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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Fonebak | LSE:FON | London | Ordinary Share | GB00B06GNN57 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 57.02 | 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:2567N
Fonebak plc
05 February 2008
Released: 5th February 2008
As stated in the Chief Financial Officers review dated 26th September 2007,
Fonebak Plc will be reporting future results under International Financial
Reporting Standards ("IFRS") as opposed to UK Generally Accepted Accounting
Practices ("UK GAAP"). This statement deals with the re-statement under IFRS of
previously released information under UK GAAP for the year ended 30 June 2007
and the interim accounts for the six months ended 31 December 2006, together
with the transition balance sheet at 1 July 2006.
The principal effects on Fonebak's reported results as a result of the adoption
of IFRS are:
* Recognition of a separable intangible asset relating to customer
relationships and contracts following the acquisition of CRC on 24 January 2007;
* Cessation of goodwill amortisation;
* Revision to goodwill impairment charge due to the reversal of goodwill
previously amortised;
* Recognition of interest rate swap at fair value;
* Recognition of certain deferred tax liabilities; and
* Reclassification of purchased software to intangible assets from
tangible assets.
Key headlines from the restated accounts for the year ended 30 June 2007:
Underlying operating losses unchanged at £0.3 million before goodwill
impairment, restructuring costs, share based payments and amortisation of
customer contracts and relationships intangible asset.
Net assets of £15.1 million increased by £0.6 million from UK GAAP reported
£14.5 million.
Operating cash flows of £8.3 million unchanged.
Enquiries:
Fonebak plc
David Kelham Chief Financial Officer 01865 471900
KBC Peel Hunt Ltd (Nominated Advisor and Broker)
Jonathan Marren 020 7418 8900
Oliver Stratton 020 7418 8900
Introduction
The Fonebak plc Group ("Group") is required to adopt International Financial
Reporting Standards ("IFRS") in the consolidated financial statements for the
year ending 30 June 2008 in place of UK Generally Accepted Accounting Principles
("UK GAAP"). Up to and including 30 June 2007, the Group has prepared and
presented its financial statements in accordance with UK GAAP.
This document describes the main differences between UK GAAP and IFRS that
impact the Group and provides IFRS information for the year ended 30 June 2007
and 6 months to 31 December 2006, as well as the IFRS opening balance sheet as
at 1 July 2006, together with reconciliations to previously reported figures
under UK GAAP.
Basis of preparation
The IFRS financial information presented in this document is based on all
currently endorsed IFRSs and International Accounting Standards ("IAS") and
interpretations by the International Accounting Standards Board ("IASB") and its
committees.
The IFRS financial information in this document has been prepared in accordance
with accounting policies expected to be applied in the Group's first IFRS
financial statements for the year ending 30 June 2008.
IFRS 1 - First time adoption
IFRS 1, "First time adoption of International Financial Reporting Standards"
prescribes how the Group should apply IFRS for the first time in preparing its
consolidated financial statements. Under this standard, the Group is required
to establish the IFRS accounting policies expected to be adopted by the Group at
30 June 2008 and apply these retrospectively to determine the IFRS opening
balance sheet as at the date of transition, 1 July 2006.
IFRS 1 contains certain exemptions from the requirement to fully adopt IFRS in
the opening balance sheet. The Group has applied the relevant exemptions as
follows:
IFRS 3 - Business Combinations
The Group has elected not to apply IFRS 3 retrospectively to business
combinations occurring prior to the transition to IFRS on 1 July 2006.
IAS 21 - Cumulative translation differences
The Group has elected to set the cumulative translation differences arsing on
consolidation of its foreign operations to zero at 1 July 2006. There were no
foreign exchange differences in the year to 30 June 2007.
Description of adjustments
The following commentary describes the differences between IFRS and UK GAAP that
have a material impact on the income or net assets of the Group.
Income Statement - Retained loss Note Year ended 30 Six months
June 2007 ended 31
December 2006
£'000 £'000
As reported under UK GAAP (10,418) (1,207)
Goodwill amortisation 1 1,581 734
Goodwill impairment 2 (1,112) -
Customer relationship amortisation 3 (171) -
Deferred tax reversed on customer relationship 5 51 -
amortisation
Deferred tax adjustment due to tax rate change 5 31 -
Deferred tax on overseas un-remitted earnings 6 (23) -
Restated under IFRS (10,061) (473)
Balance Sheet - Equity Note Year ended 30 Six months Year ended 30
June 2007 ended 31 June 2006
December 2006
£'000 £'000 £'000
As reported under UK GAAP 14,532 14,714 16,049
Goodwill amortisation 1 1,581 734 -
Goodwill impairment 2 (1,112) - -
Customer relationship amortisation 3 (171) - -
Recognition of interest rate swap at fair value 4 281 33 33
Deferred tax reversed on customer relationship 5 51 - -
amortisation
Deferred tax adjustment due to tax rate change 5 31 - -
Deferred tax liability on recognition of 5 (84) (10) (10)
interest rate swap
Deferred tax on overseas un-remitted earnings 6 (23) - -
Restated under IFRS 15,086 15,471 16,072
Adjustment 1 - Goodwill amortisation
IFRS 3 " Business Combinations" prohibits the annual amortisation of goodwill
and instead goodwill is tested for impairment on transition to IFRS and annually
thereafter. The carrying value of goodwill at the date of transition to IFRS was
£19,120,000 and the amortisation ceases from that date. The impact on the income
statement is to write back goodwill amortisation of £1,581,000 for the year
ended 30 June 2007 and £734,000 for the six months ended 31 December 2006. There
was no goodwill impairment on transition to IFRS.
Adjustment 2 - Goodwill impairment
Under IAS 36 "Impairment of assets" goodwill must be tested annually for
impairment. In the UK GAAP consolidated financial statements for the year ended
30 June 2007, an exceptional goodwill impairment of £5,469,000 was recognised.
As a result of the write back of goodwill amortisation (adjustment 1), there is
an additional goodwill impairment on the original Fonebak business, Stoke,
Barnet and Romania of £1,112,000 to be recognised in the financial statements
for the year ended 30 June 2007. There is no impairment to be recognised in the
6 months ended 31 December 2006.
Adjustment 3 - Customer contract and relationship intangible asset
It is mandatory to account for all material acquisitions in accordance with IFRS
3 "Business Combinations" from the date of transition, which includes the
acquisition of CRC Group, acquired on 24 January 2007.
Under IFRS goodwill is required to be allocated amongst the separately
identifiable assets of the business to the extent that they satisfy the criteria
for the recognition of an intangible asset. The value attributed to each
intangible asset should be fair value, defined as "the amount for which an asset
could be exchanged, or a liability settled, between knowledgeable willing
parties in an arms length transaction."
The only separately identifiable intangible asset arising on the acquisition of
CRC by Fonebak relates to customer contracts and relationships. The fair value
of this intangible asset has been calculated by assessing the residual income
generated by this intangible asset alone. An intangible asset of £2,050,000 has
been recognised out of the total goodwill in the CRC business of £13,200,000
which includes the goodwill arising on consolidation and the goodwill in the
business from previous acquisitions.
The customer contracts and relationships intangible asset will be written off
over 5 years on a straight line basis which is the estimated useful economic
life. An amortisation charge of £171,000 has been recognised for the period from
24 January 2007 (the date of acquisition) to 30 June 2007.
Adjustment 4 - Interest rate swap
IAS 39 "Financial Instruments: Recognition and Measurement" requires all
derivative financial instruments to be included on the balance sheet at fair
value. Between 1 July 2006 and the current date the Group has only held one
interest rate swap, which is used to fix the interest rate on its borrowings.
This derivative qualifies as a cash flow hedge and since the date of transition
the hedge has been effective and therefore movements are recognised in equity in
a "hedging reserve".
The fair value of the interest rate swap at each of the balance sheet dates was
as follows:
As at 30 June 2007 - £281,000 asset
As at 31 December 2006 - £33,000 asset
As at 30 June 2006 - £33,000 asset
Adjustment 5 - Deferred tax on IFRS adjustments
The IFRS adjustments relating to the recognition of customer contracts and
relationships (adjustment 3) and the interest rate swap (adjustment 4) give rise
to a deferred tax liability. Deferred tax is measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability
settled based on tax rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date.
Customer contracts and relationships intangible asset
The deferred tax movements relating to the recognition of the customer contracts
and relationships intangible asset in the year ended 30 June 2007 are as
follows:
30 June 2007 Balance sheet Income
Deferred tax statement
asset/ deferred tax
(liability) credit
£'000 £'000
Deferred tax liability recognised at acquisition (615) -
date
Movement on initial recognition of deferred tax 31 31
due to tax rate change
Deferred tax released as intangible asset 51 51
amortised in year
Impact on the IFRS financial information (533) 82
Interest rate swap
A deferred tax liability has been recognised at each of the balance sheet dates
based on the fair value on the interest rate swap as follows:
As at 30 June 2007 - £84,000 liability
As at 31 December 2006 - £10,000 liability
As at 30 June 2006 - £10,000 liability
Adjustment 6 - Deferred tax on previous UK GAAP balances
IAS 12 "Income Taxes" requires that deferred tax is provided in full on
temporary differences arising between the tax base of assets and liabilities and
their carrying amounts in the consolidated financial statements rather than just
taxable timing difference under UK GAAP. As a result an additional deferred tax
liability of £23,000 has been recognised in relation to un-remitted earnings
from overseas CRC subsidiaries.
Adjustment 7 - Purchased software
Certain software, classified as tangible fixed assets under UK GAAP, has been
assessed in accordance with IAS 38 and reclassified to intangible assets under
IFRS. The net book value of assets reclassified to intangible assets is £124,000
at 30 June 2006, £112,000 at 31 December 2006 and £242,000 at 30 June 2007.
There is no impact to the overall net assets or retained profit of the Group.
Exceptional items (IAS 1)
IAS 1 "Presentation of financial statements" does not recognise the term
non-operating exceptional items and there are no prescribed exceptional items
recognised below operating profit. The Group will continue to disclose on the
face of the income statement additional headings and subtotals for exceptional
items which are significant by virtue of their size or incidence. This is to
allow a full understanding of the underlying performance of the Group.
Consolidated Income Statement - IFRS format
Year ended 30 June 2007
UK GAAP (audited) IFRS adjustments IFRS (unaudited)
(unaudited)
£'000 £'000 £'000
Revenue 96,130 - 96,130
Cost of sales (89,859) - (89,859)
Gross profit 6,271 - 6,271
Administrative expenses (16,654) 298 (16,356)
Operating loss before goodwill (324) - (324)
amortisation, exceptional items and share based
payments
Amortisation of goodwill (1,581) 1,581 -
Exceptional goodwill impairment (5,469) (1,112) (6,581)
Intangible asset amortisation - (171) (171)
Exceptional restructuring costs (3,133) - (3,133)
Share based payments 124 - 124
Operating loss (10,383) 298 (10,085)
Net financing costs (646) - (646)
Profit before tax (11,029) 298 (10,731)
Taxation 611 59 670
Retained profit for the year (10,418) 357 (10,061)
Loss per share - basic (47.32)p (45.70)p
Loss per share - diluted (47.32)p (45.70)p
Underlying loss per share - basic (5.90)p (5.63)p
Underlying loss per share - diluted (5.90)p (5.63)p
The audited UK GAAP figures above were previously presented on a UK GAAP format
and are represented above to conform with the IFRS format.
Consolidated statement of recognised income and expense - IFRS format
Year ended 30 June 2007
UK GAAP (audited) IFRS adjustments IFRS (unaudited)
(unaudited)
£'000 £'000 £'000
Cash flow hedge - 248 248
Tax on items taken directly to equity - (74) (74)
Net income recognised directly to equity - 174 174
Loss for the financial year (10,418) 357 (10,061)
Total recognised income and expenses relating to (10,418) 531 (9,887)
the year
Consolidated Balance Sheet - IFRS format
As at 30 June 2007
UK GAAP (audited) IFRS adjustments IFRS (unaudited)
(unaudited)
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 25,350 (966) 24,384
Other intangible assets - 2,121 2,121
Property, plant and equipment 2,667 (242) 2,425
Deferred tax 1,240 (640) 600
29,257 273 29,530
Current assets
Inventory 6,079 - 6,079
Trade and other receivables 16,411 - 16,411
Current tax asset 1,287 - 1,287
Derivative and financial instruments - 281 281
Cash and cash equivalents 9,072 - 9,072
32,849 281 33,130
Current liabilities
Borrowings (5,942) - (5,942)
Trade and other payables (27,632) - (27,632)
(33,574) - (33,574)
Net current (liabilities)/assets (725) 281 (444)
Total assets less current liabilities 28,532 554 29,086
Non-current liabilities
Borrowings (14,000) - (14,000)
(14,000) - (14,000)
Net assets 14,532 554 15,086
Equity
Ordinary share capital 566 - 566
Share premium 25,304 - 25,304
Hedging reserve - 197 197
Translation reserve - - -
Retained earnings (11,338) 357 (10,981)
Total equity 14,532 554 15,086
Consolidated Cash Flow Statement - IFRS format
Year ended 30 June 2007
UK GAAP IFRS adjustments IFRS (unaudited)
(audited) (unaudited)
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 8,296 - 8,296
Tax paid (600) - (600)
Net cash from operating activities 7,696 - 7,696
Cash flows from investing activities
Purchase of property, plant and equipment (654) - (654)
Purchase of intangible assets - - -
Proceeds from disposal of property, plant & 7 - 7
equipment
Interest received 175 - 175
Acquisition of subsidiary (14,044) - (14,044)
Cash acquired with subsidiary (1,302) - (1,302)
Deferred consideration in respect of previous (2,682) - (2,682)
acquisition
Net cash used in investing activities (18,500) - (18,500)
Cash flows from financing activities
Dividends paid (192) - (192)
Interest paid (785) - (785)
Proceeds from issue of share capital 10,004 - 10,004
Costs associated with issue of shares (787) - (787)
New borrowings 19,500 - 19,500
Repayment of borrowings (9,365) - (9,365)
Repayment of finance leases (70) - (70)
Net cash used in financing activities 18,305 - 18,305
Net increase in cash and cash equivalents 7,501 - 7,501
Cash and cash equivalents at the beginning of year 1,137 - 1,137
Cash and cash equivalents at end of year 8,638 - 8,638
Represented by:
Cash and cash equivalents 9,072 - 9,072
Overdrafts (434) - (434)
8,638 - 8,638
Consolidated Income Statement - IFRS format
Six months ended 31 December 2006
UK GAAP IFRS adjustments IFRS (unaudited)
(unaudited) (unaudited)
£'000 £'000 £'000
Revenue 38,678 - 38,678
Operating loss before goodwill amortisation, (413) - (413)
exceptional items and share based payments
Amortisation of goodwill (734) 734 -
Share based payments (65) - (65)
Acquired activities 102 - 102
Operating loss (1,110) 734 (376)
Net financing costs (156) - (156)
Profit before tax (1,266) 734 (532)
Taxation 59 - 59
Retained profit for the year (1,207) 734 (473)
Loss per share - basic (6.29)p (2.46)p
Loss per share - diluted (6.29)p (2.46)p
Underlying loss per share - basic (6.29)p (2.66)p
Underlying loss per share - diluted (6.29)p (2.66)p
Consolidated statement of recognised income and expense - IFRS format
Six months ended 31 December 2006
UK GAAP IFRS adjustments IFRS (unaudited)
(unaudited) (unaudited)
£'000 £'000 £'000
Exchange adjustment (1) - (1)
Net income recognised directly to equity (1) - (1)
Loss for the financial year (1,207) 734 (473)
Total recognised income and expenses relating to (1,208) 734 (474)
the year
Consolidated Balance Sheet - IFRS format
As at 31 December 2006
UK GAAP IFRS adjustments IFRS (unaudited)
(unaudited) (unaudited)
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 18,480 734 19,214
Other intangible assets - 112 112
Property, plant and equipment 740 (112) 628
Deferred tax 42 (10) 32
19,262 724 19,986
Current assets
Inventory 5,290 - 5,290
Trade and other receivables 6,759 - 6,759
Current tax asset 5 - 5
Derivative and financial instruments - 33 33
Cash and cash equivalents 643 - 643
12,697 33 12,730
Current liabilities
Borrowings (1,623) - (1,623)
Trade and other payables (12,673) - (12,673)
(14,296) - (14,296)
Net current assets (1,599) 33 (1,566)
Total assets less current liabilities 17,663 757 18,420
Non-current liabilities
Borrowings (2,949) - (2,949)
(2,949) - (2,949)
Net assets 14,714 757 15,471
Equity
Ordinary share capital 384 - 384
Share premium 15,076 - 15,076
Hedging reserve - 23 23
Translation reserve - (1) (1)
Retained earnings (746) 735 (11)
Total equity 14,714 757 15,471
Consolidated Cash Flow Statement - IFRS format
Six months ended 31 December 2006
UK GAAP IFRS adjustments IFRS (unaudited)
(unaudited) (unaudited)
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 3,878 - 3,878
Tax paid (468) - (468)
Net cash from operating activities 3,410 - 3,410
Cash flows from investing activities
Purchase of property, plant and equipment (131) - (131)
Purchase of intangible assets - - -
Interest received 58 - 58
Acquisition of Stoke assets (406) - (406)
Deferred consideration in respect of previous (2,442) - (2,442)
acquisition
Net cash used in investing activities (2,921) - (2,921)
Cash flows from financing activities
Interest paid (178) - (178)
Dividend paid (192) (192)
Repayment of borrowings (600) - (600)
Repayment of finance leases (13) - (13)
Net cash used in financing activities (983) - (983)
Net decrease in cash and cash equivalents (494) - (494)
Cash and cash equivalents at the beginning of year 1,137 - 1,137
Cash and cash equivalents at end of year 643 - 643
Consolidated Balance Sheet - IFRS format
As at 1 July 2006
UK GAAP (audited) IFRS adjustments IFRS (unaudited)
(unaudited)
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 19,120 - 19,120
Other intangible assets - 124 124
Property, plant and equipment 728 (124) 604
Deferred tax 42 (10) 32
19,890 (10) 19,880
Current assets
Inventory 7,879 - 7,879
Trade and other receivables 6,528 - 6,528
Derivative and financial instruments - 33 33
Cash and cash equivalents 1,137 - 1,137
15,544 33 15,577
Current liabilities
Borrowings (1,400) - (1,400)
Trade and other payables (13,704) - (13,704)
Current tax liability (527) - (527)
(15,631) - (15,631)
Net current liabilities (87) 33 (54)
Total assets less current liabilities 19,803 23 19,826
Non-current liabilities
Borrowings (3,754) - (3,754)
(3,754) - (3,754)
Net assets 16,049 23 16,072
Equity
Ordinary share capital 384 - 384
Share premium 15,076 - 15,076
Hedging reserve - 23 23
Retained earnings 589 - 589
Total equity 16,049 23 16,072
This information is provided by RNS
The company news service from the London Stock Exchange
END
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