Braime Holdings Regulatory News (BMT)

28 Sep 2005 10:24

Braime (T.F.& J.H.) (Hldgs) PLC28 September 2005 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. INTERIM REPORT FOR THE PERIOD ENDED 30 JUNE 2005 The delay in announcing the interim result has been caused by the requirement toprepare both the half year accounts and to re-state last years figures inaccordance with the new International Financial Reporting Standards (IFRS).While the directors support any measures which improve transparency in thepresentation of accounts, they are of the opinion that IFRS achieves the reverseeffect while adding a further burden of unproductive cost. Sales for the first six months increased by 9% compared to the first half of2004. The improvement in sales was still not sufficient to return the companyto profit and the result for the half year was a net loss of £81,000 compared toa loss of £172,000 for the same period of 2004. The effect of the application of IFRS relating to pensions created an increasedfinance cost and produced an operating profit of £6,000. In view of the overall half year result, the directors have decided it would beunwise to pay an interim dividend. Our USA subsidiary had a successful half year. However, all other parts of thegroup continued to struggle to restore margins following the significantincreases in raw material costs over the past twelve months. Since the half year, Braime Pressings Limited has secured a significant amountof new work. In September, the company acquired tooling and equipment to manufactureadditional components, for distribution through existing channels. Taken together this additional volume should Note 2005 2004significantly improve our long term profitability (unaudited) (unaudited) £ £ Sales revenue 5 5,140,165 4,703,180 Operating profit/( loss) 6,443 (94,780)Finance costs (111,740) (102,829)Finance income 24,632 25,487Result for the year before tax (80,665) (172,122)Tax expense, net - -Net result of the period 5 (80,665) (172,122) Attributable to shareholders of T.F. & J.H. Braime (80,665) (172,122)(Holdings) P.L.C. Earnings per share Pence PenceBasic 7 (5.60) (11.95) 30 June 30 June 31 Dec 2005 2004 2004 (unaudited) (unaudited) (unaudited) £ £ £ AssetsNon-currentPension benefits 75,000 - 85,000Property, plant and equipment 587,334 567,832 555,488 662,334 567,832 640,488CurrentInventories 2,412,309 1,916,092 2,115,681Trade and other receivables 2,554,732 2,287,893 2,450,028Cash and cash equivalents 1,493,715 1,420,186 1,415,832 6,460,756 5,624,171 5,981,541 Total assets 7,123,090 6,192,003 6,622,029 30 June 30 June 31 Dec 2005 2004 2004 (unaudited) (unaudited) (unaudited)Equity £ £ £Equity attributable to shareholders ofT.F. & J. H. Braime (Holdings) P.L.C.Share capital 540,000 540,000 540,000Capital reserve 77,319 77,319 77,319Translation reserve (6,345) (7,750) (9,137)Retained earnings 3,482,501 3,039,163 3,567,666Total equity 4,093,475 3,648,732 4,175,848 LiabilitiesNon-currentPension and other employee obligations - 259,500 -Long term financial liabilities 42,864 - 52,979Other liabilities 23,956 25,612 24,784 66,820 285,112 77,763 CurrentBank overdrafts 1,338,305 1,084,832 1,080,600Bank loan 133,854 133,376 140,307Trade and other payables 1,480,636 1,039,951 1,094,311Current tax liabilities 10,000 - 10,000Other liabilities - - 43,200 2,962,795 2,258,159 2,368,418 Total liabilities 3,029,615 2,543,271 2,446,181 Total equity and liabilities 7,123,090 6,192,003 6,622,029 6 months to 6 months to 30 June 30 June 2005 2004 (unaudited) (unaudited) £ £ Exchange differences on translation of foreign operations 2,792 (7,750) Net income recognised directly in equity 2,792 (7,750) Loss for the period (80,665) (172,122) Total recognised income and expense for the period (77,873) (179,872) Attributable to:Equity holders of T.F. & J.H. Braime (Holdings) P.L.C. (77,873) (179,872) 6 months to 6 months to 30 June 30 June 2005 2004 (unaudited) (unaudited) £ £Operating activitiesResult for the year before tax 6,443 (94,780) AdjustmentsChanges in inventories (296,628) (25,893)Change in trade and other receivables (90,138) (366,942)Change in trade and other payables 386,325 51,611Outflow from pension and other employee obligations (84,000) (72,000)Depreciation 52,990 46,992Profit on sale (3,316) -Grants amortised (828) (828)Taxes paid (14,566) (31,906)Taxes recovered - 10,399Exchange difference in value of assets 10,856 (4,208) (32,862) (487,555) Investing activitiesAdditions to property, plant and equipment (92,902) (91,830)Proceeds from disposals of property, plant and equipment 3,318 600Interest received 24,632 25,487 (64,952) (65,743) Financing activitiesRepayment of bank loans (6,453) (6,269)Discharge of finance liability (10,115) -Interest paid (17,740) (10,329)Dividends paid (47,700) (62,100) (82,008) (78,698) Cash and cash equivalents, beginning of period 335,232 967,350Net decrease in cash and cash equivalents (179,822) (631,996)Cash and cash equivalents, end of period 155,410 335,354 1 basis of preparation The unaudited condensed consolidated interim financial statements of the Grouphave been prepared in accordance with International Accounting Standard 34Interim Financial Reporting and the requirements of International FinancialReporting Standard 1 First-time Adoption of International Financial ReportingStandards relevant to interim reports. T.F. & J.H. Braime (Holdings) P.L.C. is adopting International FinancialReporting Standards (IFRS) for the first time in its consolidated financialstatements for the year ending 31 December 2005, of which these condensedconsolidated interim financial statements form a part. The change from UK GAAPto IFRS was mandatory on this date to comply with UK security exchangeregulations for all listed companies. These condensed consolidated interim financial statements have been prepared onthe basis of IFRSs in issue that are effective or available for early adoptionat the Group's first IFRS annual reporting date, 31 December 2005. Based onthese IFRSs, the Board of Directors have made assumptions about the accountingpolicies expected to be adopted when the first IFRS annual financial statementsare prepared for the year ended 31 December 2005. There is, however, a possibility that the directors may determine that somechanges to these policies are necessary when preparing the full annual financialstatements for the first time in accordance with those IFRSs adopted for use bythe European Union. This is because the directors have anticipated that therevised IAS 19 Employee Benefits, which has yet to be formally adopted for usein the European Union, will be so adopted in time to be applicable to the nextannual financial statements (see note 3.16). The transition to IFRS reporting has resulted in a number of changes in thereported financial statements, notes thereto and accounting principles comparedto previous interim reports. Note 2 provides further details on the transitionfrom UK GAAP to IFRS and note 3 provides a summary of significant accountingpolicies. The condensed consolidated interim financial statements for the six months ended30 June 2005 were approved by the board of directors on 27 September 2005. 2 Transition to International Financial ReportingStandards The transition from previous GAAP to IFRS has been made in accordance with IFRS1, First-time Adoption of International Financial Reporting Standards. The following reconciliations and explanatory notes thereto describe the effectsof the transition on the IFRS opening balance sheet as at 1 January 2004 and forthe financial year 2004. All explanations should be read in conjunction with theIFRS accounting policies of T.F. & J.H. Braime (Holdings) P.L.C. as disclosed innote 3. The remeasurement of balance sheet items at the IFRS opening balance sheet datemay be summarised as follows: Reconciliation as at 1 January 2004 UK GAAP Effect of IFRS transition £ £ £ Other intangible assets 11,644 (11,644) -Property, plant and equipment 554,479 (27,343) 527,136Total change to assets (38,987) Pension and other employee obligations - (239,000) (239,000)Total change to liabilities (239,000) Total adjustment to equity (277,987) The reconciliation of the Group's equity reported under previous GAAP to itsequity under IFRSs as at 1 January 2004 may be summarised as follows: Reconciliation as at 1 January 2004 £ Share capital - UK GAAP 540,000Share capital - IFRS 540,000 Capital reserve - UK GAAP 77,319Capital reserve - IFRS 77,319 Retained earnings - UK GAAP 3,493,772- derecognition of other intangible assets (11,644)- derecognition of property, plant and equipment (27,343)- recognition of pension obligations (239,000)Retained earnings - IFRS 3,215,785 Total adjustments to equity (277,987) The remeasurement of balance sheet items as at 31 December 2004 may besummarised as follows: Reconciliation as at 31 December 2004 UK GAAP Effect of IFRS transition £ £ £ Other intangible assets 11,035 (11,035) -Property, plant and equipment 557,301 (1,813) 555,488Pension benefits - 85,000 85,000Total change to assets 72,152 Total adjustment to equity 72,152 The reconciliation of the Group's equity reported under previous GAAP to itsequity under IFRSs as at 31 December 2004 may be summarised as follows: Reconciliation as at 31 December 2004 £ Share capital - UK GAAP 540,000Share capital - IFRS 540,000 Translation reserve - UK GAAP -- reclassification of currency translation differences (9,137)Translation reserve - IFRS (9,137) Capital reserve - UK GAAP 77,319Capital reserve - IFRS 77,319 Retained earnings - UK GAAP 3,486,377- reclassification to other reserves 9,137- derecognition of other intangible assets (11,035)- derecognition of property, plant and equipment (17,553)- reversal of property depreciation 15,740- recognition of pension benefits 85,000Retained earnings - IFRS 3,567,666 Total adjustments to equity 72,152 The remeasurement of balance sheet items as at 30 June 2004 may be summarised asfollows: Reconciliation as at 30 June 2004 UK GAAP Effect of IFRS transition £ £ £ Other intangible assets 10,806 (10,806) -Property, plant and equipment 582,916 (15,084) 567,832Total change to assets (25,890) Pension and other employee obligations - (259,500) (259,500)Total change to liabilities (259,500) Total adjustment to equity (285,390) The reconciliation of the Group's equity reported under previous GAAP to itsequity under IFRSs as at 30 June 2004 may be summarised as follows: Reconciliation as at 30 June 2004 £ Share capital - UK GAAP 540,000Share capital - IFRS 540,000 Translation reserve - UK GAAP -- reclassification of currency translation differences (7,750)Translation reserve - IFRS (7,750) Capital reserve - UK GAAP 77,319Capital reserve - IFRS 77,319 Retained earnings - UK GAAP 3,316,803- reclassification to other reserves 7,750- derecognition of other intangible assets (10,806)- derecognition of property, plant and equipment (27,343)- reversal of property depreciation 12,259- recognition of pension obligations (259,500)Retained earnings - IFRS 3,039,163 Total adjustments to equity (285,390) Profit and loss reported under UK GAAP for the year ending 31 December 2004 isreconciled to IFRS as follows: Reconciliation for the year ending UK GAAP Effect of IFRS31 December 2004 transition £ £ £ Sales revenue 9,330,733 - 9,330,733Costs of material (4,751,911) - (4,751,911)Employee benefits expense (2,766,754) 144,000 (2,622,754)Depreciation and amortisation (90,882) 26,139 (64,743)Other expenses (1,679,398) - (1,679,398)Operating result 41,788 170,139 211,927Finance costs (23,238) (185,000) (208,238)Finance income 50,363 - 50,363Result for the year before tax 68,913 (14,861) 54,052Tax expense, net (14,971) - (14,971)Net result for the year 53,942 (14,861) 39,081 Profit and loss reported under UK GAAP for the period ending 30 June 2004 isreconciled to IFRS as follows: Reconciliation for the period ending UK GAAP Effect of IFRS30 June 2004 transition £ £ £ Sales revenue 4,703,180 - 4,703,180Costs of material (2,765,229) - (2,765,229)Employee benefits expense (1,403,128) 72,000 (1,331,128)Depreciation and amortisation (60,089) 13,097 (46,992)Other expenses (654,611) - (654,611)Operating result (179,877) 85,097 (94,780)Finance costs (10,329) (92,500) (102,829)Finance income 25,487 - 25,487Result for the period before tax (164,719) (7,403) (172,122)Tax expense, net - - -Net result for the period (164,719) (7,403) (172,122) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Overall considerations The significant accounting policies that have been used in the preparation ofthese condensed consolidated interim financial statements are summarised below. The condensed consolidated interim financial statements have been prepared onthe historical cost basis except for the revaluation of certain financial assetsand liabilities. The measurement bases are more fully described in theaccounting policies below. It should be noted that accounting estimates and assumptions are used inpreparing the interim financial statements. Although these estimates are basedon management's best knowledge of current events and actions, actual results mayultimately differ from those estimates. 3.2 Consolidation Subsidiaries are all entities over which the Group has the power to control thefinancial and operating policies.T.F. & J.H. Braime (Holdings) P.L.C. obtains and exercises control throughvoting rights. The consolidated financial statements of T.F. & J.H. Braime(Holdings) P.L.C. incorporate the financial statements of the parent company aswell as those entities controlled by the Group by full consolidation. In addition, acquired subsidiaries are subject to application of the purchasemethod. This involves the revaluation to fair value of all identifiable assetsand liabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their fair value amounts, which are also used asthe bases for subsequent measurement in accordance with the Group accountingpolicies. Goodwill represents the excess of acquisition cost over the fairvalue of the Group's share of the identifiable net assets of the acquiredsubsidiary at the date of acquisition. 3.3 Foreign currency translation T.F. & J.H. Braime (Holdings) P.L.C. consolidated financial statements arepresented in Sterling (£), which is also the functional currency of the parentcompany. In the separate financial statements of the consolidated entities, foreigncurrency transactions are translated into the functional currency of theindividual entity using the exchange rates prevailing at the dates of thetransactions (spot exchange rate). Foreign exchange gains and losses resultingfrom the settlement of such transactions and from the translation of monetaryassets and liabilities at year-end exchange rates are recognised in the incomestatement under "other income" or "other expenses", respectively. In the consolidated financial statements, all separate financial statements ofsubsidiaries originally presented in a currency different from the Group'spresentation currency, have been converted into Sterling. Assets andliabilities have been translated into Sterling at the closing rate at thebalance sheet date. Income and expenses have been converted into the Group'spresentation currency using the exchange rates prevailing at the dates of thetransactions. Any differences arising from this procedure have been charged/(credited) to the currency translation reserve in equity. The company has taken advantage of the exemption in IFRS 1 with respect tocumulative translation differences that existed at the date of transition toIFRS. Accordingly, the cumulative translation differences for all foreignoperations are deemed to be zero at the date of transition. 3.4 Income and expenses recognition Revenue is recognised when the risks and rewards of owning the goods have passedto the customer, which is generally on delivery. Operating expenses are recognised in the income statement upon utilisation ofthe service or at the date of their origin. Expenditure for warranties isrecognised and charged against the associated provision when the related revenueis recognised. Interest income and expenses are reported on an accrual basis.Dividends received are recognised at the time of their distribution. 3.5 Borrowing costs All borrowing costs are expensed as incurred. 3.6 Goodwill Goodwill arising on past acquisitions was written off against reserves inaccounting periods prior to transition to IFRS. 3.7 Research and development activities Costs associated with research activities are expensed in the income statementas they occur. Costs that are directly attributable to the development phase ofnew products are recognised as intangible assets provided they meet thefollowing recognition requirements: - demonstration of technical feasibility of the prospective product for internal use or sale - the intangible asset will generate probable economic benefits through internal use or sale - sufficient technical, financial and other resources are available for completion - the costs to be capitalised as an intangible asset can be reliably measured. All other development costs are expensed as incurred. 3.8 Property, plant and equipment Property, plant and equipment (other than freehold land) are carried atacquisition cost less subsequent depreciation and impairment losses. Freeholdland is carried at acquisition cost and is not depreciated. The useful lives of property, plant and equipment (other than freehold land) canbe summarised as follows: - Freehold buildings 25 years - Property improvements 10 years - Plant and fixtures 5 years - Motor vehicles 4 years - 3.9 Leases In accordance with IAS 17 (rev 2003), the economic ownership of a leased assetis transferred to the lessee if the lessee bears substantially all the risks andrewards related to the ownership of the leased asset. The related asset isrecognised at the time of inception of the lease at the fair value of the leasedasset or, if lower, the present value of the lease payments plus incidentalpayments, if any, to be borne by the lessee. A corresponding amount isrecognised as a finance leasing liability, irrespective of whether some of theselease payments are payable up-front at the date of inception of the lease. Subsequent accounting for assets held under finance lease agreements, iedepreciation methods and useful lives, correspond to those applied to comparableacquired assets. The corresponding finance leasing liability is reduced bylease payments less finance charges, which are expensed to finance costs.Finance charges represent a constant periodic rate of interest on theoutstanding balance of the finance lease liability. All other leases are treated as operating leases. Payments on operating leaseagreements are recognised as an expense on a straight-line basis. Associatedcosts, such as maintenance and insurance, are expensed as incurred. The Groupdoes not act as a lessor. 3.10 Impairment testing of intangible assets and property, plant andequipment The Group's intangible assets and property, plant and equipment are subject toimpairment testing. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment andsome are tested at cash-generating unit level. Individual assets or cash-generating units that include intangible assets withan indefinite useful life or those not yet available for use are tested forimpairment at least annually. All other individual assets or cash-generatingunits are tested for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell and value in use, based on an internal discounted cash flowevaluation. Impairment losses are charged pro rata to the assets in the cashgenerating unit. All assets are subsequently reassessed for indications that animpairment loss previously recognised may no longer exist. 3.11 Financial assets T.F. & J.H. Braime (Holdings) P.L.C.'s financial assets include cash andfinancial instruments. Financial assets, other than hedging instruments, can bedivided into the following categories: loans and receivables, financial assetsat fair value through profit or loss, available-for-sale financial assets andheld-to-maturity investments. Financial assets are assigned to the differentcategories by management on initial recognition, depending on the purpose forwhich the investments were acquired. The designation of financial assets isre-evaluated at every reporting date at which a choice of classification oraccounting treatment is available. Management consider that the financial assets of T.F & J.H. Braime (Holdings)P.L.C.'s represent loans and receivables. No items have been designated at fairvalue through profit or loss. All financial assets are recognised on their settlement date. All financialassets are initially recognised at fair value, plus transaction costs. Derecognition of financial instruments occurs when the rights to receive cashflows from the investments expire or are transferred and substantially all ofthe risks and rewards of ownership have been transferred. An assessment forimpairment is undertaken at least at each balance sheet date whether or notthere is objective evidence that a financial asset or a group of financialassets is impaired. Non-compounding interest and other cash flows resulting from holding financialassets are recognised in profit or loss when received, regardless of how therelated carrying amount of financial assets is measured. Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arise whenthe Group provides money, goods or services directly to a debtor with nointention of trading the receivables. Loans and receivables are subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. Any change in their value is recognised in profit or loss. Trade receivables are provided against when objective evidence is received thatthe Group will not be able to collect all amounts due to it in accordance withthe original terms of the receivables. The amount of the write-down isdetermined as the difference between the asset's carrying amount and the presentvalue of estimated future cash flows. 3.12 Inventories Inventories comprise raw materials, supplies and purchased goods. Cost includesall expenses directly attributable to the manufacturing process as well assuitable portions of related production overheads, based on normal operatingcapacity. Financing costs are not taken into consideration. At the balancesheet date, inventories are carried at the lower of cost and net realisablevalue. Net realisable value is the estimated selling price in the ordinarycourse of business less any applicable selling expenses. 3.13 Accounting for income taxes Current income tax assets and/or liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculatedaccording to the tax rates and tax laws applicable to the fiscal periods towhich they relate, based on the taxable profit for the year. All changes tocurrent tax assets or liabilities are recognised as a component of tax expensein the income statement. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assets andliabilities in the consolidated financial statements with their respective taxbases. However, in accordance with the rules set out in IAS 12, no deferredtaxes are recognised in conjunction with goodwill. This applies also totemporary differences associated with shares in subsidiaries and joint venturesif reversal of these temporary differences can be controlled by the Group and itis probable that reversal will not occur in the foreseeable future. Inaddition, tax losses available to be carried forward as well as other income taxcredits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply totheir respective period of realisation, provided they are enacted orsubstantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a componentof tax expense in the income statement. Only changes in deferred tax assets orliabilities that relate to a change in value of assets or liabilities that ischarged directly to equity (such as the revaluation of land) are charged orcredited directly to equity. 3.14 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short termhighly liquid investments such as money market instruments and bank deposits. 3.15 Equity Ordinary share capital is determined using the nominal value of shares that havebeen issued. Retained earnings include all current and prior period results as disclosed inthe income statement. 3.16 Pension obligations and short term employee benefits Pensions to employees are provided through a defined benefit plan as well as adefined contribution plan. A defined benefit plan is a pension plan that defines an amount of pensionbenefit that an employee will receive on retirement, usually dependent on one ormore factors such as age, years of service and salary. The legal obligation forany benefits from this kind of pension plan remains with the Group, even if planassets for funding the defined benefit plan have been acquired. Plan assets mayinclude assets specifically designated to a long term benefit fund as well asqualifying insurance policies. A defined contribution plan is a pension plan under which the Group pays fixedcontributions into an independent entity. The Group has no legal or constructiveobligations to pay further contributions after payment of the fixedcontribution. The liability recognised in the balance sheet for defined benefit pension plansis the present value of the defined benefit obligation (DBO) at the balancesheet date less the fair value of plan assets, together with adjustments forpast service costs. The DBO is calculated annually by independent actuariesusing the projected unit credit method. The present value of the DBO isdetermined by discounting the estimated future cash outflows using interestrates of high quality corporate bonds that are denominated in the currency inwhich the benefits will be paid and that have terms to maturity approximating tothe terms of the related pension liability. Actuarial gains and losses are recognised immediately and in full in thestatement of recognised income and expense. Past-service costs are recognisedimmediately in the income statement, unless the changes to the pension plan areconditional on the employees remaining in service for a specified period of time(the vesting period). In this case, the past service costs are amortised on astraight-line basis over the vesting period. The contributions recognised in respect of defined contribution plans areexpensed as they fall due. Liabilities and assets may be recognised ifunderpayment or prepayment has occurred and are included in current liabilitiesor current assets as they are normally of a short term nature. Short-term employee benefits are recognised for the number of paid leave days(usually holiday entitlement) remaining at the balance sheet date. They areincluded in current pension and other employee obligations at the undiscountedamount that the Group expects to pay as a result of the unused entitlement. This accounting policy reflects the early adoption of the amendment to IAS 19which, although yet to be formally adopted for use in the European Union, thedirectors anticipate will be so adopted in time to be applicable to the nextannual financial statements. 3.17 Financial liabilities The Group's financial liabilities include bank loans and overdrafts, trade andother payables and finance leasing liabilities. They are included in balancesheet line items 'long-term financial liabilities' and 'trade and otherpayables'. Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest related charges isrecognised as an expense in "finance cost" in the income statement. Bank loans are raised for support of long term funding of the Group'soperations. They are recognised at proceeds received, net of direct issuecosts. Finance charges, including premiums payable on settlement or redemptionand direct issue costs, are charged to profit or loss on an accrual basis usingthe effective interest method and are added to the carrying amount of theinstrument to the extent that they are not settled in the period in which theyarise. Trade payables are recognised initially at their nominal value and subsequentlymeasured at amortised cost less settlement payments. Dividend distributions to shareholders are included in 'other short termfinancial liabilities' when the dividends are approved by the shareholders'meeting. 3.18 Other provisions, contingent liabilities and contingent assets Other provisions are recognised when present obligations will probably lead toan outflow of economic resources from the Group and they can be estimatedreliably. Timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment thathas resulted from past events, for example, product warranties granted, legaldisputes or onerous contracts. Restructuring provisions are recognised only if adetailed formal plan for the restructuring has been developed and implemented,or management has at least announced the plan's main features to those affectedby it. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at the balancesheet date, including the risks and uncertainties associated with the presentobligation. Any reimbursement expected to be received in the course ofsettlement of the present obligation is recognised, if virtually certain as aseparate asset, not exceeding the amount of the related provision. Where thereare a number of similar obligations, the likelihood that an outflow will berequired in settlement is determined by considering the class of obligations asa whole. In addition, long term provisions are discounted to their presentvalues, where time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimate. In those cases where the possible outflow of economic resource as a result ofpresent obligations is considered improbable or remote, or the amount to beprovided for cannot be measured reliably, no liability is recognised in theconsolidated balance sheet, unless assumed in the course of a businesscombination as described in note 3.2. These contingent liabilities arerecognised in the course of the allocation of purchase price to the assets andliabilities acquired in the business combination. They are subsequentlymeasured at the higher amount of a comparable provision as described above andthe amount initially recognised, less any amortisation. Probable inflows of economic benefits to the Group that do not yet meet therecognition criteria of an asset are considered contingent assets. They aredescribed along with the Group's contingent liabilities in note 10. 4 BASIS OF CONSOLIDATION 4.1 Unconsolidated subsidiaries 4B Sudamerica SA (incorporated in Argentina) has not been consolidated into T.F.& J.H. Braime (Holdings) P.L.C. Group's financial statements on the grounds ofimmateriality. 5 SEGMENTAL INFORMATION Segment information is presented in the condensed consolidated interim financialstatements in respect of the Group's business segments, which are the primarybasis of segment reporting. The business segment reporting format reflects theGroup's management and internal reporting structure. T.F. & J.H. Braime (Holdings) P.L.C. operates two business segments, themanufacture of metal presswork and the distribution of bulk material handlingcomponents. All inter-segment transfers are priced and carried out at arm's length. Business segments Pressings Elevator Group30 June 2005 components £ £ £Revenue - from external customers 1,685,506 3,454,659 5,140,165- from other segments Operating result 18,783 (12,340) 6,443Finance costs, net (84,227) (2,881) (87,108)Tax expense - - -Net result for the period (65,444) (15,221) (80,665) Depreciation and amortisation 28,440 24,550 52,990 Comparative figures for the period ended 30 June 2004: Business segments Pressings Elevator Group30 June 2004 components £ £ £Revenue - from external customers 1,437,032 3,266,148 4,703,180- from other segments Operating result (23,737) (71,043) (94,780)Finance costs, net (76,862) (480) (77,342)Tax expense - - -Net result for the period (100,599) (71,523) (172,122) Depreciation and amortisation 26,238 20,754 46,992 6 WRITE-DOWN OF INVENTORIES During the six months ended 30 June 2005 the Group recognised a write-down offinished goods inventories of £38,580 (2004: £66,671) to reflect the ageing ofcertain items of stock. 7 EARNINGS PER SHARE AND DIVIDENDS Both the basic and diluted earnings per share have been calculated using the netresults attributable to shareholders of T.F. & J.H. Braime (Holdings) P.L.C. asthe numerator. The weighted average number of outstanding shares used for basic earnings pershare amounted to 1,440,000 shares (30 June 2004: 1,440,000 shares). No dilutive shares existed during the periods ended 30 June 2005 or 30 June2004. During the six months to 30 June 2005, T.F. & J.H. Braime (Holdings) P.L.C. paiddividends of £4,500 to its equity shareholders (30 June 2004: £4,500). Thisrepresents a payment of 2.5p per share (30 June 2004: 2.5p per share). 8 PROPERTY, PLANT AND EQUIPMENT Acquisitions and disposals During the six months ended 30 June 2005, the Group acquired assets with a costof £92,902 (30 June 2004: £91,830). Assets with a net book value of £2 weredisposed of during the period (30 June 2004: £600), resulting in a gain ondisposal of £3,316 (30 June 2004: £Nil). Capital commitments At 30 June 2005 the Group was contracted to acquire plant at a cost of £61,250(30 June 2004: £Nil). 9 EMPLOYEE REMUNERATION Pensions and other employee benefits and obligations The assets recognised for pensions and other employee remuneration in thebalance sheet consist of the following amounts: 30 June 31 Dec 2005 2004 £ £ Non-current pension benefits 75,000 85,000 The current portion of these liabilities represents T.F. & J.H. Braime(Holdings) P.L.C.'s obligations to its current and former employees that areexpected to be settled by 30 June 2006. These liabilities arise mainly fromaccrued holiday entitlement at the balance sheet date and pension payments. Asnone of the employees is eligible for early settlement of pension arrangements,the remaining part of pension obligations is considered non-current. T.F. & J.H. Braime (Holdings) P.L.C. operates a defined benefit pension schemefor certain employees of the Group. According to the plan, a certain percentageof the current salary is converted into a pension component each year. Pensionsunder this scheme are paid out when a beneficiary has reached the age of 65. 30 June 31 Dec 2005 2004 £ £ Present value of funded obligations (3,774,000) (3,618,000)Fair value of plan assets 3,849,000 3,703,000Pension benefits 75,000 85,000 The plan assets held for funding the defined benefit obligation do not includeany of T.F. & J.H. Braime (Holdings) P.L.C.'s own shares or any assets used bythe Group. Actual returns on plan assets in the six months ended 30 June 2005were £110,000 (year ended 31 December 2004: £495,000). The movement of the net asset / (liability), including the components of pensionbenefit expense due to defined benefit arrangements can be reconciled asfollows: 30 June 31 Dec 2005 2004 £ £ Carrying amount brought forward 85,000 (239,000) Current service costs (82,000) (156,000)Current interest costs (94,000) (185,000)Return on plan assets 110,000 495,000Actuarial gains on funded obligations - 60,000Contributions paid 56,000 110,000Carrying amount carried forward 75,000 85,000 Interest costs are included in the line item "finance costs" on the face of theincome statement. All other expenses relating to employee benefits are includedin the line item named "employee benefits expense". For determination of the pension asset / liability, the following actuarialassumptions were used: 30 June 31 Dec 2005 2004 Discount rate 5.25% 5.25%Expected rate of return on plan assets 5.90% 5.90%Expected rate of salary increases 4.00% 4.00%Inflation 3.00% 3.00% 10 CONTINGENT LIABILITIES At 30 June 2005 and 30 June 2004, the Group had no contingent liabilities. 11 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for the year ended 31 December 2004, prepared under UKGAAP, have been delivered to the Registrar of Companies and contained anunqualified auditors' report in accordance with s235 of the Companies Act 1985. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange