CTP.L Regulatory News (CTP)

24 Nov 2005 12:57

Redstone PLC24 November 2005 24 November 2005 Redstone plc Restated Financial Information Under International Financial Reporting Standards For the accounting periods up to 31st March 2005, Redstone plc has prepared itsconsolidated financial statements under UK Generally Accepted AccountingPractice (UK GAAP). From 1st April 2005, the Group will prepare its consolidatedfinancial statements in accordance with International Financial ReportingStandards (IFRS) and International Accounting Standards (IAS). The firstpublished results under IFRS will be for the six months ended 30th September2005. This announcement explains how the Group's previously reported UK GAAP financialperformance and position are affected by the change from UK GAAP to IFRS. A fullcopy of the restatement is available on the Company's website,www.redstone.co.uk ENQUIRIES: Redstone plc Tel. +44 (0)845 200 2200Tim Perks, Chief Financial Officer ICIS Limited Tel. +44 (0)20 7651 8688Tom Moriarty Or +44 (0)7802 442486Archie Berens IntroductionRedstone plc is required to report its consolidated financial statements underInternational Financial Reporting Standards (IFRS), as adopted by the EuropeanUnion for all accounting periods beginning on or after 1 January 2005.Previously the Group has applied UK generally accepted accounting principles (UKGAAP). The first financial result under IFRS will be the 2006 interim report for thesix months ending 30 September 2005, to be released on 29 November 2005. Thisdocument explains the impact of the adoption of IFRS on the Group's results, andquantifies the expected impact on the 2005 financial information for the fullyear ending 31 March 2005 and the interim period ending 30 September 2004,previously prepared under UK GAAP. All figures included in this report are insterling. Summary of IFRS impactThe impact on the profit for the year ended 31 March 2005, together with theimpact split between the half year and second half results is detailed in thetable below. Year Ended 31 March 2005 H1 2005 H2 2005 ----------- ------- --------- --------- --------- Interest Earnings Earnings Earnings Operating available for available for available Loss shareholders shareholders for shareholders -------- ------- ----------- ----------- --------- £000 £000 £000 £000 £000------------------- -------- ------- ---------- ---------- ----------UK GAAP (7,084) 452 (6,632) (3,272) (3,360)----------------- -------- ------- ---------- ---------- ----------Reversal ofgoodwillamortisation 4,100 - 4,100 2,050 2,050Goodwillimpairment (4,236) - (4,236) - (4,236)Share basedpayments (73) - (73) (24) (49)Employeebenefits (4) - (4) 36 (40)----------------- -------- ------- ---------- ---------- ----------Total IFRSadjustments (213) - (213) 2,062 (2,275)----------------- -------- ------- ---------- ---------- ----------IFRS (7,297) 452 (6,845) (1,210) (5,635)----------------- -------- ------- ---------- ---------- ---------- The impact on total equity (and net assets) at 31 March 2005 and 30 September2004 is shown in the table below. ------------ --------------- ------------ 31 March 2005 30 September 2004 31 March 2004 Total Equity Total Equity Total Equity ------------ --------------- ------------ £000 £000 £000---------------------- ------------ --------------- ------------UK GAAP 24,051 27,411 30,683-------------------- ------------ --------------- ------------Reversal of goodwillamortisation 4,100 2,050 -Goodwill impairment (4,236) - -Employee benefits (204) (164) (200)----------------- -------------- ---------------- --------------Total IFRS adjustments (340) 1,886 (200)------------------ ------------- ---------------- -------------IFRS 23,711 29,297 30,483------------------ ------------- ---------------- ------------- Detailed reconciliation information for the relevant 2005 primary statements isprovided later in this document. Summary of IFRS impact The introduction of IFRS has no impact on the underlying cash flows of thebusiness. Basis of preparation Statement of complianceThese extracts of the unaudited financial statements of Redstone plc have beenprepared, for the first time, in accordance with International FinancialReporting Standards (IFRS) and are covered byIFRS 1 'First-time Adoption of IFRS'. They have been prepared in accordance withthose IFRS standards issued and effective as at the time of preparing thesestatements, and have been applied retrospectively except where certainexceptions apply. As listed companies are adopting IFRS for the first time, there is limitedestablished practice upon which to draw in matters of interpretation andapplication. Furthermore, it is possible that new standards, revisions toexisting standards and new interpretations may be issued which affect the Group.Consequently it is not possible at this stage to definitively quantify theimpact of the adoption of IFRS, and therefore the comparative information in theinterim statement 2006 and annual report for the year ended 31 March 2006 maydiffer from that presented in this document. IFRS 1 'First-time Adoption of International Financial Reporting Standards'The Group has adopted IFRS 1 'First-time Adoption of International FinancialReporting Standards' and has applied the following optional IFRS 1 exemptions : IFRS 3 'Business Combinations'Business combinations prior to 1 April 2004 have not been restated to complywith IFRS 3. IFRS 2 'Share based payments'IFRS 2 is mandatory for accounting periods beginning on or after 1 January 2005.The Group has taken advantage of the transitional provisions of IFRS 2 inrespect of equity-settled awards and has applied IFRS 2 only to equity-settledawards granted after 7 November 2002 that had not vested on or before 31 March2005. IAS 16 'Property, Plant and Equipment'The group has elected to retain UK GAAP carrying values at the date oftransition. Revaluations under previous GAAP have been used in arriving atdeemed cost at transition. Significant assets have been tested for impairment. More details are provided in the "Explanatory notes on the impact of IFRS" and"Principal accounting policies" sections. Consolidated Income Statements, prepared under IFRS (unaudited) (i) Year ended 31 March 2005 UK GAAP Profit IFRS IFRS Income and Loss Adjustments Statement Account £000 £000 £000------------------------------- ----------- ---------- ----------Continuing OperationsRevenue 49,577 - 49,577Cost of sales (32,063) - (32,063)-------------------------- ----------- ---------- ----------Gross profit 17,514 - 17,514Other operating income 389 - 389Selling and distribution costs (7,458) (21) (7,479)Administrative expense (17,529) (192) (17,721)-------------------------- ----------- ---------- ----------Operating loss before goodwillamortisation/impairment (2,984) 41 (2,943)-------------------------- ------------ ---------- ----------Goodwill amortisation/impairment (4,100) (136) (4,236)Amortisation of intangible assets - (118) (118)--------------------- ------------ ---------- ----------Operating loss (7,084) (213) (7,297)Finance income 469 - 469Finance cost (17) - (17)--------------------- ------------ ---------- ---------- Loss on ordinary activities beforetaxation (6,632) (213) (6,845)Tax on loss on ordinary - - -activities ------------ ---------- ------------------------------Loss for the year (6,632) (213) (6,845)-------------------- ------------ ---------- ----------Basic and diluted earnings per (2.38) p (0.08) p (2.45) pshareGross profit % 35.3 - 35.3EBITDA (2,007) (77) (2,084)EBITDA per share (0.72) p (0.03) p (0.75) p-------------------- ------------ ---------- ---------- Consolidated Income Statements, prepared under IFRS (unaudited) (ii) Six months ended 30 September 2004 UK GAAP Profit IFRS IFRS Income and Loss Adjustments Statement Account £000 £000 £000----------------------------- ------------ ---------- ----------Continuing OperationsRevenue 27,464 - 27,464Cost of sales (18,941) - (18,941)----------------------- ------------ ---------- ----------Gross profit 8,523 - 8,523Other operating income 145 - 145Selling and distribution costs (3,698) (12) (3,710)Administrative expense (8,488) 2,074 (6,414)----------------------- ------------ ---------- ----------Operating loss before goodwillamortisation (1,468) 73 (1,395)------------------------ ------------- ---------- -----------Goodwill amortisation (2,050) 2,050 -Amortisation of intangible assets - (61) (61)----------------------- ------------- ---------- -----------Operating loss (3,518) 2,062 (1,456)Finance income 258 - 258Finance cost (12) - (12)----------------------- ------------- ---------- ----------- Loss on ordinary activities beforetaxation (3,272) 2,062 (1,210)------------------------ ------------- ----------- -----------Tax on loss on ordinary - - -activities ------------- ----------- --------------------------------Loss for the year (3,272) 2,062 (1,210)Basic and diluted earnings per (1.17) p 0.74 p (0.43) pshareGross profit % 31.0 - 31.0EBITDA (987) 12 (975)EBITDA per share (0.35) p 0.00 p (0.35) p---------------------- ------------- ---------- ----------- Reconciliation of consolidated balance sheet, prepared under IFRS (unaudited) (i) As at 31 March 2005 UK GAAP IFRS IFRS Balance Adjustments Balance Sheet Sheet £000s £000s £000sASSETSNon-Current AssetsGoodwill 21,270 (136) 21,134Other intangibles - 125 125Property, plant and equipment 2,746 (125) 2,621Other non-current assets - 429 429 ----------- ------------ --------- 24,016 293 24,309 ----------- ------------ ---------Current AssetsInventories 683 - 683Trade and other receivables 8,423 (429) 7,994Cash as bank and in hand 8,513 - 8,513 ----------- ------------ --------- 17,619 (429) 17,190 ----------- ------------ --------- ----------- ------------ ---------TOTAL ASSETS 41,635 (136) 41,499 ----------- ------------ ---------EQUITY AND LIABILITIESEquityCalled up share capital 8,472 - 8,472Share premium account 185,336 - 185,336Other reserves 216 - 216Retained losses (169,973) (340) (170,313) ----------- ------------ ---------- 24,051 (340) 23,711 ----------- ------------ ----------Current LiabilitiesTrade and other payable 14,639 204 14,843Provisions 816 - 816 ----------- ------------ ---------- 15,455 204 15,659 ----------- ------------ ----------Non-current LiabilitiesProvisions 2,129 - 2,129 ----------- ------------ ----------TOTAL EQUITY AND LIABILITIES 41,635 (136) 41,499 ---------- ----------- --------- Reconciliation of consolidated balance sheet, prepared under IFRS (unaudited) (ii) As at 30 September 2004 UK GAAP IFRS IFRS Balance Adjustments Balance Sheet Sheet £000 £000 £000ASSETSNon-Current AssetsGoodwill 23,320 2,050 25,370Other intangibles - 149 149Property, plant and equipment 2,729 (149) 2,580Other non-current assets - 429 429 ------------ ------------- ---------- 26,049 2,479 28,528 ------------ ------------- ----------Current AssetsInventories 905 - 905Trade and other receivables 9,859 (429) 9,430Cash as bank and in hand 11,942 - 11,942 ------------ ------------- ---------- 22,706 (429) 22,277 ------------ ------------- ---------- ------------ ------------- ----------TOTAL ASSETS 48,755 2,050 50,805 ------------ ------------- ----------EQUITY AND LIABILITIESEquityCalled up share capital 8,472 - 8,472Share premium account 185,336 - 185,336Other reserve 216 - 216Retained losses (166,613) 1,886 (164,727) ------------ ------------- ---------- 27,411 1,886 29,297 ----------- ------------ ----------Current LiabilitiesTrade and other payable 18,091 164 18,255Provisions 1,016 - 1,016 ----------- ------------ ---------- 19,107 164 19,271 ----------- ------------ ----------Non-current LiabilitiesProvisions 2,237 - 2,237 ----------- ------------ ----------TOTAL EQUITY AND LIABILITIES 48,755 2,050 50,805 ----------- ------------ --------- Reconciliation of consolidated balance sheet, prepared under IFRS (unaudited) (iii) As at 31 March 2004 UK GAAP IFRS IFRS Balance Balance Sheet Adjustments Sheet £000 £000 £000ASSETSNon-Current AssetsGoodwill 25,370 - 25,370Other intangibles - 191 191Property, plant and equipment 2,674 (191) 2,483Other non-current assets - 429 429 ----------- ---------- -------------- 28,044 429 28,473 ----------- ---------- --------------Current AssetsInventories 619 - 619Trade and other receivables 11,072 (429) 10,643Cash as bank and in hand 13,191 - 13,191 ----------- ---------- -------------- 24,882 (429) 24,453 ----------- ---------- -------------- ----------- ---------- --------------TOTAL ASSETS 52,926 - 52,926 ----------- ---------- --------------EQUITY AND LIABILITIESEquityCalled up share capital 8,472 - 8,472Share premium account 185,336 - 185,336Other reserve 216 - 216Retained losses (163,341) (200) (163,541) ----------- ---------- -------------- 30,683 (200) 30,483 ----------- ---------- --------------Current LiabilitiesTrade and other payable 18,529 200 18,729Provisions 1,024 - 1,024 ----------- ---------- -------------- 19,553 200 19,753 ----------- ---------- --------------Non-current LiabilitiesProvisions 2,690 - 2,690 ----------- ---------- --------------TOTAL EQUITY AND LIABILITIES 52,926 - 52,926 ----------- ---------- -------------- Consolidated revised cash flow format, prepared under IFRS (unaudited) (i) For the year ended 31 March 2005 and six months ended 30 September 2004 Year Six months Ended 31 Ended 30 March 2005 Sept 2004 £000 £000Cash flows from operating activitiesCash generated from operations (4,034) (939)Borrowing costs (6) (3)Interest element of finance lease payments (11) (9)-------------------------------- ----------- -----------Net cash flows from operating activities (4,051) (951)-------------------------------- ----------- ----------- Cash flows from investing activitiesProceeds from sale of property, plant and equipment 7 7Interest received 484 265Purchase of property, plant and equipment (1,056) (541)--------------------------------- ----------- ----------Net cash flows used in investing activities (565) (269)--------------------------------- ----------- ---------- Cash flows from financing activitiesPayment of finance lease liabilities (62) (29)---------------------------------- ----------- ----------Net cash flows from / (used in) financing activities (62) (29)--------------------------------- ----------- ---------- Net decrease in cash and cash equivalents (4,678) (1,249)Cash and cash equivalents at 1 April 2004 13,191 13,191---------------------------------- ----------- ----------Cash and cash equivalents 8,513 11,942--------------------------------- ----------- ---------- Net cash flows from operating activities Year ended Six months 31 March Ended 30 2005 Sept 2004 £000 £000Net operating loss (7,297) (1,456)Adjustments for :Depreciation 863 424Amortisation 118 61Goodwill impairment 4,236 -Share based payments 72 24Decrease in non-current provisions (561) (453)Profit on disposal of fixed assets (4) (4) Movements in working capitalIncrease in inventories (64) (286)Decrease in trade and other receivables 2,634 1,205Decrease in trade and other payables (3,823) (446)Decrease in provisions (208) (8)------------------------------- ------------ ------------Cash generated from operations (4,034) (939)------------------------------- ------------ ------------ Explanatory Notes on the impact of IFRS The notes below explain the impact that the adoption of IFRS has had on theGroup's consolidated results, which is summarised on pages 5 to 9. These notesalso support the detailed UK GAAP to IFRS reconciliations on pages 13 to 17. Inaddition to the reconciliation of the key financial statements, included in thisreport on pages 18 to 19 is the segment disclosure required under IFRS whichaligns the internal management reporting to that disclosed in the report andaccounts. The revised cash flow statement is shown on page 10. In addition tothe adjustments below, details of the Group's IFRS 1 elections have beensummarised on page 4. 1) IFRS 3 - Business Combinations; IAS 36 - Impairment of Assets; IAS 38 -Intangible AssetsIFRS 3 applies to accounting for business combinations for which the acquisitiondate is on or after 31 March 2004. The Group has elected not to apply IFRS 3 retrospectively to businesscombinations that took place prior to 1 April 2004. As a result in the openingbalance sheet, positive goodwill arising from previous business combinationsremains, (£25.4m) as stated under UK GAAP at 31 March 2004. The transitional provisions of IFRS 3 have required the Group to carry forwardthe UK GAAP net book value of positive goodwill as deemed cost under IFRS. The adoption of IFRS 3 and IAS 36 has resulted in the Group ceasing annualgoodwill amortisation from 1 April 2004. As a result, the UK GAAP amortisationcharge of £4.1 million for positive goodwill has been removed from the Group's2005 IFRS profit for the year. Positive goodwill has been tested for impairmentresulting in a charge for the financial year ended 31 March 2005 of £4.2million. 2) IFRS 2 - Share-Based PaymentIFRS 2 'Share-based Payment' requires an expense to be recognised for all equityrelated transactions and company share options schemes. The main impact of IFRS2 on the Group is the expensing of employees' and directors' share options andother share-based incentives by using an option-pricing model. IFRS 2 is mandatory for accounting periods beginning on or after 1 January 2005.The Group has taken advantage of the transitional provisions of IFRS 2 inrespect of equity-settled awards and has applied IFRS 2 only to equity-settledawards granted after 7 November 2002 that had not vested on or before 31 March2005. The effect of the revised policy has increased the consolidated 2005 lossposition by £72,783 and half year losses by £23,520 due to an increase in theemployee benefits expense with a corresponding increase in equity. 3) IAS 19 - Employee benefitsIAS 19 requires the Group to recognise in full liabilities in relation toemployee benefits. As at 31 March 2004, the Group has recognised an additional£200,318 of liabilities for holiday pay. The corresponding provision as at 31March 2005 is £204,424, and as a result, there is an increase in the loss forthe year of £4,106 for the year ended 31 March 2005. This introduces seasonality into the Group's result, because the holidayentitlement of employees is typically lower at 30 September than at 31 March.The reduction in the provision required at 30 September 2004 results in a creditto the half year income statement of £35,911. 4) IAS 14 - Segment reportingIAS 14 requires the disclosure of detailed segmental information based oninternal management information as it is reported to the board. Redstone hasdistinct cash generating business units within the Group with the traditionaltelecommunications business unit delivering inbound and outbound telephonyservices, the solutions business unit which delivers systems communications andsmaller units which deliver telecommunication products and related services.Redstone disclosure on secondary segment reporting is the geographical split ofrevenue which is mostly (over 90 %) derived in the UK. There are approximately3-4% of revenues generated outside of the UK through the consumption of itstelephony calling cards. 5) IAS 38 - Intangible assetsComputer software that is not an integral part of the related hardware isclassified as an intangible asset under IFRS, whereas such assets wereclassified as under tangible assets under UK GAAP. Reclassifications of £191,000have been made between tangible and intangible assets at 31 March 2004, £149,000at 30 September 2004 and £125,000 at 31 March 2005 accordingly. 6) IAS 1 - Presentation of financial statementsCurrent and non-current assets and liabilities are shown as separateclassifications on the face of the balance sheet. Rent deposits have beenreclassified as 'Other non-current assets', resulting in an increase inNon-current assets of £429,000. Property provisions have been split as currentand non-current. Reconciliation of consolidated income statement (i) For the year ended 31 March 2005 UK GAAP Reversal of Goodwill Amortisation Share Employee IFRS IFRS Profit Goodwill Impairment of Based Benefits Adjustments Income and Intangible Payments Statement Loss Amortisation Assets Account £000 £000 £000 £000 £000 £000 £000 £000 ---------- ------- --------- -------- -------- -------- ------- -------- -------ContinuingOperationsRevenue 49,577 - - - - - - 49,577 Cost of (32,063) - - - - - - (32,063)sales Gross profit 17,514 - - - - - - 17,514 Otheroperatingincome 389 - - - - - - 389Selling anddistributioncosts (7,458) - - - (19) (1) (21) (7,479)Administrativeexpenses (17,529) 4,100 (4,236) - (53) (3) (192) (17,721) ---------- ------- --------- -------- -------- -------- ------- -------- -------Operating lossbeforegoodwillamortisation/impairment (2,984) - - 118 (73) (4) 41 (2,943) ---------- ------- --------- -------- -------- -------- ------- -------- -------Goodwillamortisation/impairment (4,100) 4,100 (4,236) (118) - - (136) (4,236)Amortisationof intangibleassets (118) (118)---------- ------- --------- -------- -------- -------- ------- -------- ------- Operating loss (7,084) 4,100 (4,236) - (73) (4) (213) (7,297) Finance Income 469 - - - - - - 469Finance cost (17) - - - - - - (17)---------- ------- --------- -------- -------- -------- ------- -------- ------- Loss onordinaryactivitiesbeforetaxation (6,632) 4,100 (4,236) - (73) (4) (213) (6,845)Tax on loss of - - - - - - - -ordinary ------- --------- -------- -------- -------- ------- -------- -------activities----------Loss for theyear (6,632) 4,100 (4,236) - (73) (4) (213) (6,845)---------- ------- --------- -------- -------- -------- ------- -------- ------- Basic anddilutedearnings pershare (2.38)p (0.08) p (2.45) p Gross profit % 35.3 - 35.3 EBITDA (2,007) (77) (2,084) EBITDA pershare (0.72)p (0.03) p (0.75) p---------- --------- -------- -------- -------- ------- -------- ------- -------- Reconciliation of consolidated income statement (ii) For the six months ended 30 September 2004 UK GAAP Amortisation Profit Reversal of of Share Statement and Goodwill Intangible Based Employee IFRS IFRS Loss Account Amortisation Assets Payments Benefits Adjustments Income £000 £000 £000 £000 £000 £000 £000 --------- -------- ---------- --------- -------- --------- ---------- --------ContinuingOperationsRevenue 27,464 - - - - - 27,464 Cost of (18,941) - - - - - (18,941)sales -------- ---------- --------- -------- --------- ---------- ----------------- Gross profit 8,523 - - - - - 8,523 Otheroperatingincome 145 - - - - - 145Selling anddistributioncosts (3,698) (6) (6) (12) (3,710)Administrativeexpenses (8,488) 2,050 - (17) 41 2,074 (6,414 ---------- -------- ---------- --------- -------- --------- ---------- --------Operating lossbeforegoodwillamortisation (1,468) - 61 (24) 36 73 (1,395) ---------- -------- ---------- --------- -------- --------- ---------- --------Goodwillamortisation (2,050) 2,050 (61) - - 2,050 -Amortisationof intangibleassets (61) (61)---------- -------- ---------- --------- -------- --------- ---------- -------- Operating loss (3,518) 2,050 - (24) 36 2,062 (1,456) Finance Income 258 - - - - - 258Finance cost (12) - - - - - (12)---------- -------- ---------- --------- -------- --------- ---------- -------- Loss onordinaryactivitiesbeforetaxation (3,272) 2,050 - (24) 36 2,062 (1,210)---------- -------- ---------- --------- -------- --------- ---------- --------Tax on loss of - - - - - - -ordinaryactivitiesLoss for theyear (3,272) 2,050 - (24) 36 2,062 (1,210)---------- -------- ---------- --------- -------- --------- ---------- -------- Basic anddilutedearnings per share (1.17)p 0.74 p (0.43) p Gross profit % 31.0 - 31.0 EBITDA (987) 12 (975) EBITDA pershare (0.35)p 0.00 p (0.35) p---------- ---------- --------- -------- --------- ---------- -------- -------- Reconciliation of consolidated balance sheet (i) As at 31 March 2005 UK GAAP Reclass Reversal of Goodwill Employee IFRS IFRS Balance Goodwill Impairment Benefits Adjustments Balance Sheet Amortisation Sheet £000 £000 £000 £000 £000 £000 £000ASSETSNon-currentassetsGoodwill 21,270 - 4,100 (4,236) - (136) 21,134Othertangibles - 125 - - - 125 125Property,plant andequipment 2,746 (125) - - - (125) 2,621Othernon-currentassets - 429 - - - 429 429 -------- ------- ---------- --------- --------- ---------- -------- 24,016 429 4,100 (4,236) - 293 24,309 -------- ------- ---------- --------- --------- ---------- --------CurrentAssetsInventories 683 - - - - - 683Trade andotherreceivables 8,423 (429) - - - (429) 7,994Cash at bankand in hand 8,513 - - - - 8,513 -------- ------- ---------- --------- --------- ---------- -------- 17,619 (429) - - - (429) 17,190 -------- ------- ---------- --------- --------- ---------- -------- -------- ------- ---------- --------- --------- ---------- --------TOTAL 41,635 - 4,100 (4,236) - (136) 41,499ASSETS -------- ------- ---------- --------- --------- ---------- -------- -------- ------- ---------- --------- --------- ---------- --------EQUITY ANDLIABILITIESEquityCalled upshare capital 8,472 - - - - - 8,472Share premiumaccount 185,336 - - - - - 185,336Other 216 - - - - - 216reserveRetainedlosses (169,973) - 4,100 (4,236) (204) (340) (170,313) -------- ------- ---------- --------- --------- ---------- -------- 24,051 - 4,100 (4,236) (204) (340) 23,711 -------- ------- ---------- --------- --------- ---------- --------CurrentLiabilitiesTrade andother 14,639 - - - 204 204 14,843payablesProvisions 816 - - - - 816 -------- ------- ---------- --------- --------- ---------- -------- 15,455 - - - 204 204 15,660 -------- ------- ---------- --------- --------- ---------- --------Non-currentLiabilitiesProvisions 2,129 - - - - - 2,129 -------- ------- ---------- --------- --------- ---------- --------TOTAL EQUITYANDLIABILITIES 41,635 - 4,100 (4,236) - (136) 41,499 -------- ------- ---------- --------- --------- ---------- -------- Reconciliation of consolidated balance sheet (ii) As at 30 September 2004 -------- -------- UK GAAP Reclass Reversal of Employee IFRS IFRS Balance Goodwill Benefits Adjustments Balance Sheet Amortisation Sheet £000 £000 £000 £000 £000 £000ASSETSNon-currentassetsGoodwill 23,320 - 2,050 - 2,050 25,370Other - 149 - - 149 149tangiblesProperty,plant and 2,729 (149) - - (149) 2,580equipmentOthernon-current - 429 - - 429 429assets -------- ------- ---------- --------- ------------- --------- 26,049 429 2,050 - 2,479 28,528 -------- ------- ---------- --------- ------------- ---------CurrentAssetsInventories 905 - - - - 905Trade andother 9,859 (429) - - (429) 9,430receivablesCash at bankand in 11,942 - - - - 11,942hand -------- ------- ---------- --------- ------------- --------- 22,706 (429) - - (429) 22,277 -------- ------- ---------- --------- ------------- --------- -------- ------- ---------- --------- ------------- ---------TOTAL 48,755 - 2,050 - 2,050 50,805ASSETS -------- ------- ---------- --------- ------------- --------- -------- ------- ---------- --------- ------------- --------- EQUITY ANDLIABILITIESEquityCalled upshare 8,472 - - - - 8,472capitalShare premium account 185,336 - - - - 185,336Other 216 - - - - 216reserveRetained (166,613) - 2,050 (164) 1,886 (164,727)losses -------- ------- ---------- ---------- --------- -------- 27,411 - 2,050 (164) 1,886 29,297 -------- ------- ---------- --------- --------- --------CurrentLiabilitiesTrade andother 18,091 - - 164 164 18,255payablesProvisions 1,016 - - - - 1,016 -------- ------- ---------- --------- ------------- -------- 19,107 - - 164 164 19,272 -------- ------- ---------- ----------- ------------ --------- Non-currentLiabilitiesProvisions 2,237 - - - - 2,237 -------- ------- ---------- --------- ------------- -----------TOTAL EQUITYAND 48,755 - 2,050 - 2,050 50,805LIABILITIES -------- ------- ---------- --------- ------------- ----------- Reconciliation of consolidated balance sheet (iii) As at 31 March 2004 --------- UK GAAP Reclass Employee IFRS IFRS Balance Benefits Adjustments Balance Sheet Sheet £000 £000 £000 £000 £000ASSETS Non-current assets Goodwill 25,370 - - - 25,370 Other tangibles - 191 - 191 191 Property, plant and 2,674 (191) - (191) 2,483equipmentOther non-current - 429 - 429 429assets --------- ------- --------- ------------ ---------- 28,044 429 - 429 28,473 --------- ------- --------- ------------ ----------Current AssetsInventories 619 - - - 619Trade and other 11,072 (429) - (429) 10,643receivablesCash at bank and in 13,191 - - - 13,191hand --------- ------- -------- ----------- ----------- 24,882 (429) - (429) 24,453 --------- ------- -------- ----------- ----------- --------- ------- -------- ----------- -----------TOTAL ASSETS 52,926 - - - 52,926 --------- ------- -------- ------------ ---------- EQUITY ANDLIABILITIESEquity Called up share 8,472 - - - 8,472capitalShare premium 185,336 - - - 185,336account Other reserve 216 - - - 216 Retained losses (163,341) - (200) (200) (163,541) --------- ------- ------ ----------- --------- 30,863 - (200) (200) 30,483 --------- ------- ------ ----------- --------- CurrentLiabilitiesTrade and other 18,524 - 200 200 18,729payablesProvisions 1,024 - - - 1,024 --------- ------- -------- -------------- -------- 19,553 - 200 200 19,753 --------- ------- -------- -------------- --------Non-currentLiabilitiesProvisions 2,690 - - - 2,690 --------- ------- --------- ------------ -----------TOTAL EQUITY ANDLIABILITIES 52,296 - - - 52,296 ---------- ------- -------- ------------ ----------- Segment Reporting (i) For the year ended 31 March 2005 Telecoms Converged Managed Other Total Solutions Solutions £000 £000 £000 £000 £000 Revenue 30,802 14,554 3,677 544 49,577 ========= ========== ========= ======= ====== ResultSegment result 2,050 (4,414) (801) 104 (3,061) --------- ---------- --------- -------- ------- Central costs * (4,236)Net interest 452 --------Loss for the year (6,845) ======== Assets and liabilitiesSegment Assets 4,498 3,325 1,689 - 9,512Unallocated Assets ** 31,987 --------- ---------- --------- -------- -------Total Assets 41,499 ======= Segment Liabilities 6,267 2,923 1,478 - 10,668Unallocated liabilities 7,120 --------- ---------- --------- -------- -------Total liabilities 17,788 =======Other segment informationCapital expenditureProperty, plant and 35 405 286 330 1,056equipment ========= ========== ========= ======== ======= Depreciation 21 17 282 543 863Amortisation - - - 118 118Impairment - - - - 4,236 * Central costs relates to goodwill impairment of £4,236k** Unallocated assets includes goodwill of £21,134k The secondary segment reporting under IFRS requires disclosing a geographicalsplit. Redstone derives approximately 95% of its revenue in the UK. Revenues aregenerated outside of the UK through the consumption of telephony calling cards.All assets and capital expenditure are held and consumed in the UK. Segment Reporting (ii) For the six months ended 30 September 2004 Telecoms Converged Managed Other Total Solutions Solutions £000 £000 £000 £000 £000 Revenue 17,432 8,090 1,568 374 27,464 ========= ========= ======== ======= ====== ResultSegment result 1,003 (1,985) (596) 122 (1,456) --------- --------- -------- -------- ------- Net interest 246 -------Net loss for the period (1,210) ======= Assets and liabilitiesSegment Assets 5,356 3,769 2,169 - 11,294Unallocated Assets ** 39,511 --------- --------- -------- -------- --------Total Assets 50,805 ======== Segment Liabilities 7,824 4,099 1,731 - 13,654Unallocated liabilities 7,854 --------- --------- -------- -------- --------Total liabilities 21,508 ======== Other segment informationCapital expenditureProperty, plant and 21 177 95 248 541equipment ========= ========= ======== ======== ======== Depreciation 11 7 129 277 424Amortisation - - - 61 61 * Unallocated assets includes goodwill of £25,370k The secondary segment reporting under IFRS requires disclosing a geographicalsplit. Redstone derives approximately 95% of its revenue in the UK. Revenues aregenerated outside of the UK through the consumption of telephony calling cards.All assets and capital expenditure are held and consumed in the UK. Principal Accounting Policies The principal accounting policies that the Group has applied in preparing therestated financial information under IFRS are set out below. These policies areexpected to be used in preparation of the 2006 interim and annual reports. Basis of PreparationThe consolidated financial statements have been prepared on a historical costbasis, except for investments that have been measured at fair value. Theconsolidated financial statements are presented in sterling and all values arerounded to the nearest thousand (£'000) except when otherwise indicated. Basis of consolidationThe consolidated financial statements comprise the financial statements ofRedstone plc and its subsidiaries as at 31 March each year. The financialstatements of subsidiaries are prepared for the same reporting year as theparent company. All inter-company balances and transactions have been eliminated in full. Subsidiaries are consolidated from the date on which control is obtained by theGroup and cease to be consolidated from the date on which the Group no longerretains control. Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciationand any impairment in value. Depreciation, down to residual value, is calculated on a straight-line basisover the estimated useful life of the asset as follows:Leasehold improvements 20% or over lease term if shorterNetwork infrastructure and equipment 5% - 100%Equipment, fixtures and fittings 20% - 50% The carrying values of property, plant and equipment are reviewed for impairmentwhen events or changes in circumstances indicate the carrying value may not berecoverable. If any such indication exists and where the carrying values exceedthe estimated recoverable amount, the assets or cash-generating units arewritten down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of netselling price and value in use. In assessing value in use, the estimated futurecash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and therisks specific to the asset. For an asset that does not generate largelyindependent cash inflows, the recoverable amount is determined for thecash-generating unit to which the asset belongs. An item of property, plant and equipment is derecognised upon disposal or whenno future economic benefits are expected to arise from the continued use of theasset. Any gain or loss arising on de-recognition of the asset (calculated asthe difference between the net disposal proceeds and the carrying amount of theitem) is included in the income statement in the year the item is derecognised. LeasesFinance leases, which transfer to the Group substantially all the risks andbenefits incidental to ownership of the leased item, are capitalised at theinception of the lease at the fair value of the leased asset or, if lower, atthe present value of the minimum lease payments. Lease payments are apportionedbetween the finance charges and reduction of the lease liability so as toachieve a constant rate of interest on the remaining balance of the liability.Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimateduseful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits ofownership of the asset are classified as operating leases. Operating leasepayments are recognised as an expense in the income statement on a straight-linebasis over the lease term. Intangible assetsGoodwillGoodwill on acquisition is initially measured at cost being the excess of thecost of the business combination over the Group's interest in the net fair valueof the identifiable assets, liabilities and contingent liabilities. Followinginitial recognition, goodwill is measured at cost less any accumulatedimpairment losses. Goodwill already carried in the balance sheet is notamortised after 1 April 2004. Goodwill is reviewed for impairment, annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. As atthe acquisition date, any goodwill acquired is allocated to each of thecash-generating units expected to benefit from the combination's synergies.Impairment is determined by assessing the recoverable amount of thecash-generating unit, to which the goodwill relates. Where recoverable amount ofthe cash-generating unit is less than the carrying amount, an impairment loss isrecognised. In the event that management forecasts do not facilitate accurateimpairment testing at divisional level goodwill will be held centrally andreflected as such in the segment reporting. Where goodwill forms part of a cash-generating unit and part of the operationwithin that unit is disposed of, the goodwill associated with the operationdisposed of is included in the carrying amount of the operation when determiningthe gain or loss on disposal of the operation. Goodwill disposed of in thiscircumstance is measured on the basis of the relative values of the operationdisposed of and the portion of the cash-generating unit retained. Software and software licencesSoftware and software licences includes computer software that is not integralto a related item of hardware. These assets are stated at cost less accumulatedamortisation and any impairment in value. Amortisation is calculated onstraight-line basis over the estimated useful life of the asset. InvestmentsAll investments are initially recognised at cost, being the fair value of theconsideration given and including acquisition charges associated with theinvestment. Investments are tested for impairment at each reporting date or ifevents indicate that the carrying value has been diminished. InventoryInventories are valued at the lower of average cost and net realisable valueafter making allowance for any obsolete or slow moving items. Net realisablevalue is reviewed regularly to ensure accurate carrying values. Net realisable value is the estimated selling price in the ordinary course ofbusiness, less the estimated costs necessary to make the sale. Work in progress is valued at the lower of cost and net realisable value lessany payments received on account. Costs include materials, labour and otherexpenses incurred on the contract at the date of the balance sheet. Trade and other receivablesTrade receivables, which generally have 14-60 day terms, are recognised andcarried at original invoice amount less an allowance for any uncollectibleamounts. An estimate for doubtful debts is made when collection of the fullamount is no longer probable. Bad debts are written off when identified. Cash and cash equivalentsCash and short-term deposits in the balance sheet comprise cash at bank and inhand and short-term deposits. For the purpose of the consolidated cash flow statement, cash and cashequivalents consist of cash and cash equivalents as defined above, net ofoutstanding bank overdrafts. Foreign currency translationThe functional and presentation currency of Redstone plc is pounds sterling (£).Redstone conducts nearly all of its business in sterling with the exception ofpre paid telephone cards although typically are sold in sterling are also soldin Euros or in US Dollars. Revenues generated from the sale of these pre paidcards are exchanged into sterling based on exchange rates at the time of sale. For the purposes of this document which reviews financial information up to 31March 2005 Redstone does not have any foreign subsidiaries, however, post 31March 2005 Redstone acquired Xpert which has a subsidiary in Ireland operatingfunctional currency in Euros. ProvisionsProvisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determinedby discounting the expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and, where appropriate,the risks specific to the liability. The presentation of provisions on the face of the balance sheet under IFRSrequires separating the obligation between current (payable within the year) andnon-current liabilities. Deferred TaxationDeferred income tax is provided using the liability method, on temporarydifferences at the balance sheet date between the tax bases of assets andliabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised only to the extent that the Directors of thecompany consider it is more likely than not that there will be suitable taxableprofits from which the future reversal of the underlying temporary differencescan be deducted. Currently Redstone does not carry any deferred tax asset in itsbalance sheet as it is the view of the directors that at this stage it isunlikely that future taxable profits will be off set against any deferred taxasset. RevenueRevenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group and can be reliably measured. The followingspecific recognition criteria must also be met before revenue is recognised: TelecommunicationsCall traffic both inbound and outbound is recognised in the month in which it isconsumed. Pre paid calling cards revenue is recognised on consumption or expiry. Converged SolutionsRevenue relating to telephony solutions including project implementation andcabling is recognised when risk has passed from Redstone to the customer or onspecific project milestone with customer sign off / acceptance. Post Contract Support (maintenance agreements)Contracted support or maintenance agreements are deferred and revenue isrecognised evenly over the contract period taking into account any discountedperiods. The unrecognised contracted revenue is included as deferred income inthe balance sheet. Managed SolutionsInitial set up fees is recognised as revenue on installation. Recurring revenuesare recognised over period of service delivery. Pensions and other post-employment benefitsThe Group operates a defined contribution scheme available to all UK employees.Contributions are recognised as an expense in the income statement as theybecome payable in accordance with the rules of the scheme. Employee benefitsIn accordance with IAS 19, the Group provides for accrued holiday benefit. Thecost is measured as the additional amount that the Group expects to pay as aresult of the unused holiday entitlement that has accumulated at the balancesheet date. Share-based payment transactionsEmployees of the Group can receive remuneration in the form of share-basedpayment transactions, whereby employees are rewarded with share options grantedat a point priced based on share price at the time ('equity-settledtransactions'). The cost of equity-settled transactions with employees is measured by referenceto the fair value of the award at the date at which they are granted. The fairvalue is determined by an appropriate valuation model further details of whichare given in notes to the published accounts. In valuing equity-settledtransactions, no account is taken of any performance conditions. Redstoneemployee share option schemes do not have any performance conditions attached. The cost of equity-settled transactions is recognised together with acorresponding increase in equity, ending on the date on which the relevantemployees become fully entitled to the award ('vesting date'). The cumulativeexpense recognised for equity-settled transactions at each reporting date untilthe vesting date reflects the extent to which the vesting period has expired andthe number of awards that, in the opinion of the directors of the Group at thatdate, based on the best available estimate of the number of equity instrumentsthat will ultimately vest. As the awards do not have performance conditionsattached to them which are not market conditions no expense is recognised forawards that do not ultimately vest. Where the terms of an equity-settled award are modified, as a minimum an expenseis recognised as if the terms had not been modified. In addition, an expense isrecognised for any increase in the value of the transaction as a result of themodification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested onthe date of cancellation, and any expense not yet recognised for the award isrecognised immediately. However, if a new award is substituted for the cancelledaward, and designated as a replacement award on the date that it is granted, thecancelled and new awards are treated as if they were a modification of theoriginal award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional sharedilution in the computation of earnings per share. Under water share options arenon-dilutive. Given a consolidated loss position EPS is not diluted byoutstanding share options. The Group has taken advantage of the transitional provisions of IFRS 2 inrespect of equity-settled awards and has applied IFRS 2 only to equity-settledawards granted after 7 November 2002 that had not vested on or before 31 March2005. This information is provided by RNS The company news service from the London Stock Exchange