HDT.L Regulatory News (HDT)

18 Jul 2007 07:00

Holders Technology PLC18 July 2007 HOLDERS TECHNOLOGY PLC ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTH PERIOD TO 31 MAY 2007 CHAIRMAN'S STATEMENT Results and activities The group made further progress in the six months to 31 May 2007 with revenuegrowing by 4.7% to £9,458,000 (2006: £9,030,000) and pretax profit by 29.1% to£541,000 (2006: £419,000). AIM companies are required to adopt International Financial Reporting Standards(IFRS) for accounting periods beginning after 1 January 2007. This means thatHolders Technology would only have been obliged to adopt IFRS for the accountingperiod ending 30 November 2008, almost a year after the majority of AIMcompanies will have transitioned. The board has therefore decided to adopt IFRSin the current financial year. The adoption of IFRS has had a small favourable impact on reported profitabilityfor Holders. The main change being that goodwill is not amortised under IFRS.Instead goodwill is subject to being tested for impairment. The overall impactof the adoption of IFRS on the reported profit for the 6 months to 31 May 2007and 2006 was to increase reported profit by £16,000 in each case. Our UK operations achieved strong growth in both revenue and profitabilitywhilst our Dutch and German subsidiaries saw more moderate growth in revenue butimproved profitability. The first half benefited from changes we made last yearto achieve cost reductions across the group, coupled with further efficienciesarising from the considerable investment we have made in the IT systems of thegroup. The impact of these improvements was in part offset by weakness inScandinavia. Products have now been identified for our Chinese operation, which will allow itto develop its business in Southern China and export Chinese-sourced materialsto Holders group companies; however the new products did not contributesignificantly to revenue in the first half. Our newly established Indian jointventure is now trading and has attractive medium term prospects. Earlier in this statement I made reference to the restructuring we put in placelast year and the benefits we are seeing from this. The drive to put this inhand was, in part, to enable our small central corporate staff to devote moreattention to developing the group and identifying new product ranges.Identifying opportunities, negotiating appropriate commercial terms andqualifying new product lines with potential customers is necessarily aprotracted process but we have identified a number of attractive opportunitiesfurther to develop our business. Our balance sheet remains strong, with net cash reserves, and we are well placedto fund appropriate opportunities as they occur. To reflect the improved trading position in the first half of the year we areincreasing the interim dividend from 2.0p to 2.1p, which will be paid on 18September 2007 to shareholders on the register on 24 August 2007. We expect thesecond half of the year to see a continuation of the progress made in the firsthalf of the year thus leading to a satisfactory outcome for the year as a whole. The interim financial statements were approved by the board on 18 July 2007 andsigned on its behalf by: Rudolf W. Weinreich Holders Technology plcChairman and Chief Executive Devonshire House Manor way Borehamwood Hertfordshire WD6 1QQ18 July 2007 Enquiries: Rudi Weinreich, Chairman and Chief Executive, Holders Technology plc 020 8731 4336 Jim Shawyer, Finance Director, Holders Technology plc 020 8731 4336 Website: www.holderstechnology.com John Wakefield, Director, Corporate Finance, Blue Oar Securities Plc 0117 9330020 CONSOLIDATED INTERIM INCOME STATEMENTfor the half-year ended 31 May 2007 (Unaudited) Half-year Half-year Full-year ended 31 ended 31 ended 30 May 2007 May 2006 Nov 2006 Notes £'000 £'000 £'000 Revenue 1 9,458 9,030 18,822 Operating profit 542 433 962Deferred consideration arising onsale of former subsidiary - 6 39Share of associates operating (loss)/profit - (25) (25)Finance income 6 10 9Finance expense (7) (5) (26)Profit before taxation 541 419 959Taxation 2 (200) (162) (390)Profit after taxation 341 257 569Attributable to:Equity shareholders of the company 362 257 591Minority interest (21) - (22) 341 257 569 Earnings per share 4 8.70p 6.20p 14.24pDiluted earnings per share 4 8.22p 5.98p 13.59p CONSOLIDATED INTERIM STATEMENT OF CHANGES INSHAREHOLDERS' EQUITY (UNAUDITED) Capital Cumulative Share Share redemption translation Retained Minority Total capital premium reserve adjustment earnings interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 December 2005 414 1,525 1 - 2,883 247 5,070Profit/(loss) for the - - - - 257 - 257periodDividends - - - - (114) - (114)Currency translation - - - (40) - - (40)differencesBalance at 31 May 2006 414 1,525 1 (40) 3,026 247 5,173Profit/(loss) for the - - - - 334 (22) 312periodDividends - - - - (83) - (83)Shares issued during the 2 6 - - - - 8periodCurrency translation - - - (44) - (31) (75)differencesShare-based payment credit - - - - 8 - 8Minority interest acquired - - - - - (49) (49)Investments by minority - - - - - 17 17interestBalance at 30 November 2006 416 1,531 1 (84) 3,285 162 5,311Profit/(loss) for the - - - - 362 (21) 341periodDividends - - - - (125) - (125)Currency translation - - - 9 - - 9differencesShare-based payment credit - - - - 12 - 12Investments by minority - - - - - 10 10interest Balance at 31 May 2007 416 1,531 1 (75) 3,534 151 5,558 CONSOLIDATED INTERIM BALANCE SHEET AT 31 MAY 2007 (UNAUDITED) Half-year Half-year Full-year ended 31 ended 31 ended 30 May 2007 May 2006 Nov 2006 £'000 £'000 £'000 AssetsNon-current assets Goodwill 413 409 413 Property, plant and equipment 627 502 506 Investment in associate - 65 119 1,040 976 1,038 Current assets Inventories 2,976 2,643 3,153 Trade and other receivables 3,676 4,218 2,844 Cash and cash equivalents 701 376 822 7,353 7,237 6,819LiabilitiesCurrent liabilities Trade and other payables (2,020) (2,203) (1,678) Borrowings (335) (410) (406) Current tax liabilities (277) (241) (260) (2,632) (2,854) (2,344) Net current assets 4,721 4,383 4,475 Non-current liabilities Borrowings - - (4) Retirement benefit liability (99) (82) (94) Deferred consideration (104) (104) (104) (203) (186) (202) Net assets 5,558 5,173 5,311 Shareholders' equity Share capital 416 414 416 Share premium account 1,531 1,525 1,531 Capital redemption reserve 1 1 1 Retained earnings 3,534 3,026 3,285 Cumulative translation adjustment (75) (40) (84)Equity attributable to the equity shareholders 5,407 4,926 5,149 Minority interests 151 247 162 5,558 5,173 5,311 CONSOLIDATED INTERIM CASH FLOW STATEMENTfor the half-year ended 31 May 2007 (Unaudited) Half-year Half-year Full-year ended 31 ended 31 ended 30 May 2007 May 2006 Nov 2006 £'000 £'000 £'000 Cash flows from operating activities Operating profit 542 433 962 Share-based payment charge 12 - 8 Depreciation 98 69 208 Reduction in impairment re associate - - (35) Currency translation 7 (26) (79) (Gain)/loss on sale of tangible fixed assets - (15) 1 Movement in inventories 177 (19) (529) Movement in trade and other receivables (835) (1,366) (29) Movement in trade and other payables 357 615 76 Cash generated from/(used in) operations 358 (309) 583 Tax (paid)/recovered (180) 64 (96) Net cash generated from/(used in) operations 178 (245) 487 Cash flows from investing activities Disposal of investment in associate 119 - - Increase in investment in existing subsidiary - - (54) Deferred consideration arising on sale of former subsidiary - 6 39 Purchase of property, plant and equipment (217) (65) (244) Proceeds from sale of property, plant and equipment - 18 29 Interest received 6 3 9 Net cash generated from/(used in) investing activities (92) (38) (221) Cash flows from financing activities Proceeds from issue of shares - - 8 Interest paid (7) (5) (26) Equity dividends paid (125) (114) (197) Finance lease principal repayments (6) (7) (16) Net cash used in financing activities (138) (126) (231) Net change in cash and cash equivalents (52) (409) 35 Cash and cash equivalents at start of period 418 383 383 Effect of exchange rate fluctuations on cash held - 7 - Cash and cash equivalents at end of period 366 (19) 418 Notes: 1. Basis of preparation The consolidated interim financial statements have been prepared in accordance with the AIM Rules for Companies and on a basis consistent with the accounting policies set out in note 2 of the appendix below, which will be applied when the group prepares its first set of annual financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU for the financial year ending 30 November 2007. These are the group's first interim financial statements prepared under IFRS and therefore IFRS 1 ' First-time Adoption of International Financial Reporting Standards' has been applied. An explanation of how the transition to IFRS has affected the reported financial position and financial performance of the group together with a summary of significant accounting policies is provided in an appendix to this statement. This note includes reconciliations of equity and profit or loss for the comparative periods under UK Generally Accepted Accounting Practices ("UK GAAP") to those reported for those periods under IFRS. As permitted, the group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these interim financial statements and therefore the interim financial information is not in full compliance with IFRS. The adopted IFRS that will be effective in the annual financial statements for year ending 30 November 2007 are still subject to change and to additional interpretations and therefore cannot be determined with complete certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 30 November 2007. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. These interim financial statements have been prepared under the historical cost convention. The board of Holders Technology plc approved this interim report on 18 July 2007. 2. The tax charge for the six months ended 31 May 2007 is calculated based on the tax rates applicable in the country in which each company operates. The effective rate of tax is 37.0% (2006: 39.0%). Taxation includes a charge of £76,000 (2006: £129,000) relating to overseas operations. 3. A final dividend of 3.0p per share on the total issued share capital of 4,159,551 10p ordinary shares was paid on 22 May 2007 in respect of the year ended 30 November 2006. An interim dividend payment of 2.1p per share (2006: 2.0p per share) will be payable on 18 September 2007 to shareholders on the register at 24 August 2007. The shares will go ex-dividend on 22 August. The interim dividend was not approved by the board at 31 May 2007 and accordingly, has not been included as a liability as that date. 4. The earnings per ordinary share (basic and diluted) for the six months ended 31 May 2007 have been calculated by reference to the profit attributable to equity shareholders of £362,000 (2006: £257,000) and on 4,159,551 ordinary shares (2006: 4,144,551) being the weighted average number of shares in issue during the period. Diluted earnings per share is based on 4,404,551 ordinary shares (2006: 4,299,551), being the weighted average number of ordinary shares after an adjustment of 245,000 shares (2006: 155,000) in relation to share options. 5. The interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The auditors have not issued a review report on the restated financial information for the six months ended 31 May 2006. The financial information for the year ended 30 November 2006 has been derived from the published statutory accounts as restated by the IFRS adjustments set out in note 3. A copy of the full accounts for that period, on which the auditors issued an unqualified report that did not contain statements under Section 237 (2) or (3) of the Companies Act 1985, has been delivered to the Registrar of Companies. 6. A copy of this interim report is being sent to shareholders and is available for inspection at the company's registered office, Devonshire House, Manor Way Borehamwood, Herts WD6 1QQ. Appendix 1 Restatement of Financial Information under International Financial ReportingStandards 1. Introduction Holders Technology plc has previously prepared consolidated financial statementsin accordance with UK Generally Accepted Accounting Practice ("UK GAAP").Following a European Union Regulation issued in 2002, the group will now reportits consolidated figures under International Accounting Standards andInternational Financial Reporting Standards (collectively IFRS) as adopted bythe European Union. The group's first annual report under IFRS will be for year ending 30 November2007 and these financial statements will include restated figures under IFRS for the year ended30 November 2006. The group's date of transition to IFRS is 1 December 2005,being the start of the previous period that will be presented as comparativeinformation. The first "IFRS" results announced are for the half-year ended 31May 2007. This document sets out the changes in accounting policies arising from theadoption of IFRS and presents restated information for the opening balance sheet at 1 December 2005,the half-year ended 31 May 2006 and the year ended 30 November 2006 which werepreviously published under UK GAAP. Conversion to IFRS affects the group's reporting particularly in the area ofaccounting for goodwill arising from acquisitions. This said, the adoption ofIFRS represents an accounting change only and does not change the cash flows ofthe group or its operations. 2. Basis of preparation and summary of significant accounting policies Basis of preparation The interim financial statements have been prepared in accordance with theaccounting policies the company expects to adopt in its 2007 annual report.These accounting policies are based on the IAS, IFRS and IFRIC interpretationsthat the company expects to be applicable at that time. The IFRS and IFRICinterpretations that will be applicable at 30 November 2007, including thosethat will be applicable on an optional basis, are not known with certainty atthe time of preparing the interim financial statements. The group's consolidated financial statements were prepared in accordance withUK GAAP until 30 November 2006. The company has applied the same accountingpolicies and methods of computation in the interim financial statements as thosepublished by the group within its 2006 Annual Report, except as explained innotes 3 and 4 of this document, where the effects of changes in accountingpolicies arising as a result of the adoption of IFRS are set out.Reconciliations between previously reported financial statements prepared underUK GAAP and the IFRS equivalents are presented for profit for the year ended 30November 2006 and the six months ended 31 May 2006 and net assets as at 30November 2006, 31 May 2006 and 1 December 2005. Further disclosures required byIFRS 1 concerning the transition from UK GAAP to IFRS are also given in notes 3and 4 of this document. IFRS 1 provides certain optional exemptions from full retrospective applicationof all accounting standards effective at the company's reporting date. As discussed in more detailin the relevant sections below, the company has taken advantage of theexemptions relating to: business combinations, cumulative translationdifferences and share-based payment transactions. The company has not takenadvantage of the available optional exemption relating to fair value measurementof financial assets and financial liabilities at initial recognition. Use of estimates The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect the application of policiesand reported amounts of assets and liabilities, income and expenses. Theestimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates. Principles of consolidation The consolidated interim financial statements incorporate the interim financialstatements of the company and all its subsidiaries. Intra-group transactions, including sales,profits, receivables and payables, have been eliminated on the groupconsolidation. Subsidiaries Subsidiaries are entities controlled by the company. Control exists when thecompany has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. Inassessing control, potential voting rights that presently are exercisable orconvertible are taken into account. The financial statements of subsidiaries areincluded from the date that control commences until the date that controlceases. Goodwill and business combinations The results of subsidiaries acquired in the period are included in the incomestatement from the date they are acquired. On acquisition, all of thesubsidiaries' assets and liabilities that exist at the date of acquisition arerecorded at their fair values reflecting their condition at that date. All business combinations are accounted for by applying the purchase method.Goodwill represents the excess of the fair value of the consideration paid onacquisition of a business over the fair value of the assets, including anyintangible assets identified and liabilities acquired. Goodwill is not amortisedbut is measured at cost less impairment losses. Impairment losses areimmediately recognised in the income statement and are not subsequentlyreversed. In determining the fair value of consideration, the fair value ofequity issued is the market value of equity at the date of completion, and thefair value of contingent consideration is based upon the extent to which thedirectors believe performance conditions will be met and thus whether anyfurther consideration will be payable. As permitted by IFRS 1, goodwill arising on acquisitions before 1 December 2005(date of transition to IFRS) has been frozen at the UK GAAP amounts subject tobeing tested for impairment at that date. Goodwill is tested for impairmentannually. The company performs its annual impairment review at the cashgenerating unit level. Impairment charges The company considers at each reporting date whether there is any indicationthat non-current assets are impaired. If there is such an indication, thecompany carries out an impairment test by measuring an asset's recoverableamount, which is the higher of its fair value less costs to sell and its valuein use (effectively the expected cash to be generated from using the asset inthe business). If the recoverable amount is less than the carrying amount animpairment loss is recognised, and the asset is written down to its recoverableamount. Revenue recognition Revenue comprises the value of sales of goods and services to third partycustomers occurring in the period, stated exclusive of value added tax and netof trade discounts and rebates. Revenue on the sale of goods is recognised when substantially all of the risksand rewards in the product have passed to the customer, which is usually upondelivery to the customer. Revenue is recognised to the extent that it is probable that the economicbenefits associated with the transaction will flow into the company. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. The companyconsiders all highly liquid investments with original maturity dates of threemonths or less to be cash equivalents. Bank overdrafts that are repayable ondemand and form an integral part of the group's cash management system areincluded as a component of cash and cash equivalents for the purpose of thestatement of cash flows. Trade and other receivables Trade and other receivables do not carry interest and are stated at theirnominal value, as reduced by appropriate allowances for estimated irrecoverableamounts. A provision for impairment of trade receivables is established whenthere is evidence that the group will not be able to collect all amounts dueaccording to the original terms of these receivables. The amount of theprovision is the difference between the carrying value and the present value ofestimated future cash flows, discounted at the effective interest rate.Impairment losses are recognised in the income statement. Trade and other payables Trade and other payables are not interest bearing and are stated at theirsettlement amount. Borrowings Borrowings are recognised initially at proceeds received, net of transactioncosts. Subsequent measurement is at amortised cost. Finance charges, includingany premiums payable or discounts, and direct issue costs are recognised in theincome statement over the period of the borrowings using the effective interestrate method. Borrowings are classified as current liabilities unless the group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. Inventory Inventory is stated at the lower of cost and net realisable value. Cost isdetermined on a first-in-first-out basis, except in Germany, where an averagecost basis is used. Net realisable value is based on the estimated sales priceafter allowing for all further costs of completion and disposal. Wherenecessary, provision is made for obsolete, slow-moving and defective inventory. Property, plant and equipment The cost of items of property, plant and equipment is its purchase cost,together with any incidental costs of acquisition. Depreciation is calculated to write off assets over their expected useful lives. Where there is evidence of impairment, fixed assets are written down to therecoverable amount. No depreciation is provided on freehold land. Depreciationis calculated at the following rates: Freehold buildings 2% on costLeasehold buildings Over the period of the leaseMotor vehicles 20% on either cost or written down valuePlant and machinery 20% - 33% on either cost or written down valueOffice equipment 25% on cost Provision is made against the carrying value of items of property, plant andequipment where an impairment in value is deemed to have occurred. Leased assets Rentals payable under operating leases are charged to the income statement on astraight line basis over the periods of the leases. Assets held under finance leases are included in the balance sheet at cost lessdepreciation in accordance with the company's normal accounting policies. Thepresent value of future rentals is shown as a liability. The interest elementof rental obligations is charged to the income statement over the period of thelease in proportion to the balance of capital repayments outstanding. Foreign currencies In the consolidated financial statements, the net assets of the group's foreignoperations are translated at the rate of exchange at the balance sheet date.Income and expense items are translated at the average rates for the period.The resulting exchange differences are recognised in equity and included in thetranslation reserve. Such translation differences are recognised in the incomestatement on the disposal of the foreign operation. All other currencydifferences are taken to the income statement. Differences between forwardexchange contract rates and the year end spot rate are taken to the incomestatement. Profit and losses on holding foreign currency balances are treatedas a finance cost. Derivative financial instruments The group uses derivative financial instruments to hedge its exposure to foreignexchange and interest rate risks arising from operational, financing andinvestment activities. In accordance with its treasury policy, the group doesnot hold or issue derivative financial instruments for trading purposes.However, derivatives that do not qualify for hedge accounting are accounted foras trading instruments. Derivative financial instruments are recognised initially at cost. Subsequent toinitial recognition, derivative financial instruments are stated at fair value.The gain or loss on re-measurement to fair value is recognised immediately inthe income statement. However, where derivatives qualify for hedge accounting,recognition of any resultant gain or loss depends on the nature of the itembeing hedged. Equity instruments An equity instrument is any contract that evidences a residual interest in theassets of the group after deducting all its liabilities. Equity instrumentsissued by the company are recorded at the proceeds received, net of directlyattributable issue costs Taxes Current tax, including UK corporation tax and foreign tax, is provided atamounts expected to be paid (or recovered) using the tax rates that have beenenacted or substantively enacted by the balance sheet date. For the purposes ofinterim statements, the current tax charge is based upon a prudent expectationof the likely full year position. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred tax is measured using the tax rates that have been enacted orsubstantively enacted by the balance sheet date and are expected to apply whenthe asset is realised or the liability settled. Provision is not made for deferred tax on the unremitted earnings of foreignsubsidiaries where such remittances are not considered probable as the group'spolicy is to reinvest profits to fund growth locally. Provision is made whereit is likely that dividends will be remitted within the foreseeable future. A net deferred tax asset is recognised only when it is probable that suitabletaxable profits will be available in the foreseeable future from which thereversal of the temporary differences can be deducted. Employee share option scheme The fair value of employee share plans is calculated using a Black Scholesmodel. In accordance with IFRS 2 the resulting cost is charged to the incomestatement over the vesting period of the plans. The value of the charge isadjusted to reflect the expected and the actual levels of options vesting. IFRS2 has been applied to all grants of equity instruments after 7 November 2002that were unvested as of 1 December 2005, in accordance with the transitionalarrangements of IFRS 1. The proceeds received, net of any directly attributable transaction costs, arecredited to share capital and share premium when the options are exercised. Pension contributions The group does not operate a pension scheme. Pension costs relate to groupcontributions to the personal pension schemes of certain directors andemployees. Investment income Investment income relates to interest income, which is accrued on a time basis,by reference to the principal outstanding and at the effective interest rateapplicable. Dividends payable Distributions to equity holders are disclosed as a component of the movement inshareholders' equity. A liability is recorded for a final dividend when thedividend is declared by the company's shareholders, and, for an interimdividend, when the dividend is paid. Provisions A provision is recognised in the balance sheet when the group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation. 3. Explanation of transition to IFRS The company's financial statements for the year ending 30 November 2007 will bethe first annual financial statements that comply with IFRS. The interimfinancial statements have been prepared as described in note 2 of this document.The company has applied IFRS 1 in preparing the interim financial statements. The last financial statements under UK GAAP were for the year ended 30 November2006 and the date of transition was therefore 1 December 2005. Presented belowis the reconciliation of profit for the year ended 30 November 2006 and thereconciliations of equity at 1 December 2005, being the start of that period ("Transition Date") and at 30 November 2006 (date of last UK GAAP financialstatements) as required by IFRS 1. In addition, the reconciliation of equity at31 May 2006 and the reconciliation of profit for the 6 month period ended 31 May2006 have been included below as required by IFRS 1 to enable a comparison ofthe 2007 interim figures with those published in the corresponding period of theprevious financial year. For explanations of the nature and effect of thechanges in accounting policies as a consequence of the transition to IFRS, referto note 4 of this document. (i) Reconciliations of UK GAAP profit and loss account to IFRS income statement Half-year ended 31 May 2006(Date of corresponding interim financial statements) UK Effect of GAAP transition to IFRS IFRS Unaudited Unaudited Unaudited Notes £'000 £'000 £'000 Revenue 9,030 - 9,030Cost of sales (6,729) - (6,729)Gross Profit 2,301 - 2,301Distribution costs (156) (156)Administrative expenses a (1,743) 16 (1,727)Other operating income 15 15Operating profit 417 16 433Deferred consideration arising on sale of former 6 - 6subsidiaryFinance income 10 - 10Finance expenses (5) - (5)Share of loss of associate (25) - (25)Profit before tax 403 16 419Taxation (162) (162)Profit after tax 241 16 257 Attributable to:Equity shareholders of the company 241 16 257Minority interests - - - 241 16 257 Year ended 30 November 2006(End of last period presented under UK GAAP) UK Effect of GAAP transition to IFRS IFRS Audited Unaudited Unaudited Notes £'000 £'000 £'000 Revenue 18,822 - 18,822Cost of sales (13,891) - (13,891)Gross Profit 4,931 - 4,931Distribution costs (446) (446)Administrative expenses (3,592) 31 (3,561)Other operating income 38 - 38Operating profit 931 31 962Deferred consideration arising on sale of former 39 - 39subsidiaryFinance income 9 - 9Finance expenses (26) - (26)Share of loss of associate (25) - (25)Profit before tax 928 31 959Taxation (390) - (390)Profit after tax 538 31 569 Attributable to:Equity shareholders of the company 560 31 591Minority interests (22) - (22) 538 31 569 (ii) Reconciliation of UK GAAP profit to IFRS profit Half-year ended Year ended 31 May 30 November 2006 2006 £'000 £'000 Profit after tax as reported under UK GAAP 241 560 Adjustments for:Goodwill not amortised subsequent to the a 16 31Transition Date Profit after tax as reported under IFRS 257 591 (iii) Reconciliations of equity at 1 December 2005 from UK GAAP to IFRS UK Effect of GAAP transition to IFRS IFRS Audited Unaudited Unaudited Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill a 410 - 410Property, plant and equipment 509 - 509Investment in associate 103 - 103 1,022 - 1,022 Current assetsInventories 2,624 - 2,624Trade and other receivables 2,970 - 2,970Cash and cash equivalents 734 - 734 6,328 - 6,328 LiabilitiesCurrent liabilitiesTrade and other payables (1,588) - (1,588)Borrowings (367) - (367)Current tax liabilities (133) - (133) (2,088) - (2,088) Net current assets 4,240 - 4,240 Non-current liabilitiesBorrowings (6) - (6)Retirement benefit liability (82) - (82)Deferred consideration (104) - (104) (192) - (192) Net assets 5,070 - 5,070 Shareholders' equityShare capital 414 - 414Share premium account 1,525 - 1,525Capital redemption reserve 1 - 1Retained earnings a 2,883 - 2,883Cumulative translation adjustment b - - -Total equity attributable to the equity 4,823 - 4,823shareholdersMinority interests 247 - 247 5,070 - 5,070 (iv) Reconciliations of equity at 30 November 2006 from UK GAAP to IFRS UK Effect of GAAP transition to IFRS IFRS Audited Unaudited Unaudited Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill a 382 31 413Property, plant and equipment 506 - 506Investment in associate 119 - 119 1,007 31 1,038 Current assetsInventories 3,153 - 3,153Trade and other receivables 2,844 - 2,844Cash and cash equivalents 822 - 822 6,819 - 6,819 LiabilitiesCurrent liabilitiesTrade and other payables (1,678) - (1,678)Borrowings (406) - (406)Current tax liabilities (260) - (260) (2,344) - (2,344) Net current assets 4,475 - 4,475 Non-current liabilitiesBorrowings (4) - (4)Retirement benefit liability (94) - (94)Deferred consideration (104) - (104) (202) - (202) Net assets 5,280 31 5,311 Shareholders' equityShare capital 416 - 416Share premium account 1,531 - 1,531Capital redemption reserve 1 - 1Retained earnings a 3,170 115 3,285Cumulative translation adjustment b - (84) (84)Total equity attributable to the equity 5,118 31 5,149shareholdersMinority interests 162 - 162 5,280 31 5,311 (v) Reconciliations of equity at 31 May 2006 from UK GAAP to IFRS UK Effect of GAAP transition to IFRS IFRS Unaudited Unaudited Unaudited Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill a 393 16 409Property, plant and equipment 502 - 502Investment in associate 65 - 65 960 16 976 Current assetsInventories 2,643 - 2,643Trade and other receivables 4,218 - 4,218Cash and cash equivalents 376 - 376 7,237 - 7,237 LiabilitiesCurrent liabilitiesTrade and other payables (2,203) - (2,203)Borrowings (410) - (410)Current tax liabilities (241) - (241) (2,854) - (2,854) Net current assets 4,383 - 4,383 Non-current liabilitiesBorrowings - - -Retirement benefit liability (82) - (82)Deferred consideration (104) - (104) (186) - (186) Net assets 5,157 16 5,173 Shareholders' equityShare capital 414 - 414Share premium account 1,525 - 1,525Capital redemption reserve 1 - 1Retained earnings a 2,970 56 3,026Cumulative translation adjustment b - (40) (40)Total equity attributable to the equity 4,910 16 4,926shareholdersMinority interests 247 - 247 5,157 16 5,173 (vi) Reconciliation of equity from UK GAAP to IFRS 1 December 31 May 30 November 2005 2006 2006 Notes £'000 £'000 £'000 Total equity as reported under UK GAAP 5,070 5,157 5,280 Adjustments for: Goodwill not amortised subsequent to a - 16 31transition date Total equity as reported under IFRS 5,070 5,173 5,311 4. Explanation of adjustments. The transition to IFRS resulted in the following changes in accounting policies: a. Goodwill Goodwill is not amortised under IFRS but is measured at cost less impairmentlosses. Under UK GAAP, goodwill was amortised on a straight line basis over thetime that the group was estimated to benefit from it. The change does notaffect equity at 1 December 2005 because, as permitted by IFRS 1, goodwillarising on acquisitions before 1 December 2005 (date of transition to IFRS) hasbeen frozen at the UK GAAP amounts subject to being tested for impairment atthat date, the results of which assessment indicated no such impairment. Under UK GAAP, goodwill on acquisitions prior to 1 July 1998 was eliminateddirectly against reserves. The gain or loss on the disposal of a previouslyacquired business reflects the attributable amount of purchased goodwill inrespect of that business. As the group has opted not to restate businesscombinations prior to the date of transition, the goodwill written off toreserves under UK GAAP has been frozen and remains in reserves. b. Other reserves The group has adopted IAS 21 and discloses separately the exchange differencesarising on the translation of foreign subsidiaries' results as a component ofequity with effect from 1 December 2005. In order to eliminate the need toretrospectively apply this requirement, the group took the exemption to setcumulative translation differences to zero at the date of transition. This information is provided by RNS The company news service from the London Stock Exchange