Interim Results
Smart(J.)&Co(Contractors) PLC
24 April 2006
J SMART & CO. (CONTRACTORS) PLC
INTERIM REPORT
6 MONTHS TO 31 JANUARY 2006
CHAIRMAN'S REVIEW
INTERIM REPORT
Unaudited Group profits for the six months to 31st January 2006 amounted to
£3,026,000 compared with profits of £2,446,000 for the corresponding period last
year. Turnover increased by 23%.
The improvements in turnover and profit figures are due in the main to increased
contracting activity. The Board anticipates that turnover for the full year will
again be more than last year. Private house sales are down again and apart from
phase three of our joint venture development with EDI at Livingston referred to
in the last annual report, no industrial or commercial developments were
commenced in the half year under review.
We are now required to adopt International Financial Reporting Standards which
oblige us to take account of, inter alia, unrealised profits in revalued
property, the deficit in pensions obligations and deferred tax. Consequently,
the restated Consolidated Income Statement (formerly Profit and Loss Account)
for the year ended 31st July 2005 shows a substantially increased profit and the
Consolidated Balance Sheet shows a substantial reduction. The notes on page 7
refer.
INTERIM DIVIDEND
The Board announces an interim dividend of 3.00p per share (2005, 2.90p) to be
paid on 10th July 2006 to shareholders on the register at the close of business
on 16th June 2006. After waivers by members holding approximately 51% of the
shares the interim dividend will cost the Company £148,000.
FUTURE PROSPECTS
The amount of work in hand in contracting is less than at this time last year
and at the end of last year.
Private house sales for the full year should be similar to last year.
We will commence an internal modernisation and refurbishment of our large office
property at Links Place, Leith before the end of this financial year. We also
anticipate starting three commercial and industrial new build developments this
calendar year.
I expect profit for the second half of the year to be not less than the profit
for the first half subject to the effect of property revaluation and unforeseen
or exceptional circumstances.
24th April 2006 J.M. SMART
Chairman
CONSOLIDATED INCOME STATEMENT
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
(Unaudited) (Unaudited) (Unaudited)
Notes £000 £000 £000
Revenue 12,843 10,403 22,180
Own work
capitalised 49 18 20
--------------- --------------- ---------------
12,892 10,421 22,200
Cost of sales (10,771) (8,636) (11,670)
--------------- --------------- ---------------
Gross Profit 2,121 1,785 10,530
Other
operating
income 3,103 2,992 6,065
Net operating
expenses (2,569) (2,541) (11,403)
--------------- --------------- ---------------
Operating
Profit before
net revaluation
gains on investment
properties 2,655 2,236 5,192
Net gain on
valuation of
investment
properties - - 10,036
--------------- --------------- ---------------
Operating
Profit 2,655 2,236 15,228
Share of
profits in
Joint Ventures 206 197 848
Income from
investments 27 18 49
Decrease in
amount written
off investments 21 41 40
Finance income 182 37 131
Finance costs (65) (83) (305)
--------------- --------------- ---------------
Profit on
ordinary
activities
before tax 3,026 2,446 15,991
Tax on profit
on ordinary
activities 5 (908) (734) (4,277)
--------------- --------------- ---------------
Profit
attributable
to equity
shareholders 2,118 1,712 11,714
=============== =============== ===============
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
(Unaudited) (Unaudited) (Unaudited)
Notes £000 £000 £000
Actuarial loss
recognised on
defined
benefit
pension
schemes - - (1,035)
Deferred
taxation on
actuarial loss - - 310
--------------- --------------- ---------------
Net deficit
recognised
directly in
equity - - (725)
Profit for the
period 2,118 1,712 11,714
--------------- --------------- ---------------
Total
recognised
income and
expense for
the period 2,118 1,712 10,989
=============== =============== ===============
Attributable
to equity
shareholders 2,118 1,712 10,989
=============== =============== ===============
STATEMENT OF CHANGES IN EQUITY
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
(Unaudited) (Unaudited) (Unaudited)
Notes £000 £000 £000
Total
recognised
income and
expense for
the period 2,118 1,712 10,989
Dividends 6 (468) (450) (593)
--------------- --------------- ---------------
1,650 1,262 10,396
Opening
shareholders'
funds 74,597 64,201 64,201
--------------- --------------- ---------------
Closing
shareholders'
funds 76,247 65,463 74,597
=============== =============== ===============
CONSOLIDATED BALANCE SHEET
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.0 5ended 31.7.05
(Unaudited) (Unaudited) (Unaudited)
£000 £000 £000
Non-current assets
Property,
plant and
equipment 1,564 1,492 1,428
Investment
properties 73,825 65,996 75,985
Investments in
Joint Ventures 3,317 2,626 3,172
Other
receivables 2,056 1,656 1,656
--------------- --------------- ---------------
80,762 71,770 82,241
--------------- --------------- ---------------
Current assets
Inventories 4,758 3,673 4,924
Other
investments 1,039 1,098 1,038
Trade and
other
receivables 3,401 2,905 2,766
Cash and bank 5,039 674 2,014
--------------- --------------- ---------------
14,237 8,350 10,742
--------------- --------------- ---------------
Total Assets 94,999 80,120 92,983
=============== =============== ===============
Non-current liabilities
Retirement
benefit
obligations 7,028 6,049 7,028
Deferred tax
liabilities 6,768 4,257 6,768
--------------- --------------- ---------------
13,796 10,306 13,796
--------------- --------------- ---------------
Current liabilities
Trade and
other payables 3,965 3,617 3,917
Current tax 991 734 673
--------------- --------------- ---------------
4,956 4,351 4,590
--------------- --------------- ---------------
Total Liabilities 18,752 14,657 18,386
=============== =============== ===============
Net Assets 76,247 65,463 74,597
=============== =============== ===============
Equity
Called up
share capital 1,008 1,008 1,008
Retained earnings 75,239 64,455 73,589
--------------- --------------- ---------------
Total Equity 76,247 65,463 74,597
=============== =============== ===============
CONSOLIDATED CASH FLOW STATEMENT
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
(Unaudited) (Unaudited) (Unaudited)
Notes £000 £000 £000
Cash flows
from operating
activities 8 2,040 1,850 4,147
Tax paid on profits (590) (577) (1,299)
--------------- --------------- ---------------
Net cash flow
from operating activities 1,450 1,273 2,848
--------------- --------------- ---------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (348) (171) (385)
Purchase of
investment properties (21) (243) (308)
Sale of property,
plant and equipment 19 39 69
Sale of investment
properties 2,443 218 386
Expenditure on own work
capitalised (49) (18) (20)
Interest received - 8 5
Interest paid (1) (32) (38)
--------------- --------------- ---------------
Net cash used
in investing activities 2,043 (199) (291)
--------------- --------------- ---------------
Cash flows from financing
activities
Dividends paid (468) (450) (593)
--------------- --------------- ---------------
Net cash used
in financing activities (468) (450) (593)
--------------- --------------- ---------------
Increase in
cash, cash
equivalents
and bank 3,025 624 1,964
--------------- --------------- ---------------
Cash, cash equivalents
and bank at beginning of
period 2,014 50 50
--------------- --------------- ---------------
Cash, cash equivalents
and bank at
end of period 5,039 674 2,014
=============== =============== ===============
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These interim financial statements do not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The figures for the year to 31
July 2005 have been derived from the published statutory accounts as amended by
the IFRS adjustments as set out in note 9. The statutory accounts for 2005,
which were prepared under UK GAAP and upon which the auditors issued an
unqualified audit report, have been delivered to the Registrar of Companies.
These interim financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial Reporting and are
covered by International Financial Reporting Standard (IFRS) 1, First-time
Adoption of IFRS, because the period of these financial statements is within the
group's first IFRS financial statements for the year ended 31 July 2006.
2. Accounting policies
The accounting policies set out below have been consistently applied to all
periods presented in these interim financial statements.
Consolidated financial statements of the group until 31 July 2005 have been
prepared in accordance with UK Generally Accepted Accounting Principles (UK
GAAP). UK GAAP differs in certain respects from IFRS. When preparing the
consolidated interim financial statements for 2006, management has amended
certain accounting and valuation methods applied in the UK GAAP financial
statements to comply with IFRS. There have been no other changes to accounting
policies from those stated in the group's 2005 annual consolidated financial
statements.
The comparative figures in respect of the interim period ended 31 January 2005
and the year ended 31 July 2005 have been restated to reflect these adjustments.
Reconciliations and descriptions of the effect of the transition from UK GAAP to
IFRS on the group's equity and its net income are given in note 9.
The group has recognised actuarial gains and losses in full for the year in
which they occur in the Consolidated Statement of Recognised Income and Expense
in accordance with the proposed amendment to IAS 19. The group has assumed that
the European Commission will endorse the amendment to IAS 19 Employee Benefits -
Actuarial Gains and Losses, Group Plans and Disclosures.
For the interim accounts the assets and liabilities of the pension scheme are
estimated to be unchanged from the values included at the previous year end.
In accordance with long standing practice, the group's investment properties are
revalued annually on 31 July each year. No revaluation adjustment is made in the
interim financial statements.
3. Adoption of new and revised International Financial Reporting Standards
EU law (IAS Regulation EC 1606/2002) requires that the group's annual
consolidated financial statements for the year to 31 July 2006 be prepared in
accordance with IFRS adopted for use in the EU.
This financial information has been prepared in accordance with the Listing
Rules of the Financial Services Authority. In preparing this financial
information management has used its best knowledge of the expected standards and
interpretations, facts and circumstances, and accounting policies that will be
applied when the group prepares its first set of financial statements in
accordance with IFRSs as adopted for use in the EU as at 31 July 2006.
However, additional standards and interpretations or amendments to existing
standards and interpretations that will be applicable, on a mandatory or
optional basis, at 31 July 2006 are not known with certainty at the time of
preparing these interim financial statements. Accordingly the restated financial
information for the year to 31 July 2005 presented herein, which has not been
audited, may differ from the financial information presented as comparative
figures with the 2006 final audited financial statements.
4. Segmental information
The group's primary basis of segmentation is by activities. All of the group's
activities are undertaken within the UK.
Total Revenue Inter segment External Profit attributable to equity shareholders
Revenue Revenue
£000 £000 £000 £000 £000 £000
31 January 2006
Construction
activities 12,892 49 12,843 484 - -
Investment
activities 3,103 - 3,103 2,171 - -
Joint - - - 206 - -
Ventures
--------------- --------------- --------------- --------------- --------------- ---------------
15,995 49 15,946 2,861 - -
--------------- --------------- --------------- --------------- --------------- ---------------
31 January 2005
Construction
activities 10,421 18 10,403 - 76 -
Investment
activities 2,992 - 2,992 - 2,160 -
Joint - - - - 197 -
Ventures
--------------- --------------- --------------- --------------- --------------- ---------------
13,413 18 13,395 - 2,433 -
--------------- --------------- --------------- --------------- --------------- ---------------
31 July 2005
Construction
activities 22,200 20 22,180 - - 870
Investment
activities 6,065 - 6,065 - - 14,358
Joint - - - - - 848
Ventures
--------------- --------------- --------------- --------------- --------------- ---------------
28,265 20 28,245 - - 16,076
--------------- --------------- --------------- --------------- --------------- ---------------
Result 2,861 2,433 16,076
Finance
income 230 96 220
Finance cost (65) (83) (305)
--------------- --------------- ---------------
Profit on Ordinary
Activities before tax 3,026 2,446 15,991
Tax on Profit
on Ordinary (908) (734) (4,277)
Activities
--------------- --------------- ---------------
Profit attributable
to equity shareholders 2,118 1,712 11,714
=============== =============== ===============
5. Taxation
The tax charge for the 6 months to 31 January 2006 is based on the corporation
tax rate at 30% (2005 - 30%).
6. Dividends
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
£000 £000 £000
Ordinary dividends
2005 Final dividend declared of 9.50p per share 468 - -
2005 Interim dividend declared of 2.90p per share - - 143
2004 Final dividend of 9.15p per share - 450 450
--------------- --------------- ---------------
468 450 593
=============== =============== ===============
Certain shareholders holding approximately 51% of the shares have waived their
rights to the interim and final dividends paid for the years to 31 July 2004 and
31 July 2005.
The interim dividend of 3.00p per share for the year to 31 July 2006 will be
paid on 10 July 2006 to shareholders on the register at 16 June 2006. After
waivers by members holding approximately 51% of the shares the interim dividend
will cost the company £148,000.
7. Earnings per share
Profit Basic Earnings
attributable to
equity
shareholders Per share
£000
6 months to 31 January 2006 2,118 21.01p
=============== ===============
6 months to 31 January 2005 1,712 16.98p
=============== ===============
Year to 31 July 2005 11,714 116.19p
=============== ===============
Basic earnings per share are calculated by dividing the profit attributable to
equity shareholders by the number of ordinary shares in issue during the period.
There is no difference between basic and diluted earnings per share.
8. Reconciliation of operating profit to cash flows from operating
activities
Restated Restated
6 Months ended 6 Months ended Year
31.1.06 31.1.05 ended 31.7.05
£000 £000 £000
Profit before tax 3,026 2,446 15,991
Share of profits from
Joint Ventures (206) (197) (848)
Depreciation 200 179 434
Unrealised revaluation
gains on investment
properties - - (10,036)
Gain on sale of property,
plant and equipment (6) (16) (23)
Gain on sale of investment
properties (213) (77) (131)
(Gain)/Loss on sale of
investments (54) 4 (22)
Amounts written back
to investments (21) (41) (40)
Change in retirement benefits - - (56)
Interest received - (8) (5)
Interest
received by
Joint Ventures (3) (1) (3)
Interest paid 1 32 38
Interest paid by Joint
Ventures 65 51 99
Proceeds of sale of
investments 194 28 114
Purchase of investments (120) (250) (250)
Change in inventories 166 892 (359)
Change in receivables -
current (635) (829) (690)
Change in
receivables -
non current (400) (176) (176)
Change in payables 46 (187) 110
--------------- --------------- ---------------
Net cash
generated from
operations 2,040 1,850 4,147
=============== =============== ===============
9. Reconciliation of UK GAAP to IFRS
Reconciliation of Income Statement - 6 months to 31 January 2005
UK GAAP Effect of IFRS
transition to
IFRS
Notes £000 £000 £000
Revenue 10,403 - 10,403
Own work
capitalised 18 - 18
--------------- --------------- ---------------
10,421 - 10,421
Cost of sales (8,636) - (8,636)
--------------- --------------- ---------------
Gross Profit 1,785 - 1,785
Other operating
income 2,992 - 2,992
Net operating
expenses 9(c) (2,541) - (2,541)
--------------- --------------- ---------------
Operating
Profit before
net revaluation
gains on investment
properties 2,236 - 2,236
Net gain on
valuation of 9(e) - - -
investment properties
--------------- --------------- ---------------
Operating
Profit 2,236 - 2,236
Share of
profits in
Joint Ventures 9(e) 197 - 197
Income from
investments 18 - 18
Decrease in
amount written
off investments 41 - 41
Finance income 37 - 37
Finance costs 9(c) (83) - (83)
--------------- --------------- ---------------
Profit on
ordinary
activities
before tax 2,446 - 2,446
Tax on profit
on ordinary
activities 9(b)(c) (734) - (734)
--------------- --------------- ---------------
Profit
attributable
to equity
shareholders 1,712 - 1,712
=============== =============== ===============
Reconciliation of Income Statement - Year to 31 July 2005
UK GAAP Effect of IFRS
transition to
IFRS
Notes £000 £000 £000
Revenue 22,180 - 22,180
Own work
capitalised 20 - 20
--------------- --------------- ---------------
22,200 - 22,200
Cost of sales (11,670) - (11,670)
--------------- --------------- ---------------
Gross Profit 10,530 - 10,530
Other operating
income 6,065 - 6,065
Net operating
expenses 9(c) (11,627) 224 (11,403)
--------------- --------------- ---------------
Operating
Profit before
net revaluation
gains on
investment
properties 4,968 224 5,192
Net gain on
valuation of
investment
properties 9(e) - 10,036 10,036
--------------- --------------- ---------------
Operating
Profit 4,968 10,260 15,228
Share of
profits in
Joint Ventures 9(e) 407 441 848
Income from
investments 49 - 49
Decrease in
amount written
off investments 40 - 40
Finance income 131 - 131
Finance costs 9(c) (137) (168) (305)
--------------- --------------- ---------------
Profit on
ordinary
activities
before tax 5,458 10,533 15,991
Tax on profit
on ordinary
activities 9(b)(c) (1,449) (2,828) (4,277)
--------------- --------------- ---------------
Profit
attributable
to equity
shareholders 4,009 7,705 11,714
=============== =============== ===============
Reconciliation of equity at 31 January 2005
UK GAAP Effect of IFRS
transition to
IFRS
Notes £000 £000 £000
Non-current assets
Intangible
assets 1 (1) -
Property,
plant and
equipment 1,492 - 1,492
Investment
properties 65,996 - 65,996
Investments in
Joint Ventures 2,626 - 2,626
Other
receivables 9(f) - 1,656 1,656
--------------- --------------- ---------------
70,115 1,655 71,770
--------------- --------------- ---------------
Current assets
Inventories 3,673 - 3,673
Other
investments 1,098 - 1,098
Trade and
other
receivables 9(f) 4,560 (1,655) 2,905
Cash and bank 674 - 674
--------------- --------------- ---------------
10,005 (1,655) 8,350
--------------- --------------- ---------------
Total Assets 80,120 - 80,120
=============== =============== ===============
Non-current liabilities
Retirement
benefit
obligations 9(c) - 6,049 6,049
Deferred tax
liabilities 9(b)(c) 148 4,109 4,257
--------------- --------------- ---------------
148 10,158 10,306
--------------- --------------- ---------------
Current liabilities
Trade and
other payables 9(a) 3,760 (143) 3,617
Current tax 734 - 734
--------------- --------------- ---------------
4,494 (143) 4,351
--------------- --------------- ---------------
Total
Liabilities 4,642 10,015 14,657
=============== =============== ===============
Net Assets 75,478 (10,015) 65,463
=============== =============== ===============
Equity
Called up
share capital 1,008 - 1,008
Revaluation
reserve 9(e) 26,751 (26,751) -
Retained
earnings 47,719 16,736 64,455
--------------- --------------- ---------------
Total Equity 75,478 (10,015) 65,463
=============== =============== ===============
Reconciliation of equity at 31 July 2005
UK GAAP Effect of IFRS
transition to
IFRS
Notes £000 £000 £000
Non-current assets
Intangible
assets 1 (1) -
Property,
plant and
equipment 1,428 - 1,428
Investment
properties 75,985 - 75,985
Investments in
Joint Ventures 3,172 - 3,172
Other
receivables 9(f) - 1,656 1,656
--------------- --------------- ---------------
80,586 1,655 82,241
--------------- --------------- ---------------
Current assets
Inventories 4,924 - 4,924
Other
investments 1,038 - 1,038
Trade and
other
receivables 9(f) 4,421 (1,655) 2,766
Cash and bank 2,014 - 2,014
--------------- --------------- ---------------
12,397 (1,655) 10,742
--------------- --------------- ---------------
Total Assets 92,983 - 92,983
=============== =============== ===============
Non-current liabilities
Retirement
benefit
obligations 9(c) - 7,028 7,028
Deferred tax
liabilities 9(b)(c) 141 6,627 6,768
--------------- --------------- ---------------
141 13,655 13,796
--------------- --------------- ---------------
Current liabilities
Trade and
other payables 9(a) 4,385 (468) 3,917
Current tax 673 - 673
--------------- --------------- ---------------
5,058 (468) 4,590
--------------- --------------- ---------------
Total
Liabilities 5,199 13,187 18,386
=============== =============== ===============
Net Assets 87,784 (13,187) 74,597
=============== =============== ===============
Equity
Called up
share capital 1,008 - 1,008
Revaluation
reserve 9(e) 37,157 (37,157) -
Retained
earnings 49,619 23,970 73,589
--------------- --------------- ---------------
Total Equity 87,784 (13,187) 74,597
=============== =============== ===============
Reconciliation of equity at 1 August 2004
UK GAAP Effect of IFRS
transition to
IFRS
Notes £000 £000 £000
Non-current assets
Intangible
assets 1 (1) -
Property,
plant and
equipment 1,522 - 1,522
Investment
properties 65,877 - 65,877
Investments in
Joint Ventures 2,478 - 2,478
Other
receivables 9(f) - 1,480 1,480
--------------- --------------- ---------------
69,878 1,479 71,357
--------------- --------------- ---------------
Current assets
Inventories 4,565 - 4,565
Other
investments 840 - 840
Trade and
other
receivables 9(f) 3,555 (1,479) 2,076
Cash and bank 50 - 50
--------------- --------------- ---------------
9,010 (1,479) 7,531
--------------- --------------- ---------------
Total Assets 78,888 - 78,888
=============== =============== ===============
Non-current liabilities
Retirement
benefit
obligations 9(c) - 6,049 6,049
Deferred tax
liabilities 9(b)(c) 148 4,109 4,257
--------------- --------------- ---------------
148 10,158 10,306
--------------- --------------- ---------------
Current liabilities
Trade and
other payables 9(a) 4,255 (450) 3,805
Current tax 576 - 576
--------------- --------------- ---------------
4,831 (450) 4,381
--------------- --------------- ---------------
Total
Liabilities 4,979 9,708 14,687
=============== =============== ===============
Net Assets 73,909 (9,708) 64,201
=============== =============== ===============
Equity
Called up
share capital 1,008 - 1,008
Revaluation
reserves 9(e) 26,751 (26,751) -
Retained
earnings 46,150 17,043 63,193
--------------- --------------- ---------------
Total Equity 73,909 (9,708) 64,201
=============== =============== ===============
Notes to the Reconciliations from UK GAAP to IFRS
a) IAS 10 - Events after the Balance Sheet Date
Under UK GAAP proposed dividends were accrued into the accounts for the period
to which they related. Under IFRS the proposed dividend can only be accounted
for when it has been declared and approved at the Annual General Meeting. Thus
the proposed dividend at the end of each financial period has been derecognised,
which has resulted in a decrease in Trade and other payables and an increase in
Retained earnings. Interim dividends are recognised when paid.
As at 31 As at 31 As at 1 August
January 2005 2004
July 2005
£000 £000 £000
Decrease in
Trade and
other payables 468 143 450
=============== =============== ===============
Increase in
Retained
earnings 468 143 450
=============== =============== ===============
Additionally IFRS requires dividends to be presented differently from UK GAAP.
Under IFRS dividends are not considered to be an expense and therefore are not
included in the Income Statement, but charged against Retained earnings.
b) IAS 12 - Income Tax
Under UK GAAP the contingent capital gains tax that would be payable if all
investment properties were sold at their valuation on the Balance Sheet date was
disclosed as a note to the accounts but not recognised in the Balance Sheet.
Under IFRS a provision for the deferred tax liability based on the tax which may
arise on the sale of the investment properties is recognised in the Balance
Sheet and movements from year to year are recognised in the tax charge in the
Income Statement.
Under UK GAAP deferred tax is calculated by reference to temporary timing
differences arising on the Income Statement. Under IFRS a Balance Sheet approach
is adopted by applying the appropriate tax rate to the temporary differences
arising between the carrying values of assets and liabilities and their tax
base.
The effect on the Balance Sheet of applying IAS 12 is:-
As at 31 As at 31 As at 1 August
January 2005 2004
July 2005
£000 £000 £000
Deferred tax
liability arising on
revaluation of investment
properties (8,649) (5,892) (5,892)
Deferred tax
liability
arising on
temporary
differences (86) (32) (32)
--------------- --------------- ---------------
Decrease in
Retained
earnings (8,735) (5,924) (5,924)
To reconcile to IFRS adjustment
to deferred tax liability:-
Retirement benefits
deferred tax asset (Note 9(c)) 2,108 1,815 1,815
--------------- --------------- ---------------
(6,627) (4,109) (4,109)
=============== =============== ===============
The effect on the Income Statement of applying IAS 12 is:-
Increase in deferred tax
liability arising on
revaluation of
investment properties (2,757) -
Increase in
deferred tax
liability arising on
temporary differences (54) -
Increased tax
charge on pension scheme
service costs
(Note 9(c)) (17) -
--------------- ---------------
(2,828) -
=============== ===============
c) IAS 19 - Employee Benefits
Under UK GAAP the net deficit in the defined benefit pension scheme and the
related deferred tax asset were not required to be recognised in the Balance
Sheet. Under IFRS the deficit in the scheme and the related deferred tax asset
are recognised on the face of the Balance Sheet.
IAS 19 allows several alternative options for the accounting for actuarial gains
and losses. The group has elected to recognise all actuarial gains and losses in
full in the period in which they occur in the Statement of Recognised Income and
Expense. This option has been selected as it is consistent with the requirements
under UK GAAP treatment under FRS 17, that had previously been disclosed by way
of a note in the group's financial statements.
The effect on the Balance Sheet of applying IAS 19 is:-
As at 31 As at 31 As at 1 August
January 2005 2004
July 2005
£000 £000 £000
Retirement benefit
obligations recognised (7,028) (6,049) (6,049)
Deferred tax
asset on retirement
benefit deficit
(Included within
deferred taxation Note
9(b)) 2,108 1,815 1,815
--------------- --------------- ---------------
Decrease in
Retained earnings (4,920) (4,234) (4,234)
=============== =============== ===============
The effect on the Income Statement of applying IAS 19 is:-
Decrease in
pension costs
within Net
operating
expenses 224 -
Increase in
pension
finance costs (168) -
Increased tax
charge arising
on above (17) -
=============== ===============
d) IAS 31 - Interest in Joint Ventures
Under UK GAAP, the group recognised its share of Joint Ventures operating profit
before interest and its share of interest with the group figures on the face of
the Profit and Loss Account. In the Balance Sheet the group's share of the Joint
Ventures' gross assets and liabilities were separately shown.
IAS 31 allows the company to make a one-off decision as to whether Joint
Ventures are to be accounted for under the equity method or by proportional
consolidation. The company has chosen to apply the equity method.
e) IAS 40 - Investment Properties
Under UK GAAP revaluation surpluses or deficits on investment properties were
taken directly to reserves. Under IFRS these surpluses and deficits are
recognised in the Income Statement. As a result the revaluation reserve is no
longer reported separately as a component of equity in the Balance Sheet. At the
date of transition the accumulated revaluation reserve has been reallocated to
retained earnings. This treatment does not have any effect on the distributable
profits of the group as these will continue to be determined by the application
of the Companies Act 1985.
As the group only revalues its investment properties annually on 31 July each
year no adjustments regarding IAS 40 are required for the periods 31 January
2005 or 31 January 2006.
Revaluation of investment properties in Joint Venture companies have been
treated in line with the group policy.
f) Reclassifications
Under IFRS other receivables not recoverable within one year are shown under
Non-current assets.
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