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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Brammer | LSE:BRAM | London | Ordinary Share | GB0001195089 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 164.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:8714Q
Brammer PLC
06 September 2005
FOR IMMEDIATE RELEASE 6 September 2005
2005 INTERIM RESULTS
Improved profitability and continued market share gains
Brammer plc, the European industrial services group, today announces its results
for the six months ending 30 June 2005, under IFRS.
FINANCIAL SUMMARY
2005 2004
Restated
#m #m Change
Total operations
Turnover 145.5 156.2
Profit before tax 5.3 0.3
Net debt (51.5) (57.7)
Earnings/ (loss) per share pence pence
Basic 7.6 (3.3)
Diluted 7.6 (3.3)
Before exceptional items 7.6 7.0
Continuing operations
Turnover 145.5 136.9 6.3%
Profit before tax 5.3 3.0 77.7%
Earnings per share pence pence
Basic 7.6 4.8 58.3%
Diluted 7.6 4.8 58.3%
Before exceptional items 7.6 5.4 40.7%
Last year, the UK GAAP reported profit before goodwill amortisation, exceptional
items and tax for the 6 months to June 2004 was #5.2m. Had this years accounts
been prepared under UK GAAP, the equivalent result for the 6 months to June 2005
would have been #5.7m
Highlights
* Revenues for continuing operations up 6.3% and profit before tax up 77.7%
* Brammer now offers customers consistent products and services in over
250 locations in 10 countries, representing further progress towards its
ultimate aim of supplying customers anywhere in Europe.
* Significant increases in sales per working day, up 6% overall, were
enjoyed across the group reflecting growth in corporate accounts, now
representing 26% of total revenues, and Insites
* Operating margin improved by 1.2% to 4.5% and revenues per head by 7.9%
reflecting cost benefits from closer supplier relationships and significant
improvements in productivity.
* Profits improved both on the continent and in the UK
* Cash flow remained positive, net borrowings reduced from #58m to #52m - in
each of the past 4 years, operating cash flow has considerably exceeded
operating profit, a trend that is expected to continue
David Dunn, chairman, said:
"Trading since the end of June has been satisfactory and we are anticipating
further progress in the second half
The Board has declared an increased interim dividend of 1.65p (2004 1.5p). This
will be paid on the 4th November 2005 to shareholders on the register at the
close of business on 7th October 2005."
Enquiries: Brammer plc 020 7638 9571 (8.00am - 1.00pm)
David Dunn, chairman 0161 902 5599 (1.00pm - 4.30pm)
Ian Fraser, chief executive
Paul Thwaite, finance director
Issued: Citigate Dewe Rogerson Ltd 020 7638 9571
Martin Jackson
Anthony Kennaway
BRAMMER PLC
2005 PRELIMINARY RESULTS
CHAIRMAN'S STATEMENT
The first six months
The interim financial statements, including restated comparatives, of Brammer
for the period ending 30 June 2005 have been prepared in accordance with
International Financial Reporting Standards (IFRS). The principal differences
arising from the transition to IFRS from UK Generally Accepted Accounting
Practice were set out in a press release dated 24 August 2005 and details are
also included in the notes to these financial statements.
As required under IFRS, the results of discontinued businesses are reported on
one line in the Profit and Loss account. As the discontinued activities ceased
in the first half of 2004, all further comments from hereon refer to continuing
businesses.
Brammer continued to improve its performance in the first half of 2005. Turnover
increased by 6.3% to #145.5m and profit before tax was #5.3m compared to #3.0m
last year (2004 results included a #0.3m exceptional charge) Basic earnings per
share improved to 7.6p (2004 restated 4.8p).
Trading
All geographic locations increased their sales in the first half of 2005. Whilst
overall market conditions have been subdued and highly competitive, Brammer has
continued to successfully grow its corporate accounts business and win market
share. Margins have been held steady and, combined with a firm control of costs,
profits have therefore increased. Some increased costs have necessarily been
incurred to specifically support corporate account activity and systems
development as we implement our strategy for growth.
Cash flow in the period was also positive with further reductions in working
capital. Net borrowings reduced from #58m to #52m.
Strategy
We have made good progress in implementing the strategy outlined in my previous
statement, and are on target with the time specific benchmarks we have set
ourselves. Brammer operates in a highly fragmented market place and whilst our
geographic coverage in Europe provides a market leading position in the supply
of essential components and services to industry, our overall market share
remains relatively small. We therefore intend to intensify our efforts to
identify quality bolt on acquisitions which can both add to our presence in
Europe and meet the expansion needs of our customers, particularly in Eastern
Europe. We believe this is possible to achieve from within our existing
resources.
Board
We are delighted to welcome Svante Adde to the Board as a non executive
director. Svante is a Swedish national living in London and has extensive
experience in dealing with businesses in many of our key market sectors. We look
forward to his contribution in helping to develop Brammer in the future. In
making this appointment we are planning for the retirement in December of Kevin
Mellor, our senior independent non executive director who has served on the
Board since 1997.
Dividend
The Board has declared an increased interim dividend of 1.65p (2004 1.5p). This
will be paid on the 4th November to shareholders on the register at the close of
business on 7th October 2005.
Outlook
Trading since the end of June has been satisfactory and we are anticipating
further progress in the second half.
David Dunn
6 September 2005
CHIEF EXECUTIVE'S REVIEW
Overview
In the first half of 2005 we further strengthened Brammer's market leading
position in Europe. We continued to execute the clear and simple strategy
outlined in my statement last year and in particular, made considerable progress
in the creation of "One Brammer" - a business which can offer consistent
products and services in each of 255 locations in 10 countries. Our ultimate
aim is to supply our customers a consistent quality of service across the entire
bearings, power transmission and fluid power product range anywhere in Europe.
Operational Review
Brammer is the leading European supplier of technical components and related
services to the maintenance, repair and operations ("MRO") markets. In the
first half revenues for continuing operations increased by 6.3% to #145.5
million, whilst operating profit before exceptional items and interest increased
by 36.5% to #6.6 million. Profits improved both on the continent and in the UK.
Cash generated from operating activities was #3.9 million and net current assets
reduced by #1 million compared to June 2004 as we continued our planned
reduction in working capital, mainly achieved through an improvement in
inventory turns. In each of the past 4 years we have produced considerably more
operating cash flow than operating profit, and we expect to continue this trend
in 2005 and beyond as we improve inventory turns by managing our inventory on a
European basis.
Operating margin improved by 1.2% to 4.5% despite price pressure in the
marketplace. At the end of the first half, total headcount in Brammer was 1,861
compared to 1,845 at the end of last year. Revenues per head increased by 7.7%
to #78,000 for the half year, compared with the second half of last year,
indicating significant improvement in productivity.
In the UK, revenues on a sales per working day basis ("SPWD") increased by 2.1%
as management actions implemented last year began to take effect. Capital
employed reduced by #1.4 million (9.8%), due to improvements in inventory
efficiency and the provision by suppliers of a total of #2.1 million of service
stock. We increased sales through Insites and part-time insites (those
locations where we have several regular clinics with the customer's staff each
week) by 3%. Customer locations where we have contracted to provide either full
or part-time regular on site support, or where we provide a consigned stock
solution to the site, now represent 26% of our revenues in the UK. Several new
contracts were won with customers such as Marshalls plc, Alcoa, Alstom Power
Ltd, Abbott Laboratories and Kelda Water.
In Germany SPWD grew by 11.0%, costs were tightly controlled and operating
profit increased by 32.3% compared with last year. Excellent progress was made
on corporate accounts, with revenues in this segment up 43.6%, and now
representing 15.9% of our business. Our pneumatics contract with Volkswagen
across six locations reported last year has exceeded our expectations and we
have developed good business with GKN and Smurfit. We extended our contract
with Daimler-Chrysler, and won a pan European contract with Bosch which could
provide revenues across Europe in excess of Euro10 million. Headcount increased by
9 to 397 and productivity as measured by sales per head increased by 9.4%
compared with the first half of 2004.
In France SPWD increased by 7.2%, driven by continued growth in key accounts and
Insites, and new product introduction, particularly pneumatics. This growth,
combined with tight control of costs, helped increase operating profit by 14.5%.
Revenues through Insites increased by 18% compared with the second half of last
year. Key account revenues grew by 13% and now represent 33.8% of our business.
New contracts were won with Veolia, Lyonnaise des Eaux, Balthazard and Nexans.
In Spain SPWD grew 4%. We continued to increase our sales to the MRO market (up
5%) reducing further our exposure to the more cyclical original equipment
manufacturers ("OEM") marketplace (up only 3%). At the end of last year we made
considerable SDA investment in both marketing and our branch network in order to
improve our growth prospects. This investment, though successful in starting to
accelerate top line growth, will not produce a positive return until the first
half of 2006. Accordingly, operating profit in Spain declined by 14.8%.
Corporate account sales grew by 27.3%, but still represent only 11.9% of Spanish
revenues. We won new contracts with Italcementi, Damm, Mercadona, Danone and
Bridgestone. New product introductions contributed to growth with pneumatics up
129%, seals up 25% and linear motion up 29%.
In the Netherlands SPWD were up 4.3% on a like for like basis, with good growth
in MRO sales contributing to yet further improvement in the gross profit margin.
Several new contracts were won including Vecrot - SEW and Gazelle, the Dutch
leading bike manufacturer. In our developing businesses, overall SPWD increased
by 13.9%, and total revenues were #7.5 million. In Belgium we established a new
management team, the business is becoming highly focused and the improvement is
starting to show through in SPWD improvement of 12%. In Austria, we have begun
the process of integration of our two companies under one management team,
achieving significant operating improvements in the process. The combined
businesses are achieving around 18% growth on last year. In the Czech Republic,
we have enhanced management and have introduced the SKF brand. We are beginning
to make progress on Key Accounts. In Hungary, considerable progress has been
made through the achievement of authorisation from Key Suppliers such as
Norgren, Gates and Schneeberger, enabling us to approach with more confidence
the Key Accounts which are present in the country. Our start-up in Italy was
successful having developed business with several key accounts including Eaton
Corporation and GKN.
Strategy
We continued to implement our clear strategy
Growth
* Overall SPWD growth was 6%, exactly in line with our declared strategy,
and representing significant market share gains.
* Key account sales grew by 15%, in line with our internal objectives.
Sales to our contracted European customers grew by 40%. Key accounts
represented 26% of total revenues. Additional investment has been made in
our key account teams in every territory as well as the centre to accelerate
development of this important segment of our business and maintain high
levels of service to this sophisticated customer base.
* Segmented marketing packages were introduced for the Food and Beverage
market segment.
* We continued to evaluate bolt-on acquisition opportunities in each of our
businesses on the continent.
Costs/Synergies
* We continued to develop closer relationships with strategic suppliers, and
increased concentration of spend with those suppliers, leading to both cost
benefits and greater supplier marketing support in the field.
* The development of the Brammer Brand continues. All our businesses are now
either using the 'linked Brand name' or have moved directly to the Brammer
Brand. This development is on track for a complete make-over of the Group
by 1 January 2007.
Capability
* The Foundation Programme offered to all our people across the Group has
now achieved a take-up rate of over 70%, in some countries as high as 85%.
This programme is the first of a series of e-learning programmes underway
which will enable all our people in all our locations to have access to
relevant learning to help them do their job, upgrading their technical and
selling skills.
* The Key Performance Indicators have now been refined to a set of 10
measures which our businesses will be reporting on monthly. These measures
will help establish systematic and consistent service levels across the
Group.
* Our Key Account Toolkit, which is operating in all our businesses, is now
being enhanced by a learning programme which introduces it to all sales
staff and helps them to understand their role in this vital part of our
operations.
The future
We have a strong presence within Europe upon which to build and anticipate gains
in market share in an extremely fragmented market place. The trend for
customers to seek a single European source of supply for our chosen product
range is increasing, and we continue investing to take advantage of this trend.
The excellent cash flow generated by the business should continue for the
foreseeable future, and provides the funding for bolt-on acquisitions. As
previously stated, our growth targets are to achieve 6% organic top line growth,
and to match this with acquisitive growth from bolt-on acquisitions over the
longer term.
Ian Fraser
6 September 2005
Brammer CONSOLIDATED INTERIM INCOME STATEMENT (unaudited)
The unaudited group results for the six months
Six months to Six months to Year to
30 June 2005 30 June 2004 31 Dec 2004
Restated Restated
#'000 #'000 #'000
Continuing operations
Revenue (note 2) 145,528 136,876 270,786
Cost of sales (100,903) (95,993) (189,337)
Gross profit 44,625 40,883 81,449
Distribution costs (38,033) (36,054) (71,639)
Exceptional distribution costs - (274) (850)
Total distribution costs (38,033) (36,328) (72,489)
Operating profit (note 2) 6,592 4,555 8,960
Finance expense (1,422) (1,645) (2,956)
Finance income 96 93 339
Share of associate's loss after tax - (39) (96)
Profit before tax 5,266 2,964 6,247
Taxation (1,640) (677) (2,443)
Profit for the period from continuing operations (note 2) 3,626 2,287 3,804
Discontinued operations (note 4)
Loss for the period from discontinued operations - (3,876) (2,954)
Profit/(loss) for the period attributable to equity 3,626 (1,589) 850
shareholders
Earnings per share - total (note 3)
Basic 7.6p (3.3)p 1.8p
Diluted 7.6p (3.3)p 1.8p
Earnings per share - continuing operations (note 3)
Basic 7.6p 4.8p 7.9p
Diluted 7.6p 4.8p 7.9p
The notes on pages 12 to 26 form part of these accounts.
Brammer INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(unaudited)
The unaudited group results for the six months
Share Share Treasury Translation Retained
capital premium shares reserve earnings Total
#'000 #'000 #'000 #'000 #'000 #'000
For the period ended 30 June 2005
At 1 January 2005 restated 9,573 3,552 (958) 122 (15,360) (3,071)
Profit for the year attributable
to equity shareholders
- - - - 3,626 3,626
Unrealised exchange movement - - - (365) - (365)
Share options - Value of employee - - - - 248 248
services
Dividends - - - - (1,580) (1,580)
Actuarial gains on pensions
schemes
- - - - 1,520 1,520
Tax on actuarial gains on pensions
schemes
- - - - (456) (456)
Movement in period - - - (365) 3,358 2,993
At 30 June 2005 9,573 3,552 (958) (243) (12,002) (78)
For the period ended 30 June 2004
restated
At 1 January 2004 9,573 3,552 (958) - (12,537) (370)
Profit for the year attributable
to equity shareholders
- - - - (1,589) (1,589)
Unrealised exchange movement - - - 1,217 - 1,217
Acquisition of own shares - - - - (29) (29)
Share options - Value of employee - - - - 112 112
services
Dividends - - - - (1,436) (1,436)
Actuarial gains on pensions - - - - 2,700 2,700
schemes
Tax on actuarial gains on pensions
schemes
- - - - (810) (810)
Movement in period - - - 1,217 (1,052) 165
At 30 June 2004 9,573 3,552 (958) 1,217 (13,589) (205)
For the year ended 31 December
2004 restated
At 1 January 2004 9,573 3,552 (958) - (12,537) (370)
Profit for the year attributable
to equity shareholders
- - - - 850 850
Unrealised exchange movement - - - 122 - 122
Acquisition of own shares - - - - (187) (187)
Share options - Value of employee - - - - 226 226
services
Dividends - - - - (2,117) (2,117)
Actuarial losses on pensions
schemes
- - - - (2,305) (2,305)
Tax on actuarial losses on
pensions schemes
- - - - 710 710
Movement in period - - - 122 (2,823) (2,701)
At 31 December 2004 9,573 3,552 (958) 122 (15,360) (3,071)
Retained earnings as disclosed in the Balance Sheet (page 10) represent the
retained earnings and treasury share balances above
The notes on pages 12 to 26 form part of these accounts.
Brammer CONSOLIDATED INTERIM BALANCE SHEET (unaudited)
The unaudited group financial position as at 30 June 2005
30 June 2005 30 June 2004 31 Dec 2004
Restated Restated
#'000 #'000 #'000
Assets
Non-current assets
Goodwill 35,890 34,324 37,394
Intangible assets 1,301 1,345 1,367
Property, plant and equipment 10,072 10,284 10,557
Investments accounted for using equity method - 462 -
Deferred tax assets 10,506 8,244 10,813
57,769 54,659 60,131
Current assets
Inventories 41,811 45,109 45,862
Trade and other receivables 59,150 55,514 55,520
Cash and cash equivalents 8,171 9,241 8,320
109,132 109,864 109,702
Liabilities
Current liabilities
Financial liabilities - borrowings (10,879) (14,312) (13,564)
Trade and other payables (66,566) (62,903) (65,217)
Deferred consideration (1,724) (4,686) (2,762)
Current tax liabilities (3,318) (293) (2,696)
(82,487) (82,194) (84,239)
Net current assets 26,645 27,670 25,463
Non-current liabilities
Financial liabilities - borrowings (48,760) (52,584) (51,797)
Deferred tax liabilities (4,114) (2,802) (3,643)
Provisions (646) - (637)
Deferred consideration (163) (295) (199)
Retirement benefit obligations (30,809) (26,853) (32,389)
(84,492) (82,534) (88,665)
Net liabilities (78) (205) (3,071)
Shareholders' equity
Share capital 9,573 9,573 9,573
Share premium 3,552 3,552 3,552
Translation reserve (243) 1,217 122
Retained earnings (12,960) (14,547) (16,318)
Total equity (78) (205) (3,071)
The notes on pages 12 to 26 form part of these accounts.
Brammer CONSOLIDATED INTERIM CASH FLOW STATEMENT (unaudited)
The unaudited group cash flow for the six months
Six months to Six months to Year to
30 June 2005 30 June 2004 31 Dec 2004
Restated Restated
#'000 #'000 #'000
Retained profit/(loss) 3,626 (1,589) 850
Tax charge (including discontinued operations) 1,640 1,921 2,833
Depreciation of tangible and intangible assets 1,210 1,462 2,806
Share options - value of employee services 248 112 226
Share of associate's loss - 38 96
Loss on sale of business - 5,570 5,502
Profit on sale of property, plant and equipment - 1,040 1,040
Financing expense 1,326 1,552 2,617
Movement in working capital (4,078) 1,087 3,628
Pension obligations (60) (1,418) (888)
Cash generated from operating activities 3,912 9,775 18,710
Interest received 97 92 336
Interest paid (950) (1,768) (2,843)
Tax (paid)/received (594) 1,491 2,795
Net cash generated from operating activities 2,465 9,590 18,998
Cash flows from investing activities
Proceeds from disposal of subsidiaries (net of cash disposed 3,000 17,322 18,650
of)
Acquisition of subsidiaries (net of cash acquired) - - (144)
Investment in associated undertaking - (44) -
Deferred consideration paid on prior acquisitions (948) (2,074) (4,061)
Proceeds from sale of property, plant and equipment 17 2,537 2,564
Purchase of property, plant and equipment (833) (7,846) (8,442)
Purchase of software (67) (204) (318)
Net cash generated from investing activities 1,169 9,691 8,249
Cash flows from financing activities
Repayment of loans (2,199) (16,913) (24,803)
Finance lease principal payments (53) (482) (533)
Dividends paid to shareholders - - (2,117)
Purchase of own shares - (29) (187)
Net cash used in financing activities (2,252) (17,424) (27,640)
Net increase / (decrease) in cash and cash equivalents 1,382 1,857 (393)
Exchange gains and losses on cash and cash equivalents (1,015) (1,597) (438)
Cash and cash equivalents at beginning of period 7,804 8,635 8,635
Net cash at end of period 8,171 8,895 7,804
Cash and cash equivalents 8,171 9,241 8,320
Overdrafts - (346) (516)
Net cash at end of period 8,171 8,895 7,804
The notes on pages 12 to 26 form part of these accounts.
Brammer ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
Basis of preparation
The interim financial statements of Brammer PLC for the half year period ended
30 June 2005 are unaudited and do not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985.
From 1 January 2005, Brammer PLC is required to prepare its consolidated
financial statements in accordance with International Financial Reporting
Standards (IFRS) endorsed by the European Union. Reconciliations and
descriptions of the effect of the transition from UK GAAP to IFRS on the Group's
equity and its income statement are provided in an attachment to the interim
report.
Standards currently in issue and adopted by the EU are subject to interpretation
issued from time to time by the International Financial Reporting
Interpretations Committee (IFRIC). Further standards may be issued by the
International Accounting Standards Board that will be adopted for financial
years beginning on or after 1 January 2005. Additionally, IFRS is currently
being applied in the United Kingdom and in a large number of countries
simultaneously for the first time. Furthermore, due to a number of new and
revised Standards included within the body of the Standards that comprise IFRS,
there is not yet a significant body of established practice on which to draw in
forming options regarding interpretation and application. Accordingly, practice
is continuing to evolve. At this preliminary stage, therefore, the full
financial effect of reporting under IFRS as it will be applied and reported on
in the Company's first IFRS Financial Statements for the year ended 31 December
2005 may be subject to change.
These financial statements have been prepared in accordance with International
Financial Reporting Standards and IFRIC interpretations and with those parts of
the Companies Act, 1985 applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost convention. A
summary of the more important group accounting policies is set out below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, events or actions, actual results ultimately may differ
from those estimates.
When preparing the group's IFRS balance sheet at 1 January 2004 the following
optional exemptions from full retrospective application of IFRS accounting
policies have been adopted:
* The group has taken the option under IAS 19 revised, whereby, the
accumulated actuarial gains and losses in respect of employee defined
benefit plans have been recognised in full through reserves as opposed to
using the corridor approach
* Business combinations prior to 1 January 2004 have not been restated
on an IFRS basis
* IFRS 2 has not been applied to equity instruments granted before 7
November 2002
* Previously accumulated translation differences on net investments
overseas have been set to zero at 1 January 2004
* The group has adopted IAS 39 from 1 January 2005
Group accounting
Subsidiaries are those entities which the group has an interest of more than one
half of the voting rights or otherwise has power to govern the financial and
operating policies. The existence and effect of potential voting rights that are
presently exercisable or presently convertible are considered when assessing
whether the group controls another entity.
Subsidiaries are consolidated from the date on which control is transferred to
the group and are no longer consolidated from the date that control ceases. The
purchase method of accounting is used to account for the acquisition of
subsidiaries. Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised losses are also
eliminated unless cost cannot be recovered. Where necessary, the accounting
policies of subsidiaries have been changed in order to ensure consistency with
the policies adopted by the group.
Investments in associates are accounted for by the equity method of accounting.
Under this method the company's share of the post-acquisition profits or losses
of associates is recognised in the income statement and its share of
post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the cost of the
investment. Associates are entities over which the group generally has between
20% and 50% of the voting rights, or over which the group has significant
influence, but which it does not control. Unrealised gains on transactions
between the group and its associates are eliminated to the extent of the group's
interest in the associates; unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. The
group's investment in associates includes goodwill. When the group's share of
losses in an associate equals or exceeds its interest in the associate, the
group does not recognise further losses, unless the group has incurred
obligations or made payments on behalf of the associates.
The exemption under IFRS 1 which allows IFRS 3 to be applied prospectively from
the date of transition, has been taken. Business combinations recognised before
the date of transition have therefore not been restated.
Foreign currency translation
Measurement currency
Items included in the financial statements of each entity in the group are
measured using the currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity ("the measurement
currency"). The consolidated financial statements are presented in sterling,
which is the measurement currency of the parent.
Transactions and balances
Foreign currency transactions are translated into the measurement currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when deferred in
equity as qualifying cash flow hedges.
Group companies
Income statements and cash flows of foreign entities are translated into the
group's measurement currency at average exchange rates for the year and their
balance sheets are translated at the exchange rates ruling at the period end.
Exchange differences arising from the translation of the net investment in
foreign entities and of borrowings designated as hedges of such investments are
taken to shareholders' equity where the hedging criteria are met. The exemption
under IFRS 1, allowing these exchange differences to be reset to zero on
adoption of IFRS has been utilised. When a foreign entity is sold, these
exchange differences are recognised in the income statement as part of the gain
or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less
depreciation.
Depreciation is calculated on the straight-line method to write off the cost of
each asset to their residual values over their estimated useful lives as
follows:
Freehold buildings Individually estimated subject to a maximum of 50 years.
Leasehold properties The term of the lease subject to a maximum of 50 years.
Plant and equip. 10 years
Computers and similar office equip. 3-7 years
Motor cars 4 years
Commercial vehicles 3 years
Land is not depreciated
Where the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying
amount and are included in operating profit.
Repairs and maintenance are charged to the income statement during the financial
period in which they are incurred. The cost of major renovations is included in
the carrying amount of the asset when it is probable that future economic
benefits in excess of the originally assessed standard of performance of the
existing asset will flow to the group. Major renovations are depreciated over
the remaining useful life of the related asset.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the group's share of the net assets of the acquired subsidiary/associate at
the date of acquisition. Goodwill on acquisition of subsidiaries occurring on
or after 1 January 1998 is included in intangible assets. Goodwill on
acquisitions of associates occurring on or after 1 January 1998 is included in
investments in associates. Goodwill on acquisitions that occurred prior to 1
January 1998 has been charged in full to retained earnings in shareholders'
equity; such goodwill has not been retrospectively capitalised.
Prior to 1 January 2004, (the date of transition to IFRS) goodwill was amortised
over its estimated useful life; such amortisation ceasing on 31 December 2003.
Goodwill is subject to impairment review, both annually and when there are
indicators that the carrying value may not be recoverable. A write down is made
if the carrying amount exceeds the recoverable amount.
Computer software
Cost associated with maintaining computer software programmes are recognised as
an expense as incurred. Costs that are directly associated with identifiable
software systems operated by the group and will probably generate economic
benefits exceeding costs beyond one year, are recognised as intangible assets.
Direct costs include staff costs of the software development team and an
appropriate portion of relevant overheads.
Expenditure which enhances or extends the performance of identifiable software
systems beyond their original specifications is recognised as a capital
improvement and added to the original cost of the software. Computer software
development costs recognised as assets are amortised using the straight-line
method over their useful lives, not exceeding a period of 7 years.
Impairment of long life assets
Property, plant and equipment and other non-current assets, including goodwill
and intangible assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
carrying amount of the asset exceeds its recoverable amount which is the higher
of an asset's net selling price and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels at which there are
separately identifiable cash flows.
Finance leases where the group is the lessee
Leases of property, plant and equipment where the group is subject to
substantially all the risks and rewards of ownership, are classified as finance
leases. Finance leases are capitalised at the inception of the lease at the
lower of the fair value of the leased property or the present value of the
minimum lease payments. Each lease payment is allocated between the liability
and finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are
included in other payables. The interest element of the finance cost is charged
to the income statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the useful life of the asset or the lease term.
Leases where a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
Where reference is made in the report and financial statements to finance
leases, this includes hire purchase agreements.
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost of
inventory represents material and a proportion of procurement overheads.
Provisions are made for slow moving and obsolete items. Net realisable value is
the estimated selling price in the ordinary course of business, less selling
expenses.
Trade receivables
Trade receivables are carried at original invoice amount less provision made for
impairment of these receivables. A provision for impairment of trade
receivables is established when there is objective evidence that the group will
not be able to collect all amounts due according to the original terms of
receivables. The amount of the provision is the difference between the carrying
amount and the recoverable amount, being the present value of expected cash
flows, discounted at the market rate of interest for similar borrowers.
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purpose of the cash flow statement, cash and cash equivalents comprise cash on
hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank
overdrafts. Bank overdrafts are included within borrowings in current
liabilities on the balance sheet.
Deferred consideration
The amounts quoted for deferred payments relating to acquisitions and shown as
shares to be issued and deferred consideration are the directors' best estimates
of the actual amount which will be payable.
Employee benefits
Defined Contribution schemes
A defined contribution plan is a pension plan under which the group pays fixed
contributions into a separate entity (a fund) and will have no legal or
constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees benefits relating to employee service in
the current and prior periods. Contributions are charged to the profit and loss
account in the year in which they arise.
Defined Benefit schemes
A defined benefit plan is a pension plan that defines an amount of pension
benefit to be provided, usually as a function of one or more factors such as
age, years of service or compensation.
The operating and financing costs of such plans are recognised separately in the
income statement; service costs are spread systematically over the lives of
employees and financing costs are recognised in the periods in which they arise.
The liability in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet date minus the fair value
of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The present value
of the defined benefit obligation is determined by the estimated future cash
outflows using interest rates of government securities, which have terms to
maturity approximating the terms of the related liability.
The amendments to IAS 19 issued by the IASB allowing actuarial gains or losses
to be taken directly to reserves, as is required under FRS 17 'Retirement
Benefits', if endorsed by the EU, will be effective for accounting periods
commencing on or after 1 January 2006, with earlier adoption encouraged by the
IASB. Brammer has adopted these amended provisions from 1 January 2004 (the
date of transition).
Curtailment gains in respect of discontinued operations are recognised in the
income statement in the year of disposal
Termination Benefits
Termination benefits are payable whenever an employee's employment is terminated
before the normal retirement date or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The group recognises termination
benefits when it is demonstrably committed to either terminate the employment of
current employees according to a detailed formal plan without possibility of
withdrawal or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after
balance sheet date are discounted to present value.
Profit sharing and bonus plans
Liabilities for profit sharing and bonus plans are expected to be settled within
12 months and are measured at the amounts expected to be paid when they are
settled.
Share-based payments
The fair values of employee share option and share performance plans are
calculated using the Black-Scholes model. In accordance with IFRS 2, '
Share-based Payments' the resulting cost is charged to the income statement over
the vesting period of the options. The value of the charge is adjusted to
reflect expected and actual levels of options vesting. The cost of shares
acquired to satisfy potential awards under the group's share performance plan
are taken directly to reserves.
Borrowings
Borrowings are recognised as the proceeds received, net of transaction costs
incurred, which are then amortised over the expected life of the facility.
Deferred income taxes
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. Currently enacted tax
rates are used in the determination of deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.
No deferred tax asset or liability is recognised in respect of temporary
differences associated with investments in subsidiaries, branches, associates
and joint ventures, where the group is able to control the timing of reversal of
the temporary differences and it is probable that the temporary differences will
not reverse in the foreseeable future.
Provisions
Provisions are recognised when the group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation, and a reliable estimate of
the amount can be made. Where the group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain.
Provisions are measured at the best estimate of the amount to be spent and are
discounted where material.
Revenue recognition
Revenue comprises the invoiced value for the sale of goods and services net of
value-added tax, rebates and discounts, and after eliminating sales within the
group. Revenue from the sale of goods is recognised when significant risks and
rewards of ownership of the goods are transferred to the buyer, which is usually
on dispatch.
Revenue arising from royalties is recognised on an accruals basis in accordance
with the substance of the relevant agreements. Interest income is recognised on
a time proportion basis, taking account of the principal outstanding and the
effective rate over the period of maturity, when it is determined that such
income will accrue to the group. Dividends are recognised when the right to
receive payment is established.
Dividends
The final dividend is recognised in the group's financial statements in the
period in which it is approved by the group's shareholders. The interim dividend
is recognised when paid.
Segment reporting
Geographical segments provide products or services within a particular economic
environment that is subject to risks and returns that are different from those
of components operating in other economic environments. Business segments
provide products or service that are subject to risks and returns that are
different from those of other business segments.
Treasury shares
The cost of the purchase of own shares are taken directly to reserves and are
disclosed in the "treasury shares" reserve
Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in
presentation in the current year.
BRAMMER FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk
(including foreign exchange price risk), credit risk, liquidity risk, cash flow
and interest rate risk. The Group's overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group's financial performance.
Risk management is carried out by a central treasury department (Group Treasury)
under policies approved by the Board of Directors. Group Treasury identifies,
evaluates and hedges financial risks in close co-operation with the Group's
operating units. The Board provides written principles for overall risk
management, as well as written policies covering specific areas, such as foreign
exchange risk, interest-rate risk, credit risk, use of non-derivative financial
instruments, and investing excess liquidity.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from currency exposures, primarily with respect to the Euro and the UK
pound. Foreign exchange risk arises primarily from recognised assets and
liabilities and net investments in foreign operations. The Group has several
investments in foreign operations, whose net assets are exposed to foreign
currency translation risk. Currency exposure arising from the net assets of the
Group's foreign operations is managed primarily through borrowings denominated
in the relevant foreign currencies.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in
place to ensure that sales of products are made to customers with an appropriate
credit history.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the
availability of funding through an adequate amount of committed credit
facilities. Group treasury aims to maintain flexibility in funding by keeping
committed credit lines available.
Cash flow and interest rate risk
The Group's income and operating cash flows are substantially independent of
changes in market interest rates. The Group's cash flow interest rate risk
arises from long-term borrowings. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at fixed rates expose
the Group to fair value interest rate risk. Due to the benign state of the
interest rate environment the Group does not enter into fixed rate borrowings of
greater than six months nor enter into floating to fixed rate interest rate
swaps. Instead the Group minimises effective interest rates using cash pooling
and tight management of working capital.
Accounting for hedging activities
The Group documents at the inception of the transaction the relationship between
the hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking hedging transactions. The Group also
documents its assessment, both at hedge inception and on an on-going basis, of
whether the hedging instruments that are used are highly effective. Where the
Group hedges net investments in foreign entities through currency borrowings,
gains or losses on the borrowings are hedging instrument are recognised in
equity. The gains or losses relating to the ineffective portion are recognised
immediately in the income statement.
Brammer NOTES TO THE ACCOUNTS
1 COMPARATIVE RESULTS
Comparative figures for the year ended 31 December 2004 are taken from the
company's statutory accounts (as adjusted to comply with the new IFRS
regulations) which have been delivered to the Registrar of Companies with an
unqualified audit report. Copies of the 2004 annual report and the 2005 interim
report are available on the company's web site (www.brammer.biz).
2 SEGMENTAL ANALYSIS
Continuing operations
Continuing operations represent the Brammer distribution business which is a
separately identifiable segment. The group is primarily controlled on a country
by country basis in line with legal structure of the group. Segment assets
include property, plant and equipment, goodwill, inventories, debtors and
operating cash, but exclude deferred tax. Segment liabilities comprise operating
liabilities but exclude taxation and corporate borrowings. All inter-segmental
trading is at an arms-length basis.
UK France Germany Spain Benelux Other Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Six months ended 30 June
2005
Revenue
Sales to external customers 52,285 27,161 38,501 13,981 10,292 3,308 145,528
Inter company sales 188 162 594 184 799 (1,927) -
Total 52,473 27,323 39,095 14,165 11,091 1,381 145,528
Operating profit 839 1,169 2,500 1,321 865 (102) 6,592
Interest expense (1,422)
Interest income 96
Profit before tax 5,266
Tax (1,640)
Profit for the year 3,626
Segment assets 41,705 24,703 22,174 17,372 11,408 3,143 120,505
Goodwill - 2,177 27,357 1,581 3,846 929 35,890
Investments - - - - - - -
Associates - - - - - - -
41,705 26,880 49,531 18,953 15,254 4,072 156,395
Corporation tax -
Deferred tax 10,506
Total assets 166,901
Segment liabilities (24,608) (13,021) (11,596) (10,305) (4,637) (3,352) (67,519)
Corporation tax (3,318)
Deferred tax (4,114)
Dividends (1,580)
Loans (59,639)
Retirement benefit (30,809)
liability
Total liabilities (166,979)
Net assets (78)
Other segment items
Capital expenditure 416 70 62 183 36 133 900
Depreciation (591) (145) (123) (96) (71) (184) (1,210)
2 SEGMENTAL ANALYSIS(Continued)
UK France Germany Spain Benelux Other Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Restated
Six months ended 30 June
2004
Revenue
Sales to external customers 51,801 25,147 34,449 13,312 9,827 2,340 136,876
Inter company sales - 162 543 209 988 (1,902) -
Total 51,801 25,309 34,992 13,521 10,815 438 136,876
Operating profit 73 810 1,686 1,548 607 (169) 4,555
Interest expense (1,645)
Interest income 93
Share of associate's loss - - - - - (39) (39)
after tax
Profit before tax 2,964
Tax (677)
Profit for the year 2,287
Segment assets 47,447 25,192 20,708 15,378 11,017 1,751 121,493
Goodwill - 2,163 27,173 1,571 2,970 447 34,324
Associates - - - - - 462 462
47,447 27,355 47,881 16,949 13,987 2,660 156,279
Deferred tax 8,244
Total assets 164,523
Segment liabilities (24,133) (13,363) (12,795) (8,186) (6,739) (1,578) (66,794)
Corporation tax (293)
Deferred tax (2,802)
Dividends (1,436)
Loans (66,550)
Retirement benefit (26,853)
liability
Total liabilities (164,728)
Net assets (205)
Other segment items
Capital expenditure 845 71 37 24 102 174 1,253
Depreciation (1,137) (165) (188) (95) (68) (32) (1,685)
3 EARNINGS PER SHARE
Half year 2005
Earnings per share
Earnings Basic Diluted
#'000
Weighted average number of shares in issue ('000) 47,865 47,985
Total
Profit for the financial year 3,626 7.6p 7.6p
Exceptional items -
Tax on exceptional items -
Earnings before exceptional items 3,626 7.6p 7.6p
Continuing operations
Profit for the financial year 3,626 7.6p 7.6p
Exceptional items -
Tax on exceptional items -
Earnings before exceptional items 3,626 7.6p 7.6p
Half year 2004 restated
Earnings per share
Earnings Basic Diluted
#'000
Weighted average number of shares in issue ('000) 47,865 47,922
Total
Loss for the financial year (continuing and discontinued) (1,589) (3.3)p (3.3)p
Exceptional items 274
Loss on sale of subsidiary net tangible assets (note 4) 5,570
Exceptional pension income (note 4) (1,300)
Tax on exceptional pension income 390
Earnings before exceptional items and loss on discontinued operations 3,345 7.0p 7.0p
Continuing operations
Profit for the financial year 2,287 4.8p 4.8p
Exceptional items 274
Tax on exceptional items -
Earnings before exceptional items 2,561 5.4p 5.3p
Full year 2004 restated
Earnings per share
Earnings Basic Diluted
#'000
Weighted average number of shares in issue ('000) 47,865 47,931
Total
Profit for the financial year (continuing and discontinued) 850 1.8p 1.8p
Exceptional items 850
Loss on sale of subsidiary net tangible assets (note 4) 5,502
Exceptional pension income (note 4) (1,300)
Tax on exceptional pension income 390
Earnings before exceptional items and loss on discontinued operations 6,292 13.1p 13.1p
Continuing operations
Profit for the financial year 3,804 7.9p 7.9p
Exceptional items 850
Tax on exceptional items (251)
Earnings before exceptional items 4,403 9.2p 9.2p
4 DISCONTINUED OPERATIONS
Six months to Six months to Year to
30 June 2005 30 June 2004 31 Dec 2004
Restated Restated
#'000 #'000 #'000
Revenue - 19,305 19,305
Cost of sales - (11,710) (11,710)
Gross profit - 7,595 7,595
Distribution costs - (5,957) (5,957)
Profit before tax - 1,638 1,638
Taxation - (1,244) (390)
Profit for the period - 394 1,248
Exceptional pension income - 1,300 1,300
Loss on sale of subsidiary net tangible assets - (5,570) (5,502)
Total - (3,876) (2,954)
5 PENSIONS
The valuations used for IAS 19 disclosures have been based on the most recent actuarial valuation at 1
January 2003 updated by Watson Wyatt LLP to take account of the requirements of IAS 19 in order to assess
the liabilities of each of the schemes at 30 June 2005. Assets are stated at their market value at 30 June
2005.
The financial assumptions used to calculate the liabilities
under IAS 19 are
UK
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
Inflation rate 2.80% 2.80% 2.80%
Rate of increase in salaries 4.30% 4.30% 4.30%
Rate of increase of pensions in payment 2.80% 2.80% 2.80%
Rate of increase for deferred pensioners 2.80% 2.80% 2.80%
Discount rate 5.30% 5.30% 5.30%
Netherlands
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
Inflation rate 2.00% 2.00% 2.00%
Rate of increase in salaries 3.00% 3.00% 3.00%
Rate of increase of pensions in payment 2.00% 2.00% 2.00%
Rate of increase for deferred pensioners 2.00% 2.00% 2.00%
Discount rate 4.75% 4.75% 4.75%
The amounts recognised in the balance sheet are determined as
follows:
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
#'000 #'000 #'000
Present value of funded obligations 90,559 78,653 88,089
Fair value of plan assets (59,750) (51,800) (55,700)
Net liability recognised in the balance sheet 30,809 26,853 32,389
5 PENSIONS(continued)
The amounts recognised in the income statement are as follows
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
#'000 #'000 #'000
Current service cost 855 1,005 1,909
Interest cost 2,300 2,100 4,300
Expected return on plan assets (2,000) (2,000) (3,900)
1,155 1.105 2,309
On-going pension expense
Settlement/Curtailment gain on discontinued operations - (1,300) (1,300)
Total pension expense/(income) included within staff costs 1,155 (195) 1,009
Analysis of the movement in the balance sheet net liability
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
#'000 #'000 #'000
Opening 32,389 30,971 30,971
Exchange adjustments (60) - -
Fair value adjustments in Holland - - 543
Total expense as above 1,155 (195) 1,009
Employer contributions (1,155) (1,223) (2,439)
Actuarial (gain)/loss recognised as a reserves movement (1,520) (2,700) 2,305
Closing 30,809 26,853 32,389
The on-going pension expense has been included in distribution costs. The actual return on plan assets was
#4.1m (2004:#1.5m)
6 CLOSING NET DEBT
Six months to Six months to Year to 31 Dec
June 2005 June 2004 2004
#'000 #'000 #'000
Borrowings - current (10,879) (14,312) (13,564)
Borrowings - non-current (48,760) (52,584) (51,797)
Cash and cash equivalents 8,171 9,241 8,320
Closing net debt (51,468) (57,655) (57,041)
7 RECONCILIATION OF NET ASSETS AND PROFIT UNDER UK GAAP TO IFRS
The reconciliations, as required by IFRS 1, are set out below.
RECONCILIATION OF NET ASSETS
31 Dec 2004 30 June 2004 1 January
2004
Notes #'000 #'000 #'000
Net assets as reported under UK GAAP 16,345 17,499 20,153
Reversal of accrued dividend A 1,580 718 1,436
Pension deficit not previously recognised B (31,585) (26,853) (30,971)
Full recognition of deferred tax on pension B 9,499 8,244 9,489
deficit
Reverse SSAP 24 debtor C (1,549) (1,132) (682)
Reverse deferred tax on SSAP 24 debtor C 461 340 205
Reverse amortisation of goodwill D 2,292 1,189 -
Additional write off of goodwill on E (201) (201) -
disposal
Exchange adjustments F 87 (9) -
Net assets as reported under IFRS (3,071) (205) (370)
RECONCILIATION OF PROFIT BEFORE FINANCE COSTS
Year to Six months to
31 Dec 2004 30 June 2004
Notes #'000 #'000
Continuing businesses
Total UK GAAP profit before interest 6,173 2,402
UK GAAP loss on sale of businesses 2,833 2,901
UK GAAP discontinued businesses operating (1,437) (1,437)
profit
UK GAAP continuing operations profit before 7,569 3,866
interest
Pensions B (735) (350)
Reversal of amortisation of goodwill D 2,091 988
Associate's interest K (4) (4)
Costs of share options G (57) 16
Profit before finance costs as reported 8,864 4,516
under IFRS
RECONCILIATION OF PROFIT/ (LOSS) FOR THE PERIOD
Year to Six months to
31 Dec 2004 30 June 2004
Notes #'000 #'000
Loss for the period as reported under UK (1,369) (1,508)
GAAP
Pensions B/C (735) (350)
Reversal of amortisation of goodwill D 2,292 1,189
Costs of share options G (57) 16
Tax H (173) (285)
Exceptional pension income B 1,300 1,300
Exceptional write off of goodwill on E (201) (201)
disposal
Exchange recycled on disposal F (2,468) (2,468)
Reversal of accrued dividend A 2,261 718
Profit/(Loss) for the period as reported 850 (1,589)
under IFRS
8 RECONCILIATION OF EQUITY FROM UK GAAP TO IFRS FOR THE PERIOD ENDED
31 December 2004 30 June 2004 1 January 2004
Effects Effects Effects
UK of move UK of move UK of move
GAAP to IFRS IFRS GAAP to IFRS IFRS GAAP to IFRS IFRS
Notes #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Fixed assets
Goodwill D / E 35,216 2,178 37,394 33,346 978 34,324 49,569 - 49,569
Intangible assets I - 1,367 1,367 - 1,345 1,345 - 2,663 2,663
Property, plant and I 11,924 (1,367) 10,557 11,629 (1,345) 10,284 23,783 (2,663) 21,120
equipment
Investment in associate D - - - 461 1 462 478 - 478
Deferred tax assets H - 10,813 10,813 - 8,244 8,244 - 9,489 9,489
47,140 12,991 60,131 45,436 9,223 54,659 73,830 9,489 83,319
Current assets
Inventories 45,862 - 45,862 45,109 - 45,109 51,018 - 51,018
Trade and other 55,520 - 55,520 55,514 - 55,514 70,279 - 70,279
receivables
Retirement benefits C 1,549 (1,549) - 591 (591) - 682 (682) -
Cash and cash 8,320 - 8,320 9,241 - 9,241 12,740 - 12,740
equivalents
111,251 (1,549) 109,702 110,455 (591) 109,864 134,719 (682) 134,037
Current liabilities
Financial liabilities (13,564) - (13,564) (14,312) - (14,312) (28,583) - (28,583)
Trade and other (66,021) 804 (65,217) (60,926) (541) (61,467) (80,386) - (80,386)
payables
Dividend A (1,580) 1,580 - (2,154) 718 (1,436) (1,436) 1,436 -
Deferred consideration (2,762) - (2,762) (4,686) - (4,686) (6,818) - (6,818)
Corporation tax (2,696) - (2,696) (293) - (293) (1,242) - (1,242)
liabilities
(86,623) 2,384 (84,239) (82,371) 177 (82,194) (118,465) 1,436 (117,029)
Non-current liabilities
Financial liabilities (51,797) - (51,797) (52,584) - (52,584) (63,876) - (63,876)
Deferred tax H (2,790) (853) (3,643) (3,142) 340 (2,802) (3,233) 205 (3,028)
liabilities
Provisions (637) - (637) - - - (2,474) - (2,474)
Deferred consideration (199) - (199) (295) - (295) (348) - (348)
Retirement benefit B - (32,389) (32,389) - (26,853) (26,853) - (30,971) (30,971)
obligation
(55,423) (33,242) (88,665) (56,021) (26,513) (82,534) (69,931) (30,766) (100,697)
Net assets employed 16,345 (19,416) (3,071) 17,499 (17,704) (205) 20,153 (20,523) (370)
Shareholders' equity
Ordinary shares 9,573 - 9,573 9,573 - 9,573 9,573 - 9,573
Share premium 3,552 - 3,552 3,552 - 3,552 3,552 - 3,552
Other reserves G - 384 384 - 270 270 - 158 158
Translation reserve J - 122 122 - 1,217 1,217 - - -
Retained earnings 3,220 (19,922) (16,702) 4,374 (19,191) (14,817) 7,028 (20,681) (13,653)
Total equity 16,345 (19,416) (3,071) 17,499 (17,704) (205) 20,153 (20,523) (370)
9 RECONCILIATION OF PROFIT BEFORE TAX FROM UK GAAP TO IFRS FOR THE PERIOD ENDED
31 December 2004 30 June 2004
Effects Effects
UK of move UK of move
GAAP to IFRS IFRS GAAP to IFRS IFRS
Notes #'000 #'000 #'000 #'000 #'000 #'000
Continuing operations
Revenue 270,786 - 270,786 136,876 - 136,876
Cost of sales (189,337) - (189,337) (95,993) - (95,993)
Gross profit 81,449 - 81,449 40,883 - 40,883
Distribution costs before amortisation of B/G (70,847) (792) (71,639) (35,720) (334) (36,054)
goodwill
Amortisation of goodwill D (2,089) 2,089 - (987) 987 -
Exceptional (850) - (850) (274) - (274)
Total distribution costs and administrative (73,786) 1,297 (72,489) (36,981) 653 (36,328)
expenses
Operating profit 7,663 1,297 8,960 3,902 653 4,555
Financing costs (2,621) 4 (2,617) (1,556) 4 (1,552)
Share of associate's operating profit D (94) (2) (96) (36) (3) (39)
4,948 1,299 6,247 2,310 654 2,964
Discontinued operations
Profit before tax E 1,437 201 1,638 1,437 201 1,638
Exceptional pension income B 1,300 1,300 1,300 1,300
Loss on sale of discontinued businesses E/F (2,833) (2,669) (5,502) (2,901) (2,669) (5,570)
Profit before tax 3,552 131 3,683 846 (514) 332
Reconciliation of the cash flow statement from UK GAAP to IFRS
Income taxes paid during the year ended 2004 are classified as part of operating
cash flows under IFRS, but were included in a separate category of tax cash flow
under UK GAAP. Cash and cash equivalents include short term deposits under IFRS,
whilst under UK GAAP the same has been included in the management of liquid
resources category. There are no other material differences between the cash
flow statement presented under IFRS and the cash flow statement presented under
UK GAAP.
10 NOTES TO RECONCILIATIONS FROM UK GAAP TO IFRS
A Under IFRS the interim dividend is recognised on the date of payment and the
final dividend is recognised on the date of the annual general meeting when it
is approved. This adjustment reflects the effect of the timing adjustment
resulting from this change. Dividends are no longer presented in the profit and
loss account and are instead shown as a deduction from reserves.
B The full net pension liability is recognised for the first time according to
the calculation rules of IAS 19 in respect of the UK and Dutch Schemes
(previously disclosed under FRS 17). The results of these adjustments are
disclosed further in note 5 to these accounts. In the case of the Dutch Scheme,
an accrual for the pension liability at the date of acquisition of the KNS group
of #804,000 had already been recognised under UK GAAP and shown within trade and
other payables. When added together with the total IFRS pension adjustment at 31
December 2004 of #31,585,000, this results in a balance sheet value of
#32,389,000 at 31 December 2004. The excess of the ongoing charge under IAS 19
over the SSAP 24 charge in the year ended 31 December 2004 of #735,000
represents an IAS 19 charge of #2,309,000 less a SSAP 24 charge of #1,574,000.
The excess of the ongoing charge under IAS 19 over the SSAP 24 charge in the six
months ended 31 December 2004 of #350,000 represents an IAS 19 charge of
#1,105,000 less a SSAP 24 charge of #755,000. Full deferred tax is recognised on
all pension adjustments. As a result of the disposal of the Livingston Group, a
gain on curtailment of #1,300,000 arose in the pension scheme under IAS 19. This
has been recorded as an exceptional item within discontinued operations.
C As the full net pension liability is now recognised under IAS 19, the
previous SSAP 24 debtor has been written off and the associated deferred tax
liability reversed.
D Under IFRS goodwill is no longer amortised but, instead, is subject to
impairment tests. The group has established that no impairment is required in
relation to any of its goodwill. This adjustment reverses the previous goodwill
charge under UK GAAP.
E As a result of goodwill no longer being amortised under IFRS, the carrying
value of the Livingston group at the date of disposal was increased by this
write-back of goodwill, consequently increasing the loss on sale of the
Livingston group.
F Exchange adjustments result from IFRS adjustments denominated in foreign
currencies (principally the Euro) in respect of the recycling of the exchange on
the disposal of the Livingston Group (#2,468,000), Goodwill and the Dutch
pension scheme.
G Under UK GAAP, shares owned by the group were held in reserves and a charge
made in respect of the cost of the related share options. Under IFRS a charge is
made to the profit and loss account in respect of all share options to reflect
the value of employee services provided in each period. This is calculated using
the "Black-Scholes" model. This adjustment reflects the difference between these
two valuation methods. The "Black-Scholes" charge for the year ended 31 December
2004 was #226,000 compared with an amortisation charge of #169,000. The "
Black-Scholes" charge for the six months ended 31 December 2004 was #112,000
compared with an amortisation charge of #128,000. The "Black-Scholes" cost
calculated in each period is charged to the profit and loss account and credited
to other reserves.
H The taxation charge has been adjusted to fully reflect deferred tax movements
on the adjustments related to pensions. In the year to December 2004, the
deferred tax assets and liabilities have been grossed up where no legal right of
set-off exists.
I Specialist software previously reported within tangible assets has been
re-classified as an intangible asset.
J Under IFRS the group's unrealised exchange movements arising since the date
of transition to IFRS are reported separately in the "translation reserve".
Under UK GAAP all unrealised exchange movement were charged/credited to the
profit and loss account reserve.
K Under IFRS the interest arising from associates is treated as part of the
share of profits of the associate whereas under UK GAAP this was part of
interest.
11 BASIS OF ACCOUNTING
The interim financial statements have been prepared on the basis of the
accounting policies set out above. The interim financial statements were
approved on 6 September 2005 by a duly appointed and authorised committee of the
board and are neither audited nor reviewed by the auditors.
12 INTERIM ANNOUNCEMENT
A copy of the interim announcement is available for inspection at the registered
office of the company, Claverton Court, Claverton Road, Wythenshawe, Manchester,
M23 9NE and the offices of Citigate Dewe Rogerson Ltd, 3 London Wall Buildings,
London Wall, London EC2M 5SY, and will be posted to shareholders.
13 INTERIM DIVIDEND
Relevant dates concerning the payment of the interim dividend are
Record date 7 October 2005
Payment date 4 November 2005
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DGGDCISGGGUU
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