Iq-ai Ltd Regulatory News (IQAI)

29 Jul 2005 07:00

Flying Brands Limited29 July 2005 Flying Brands Limited Interim results for the 26 weeks ended 1 July 2005 29 July 2005, Jersey. Flying Brands Limited (LSE: FBDU), the home shoppingcompany, today announces interim results for the 26 weeks ended 1 July 2005. Coming back after a difficult first quarter Highlights • Weak Spring demand from Gardening Direct impacted sales and profits • Summer demand much better, with all brands on track • Group sales decreased by 9% to £18.18m (H1 2004: £20.00m) • Internet sales increased by 15% • Profit before tax decreased by 27% to £2.86m (H1 2004: £3.93m) • Interim dividend increased by 4% to 2.85p • Cash surplus of £5.34m (H1 2004: £4.06m) • Assets of Silverminds Direct acquired in April • Benham restructuring including property disposal will generate cost savings Commenting on today's announcement, Alan Fryer, Chairman, said: "Following a tough first quarter, performance has stabilised and our recentcampaigns are back on track. Our cash generation remained strong, although ourfinancial performance has suffered as a result of a weak Spring from GardeningDirect and, in particular, in comparison with excellent results in the firsthalf of last year. The fundamentals of Flying Brands remain strong and we areconfident of future growth." Mark Dugdale, Chief Executive, said: "Our strategy of developing our earnings by diversifying our portfolio ofexisting brands and acquiring suitable new businesses remains robustly in place.We are addressing the volatility of performance in Gardening Direct and werecognise the need to widen the franchise for this brand. The Group has cut its costs in the light of a disappointing first quarter and iswell positioned to take advantage of any market upside, but can also defend itsposition should markets remain depressed. The acquisition of Silverminds has setour external strategy in motion and additional acquisitions will follow at theright time and price." For further information, please contact: Flying Brands Limited c/o SmithfieldMark Dugdale, Chief ExecutiveGraham Norton, Finance Director Smithfield 020 7360 4900John KielyGeorge Hudson Notes to editors Jersey based Flying Brands Limited (LSE: FBDU) is a leading home shoppingcompany. Founded in 1965, it was admitted to the Official List of the LondonStock Exchange in 1993. The Group has the following brands: • Flying Flowers, the UK's largest flowers by post brand, despatching nearly one million bouquets a year• Gardening Direct, one of the UK's largest mail order bedding plants and gardening products operations• Listen2Books, the leading mail order audio books, DVD and video publisher and distributor• Benham, the first day cover stamps and coins collectables specialist• Silverminds Direct, the nostalgic music business More information can be found at: www.flyingbrands.com CHAIRMAN'S STATEMENT In the first half of 2005 to 1 July, Flying Brands achieved a profit of £2.86mon sales of £18.18m. While these results were mainly impacted by a weak Springseason for Gardening Direct, we have also experienced a softer retail tradingenvironment. Our financial performance has also suffered in comparison with ourexcellent results in the first half of last year. Following a tough first quarter, performance has stabilised in the secondquarter and our recent campaigns are very much on track. Our cash generation remained strong and at the half year the Company had asurplus of £5.34m (2004: £4.06m). This was achieved after spending £0.69m onacquisitions and share buy backs. The interim dividend is increased by 4% to 2.85p per share, and this will bepaid on 9 September 2005 to shareholders on the register on 12 August 2005. Despite the very early Mother's Day, Flying Flowers achieved sales in line withthe prior year. A planned additional mailing at Easter resulted in total firsthalf sales of £5.44m, but higher costs associated with Mother's Day resulted ina reduced contribution of £1.28m (2004: £1.63m). A combination of inconsistent weather throughout the season and generally poorperformance for sales of bedding plants across the entire retail spectrum, meantthat Gardening Direct's results were disappointing. Sales came in at £9.29magainst £10.91m last year, with contribution at £3.07m compared with £4.38m inthe first half of 2004. Listen2Books has now moved virtually all of its new customer recruitment intothe fourth quarter to catch the gift giving market. Sales of £1.51m in the firsthalf were 2% above £1.48m last year, whereas contribution, reflecting a strongperformance from the customer database, increased to £0.31m from £0.14m in 2004. We acquired the database and other assets of the nostalgic music business,Silverminds Direct, in April. This business has built up a strong franchise ofrepeat purchasing customers whose profile complements that of our audio booksbrand Listen2Books. We believe that this is an exciting opportunity that willsignificantly enhance our growing Entertainment Division. I am delighted to welcome Graham Norton as Finance Director, who has joined usfrom Cable & Wireless plc. Graham replaces David Harbord who left the company inMarch. We have also appointed Robert W. Baird Ltd as our broker and financialadviser. We have now adopted IFRS accounting practices, which have impacted first halfprofits by £36,000, as a result of expensing the cost of share options (2004:£8,000). The acquisition of the assets of Silverminds Direct shows our commitment toexpanding the business by adding appropriate new brands to our portfolio whichwill also provide us with more options in difficult trading conditions. Thefundamentals of Flying Brands remain strong and we are confident of futuregrowth. ALAN FRYERCHAIRMAN 29 JULY 2005 CHIEF EXECUTIVE'S REPORT OPERATING RESULTS FOR THE PERIOD------------------------------------------------------------------------------- 2005 2004 Sales Profit Sales Profit £'000 £'000 £'000 £'000-------------------------------------------------------------------------------Flying Flowers 5,438 1,276 5,456 1,630Gardening Direct 9,293 3,073 10,913 4,381Listen2Books 1,510 310 1,482 140Silverminds Direct 136 31 - -Kelvedon and Jersey overheads - (1,675) - (2,015)------------------------------------------------------------------------------- 16,377 3,015 17,851 4,136-------------------------------------------------------------------------------Benham 1,753 92 2,103 97Other 53 (26) 49 (58)Corporate overheads - (392) - (359)Interest - 166 - 116------------------------------------------------------------------------------- 18,183 2,855 20,003 3,932------------------------------------------------------------------------------- Despite a disappointing and difficult first quarter, performance has been moreconsistent during the second, which is continuing currently. Our strategy of developing our earnings by diversifying our portfolio ofexisting brands and acquiring suitable new businesses remains robustly in place.We remain committed to creating a more rounded business in the Gifts, Hobbiesand Entertainment arenas by making our brands and products appeal to a widercustomer franchise. The internet is playing a key role in this, with on line sales increasing by 15%to £1.89m in the first half of 2005. More of our existing customers are orderingon line, but also new customers are visiting our sites, mainly as a result of afocused effort to improve our search engine rankings. FLYING FLOWERS As we highlighted earlier in the year, we were anticipating a difficult firstquarter despite a very positive result at Valentine's Day (sales 27% ahead of2004). With Mother's Day being very early on 6 March there was a short tradingwindow between our New Year, Valentine's and Mother's Day mailings. As aconsequence, Mother's Day sales fell short by 8%. To combat this, and based on asuccessful on line test in 2004, we added an extra mailing after Mother's Day topromote Easter as a gift giving occasion. This Easter promotion recouped much ofthe Mother's Day shortfall. The fact that overall sales for the first half matched those in 2004 is anindication not just that the tactics for this particular first quarter'scircumstances were correct but the stronger second quarter results show theprogress that this brand has made in establishing itself as a low cost giftssolutions provider. To this end, we are increasing our non flower offerings (pot plants,personalised bears, wine gift packs, chocolates and other gifts for specialoccasions) as well as continuing to introduce new ranges of bouquets, both forpostal despatch and as part of our expanding courier business, The UltimateCollection. The aggregation of all these offers in a single catalogue promotionis driving up response rates and spend levels, and on line sales increased to£1.04m, up from £0.93m in the first half of 2004. GARDENING DIRECT Extensive market research that we conducted reveals that sales of bedding plantsin the first half of 2005 have been depressed wherever plants were offered -multiple retail sheds, garden centre chains, specialist garden centres or mailorder, and we have certainly experienced our worst spring season for some time,with contribution of £3.07m (2004: £4.38m). We did enjoy increasing internetsales, which were up to £0.72m, 8% of overall sales, compared to £0.61m in thefirst half of 2004 (5.6% of total sales). Both response and spend levels were down across all segments of the business, inpart due to the inconsistent weather throughout the spring period, but also theweak general retail climate. We remain in a strong position as we grow, on Jersey, the vast majority of whatwe sell and therefore have tight control over production. While we are confidentthat sales will return on bedding plants, we recognise the need and are takingsteps to widen the franchise for this brand. ENTERTAINMENT Listen2Books has been trading consistently well throughout the first half, withsales from existing customers increasing by 11%, thanks to the introduction ofnostalgic video and DVD products within the main catalogue (now accounting for 7out of the 52 pages), extending the offer of CDs as an alternative to cassettes,and a continuing stream of new and exclusive audio product launches to stimulateregular repeat purchase. Contribution has increased over 2004 by 121% to £0.31m. Overall sales have grown by 2% over last year because we have moved most of thenew recruitment to the fourth quarter, where we achieve lower costs per newcustomer. We will be adding 12 pages to the pagination of the main cataloguefrom the start of the second half, which should further drive customerpurchases. We were pleased to acquire the assets of Silverminds Direct in April: this addsan additional 50% of active trading customers to our overall entertainmentdatabase. A small mailing to date has been encouraging, and we have alreadysuccessfully integrated the business into our operating infrastructure withminimal additional fixed overhead. BENHAM Although Benham was slightly boosted by a Royal wedding in April, the majoractivity is planned for the second half of the year and hence sales declined by17% to £1.75m from £2.10m in 2004. As with our other brands, a much strongersecond quarter was delivered, which, together with tighter cost control and thesuccessful streaming in of the new operating system introduced in the secondhalf of 2004, meant that operating profit remained level with last year. We are focusing on centralising many Benham functions and consolidating thisbrand much more closely within the overall Group infrastructure; to that end, wehave exchanged contracts to sell Benham House (Folkestone) in the second half ofthis year. The sale of this property will provide both a substantial exceptionalgain and will also enable us to relocate both Benham's finance and call centrefunctions to Kelvedon Park, thereby generating further savings. As a result ofthese activities we are confident that Benham will generate stronger profits inthe second half of this year. KELVEDON AND JERSEY OVERHEADS Overheads were reduced by 17% in the first half to £1.68m (from £2.02m in 2004)as a result of tight cost control. Corporate overheads increased slightly from£0.36m in 2004 to £0.39m in the first half of 2005 due to the expensing of shareoptions. We continue to look at ways of running our businesses more costeffectively without losing productivity. OUTLOOK The Group has moved quickly to reduce overheads in the light of a disappointingfirst quarter. We remain well positioned to take advantage of any market upside.Home shopping businesses should be better equipped to ride out difficult timesbecause of the nature of database marketing, and Flying Brands is no exceptionto this. We continue to generate large amounts of cash - £5.3m on the balance sheet atthe end of the first half compared with £4.1m in 2004, and we are committed tomaintaining our progressive dividend policy, as well as continuing to createefficiencies that reduce overall costs. The acquisition of Silverminds has set our external strategy in motion and ithas demonstrated the flexibility and speed of our team in integratingsuccessfully this business into our infrastructure. Additional appropriateacquisitions will follow at the right time and price, and we remain confidentthat the strengths of our Company will deliver long term shareholder value. MARK DUGDALECHIEF EXECUTIVE 29 JULY 2005 Consolidated Income StatementFor the 26 weeks ended 01 July 2005 ------------------------------------------------------------------------------- notes 26 weeks to 26 weeks to 52 weeks to 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed by (unaudited) the auditors) £'000 £'000 £'000-------------------------------------------------------------------------------From continuingoperations Turnover 1.9 18,183 20,003 35,768 Cost of sales (12,648) (13,191) (24,540)-------------------------------------------------------------------------------Gross profit 5,535 6,812 11,228Operating expenses (2,846) (2,996) (5,666)-------------------------------------------------------------------------------Operating profit 2,689 3,816 5,562Interest receivable 166 116 209-------------------------------------------------------------------------------Profit before tax 2,855 3,932 5,771Taxation 1.16 (657) (940) (1,346)-------------------------------------------------------------------------------Profit for the year 2,198 2,992 4,425-------------------------------------------------------------------------------Earnings per Shareexpressed in penceper share 4Basic 8.51p 11.55p 17.15pDiluted 8.19p 11.26p 16.96p------------------------------------------------------------------------------- Consolidated Balance SheetAs at 01 July 2005 ------------------------------------------------------------------------------- notes 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed by the (unaudited) auditors) £'000 £'000 £'000-------------------------------------------------------------------------------AssetsNon-current assetsIntangible 1.3, 8 648 - -Property, plantand equipment 1.2, 7 12,269 13,472 13,081------------------------------------------------------------------------------- 12,917 13,472 13,081-------------------------------------------------------------------------------Current assetsInventories 1.4 2,745 2,456 2,674Trade and otherreceivables - duewithin one year 1.5 1,359 1,269 1,322Cash and cashequivalents 1.6 5,337 4,055 6,022-------------------------------------------------------------------------------Liabilities 9,441 7,780 10,018Currentliabilities (4,141) (4,497) (5,705)-------------------------------------------------------------------------------Net Currentassets/(liabilities) 5,300 3,283 4,313Non-current liabilitiesOther non-currentliabilities (657) (1,026) (846)Deferred taxliabilities 1.13 (59) (59) (59)------------------------------------------------------------------------------- (716) (1,085) (905)-------------------------------------------------------------------------------Net assets 17,501 15,670 16,489-------------------------------------------------------------------------------Shareholders' equityOrdinary shares 1.7, 12 264 264 265Share premium 15,936 15,880 15,936Revaluationreserve 457 464 457Capital reserve (17) (17) (17)Capitalredemptionreserve 10 10 10Share basedpayments 1.8 73 8 37Treasury shares 9 (544) (838) (820)Retained earnings 6 1,322 (101) 621-------------------------------------------------------------------------------Total equity 17,501 15,670 16,489------------------------------------------------------------------------------- Consolidated Statement of Changes in Shareholders' EquityFor the 26 weeks ended 01 July 2005 ---------------------------------------------------------------------------------------------------------------------- notes Share Share Revaluation Capital Capital Share Treasury Retained Total capital premium reserve reserve redemption based shares earnings equity £'000 £'000 £'000 £'000 reserve payments £'000 £'000 £'000 £'000 £'000----------------------------------------------------------------------------------------------------------------------Balance at 02January 2004 268 15,731 464 (17) 5 - (927) (744) 14,780Profit forthe - - - - - - - 2,992 2,992periodEmployeeshare 1.8 - - - - - 8 - - 8option schemeDividend 3 - - - - - - - (1,349) (1,349)Sale of ownshares in - - - - - - 89 - 89ESOPIssue/cancella-tion of share (4) 149 - - 5 - - (1,000) (850)capital ----------------------------------------------------------------------------------------------------------------------Balance at 02July 2004 264 15,880 464 (17) 10 8 (838) (101) 15,670----------------------------------------------------------------------------------------------------------------------Balance at 03July 2004 264 15,880 464 (17) 10 8 (838) (101) 15,670Profit forthe - - - - - - - 1,433 1,433periodEmployeeshare 1.8 - - - - - 29 - - 29option schemeDividend 3 - - - - - - - (718) (718)Sale of ownshares in - - - - - - 18 - 18ESOPTransferbetweenreserves - - (7) - - - - 7 0Issue/cancella-tion of share 1 56 - - - - - - 57capital ----------------------------------------------------------------------------------------------------------------------Balance at 31December 2004 265 15,936 457 (17) 10 37 (820) 621 16,489----------------------------------------------------------------------------------------------------------------------Balance at 01January 2005 265 15,936 457 (17) 10 37 (820) 621 16,489Profit forthe - - - - - - - 2,198 2,198periodEmployeeshare 1.8 - - - - - 36 - - 36option schemeDividend 3 - - - - - - - (1,453) (1,453)Sale of ownshares in - - - - - - 276 - 276ESOPTransfer - - - - - - - - -betweenreservesIssue/cancella-tion of share (1) - - - - - - (44) (45)capital ----------------------------------------------------------------------------------------------------------------------Balance at 01July 2005 264 15,936 457 (17) 10 73 (544) 1,322 17,501---------------------------------------------------------------------------------------------------------------------- Consolidated Cash Flow StatementsFor the 26 weeks ended 01 July 2005 -------------------------------------------------------------------------------- notes 26 weeks to 26 weeks to 52 weeks to 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed (unaudited) £'000 by the auditors) £'000 £'000--------------------------------------------------------------------------------Cash flows from operatingactivitiesCash generated from operations 11 2,036 3,309 6,754Interest received 166 116 209Tax paid (955) (781) (1,186)-------------------------------------------------------------------------------- Net cash from operating activities 1,247 2,644 5,777 Cash flow investing activitiesPurchase of intangible fixedassets (648) - -Purchase of property, plant andequipment (89) (429) (976)Proceeds from sales of tangibleassets 27 37 49-------------------------------------------------------------------------------- Net cash used in investingactivities (710) (392) (927) Cash flows from financingactivitiesNet proceeds from issue ofordinary share capital - 150 207Purchase of own shares 10 (45) (1,000) (1,000)Exercise of treasury shares 276 89 107Dividends paid to shareholders 3 (1,453) (1,356) (2,062)-------------------------------------------------------------------------------- Net cash used in financingactivities (1,222) (2,117) (2,748)-------------------------------------------------------------------------------- Net decrease/increase in cash andcash equivalents (685) 135 2,102 Cash and cash equivalents at 01January 2005 6,022 3,920 3,920-------------------------------------------------------------------------------- Cash and cash equivalents at 01July 2005 5,337 4,055 6,022-------------------------------------------------------------------------------- Notes to the Financial Statements 1 ACCOUNTING POLICIES 1.1 Basis of preparationThis special purpose preliminary financial information comprises theconsolidated interim balance sheets as of 1 July 2005 and 2 July 2004 andrelated consolidated interim statements of income and cash flows for the sixmonths then ended of Flying Brands Limited (hereinafter referred to as"financial information"). Previously the Group prepared its audited annual financial statements andunaudited interim results under UK Generally Accepted Accounting Principles (UKGAAP). From 3 January 2005 the Group is required to present its annualconsolidated financial statements in accordance with accounting standardsadopted for use in the European Union (EU). In preparing this financial information management has used its best knowledgeof the expected standards and interpretations, facts and circumstances, andaccounting policies that will be applied when the Group prepares its first setof financial statements in accordance with accounting standards adopted for usein the EU as of 30 December 2005. As a result, although this financial information is based on management's bestknowledge of expected standards and interpretations, and current facts andcircumstances, this may change. For example, IFRS standards and IFRICinterpretations are subject to ongoing review and possible amendment orinterpretative guidance and therefore are still subject to change. Therefore,until the Group prepares its first set of financial statements in accordancewith accounting standards adopted for use in the EU, the possibility cannot beexcluded that the accompanying financial information may have to be adjusted. The rules for first time adoption of IFRS are set out in IFRS 1 "First TimeAdoption of International Financial Reporting Standards". IFRS 1 states that acompany should use the same accounting policies in its opening IFRS balancesheet and throughout all periods presented in its first IFRS financialstatements. In preparing this financial information, the Group has not appliedthe mandatory exemptions from full retrospective application of IFRS as theywere not applicable to the Group's circumstances. However, the optionalexemption under IFRS 2 'Share Based Payments' has been applied as disclosed inNote 2.6. As permitted, the Group has chosen not to adopt IAS 34 "Interim financialstatements" in preparing its 2005 interim statements, and therefore this interimfinancial information is not in compliance with IFRS. Reconciliations of the group's equity as of 31 December 2004, 2 July 2004 and 3January 2004 and results for the period/year ended 2 July 2004 and 31 December2004 reported under UK GAAP to the basis of preparation described in this noteare included below. These consolidated interim financial statements have been prepared under thehistorical cost convention as modified by the revaluations of property, plantand equipment through the revaluation reserve. The preparation of financial statements requires the use of certain criticalaccounting estimates. It also requires management to exercise judgement in theprocess of applying the Company's accounting policies. The areas involving ahigher degree of judgement or complexity, or areas where assumptions andestimates are significant to the consolidated interim financial statements, aredisclosed in Notes 1.2, 1.3 and 1.8. The consolidated financial statements include the assets, liabilities andresults of the Company and all its subsidiary undertakings. Subsidiaries are allentities over which the Group has the power to govern the financial andoperating policies generally accompanying a shareholding of more than one halfof the voting rights. The results of the subsidiary undertakings acquired ordisposed of during the year are included in the consolidated income statementfrom the date of the acquisition or up to the date of disposal. Intra-groupsales and profits are eliminated on consolidation, and all sales and profitfigures relate to external transactions only. 1.2 Property, plant and equipmentAll property, plant and equipment (PPE) is shown at cost less subsequentdepreciation and impairment, except for land and buildings, which is shown atvaluation or cost less impairment. Cost includes expenditure that is directlyattributable to the acquisition of the items. Depreciation on assets iscalculated using a straight-line method to allocate the cost to each asset toits residual value over its estimated useful life, as follows: %Freehold land and buildings including glasshouses 0- 4Plant and equipment 10-20Computer hardware, included in plant and equipment 20- 33.33Motor vehicles, including tractors 15-25 The assets' residual values and useful lives are reviewed and adjusted ifappropriate, at each balance sheet date. Gains and losses on disposals aredetermined by comparing proceeds with the carrying amount and are included inthe income statement. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that future economicbenefits associated with the item flow to the Group and the cost of the item canbe measured reliably. All other repairs and maintenance are charged to theincome statement during the financial period in which they are incurred. 1.3 Intangible assetsThe purchase of database names from Silverminds Direct Ltd are recognised atcost. The value of the database names is tested for impairment annually andwhenever events or changes in circumstances indicate that the carrying value maynot be recoverable and carried at cost less accumulated impairment losses. Theimpairment review looks at the actual and the discounted expected future cashgeneration from the database listing. An impairment loss is recognised for theamount by which the asset's carrying value exceeds its recoverable amount. 1.4 InventoriesInventories are valued at the lower of cost and net realisable value. Ingeneral, cost is determined on a first in first out basis and includes transportand handling costs. Net realisable value is the price at which inventory can besold in the normal course of business after allowing for the costs ofrealisation. Provision is made where necessary for obsolete, slow moving ordefective inventories. Included within inventory are certain First Day Cover inventories. Theseinventories are valued as a proportion of the anticipated realisable value, as abest estimator of the lower of cost and net realisable value, based on expertopinion of the Group's philatelists. Provision is made for slow movinginventory. 1.5 Trade receivablesTrade receivables are recognised at fair value less provision for impairment. Aprovision for impairment of trade receivables is established when there isobjective evidence that the Group will not be able to collect all the moniesdue. The amount of the provision is recognised in the income statement. 1.6 Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with maturities of threemonths or less. 1.7 Share capitalOrdinary shares are classified as equity. Where the company purchases its ownshares, the consideration paid including any directly attributable incrementalcosts, is deducted from the equity attributable to the Company's equity holdersuntil the shares are cancelled, reissued or disposed of. 1.8 Share based plansThe fair value of the employees services received in exchange for the grant ofoption is recognised as an expense. The total amount to be expensed rateablyover the vesting period is determined by reference to the fair value of theoptions determined at the grant date, excluding the impact of any vestingconditions. The vesting conditions are included in assumptions about the numberof options that are expected to become exercisable. The estimate is revised ateach balance sheet date and the difference is charged or credited to the incomestatement, with the corresponding adjustment to equity. The proceeds received onexercise of the options net of any directly attributable transaction cost arecredited to equity. 1.9 Revenue RecognitionRevenue represents the invoiced value of goods supplied and is stated net ofVAT. Revenue is recognised at the date of despatch of goods to customers. Anyrefunds or replacements are recognised in the period in which the refund orreplacement is made. Credit card commission and the cost of overseas bouquetsare treated as cost of sales. 1.10 Leasesa) Finance LeasesWhere fixed assets are financed by entering into leasing arrangements, whichtransfer to the lessee substantially all benefits and risks of ownership, theassets are treated as if they had been purchased and included in fixed assetsand the capital element of the leasing commitments is shown as an obligationunder finance leases. The lease rentals are treated as consisting of capital andinterest elements; the capital element is applied to reduce the outstandingobligations and the interest element is charged against profit, in proportion tothe reducing capital element amount outstanding. Assets held under financeleases are depreciated over the shorter of the lease terms and the estimateduseful lives of the assets. b) Operating LeasesLeases where the lessor retains substantially all the risks and rewards ofownership are classified as operating leases. Rentals payable under operatingleases are taken to the income statement on a straight line basis over the leaseterm. 1.11 Dividend distributionDividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends areapproved by the Company's shareholders. 1.12 Foreign CurrenciesTransactions denominated in foreign currencies are translated into sterling atthe exchange rate ruling when the transaction was entered into. Monetary assetsand liabilities denominated in foreign currencies are translated into sterlingat the exchange rate ruling at the balance sheet date. Exchange gains or lossesare included in operating profit. 1.13 Deferred TaxDeferred taxation is provided in full, using the liability method on all timingdifferences arising from the different treatment of items for accounts andtaxation purposes, calculated at the rates which it is estimated that tax willarise. Deferred tax balances are not discounted. 1.14 PensionsThe Group makes contributions to some employees' and Directors' personal pensionplans which are accounted on an accruals basis. 1.15 Marketing expenditureThe Group charges external campaign marketing expenditure to the profit and lossaccount in the accounting period in which the related sales campaign takesplace. Any losses on recruitment sales are taken to the profit and loss accountas incurred. 1.16 TaxationTaxation is calculated at the estimated rate for the period together with themovement in the provision for deferred taxation. 2 Transition to IFRS Notes to the consolidated interim financial statements 2.1 Reconciliation of equity at 03 January 2004 ------------------------------------------------------------------------------- notes UK GAAP Effect of IFRS £'000 transition £'000 to IFRS £'000-------------------------------------------------------------------------------AssetsNon-current assetsIntangibles 7 - 7Property, plant and equipment 14,042 - 14,042Investments in group company a 927 (927) -------------------------------------------------------------------------------- 14,976 (927) 14,049Current assets 7,331 - 7,331------------------------------------------------------------------------------- Total assets 22,307 (927) 21,380------------------------------------------------------------------------------- EquityCapital and reserves attributable to equity holdersShare capital 268 - 268Retained earnings b (2,100) 1,356 (744)Share premium, revaluation and capital reserves 16,183 - 16,183Treasury Shares a - (927) (927)------------------------------------------------------------------------------- 14,351 429 14,780------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesDeferred taxation 145 - 145Provisions 1,007 - 1,007------------------------------------------------------------------------------- 1,152 - 1,152Current liabilities b 6,804 (1,356) 5,448------------------------------------------------------------------------------- 7,956 (1,356) 6,600------------------------------------------------------------------------------- Total equity 22,307 (927) 21,380------------------------------------------------------------------------------- The following explains the material adjustments to the balance sheet: a) Shares in own Company that are held in an ESOP trust are no longer treated as an investment but are netted off against equityb) Dividends are only accounted for on an approved basis, rather than under UK GAAP on a declared basis 2.2 Reconciliation of equity at 02 July 2004 ------------------------------------------------------------------------------- notes UK GAAP Effect of IFRS £'000 Transition £'000 to IFRS £'000-------------------------------------------------------------------------------AssetsNon-current assetsProperty, plant and equipment 13,472 - 13,472Investments in group company a 838 (838) -------------------------------------------------------------------------------- 14,310 (838) 13,472Current assets 7,780 - 7,780------------------------------------------------------------------------------- Total assets 22,090 (838) 21,252------------------------------------------------------------------------------- EquityCapital and reserves attributable to equityholdersShare capital 264 - 264Retained earnings b, c (799) 698 (101)Share premium, revaluation and capitalreserves 16,337 - 16,337Treasury shares a - (838) (838)Share based payments c - 8 8------------------------------------------------------------------------------- 15,802 (132) 15,670------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesDeferred taxation 145 - 145Provisions 940 - 940------------------------------------------------------------------------------- 1,085 - 1,085Current liabilities b 5,203 (706) 4,497------------------------------------------------------------------------------- 6,288 (706) 5,582------------------------------------------------------------------------------- Total equity 22,090 (838) 21,252------------------------------------------------------------------------------- The following explains the material adjustments to the balance sheet: a) Shares in own Company that are held in an ESOP trust are no longert reated as an investment but are netted off against equityb) Dividends are only accounted for on an approved basis, rather than under UK GAAP on a declared basisc) Fair value of share options awarded - £8,000 2.3 Reconciliation of equity at 31 December 2004 ------------------------------------------------------------------------------- notes UK GAAP Effect of IFRS £'000 transition £'000 to IFRS £'000-------------------------------------------------------------------------------AssetsNon-current assetsProperty, plant and equipment 13,081 - 13,081Investments in group company a 820 (820) -------------------------------------------------------------------------------- 13,901 (820) 13,081Current assets 10,018 - 10,018------------------------------------------------------------------------------- Total assets 23,919 (820) 23,099------------------------------------------------------------------------------- EquityCapital and reserves attributable to equity holdersShare capital 265 - 265Retained earnings b, c (795) 1,416 621Share premium, revaluation and capital reserves 16,386 - 16,386Treasury Shares a - (820) (820)Share based payments c - 37 37------------------------------------------------------------------------------- 15,856 633 16,489 ------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesDeferred taxation 59 - 59Provisions 846 - 846------------------------------------------------------------------------------- 905 - 905Current liabilities b 7,158 (1,453) 5,705------------------------------------------------------------------------------- 8,063 (1,453) 6,610------------------------------------------------------------------------------- Total equity 23,919 (820) 23,099------------------------------------------------------------------------------- The following explains the material adjustments to the balance sheet: a) Shares in own Company that are held in an ESOP trust are no longer treated as an investment but are netted off against equityb) Dividends are only accounted for on an approved basis, rather than under UK GAAP on a declared basisc) Fair value of share options awarded - £37,000 2.4 Reconciliation of net income for 26 weeks ended 02 July 2004 ------------------------------------------------------------------------------- notes UK GAAP Effect of IFRS £'000 transition £'000 to IFRS £'000-------------------------------------------------------------------------------Gross profit 6,812 - 6,812Operating expenses a (2,988) (8) (2,996)------------------------------------------------------------------------------- Operating profit 3,824 (8) 3,816Interest 116 - 116------------------------------------------------------------------------------- Profit before taxation 3,940 (8) 3,932Taxation (940) - (940)------------------------------------------------------------------------------- Profit for the period 3,000 (8) 2,992------------------------------------------------------------------------------- a) Fair value of share options awarded - £8,000 2.5 Reconciliation of net income for 52 weeks ended 31 December 2004 ------------------------------------------------------------------------------- notes UK GAAP Effect of IFRS £'000 transition £'000 to IFRS £'000-------------------------------------------------------------------------------Gross profit a 11,228 - 11,228Operating expenses (5,629) (37) (5,666)------------------------------------------------------------------------------- Operating profit 5,599 (37) 5,562Interest 209 - 209------------------------------------------------------------------------------- Profit before taxation 5,808 (37) 5,771Taxation (1,346) - (1,346)------------------------------------------------------------------------------- Profit for the period 4,462 (37) 4,425------------------------------------------------------------------------------- a) Fair value of share options awarded - £37,000 2.6 Share based payments The Group has elected to apply the share-based payment exemption. It appliedIFRS 2 from 3 January 2004 to those options that were issued after 7 November2002 but that have not vested by 1 January 2005. Refer to note 13 for details onshare based payments. 3 Dividends ------------------------------------------------------------------------------- 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed (unaudited) £'000 by the auditors) £'000 £'000-------------------------------------------------------------------------------Dividends on equity shares Interim dividend proposed at2.75p per ordinary share in July and - - 706paid in September Final dividend propsed in March,agreed at AGM in April at 5.65p(2004 5.22p) 1,453 1,356 1,356 Under/(over) provision in prioryear - (7) 5------------------------------------------------------------------------------- 1,453 1,349 2,067------------------------------------------------------------------------------- 4 Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable tothe equity holders of the Company by the weighted average number of ordinaryshares in issue during the period, excluding ordinary shares purchased by theCompany and held as treasury shares (Note 9). ------------------------------------------------------------------------------- 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed (unaudited) £'000 by the auditors) £'000 £'000-------------------------------------------------------------------------------Profit attributable to equityholders of the Company 2,198 2,992 4,425-------------------------------------------------------------------------------Weighted average number ofordinary shares in issue(thousands) 25,829 25,908 25,795-------------------------------------------------------------------------------Basic earnings per share (penceper share) 8.51 11.55 17.15------------------------------------------------------------------------------- Diluted Diluted earnings per share is calculated adjusting the weighted average numberof ordinary shares outstanding to assume conversion of all dilutive potentialordinary shares. The Company has one category of dilutive potential ordinaryshares: share options. The calculation is performed for the share options to determine the number ofordinary shares that could have been acquired at fair value (determined as theaverage market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options. The number ofshares calculated as above is compared with the number of shares that would havebeen issued assuming the exercise of the share options. ------------------------------------------------------------------------------- 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed (unaudited) £'000 by the auditors) £'000 £'000-------------------------------------------------------------------------------Profit attributable to equityholders of the Company 2,198 2,992 4,425-------------------------------------------------------------------------------Weighted average number ofordinary shares in issue(thousands) 25,829 25,908 25,795Adjustment for share options(thousands) 1,001 551 281-------------------------------------------------------------------------------Weighted average number ofordinary shares for dilutedearnings per share (thousands) 26,830 26,459 26,076-------------------------------------------------------------------------------Diluted earnings per share (penceper share) 8.19 11.26 16.96------------------------------------------------------------------------------- 5 Financial Information This financial information above does not comprise full financial statements.Full financial statements of Flying Brands Limited for the 52 weeks to 31December 2004, on which the auditors gave an unqualified report, have beendelivered to the Jersey Registrar of Companies. 6 Income Statement ------------------------------------------------------------------------------- 01 July 02 July 31 December 2005 2004 2004 (unaudited) (not reviewed (unaudited) £'000 by the auditors) £'000 £'000-------------------------------------------------------------------------------Brought forward under UK GAAP (795) (2,100) (2,100)Accounting policy changes underIFRSDividend 1,453 1,356 1,356Share based payments (37) - -------------------------------------------------------------------------------- Revised brought forward under IFRS 621 (744) (744) Profit for the period 2,198 2,992 4,425 Dividend (note 3) for the period (1,453) (1,349) (2,067)Repurchase of own shares (note 10) (44) (1,000) (1,000)New shares issued - - 7------------------------------------------------------------------------------- 1,322 (101) 621------------------------------------------------------------------------------- 7 Property, Plant and Equipment ------------------------------------------------------------------------------- Freehold Plant Motor Total land and and vehicles £'000 buildings equipment £'000 £'000 £'000------------------------------------------------------------------------------- Cost or valuationAt 01 January 2005 11,421 12,823 341 24,585Additions 12 57 20 89Disposals - - (42) (42)------------------------------------------------------------------------------- At 01 July 2005 11,433 12,880 319 24,632------------------------------------------------------------------------------- DepreciationAt 01 January 2005 1,996 9,390 118 11,504Charges for the period 174 670 30 874Disposals - - (15) (15)-------------------------------------------------------------------------------At 01 July 2005 2,170 10,060 133 12,363-------------------------------------------------------------------------------Net book value 01 July 2005 9,263 2,820 186 12,269-------------------------------------------------------------------------------Net book value 31 December 2004 9,425 3,433 223 13,081-------------------------------------------------------------------------------Net book value 30 June 2004 9,445 3,853 174 13,472------------------------------------------------------------------------------- 8 Intangible Fixed Assets On 18 April 2005 the Group acquired the assets of Silverminds Direct, a musicCD, video and DVD home shopping retailer. The assets that have been acquired area database of 350,000 names and addresses (including 140,000 customers who have