Bos Glb Hldgs Regulatory News (BOS)

1 Sep 2005 07:00

Body Shop International PLC01 September 2005 THE BODY SHOP INTERNATIONAL PLC Adoption of International Financial Reporting Standards 31 August 2005 The Body Shop International PLC is adopting International Financial ReportingStandards ("IFRS") with effect from 29 February 2004. Financial statements forthe 26 weeks ended 27 August 2005 and for the 52 weeks to 25 February 2006 willbe prepared and reported under IFRS. In order to facilitate understanding of the impact that IFRS will have on theGroup's financial statements, the Company is today publishing its preliminaryfinancial information for the full year accounts to 26 February 2005 and for theinterim accounts to 28 August 2004, together with the transition balance sheetas at 28 February 2004, restated in accordance with IFRS endorsed as at 26February 2005. A copy of this announcement will be made available on the Company's web site,www.thebodyshopinternational.com. Interim results for the 26 weeks ended 27 August 2005 will be reported on 13October 2005. Enquiries: For media enquiries, please contact: The Body Shop International PLCBill Eyres, Head of Global Corporate PRTel: 01903 844040 For investor enquiries, please contact: Angela BawtreeTel: 01903 846333 CONTENTS Section 1: IntroductionSection 2: Basis of preparationSection 3: First time adoptionSection 4: Main changes in accounting policies as a result of adopting IFRSSection 5: IFRS accounting policiesSection 6: Reconciliation of UK GAAP to preliminary IFRS consolidated income statement for the 52 weeks ended 26 February 2005Section 7: Reconciliation of UK GAAP to preliminary IFRS consolidated balance sheet as at 26 February 2005Section 8: Reconciliation of UK GAAP to preliminary IFRS consolidated balance sheet as at 28 February 2004Section 9: Reconciliation of UK GAAP to preliminary IFRS consolidated income statement for the 26 weeks ended 28 August 2004Section 10: Reconciliation of UK GAAP to preliminary IFRS consolidated balance sheet as at 28 August 2004Section 11: Reconciliation of increase in cash under UK GAAP to increase in cash and cash equivalents under preliminary IFRSSection 12: Special purpose audit report for the 52 weeks ended 26 February 2005Section 13: Special purpose review report for the 26 weeks ended 28 August 2004 SECTION 1: INTRODUCTION Following the regulation passed by the European Parliament in July 2002, TheBody Shop International PLC ("the Group") will prepare its consolidatedfinancial statements for the 52 weeks ended 25 February 2006, including theinterim statements for the 26 weeks ended 27 August 2005, under InternationalFinancial Reporting Standards ("IFRS"). To date, all the Group's consolidatedfinancial statements have been prepared under UK Generally Accepted AccountingPrinciples ("UK GAAP"). In order to facilitate understanding of the impact that IFRS will have on thefinancial statements of The Body Shop International PLC, this document containsreconciliations of the Group's balance sheet and income statement for theinterim accounts to 28 August 2004 and for the full year accounts to 26 February2005, together with the transition balance sheet as at 28 February 2004. Thisdocument also provides information on changes to the Group's accounting policiesfollowing the adoption of IFRS. References to IFRS in this document include International Financial ReportingStandards ("IFRS") and International Accounting Standards ("IAS"). In summary, the impact of adopting IFRS on the accounts for the 52 weeks ended26 February 2005 is as follows: Impact on Income Statement £mGoodwill amortisation 3.8 Share-based payments (1.4)Financial instruments (0.9)Other (0.3) ------Increase in profit before tax 1.2Taxation 0.3 ------Increase in profit after tax 1.5 ------ Impact on Net Assets £mDividends 7.9Taxation 6.1Goodwill amortisation 3.8Leases (5.7)Other (0.5) ------Increase in net assets 11.6 ------ Impact on Cash Flow Under IAS 7 "Cash Flow Statements", the definition of cash is extended to "cashand cash equivalents" which includes movements on short-term deposits. Thepresentation of the cash flow statement will therefore change to include thesecash equivalents. Other than this disclosure change, there is no impact onreported cash flows as a result of the transition to IFRS. SECTION 2: BASIS OF PREPARATION This financial information has been prepared in accordance with IFRS endorsed asat 26 February 2005, in line with the accounting policies set out in Section 5.As IFRS is subject to ongoing review and endorsement by the European Commissionor possible amendment by the International Accounting Standards Board, possiblefuture changes could result in an adjustment to the financial information anddisclosure included in this document prior to the issue of either the 27 August2005 and 25 February 2006 financial statements under IFRS. IFRS 1 "First-time Adoption of International Financial Reporting Standards" hasbeen applied with effect from 29 February 2004 in preparing this financialinformation. As a result, the balance sheet at 28 February 2004 has beenadjusted to conform to IFRS and this has been used as the transition balancesheet. Until 26 February 2005, the Group's consolidated financial statements had beenprepared in accordance with the Companies Act 1985 and United Kingdom AccountingStandards ("UK GAAP"). UK GAAP differs in certain respects from IFRS. Therefore,in preparing this IFRS consolidated financial information certain accounting,valuation and consolidation methods as applied under UK GAAP have been amended. The Group's annual accounting period ends on the Saturday nearest the end ofFebruary in each year. On that basis, the full restated period accounts havebeen prepared for a 52 week period ending 26 February 2005 and the date of thetransition balance sheet is 28 February 2004. Restated interim accounts are madeup for the 26 weeks ending 28 August 2004. SECTION 3: FIRST TIME ADOPTION The Group has adopted IFRS from 29 February 2004 ("the date of transition"). Generally, companies are required to select accounting policies that comply withIFRS and apply these accounting policies retrospectively to all periods sincethe date of transition and, in addition, to restate the balance sheet as at thedate of transition as if these accounting policies had always been applied. IFRS 1 permits or requires certain exemptions from the general principle ofretrospective application. Where permitted, the Group has utilised exemptionswhen retrospective application would result in little or no added usefulness interms of the information presented and where retrospective application wouldrequire the use of hindsight, which is specifically precluded by IFRS 1. The following summarises the Group's application of the IFRS 1 exemptions: Business combinations IFRS 1 exempts a first-time adopter from the retrospective application of IFRS 3"Business Combinations". Consequently, business combinations that occurred priorto the date of transition to IFRS have not been restated. Cumulative translation differences IAS 21 "The Effects of Changes in Foreign Exchange Rates" requires theclassification of translation differences arising in connection with foreignoperations to be classified as a separate component of equity. IFRS 1 exempts afirst-time adopter from the retrospective application of IAS 21. The Group hasapplied this exemption, with the effect that cumulative translation differencesfor all foreign operations as at the date of transition are deemed to be nil. The exception to retrospective application required by IFRS 1 that applies tothe Group is as follows: Hedge accounting IFRS 1 prohibits the retrospective re-designation of hedging instruments of netpositions enacted prior to the date of transition to IFRS. Consequently, inaccordance with IAS 39 "Financial Instruments: Recognition and Measurement", thegains or losses on the hedging instruments enacted by the Group that had notmatured at the date of transition have been recognised at fair value through theincome statement SECTION 4: MAIN CHANGES IN ACCOUNTING POLICIES AS A RESULT OF ADOPTING IFRS The most significant changes in the Group's accounting policies as a result ofthe adoption of IFRS are described below. IFRS 3 "Business Combinations" As at the date of transition, amortisation of goodwill on a straight-line basisceased and accumulated amortisation and impairment losses recognised to thatdate were netted against the goodwill's original cost. From the date of transition, goodwill is tested annually for impairment and iscarried at cost less accumulated impairment losses. Goodwill balances werereviewed for impairment as at 28 February 2004 and 26 February 2005 and noadjustments were identified. In the 52 weeks ended 26 February 2005, the non-amortisation of goodwill hasresulted in an increase in profit before tax of £3.8 million. There was noresulting tax impact. IAS 21 "Foreign Exchange" Under IAS 21, exchange differences resulting from the translation of the openingnet investment in foreign operations that arise after the date of transition arerecognised as a separate component of equity, rather than within retainedearnings as under UK GAAP. In addition, when a foreign operation is sold, such exchange differencesaccumulated since the date of transition are recognised in the income statementas part of the gain or loss on sale. Under UK GAAP, such exchange differencesare not re-cycled from retained earnings through the profit and loss account onthe disposal of a foreign operation. IAS 17 "Leased Assets" Under IAS 17, lease agreements for land and buildings are treated as financeleases where the lease term approximates to the useful life of the building orwhere the present value of the minimum lease payments, excluding payments forland, approximates to the fair value of the leased assets at inception. Following a review of the Group's building leases, a number of leases have beenreclassified from operating to finance leases and have been brought on to thebalance sheet. This has led to an increase of £9.4 million in fixed assets as at26 February 2005, with a resultant increase in finance lease liabilities. The main impact to the income statement is that operating lease rentals under UKGAAP will be replaced by depreciation and an interest expense under IFRS. Overthe period of the lease, the total impact on the income statement will be thesame. However, under IFRS, more of the total expense will be recognised earlierin the term of the lease and the majority of the expense will be classifiedunder finance costs rather than operating costs. The pre-tax impact on theincome statement for the 52 weeks ended 26 February 2005 is not material,although there is a £1.7 million reclassification of cost from operating profitto interest expense as a result of this change in accounting policy. IAS 38 "Intangible Assets" Under UK GAAP, items such as software development and website development costsare included within tangible fixed assets. IAS 38 requires these assets to bedisclosed under intangible assets. Consequently, a reclassification has beenperformed on the restatement of the Group's balance sheet to IFRS. The amountreclassified as at 26 February 2005 is £9.8 million. There is no impact on theincome statement as a result of this reclassification. IAS 39 "Financial Instruments" IAS 39 has a number of implications on the restatement of the Group's financialstatements: Deferred Consideration Receivable Previously, deferred consideration was recorded at the gross amount due. UnderIAS 39, such receivables are recorded at their discounted value, with thedifference being recorded as interest receivable over the period that theconsideration is due. As at 26 February 2005, this adjustment has resulted in a reduction inreceivables due after more than one year of £0.7 million. The effect on theincome statement for the 52 weeks ended 26 February 2005 is an increase inpre-tax profit of £0.2 million. Hedging Instruments Under UK GAAP, gains and losses on hedges on long-term amounts due from or toforeign subsidiaries are taken to the profit and loss account. In addition,gains and losses on hedges of future transactions denominated in foreigncurrency are deferred until the period in which the hedged transaction occurs,at which point they are recognised in the profit and loss account. Under IFRS, both these types of gains and losses are recognised in thetranslation reserve in equity to the extent that the hedges are deemed to beeffective; the ineffective portion is recognised in the income statement. Thisapplies from 1 January 2005 for hedges of future transactions denominated incurrency, as prior to this date the Group did not meet the criteria for hedgeaccounting under IAS 39, and this resulted in a reduction in pre-tax profit of£1.1 million for the 52 weeks ended 26 February 2005. IFRS 2 "Share Based Payments" The main impact on the Group of IFRS 2 is an expense charged to the incomestatement in respect of employee and directors' share options. Previously, therewas no comparable charge. The expense is calculated based on the fair value of the share options at thedate of grant and is spread over the vesting period of the option scheme,adjusted for expected levels of vesting. The Black-Scholes model has been usedto calculate the fair value of the share options at the date of grant. To improve comparability, the Group has applied IFRS 2 to all share options thathad not vested as at 29 February 2004, rather than just to those granted post 7November 2002 (as permitted by the standard). The fair value of share optionsgranted prior to 7 November 2002 and not vested as at 29 February 2004 waspublished on the Group's website on 15 August 2005. For the 52 weeks ended 26 February 2005, the impact of IFRS 2 was a £1.4 millionreduction in pre-tax profit. This is offset by a deferred tax credit of £0.2million, which is shown within the adjustment for IAS 12. The final tax creditis based on the intrinsic value at the balance sheet date, being the differencebetween the market value of the share options and the option exercise price.Where the amount of the estimated future tax deduction based on the intrinsicvalue exceeds that for the cumulative amount of the expense charged to theincome statement, the excess deferred tax is recognised within equity, with theremainder in the income statement. As at 26 February 2005, the total amountrecognised with respect to deferred tax on share options was £4.1 million, whichis shown within the adjustment for IAS 12. IAS 12 "Income Taxes" Current taxes are accounted for under IFRS under the same basis as UK GAAP. Deferred tax under UK GAAP is generally recognised on all timing differencesthat have originated but not reversed by the balance sheet date. The exceptionis the recognition of deferred tax assets, which is limited to the extent thatthe Group anticipates making sufficient taxable profits in the future to absorbthe reversal of the underlying timing differences. Under IFRS, deferred tax is accounted for using the balance sheet liabilitymethod in respect of temporary differences arising from the differences betweenthe carrying amount of assets and liabilities in the balance sheet and theircorresponding tax base. Deferred tax is not recognised on temporary differencesarising from goodwill or from the initial recognition (other than in a businesscombination) of other assets and liabilities in a transaction where there is noeffect on either the tax or accounting profit. The change to the balance sheet liability method of accounting for deferred taxresults in the following changes to the tax charge: 29 Feb 2004 26 Feb 2005 26 Feb 2005 26 Feb 2005 Net Assets Income Reserves Net Assets Statement £m £m £m £m Impact of IAS 12 0.2 (0.2) - -Tax effect ofaccounting changes 2.6 0.5 3.0 6.1 ---------- ---------- ---------- ----------Total tax impact 2.8 0.3 3.0 6.1 ---------- ---------- ---------- ---------- The most significant elements of the change in the tax charge as a result of thetransition to IFRS relates to the recognition of deferred tax on share-basedpayments and on hedging gains or losses under IAS 39. IAS 10 "Dividends" Under UK GAAP, dividends are recognised in the profit and loss account in theperiod to which they relate. Under IFRS, dividends are only recognised in the period to which they relate ifthey have been declared prior to the balance sheet date. If they are notdeclared until after the balance sheet date, they are recognised in thefollowing accounting period. As a result, the final dividend for the 52 weeks ended 28 February 2004 of £7.7million, which was not declared until after the balance sheet date, has beenreversed in the transition balance sheet and charged to equity in the 52 weeksto 26 February 2005. Similarly, the final dividend for the 52 weeks ended 26February 2005 of £7.9 million has been de-recognised under IFRS and will becharged to equity in the 52 weeks to 25 February 2006. IAS 37 "Provisions" Previously, provisions in the balance sheet were not discounted. Under IFRS,provisions are carried at a discounted value that reflects an appropriatepre-tax discount rate applied to expected future cash flows. Other adjustments Other adjustments include the recognition of a vacation accrual under IAS 19,the impact of which was not material on either the transition balance sheet orthe 52 weeks to 26 February 2005. SECTION 5: IFRS ACCOUNTING POLICIES The following section details the Group's accounting policies under IFRS. Basis of preparation The preliminary IFRS balance sheets and income statements shown in thereconciliations in Sections 6 to 11 have been prepared on the basis of IFRSexpected to be in issue at 25 February 2006. Basis of consolidation This consolidated financial information comprises the financial information ofthe parent company ("the Company") and its subsidiary undertakings. Subsidiaryundertakings are all entities over which the Group has the power to govern thefinancial and operating policies, generally accompanying a shareholding of morethan one half of the voting rights. The Group's accounting policies have beenapplied consistently in dealing with items that are considered material inrelation to the consolidated accounts. The Group uses the purchase method of accounting to account for the acquisitionof subsidiaries. The results of subsidiaries acquired or disposed of during theyear are included in the consolidated income statement from the effective dateof acquisition or up to the effective date of disposal, as appropriate. The interest of minority shareholders is stated at the minority's proportion ofthe fair values of the identifiable assets, liabilities and contingentliabilities recognised. All inter-company transactions and balances between group entities areeliminated on consolidation. Use of estimates and judgements The preparation of financial statements requires management to make estimatesand judgements that affect the application of accounting policies and thereported values of assets, liabilities, incomes and expenses. Such estimates andjudgements are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to bereasonable under the circumstances. Estimates are adjusted as appropriate andthe impact reflected in either just the current, or current and future, periodsdepending on the time frame to which the estimate relates. Revenue Revenue represents the fair value receivable in the ordinary course of businessfor goods sold and services provided. It excludes sales between group companies,discounts given, VAT and other sales taxes. Revenue is recognised as follows: Sale of goods: wholesale Revenue is recognised when the Group dispatches product to the customer. Sale of goods: retail Revenue is recognised when the product is sold to the customer. Retail sales areusually in cash or by credit card. The recorded revenue is the gross amount ofthe sale, including credit card fees payable for the transaction. Royalty income Royalty income is recognised on an accruals basis in accordance with thesubstance of the relevant royalty agreements. Sale of gift vouchers Revenue from the sale of gift vouchers is initially recognised as deferredincome, with the revenue recognised as the vouchers are redeemed. Sale of loyalty cards Loyalty cards entitle the holder to discounted purchases and gifts for a limitedperiod of time, in exchange for an initial fee payment. Revenues are deferredand recognised over the period of the loyalty card, matched by the associatedexpense, which is estimated based on previous experience. Dividends Dividends proposed by the Board and unpaid at the period end are not recognisedin the financial statements until they have been approved by shareholders at theAnnual General Meeting. Goodwill Goodwill arising on the acquisition of a subsidiary or business is thedifference between the fair value of the consideration paid and the fair valueof the assets and liabilities acquired. Goodwill arising on acquisitions prior to 28 February 1998 was set off directlyagainst reserves. Positive goodwill arising on acquisitions from 1 March 1998 to28 February 2004 was capitalised and amortised on a straight-line basis over itsuseful economic life up to a presumed maximum of 15 years. As at 29 February 2004, amortisation of goodwill ceased and the accumulatedamortisation and impairment losses previously recognised were netted off againstthe goodwill's original cost. From 29 February 2004 onwards, goodwill is tested annually for impairment and iscarried at cost less accumulated impairment losses. Gains and losses on thedisposal of an entity include the carrying amount of goodwill relating to theentity sold. IntangiblesIntangible assets include items such as software development and websitedevelopment costs. They are measured initially at cost and are then amortised ona straight-line basis over their estimated useful lives. Impairment Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation ordepreciation are reviewed for impairment whenever events or changes incircumstances indicate that their carrying amounts may not be recoverable. Animpairment loss is recognised for the amount by which the asset's carryingamount exceeds its recoverable amount. The recoverable amount is the higher ofan asset's fair value less costs to sell and value in use. For the purposes ofassessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows. Property, plant and equipment All property, plant and equipment is shown at cost less depreciation andprovision for impairments, with the exception of freehold land which is onlyshown net of provision for impairment. Depreciation is provided on a straight-line basis to write off the cost, lessestimated residual value, of all tangible fixed assets except freehold land overtheir expected useful lives. Depreciation is calculated using the followingrates: * Freehold buildings - over 50 years; * Leasehold property - over the period of the respective leases; * Plant and equipment - over 3 to 10 years. Inventory Inventories are stated at the lower of cost and net realisable value. Cost is calculated as follows: * Raw materials - cost of purchase on a first in, first out basis * Work in progress and finished goods - cost of raw materials and labour together with overheads attributable to bringing the inventories to their present location and condition. Net realisable value is based on estimated selling price less further costs tocompletion and disposal. Trade and other receivables Trade and other receivables are recognised initially at fair value andsubsequently measured at amortised cost using the effective interest method,less provision for impairment. A provision for impairment of trade and other receivables is established whenthere is objective evidence that the Group will not be able to collect allamounts due according to the original terms of receivables. The amount of theprovision is the difference between the asset's carrying amount and the presentvalue of estimated future cash flows, discounted at the effective interest rate.The amount of the provision is recognised in the income statement. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, together withshort-term deposits with an initial maturity date of 3 months or less. Provisions A provision is recognised when the Group has a present legal or constructiveobligation as a result of a past event and it is probable that an outflow ofeconomic benefits will be required to settle the obligation. If the effect ismaterial, provisions are measured using expected future cash flows discounted ata pre-tax rate that reflects current market assessments of the time value ofmoney and, where appropriate, the risks specific to the liability. A provision for onerous contracts is recognised when the expected benefits to bederived by the Group from a contract are lower than the unavoidable cost ofmeeting its obligations under the contract. The Body Shop International Employee Share TrustThe Company is deemed to have control of the assets, liabilities, income andcosts of The Body Shop International Employee Share Trust ("the EST"). Thesehave therefore been included in the financial information of the Group and theCompany. The ordinary shares of the Company held in the EST are included within thereserve for own shares and are deducted in arriving at shareholders' funds. To facilitate the acquisition and holding of shares, loans are made on aninterest-free basis by the Company to the EST. Shares held by the EST do notrank for dividends and accordingly are excluded from the calculation of theearnings per ordinary share. Foreign currency translation Transactions and balances in foreign currencies Transactions in foreign currencies are recorded at the rates prevailing at thedates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translatedat period end exchange rates. All foreign currency exchange differences are recognised in the incomestatement, except when deferred in equity as qualifying cash flow hedges orqualifying net investments hedges. Tax charges and credits attributable to suchexchange differences are also taken to equity. Group entities The assets and liabilities of foreign operations are translated at the rate ofexchange ruling at the balance sheet date. Income and expenses are translated ataverage exchange rates as a reasonable approximation of the rates prevailing onthe transaction dates. All these exchange differences are recognised as aseparate component of equity. Research and development Research and development costs are written off to the income statement asincurred, as they do not meet the criteria under IAS 38 for capitalisation in somuch as they cannot be reliably identified. Deferred taxation Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising from differences between the carryingamount of assets and liabilities in the financial statements and thecorresponding tax base used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it isprobable that taxable profits will be available against which deductibletemporary differences can be utilised. Deferred tax assets and liabilities are not recognised if the temporarydifferences arise from goodwill, or from the initial recognition (other than ina business combination) of other assets and liabilities in a transaction whichaffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries except where the Group is able to controlthe reversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future. Deferred tax is calculated at the rates that are expected to apply when theasset or liability is settled. Deferred tax is charged or credited in the income statement, except when itrelates to items credited or charged directly to equity, in which case thedeferred tax is also dealt with in equity. Leased assets Leases of property, plant and equipment where the Group has substantially allthe risks and rewards of ownership are classified as finance leases. Assets held under finance leases are capitalised at the lower of the fair valueof the leased asset and the present value of the minimum lease payments. Thecorresponding leasing commitments, net of finance charges, are included inliabilities. Leasing payments are analysed between capital and interest components so thatthe interest element is charged to the income statement over the period of thelease at a constant periodic rate of interest on the remaining balance of theliability outstanding. Depreciation on assets held under finance leases is charged to the incomestatement. All other leases are treated as operating leases with annual rentals charged tothe income statement on a straight-line basis over the term of the lease. Pension costs Contributions to the Group's defined contribution scheme are charged to theincome statement in the year in which they become payable. Share-based payments It is the Group's policy that part of some employees' (including directors)remuneration should be received in the form of either share options or rightsover shares. A charge is made in the income statement to reflect the cost to the Group ofthis remuneration. This is calculated with regard to the fair value of the shareoption or share right, which is itself calculated using the Black-Scholes model. The resulting cost is charged to the income statement over the period that theshare option or share right vests, with adjustments made to reflect the level ofoptions expected to vest. Derivative financial instruments The Group uses derivatives (such as forward foreign currency contracts) andnon-derivative financial instruments (such as foreign currency loans) to providecommercial hedges of its net investments in foreign subsidiaries and againstforecast cash flows designated in currencies other than the Group's functionalcurrency. Derivative financial instruments are initially accounted for at cost andsubsequently re-measured to fair value at each reporting date. The gains orlosses on re-measurement are taken to the income statement, except where thederivative is designated as a cash flow hedge or a net investment hedge in whichcase the gains or losses are taken to equity until such time that the hedgedtransactions are recognised in the income statement, at which time theaccumulated gains and losses recognised in equity will also be recognised in theincome statement. For financial instruments that do not qualify for hedge accounting, any gains orlosses arising from changes in fair value are taken directly to the incomestatement. SECTION 6: RECONCILIATION OF UK GAAP TO PRELIMINARY IFRS CONSOLIDATED INCOMESTATEMENT FOR THE 52 WEEKS ENDED 26 FEBRUARY 2005 IFRS 3 IAS 39 IAS 12 IFRS 2 Preliminary Business Financial IAS 17 Income Share Based IFRS UK GAAP Combinations Instruments Leases Taxes Payments Other (audited) £m £m £m £m £m £m £m £m ------ -------- ------- ------ ------ ------- ------ ------- Group operatingprofit 36.2 3.8 (1.1) 1.7 - (1.4) - 39.2Net finance costs (1.7) - 0.2 (1.8) - - (0.2) (3.5) ------ -------- ------- ------ ------ ------- ------ -------Profit on ordinaryactivities beforetaxation 34.5 3.8 (0.9) (0.1) - (1.4) (0.2) 35.7Taxation (7.2) - - - 0.3 - - (6.9) ------ -------- ------- ------ ------ ------- ------ -------Profit for the year 27.3 3.8 (0.9) (0.1) 0.3 (1.4) (0.2) 28.8 ------ -------- ------- ------ ------ ------- ------ -------Profitattributableto minorityinterests 0.3 - - - - - 0.3Profitattributable toshareholders 27.0 3.8 (0.9) (0.1) 0.3 (1.4) (0.2) 28.5 ------ -------- ------- ------ ------ ------- ------ ------- 27.3 3.8 (0.9) (0.1) 0.3 (1.4) (0.2) 28.8 ------ -------- ------- ------ ------ ------- ------ -------Earnings per share - basic 13.1p 13.8pEarnings pershare - diluted 12.6p 13.3p SECTION 7: RECONCILATION OF UK GAAP TO PRELIMINARY IFRS CONSOLIDATED BALANCESHEET AS AT 26 FEBRUARY 2005 IFRS 2 IFRS 3 IAS 38 IAS 39 IAS 12 Share Preliminary Business Intangible Financial IAS 17 Income Based IAS 10 IFRS UK GAAP Combinations Assets Instruments Leases Taxes Payments Dividends Other (audited) £m £m £m £m £m £m £m £m £m £m ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Non-current assetsGoodwill 44.0 3.8 - - - - - - - 47.8Other intangibleassets - - 9.8 - - - - - - 9.8Property, plant andequipment 73.5 - (9.8) - 9.4 - - - - 73.1Deferred tax 2.5 - - - - 9.3 - - - 11.8Non-currentreceivables 5.4 - - (0.7) - - - - - 4.7 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- 125.4 3.8 - (0.7) 9.4 9.3 - - - 147.2 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Current assetsInventories 62.1 - - - - - - - - 62.1Trade and otherreceivables 32.4 - - - - - - - - 32.4Derivatives - - - 0.2 - - - - - 0.2Cash and cashequivalents 41.6 - - - - - - - - 41.6 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- 136.1 - - 0.2 - - - - - 136.3 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Total assets 261.5 3.8 - (0.5) 9.4 9.3 - - - 283.5 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------CurrentliabilitiesInterest-bearing loans and borrowings (45.6) - - - - - - - - (45.6)Obligations under finance leases (0.2) - - - (2.2) - - - - (2.4)Trade and other payables (51.8) - - - - - - 7.9 (0.2) (44.1)Corporation taxliabilities (8.0) - - - - - - - - (8.0) ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- (105.6) - - - (2.2) - - 7.9 (0.2) (100.1) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Non-currentliabilitiesInterest-bearing loans andborrowings (0.3) - - - - - - - - (0.3)Obligations under finance leases (0.2) - - - (12.9) - - - - (13.1)Deferred tax - - - - - (3.2) - - - (3.2)Provisions (2.4) - - - - - - - 0.2 (2.2) ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- (2.9) - - - (12.9) (3.2) - - 0.2 (18.8) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Totalliabilities (108.5) - - - (15.1) (3.2) - 7.9 - (118.9) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Net assets 153.0 3.8 - (0.5) (5.7) 6.1 - 7.9 - 164.6 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------EquityCalled up share capital 10.7 - - - - - - - - 10.7Share premiumaccount 62.3 - - - - - - - - 62.3Reserve forown shares (6.1) - - - - - - - - (6.1)Foreign currencytranslation - - - 0.3 - 0.1 - - (0.4) -Other - - - - - 3.3 3.5 - - 6.8reserveRetainedearnings 85.0 3.8 - (0.8) (5.7) 2.7 (3.5) 7.9 0.4 89.8 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Equityshareholders' funds 151.9 3.8 - (0.5) (5.7) 6.1 - 7.9 - 163.5 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Minority interests 1.1 - - - - - - - - 1.1 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Total equity 153.0 3.8 - (0.5) (5.7) 6.1 - 7.9 - 164.6 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- SECTION 8: RECONCILATION OF UK GAAP TO PRELIMINARY IFRS CONSOLIDATED BALANCESHEET AS AT 28 FEBRUARY 2004 IFRS 2 IAS 38 IAS 39 IAS 12 Share Preliminary Intangible Financial IAS 17 Income Based IAS 10 IFRS UK GAAP Assets Instruments Leases Taxes Payments Dividends Other (audited) £m £m £m £m £m £m £m £m £m ------ -------- --------- ------- ------ ------ ------- ------ ----- Non-current assetsGoodwill 31.7 - - - - - - - 31.7Other intangibleassets - 7.3 - - - - - 0.1 7.4Property, plant andequipment 61.9 (7.3) - 9.9 - - - (0.1) 64.4Deferred tax 0.2 - - - 5.0 - - - 5.2Non-currentreceivables 5.9 - (0.9) - - - - - 5.0 ------ -------- --------- ------- ------ ------ ------- ------ ----- 99.7 - (0.9) 9.9 5.0 - - - 113.7 ------ -------- --------- ------- ------ ------ ------- ------ ----- Current assetsInventories 52.4 - - - - - - - 52.4Trade and otherreceivables 36.0 - - - - - - - 36.0Derivatives - - 1.0 - - - - - 1.0Cash and cashequivalents 17.6 - - - - - - - 17.6 ------ -------- --------- ------- ------ ------ ------- ------ ----- 106.0 - 1.0 - - - - - 107.0 ------ -------- --------- ------- ------ ------ ------- ------ ----- Total assets 205.7 - 0.1 9.9 5.0 - - - 220.7 ------ -------- --------- ------- ------ ------ ------- ------ ----- CurrentliabilitiesInterest-bearingng loans andborrowings (25.9) - - - - - - - (25.9)Obligationsunder financeleases (0.2) - - (2.2) - - - - (2.4)Trade and other payables (41.8) - - - - - 7.7 (0.2) (34.3)Corporation taxliabilities (5.1) - - - - - - - (5.1) ------ -------- --------- ------- ------ ------ ------- ------ ----- (73.0) - - (2.2) - - 7.7 (0.2) (67.7) ------ -------- --------- ------- ------ ------ ------- ------ ----- Non-currentliabilitiesInterest-bearingloans andborrowings (0.6) - - - - - - - (0.6)Obligationsunder financeleases (0.3) - - (13.3) - - - - (13.6)Deferred tax - - - - (2.2) - - - (2.2)Provisions (2.5) - - - - - - 0.4 (2.1) ------ -------- --------- ------- ------ ------ ------- ------ ----- (3.4) - - (13.3) (2.2) - - 0.4 (18.5) ------ -------- --------- ------- ------ ------ ------- ------ ----- Totalliabilities (76.4) - - (15.5) (2.2) - 7.7 0.2 (86.2) ------ -------- --------- ------- ------ ------ ------- ------ ----- Net assets 129.3 - 0.1 (5.6) 2.8 - 7.7 0.2 134.5 ------ -------- --------- ------- ------ ------ ------- ------ ----- EquityCalled up Share capital 10.4 - - - - - - - 10.4Share premiumaccount 54.7 - - - - - - - 54.7Reserve forown shares (6.1) - - - - - - - (6.1)Other reserve - - - - 0.4 2.1 - - 2.5 Retained earnings 70.3 - 0.1 (5.6) 2.4 (2.1) 7.7 0.2 73.0 ------ -------- --------- ------- ------ ------ ------- ------ ----- Equityshareholders' funds 129.3 - 0.1 (5.6) 2.8 - 7.7 0.2 134.5 ------ -------- --------- ------- ------ ------ ------- ------ ----- Minority interests - - - - - - - - - ------ -------- --------- ------- ------ ------ ------- ------ ----- Total equity 129.3 - 0.1 (5.6) 2.8 - 7.7 0.2 134.5 ------ -------- --------- ------- ------ ------ ------- ------ ----- SECTION 9: RECONCILIATION OF UK GAAP TO PRELIMINARY IFRS CONSOLIDATED INCOMESTATEMENT FOR THE 26 WEEKS ENDED 28 AUGUST 2004 IFRS 3 IAS 39 IFRS 2 Preliminary Business Financial IAS 17 Share Based IFRS UK GAAP Combinations Instruments Leases Payments Other (reviewed) £m £m £m £m £m £m £m -------- -------- -------- ------ ------- ------ -------Group operatingprofit 9.0 1.7 (1.0) 0.8 (0.7) - 9.8Net finance costs (0.7) - 0.1 (0.9) - (0.1) (1.6) -------- -------- -------- ------ ------- ------ ------- Profit on ordinaryactivities beforetaxation 8.3 1.7 (0.9) (0.1) (0.7) (0.1) 8.2Taxation (1.6) - - - - - (1.6) -------- -------- -------- ------ ------- ------ -------Profit for the year 6.7 1.7 (0.9) (0.1) (0.7) (0.1) 6.6 -------- -------- -------- ------ ------- ------ ------- Profit attributableto minority interests 0.1 - - - - 0.1Profit attributableto shareholders 6.6 1.7 (0.9) (0.1) (0.7) (0.1) 6.5 -------- -------- -------- ------ ------- ------ ------- 6.7 1.7 (0.9) (0.1) (0.7) (0.1) 6.6 -------- -------- -------- ------ ------- ------ -------Earnings per share - basic 3.3p 3.2pEarnings per share -diluted 3.2p 3.1p SECTION 10: RECONCILATION OF UK GAAP TO PRELIMINARY IFRS CONSOLIDATED BALANCESHEET AS AT 28 AUGUST 2004 IFRS 2 IFRS 3 IAS 38 IAS 39 IAS 12 Share Preliminary Business Intangible Financial IAS 17 Income Based IAS 10 IFRS UK GAAP Combinations Assets Instruments Leases Taxes Payments Dividends Other (reviewed) £m £m £m £m £m £m £m £m £m £m ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Non-current assetsGoodwill 45.5 1.7 - - - - - - - 47.2Other intangibleassets - - 11.7 - - - - - - 11.7Property, plant andequipment 69.9 - (11.7) - 9.6 - - - - 67.8Deferred tax 0.2 - - - - 6.2 - - - 6.4Non-currentreceivables 7.1 - - (0.8) - - - - - 6.3 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- 122.7 1.7 - (0.8) 9.6 6.2 - - - 139.4 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Current assetsInventories 76.0 - - - - - - - - 76.0Trade and otherreceivables 46.1 - - - - - - - - 46.1Derivatives - - - 0.1 - - - - - 0.1Cash and cashequivalents 18.0 - - - - - - - - 18.0 ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- 140.1 - - 0.1 - - - - - 140.2 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Total assets 262.8 1.7 - (0.7) 9.6 6.2 - - - 279.6 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Current liabilitiesInterest-bearingloans andborrowings (62.6) - - - - - - - - (62.6)Obligations under finance leases (0.2) - - - (2.2) - - - - (2.4)Derivatives - - - (0.1) - - - - - (0.1)Trade and other payables (53.0) - - - - - - 3.9 (0.2) (49.3)Corporation taxliabilities (4.1) - - - - - - - - (4.1) ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- (119.9) - - (0.1) (2.2) - - 3.9 (0.2) (118.5) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Non-current liabilitiesInterest-bearingloans andborrowings (0.4) - - - - - - - - (0.4)Obligationsunder finance leases (0.3) - - - (13.1) - - - - (13.4)Deferred tax - - - - - (2.4) - - - (2.4)Provisions (2.3) - - - - - - - 0.3 (2.0) ------ -------- --------- ------- ------ ------ ------- ------ ----- ------- (3.0) - - - (13.1) (2.4) - - 0.3 (18.2) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Total liabilities (122.9) - - (0.1) (15.3) (2.4) - 3.9 0.1 (136.7) ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Net assets 139.9 1.7 - (0.8) (5.7) 3.8 - 3.9 0.1 142.9 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------EquityCalled up share capital 10.6 - - - - - - - - 10.6Share premiumaccount 61.2 - - - - - - - - 61.2Reserve for own shares (6.1) - - - - - - - - (6.1)Foreign currencytranslation - - - - - - - - 0.4 0.4Other reserve - - - - - 1.4 2.8 - - 4.2Retained earnings 73.3 1.7 - (0.8) (5.7) 2.4 (2.8) 3.9 (0.3) 71.7 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Equityshareholders' funds 139.0 1.7 - (0.8) (5.7) 3.8 - 3.9 0.1 142.0 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Minority interests 0.9 - - - - - - - - 0.9 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------Total equity 139.9 1.7 - (0.8) (5.7) 3.8 - 3.9 0.1 142.9 ------ -------- --------- ------- ------ ------ ------- ------ ----- -------SECTION 11: RECONCILATION OF INCREASE IN CASH UNDER UK GAAP TO INCREASE IN CASHAND CASH EQUIVALENTS UNDER PRELIMINARY IFRS 28 August 2004 26 February 2005 (reviewed) (audited) £m £m ------------ ----------Increase in cash as reported under UK GAAP 0.7 8.1Movement on short term deposits - 16.0 ------------ ----------Increase in cash and cash equivalentsunder preliminary IFRS 0.7 24.1