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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Alpha Airports | LSE:AAP | London | Ordinary Share | GB0000281328 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 109.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:9257R Alpha Airports Group PLC 29 September 2005 Alpha Airports Group Plc Results for the Six Months ended 31 July 2005 Unaudited 29 September 2005 * Encouraging overall revenue growth of 12.4% to #268.8m (2004/5: #239.2m), driven primarily by 8.4% growth in like-for-like international passengers at UK regional airports, and excellent 27% growth in Inflight Retail. * Adjusted* profit before tax down 34.7% to #6.6m (2004/5: #10.1m) due to new contract start-up costs in UK Flight Services, enhanced business development costs in UK Retail, and subdued Asian Retail trading post-tsunami. Profit before tax down 42% to #6.2m (2004/5: #10.7m). * Recent acquisitions in Turkey, Romania and Bulgaria performing to plan. * New #100 million five year debt financing secured. * UK pensions deficit has increased due primarily to lower long-term interest rates. This deficit will require increased future company funding and higher charges in our future results. * The Board has recommended a dividend of 1.0p per share (31 July 2004: 1.0p per share) to be paid on 4 November 2005 to shareholders on the register as at 7 October 2005. * From continuing operations before separately disclosable items, goodwill impairment and after adjustments for tax on associates. Commenting on the interim results, Kevin Abbott, Chief Executive, said: "Even though these results are broadly in line with our own expectations, we are disappointed to report a profits decline. We are pleased with the underlying progress made on many of last year's Flight Services initiatives, and we remain committed both to ongoing active development of our existing strongly positioned businesses and to further acquisitions. Despite our first half result and a weakening UK retail environment, we anticipate a strong second half recovery and are cautiously optimistic for overall Group progress for the full year." Enquiries: Alpha Airports Group Plc Kevin Abbott, Chief Executive Tel: 020 7554 1400 (today) Heather McRae, Finance Director Tel: 020 8580 3200 (thereafter) Gavin Anderson & Company Deborah Walter / Amelia Ward Tel: 020 7554 1400 Website: www.alpha-group.com Introduction Alpha's business is providing retailing and catering services to the world's airlines and airports. Our essence is "people making travel special". Alpha currently operates from over 150 retail and catering outlets at 83 airports in 15 countries across the globe. Group For the first time, the Group's results are reported under International Financial Reporting Standards ("IFRS") for the six months ended 31 July 2005 and the comparative results have been restated accordingly. We are pleased to report an overall increase in revenue of 12.4% to #268.8m (2004/5: #239.2m) benefiting from ongoing passenger growth in the UK regional airports and the acquisition of new businesses in Turkey, Romania and Bulgaria. Adjusted profit before tax (from continuing operations before exceptional items, goodwill impairment and excluding tax on associates) is down 34.7% to #6.6m (2004/5: #10.1m). We expected a weaker first half profit compared to last year due to a combination of new contract start-up costs for American Airlines in UK Flight Services, increased business development costs in UK Retail, and subdued Asian trading post-tsunami. We have benefited from a first time profit contribution from our recent Romanian and Bulgarian acquisition. However, our first half profit is slightly below our expectations due to subdued underlying UK Retail profits caused by weakening penetration levels. UK revenue is 8.9% ahead of the same period last year at #218.5m (2004/5: #200.6m) and revenue from international locations is up 30.3% to #50.3m (2004/5: #38.6m) benefiting from the acquisitions made during the last 8 months. Flight Services Overall Flight Services revenue increased 9.8% to #146.9m (2004/5: #133.8m). A significant part of the increase arose from the 27% like-for-like ongoing growth of our Inflight Retail business serving UK and European low-fare passengers, which now represents 36% of our total Flight Services business. Adjusted operating profit before interest and tax declined 15.7% to #4.3m (2004/5:#5.1m). In our major UK Flight Catering business, whilst the number of aircraft serviced increased, overall revenue has declined slightly, as our airline customers continue to seek cost-savings in meal service design. UK Flight Catering successfully launched its largest ever programme of new services to American Airlines at Heathrow and Gatwick and incurred significant one-off start-up costs. However, in a challenging London employment market - now easing - we also had to rely on substantial levels of overtime working to meet the increased service requirements, resulting in a significant first half profit decline in UK Flight Catering. UK Flight Catering is delighted to confirm the extension of major customer contracts with both British Airways CitiExpress and Continental Airlines for a further 3 and 7 years respectively, and existing major customers have committed to our Blue Sky Service concept, starting both this winter and next summer. Inflight Retail maintained its strong growth record in the UK and Europe, despite a difficult and costly start-up to the peak summer trading season, as many vendor partners struggled initially to provide adequate stock coverage. In Australia, the new and extended contract for Qantas' inflight duty-free programme from March 2005 has generated a small profit contribution compared to last year's significant start-up costs. After a costly 12 months, during which we have established our Australian operation and upgraded our UK Bond infrastructure and IT support systems, we anticipate strong second half progress throughout our fast growing Inflight Retail business. Internationally, our Middle East business in Jordan has continued to prosper, and has successfully opened four Alpha-designed World News Cafes at Queen Alia International Airport, Amman. In Amsterdam, after significant restructuring last year, the business has achieved a break-even result. The recently acquired Flight and Airport Retail Catering businesses in Romania and Bulgaria have performed in line with our expectations; in addition, new World News Cafe, Deli Sandwich Bar and Food Hall contracts have been awarded as part of exciting local airport development plans. In Australia, we have secured new flight catering contracts for both Lauda Air and Air Tahiti Nui, and are actively seeking further major international airline customers for our excellent flight kitchen network. In Italy, our joint-venture company has secured several new customers for its recently opened Rome Fiumicino flight kitchen. We anticipate ongoing strong profits performances across our International Flight businesses in the second half. Retail Overall Retail revenue increased an excellent 15.7% to #121.9m (2004/5: #105.4m) but adjusted operating profit declined by 38% to #3.6m (2004/5: #5.8m). UK Retail revenue was up 9.2%. On a "like-for-like" basis, Alpha Airport Shopping increased revenue 6.2% on passenger growth of 9.2%, despite last year's EU expansion reducing the growth in sales of duty free liquor and tobacco. Whilst we have continued to achieve significant growth in average transaction spend for those passengers visiting our Alpha 'pink shops', we have experienced a decline in the percentage of passengers shopping in our airport outlets reflecting, we believe, weakening UK consumer confidence. We have committed significant extra people resources to continue to drive our UK Retail performances and to support expansion into Europe. In addition, we have incurred significant tender and due diligence costs associated with our European development plans. We are in the pre-implementation phase of our upgraded and integrated IT systems and tills project (IRIS) which will be rolled out across the UK Retail estate this winter. The costs of this capital project in the first half, combined with increased business development costs, gave rise to a substantial decline in profits from our UK Retail business compared with the previous year. We are delighted to have been awarded numerous new UK Retail concessions, many of which are already successfully trading; Alpha Airport Shopping- new 'pink shops' in Doncaster Robin Hood and Belfast City, and an expanded offer and contract extension at Leeds Bradford. World News - new outlets and contracts at Birmingham International Airport and Doncaster Robin Hood Airport. Retail Catering - new Alpha-designed World News Cafe at Birmingham International,new 'Bar O8' bars at Doncaster Robin Hood and Eurotunnel, new Deli Sandwich Bars at Belfast City and Inverness, and a new Food Court at Nottingham East Midlands. We are also delighted that our fantastic Glorious Britain gift offer was voted 'Best of the Best' in the prestigious Gift Retailer of the Year awards. Internationally, our Sri Lankan business, post the devastation caused by the tsunami, has only suffered a 6.6% decline in arrivals passengers. With the benefit of the recently opened and expanded arrivals shop and with an upgraded focus on value offers and promotions, the profit decline has been limited to 7.1%. We anticipate that the better located departures shop which opened in September will help to stabilise both revenue and profit over the next six months. In the USA, revenue was 2.4% ahead of last year. Our major reinvestment in upgraded and expanded Alpha pink duty free shops is currently underway and this will maximise opportunities from our five year contract extension starting in the second half. Our recently acquired Turkish business traded in line with expectations. As we have said, a key strategic ambition across Retail is to develop in Europe, and we are pleased to have been awarded our first mainland European retail contract for seven speciality retail boutiques, six of which are now open at Rome Fiumicino and Ciampino airports. Overall, our International Retail businesses registered a 42.5% revenue increase (due primarily to our Turkish acquisition) and a 1.3% increase in profit which reflects the Asian profit decline and Italian start-up costs offsetting the first time contribution from Turkey. We anticipate stronger second half performances from all our International Retail businesses. Acquisitions During the first half we acquired two small businesses in Romania and Bulgaria. Both businesses provide flight catering services to airlines and operate retail catering outlets at the main capital city airports in each country. The total consideration, including acquisition costs was #3.9m and net assets acquired totalled #0.4m. In Romania we are in partnership with the major state airline, Tarom, and the Bucharest airport authority, with Alpha owning 64% of the company. Bulgaria is a wholly owned subsidiary. Both businesses have performed well since acquisition and have been successful in winning new retail catering contracts. Financing During the first half, the Group renegotiated its existing banking facility and replaced it with a new #100m revolving five year multi-currency facility with three banks, LloydsTSB, Royal Bank of Scotland and Allied Irish Bank. This new facility gives us capacity to organically grow the existing business and for future investment opportunities. Pensions Our biggest change under IFRS is the recognition of the pension fund deficit on the balance sheet. Up until 31 January 2005 the deficit was disclosed in the financial statements but not recognised. The deficit at 31 July, net of deferred tax, is #24.8m (31 July 2004: #15.7m). The principal reason for the increase in the deficit is lower returns on gilts which means the scheme liabilities are discounted at a lower rate compared with January and July last year. We have a relatively immature scheme and the Group still considers it appropriate to have a significant part of the assets invested in equities. The total profit and loss charge in the first half, including the financing cost was #2.3m (2004/5: #1.9m). We are currently conducting our triennial valuation of the UK pension fund and await the outcome of this, however, given the increased deficit under IAS 19 we are likely to see a significant increase in contributions going forward. We anticipate finalising the outcome of the valuation and the full cash funding position by 31 January 2006. Dividend The Board has recommended the payment of an interim dividend of 1.0 pence per ordinary share (2004/5: 1.0p per share) which will be payable on 4 November 2005 to shareholders on the register on 7 October 2005. IFRS The Group has adopted IFRS for the first time in reporting the half year results. The areas that have impacted the results are shown below:- 1. Pensions The net pensions deficit has been recorded in the accounts at 31 July. This has reduced net equity in total by #24.8m albeit the prior periods have been restated to reflect this change. The profit and loss account in the first half has seen an additional charge of #0.8m over and above the SSAP 24 charge reflecting the size of the deficit compared with 31 January 2005. This additional charge is split between operating profit and interest expense. 2. Share Based Payments The Group has recognised the cost of share based payments within the results. A charge of #0.1m has been made in the first half result. 3. Goodwill Under IFRS, acquisition goodwill is considered to have an indefinite life and is not amortised, however, it is subject to an annual impairment review. The half year amortisation charge under UK GAAP (2004/5: #1.6m) has been reversed out of the comparative periods' profit and loss account and an impairment review conducted. There was no impairment charge in the six months ended 31 July 2005. 4. Dividends Dividends are not recognised in the accounts until they are approved for payment hence the interim figures do not contain an interim dividend provision but recognise the 2004/5 final dividend. 5. Tax on Associates Previously, operating profit included the results of associates and joint ventures on a pre-tax basis. IFRS requires operating profit to include the results on a post-tax basis. This has the effect of reducing profit before tax by #0.4m in the first half. Outlook Ongoing progress in relation to last year's Flight Services development projects both in the UK and Internationally combined with the absence of the first half's significant one-off start-up costs, gives us confidence for a strong second half Flight Services recovery. In addition, we are seeking further UK cost-savings this winter, as we upgrade and rationalise our UK Flight Services facilities at Manchester, and extend our Blue Sky Service customer base. We believe UK consumer confidence in the retail sector will remain cautious, and thus our UK Retail environment will continue to be challenging. However, we anticipate significantly improved second half International Retail performances. Despite our upgraded investment in business development - including the #7m implementation of new IT systems across our UK Retail estate this winter - we remain cautiously optimistic for overall Group progress for the full year. Group Income Statement Unaudited for the six months ended 31 July 2005 Six months Six months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005* Notes #m #m #m ------------------------------------------------------------------------------------------------------ Continuing operations Revenue 2 268.8 239.2 487.8 Cost of sales (176.4) (157.0) (317.6) ------------------------------------------------------------------------------------------------------ Gross profit 92.4 82.2 170.2 Administrative expenses (85.2) (70.8) (155.5) ------------------------------------------------------------------------------------------------------ Operating profit 7.2 11.4 14.7 Interest payable and similar charges (1.6) (0.9) (2.0) Interest receivable 0.3 0.1 - Income from interests in associated undertakings after tax 0.1 0.1 0.3 Share of profit from joint ventures after tax 0.2 - 0.1 ------------------------------------------------------------------------------------------------------ Profit before tax 6.2 10.7 13.1 Taxation (1.7) (3.2) (4.3) ------------------------------------------------------------------------------------------------------ Profit for the period 4.5 7.5 8.8 ------------------------------------------------------------------------------------------------------ Attributable to: Equity shareholders 2.9 6.6 6.5 Minority interests 1.6 0.9 2.3 ------------------------------------------------------------------------------------------------------ Profit for the period 4.5 7.5 8.8 ------------------------------------------------------------------------------------------------------ Earnings per share (note 5) - Basic 1.65p 3.84p 3.78p - Diluted 1.62p 3.79p 3.73p * Separately disclosable items in relation to the year ended 31 January 2005 are disclosed in note 3. Group Statement of Recognised Income and Expense Unaudited for the six months ended 31 July 2005 Six Six months months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005 #m #m #m ----------------------------------------------------------------------------------------------- Profit for the period 4.5 7.5 8.8 Currency translation differences on foreign currency net 1.1 (0.5) (0.9) assets Actuarial (losses)/gains on defined benefit pension schemes (6.5) 2.3 (3.2) Deferred tax on pension scheme 1.9 (0.7) 0.9 ----------------------------------------------------------------------------------------------- Total recognised income relating to the period 1.0 8.6 5.6 ----------------------------------------------------------------------------------------------- Attributable to: Equity shareholders (0.6) 7.7 3.5 Minority interests 1.6 0.9 2.1 1.0 8.6 5.6 Group Reconciliation of Equity Unaudited for the six months ended 31 July 2005 Six Six months months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005 #m #m #m ----------------------------------------------------------------------------------------------- At start of period 42.4 42.8 42.8 Total recognised income (as above) 1.0 8.6 5.6 Minority interests - dividends (1.3) (0.9) (2.2) Minority interests - acquisition 0.2 - 1.1 Minority interests - part disposal of subsidiary - 0.2 0.1 Share options - proceeds from share options 0.2 0.9 1.3 - value of employee services 0.1 - 0.1 Credit in respect of long term incentive plan amortisation - 0.1 0.2 charge Dividends (5.2) (4.8) (6.6) ----------------------------------------------------------------------------------------------- At end of period 37.4 46.9 42.4 ----------------------------------------------------------------------------------------------- Group Balance Sheet Unaudited At 31 July 2005 31 July 31 July 31 Jan 2005 2004 2005 Notes #m #m #m ----------------------------------------------------------------------------------------------------- Non-current assets Goodwill 6 16.4 10.1 12.9 Intangible assets 4.5 1.8 2.6 Property, plant and equipment 59.9 57.8 56.8 Investments in associates and joint ventures 6.6 3.5 6.5 Other receivables 2.3 2.2 2.1 Deferred tax 10.7 6.7 8.6 ----------------------------------------------------------------------------------------------------- 100.4 82.1 89.5 ----------------------------------------------------------------------------------------------------- Current assets Inventories 39.6 28.9 32.1 Trade and other receivables 55.2 39.7 36.6 Cash and cash equivalents 10.9 8.3 10.8 ----------------------------------------------------------------------------------------------------- 105.7 76.9 79.5 ----------------------------------------------------------------------------------------------------- Current liabilities Bank and other borrowings (33.9) (10.4) (30.6) Trade and other payables (94.6) (71.7) (61.4) Current tax liabilities (2.6) (3.1) (3.1) Provisions for liabilities and charges (0.3) (1.5) (1.5) ----------------------------------------------------------------------------------------------------- (131.4) (86.7) (96.6) ----------------------------------------------------------------------------------------------------- Net current liabilities (25.7) (9.8) (17.1) ----------------------------------------------------------------------------------------------------- Non-current liabilities Bank and other borrowings (0.5) (0.9) (0.7) Other non-current liabilities (0.5) (0.1) (0.5) Provisions for liabilities and charges (0.3) (1.1) (0.3) Retirement benefit obligations (35.5) (22.4) (28.2) Deferred tax (0.5) (0.9) (0.3) ----------------------------------------------------------------------------------------------------- (37.3) (25.4) (30.0) ----------------------------------------------------------------------------------------------------- Net assets 37.4 46.9 42.4 ----------------------------------------------------------------------------------------------------- Shareholders' equity Ordinary shares 17.4 17.3 17.4 Share premium 44.4 43.8 44.1 Capital redemption reserve 0.4 0.4 0.4 Other reserves 0.2 (0.5) (0.9) Retained earnings (27.9) (15.6) (21.0) ----------------------------------------------------------------------------------------------------- Total shareholders' equity 34.5 45.4 40.0 Minority interests 2.9 1.5 2.4 ----------------------------------------------------------------------------------------------------- Total equity 37.4 46.9 42.4 ----------------------------------------------------------------------------------------------------- Group Cash Flow Statement Unaudited At 31 July 2005 Six months Six months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005 Notes #m #m #m ---------------------------------------------------------------------------------------------------------------- Net cash from operating activities 7.1 16.0 7.0 7.8 ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Acquisition and disposal of businesses (3.9) - (7.1) Part disposal of subsidiary - continuing operations - 1.7 1.7 Cash acquired on purchase of business 8.1 0.3 - 0.4 Disposal of associate - 0.5 0.5 Proceeds from sale of property, plant and equipment - - 0.1 Expenditure on intangible assets (software) (1.9) (0.5) (0.8) Purchase of property, plant and equipment (7.3) (7.1) (15.4) Dividends received from associates 0.2 0.1 0.2 Dividends received from joint ventures - - 0.1 ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (12.6) (5.3) (20.3) ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net proceeds from issue of ordinary share capital 0.2 0.9 1.3 Repayment of long term #60m facility 11 (39.9) - - Loans from #100m facility 11 39.9 - - Repayment of finance leases (0.3) (0.4) (0.7) Increase in loans 8.8 2.0 21.1 Dividends paid to shareholders (5.2) (4.6) (6.6) ---------------------------------------------------------------------------------------------------------------- Dividends paid to minority interests (1.3) (0.9) (2.2) ---------------------------------------------------------------------------------------------------------------- Net cash used in financing activities 2.2 (3.0) 12.9 ---------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in cash and bank overdrafts 5.6 (1.3) 0.4 Cash and bank overdrafts at opening period 4.8 4.9 4.9 Effects of exchange rates (0.1) (0.1) (0.5) ---------------------------------------------------------------------------------------------------------------- Total cash and bank overdrafts at closing period 10.3 3.5 4.8 ---------------------------------------------------------------------------------------------------------------- Notes to the Group Interim Financial Statements Unaudited 1. Accounting policies Accounting policies for the six months ended 31 July 2005 The principal accounting policies adopted in the preparation of these interim financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (1) Basis of preparation The financial information presented in this document has been prepared in accordance with the accounting policies the Group expects to be applicable at 31 January 2006 and the interpretations of those standards are set out below. These interim financial statements have been prepared in accordance with those IFRS and IFRIC interpretations issued and effective or, issued and early adopted, as at the time of preparing these statements. The IFRS standards and IFRIC interpretations that will be applicable at 31 January 2006, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. These figures may therefore require amendment to change the basis of accounting or presentation of certain financial information, before their inclusion in the IFRS financial statements for the year ending 31 January 2006, which will be the Group's first full set of IFRS financial statements. The financial statements of the Company and its subsidiaries have been prepared under the historical cost convention. The comparative figures for the year ended 31 January 2005 do not constitute statutory accounts for the purposes of s240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 January 2005, prepared under UK GAAP, has been delivered to the Registrar of Companies and contained an unqualified auditors' report in accordance with s235 of the Companies Act 1985. A summary of the more important group accounting policies is set out below, together with an explanation of where changes have been made to previous policies on the adoption of the IFRS accounting standards in the year. The preparation of financial statements in conformity with IFRS 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, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group's business activities. (2) Changes in accounting policies - Introduction of IFRS Previously the Group prepared its financial statements in accordance with UK GAAP. The impact of the transition between UK GAAP and IFRS is disclosed in note 10 to the financial statements. The comparative financial statements of the Group for the six months ended 31 July 2004 and the year ended 31 January 2005 have been restated in accordance with IFRS. The date of transition to IFRS is 1 February 2004. (3) First time adoption The rules for first time adoption of IFRS are set out in IFRS 1, First-time Adoption of International Financial Reporting Standards. In general, selected accounting policies must be applied retrospectively in determining the opening balance sheet under IFRS. However, IFRS 1 allows a number of exemptions to this general principle. Exemptions which the Group have taken advantage of, are noted below: a) Post-employment employee benefits In accordance with IFRS 1, the Group has elected to fully recognise all actuarial gains and losses at the date of transition to IFRS. Subject to the endorsement by the European Union of IAS 19 (revised), ongoing actuarial gains and losses will be recognised in the Statement of Recognised Income and Expense. Notes to the Group Interim Financial Statements Continued 1. Accounting policies (continued) (3) First Time Adoption (continued) b) Goodwill Under the transitional arrangements of IFRS 1, there is the option of applying IFRS 3, Business Combinations, prospectively from the date of transition. The Group has exercised this option and has not restated past business combinations prior to the transition date. c) Cumulative translation differences Under IAS 21, The Effects of Changes in Foreign Exchange Rates, certain translation differences are classified as a separate component of equity, and on disposal of foreign operations, these are transferred to the relevant cumulative translation difference to the income statement as part of the gain or loss on disposal. In accordance with IFRS 1, the Group has elected to reset the cumulative translation differences for all foreign operations to be zero at the date of transition to IFRS. d) Adoption date for subsidiaries The Group has prepared its consolidated financial statements in accordance with IFRS but has elected not to adopt IFRS for the accounts of Alpha Airports Group Plc or its subsidiaries as permitted by IFRS 1. The Group plans to prepare all subsidiaries financial statements in accordance with IFRS from 1 February 2007. e) Fixed asset valuation The Group has elected not to measure fixed assets at fair value on the date of transition. f) Leases The Group has reviewed its lease arrangements for land and buildings and other assets at the date of transition to determine whether the lease arrangement is a finance or operating lease under IAS 17. Certain finance leases have been identified which have been recognised prospectively from the date of transition. g) Share based payments The Group has recognised the costs of share based payments in the income statement for share options granted after 7 November 2002. (4) Basis of consolidation The Group financial statements for the six months ended 31 July 2005 include the accounts of Alpha Airports Group Plc and all of its subsidiary undertakings, and the relevant proportion of the results of associated companies, accounted for on an equity basis, in which the Group holds an equity interest and over which it exercises significant influence. (5) Joint Ventures Joint ventures are those enterprises over whose activities Alpha has joint control, established by contractual agreement or the Articles of Association. The consolidated financial statements include Alpha's share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that significant influence or joint control commences until the date significant influence ceases. (6) Business combinations The results of businesses acquired are consolidated from the effective date of acquisition using acquisition accounting, whereby the acquisition of a business or an associate cost is allocated to the fair value of net tangible assets after adjustments to bring accounting policies in line with those of the Group. (7) Foreign currency accounting The income statements and cash flows of overseas subsidiaries and associates are translated into sterling at average rates of exchange during the accounting period. Overseas net assets and UK loans denominated in foreign currencies are expressed in sterling at the rates of exchange ruling at the balance sheet date. Exchange differences arising on the retranslation, at closing rates, of the opening balance sheets of overseas subsidiaries and associates, together with the year end adjustment to closing rates of the income statements translated at average rates, are taken to reserves. Exchange differences arising in the normal course of trading and on the translation of monetary assets and liabilities are dealt with in the income statement. Differences arising on the translation of foreign currency borrowings are taken directly to reserves where there is a corresponding exchange difference on the translation of the related net investment in overseas subsidiaries and associates Notes to the Group Interim Financial Statements Continued 1. Accounting policies (continued) (8) Goodwill On the acquisition of a subsidiary, joint venture, associate or business, the purchase consideration is allocated between the net tangible and intangible assets on a fair value basis, with any excess purchase consideration representing goodwill. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and will not be subsequently reversed. On disposal of a subsidiary, joint venture, associate or business, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRS is included in the balance sheet at the previously stated net book value amount under UK GAAP. The net book value of goodwill on transition was #11.3m. An impairment review was carried out as at the transition date and no impairment identified. (9) Intangible assets Intangible assets consist of computer application software. Application software is amortised over its expected economic life. The amortisation rates used range from 3 to 5 years. In connection with the introduction of new systems, costs are capitalised once the Group is committed to the implementation. Costs incurred in respect of new systems are written-off in equal annual instalments over the expected useful life of the system, commencing in the year in which the benefits arise. (10) Property, plant and equipment All property, plant and equipment is stated at cost less depreciation. Cost includes all relevant external expenditure incurred in acquiring the asset. The Group selects its depreciation rates carefully and reviews them regularly to take account of any changes in circumstances. When determining expected economic lives, the Group considers the expected rate of technological developments and the intensity at which the assets are expected to be used. All assets are subject to annual review and where necessary, further provision is made for any impairment in value. In line with the above depreciation policy, freehold properties are amortised over a period of 50 years and leasehold properties amortised over the unexpired lease term. Depreciation is provided on other assets on a straight line basis at annual rates estimated to write-off their book values over their expected economic lives. The depreciation rates range from 10-15 years for plant and machinery and 4-10 years for furniture and equipment. Assets under construction are not depreciated until they are ready for use, when they are transferred to the relevant asset class and depreciated over their useful economic lives. (11) Leases Where a Group company enters into a lease, which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a "finance lease". The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated over its estimated useful life or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged to the income statement, and the capital element, which reduces the outstanding creditor. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the lease. (12) Investments Investments in subsidiary undertakings are stated at historic cost less any required provision for impairment. The Directors review the carrying value of the Group's investments in subsidiary undertakings at least annually or whenever an event occurs that would indicate a possible impairment. (13) Impairment At each balance sheet date, reviews are carried out of the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, estimates are made of the cash flows of the cash generating unit to which the asset belongs. Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value, less costs to sell, and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a discount rate appropriate to the specific asset or cash generating unit. Notes to the Group Interim Financial Statements Continued 1. Accounting policies (continued) (13) Impairment (continued) If the recoverable amount of an asset or cash generating unit is estimated to be less that its carrying amount, the carrying amount of the asset or cash generating unit is reduced to its recoverable amount. Impairment losses are recognised immediately in the income statement. (14) Inventories Inventories for resale are held at an average weighted cost and raw materials and consumables are held at FIFO. Provision is made, where necessary, against identified slow moving and obsolete inventories. (15) Taxation including deferred tax The tax expense represents the sum of the tax payable on the current year taxable profits and the movements on deferred tax. The tax payable on the current year taxable profits is calculated using the applicable tax rates that have been enacted, or substantively enacted, by the balance sheet date. Deferred tax is the tax arising on differences between the carrying amounts of assets and liabilities in the financial statements and their corresponding tax bases used in the computation of taxable profits, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is not recognised on temporary differences arising in respect of goodwill that is not deductible for tax purposes. No provision is made for deferred tax which would become payable on the distribution of retained profits by foreign subsidiaries, joint ventures, or associates, unless there is an intention to distribute such retained profits. Deferred tax is calculated using tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Movements in deferred tax are charged or credited in the income statement, except when they relate to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (16) Onerous contracts Where the benefits to be derived from a contract are lower than the unavoidable costs of meeting the Group's obligation under the contract, a provision is recognised. The provision is stated at the discounted present value of the future net cash outflows expected to be incurred in respect of the contract. The provision is utilised as cash outflows are incurred under the contract and an amount is charged to the income statement for interest incurred on the unwinding of the discounted provision over time. (17) Employee benefits The expense of defined benefit schemes and other post-retirement employee benefits is determined using the projected unit credit method and charged to the income statement as an operating expense, based on actuarial assumptions reflecting market conditions at the beginning of the financial year. Actuarial gains and losses are recognised in full in the statement of recognised income and expense in the period in which they occur. Past service costs are recognised immediately to the extent that benefits have vested, or, if not vested, on a straight line basis over the period until the benefits vest. Net pension obligations in respect of defined benefit schemes are included in the balance sheet at the present value of scheme liabilities, less the fair value of scheme assets. Where assets exceed liabilities, any net pension asset is limited to the extent that the asset is not recoverable through reductions in future contributions. The expense of defined contribution benefit schemes and other employee benefits are charged in the income statement as incurred. The Group operates an employee share option scheme (Sharing in Success) which rewards employees' long service by the issue of share options. Provisions for the Group's employee loyalty scheme are based upon the service levels of the employees and the number of share options that are expected to vest. The share options are valued in accordance with the Group's share based payment policy (note1(19)). (18) Revenue recognition Revenue represents the amounts receivable for goods sold and services provided, net of discounts and excluding VAT and similar sales taxes. In respect of goods sold, revenue is recognised at the point of sale to the customer in the Group's retail or retail catering outlets, or on-board aircraft in the case of inflight sales. For the supply of airline catering services, revenue is recognised at the point of delivery of meals and drinks to the aircraft. Notes to the Group Interim Financial Statements Continued 1. Accounting policies (continued) (19) Share based payments The fair value of share-based remuneration is determined at date of grant and recognised as an expense in the income statement on a straight line basis over the vesting period, taking account of the estimated number of shares that will vest. The fair value is determined by use of a Black-Scholes model. In the case of the Group's Long Term Incentive Plan, the consideration paid for the shares, which equated to open market value at the date of grant, is deducted in arriving at shareholders' equity and amortised through the income statement on a straight line basis over the vesting period, until the shares held by the trust vest unconditionally to employees. (20) Separately disclosable items Items that are both material in size and unusual and infrequent in nature are presented as separately disclosable items in the income statement or separately disclosed in the notes to the financial statements. The directors are of the opinion that the separate recording of these items provides helpful information about the Group's underlying business performance. Notes to the Group Interim Financial Statements Continued 2. Segment reporting 2 (a). Business segments The Group operates in two main business segments: - Flight Services - the provision of Flight Catering and In flight Retailing to the airline industry - Retail - Retailing and Catering at airports The business segment reporting reflects the Group's management and internal reporting structure. Flight Services Retail Group ------------------------ -------------------- --------------------- Six Six Year Six Six Year Six Six months months months months months months Year ended ended ended ended ended ended ended ended ended 31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan 2005 2004 2005 2005 2004 2005 2005 2004 2005 #m #m #m #m #m #m #m #m #m ----------------------------------------------------------------------------------------------------------------------- Continuing operations Revenue 146.9 133.8 268.5 121.9 105.4 219.3 268.8 239.2 487.8 ----------------------------------------------------------------------------------------------------------------------- Profit before separately 3.6 4.9 7.1 3.6 5.8 11.6 7.2 10.7 18.7 disclosable items Separately disclosable items - cost - - (2.3) - - - - - (2.3) of sales Separately disclosable items - - - (3.9) - - 1.5 - - (2.4) admin expenses Profit on part disposal of - 0.3 0.3 - - - - 0.3 0.3 subsidiary undertaking Profit on disposal of associate - 0.4 0.4 - - - - 0.4 0.4 ----------------------------------------------------------------------------------------------------------------------- Operating profit 3.6 5.6 1.6 3.6 5.8 13.1 7.2 11.4 14.7 Share of associates/joint venture 0.3 0.1 0.4 - - - 0.3 0.1 0.4 after tax ----------------------------------------------------------------------------------------------------------------------- Segment profit before tax and 3.9 5.7 2.0 3.6 5.8 13.1 7.5 11.5 15.1 interest Interest expense (1.6) (0.9) (2.0) Interest income 0.3 0.1 - ----------------------------------------------------------------------------------------------------------------------- Profit before tax 6.2 10.7 13.1 Taxation (1.7) (3.2) (4.3) ----------------------------------------------------------------------------------------------------------------------- Profit for the period 4.5 7.5 8.8 ----------------------------------------------------------------------------------------------------------------------- There are no material sales between the business segments. Interest (payable)/receivable has not been allocated recognising the centre's role and responsibility in allocating financial resources. 2 (b) Geographical UK Rest of the World Group segments ------------ ------------------------ ----------- Six Six Six Six Six Six months months Year months months Year months months Year ended ended ended ended ended ended ended ended ended 31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan 2005 2004 2005 2005 2004 2005 2005 2004 2005 #m #m #m #m #m #m #m #m #m ----------------------------------------------------------------------------------------------------------------------- Continuing operations Revenue 218.5 200.6 404.9 50.3 38.6 82.9 268.8 239.2 487.8 ----------------------------------------------------------------------------------------------------------------------- Notes to the Group Interim Financial Statements Continued 3. Separately disclosable items The results for the year ended 31 January 2005 include separately disclosable items of #4.7m charged against operating profit which are analysed below: Year Ended 31 Jan 2005 #m ---------------------------------------------------------------------------------- Redundancy payments UK Flight operations 0.9 Netherlands Flight operations 1.4 Impairment charge - freehold property 3.9 Release of onerous contract provision (1.5) ---------------------------------------------------------------------------------- 4.7 ---------------------------------------------------------------------------------- There were no separately disclosable items for the half years ended 31 July 2005 and 31 July 2004. In April 2004 a Group company disposed of 19.6% of its investment in Alpha Flight Services Overseas Limited (a subsidiary which owns 51% of Jordan Flight Catering Company Limited), for a net consideration of #1.7m. The Group's profit on disposal, including disposal of related goodwill, was #0.3m. In July 2004 the Group disposed of its 20% shareholding in Calibre Airline Services Limited (an information technology company), for a net consideration of #0.5m, realising a profit on disposal of #0.4m. 4. Equity dividends The Board has approved an interim dividend of 1.0 pence (2004/05: 1.0 pence) per ordinary share, which will be paid on 4 November 2005 to shareholders on the register at the close of business on 7 October 2005. 5. Earnings per share a). Basic and diluted earnings per share The calculation of basic and diluted earnings per ordinary share are based on the earnings for the period attributable to ordinary shareholders and the weighted average number of shares as follows: Weighted average no. of Profit for the period shares Earnings per Share ----------------------- ----------------------- -------------------- Six Six Year Six Six Year Six Six Year months months ended months months ended months months ended ended ended ended ended ended ended 31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan 2005 2004 2005 2005 2004 2005 2005 2004 2005 #m #m #m m m m p p p ----------------------------------------------------------------------------------------------------------------------- Basic EPS 2.9 6.6 6.5 174.1 171.7 172.4 1.65 3.84 3.78 Effect to reflect - - - 3.4 2.0 2.1 (0.03) (0.05) (0.05) dilutive ordinary shares under options ----------------------------------------------------------------------------------------------------------------------- Diluted EPS 2.9 6.6 6.5 177.5 173.7 174.5 1.62 3.79 3.73 ----------------------------------------------------------------------------------------------------------------------- b). Underlying earnings per share The calculation of underlying profit for the financial period and underlying earnings per share are as follows: Profit for the period Earnings per Share --------------------- ----------------------- Six Six Year Six Six Year months months ended months months ended ended ended ended ended 31 July 31 July 31 Jan 31 July 31 July 31 Jan 2005 2004 2005 2005 2004 2005 #m #m #m p p p ----------------------------------------------------------------------------------------------------------------------- Basic EPS 2.9 6.6 6.5 1.65 3.84 3.78 Adjustments for: separately disclosable - - 4.7 - - 2.73 items (note 3) profit on disposal of - (0.4) (0.4) - (0.23) (0.23) associate profit on part disposal - (0.3) (0.3) - (0.17) (0.17) of subsidiary undertaking Taxation relating to - - (0.8) - - (0.46) these items Add back goodwill - - 0.3 - - 0.17 impairment ----------------------------------------------------------------------------------------------------------------------- Underlying EPS 2.9 5.9 10.0 1.65 3.44 5.82 ----------------------------------------------------------------------------------------------------------------------- Notes to the Group Interim Financial Statements Continued 6. Goodwill Net book Cost Impairment value #m #m #m --------------------------------------------------------------------------------- At 1 February 2005 23.8 (10.9) 12.9 Additions - Abela Rocas SA (note 8.1) 3.5 - 3.5 - Abela Airport Services EOOD (note 8.2) - - - --------------------------------------------------------------------------------- At 31 July 2005 27.3 (10.9) 16.4 --------------------------------------------------------------------------------- 7. Notes to the Group statement of cash flows 7.1 Reconciliation of operating profit to net cash inflow from operating activities Six months Six months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005 #m #m #m --------------------------------------------------------------------------------- Profit before tax 6.2 10.7 13.1 Share of profit from joint ventures after tax (0.2) - (0.1) Income from interests in associated (0.1) (0.1) (0.3) undertakings after tax Interest payable and similar charges 1.6 0.9 2.0 Interest receivable (0.3) (0.1) - Profit on part disposal of subsidiary - (0.3) (0.3) undertaking - continuing operations Profit on disposal of associate - (0.4) (0.4) Depreciation 5.4 5.3 10.6 Share options 0.1 - 0.1 Fixed Asset impairment - - 3.9 Goodwill impairment - - 0.3 LTIP - 0.1 0.2 Increase in provisions - - (3.4) Increase in inventories (6.7) (6.4) (7.3) Increase in trade and other receivables (18.7) (13.8) (10.3) Increase in creditors 31.0 15.0 6.0 --------------------------------------------------------------------------------- Cash flows from operating activities 18.3 10.9 14.1 Interest received 0.3 0.1 - (1.3) (0.7) (1.6) Interest paid Tax paid (1.3) (3.3) (4.7) --------------------------------------------------------------------------------- Net cash from operating activities 16.0 7.0 7.8 --------------------------------------------------------------------------------- 7.2 Reconciliation of net cash flow to movement in net debt Analysis of net (debt)/cash Six months Six months Year ended ended ended 31 July 31 July 31 Jan Total debt position 2005 2004 2005 #m #m #m --------------------------------------------------------------------------------- Increase/(decrease) in cash and bank 5.6 (1.3) 0.4 overdrafts in the period Increase in bank borrowings (8.8) (2.0) (21.1) Decrease in borrowings under finance leases 0.3 0.4 0.7 --------------------------------------------------------------------------------- Change in net debt from cashflows (2.9) (2.9) (20.0) Currency translation (0.1) (0.1) (0.5) --------------------------------------------------------------------------------- Movements in net (debt) in the period (3.0) (3.0) (20.5) Opening net debt (20.5) - - --------------------------------------------------------------------------------- Closing net debt (23.5) (3.0) (20.5) --------------------------------------------------------------------------------- Notes to the Group Interim Financial Statements Continued 8. Acquisition of businesses 8.1 Romania Acquisition of 64.18% of Abela Rocas SA On 12 April 2005, the Group acquired 64.18% of the share capital of Abela Rocas SA, a small flight and retail catering business in Romania. The goodwill arising on the acquisition was #3.5m as follows: Book Fair Value Provisional Value adjustments fair value #m #m #m ------------------------------------------------------------------------------------------------------- Investment in Associate (0.1) - 0.1 Tangible fixed assets - 0.3 0.3 Inventories - 0.2 0.2 Trade receivables - 0.6 0.6 Creditors - (0.6) (0.6) Cash at bank and in hand 0.1 0.3 0.2 Taxation (0.2) (0.2) - ------------------------------------------------------------------------------------------------------- Total net assets at acquisition (0.2) 0.6 0.8 ------------------------------------------------------------------------------------------------------- Minority Interests (0.2) Total net assets acquired 0.4 Goodwill 3.5 ------------------------------------------------------------------------------------------------------- Consideration 3.9 ------------------------------------------------------------------------------------------------------- Consideration satisfied by: Cash (including costs of acquisition) 3.9 ------------------------------------------------------------------------------------------------------- The book value of the assets and liabilities has been taken from the management accounts of Abela Rocas SA at 12 April 2005 at actual exchange rates on that date. The fair value adjustments contain some provisional amounts as indicated below, which will be finalised in the 2006 financial statements when the detailed acquisition investigation has been completed. The provisional fair value adjustments principally comprise #0.1m for the write off of a small investment in an associated company, the results for which had never been consolidated into the results of Abela Rocas SA, an exchange adjustment in respect of cash balances and a provision for dividend taxes in respect of 2004 and 2005 The profit after tax of Abela Rocas SA was #0.2m for the period from 1 January 2005 to 12 April 2005 and #1.0m for the year ending 31 December 2004. 8.2 Bulgaria Acquisition of 100% of Abela Airport Services EOOD On 28 April 2005, the Group acquired 100% of the share capital of Abela Airport Services EOOD, a small flight and retail catering business based in Bulgaria, for a consideration of Euro1 and costs of #15,000.The only assets acquired were fixed assets of #0.3m against which a full impairment was provisionally booked which will be finalised in the 2006 financial statements when the detailed acquisition investigation has been completed. As a result there was no goodwill generated on this acquisition. The losses after tax of Abela Airport Services EOOD were #0.1m for the period from 1 January 2005 to 28 April 2005 and #0.3m for the year ending 31 December 2004. Notes to the Group Interim Financial Statements Continued 9. Adjusted figures Alpha uses adjusted figures as key underlying performance measures. Adjusted figures are stated before related tax effects and movements in deferred taxation assets and liabilities that are not expected to crystallise in the near future. Adjusted operating profits are also grossed up to include the pre tax equity share of profits of joint ventures and associates so that they are comparable to other businesses of the Group and to exclude non trading items such as the impairment of intangible fixed assets, rationalisation and restructuring costs and other separately disclosable items. Six Six months months Year ended ended ended 31 July 31 July 31 Jan 2005 2004 2005 #m #m #m ------------------------------------------------------------------------------------------------------- Operating profit 7.2 11.4 14.7 Adjustments: Share of profit from associates/joint venture 0.3 0.1 0.4 Reclassification of tax on associates/joint venture 0.4 0.1 0.6 Goodwill impairment - - 0.3 Separately disclosable items (note 3) - - 4.7 Profit on disposal of associate - (0.4) (0.4) Profit on part disposal of subsidiary undertaking - (0.3) (0.3) ------------------------------------------------------------------------------------------------------- Adjusted operating profit 7.9 10.9 20.0 ------------------------------------------------------------------------------------------------------- Profit before tax 6.2 10.7 13.1 Adjustments: Reclassification of tax on associates/joint venture 0.4 0.1 0.6 Goodwill impairment - - 0.3 Separately disclosable items (note 3) - - 4.7 Profit on disposal of associate - (0.4) (0.4) Profit on part disposal of subsidiary undertaking - (0.3) (0.3) ------------------------------------------------------------------------------------------------------- Adjusted profit before tax 6.6 10.1 18.0 ------------------------------------------------------------------------------------------------------- Profit attributable to equity shareholders 2.9 6.6 6.5 Adjustments: Goodwill impairment - - 0.3 Profit on disposal of associate - (0.4) (0.4) Profit on part disposal of subsidiary undertaking - (0.3) (0.3) Separately disclosable items (note 3) - - 4.7 Taxation on these items - - (0.8) ------------------------------------------------------------------------------------------------------- Adjusted attributable profit 2.9 5.9 10.0 ------------------------------------------------------------------------------------------------------- Notes to the Group Interim Financial Statements continued 10. Reconciliation to UK GAAP for comparative periods The following reconciliations provide quantification of the effect of transition to IFRS on retained profit for the periods ended 31 July 2004 and 31 January 2005 and the effect on total equity for 31 January 2004, 31 July 2004 and 31 January 2005. Six months Year ended ended 31 July 31 Jan 2004 2005 Note #m #m ----------------------------------------------------------------------------------------- Retained profit/(loss) under UK GAAP 3.6 (2.7) IFRS 3 - non amortisation of goodwill (i) 1.6 3.2 IAS 36 - goodwill impairment (i) - (0.3) IAS 19 - pension costs (iii) (0.3) (0.6) IFRS 2 - share based payments (iv) (0.1) (0.1) IAS 7 - post balance sheet events - (v) (3.0) 0.4 dividends ----------------------------------------------------------------------------------------- Retained profit under IFRS 1.8 (0.1) ----------------------------------------------------------------------------------------- Profit for the period 7.5 8.8 Minority interests (0.9) (2.3) Dividends (4.8) (6.6) ----------------------------------------------------------------------------------------- Retained profit under IFRS 1.8 (0.1) ----------------------------------------------------------------------------------------- Retained profit is not separately disclosed under IFRS. The reconciliation between profit for the period in the income statement and IFRS retained profit is shown above. 1 Feb 31 July 31 Jan 2004 2004 2005 #m #m #m Note --------------------------------------------------------------------------------------------------------- Total equity under UK GAAP 55.2 60.1 55.4 IFRS 3 - non amortisation of goodwill (i) - 1.6 3.2 IAS 36 - goodwill impairment (i) - - (0.3) IFRS 3 - no recycling of goodwill from (ii) - (0.6) (1.2) equity IAS 19 - pension costs (iii) (24.2) (22.4) (28.2) IAS 7 - post balance sheet events - (v) 4.8 1.8 5.2 dividends IAS 17 - finance leases (vi) (0.1) (0.1) (0.1) IAS 12 - deferred taxation (vii) 7.3 6.7 8.6 IAS 37 - dilapidations (viii) (0.2) (0.2) (0.2) --------------------------------------------------------------------------------------------------------- Total equity under IFRS 42.8 46.9 42.4 --------------------------------------------------------------------------------------------------------- (i) Under IFRS, acquisition goodwill is considered to have an indefinite life and is not amortised, but is subject to an impairment review on transition and annually thereafter. As a result of the impairment review at 31 Jan 2005 #0.3m of goodwill in relation to a part of the Australian flight operation was written off. (ii) Goodwill of #10.3m which arose on the acquisition of the original shareholding of Orient Lanka Limited in 1996 was written off to reserves under the transitional arrangements of FRS 10. Under UK GAAP this was being amortised through the profit and loss account resulting in an annual profit and loss charge of #1.2m, which was added back into shareholders' funds. IFRS does not allow this treatment. (iii)Under UK GAAP, the Group provided for pensions in accordance with SSAP 24 'Accounting for pension costs' and also provided the detailed disclosures included in the transitional requirements of FRS 17 'Retirement benefits'. Under IFRS, IAS 19 'Employee benefits' uses a similar approach compared to FRS 17 to calculate a current service cost, interest cost and expected return on assets for defined benefit pension plans. (iv) IFRS 2 requires the fair value of the equity instruments to be charged to profit and loss. The cost is calculated using option price methods and applies to all options granted after 7 November 2002. (v) The dividends declared at the date of the approval of the financial statements are treated as post balance sheet events under IFRS. Notes to the Group Interim Financial Statements continued 10. Reconciliation to UK GAAP for comparative periods (continued) (vi) Under UK GAAP, a lease is classified as a finance lease if it transfers substantially all the risks and rewards of ownership. Conversely it is classified as an operating lease if it does not transfer substantially all the risks and rewards of ownership. This is similar under IFRS although there are differences particularly in the treatment of land and buildings finance leases. The Group has identified a small number of specialised leases which were reclassified on transition from finance to operating leases. (vii)Deferred tax under IFRS is the tax arising on differences between the carrying value of assets and liabilities in the financial statements and their corresponding tax bases used in the computation of taxable profits, and is accounted for using the balance sheet liability method. The main element of the reconciliation adjustment is the deferred tax arising on the pension adjustment under IAS 19 ((iii) above) (viii) Under IFRS certain dilapidation costs arising on leasehold property should be provided from the date when the contractual obligation arises where it is probable that the dilapidation costs will be payable. Explanation of IFRS net debt adjustments The move from UK GAAP does not significantly change the cash flows of the Group. The IFRS cash flow format is similar to UK GAAP but presents various cash flows in different categories and in a different order from the UK GAAP cash flow statement. All the IFRS accounting adjustments net out within cash generated from operations. Under IFRS the analysis of net debt is as follows: 31 Jan 31 July 31 Jan 2004 2004 2005 #m #m #m ---------------------------------------------------------------------------------------- Cash at bank and in hand 8.6 8.3 10.8 Bank borrowings (6.7) (9.8) (30.1) ---------------------------------------------------------------------------------------- Net cash/(debt) under UK GAAP 1.9 (1.5) (19.3) Operating leases reclassified as finance leases - obligations due within one year (0.7) (0.6) (0.5) - obligations due after more than one year (1.2) (0.9) (0.7) ---------------------------------------------------------------------------------------- Net debt under IFRS - (3.0) (20.5) 11. Bank borrowings On 22 July 2005 the Group secured committed borrowing facilities of #100m with a consortium of three major banks, which will expire in July 2010. At 31 July 2005 the Group had drawn down #38.8m including, guarantees under this facility. The Group's previous #60m facility was repaid and cancelled on 27 July 2005. 12. Approval of Group Interim Financial Information The Group interim financial information was approved by the Board of Directors on 29 September 2005. Independent review report to Alpha Airports Group Plc Introduction We have been instructed by the Company to review the financial information for the six months ended 31 July 2005 which comprises the Group balance sheet as at 31 July 2005 and the Group income statement, Group cash flow statement, Group reconciliation of equity and Group statement of recognised income and expense for the six months then ended and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the next financial statements of the Group will be prepared in accordance with accounting standards adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in note 1. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. As explained in note 1, there is, however, a possibility that the directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 31 January 2006 are not known with certainty at the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 July 2005 Chartered Accountants The Atrium 1 Harefield Road Uxbridge Middlesex UB8 1EX 29 September 2005 Notes: (a) The maintenance and integrity of the Alpha Airports Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. Financial Calendar Addresses 29 September 2005 Company Secretary Announcement of interim results H McRae 5 October 2005 Registered Office Ex-dividend date Europa House, 804 Bath Rd, Cranford, Middlesex, TW5 9US 7 October 2005 Telephone 020 8580 3200 Dividend record date Facsimile 020 8580 3201 Registered in England 4 November 2005 Company Number 2854090 Interim dividend payment date Registrars March/April 2006 Lloyds TSB Registrars Preliminary announcement of full year The Causeway, Worthing, results West Sussex, BN99 6DA Telephone 0870 6003970 May 2006 Posting of Annual Report to shareholders Solicitors May 2006 Berwin Leighton Paisner Annual General Meeting Adelaide House London Bridge June 2006 London EC4R 9HA Final dividend payable Auditors PricewaterhouseCoopers LLP Chartered Accountants & Registered Auditors The Atrium 1 Harefield Road Uxbridge Middlesex UB8 1EX Stockbrokers Panmure Gordon Moorgate Hall 155 Moorgate London EC2M 6XB Merchant Bankers & Financial Advisors Close Brothers Corporate Finance Limited 10 Crown Place London EC2A 4FT Principal Bankers National Westminister Bank plc City of London Office PO Box 12258 1 Princes Street London EC4R 9HA Website www.alpha-group.com This information is provided by RNS The company news service from the London Stock Exchange END IR FKLBLEKBXBBD
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