ARL.L Regulatory News (ARL)

28 Sep 2007 13:15

Arlington Group Ltd28 September 2007 ARLINGTON GROUP LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2007 Arlington group Limited ("Arlington" or the "Group") Adoption of International Financial Reporting Standards For all periods up to and including the year ended 31 March 2006 the Groupprepared its financial statements in accordance with United Kingdom generallyaccepted accounting practice (UK GAAP). These financial statements for the yearended 31 March 2007 are the first the Group has voluntarily prepared inaccordance with International Financial Reporting Standards (IFRSs) as adoptedby the European Union (EU). Accordingly, the Group has prepared financial statements which comply with IFRSsapplicable for periods beginning on or after 1 April 2006 and the significantpolicies meeting those requirements are noted in note 1. In preparing thesefinancial statements the Group has started from an opening balance sheet as at 1April 2005, the Group's date of transition to IFRSs, and made those changes inaccounting policies and other restatements required by IFRS 1 for the first timeadoption of IFRSs. This announcement explains the principal adjustments made bythe Group in restating its UK GAAP balance sheet as at 1 April 2005 and itspreviously published UK GAAP financial statements for the year ended 31 March2006. (a) Group Group reconciliation of equity as at 1 Notes UK Adjustments IFRSsApril 2005 GAAP £000 £000 £000Non-current assetsProperty, plant and equipment 1,211 - 1,211Intangible assets 1 (284) 284 - Current assetsStock 809 - 809Trade and other receivables 5,125 - 5,125Held for trading investments 2 9,505 2,441 11,946Property held for resale - - -Cash and cash equivalents 24,693 - 24,693 TOTAL ASSETS 41,059 2,725 43,784 EQUITY AND LIABILITIESEQUITYShare capital 325 - 325Capital redemption reserve 1 - 1Shares to be issued 3 - 39 39Retained earnings 32,228 2,686 34,914Minority interest 3 - 3 Current liabilitiesTrade and other payables 7,352 - 7,352Financial liabilities 1,094 - 1,094Government grants 27 - 27 Non-current liabilitiesFinancial liabilities 29 - 29 TOTAL LIABILITIES 8,502 - 8,502 TOTAL LIABILITIES AND EQUITY 41,059 2,725 43,784 (a) Group (continued) Group reconciliation of equity as at 1 Notes UK Adjustments IFRSsApril 2006 GAAP £000 £000 £000Non-current assetsProperty, plant and equipment 29 - 29 Current assetsTrade and other receivables 1,100 - 1,100Held for trading investments 2 31,345 164 31,509Property held for resale 579 - 579Cash and cash equivalents 6,086 - 6,086 TOTAL ASSETS 39,139 164 39,303 EQUITY AND LIABILITIESEQUITYShare capital 323 - 323Capital redemption reserve 3 - 3Shares to be issued 3 - 39 39Retained earnings 37,498 125 37,623 Current liabilitiesTrade and other payables 1,311 - 1,311Deferred tax liabilities 4 - 4 TOTAL LIABILITIES 1,315 - 1,315 TOTAL LIABILITIES AND EQUITY 39,139 164 39,303 (a) Group (continued) Reconciliation of net income for the year UK GAAP Adjustments IFRSto 31 March 2006 Reclassifications Note £000 £000 £000 £000TRADING INCOMEContinuing operations 4 16,050 - (11,312) 4,738Discontinued operations 5 4,994 - (4,994) - ----------------- ----------------- ----------------- ----------------- 21,044 - (16,306) 4,738 Cost of sales 2,4,5 (15,421) (2,102) 17,523 -Operating expenses 4 - - (2,661) (2,661) ----------------- ----------------- ----------------- -----------------GROSS PROFIT 5,623 (2,102) (1,444) 2,077 Changes in market value of open-ended hedge 2,4 2,343 (175) (2,168) 2,168fundsAdministrative expenses 1,4 (3,529) (71) 3,600 (3,600) ----------------- ----------------- ----------------- -----------------OPERATING PROFITContinuing operations 4,354 (2,277) - 2,077Discontinued operations 5 83 (71) (12) - ----------------- ----------------- ----------------- ----------------- 4,437 (2,348) (12) 2,077 Profit on sale of discontinued operations 1,5 714 (213) (501) -Interest receivable and similar income 5 903 - 33 936Interest payable (20) - - (20) ----------------- ----------------- ----------------- -----------------PROFIT ON ORDINARY ACTIVITIES BEFORE 5 6,034 (2,561) (480) 2,993TAXATION Tax on profit on ordinary activities 5 (638) - (6) (644)Profit on sale of discontinued operations 5 - - 486 486 ----------------- ----------------- ----------------- -----------------RETAINED PROFIT FOR THE FINANCIAL YEAR 5,396 (2,561) - 2,835 ========== ----------------- ----------------- ========== (a) Group (continued) Reconciliation of cashflows for the year to 31 March 2006 UK GAAP Adjustments IFRS £000 £000 £000 Group operating profit from continuing 2 4,354 (2,277) 2,077operationsAdjustments to reconcile group operatingprofit to net cash inflows from operatingactivitiesLoss before tax from discontinued 1 83 (71) 12operationsAmortisation 1 (71) 71 -Depreciation of property plant and 192 - 192equipmentShare based payments - - -(Increase)/Decrease in trade and other 1,724 - 1,724receivablesIncrease/(Decrease) in trade and other (2,947) - (2,947)payablesDecrease in stocks 100 - 100(Increase)/Decrease in investments held at 2 (22,378) 2,277 (20,101)fair value in profit and loss ------- ------- ------- Net cash flow from operating activities (18,943) - (18,943)before taxationTax paid (1,613) - (1,613) ------ ------- ------- Net cash from operating activities (20,556) (20,556)INVESTING ACTIVITIESInterest received 902 - 902Dividends received 1 - 1Sale of property plant and equipment 578 - 578Sale of subsidiary undertaking 1,751 - 1,751Purchases of property plant and equipment (12) - (12) ------ ------- -------Net cash used in investing activities 3,220 - 3,220FINANCING ACTIVITIESInterest paid (18) - (18)Interest element of hire purchase and (2) - (2)finance leaseDividends paid to equity shareholders of - - -the parentPurchase of own shares (126) - (126)Repayment of loans (161) - (161)Capital element of hire purchase and (11) - (11)finance lease ------ ------- -------Net cash used in financing activities (318) - (318) Increase in cash and cash equivalents (17,654) - (17,654)Cash and cash equivalents at the start of 23,740 - 23,740the year ------ ------- -------Cash and cash equivalents at the end of the 6,086 - 6,086year ------ ------- ------- (a) Group (continued) Explanation of adjustments 1. Under IFRS 3 "Business Combinations" negative goodwill does not fall tobe treated as a liability and is therefore written off to equity. The openingbalance of £284,000 has been written off at the date of Transition to IFRS. As aconsequence, the amortisation of negative goodwill in the year ended 31 March2006 is reversed, decreasing operating profits from discontinued operations by£71,000. Furthermore the unamortised negative goodwill at the date of disposalis no longer taken into account in the calculation of profit on disposal ofdiscontinued operations. This results in the profit being reduced by £213,000. This has no consequential impact on cash flows. However it does result in noamortisation being added back, and lower operating profit from discontinuedoperations. 2. Under IAS 39 all investments have been classified as held at fair valuethrough profit or loss in accordance. This results in an increase in thevaluation of investments at the date of transition to IFRS (£2,441,000) as wellas at 31 March 2006 (£164,000). This resulted in Cost of Sales in 2006 being£2,102,000 higher under IFRS than under UK GAAP and the change in fair value ofopen ended hedge funds being £175,000 lower under IFRS than under UK GAAP This has no consequential impact on cash flows. However it does result inoperating profit being lower and a lower amount being added back for change invalue of investments. 3. IFRS 2 "Share Based payment" requires that share based employee benefitsare expensed to the income statement based on their fair value at grant date,instead of their intrinsic value as required previously under UK GAAP before theadoption of FRS20. A Black-Scholes share option valuation model has beendeveloped to calculate the appropriate fair values. The fair values arecalculated at the date of grant of the awards and the total fair value ischarged to income over the relevant vesting periods. For IFRS purposesadditional share based payment costs are recognised in equity at the date ofTransition to IFRS of £39,000. This is consistent with the amount disclosed inthe UK GAAP interim announcement for the period ended 31 September 2006following the adoption of FRS20. Explanation of reclassifications 4. Under IAS 1 it is more appropriate to present "Trading Income" and"Operating Costs" rather than turnover, cost of sales, changes in fair value ofhedge funds and administrative expenses. This has resulted in a reduction of£11,312,000 in turnover, £13,817,000 in cost of sales, £2,168,000 in changes invalue of hedge funds and £2,324,000 in administrative expenses and an increasein operating expenses of £2,661,000 with a net impact of nil. 5. Under IFRS 5 profits arising from discontinued operations are presentedas a single line item in the income statement. This has the effect of reducingTurnover by £4,994,000, Cost of Sales by £3,706,000, Administrative expenses by£1,276,000 (net reduction in operating profit of £12,000), and increasingfinance income by £33,000 and taxation by £6,000 with a net impact of nil. (b) Company Company reconciliation of equity as at Notes UK Adjustments IFRSs1 April 2005 GAAP £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 35 - 35Investments 1,633 - 1,633 Current assetsTrade and other receivables 232 - 232Held for trading investments 6 7,745 264 8,009Cash and cash equivalents 21,872 - 21,872 TOTAL ASSETS 31,517 264 31,781 EQUITY AND LIABILITIESEQUITYShare capital 325 - 325Capital redemption reserve 1 - 1Shares to be issued 7 - 39 39Retained earnings 30,823 225 31,048 Current liabilitiesTrade and other payables 366 - 366Amounts owed by group undertakings 2 - 2 TOTAL LIABILITIES 368 - 368 TOTAL LIABILITIES AND EQUITY 31,517 264 31,871 (b) Company (continued) Company reconciliation of equity as at Notes UK Adjustments IFRSs1 April 2006 GAAP £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 29 - 29Investments 293 - 293 Current assetsTrade and other receivables 1,081 - 1,081Held for trading investments 6 31,364 125 31,489Cash and cash equivalents 5,163 - 5,163 TOTAL ASSETS 37,930 125 38,055 EQUITY AND LIABILITIESEQUITYShare capital 323 - 323Capital redemption reserve 3 - 3Shares to be issued 7 - 39 39Retained earnings 36,927 86 37,013 Current liabilitiesTrade and other payables 677 - 677 TOTAL LIABILITIES 677 - 677 TOTAL LIABILITIES AND EQUITY 37,930 125 38,055 Explanation of adjustments 6. Under IAS 39 all investments have been classified as held at fair valuethrough profit or loss in accordance. This results in an increase in thevaluation of investments at the date of transition to IFRS (£264,000) as well asat 31 March 2006 (£125,000). 7. IFRS 2 "Share Based payment" requires that share based employee benefitsare expensed to the income statement based on their fair value at grant date,instead of their intrinsic value as required previously under UK GAAP before theadoption of FRS20. A Black-Scholes share option valuation model has beendeveloped to calculate the appropriate fair values. The fair values arecalculated at the date of grant of the awards and the total fair value ischarged to income over the relevant vesting periods. For IFRS purposesadditional share based payment costs are recognised in equity at the date ofTransition to IFRS of £39,000. This is consistent with the amount disclosed inthe UK GAAP interim announcement for the period ended 31 September 2006following the adoption of FRS20. 28 September 2007 Enquiries; Bobbie Hilliam, Evolution Securities0207 071 4300 This information is provided by RNS The company news service from the London Stock Exchange