's profit before tax for the six months ended 31 December 2004 and net assets at 31 December 2004 are the same, and the detailed amounts are included in appendix II. APPENDIX I: Reconciliations for the year ended 30 June 2005 Consolidated Income Statement for the year ended 30 June 2005 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 12 IAS 17 IAS 23 Restated IFRS format Employee Intangible Share Based Income Leases Borrowing under IFRS Benefits Assets Payments Taxes Costs £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations Revenue 159,920 159,920 Cost of sales (113,241) (113,241) ----------------------------------------------------------------------------------------- Gross profit 46,679 0 0 0 0 0 0 46,679 Administrative expenses (38,536) 899 1,004 36 0 (14) (36,611) ----------------------------------------------------------------------------------------- Profit from operations 8,143 899 1,004 36 0 (14) 0 10,068 Finance costs (796) (1,029) (6) (1,831) ----------------------------------------------------------------------------------------- Profit before tax 7,347 (130) 1,004 36 0 (14) (6) 8,237 Tax (186) 39 (42) (11) (796) 4 (992) ----------------------------------------------------------------------------------------- Profit for the period 7,161 (91) 962 25 (796) (10) (6) 7,245 ========================================================================================= Profit attributable to minority interest 82 82 Profit attributable to equity shareholders 7,079 (91) 962 25 (796) (10) (6) 7,163 ----------------------------------------------------------------------------------------- 7,161 (91) 962 25 (796) (10) (6) 7,245 ========================================================================================= Consolidated Statement of Recognised Income and Expense for the year ended 30 June 2005 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 12 IAS 17 IAS 23 IAS 21 Restated IFRS format Employee Intangible Share Income Leases Borrowing Exchange under IFRS Benefits Assets Based Taxes Costs Rate Payments Changes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Actuarial gains/ (losses) (7,892) (7,892) Net exchange adjustments 171 (171) 0 Tax on items taken directly 2,367 2,367 to equity ----------------------------------------------------------------------------------------------- Net gains/ (losses) not recognised in the income statement 171 (5,525) 0 0 0 0 0 (171) (5,525) Profit for the period attributable to equity shareholders 7,079 (91) 962 25 (796) (10) (6) 0 7,163 ----------------------------------------------------------------------------------------------- Total recognised income and expense for the year 7,250 (5,616) 962 25 (796) (10) (6) (171) 1,638 =============================================================================================== Consolidated Balance Sheet as at 1 July 2004 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 12 IAS 10 IAS 17 IAS 37 Restated IFRS format Employee Intangible Share Based Income Dividends Leases Provisions under IFRS Benefits Assets Payments Taxes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Non-current assets Goodwill 16,161 (10) 16,151 Other intangible assets 756 756 Property, plant and equipment 50,944 (756) 50,188 Deferred tax asset 9,924 9,924 ----------------------------------------------------------------------------------------------------- 67,105 0 (10) 0 9,924 0 0 0 77,019 ----------------------------------------------------------------------------------------------------- Current assets Inventories 6,285 6,285 Trade and other receivables 34,057 (1,240) 32,817 Current tax assets 2,468 2,468 Cash and cash equivalents 11,119 11 11,130 ----------------------------------------------------------------------------------------------------- 53,929 (1,240) 0 11 0 0 0 0 52,700 ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- Total assets 121,034 (1,240) (10) 11 9,924 0 0 0 129,719 ----------------------------------------------------------------------------------------------------- Current liabilities Trade and other payables (33,040) (234) (81) 43 (33,312) Tax liabilities (3,480) (3,480) Bank overdrafts and loans (16,588) (16,588) Proposed final dividend (3,139) 3,139 0 Provisions (43) (43) ----------------------------------------------------------------------------------------------------- (56,247) (234) 0 0 0 3,139 (81) 0 (53,423) ----------------------------------------------------------------------------------------------------- Net current assets/ (liabilities) (2,318) (1,474) 0 11 0 3,139 (81) 0 (723) ----------------------------------------------------------------------------------------------------- Non-current liabilities Bank loans (4,788) (4,788) Retirement benefit obligation (27,296) (27,296) Deferred tax liabilities (3,561) 8,631 (9,924) 24 (4,830) Long term provisions (282) (282) ----------------------------------------------------------------------------------------------------- (8,631) (18,665) 0 0 (9,924) 0 24 0 (37,196) ----------------------------------------------------------------------------------------------------- Total liabilities (64,878) (18,899) 0 0 (9,924) 3,139 (57) 0 (90,619) ----------------------------------------------------------------------------------------------------- NET ASSETS 56,156 (20,139) (10) 11 0 3,139 (57) 0 39,100 ==================================================================================================== EQUITY Share capital 12,474 12,474 Share premium account 12,076 12,076 Capital redemption reserve 40 40 Merger reserve 967 967 Other 11 11 Retained earnings 30,106 (20,139) (10) 0 3,139 (57) 13,039 ----------------------------------------------------------------------------------------------------- Equity attributable to shareholders of Ricardo plc 55,663 (20,139) (10) 11 0 3,139 (57) 0 38,607 Minority interest in Equity 493 493 ----------------------------------------------------------------------------------------------------- Total equity 56,156 (20,139) (10) 11 0 3,139 (57) 0 39,100 ==================================================================================================== Consolidated Balance Sheet as at 30 June 2005 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 12 IAS 10 IAS 17 IAS 37 IAS 21 Restated IFRS format Employee Intangible Share-based Income Dividends Leases Provisions Exchange under IFRS Benefits Assets Payments Taxes Rate Changes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Non-current assets Goodwill 14,643 994 15,637 Other intangible assets 1,126 1,126 Property, plant and equipment 47,872 (1,126) 46,746 Deferred tax asset 11,268 11,268 ----------------------------------------------------------------------------------------------------- 62,515 0 994 0 11,268 0 0 0 0 74,777 ----------------------------------------------------------------------------------------------------- Current assets Inventories 6,918 6,918 Trade and other receivables 43,138 43,138 SSAP24 debtor 1,848 (1,848) 0 Current tax assets 1,603 1,603 Cash and cash equivalents 8,807 8 8,815 ----------------------------------------------------------------------------------------------------- 62,314 (1,848) 0 8 0 0 0 0 0 60,474 ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- Total assets 124,829 (1,848) 994 8 11,268 0 0 0 0 135,251 ----------------------------------------------------------------------------------------------------- Current liabilities Bank overdrafts and loans (1,536) (1,536) Trade and other payables (35,513) (234) 14 (95) 356 (35,472) Tax liabilities (4,866) (4,866) Short-term provisions (35) (35) Proposed final dividend (3,151) 3,151 0 Provisions (356) (356) ----------------------------------------------------------------------------------------------------- (45,066) (234) 0 14 0 3,151 (95) (35) 0 (42,265) ----------------------------------------------------------------------------------------------------- Net current assets 17,248 (2,082) 0 22 0 3,151 (95) (35) 0 18,209 ----------------------------------------------------------------------------------------------------- Non-current liabilities Bank loans (18,531) (18,531) Deferred consideration (124) (124) Retirement benefit obligation (34,710) (34,710) Deferred tax liabilities (1,780) 11,037 (42) (11) (12,064) 28 (51) (2,883) Long term provisions (35) 35 0 ---------------------------------------------------------------------------------------------------------- (20,470) (23,673) (42) (11) (12,064) 0 28 35 (51) (56,248) ---------------------------------------------------------------------------------------------------------- Total liabilities (65,536) (23,907) (42) 3 (12,064) 3,151 (67) 0 (51) (98,513) ---------------------------------------------------------------------------------------------------------- NET ASSETS 59,293 (25,755) 952 11 (796) 3,151 (67) 0 (51) 36,738 ========================================================================================================== EQUITY Share capital 12,504 12,504 Share premium account 12,201 12,201 Capital redemption reserve 40 40 LTIP reserve 143 (22) 121 Merger reserve 967 967 Translation reserve 120 120 Other 8 8 Retained earnings 32,944 (25,755) 952 25 (796) 3,151 (67) (171) 10,283 ---------------------------------------------------------------------------------------------------------- Equity attributable to shareholders of Ricardo plc 58,799 (25,755) 952 11 (796) 3,151 (67) 0 (51) 36,244 Minority interest in Equity 494 494 ---------------------------------------------------------------------------------------------------------- Total equity 59,293 (25,755) 952 11 (796) 3,151 (67) 0 (51) 36,738 ========================================================================================================== APPENDIX II: Reconciliations for the six months ended 31 December 2004 Consolidated Income Statement for the six months ended 31 December 2004 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 17 IAS 23 Restated IFRS format Employee Intangible Share Based Leases Borrowing under IFRS Benefits Assets Payments Costs £'000 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations Revenue 72,584 72,584 Cost of sales (50,520) (50,520) --------------------------------------------------------------------------------- Gross profit 22,064 0 0 0 0 0 22,064 Administrative expenses (19,160) 408 502 187 (7) (18,070) --------------------------------------------------------------------------------- Profit from operations 2,904 408 502 187 (7) 0 3,994 Finance costs (447) (514) (3) (964) --------------------------------------------------------------------------------- Profit before tax 2,457 (106) 502 187 (7) (3) 3,030 Tax (183) 32 (21) (56) 2 (226) --------------------------------------------------------------------------------- Profit for the period 2,274 (74) 481 131 (5) (3) 2,804 ================================================================================= Profit attributable to minority interest 25 25 Profit attributable to equity shareholders 2,249 (74) 481 131 (5) (3) 2,779 --------------------------------------------------------------------------------- 2,274 (74) 481 131 (5) (3) 2,804 ================================================================================= Consolidated Statement of Recognised Income and Expense for the six months ended 31 December 2004 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 17 IAS 23 IAS 21 Restated IFRS format Employee Intangible Share Based Leases Borrowing Exchange under IFRS Benefits Assets Payments Costs Rate Changes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Actuarial gains/ (losses) (4,977) (4,977) Net exchange adjustments (683) 683 0 Tax on items taken directly 1,493 1,493 to equity -------------------------------------------------------------------------------------------- Net gains/ (losses) not recognised in the income statement (683) (3,484) 0 0 0 0 683 (3,484) Profit for the period attributable to equity shareholders 2,249 (74) 481 131 (5) (3) 0 2,779 -------------------------------------------------------------------------------------------- Total recognised income and expense for the year 1,566 (3,558) 481 131 (5) (3) 683 (705) ============================================================================================ Consolidated Balance Sheet at 31 December 2004 UK GAAP in IAS 19 IAS 38 IFRS 2 IAS 10 IAS 17 IAS 37 IAS 21 Restated IFRS format Employee Intangible Share-based Dividends Leases Provisions Exchange under IFRS Benefits Assets Payments Rate Changes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Non-current assets Goodwill 16,365 492 16,857 Other intangible assets 699 699 Property, plant and equipment 48,995 (699) 48,296 Deferred tax asset 9,623 205 9,828 ------------------------------------------------------------------------------------------------ 65,360 9,623 492 0 0 0 0 205 75,680 ------------------------------------------------------------------------------------------------ Current assets Inventories 7,786 7,786 Trade and other receivables 39,031 39,031 SSAP24 debtor 1,544 (1,544) 0 Current tax assets 2,060 2,060 Cash and cash equivalents 6,352 11 6,363 ------------------------------------------------------------------------------------------------ 56,773 (1,544) 0 11 0 0 0 0 55,240 ------------------------------------------------------------------------------------------------ Total assets 122,133 8,079 492 11 0 0 0 205 130,920 ------------------------------------------------------------------------------------------------ Current liabilities Bank overdrafts and loans (19,235) (19,235) Trade and other payables (34,478) (234) 31 (88) 221 (34,548) Tax liabilities (3,777) (3,777) Proposed final dividend (1,354) 1,354 0 Provisions (221) (221) ------------------------------------------------------------------------------------------------ (58,844) (234) 0 31 1,354 (88) 0 0 (57,781) ------------------------------------------------------------------------------------------------ Net current assets (2,071) (1,778) 0 42 1,354 (88) 0 0 (2,541) ------------------------------------------------------------------------------------------------ Non-current liabilities Bank loans (2,903) (2,903) Retirement benefit obligation (32,075) (32,075) Deferred tax liabilities (3,180) 533 (21) (56) 26 (2,698) Long term provisions (660) (660) ------------------------------------------------------------------------------------------------ (6,743) (31,542) (21) (56) 0 26 0 0 (38,336) Total liabilities (65,587) (31,776) (21) (25) 1,354 (62) 0 0 (96,117) ------------------------------------------------------------------------------------------------ NET ASSETS 56,546 (23,697) 471 (14) 1,354 (62) 0 205 34,803 ================================================================================================ EQUITY Share capital 12,477 12,477 Share premium account 12,085 12,085 Capital redemption reserve 40 40 LTIP reserve 165 (156) 9 Merger reserve 967 967 Translation reserve (478) (478) Other 11 11 Retained earnings 30,315 (23,697) 471 131 1,354 (62) 683 9,195 ------------------------------------------------------------------------------------------------ Equity attributable to shareholders of Ricardo plc 56,049 (23,697) 471 (14) 1,354 (62) 0 205 34,306 Minority interest in Equity 497 497 ------------------------------------------------------------------------------------------------ Total equity 56,546 (23,697) 471 (14) 1,354 (62) 0 205 34,803 ================================================================================================ This information is provided by RNS The company news service from the London Stock Exchange

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