Portmeirion Regulatory News (PMP)

9 Aug 2007 07:00

Portmeirion Group PLC09 August 2007 9th August 2007 Portmeirion Group PLC ("Portmeirion" or "the Group") Interim results for the six months ended 30 June 2007 HIGHLIGHTS: Financial -Solid set of financial results underpin impressive sales growth - Operating profit before exceptional items and financing of £838,000 compared to £748,000 in 2006. - Profit before taxation of £2,491,000 compared to £713,000 in 2006. - Revenue increased by 19% to £14.5 million compared to £12.2 million in 2006. - Export revenue up by 18%. - UK revenue up by 22%. - Proposed interim dividend of 3.55p, an increase of 7.6%. Operational - Sophie Conran collection performed ahead of expectations - New 64,000 sq ft Trentham Lakes warehouse operational - New ranges being actively developed in the UK and sourced in the Far East - Externally sourced products expected to comprise a third of sales in 2007 - Current trading in-line with expectations Dick Steele, Non Executive Chairman commented: "We have had a very encouraging first half with sales in the UK and NorthAmerica well ahead of last year. Growth has been driven by the popularity of ourwell established ranges such as Botanic Garden and importantly, by the successof the new ranges particularly Sophie Conran. "In addition, we have achieved some major structural changes to the Group withthe completion of the new warehouse which will have long term benefits as weexpand. These results demonstrate the huge potential for the Group both in theUK and internationally and we look forward to the future with confidence." ENQUIRIES: Portmeirion Dick Steele, Non-executive Chairman 01782 744721 steele_clan@msn.com Brett Phillips, Group Finance Director 01782 744721 bphillips@portmeirion.co.uk Pelham Public Relations James Henderson 020 7743 6673 James.henderson@pelhampr.com Chairman's Statement Trading performance I am delighted to report that revenue has increased significantly in our UK, USand other markets. In the UK sales were 22% above the same period in 2006, inthe US they were 9% ahead in sterling terms and 20% ahead in local currency.Our other markets were 29% ahead. This strong sales growth follows a turnaroundin sales in the second half of last year with an 11% increase resulting in afull year increase of 3.2% in 2006. The Group has a clear strategy for growth in place which is already generatingimpressive sales and profit increases. There are three principal strands to ourstrategy: - Focus on improving operating efficiency by streamlining our manufacturing cost base and outsourcing to overseas manufacturing where appropriate - Enhance the existing product base with innovative designs across all key segments of the tableware and giftware market; formal, informal and children - Extend the product range through the acquisition of niche bolt on businesses. This strategy is enabling us to maintain our position and profile at theforefront of the UK and overseas tableware and giftware markets helped by somevery successful new product ranges including Sophie Conran's range andJacqueline Wilson's "Totally Tracy" collection which to date have both performedwell ahead of expectation. Our pure manufacturing margin has held steady compared to last year, althoughcosts after manufacturing - particularly UK warehousing where we have beendouble running and royalties reflecting more designer ranges - have increased.We expect that the double running costs of UK warehousing will cease by the yearend, but royalty costs will continue to increase in line with our designstrategies. Profitability Operating profit before exceptional1 items and financing was £838,000, anincrease of 12% compared to the restated figures for 2006, reflecting anexcellent sales performance, steady margins and careful cost control. Theexceptional credit of £1,644,000 is largely composed of the profit achieved onthe disposal of a freehold site which became surplus to requirements as a resultof the consolidation of our UK manufacturing facilities, a process which westarted in 2004 and which is now complete. Dividend The Board has decided to increase the interim dividend by 7.6% to 3.55p perordinary share, this is the same percentage increase as was applied to the finaldividend last year. The dividend will be paid on 1 October 2007 to shareholderson the register on 7 September 2007. 1. See note 4 on page 16 for definition of exceptional. Balance sheet Our balance sheet remains strong, with net assets of £17.0 million. Our cash atbank is currently £2.0 million, following a greater investment in stock requiredto pursue our sales opportunities, our new ranges and to facilitate doublerunning as the new UK warehouse was commissioned. The fixed asset investment inthe new warehouse has been partly financed by the sale of a surplus freeholdsite. We hold 677,218 of treasury shares, at an average balance sheetacquisition cost of £1.87 each. Accounting policies These are the first results presented under International Financial ReportingStandards (IFRS) and the comparatives have been restated on this basis. Theonly significant impact for the interim report is in respect of accounting forforward foreign exchange contracts which has had a net adverse effect on theprofit before tax compared to last year of £217,000. Details of the adjustmentsare set out in note 10. New UK warehouse We started shipping some product from our new Trentham Lakes warehouse inStoke-on-Trent in June 2007 and with effect from 30 June 2007, one of our othertwo UK warehouses ceased operation. Most products will be shipped from the newwarehouse from September 2007 and the remaining old warehouse will close shortlythereafter. The installation and commissioning of the automatic handlingequipment was completed satisfactorily and within budget. It will be some timebefore the full cost savings we have planned for are achieved as we will stillhave one surplus leasehold property for disposal. We will also have to bringour stock levels back into balance once double running has ceased. Product development We have continued to develop contemporary ranges in the Far East, takingadvantage of outside manufacturing capabilities. In 2006 20% of our total volumecame from externally sourced product, we continue to anticipate that 2007 willsee a third of our volume from externally sourced product. We have been delighted by the success of our new ranges, in particular theSophie Conran range which is currently our second biggest seller in the UK andour fourth biggest seller in the US. On 13 October 2006 we acquired the Pimpernel brand and certain assets from theAdministrator to the company. This has been a successful transaction forPortmeirion and has already generated sales in excess of the purchase price. Current trading These results are to the end of June, the month of July has seen sales at asimilar level to July last year but we still have our important Autumn tradingperiod to come. We look forward to the future with confidence. R.J. SteeleNon-executive Chairman8 August 2007 Independent Review Report toPortmeirion Group PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated cash flow statement,the consolidated statement of recognised income and expense, the reconciliationof movements in shareholders' equity and related notes 1 to 10. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the Company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed and also preparing the interim report as required by AIMRules issued by the London Stock Exchange. International Financial Reporting Standards As disclosed in note 1, the next financial statements of the Group will beprepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the Interim Report has been prepared inaccordance with the recognition and measurement criteria of IFRS and by the AIMRules. The accounting policies are consistent with those that the Directorsintend to use in the annual financial statements. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered Accountants, Birmingham, UK8 August 2007 Consolidated Income StatementUnaudited Notes Six months Restated* Restated* to 30.06.07 Six months Year to £'000 to 30.06.06 31.12.06 £'000 £'000 Revenue 3 14,520 12,232 28,422Operating costs (13,682) (11,484) (25,747) Operating profit before exceptional items and financing 838 748 2,675Exceptional items 4 1,644 (277) (277) Operating profit after exceptional items 2,482 471 2,398Interest receivable from bank deposits 90 130 231Finance costs 6 (106) 137 46Share of profit of associated undertakings 25 (25) 58Impairment in investment in associated undertaking - - (46) Profit before tax 2,491 713 2,687 Income tax (930) (263) (938) Profit for the period attributable to equity holders of the 1,561 450 1,749parent Earnings per share 8 15.94p 4.57p 17.81p Diluted earnings per share 8 15.40p 4.52p 17.58p Dividend per share 7 3.55p 3.30p 14.00p All the above figures relate to continuing operations. * Restated to reflect the adoption of IFRS as per note 10. Consolidated Balance SheetUnaudited As at Restated* Restated* 30.06.07 As at As at 30.06.06 31.12.06 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 6,329 5,068 5,767Intangible assets 714 69 628Interests in associates 1,377 1,369 1,332Derivative financial instruments - 36 - Total non-current assets 8,420 6,542 7,727 Current assetsInventories 9,896 6,859 8,352Trade and other receivables 5,373 4,815 4,467Cash and cash equivalents 1,959 5,209 5,203Derivative financial instruments 64 76 105Assets held for sale - - 350 Total current assets 17,292 16,959 18,477 Total assets 25,712 23,501 26,204 Current liabilitiesTrade and other payables (4,085) (3,179) (5,328)Current income tax liabilities (33) (377) (246)Derivative financial instruments - (4) - Total current liabilities (4,118) (3,560) (5,574) Non-current liabilitiesDeferred income tax liabilities (560) (24) (49)Pension scheme deficit (4,028) (2,796) (3,995) Total non-current liabilities (4,588) (2,820) (4,044) Total liabilities (8,706) (6,380) (9,618) Net assets 17,006 17,121 16,586 EquityCalled up share capital 525 523 523Share premium account 4,725 4,657 4,657Treasury shares (1,266) (1,263) (1,266)Share based payment reserve 60 22 38Cash flow hedging reserve (3) (65) (6)Tax on cash flow hedging reserve 1 20 2Retained earnings 12,964 13,227 12,638 Total equity 17,006 17,121 16,586 * Restated to reflect the adoption of IFRS as per note 10. Consolidated Cash Flow StatementUnaudited Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 Operating profit 2,482 471 2,398Adjustments for:Depreciation 314 368 712Amortisation of intangible fixed assets 68 18 54Contributions to defined benefit pension scheme (174) (174) (348)Charge for share based payments 22 10 26Exchange loss (75) (160) (328)Profit on sale of tangible fixed assets (1,793) (6) (16) Operating cash flows before movements in working capital 844 527 2,498Increase in inventories (1,544) (946) (2,439)(Increase)/decrease in receivables (891) 56 382(Decrease)/increase in payables (1,243) 139 2,290 Cash (absorbed by)/generated from operations (2,834) (224) 2,731Interest paid - (1) (1)Income taxes (paid)/refunded (627) 437 (306) Net cash from operating activities (3,461) 212 2,424 Investing activitiesInterest received 97 181 304Proceeds on disposal of property, plant and equipment 2,172 11 32Purchase of property, plant and equipment (921) (237) (1,678)Purchase of intangible fixed assets (154) (10) (605)Purchase of treasury shares - (299) (302)Purchase of equity interest - (40) (40) Net cash inflow/(outflow) from investing activities 1,194 (394) (2,289) Financing activitiesEquity dividends paid (1,047) (982) (1,305)Shares issued under employee share schemes 70 79 79 Net cash outflow from financing activities (977) (903) (1,226) Net decrease in cash and cash equivalents (3,244) (1,085) (1,091)Cash and cash equivalents at beginning of period 5,203 6,294 6,294 Cash and cash equivalents at end of period 1,959 5,209 5,203 Consolidated Statement of Recognised Income and Expense Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 Exchange differences on translation of foreign operations (77) (234) (498)Actuarial loss on defined benefit pension scheme - - (1,858)Deferred tax on pension deficit (111) - 557 Net expense recognised directly in equity (188) (234) (1,799) TransfersTransferred to profit or loss on cash flow hedges 3 66 125Tax on transfers to profit or loss on cash flow hedges (1) (19) (37) (186) (187) (1,711) Profit for the period 1,561 450 1,749 Total recognised income and expense for the period 1,375 263 38 Reconciliation of Movements in Shareholders' Equity Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 Opening balance as previously reported 16,538 18,205 18,205Adjustments on adoption of IFRS from 1 January 2006 48 (115) (115) Opening balance as restated 16,586 18,090 18,090Total recognised income and expense for the period 1,375 263 38Dividends paid (1,047) (982) (1,305)Shares issued under employee share schemes 70 79 79Increase in share based payment reserve 22 10 26Purchase of treasury shares - (299) (302)Purchase of equity interests - (40) (40) Closing balance 17,006 17,121 16,586 Notes to the Financial Statements 1. Basis of preparation 1.1 The interim financial information has not been audited anddoes not constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985 but has been reviewed by the auditors in accordance withBulletin 1999/4 issued by the Auditing Practices Board. The Company's statutoryaccounts for the year ended 31 December 2006, prepared under UK GAAP, have beendelivered to the Registrar of Companies; the report of the auditors on theseaccounts was unqualified and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. 1.2 Prior to 2007 the Group prepared its audited financialstatements under United Kingdom Generally Accepted Accounting Principles (UKGAAP). For the year ending 31 December 2007 the Group is required to prepareits annual consolidated financial statements in accordance with accountingstandards adopted for use in the European Union (International FinancialReporting Standards (IFRS)). These interim financial statements have been prepared in accordance with theaccounting policies set out below, taking into account the requirements andoptions in IFRS 1 'First-time adoption of International Financial ReportingStandards'. The Group has not adopted the reporting requirements of IAS 34 'Interim Financial Reporting'. The transition date for the Group's applicationof IFRS is 1 January 2006 and the comparative figures for 30 June 2006 and 31December 2006 have been restated accordingly. Reconciliations of the incomestatement (previously the profit and loss account) and the balance sheet frompreviously reported UK GAAP to IFRS are shown in note 10. The interim financial statements have been prepared on the historic basis,except that derivative financial instruments are stated at their fair value. 2. Accounting policies The accounting policies which follow set out those policies which are expectedto apply in preparing the financial statements for the year ending 31 December2007. These policies have been followed in producing these interim statements. 2.1 Basis of consolidation The consolidated financial statements incorporate the financial statements ofPortmeirion Group PLC and its subsidiaries. Subsidiary undertakings are consolidated on the basis of the acquisition methodof accounting. Intra-group transactions and balances are eliminated fully onconsolidation and the consolidated accounts reflect external transactions only.Subsidiaries' accounting policies are amended where necessary to ensureconsistency with the policies adopted by the Group. 2.2 Investment in associates An associate is an entity over which the Group is in a position to exercisesignificant influence, but not control or joint control, through participationin the financial and operating policy decisions of the investee. Significantinfluence is the power to participate in the financial and operating policydecisions of the investee but is not control or joint control over thosepolicies. The results and assets and liabilities of associates are incorporated in thesefinancial statements using the equity method of accounting. Investments inassociates are carried in the balance sheet at cost as adjusted bypost-acquisition changes in the Group's share of the net assets of theassociate, less any impairment in the value of individual investments. Where a Group company transacts with an associate of the Group, profits andlosses are eliminated to the extent of the Group's interest in the relevantassociate. Losses may provide evidence of an impairment of the assettransferred in which case appropriate provision is made for impairment. 2.3 Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower ofcarrying amount and fair value less costs to sell. Non-current assets are classified as held for sale if their carrying amount willbe recovered through a sale transaction rather than through continuing use.This condition is regarded as met only when the sale is highly probable and theasset is available for immediate sale in its present condition. The Directorsmust be committed to the sale which should be expected to qualify forrecognition as a completed sale within one year from the date of classification. 2.4 Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the Directors' best estimate of theexpenditure required to settle the obligation at the balance sheet date, and arediscounted to present value where the effect is material. 2.5 Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services provided inthe normal course of business, net of discounts, VAT and other sales relatedtaxes. Sales of goods are recognised when goods are delivered and title has passed. 2.6 Operating leases Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operatinglease are also spread on a straight-line basis over the lease term. 2.7 Foreign currencies The individual financial statements of each Group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). The results and financial position of each Group companyare expressed in pounds sterling, which is the functional currency of theCompany, and the presentation currency for the consolidated financialstatements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at the rates prevailingon the balance sheet date. Non-monetary items that are measured in terms ofhistorical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on theretranslation of monetary items, are included in profit or loss for the period. In order to hedge its exposure to certain foreign exchange risks, the Groupenters into forward contracts (see below for details of the Group's accountingpolicies in respect of such derivative financial instruments). For the purpose of presenting consolidated financial statements, the assets andliabilities of the Group's foreign operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items are translatedat the average exchange rates for the period. Exchange differences arising, ifany, are dealt with through reserves. 2.8 Operating profit Operating profit is stated both before and after exceptional items but beforeinterest received, finance costs, share of results of associates and impairmentin investment in associates. Exceptional items are defined as reorganisation costs: specifically profit orloss on the sale of land and buildings, rent-free periods and other costsassociated with the assignment of leasehold property no longer required by thebusiness and redundancy costs. 2.9 Group pension schemes The Group operates a Group stakeholder pension plan in the UK. For this schemethe amount charged to income in respect of pension costs and otherpost-retirement benefits is the contributions payable in the year. Differencesbetween contributions payable in the year and contributions actually paid areshown as either accruals or prepayments in the balance sheet. The defined benefit scheme previously operated by the Group closed on 5th April1999. For this scheme the amounts charged to operating profit are the currentservice costs and gains and losses on settlements and curtailments. They areincluded as part of staff costs. Past service costs are recognised immediatelyin the income statement if the benefits have vested. If the benefits have notvested immediately, the costs are recognised over the period until vestingoccurs. The interest cost and the expected return on assets are shown as a netamount of other finance costs or credits. Actuarial gains and losses arerecognised immediately in the statement of recognised income and expense. Defined benefit schemes are funded, with the assets of the scheme heldseparately from those of the Group, in separate trustee administered funds.Pension scheme assets are measured at fair value and liabilities are measured onan actuarial basis using the projected unit method and discounted at a rateequivalent to the current rate of return on a high quality corporate bond ofequivalent currency and term to the scheme liabilities. The actuarialvaluations are obtained at least triennially and are updated at each balancesheet date. The resulting defined benefit asset or liability, net of therelated deferred tax, is presented separately on the face of the balance sheet. In the United States, the Group operates a money purchase pension scheme withpayments being made to the scheme at the discretion of the Group. All paymentsare expensed as they are incurred. 2.10 Taxation The tax expense represents the sum of the current tax and deferred tax. Current tax including UK corporation tax and foreign tax is provided at amountsexpected to be paid using the tax rates and laws that have been enacted orsubstantively enacted by the balance sheet date. Deferred tax is provided in full on timing differences which result in anobligation at the balance sheet date to pay more tax, or a right to pay less taxat a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. Deferred tax is not provided on timing differences on unremitted earnings ofsubsidiaries and associates where there is no commitment to remit theseearnings. Deferred tax assets are recognised to the extent that it is regardedas more likely than not that they will be recovered. Deferred tax assets andliabilities are not discounted. 2.11 Property, plant and equipment Property, plant and equipment are held at cost, net of depreciation less anyprovision for impairment. Depreciation is provided by either the reducingbalance method or the straight line method at rates calculated to write off thecost of the assets less their estimated residual value over their expecteduseful lives: Freehold buildings - 2% per annumShort leasehold buildings - over the life of the leasePlant and vehicles - 10% to 33% per annum 2.12 Intangible assets Purchases of trademarks are included at cost and written off in equal annualinstalments over 5 years, which is their estimated useful economic life.Provision is made for any impairment. Computer software is held at cost, net of depreciation less any provision forimpairment. 2.13 Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risk specific to the assetfor which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of animpairment loss is recognised as income immediately. 2.14 Inventories Inventories are stated at the lower of cost and net realisable value. Costcomprises direct materials and, where applicable, direct labour costs and thoseoverheads that have been incurred in bringing the inventories to their presentlocation and condition. Net realisable value represents the estimated sellingprice less all estimated costs of completion and costs to be incurred inmarketing, selling and distribution. 2.15 Derivative financial instruments The Group's activities expose it primarily to the financial risks of changes inforeign currency exchange rates. The Group uses foreign exchange forwardcontracts to hedge this exposure. The Group does not use derivative financialinstruments for speculative purposes. Changes in the fair value of derivative financial instruments that aredesignated and effective as hedges of future cash flows are recognised directlyin equity and the ineffective portion is recognised immediately in the incomestatement. Amounts deferred in equity are recognised in the income statement inthe same period in which the hedged item affects net profit or loss. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated, or exercised, or no longer qualifies for hedge accounting. At thattime, any cumulative gain or loss on the hedging instrument recognised in equityis retained in equity until the forecasted transaction occurs. 2.16 Share-based payments The Group has applied the requirements of IFRS 2 "Share-based Payment". Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested at 1January 2005. The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value(excluding the effect of non market-based vesting conditions) at the date ofgrant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest andadjusted for the effect of non market-based vesting conditions. Fair value is measured by use of the Black Scholes model. The expected lifeused in the model has been adjusted, based on management's best estimate, forthe effects of non-transferability, exercise restrictions, and behaviouralconsiderations. A liability equal to the portion of the goods or services received is recognisedat the current fair value determined at each balance sheet date forcash-settled, share-based payments. 2.17 Segmental reporting Activities are allocated to one business segment being consumer housewares. Abusiness segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. A geographical segment is engaged inproviding products or services within a particular economic environment that issubject to risks and returns which are different from those segments operatingin other economic environments. 3. Geographical segments The following table provides an analysis of the Group's revenue by geographicalmarket, irrespective of the origin of the products: Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 United Kingdom 4,163 3,422 8,457United States 5,273 4,855 11,009South Korea 2,895 2,323 5,590Rest of the World 2,189 1,632 3,366 14,520 12,232 28,422 4. Exceptional items As stated in the Group's accounting policies, the Directors definereorganisation costs as exceptional. Specifically included under suchexceptional costs are profit or loss on the sale of land and buildings,rent-free periods and other costs associated with the assignment of leaseholdproperty no longer required by the business and redundancy costs. The analysisof exceptional items is as follows: Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 Profit on sale of freehold land & 1,793 - -buildingsCosts associated with assignment of (139) - -leasehold propertyRedundancy costs (10) (277) (277) 1,644 (277) (277) 5 Taxation Tax for the interim period is charged at 37% (year to 31 December 2006 35%)representing the best estimate of the weighted average annual corporation taxrate expected for the full year. Deferred tax has been calculated at a rate of28%. 6. Finance costs Six months Six months Year to 30.06.07 to 30.06.06 to 31.12.06 £'000 £'000 £'000 Interest paid - (1) (1)(Losses)/gains on financial derivatives (44) 173 111Other finance costs (62) (35) (64) (106) 137 46 7. Dividend A dividend of 3.55p (2006 - 3.3p) per ordinary share will be paid on 1 October2007 to shareholders on the register on 7 September 2007. 8. Earnings per share The earnings per share are calculated on profit after tax of £1,561,000 (2006 -£450,000) and the weighted average number of ordinary shares of 9,791,802 (2006- 9,852,718) in issue during the period. The share options in existence duringthe six months ended 30 June 2007 have a dilutive effect. The diluted earningsper share are calculated on earnings of £1,561,000 (2006 - £450,000) and theweighted average of ordinary shares in issue adjusted to assume conversion ofall dilutive potential ordinary shares which is 10,137,066 (2006 - 9,951,750). 9. Analysis of net funds As at As at As at 30.06.07 30.06.06 31.12.06 £'000 £'000 £'000 Cash in hand and at bank 609 1,314 1,178Short term money market deposits 1,350 3,895 4,025 Total 1,959 5,209 5,203 10. Explanation of transition to IFRS As explained in Note 1, these are the Group's first interim financial statementsprepared for part of the first year in which financial statements will beprepared in accordance with International Financial Reporting Standards (IFRS). The accounting policies in Note 2 have been applied in preparing these interimfinancial statements, and in preparing an opening IFRS balance sheet as at 1January 2006 (the Group's date of transition). The preparation of thesefinancial statements has required the adjustment of amounts previously reportedin financial statements prepared in accordance with UK GAAP. As required by IFRS 1 "First time adoption of international reporting standards"an explanation of how the transition from UK GAAP to IFRS has affected theGroup's financial position is set out in the tables below. The adjustments shownin the tables are: (i) The effect of the change to valuing pension scheme assetsat bid rather than mid price as required by IAS 19 "Employee Benefits". (ii) The effect of the revised treatment of the Group's forwardforeign exchange contracts as required by IAS 39 "Financial Instruments:Recognition and Measurement". (iii) The reclassification of interest paid to finance costs. (iv) The disclosure of share of profit of associated undertakings net of income taxes. (v) The reclassification of software assets as intangible assets. (vi) The separate disclosure of income taxes payable orrecoverable. (vii) The reclassification of property being marketed for sale as anasset held for sale in current assets. 10.1 Reconciliation of income statement for the six months ended 30 June 2006 Other IFRS UK Reclass- GAAP IAS 39 ifications IFRS £'000 £'000 £'000 £'000 Revenue 12,232 - - 12,232Operating costs (11,484) - - (11,484) Operating profit before exceptional items and financing 748 - - 748Exceptional items (277) - - (277) Operating profit after exceptional items 471 - - 471Interest receivable from bank deposits 130 - - 130Interest payable (1) - 1 -Finance costs (35) 173 (1) 137Share of profit of associated undertakings (55) - 30 (25) Profit before tax 510 173 30 713Income tax (181) (52) (30) (263) Profit for the period 329 121 - 450 Earnings per share 3.34p 4.57p Diluted earnings per share 3.31p 4.52p 10.2 Reconciliation of income statement for the year ended 31 December 2006 Other IFRS UK Reclass- GAAP IAS 19 IAS 39 ifications IFRS £'000 £'000 £'000 £'000 £'000 Revenue 28,422 - - - 28,422Operating costs (25,747) - - - (25,747) Operating profit before exceptional items 2,675 - - - 2,675and financing Exceptional items (277) - - - (277) Operating profit after exceptional items 2,398 - - - 2,398Interest receivable from bank deposits 231 - - - 231Interest payable (1) - - 1 -Finance costs (62) (2) 111 (1) 46Share of profit of associated undertakings 64 - - (6) 58Impairment in investment in associated undertaking (46) - - - (46) Profit before tax 2,584 (2) 111 (6) 2,687Income tax (912) 1 (33) 6 (938) Profit for the period 1,672 (1) 78 - 1,749 Earnings per share 17.03p 17.81p Diluted earnings per share 16.80p 17.58p 10.3 Reconciliation of balance sheet as at 1 January 2006 As at Other IFRS As at 01.01.06 Reclass- 01.01.06 UK GAAP IAS 19 IAS 39 ifications IFRS £'000 £'000 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 5,335 - - (77) 5,258Intangible assets - - - 77 77Interests in associates 1,413 - - - 1,413Derivative financial instruments - - - - - Total non-current assets 6,748 - - - 6,748 Current assets -Inventories 5,913 - - - 5,913Trade and other receivables 5,243 - - (321) 4,922Current income tax receivable - - - 321 321Cash and cash equivalents 6,294 - - - 6,294Derivative financial instruments - - - - -Assets held for sale - - - - - Total current assets 17,450 - - - 17,450 Total assets 24,198 - - - 24,198 Current liabilities - -Trade and other payables (3,080) - - 42 (3,038)Current income tax liabilities - - - (42) (42)Derivative financial instruments - - (131) - (131) Total current liabilities (3,080) - (131) - (3,211) Non-current liabilitiesDeferred income tax liabilities (43) - 39 - (4)Pension scheme deficit (2,870) (23) - - (2,893) Total non-current liabilities (2,913) (23) 39 - (2,897) Total liabilities (5,993) (23) (92) - (6,108) Net assets 18,205 (23) (92) - 18,090 EquityCalled up share capital 521 - - - 521Share premium account 4,580 - - - 4,580Treasury shares (964) - - - (964)Share based payment reserve 12 - - - 12Cash flow hedging reserve - - (131) - (131)Tax on cash flow hedging reserve - - 39 - 39Retained earnings 14,056 (23) - 14,033 Total equity 18,205 (23) (92) - 18,090 10.4 Reconciliation of balance sheet as at 30 June 2006 As at Other IFRS As at 30.06.06 Reclass- 30.06.06 UK GAAP IAS 19 IAS 39 ifications IFRS £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 5,137 - - (69) 5,068Intangible assets - - - 69 69Interests in associates 1,369 - - - 1,369Derivative financial instruments - - 36 - 36 Total non-current assets 6,506 - 36 - 6,542 Current assetsInventories 6,859 - - - 6,859Trade and other receivables 4,815 - - - 4,815Cash and cash equivalents 5,209 - - - 5,209Derivative financial instruments - - 76 - 76Assets held for sale - - - - - Total current assets 16,883 - 76 - 16,959 Total assets 23,389 - 112 - 23,501 Current liabilitiesTrade and other payables (3,504) - - 325 (3,179)Current income tax liabilities - - (52) (325) (377)Derivative financial instruments - - (4) - (4) Total current liabilities (3,504) - (56) - (3,560) Non-current liabilitiesDeferred income tax liabilities (44) - 20 - (24)Pension scheme deficit (2,773) (23) - - (2,796) Total non-current liabilities (2,817) (23) 20 - (2,820) Total liabilities (6,321) (23) (36) - (6,380) Net assets 17,068 (23) 76 - 17,121 EquityCalled up share capital 523 - - - 523Share premium account 4,657 - - - 4,657Treasury shares (1,263) - - - (1,263)Share based payment reserve 22 - - - 22Cash flow hedging reserve - - (65) - (65)Tax on cash flow hedging reserve - - 20 - 20Retained earnings 13,129 (23) 121 - 13,227 Total equity 17,068 (23) 76 - 17,121 10.5 Reconciliation of balance sheet as at 31 December 2006 As at Other IFRS As at 31.12.06 Reclass- 31.12.06 UK GAAP IAS 19 IAS 39 ifications IFRS £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 6,243 - - (476) 5,767Intangible assets 502 - - 126 628Interests in associates 1,332 - - - 1,332Derivative financial instruments - - - - - Total non-current assets 8,077 - - (350) 7,727 Current assetsInventories 8,352 - - - 8,352Trade and other receivables 4,467 - - - 4,467Cash and cash equivalents 5,203 - - - 5,203Derivative financial instruments - - 105 - 105Assets held for sale - - - 350 350 Total current assets 18,022 - 105 350 18,477 Total assets 26,099 - 105 - 26,204 Current liabilitiesTrade and other payables (5,524) - - 196 (5,328)Current income tax liabilities (17) - (33) (196) (246)Derivative financial instruments - - - - - Total current liabilities (5,541) - (33) - (5,574) Non-current liabilitiesDeferred income tax liabilities (51) - 2 - (49)Pension scheme deficit (3,969) (26) - - (3,995) Total non-current liabilities (4,020) (26) 2 - (4,044) Total liabilities (9,561) (26) (31) - (9,618) Net assets 16,538 (26) 74 - 16,586 EquityCalled up share capital 523 - - - 523Share premium account 4,657 - - - 4,657Treasury shares (1,266) - - - (1,266)Share based payment reserve 38 - - - 38Cash flow hedging reserve - - (6) - (6)Tax on cash flow hedging reserve - - 2 - 2Retained earnings 12,586 (26) 78 - 12,638 Total equity 16,538 (26) 74 - 16,586 This interim statement will be posted out to shareholders in August and will beavailable from the Company Secretary at Portmeirion Group PLC, London Road,Stoke-On-Trent, Staffs. ST4 7QQ or from the website, www.portmeirion.com after31 August 2007. This information is provided by RNS The company news service from the London Stock Exchange