DiscoverIE Regulatory News (DSCV)

28 Sep 2005 07:00

Acal PLC28 September 2005 FOR RELEASE 7:00 AM 28 SEPTEMBER 2005 ACAL plc Adoption of International Financial Reporting Standards Acal, a leading pan-European value-added distributor providing specialistdesign-in sales and marketing services for international suppliers, todayprovides unaudited summaries of the restatement, in accordance withInternational Financial Reporting Standards ('IFRS'), of its 2004/05 Interimand Full Year Consolidated Income Statements and Balance Sheets. Thesesummaries are provided in advance of the publication in December 2005 of Acal'sInterim Report for the six months to 30 September 2005, which will be theGroup's first report prepared under IFRS. Highlights of the restated financial statements are as follows: year to 31 March 2005 Six months to 30 September 2004 UK IFRS Change UK GAAP IFRS Change GAAP Profit before taxation and £11.3m £11.1m -2% £5.5m £5.4m -2%goodwill amortisation Goodwill amortisation £3.0m - £1.6m - Profit before taxation £8.3m £11.1m +34% £3.9m £5.4m +38% Earnings per share (before 26.9p 26.6p -1% 13.0p 13.0p 0%goodwill amortisation) Earnings per share (after 15.3p 26.6p +74% 7.3p 13.0p +78%goodwill amortisation) Shareholders' equity £65.3m £71.6m +10% £68.2m £71.2m +4%Commenting on the Group's adoption of the new accounting rules Jim Virdee,Finance Director, said: "The information presented today shows that, apart from the elimination ofgoodwill amortisation, there is little overall impact on Acal's reportedfinancial results from the adoption of IFRS. The Group's underlying businesseconomics are unchanged, underpinned by a strong balance sheet and good cashgeneration" The main impacts of IFRS on Acal's financial statements are in the followingareas: •dividends - now only accrued when the dividend is declared. •acquisitions - unamortised goodwill as at March 2004 becomes the opening goodwill amount, with no further amortisation. To date, Acal has prepared its accounts in compliance with UK GenerallyAccepted Accounting Principles ('UK GAAP'). EU regulations require Acal toadopt IFRS in its financial statements for accounting periods beginning in orafter 2005. The Group has reviewed those changes necessary to move from UK GAAPto IFRS. The restatement of the 2004/05 financial statements is unaudited andhas been prepared on the basis of IFRS expected to be adopted by the EU at 1April 2006. These standards are subject to ongoing review and interpretationand therefore may be subject to change. The effect of the adoption of IFRS on Acal's financial statements, including areconciliation of the main changes, a summary of Consolidated Income Statementsfor the year to 31 March 2005 and six months to 30 September 2004 restatedunder IFRS, together with shareholders' equity at those dates and principalaccounting policy changes are given below as part of this announcement. A copy of this announcement and other information about the Acal Group can befound on the Acal website, www.acalplc.co.uk. For further information, please contact: Acal plc 01483 544 500Jim Virdee, Finance Director Beattie Financial. 0207 053 6400Brian Coleman-Smith/ Jo Clewlow/Nia Thomas Acal plc ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS Acal plc will in future be reporting its consolidated results in accordancewith International Financial Reporting Standards ('IFRS'), beginning with itsInterim Report for the six months to 30 September 2005. This statement presentsand explains the unaudited restatement to an IFRS basis of the Group's resultsand shareholders' equity for the six months to 30 September 2004 and the yearto 31 March 2005, which were previously reported under UK Generally AcceptedAccounting Principles ('UK GAAP'). These restated figures will form thecomparative information for the Group's first IFRS financial statements in 2005/06. Reconciliation and explanation of changes A reconciliation of the changes is as follows: £m year to/as at 31 March Six months to/as at 30 2005 September 2004 Shareholders' Shareholders' Profit equity Profit equity before before taxation taxation As reported under UK GAAP 8.3 65.3 3.9 68.2 Share-based payments (0.1) - - - Dividends - 3.8 - 1.9 Holiday pay * - (0.2) - (0.2) Reversal of goodwill 3.0 3.0 1.6 1.6 amortisation Deferred tax - (0.3) - (0.3) Presentation of Associates (0.1) - (0.1) - As restated under IFRS 11.1 71.6 5.4 71.2 * effect on shareholders' equity stated net of associated deferred tax Share-based payments This charge relates to employee share option schemes operated by the Group.Under UK GAAP, no charge was made against profit in relation to the Group'sshare option schemes. Under IFRS the fair value of options is assessed andcharged against profit over the period from granting to vesting, resulting inan extra £0.1 million charge against profit for the year to 31 March 2005. Thischarge is only applied to options awarded on or after 7 November 2002 that hadnot vested at 31 March 2005. Dividends Under IFRS, dividends are considered a liability in the period they aredeclared. Accordingly the accruals for the interim dividend of £1.9 million at30 September 2004 and the final dividend of £3.8 million at 31 March 2005 arereleased under IFRS and charged against profit in the following reportingperiod. Employee benefits IAS 19 requires the Group to recognise in full liabilities in relation toemployee benefits. As at 1 April 2004, the Group has recognised an additional£0.2 million of liabilities for holiday pay. The corresponding provision as at31 March 2005 is £0.2 million so that there is no adjustment to profit for theyear to 31 March 2005. Reversal of goodwill amortisation The £3.0 million of goodwill amortisation charged in the year to 31 March 2005under UK GAAP is reversed, as IFRS has replaced the amortisation charge with anannual impairment test. Taxation Under IAS 12 Income Taxes, it is necessary to recognise a deferred taxliability on all assets that are carried at a revaluation. Under UK GAAP noliability was recognised unless there was a binding agreement to sell theasset. The impact is to reduce Group net assets by £0.3m. There is no impact onthe Income Statement. Associates The adoption of IFRS leads to a change in the presentation of the Group's shareof the results of Associates. Under UK GAAP, the Group's operating profitincludes the share of Associate operating profits before interest and tax andthe Group's share of the Associate's interest and tax is included in therespective Group lines on the Profit and Loss account. Under IFRS, Associateprofit is shown as a net figure after interest and tax. This will have theeffect of reducing profit before tax, but will reduce the tax and interestcosts. Overall, there is no impact on the Group profit after tax as this ispurely a presentational change. Income StatementsSummary Consolidated Income Statement for the year to 31 March 2005 £m Under UK IFRS Under GAAP adjustments IFRS (see below) Group operating profit (excluding associates) 12.7 (0.1) 12.6 Group share of profit of associates 0.6 (0.2) 0.4 Profit from operations before goodwill 13.3 (0.3) 13.0amortisation Goodwill amortisation (3.0) 3.0 -Profit from operations 10.3 2.7 13.0 Net finance income/(expense) (2.0) 0.1 (1.9) Profit before tax 8.3 2.8 11.1 Tax (3.8) 0.1 (3.7) Profit on ordinary activities after taxation 4.5 2.9 7.4 Minority interest (0.4) - (0.4) Profit attributable to ordinary shareholders 4.1 2.9 7.0 Earnings per share 15.3p 26.6p Profit before tax (before goodwill 11.3 11.1amortisation) Earnings per share (before goodwill 26.9p 26.6pamortisation) Summary Consolidated Income Statement for the six months to 30 £mSeptember 2004 Under UK IFRS Under GAAP adjustments IFRS (see below) Group operating profit (excluding associates) 6.1 - 6.1 Group share of operating profit of associates 0.3 (0.1) 0.2 Profit from operations before goodwill 6.4 (0.1) 6.3amortisation Goodwill amortisation (1.6) 1.6 - Profit from operations 4.8 1.5 6.3 Net finance income/(expense) (0.9) - (0.9) Profit before tax 3.9 1.5 5.4 Tax (1.8) 0.1 (1.7) Profit on ordinary activities after taxation 2.1 1.6 3.7 Minority interest (0.2) - (0.2) Profit attributable to ordinary shareholders 1.9 1.6 3.5 Earnings per share 7.3p 13.0p Profit before tax (before goodwill 5.5 5.4amortisation) Earnings per share (before goodwill 13.0p 13.0pamortisation) Summary of IFRS adjustments to Consolidated Income Statement £m year to six months Notes 31 March 2005 to 30 Sep 2004 Profit from operations 2 (0.1) -Share-based payments Group operating profit (excluding (0.1) -associates) Reclassification of interest and tax of (0.2) (0.1)associates Reversal of goodwill amortisation charge 6a 3.0 1.6 Profit from operations 2.7 1.5 Net finance income/(expense) 0.1 -Reclassification of interest of associates Profit before tax 2.8 1.5 Tax 0.1 0.1Reclassification of tax of associates tax Total tax 0.1 0.1 Profit on ordinary activities after taxation 2.9 1.6 Balance Sheet Detailed reconciliations of the balance sheets prepared under UK GAAP and IFRSat 1 April 2004, 30 September 2004 and 31 March 2005 are set out in AppendicesI to III respectively to this announcement. Set out below is a summary of thereconciliation of shareholders' equity as at 30 September 2004 and 31 March2005. Summary of IFRS adjustments to Shareholders' Equity £m At 31 March At 30 Sep Notes 2005 2004 Shareholders' equity as reported under UK GAAP 65.3 68.2 Dividends 3 3.8 1.9 Holiday pay * 4 (0.2) (0.2) Goodwill 6a 3.0 1.6 Deferred tax on asset revaluations 7 (0.3) (0.3) Shareholders' equity as restated under IFRS 71.6 71.2 * net of associated deferred tax Cash flow reconciliation Cash flow is unchanged from that previously reported under UK GAAP. Principal accounting policy changes 1. Basis of accounting Acal plc and its subsidiaries (the 'Group') have previously preparedconsolidated financial statements under UK Generally Accepted AccountingPrinciples ('UK GAAP'). From 1 April 2005 the Group is required to prepareconsolidated financial statements in accordance with International FinancialReporting Standards ('IFRS') and International Accounting Standards (IAS)adopted by the European Union (EU). References to IFRS throughout this documentrefer to the application of IFRS and IAS as adopted by the EU. The Group's first published figures under IFRS will be in the Interim Reportfor the six months to 30 September 2005 and the first Annual Report under IFRSwill be the Annual Report and Accounts for the year to 31 March 2006. Thetransition date for IFRS purposes is 1 April 2004, being the start of theearliest period of comparative information. To explain the effect of this transition on the Group's reported performanceand financial position, information for the six months to 30 September 2004 andyear to 31 March 2005, which was previously published under UK GAAP, has beenrestated in summary form in this document. This information is unaudited. Standards currently in issue and adopted by the EU are subject tointerpretation issued from the International Financial ReportingInterpretations Committee ('IFRIC'). Further standards may be issued by theInternational Accounting Standards Board that will be adopted for financialyears beginning on or after 1 January 2005. IFRS is currently being applied inthe United Kingdom and in a large number of other countries simultaneously forthe first time. Due to the number of new and revised standards included withinthe body of standards that comprise IFRS, there is not yet significantestablished practice on which to draw in forming decisions regarding theirinterpretation and application. Accordingly, practice is continuing to evolve.At this preliminary stage, therefore, the full financial effect of reportingunder IFRS as it will be applied and reported on in the Group's first IFRSfinancial statements for the year ended 31 March 2006 may be subject to change.Generally, transition to IFRS requires full retrospective application. HoweverIFRS 1 'First-Time Adoption of IFRS' allows a certain number of mandatory andoptional exemptions from this general rule. Where the Group intends to takeadvantage of these exemptions they are noted below. 2. Share-based payments Under UK GAAP no charge was made in the Consolidated Profit and Loss Account inrelation to the Group's share option schemes. In accordance with IFRS 2 'Share-Based Payments' the fair value of employeeshare-based rewards have been calculated and charged to the Consolidated IncomeStatement on a straight line basis over the expected vesting period. Thischarge is adjusted to reflect the expected and actual levels of vesting and anychanges to the vesting period that arise from non-market based performanceconditions. In accordance with the exemption permitted under IFRS 1, IFRS 2 has only beenapplied to options awarded on or after 7 November 2002 that had not vested at31 March 2005. 3. Dividends Under UK GAAP, proposed dividends were recognised as a liability in the periodto which they related. Under IFRS, dividends are recognised as a liability inthe period in which they are declared. Accordingly the accruals for dividendsnot declared at 31 March 2005 and 30 September 2004 have been released. 4. Short-term employee benefits Under IAS 19, the cost of all holiday entitlement earned but not taken at thebalance sheet date is accrued on the Consolidated Balance Sheet. 5. Acquired intangible assets IFRS requires intangible assets which are acquired with a subsidiaryundertaking to be recognised separately from goodwill and amortised over theirestimated economic life, if they are separable from the acquired business orderive from contractual or legal rights. No such assets have been reclassifiedfrom goodwill. 6. Goodwill a. Amortisation Under UK GAAP, goodwill which arose on acquisitions after 31 March 1998 wascapitalised as an intangible asset in the Consolidated Balance Sheet andamortised over its estimated economic life of 20 years. Under IFRS, capitalisedgoodwill is no longer amortised but is tested annually for impairment.Accordingly, the amortisation charged against the Consolidated Income Statementfor the year to 31 March 2005 has been reversed and added back to goodwill. b. Goodwill in reserves Under UK GAAP, goodwill on acquisitions prior to 31 March 1998 was takendirectly to reserves, but would have been included in the determination ofprofit or loss on sale or closure of the business to which it relates. Asrequired by IFRS 1, goodwill in reserves will no longer be included in thedetermination of profit or loss on sale or closure of the business to which itrelates. c. Carrying value As permitted by IFRS 1, the Group has elected to deem the UK GAAP net bookvalue of goodwill at 1 April 2004 as the IFRS cost of goodwill at transitiondate. Under UK GAAP, goodwill was considered a Sterling asset. IFRS considersgoodwill to be an asset denominated in the currency of the acquired business.Goodwill relating to overseas businesses will therefore be retranslated eachperiod end using the relevant closing exchange rates and any difference will betaken to reserves. 7. Deferred taxation Under UK GAAP, deferred taxation was provided on timing differences between theaccounting and taxable profit. Under IAS 12 'Income Taxes' deferred tax isprovided using the balance sheet liability method, providing for temporarydifferences between carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thatfuture taxable profit will be available against which the temporary differencescan be utilised. 8. Financial instruments The Group has chosen to adopt the one-year exemption delaying theimplementation of the Financial Instruments standards. Therefore, for 2004/05IFRS financial information, financial instruments continue to be accounted forand presented in accordance with UK GAAP. For 2005/06 financial reporting,adjustments will be made as at 31 March 2005 to reflect the differences betweenUK GAAP and IAS32/IAS 39. 9. Actuarial gains and losses on defined benefit pension schemesThe Group has chosen to recognise all cumulative actuarial gains and losses atthe date of transition to IFRS. Going forward, we will apply the rules of theamendment to IAS 19 (issued in December 2004) which allows actuarial gains andlosses to be recognised immediately in the Statement of Recognised Income andExpense. This approach is consistent with the treatment required by the UKstandard FRS 17, the effect of which we have previously disclosed in our UKGAAP accounts. 10. Intangible assets Under UK GAAP, software licences and capitalised software development costs areincluded within tangible fixed assets on the balance sheet. Under IAS 38,'Intangible Assets' such items are disclosed separately on the face of thebalance sheet. As a result, there is a reclassification of £5.9 million in thebalance sheet at 31 March 2005 between property, plant and equipment andintangible assets. 11. Other balance sheet presentational differences Taxation IFRS requires the separate disclosure of current and deferred tax assets,including the deferred tax asset relating to the Group's pension scheme. Thesewere netted off the respective liabilities under UK GAAP. Cumulative translation differences According to IAS 21, cumulative foreign exchange movements on translation offoreign entities on consolidation should be disclosed separately within equityshareholders' funds. The Group has elected to apply the exemption given in IFRS1 to set the cumulative foreign currency translation reserve to zero at 1 April2004. These are purely balance sheet presentational changes and are indicated as suchin the respective appendices to this announcement. APPENDIX I: RECONCILIATION OF BALANCE SHEET - As at 1 April 2004 (Openingbalance sheet for IFRS) £m Deferred Reported Intangible Holiday tax on under UK Dividends Assets * pay revaluations Pensions Restated GAAP IAS 10 IAS 38 accruals IAS 12 * Other * under IAS 19 IAS 19 IFRS Non-current assetsProperty, plant and equipment 14.1 - (6.1) - - - - 8.0Goodwill and intangible assets 46.9 - 6.1 - - - - 53.0Investments in associates 4.1 - - - - - - 4.1Other investments 2.3 - - - - - - 2.3Deferred tax assets - - - - - 2.1 - 2.1 67.4 - - - - 2.1 - 69.5Current assetsInventories 23.6 - - - - - - 23.6Trade and other receivables 54.2 - - - - - - 54.2Current tax assets - - - - - - 1.7 1.7Cash and cash equivalents 10.8 - - - - - - 10.8 88.6 - - - - - 1.7 90.3Current liabilitiesTrade and other payables (54.7) 3.7 - (0.2) - - - (51.2)Short-term borrowings (5.7) - - - - - - (5.7)Current tax payable (1.6) - - - - - (1.7) (3.3) (62.0) 3.7 - (0.2) - - (1.7) (60.2) Net current assets 26.6 3.7 - (0.2) - - - 30.1 Non-current liabilitiesLong-term borrowings (20.3) - - - - - - (20.3)Post-employment benefits (4.8) - - - - (2.1) - (6.9)Deferred tax liabilities (0.3) - - - (0.3) - - (0.6)Provisions (1.0) - - - - - - (1.0) (26.4) - - - (0.3) (2.1) - (28.8) Net assets 67.6 3.7 - (0.2) (0.3) - - 70.8 EquityShare capital 1.3 - - - - - - 1.3Share premium account 37.8 - - - - - - 37.8Other reserves 1.1 - - - - - - 1.1Retained earnings 26.5 3.7 - (0.2) (0.3) - - 29.7Total equity (0.3)shareholders' funds 66.7 3.7 - (0.2) - - 69.9Minority interests 0.9 - - - - - - 0.9Total equity 67.6 3.7 - (0.2) (0.3) - - 70.8 NB - The above UK GAAP numbers have been adjusted into IFRS format (in accordance with IAS 1) * reclassifications only APPENDIX II: RECONCILIATION OF BALANCE SHEET - As at 30 September 2004 Goodwill Deferred £m Reported amort- Divi- Intangible Share-based Holiday tax on under UK isation dends Assets* payments pay reval- Pensions* Restated GAAP IFRS 3 IAS 10 IAS 38 IFRS 2 accruals uations IAS 19 under IAS 19 IAS 12 Other* IFRSNon-current assetsProperty, plant and 13.8 - - (6.3) - - - - - 7.5equipmentGoodwill and intangible 47.3 1.6 - 6.3 - - - - - 55.2assetsInvestments in associates 4.2 - - - - - - - - 4.2Other investments 2.2 - - - - - - - - 2.2Deferred tax assets - - - - - - - 2.0 0.3 2.3 67.5 1.6 - - - - - 2.0 0.3 71.4Current assets -Inventories 26.3 - - - - - - - - 26.3Trade and other receivables 48.9 - - - - - - - - 48.9Current tax assets - - - - - - - - 2.1 2.1Cash and cash equivalents 10.9 - - - - - - - - 10.9 86.1 - - - - - - - 2.1 88.2Current liabilitiesTrade and other payables (46.3) - 1.9 - - (0.2) - - - (44.6)Short-term borrowings (11.0) - - - - - - - - (11.0)Current tax payable (1.4) - - - - - - - (2.1) (3.5) (58.7) - 1.9 - - (0.2) - - (2.1) (59.1) Net current assets 27.4 - 1.9 - - (0.2) - - - 29.1 Non-current liabilitiesLong-term borrowings (20.3) - - - - - - - - (20.3)Post-employment benefits (4.6) - - - - - - (2.0) - (6.6)Deferred tax liabilities (0.1) - - - - - (0.3) - (0.3) (0.7)Provisions (0.7) - - - - - - - - (0.7) (25.7) - - - - - (0.3) (2.0) (0.3) (28.3) Net assets 69.2 1.6 1.9 - - (0.2) (0.3) - - 72.2 EquityShare capital 1.3 - - - - - - - - 1.3Share premium account 38.0 - - - - - - - - 38.0Share capital to be issued - - - - 0.1 - - - - 0.1Other reserves 1.1 - - - - - - - 0.4 1.5Retained earnings 27.8 1.6 1.9 - (0.1) (0.2) (0.3) - (0.4) 30.3Total equity shareholders' funds 68.2 1.6 1.9 - - (0.2) (0.3) - - 71.2Minority interests 1.0 - - - - - - - - 1.0Total equity 69.2 1.6 1.9 - - (0.2) (0.3) - - 72.2 NB - The above UK GAAP numbers have been adjusted into IFRS format (in accordance with IAS 1) * reclassifications only APPENDIX III: RECONCILIATION OF BALANCE SHEET - As at 31 March 2005 Deferred£m Reported Goodwill Intangible Share-based Holiday tax on under UK amortisation Dividends Assets * payments pay revaluations Pensions Restated GAAP IFRS 3 IAS 10 IAS 38 IFRS 2 accruals IAS 12 * Other * under IAS 19 IAS 19 IFRS Non-current assetsProperty, plant and 12.5 - - (5.9) - - - - - 6.6equipmentGoodwill and 45.7 3.0 - 5.9 - - - - - 54.6intangible assetsInvestments in 3.9 - - - - - - - - 3.9associatesOther investments 2.2 - - - - - - - - 2.2Deferred tax assets - - - - - - - 1.9 0.2 2.1 64.3 3.0 - - - - - 1.9 0.2 69.4Current assetsInventories 25.5 - - - - - - - - 25.5Trade and other 55.5 - - - - - - - - 55.5receivablesCurrent tax assets - - - - - - - - 1.0 1.0Cash and cash 15.9 - - - - - - - - 15.9equivalents 96.9 - - - - - - - 1.0 97.9Current liabilitiesTrade and other (59.4) - 3.8 - - (0.2) - - - (55.8)payables Short-term (8.0) - - - - - - - - (8.0)borrowingsCurrent tax payable (1.0) - - - - - - - (1.0) (2.0) (68.4) - 3.8 - - (0.2) - - (1.0) (65.8) Net current assets 28.5 - 3.8 - - (0.2) - - - 32.1 Non-currentliabilitiesLong-term (20.2) - - - - - - - - (20.2)borrowingsPost-employment (4.5) - - - - - - (1.9) - (6.4)benefitsDeferred tax (0.7) - - - - - (0.3) - (0.2) (1.2)liabilitiesProvisions (0.9) - - - - - - - - (0.9) (26.3) - - - - - (0.3) (1.9) (0.2) (28.7) Net assets 66.5 3.0 3.8 - - (0.2) (0.3) - - 72.8 EquityShare capital 1.3 - - - - - - - - 1.3Share premium 38.0 - - - - - - - - 38.0accountShare capital to be - - - - 0.1 - - - - 0.1issuedOther reserves 1.1 - - - - - - - 0.3 1.4Retained earnings 24.9 3.0 3.8 - (0.1) (0.2) (0.3) - (0.3) 30.8 Total equity shareholders' funds 65.3 3.0 3.8 - - (0.2) (0.3) - - 71.6Minority interests 1.2 - - - - - - - - 1.2Total equity 66.5 3.0 3.8 - - (0.2) (0.3) - - 72.8 NB - The above UK GAAP numbers have been adjusted into IFRS format (in accordance with IAS 1) * reclassifications only This information is provided by RNS The company news service from the London Stock Exchange