Porvair Regulatory News (PRV)

19 May 2006 07:00

Porvair PLC19 May 2006 For Immediate Release 19 May 2006 Porvair plc Transition to International Financial Reporting Standards (IFRS) Porvair plc ("Porvair") is today publishing information about its IFRSaccounting policies and restating its results for the year ended 30 November2005, the six months results to 31 May 2005 and its balance sheets as at 30November 2004, 2005 and 31 May 2005 in order to give an understanding of theeffect of IFRS on the Company's financial reporting. Porvair will report underIFRS for the first time in the 2005/2006 interim results, which will bepublished in July 2006. Summary of IFRS impact on the year ended 30 November 2005 Income Statement(unaudited) Summary of IFRS impact on the year ended 30 November 2005 Income Statement(unaudited) Underlying* Statutory £'000 £'000UK GAAP profit before tax 3,028 874Add back loss on discontinued operations - 644 ----------- -----------UK GAAP profit before tax (continuing 3,028 1,518operations)Adjustments:Amortisation of goodwill - 2,221SSAP 24 to IAS19 retirement benefit (325) (325)adjustmentCharge for share based payments (81) (81)Interest earned on long term debtor held 20 20at fair valueNet impact of capitalised development 40 40costs ----------- -----------IFRS profit before tax (continuing 2,682 3,393operations) Summary of IFRS impact on earnings per share for the year ended 30 November 2005(unaudited) Underlying* Statutory pence penceUK GAAP - earnings per share 4.3p (1.1)pIFRS - earnings per shareBasic 3.6p 3.7pBasic - on continuing operations 3.6p 4.9p Summary of IFRS impact on the Balance Sheet (unaudited) 1 December 30 November 1 December 2004 2005 2005** £'000 £'000 £'000Shareholders' funds under 30,472 33,305 33,305UK GAAPAdjustments (net of deferred tax)Goodwill amortisation andcurrency revaluation (1,798) 1,389 1,389Fair value of long term debtor (105) (91) (91)Retirement benefit (4,810) (4,827) (4,827)provision adjustmentDividend 368 425 425Development expenditure 43 71 71Deferred tax on share based - 26 26paymentsAdoption of IAS 39 - - (46) ----------- ----------- -----------Shareholders' funds under 24,170 30,298 30,252IFRS Note 1 * Underlying performance is before goodwill amortisation and exceptional items under UK GAAP and before exceptional items under IFRS. Note 2 ** Porvair has elected to adopt IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement from 1 December 2005 with no restatement of comparative information. The Company is not issuing a trading statement. However Porvair believes thatthe market's estimates for its expected performance in 2006 and beyond arecurrently based upon UK GAAP and will consequently require adjustment to bringthem into line with the new reporting requirements. The adoption of IFRS changes the presentation of and measurements in theaccounts but has no impact on the underlying operations or cash flows of theGroup. However the implementation of the new standards may result in increasedvolatility between periods in the reported results. For further information please contact:Porvair plc 01553 765 500Chris Tyler, Group FinanceDirector Buchanan Communications 0207 466 5000Charles Ryland / Ben Willey Introduction As a consequence of the adoption by the European Union ("EU") of InternationalFinancial Reporting Standards ("IFRS") Porvair plc ("Porvair"), in common withall companies quoted on the London Stock Exchange, is required to prepare itsconsolidated financial statements under IFRS for all periods commencing on orafter 1 January 2005. Porvair will first adopt IFRS for the year commencing 1 December 2005 and ending30 November 2006, including the Interim Statement for the six months ending 31May 2006. However, the requirement to restate comparative figures on the samebasis as the period then under review means that Porvair has:- • Applied its new IFRS accounting policies to its consolidated 30 November 2004 balance sheet (previously prepared under UK Generally Accepted Accounting Principles ("UK GAAP")), in order to determine an appropriately adjusted opening position on transition to IFRS as at 1 December 2004 except in respect of IAS 32 and IAS 39, as explained below; and • Restated its results for the year ended 30 November 2005 and its balance sheet as at 30 November 2005 in line with its new IFRS accounting policies for such comparative purposes, except in respect of IAS 32 and IAS 39, as explained below. The adoption of IFRS on the Porvair consolidated financial statements affects: • Presentation The format and descriptions used in the balance sheet and income statement will change to accord with the new reporting requirements, and • Measurement The recognition and measurement of certain assets, liabilities, income and expenses will change in order to comply with the new standards. This document sets out the changes that are required to the previously reported2004 balance sheet and the 2005 full year results and cash flows in order tocomply with IFRS, and the underlying reasons for those changes. Also includedare the consolidated income statement, cash flow statement and balance sheet forthe six months ended 31 May 2005 under IFRS. A further balance sheet has beenprepared as at 1 December 2005 to illustrate the effect of adopting IAS 32Financial Instruments: Disclosure and Presentation and IAS 39 FinancialInstruments: Recognition and Measurement as at that date. The financial information represents the Company's current best estimates, andmay need to be revised subsequently due to changes in IFRS, or to theinterpretation of its provisions. Consolidated Income Statement for the year ended 30 November 2005 (unaudited) IFRS format UK (GAAP) IFRS ------------------------ ---------------- Before Goodwill Exceptional Group Before Exceptional Group exceptional amortisation items Exceptional items items and items goodwill amortisation £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue 44,873 44,873 44,873 44,873Cost of sales (30,985) (30,985) (30,985) (30,985) ------- --------- ------- ------- ------- ------- ------Gross profit 13,888 - - 13,888 13,888 - 13,888Distribution (510) (510) (510) (510)costsAdministrative (9,978) (2,221) 711 (11,488) (10,144) 711 (9,433)expenses ------- --------- ------- ------- ------- ------- ------Operating 3,400 (2,221) 711 1,890 3,234 711 3,945profit/(loss)Interest (557) (557) (757) (757)payable andsimilarchargesInterest 185 185 205 205receivable ------- --------- ------- ------- ------- ------- ------Profit/(loss) 3,028 (2,221) 711 1,518 2,682 711 3,393before taxTaxation (889) (213) (1,102) (800) (213) (1,013) ------- --------- ------- ------- ------- ------- ------Profit/(loss) 2,139 (2,221) 498 416 1,882 498 2,380for the yearfrom continuingoperationsDiscontinuedoperationsLoss for the - - (451) (451) - (451) (451)year from ------- --------- ------- ------- ------- ------- ------discontinuedoperationsProfit/(loss) 2,139 (2,221) 47 (35) 1,882 47 1,929for the year ------- --------- ------- ------- ------- ------- ------Profit 561 (201) - 360 561 - 561attributableto minorityinterestProfit/(loss) 1,578 (2,020) 47 (395) 1,321 47 1,368attributable ------- --------- ------- ------- ------- ------- ------to equityshareholders 2,139 (2,221) 47 (35) 1,882 47 1,929 ------- --------- ------- ------- ------- ------- ------Earnings/ (loss) per shareexpressed inpence per share- basic 4.3p (5.5)p 0.1p (1.1)p 3.6p 0.1p 3.7p- diluted 4.3p (5.5)p 0.1p (1.1)p 3.6p 0.1p 3.7p Earnings per share fromcontinuingoperations - basic 4.3p (5.5)p 1.3p 0.1p 3.6p 1.3p 4.9p- diluted 4.3p (5.5)p 1.3p 0.1p 3.6p 1.3p 4.9p Consolidated Income Statement for the 6 months ended 31 May 2005 (unaudited) IFRS format UK (GAAP) IFRS ------------------------ ---------------- Before Goodwill Exceptional Group Before Exceptional Group exceptional amortisation items Exceptional items items and items goodwill amortisation £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue 21,566 21,566 21,566 21,566Cost of sales (15,213) (15,213) (15,213) (15,213) ------- --------- ------- ------- ------- ------- ------Gross profit 6,353 6,353 6,353 6,353Distribution (212) (212) (212) (212)costsAdministrative (4,948) (1,109) 711 (5,346) (5,039) 711 (4,328)expenses ------- --------- ------- ------- ------- ------- ------Operating 1,193 (1,109) 711 795 1,102 711 1,813profit/(loss)Interest (318) (318) (418) (418)payable andsimilarchargesInterest 133 133 143 143receivable ------- --------- ------- ------- ------- ------- ------Profit/(loss) 1,008 (1,109) 711 610 827 711 1,538before taxTaxation (325) (213) (538) (282) (213) (495) ------- --------- ------- ------- ------- ------- ------Profit/(loss) 683 (1,109) 498 72 545 498 1,043for the periodfrom continuingoperationsDiscontinuedoperationsLoss for the - - (451) (451) - (451) (451)period from ------- --------- ------- ------- ------- -------- ------discontinuedoperationsProfit/(loss) 683 (1,109) 47 (379) 545 47 592for the period ------- --------- ------- ------- ------- -------- ------Profit 202 (89) - 113 202 202attributableto minorityinterestProfit/(loss) 481 (1,020) 47 (492) 343 47 390attributable ------- --------- ------- ------- ------- -------- ------to equityshareholders 683 (1,109) 47 (379) 545 47 592 ------- --------- ------- ------- ------- -------- ------Earnings/ (loss) per shareexpressed inpence per share- basic 1.3p (2.7)p 0.1p (1.3)p 1.0p 0.1p 1.1p- diluted 1.3p (2.7)p 0.1p (1.3)p 1.0p 0.1p 1.1p Earnings per share fromcontinuingoperations- basic 1.3p (2.7)p 1.4p - 1.0p 0.1p 1.1p- diluted 1.3p (2.7)p 1.4p - 1.0p 0.1p 1.1p Basis of preparation The unaudited financial information contained in this document has been preparedusing IFRS policies based on IFRS expected to be applicable to the Company andadopted formally by the EU as at 30 November 2006. At this stage in the development of IFRS, matters such as the interpretation andapplication surrounding it are continuing to evolve. In addition IFRS currentlyin issue and endorsed by the EU are subject to interpretation by IFRIC andfurther standards may be issued by the IASB that will be endorsed by the EUbefore 30 November 2006. These uncertainties could result in the need to changethe basis of accounting or presentation of certain financial information fromthat presented in this document. Porvair is required to establish its IFRS accounting policies for the year ended30 November 2006, and apply these retrospectively to determine its opening IFRSbalance sheet at the transition date of 1 December 2004 and the comparativefinancial information for the year ending 30 November 2005. However, advantagehas been taken of certain exemptions afforded by IFRS 1 First Time Adoption ofInternational Financial Reporting Standards as follows:- • Share-based payment Porvair has applied IFRS 2 Share-based Payment retrospectively only to equity-settled awards made after 7 November 2002 that had not vested at 1 January 2005. • Financial Instruments Porvair has elected to adopt IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement from 1 December 2005 with no restatement of comparative information. Consequently, the relevant comparative financial information for the six months ended 31 May 2005 and the year ended 30 November 2005 does not reflect the impact of these standards, but includes financial instruments accounted for on a UK GAAP basis. A balance sheet is given to show the impact of these standards as at 1 December 2005. • Business combinations As permitted by IFRS1, goodwill arising on acquisitions before 1 December 2004 (date of transition to IFRS) has been frozen at the UK GAAP amounts subject to being tested for impairment at that date. Principal Impacts of IFRS The key differences between UK GAAP and IFRS that will impact the Group are setout below. The impact of these adjustments is shown in the following tables. Research and development Under UK GAAP Porvair wrote off research and development expenditure in the yearin which it was incurred. Under IFRS the Group capitalises development expenditure from the point that itcan be demonstrated that a measurable asset has been created and it is probablethat the asset will create future economic benefit. Capitalised expenditure isamortised over the expected life of the developed product from the initialcommercial sales. Much of the Group's development expenditure is either in noveltechnologies or bespoke products for specific customers and in these cases therequirements are not met until the initial commercial trials have been approved. Goodwill Under UK GAAP goodwill on businesses acquired by the Group is capitalised andamortised on a straight-line basis over its anticipated future life up to amaximum of 20 years. Goodwill is calculated at the date of purchase and usuallyrecorded in the functional currency of the acquiring company. Under IFRS, from 1 December 2004 onwards, goodwill will no longer be amortised,but will instead be subject to an annual impairment review. Goodwill is held inthe functional currency of the underlying acquired operation. Dividends Under UK GAAP dividends relating to an accounting period but declared after thebalance sheet date are recognised as a liability even if the approval of thatdividend took place after the balance sheet date. Under IFRS, proposed dividends do not meet the definition of a liability untilsuch time as they have been declared and paid, and in the case of the finaldividend, approved by shareholders at the Annual General Meeting. Share-based payment Under UK GAAP Porvair does not recognise an expense as options are either issuedat market value on which no charge arises or are Save-As-You-Earn schemes forwhich UK GAAP includes an exemption from recognising an expense. Under IFRS the cost of all share-based payments, based on the fair value of theoptions or shares at the date of grant and calculated using an appropriatepricing model, is recognised over the vesting period of the award. Retirement benefits Under UK GAAP the company accounted for its pension scheme under SSAP 24 but hadprovided disclosures to enable the impact of adopting FRS17 to be derived. UnderFRS 17 the assets and liabilities of the Group's defined benefit pension schemeare recognised at fair value in the balance sheet and the operating andfinancing costs of defined benefit pension schemes are recognised in the incomestatement as operating costs and finance costs respectively. Variations fromexpected costs arising from the experience of the plans or changes in actuarialassumptions are recognised immediately in the Statement of Total RecognisedGains and Losses. The differences between the requirements of FRS17 and IAS 19 Employee Benefitshave no impact on the Group. To comply with IFRS, therefore the Group will apply the FRS17 adjustmentsdisclosed in its 2005 report and accounts. Deferred taxation The carrying values of deferred tax assets and liabilities in the balance sheethave been adjusted to reflect the restatement of newly recognised assets andliabilities arising from the adoption of IFRS. Computer software Under UK GAAP all capitalised computer software was classified within tangiblefixed assets. IFRS requires capitalised software that is not an integral part ofthe hardware to be treated as an intangible asset. Forward foreign exchange contracts and currency options Porvair uses forward foreign exchange contracts and currency options for thepurposes of hedging material contractually committed and forecast foreigncurrency denominated future sales and purchases. Under UK GAAP a form of hedgeaccounting was applied to these forward foreign exchange contracts and currencyoptions meaning that these derivatives are held off balance sheet at periodends. Under IFRS the fair value of all forward foreign exchange contracts and currencyoptions is recognised on the balance sheet. IAS 39 places significantrestrictions on the use of hedge accounting and changes the hedge accountingmethodology. As a result, from 1 December 2005, Porvair will recognise allforward foreign exchange contracts and currency options on the balance sheet atfair value. Long term loan receivable Under UK GAAP the Group's long term loan receivable was held at its nominalvalue and interest was credited to the income statement at the coupon rate onthe debtor. Under IFRS the loan has been restated to its fair value to reflect a marketinterest rate for the loan. IFRS adjustments to consolidated Income Statement for the year ended 30 November 2005 (unaudited) IFRS format UK Goodwill Retirement Share Income Development IFRS (GAAP) amortisation benefit based from expenditure charge payments long term loan £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue 44,873 44,873Cost of sales (30,985) (30,985) ------ -------- ------- ------ ------ -------- ------Gross profit 13,888 - - - - - 13,888Distribution (510) (510)costsAdministrative(11,488) 2,221 (125) (81) 40 (9,433)expenses ------ -------- ------- ------ ------ -------- ------Operating 1,890 2,221 (125) (81) - 40 3,945profit/(loss)Interest (557) (200) (757)payable andsimilarchargesInterest 185 20 205receivable ------ -------- ------- ------ ------ -------- ------Profit/(loss) 1,518 2,221 (325) (81) 20 40 3,393before taxTaxation (1,102) 98 9 (6) (12) (1,013) ------ -------- ------- ------ ------ -------- ------Profit/(loss) 416 2,221 (227) (72) 14 28 2,380for the yearfrom continuingoperations DiscontinuedoperationsLoss for the (451) (451)year from ------ -------- ------- ------ ------ -------- ------discontinuedoperationsProfit/(loss) (35) 2,221 (227) (72) 14 28 1,929for the year ------ -------- ------- ------ ------ -------- ------Profit 360 201 561attributableto minorityinterestProfit/(loss) (395) 2,020 (227) (72) 14 28 1,368attributable ------ -------- ------- ------ ------ -------- ------to equityshareholders (35) 2,221 (227) (72) 14 28 1,929 ------ -------- ------- ------ ------ -------- ------ IFRS adjustments to consolidated Income Statement for the 6 months ended 31 May 2005 (unaudited) IFRS format UK Goodwill Retirement Share Income Development IFRS (GAAP) amortisation benefit based from expenditure charge payments long term loan £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue 21,566 21,566Cost of sales (15,213) (15,213) ------ ------- ------- ------ ------ -------- ------Gross profit 6,353 - - - - - 6,353Distribution (212) (212)costsAdministrative (5,346) 1,109 (80) (39) 28 (4,328)expenses ------ ------- ------- ------ ------ -------- ------Operating 795 1,109 (80) (39) - 28 1,813profit/(loss)Interest (318) (100) (418)payable andsimilarchargesInterest 133 10 143receivable ------ ------- ------- ------ ------ -------- ------Profit/(loss) 610 1,109 (180) (39) 10 28 1,538before taxTaxation (538) 54 (3) (8) (495) ------ ------- ------- ------ ------ -------- ------Profit/(loss) 72 1,109 (126) (39) 7 20 1,043for the periodfrom continuingoperations DiscontinuedoperationsLoss for the (451) (451)period from ------ ------- ------- ------ ------ -------- ------discontinuedoperationsProfit/(loss) (379) 1,109 (126) (39) 7 20 592for the period ------ ------- ------- ------ ------ -------- ------Profit 113 89 202attributableto minorityinterestProfit/(loss) (492) 1,020 (126) (39) 7 20 390attributable ------ ------- ------- ------ ------ -------- ------to equityshareholders (379) 1,109 (126) (39) 7 20 592 ------ ------- ------- ------ ------ -------- ------ Consolidated Balance Sheet as at 1 December 2004 - Adjustments and reclassification to IFRS Format (unaudited) IFRS format UK Goodwill Retirement Software Fair Dividend Development IFRS (GAAP) amortisation benefit intangibles value expenditure and currency obligations of long revaluation term loan £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 27,785 (1,798) 25,987Other - 12 62 74intangibleassetsProperty, plant 8,241 (12) 8,229and equipmentOther 1,812 (150) 1,662receivableDeferred tax 587 202 45 (19) 815assetPension 672 (672) -prepayment ------- -------- -------- -------- ------ ------- --------- ------ 39,097 (1,798) (470) - (105) - 43 36,767 ------- -------- -------- -------- ------ ------- --------- ------Current assetsInventories 5,897 5,897Trade and other 8,263 8,263receiveablesCash and cash 3,047 3,047equivalents ------- -------- -------- -------- ------ ------- --------- ------ 17,207 - - - - - - 17,207Currentliabilities Trade and other 5,853 5,853payablesCurrent tax 532 532liabilitiesRetirement 550 (550) -benefitobligationsBank overdrafts 1,000 1,000and loansProvisions 190 190Proposed 368 (368) -dividend ------- -------- -------- -------- ------ ------- --------- ------ 8,493 - (550) - - (368) - 7,575 ------- -------- -------- -------- ------ ------- --------- ------Net current 8,714 - 550 - - 368 - 9,632assets ------- -------- -------- -------- ------ ------- --------- ------Non-currentliabilitiesBank loans 10,052 10,052Retirement 550 4,890 5,440benefitobligationsLong-term 1,218 1,218provisions ------- -------- -------- -------- ------ ------- --------- ------ 11,820 - 4,890 - - - - 16,710 ------- -------- -------- -------- ------ ------- --------- ------Total 20,313 - 4,340 - - (368) - 24,285liabilities ------- -------- -------- -------- ------ ------- --------- ------Net assets 35,991 (1,798) (4,810) - (105) 368 43 29,689 ------- -------- -------- -------- ------ ------- --------- ------Capital andreservesShare capital 736 736Share premium 28,679 28,679accountCumulative (1,100) (1,677) (2,777)translationadjustmentRetained 2,157 (121) (4,810) (105) 368 43 (2,468)earnings ------- -------- -------- -------- ------ ------- --------- ------Equity 30,472 (1,798) (4,810) - (105) 368 43 24,170attributable toequity holdersof the parentMinority 5,519 5,519interests ------- -------- -------- -------- ------ ------- --------- ------Total equity 35,991 (1,798) (4,810) - (105) 368 43 29,689 ------- -------- -------- -------- ------ ------- --------- ------ Consolidated Balance Sheet as at 31 May 2005 - Adjustments and reclassification to IFRS Format (unaudited) IFRS format UK Goodwill Retirement Software Fair Dividend Development IFRS (GAAP) amortisation benefit intangibles value expenditure and currency obligations of long revaluation term loan £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 26,776 (238) 26,538Other - 9 90 99intangibleassetsProperty, plant 8,122 (9) 8,113and equipmentOther 1,282 (140) 1,142receivableDeferred tax 605 208 42 (27) 828assetPension 692 (692) -prepayment ------- -------- -------- -------- ------ ------- --------- ------ 37,477 (238) (484) - (98) - 63 36,720 ------- -------- -------- -------- ------ ------- --------- ------Current assetsInventories 5,759 5,759Trade and other 9,160 9,160receiveablesCash and cash 3,679 3,679equivalents ------- -------- -------- -------- ------ ------- --------- ------ 18,598 - - - - - - 18,598Currentliabilities Trade and other 6,557 6,557payablesCurrent tax 360 360liabilitiesRetirement 550 (550) -benefitobligationsBank overdrafts 1,000 1,000and loansProvisions - -Proposed 368 (368) -dividend ------- -------- -------- -------- ------ ------- --------- ------ 8,835 - (550) - - (368) - 7,917 ------- -------- -------- -------- ------ ------- --------- ------Net current 9,763 - 550 - - 368 - 10,681assets ------- -------- -------- -------- ------ ------- --------- ------Non-currentliabilitiesBank loans 10,509 10,509Retirement - 5,002 5,002benefitobligationsLong-term 1,427 1,427provisions ------- -------- -------- -------- ------ ------- --------- ------ 11,936 - 5,002 - - - - 16,938 ------- -------- -------- -------- ------ ------- --------- ------Total 20,771 - 4,452 - - (368) - 24,855liabilities ------- -------- -------- -------- ------ ------- --------- ------Net assets 35,304 (238) (4,936) - (98) 368 63 30,463 ------- -------- -------- -------- ------ ------- --------- ------Capital andreservesShare capital 736 736Share premium 28,679 28,679accountCumulative (1,040) (1,226) (2,266)translationadjustmentRetained 1,297 988 (4,936) (98) 368 63 (2,318)earnings ------- -------- -------- -------- ------ ------- --------- ------Equity 29,672 (238) (4,936) - (98) 368 63 24,831attributable toequity holdersof the parentMinority 5,632 5,632interests ------- -------- -------- -------- ------ ------- --------- ------Total equity 35,304 (238) (4,936) - (98) 368 63 30,463 ------- -------- -------- -------- ------ ------- --------- ------ Consolidated Balance Sheet as at 30 November 2005 - Adjustments and reclassification to IFRS Format (unaudited) IFRS format UK Goodwill Retirement Software Fair Dividend Share Development IFRS (GAAP) amortisation benefit intangibles value based expenditure and currency obligations of long payments revaluation term loan £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassetsGoodwill 26,502 1,389 27,891Other - 12 102 114intangibleassetsProperty, 8,057 (12) 8,045plant andequipmentOther 1,289 (130) 1,159receivableDeferred tax 715 204 39 26 (31) 953assetPension 678 (678) -prepayment ------ -------- ------- ------- ------ ------- ------ -------- ------ 37,241 1,389 (474) - (91) - 26 71 38,162 ------ -------- ------- ------- ------ ------- ------ -------- ------Current assetsInventories 6,103 6,103Trade and 7,970 7,970otherreceiveablesCash and cash 1,001 1,001equivalents ------ -------- ------- ------- ------ ------- ------ -------- ------ 15,074 - - - - - - - 15,074Currentliabilities Trade and 6,776 6,776otherpayablesCurrent tax 676 676liabilitiesRetirement 812 (812) -benefitobligationsBank 500 500overdraftsand loansProvisions 324 324Proposed 425 (425) -dividend ------ -------- ------- ------- ------ ------- ------ -------- ------ 9,513 - (812) - - (425) - - 8,276 ------ -------- ------- ------- ------ ------- ------ -------- ------Net current 5,561 - 812 - - 425 - - 6,798assets ------ -------- ------- ------- ------ ------- ------ -------- ------Non-currentliabilitiesBank loans 9,012 9,012Retirement - 5,165 5,165benefitobligationsLong-term 485 485provisions ------ -------- ------- ------- ------ ------- ------ -------- ------ 9,497 - 5,165 - - - - - 14,662 ------ -------- ------- ------- ------ ------- ------ -------- ------Total 19,010 - 4,353 - - (425) - - 22,938liabilities ------ -------- ------- ------- ------ ------- ------ -------- ------Net assets 33,305 1,389 (4,827) - (91) 425 26 71 30,298 ------ -------- ------- ------- ------ ------- ------ -------- ------Capital andreservesShare capital 810 810Share premium 32,513 32,513accountCumulative (987) (711) (1,698)translationadjustmentRetained 969 2,100 (4,827) (91) 425 26 71 (1,327)earnings ------ -------- ------- ------- ------ ------- ------ -------- ------Equity 33,305 1,389 (4,827) - (91) 425 26 71 30,298attributableto equityholders ofthe parentMinority - -interests ------ -------- ------- ------- ------ ------- ------ -------- ------Total equity 33,305 1,389 (4,827) - (91) 425 26 71 30,298 ------ -------- ------- ------- ------ ------- ------ -------- ------ Consolidated Balance Sheet as at 1 December 2005 - Implementation of IAS39 (unaudited) IFRS format IFRS Financial IFRS 30 November instruments 1 December 2005 2005 £'000 £'000 £'000Non-current assetsGoodwill 27,891 27,891Other intangible assets 114 114Property, plant and 8,045 8,045equipmentAvailable for sale 1,159 1,159investmentsDeferred tax asset 953 20 973 --------- -------- -------- 38,162 20 38,182 --------- -------- --------Current assetsInventories 6,103 6,103Trade and other 7,970 7,970receiveablesCash and cash equivalents 1,001 1,001 --------- -------- -------- 15,074 - 15,074 --------- -------- --------Current liabilitiesTrade and other payables 6,776 6,776Current tax liabilities 676 676Bank overdrafts and loans 500 500Provisions 324 324Derivative financial - 66 66instruments --------- -------- -------- 8,276 66 8,342 --------- -------- --------Net current assets/ 6,798 (66) 6,732(liabilities) --------- -------- --------Non-current liabilitiesBank loans 9,012 9,012Retirement benefit 5,165 5,165obligationsLong-term provisions 485 485 --------- -------- -------- 14,662 - 14,662 --------- -------- --------Total liabilities 22,938 66 23,004 --------- -------- --------Net assets 30,298 (46) 30,252 --------- -------- --------Capital and reservesShare capital 810 810Share premium account 32,513 32,513Cumulative translation (1,698) (1,698)adjustmentRetained earnings (1,327) (46) (1,373) --------- -------- --------Equity attributable to 30,298 (46) 30,252equity holders of theparentMinority interests - - - --------- -------- --------Total equity 30,298 (46) 30,252 --------- -------- -------- Porvair has elected to adopt IAS 32 Financial Instruments: Disclosure andPresentation and IAS 39 Financial Instruments: Recognition and Measurement from1 December 2005 with no restatement of comparative information. Consequently,the relevant comparative financial information for periods up to the year ended30 November 2005 will not reflect the impact of these standards, but willinclude financial instruments accounted for on a UK GAAP basis. The table aboveshows the prior year adjustment required to the balance sheet as at 1 December2005 to reflect the adoption of IAS39. Consolidated Cash Flow Statement for the year ended 30 November 2005 IFRS format UK Goodwill Retirement Share Development IFRS (GAAP) amortisation benefit based expenditure charge payments £'000 £'000 £'000 £'000 £'000 £'000Operating profit 1,179 2,221 (125) (81) 40 3,234from continuingoperationAdjustments for:Exceptional profits 711 711Goodwill 2,221 (2,221) -amortisationShare based payments 81 81Depreciation 1,506 1,506Profit on disposal 4 4of property, plant and equipment ------ -------- ------- -------- -------- ------Operating cash flows 5,621 - (125) - 40 5,536before movement inworking capital Increase in (19) (19)inventoriesIncrease in trade (235) (235)and otherreceivablesDecrease in payables (85) (85)Increase in pensions 125 125 ------ -------- ------- -------- -------- ------Cash generated from 5,282 - - - 40 5,322continuing ------ -------- ------- -------- -------- ------operations Operating profit (644) (644)from discontinuedoperation(Decrease in (181) (181)provisions ------ -------- ------- -------- -------- ------Cash used by (825) - - - - (825)discontinuedoperations ------ -------- ------- -------- -------- ------Cash generated from 4,457 - - - 40 4,497operations ------ -------- ------- -------- -------- ------ Cash generated from 4,457 40 4,497operationsInterest received 185 185Interest paid (494) (494)Tax paid (800) (800) ------ -------- ------- -------- -------- ------Net cash from 3,348 - - - 40 3,388operating activities ------ -------- ------- -------- -------- ------Cash flows frominvesting activitiesAcquisition of (6,603) (6,603)subsidiaries (net ofcash acquired)Purchase of property (842) (842)plant and equipmentPurchase of (40) (40)intangible assetsAvailable for sale 1,288 1,288investments ------ -------- ------- -------- -------- ------Net cash used in (6,157) - - - (40) (6,197)investing activities -------- ------- -------- -------- ------ ------Cash flow fromfinancing activitiesNet proceeds from 3,908 3,908issue of ordinaryshare capitalRepayment of (2,508) (2,508)borrowingsDividends paid to (736) (736)shareholders ------ -------- ------- -------- -------- ------Net cash from 664 - - - - 664financing activities ------ -------- ------- -------- -------- ------Net decrease in cash (2,145) - - - - (2,145)and cash equivalentsEffects of exchange 99 99rate changesCash and cash 3,047 3,047equivalents at the ------ -------- ------- -------- -------- ------beginning of theperiodCash and cash 1,001 - - - - 1,001equivalents at the ------ -------- ------- -------- -------- ------end of the period Consolidated Cash Flow Statement for the six months ended 31 May 2005 IFRS format UK Goodwill Retirement Share Development IFRS (GAAP) amortisation benefit based expenditure charge payments £'000 £'000 £'000 £'000 £'000 £'000Operating profit 84 1,109 (80) (39) 28 1,102from continuingoperationAdjustments for:Exceptional profits 711 711Goodwill 1,109 (1,109) -amortisationShare based payments 39 39Depreciation 755 755 ------ -------- ------- -------- -------- ------Operating cash flows 2,659 - (80) - 28 2,607before movement inworking capital Decrease in 226 226inventoriesIncrease in trade (1,144) (1,144)and otherreceivablesIncrease in payables 105 105Increase in pensions 80 80 ------ -------- ------- -------- -------- ------Cash generated from 1,846 - - - 28 1,874continuing ------ -------- ------- -------- -------- ------operations Operating profit (644) (644)from discontinuedoperationDecrease in (4) (4)provisions ------ -------- ------- -------- -------- ------Cash used by (648) (648)discontinuedoperations ------ -------- ------- -------- -------- ------Cash generated from 1,198 - - - 28 1,226operations ------ -------- ------- -------- -------- ------ Cash generated from 1,198 28 1,226operationsInterest received 132 132Interest paid (309) (309)Tax paid (482) (482) ------ -------- ------- -------- -------- ------Net cash from 539 - - - 28 567operating activities ------ -------- ------- -------- -------- ------Cash flows frominvesting activitiesPurchase of property (407) (407)plant and equipmentPurchase of (28) (28)intangible assetsAvailable for sale 827 827investments ------ -------- ------- -------- -------- ------Net cash used in 420 - - - (28) 392investing activities ------ -------- ------- -------- -------- ------Cash flow fromfinancing activitiesDividends paid to (368) (368)shareholders ------ -------- ------- -------- -------- ------Net cash from (368) - - - - (368)financing activities ------ -------- ------- -------- -------- ------Net increase in cash 591 - - - - 591and cash equivalentsEffects of exchange 41 41rate changesCash and cash 3,047 3,047equivalents at the ------ -------- ------- -------- -------- ------beginning of theperiodCash and cash 3,679 - - - - 3,679equivalents at the ------ -------- ------- -------- -------- ------end of the period Significant IFRS Accounting Policies Basis of preparation and statement of compliance The financial information presented in this press release comprises unauditedinformation in respect of the consolidated balance sheets as at 1 December 2004,30 November 2005 and 31 May 2005 and income statement for the year ended 30November 2005 and the six months ended 31 May 2005. Prior to the year ending 30November 2006, the Group prepared its audited annual financial statements andunaudited interim results under UK GAAP. From 1 December 2005, the Group is required to prepare its annual consolidatedfinancial statements in accordance with International Financial ReportingStandards (IFRS) as adopted by the EU and implemented in the UK. As the annual2006 financial statements will include comparatives for 2005, the Group's dateof transition to IFRS under IFRS1 (First time adoption of IFRS) is 1 December2004 and 2005 comparatives have been restated accordingly. The financial information presented in this press release has been preparedunder the historical cost convention, except in respect of certain financialinstruments, and has been prepared on a basis consistent with the IFRSaccounting policies as set out below. The accounting policies are consistentwith those that the directors intend to use in the next annual financialstatements. There is, however, a possibility that the directors may determinethat some changes are necessary when preparing the full annual financialstatements for the first time in accordance with accounting standards adoptedfor use in the EU. The IFRS standards and IFRIC interpretations that will beapplicable and adopted for use in the EU at 30 November 2006 are not known withcertainty at the time of preparing this financial information. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to30 November each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to the income statement in the period ofacquisition. The interest of minority shareholders is stated at the minority'sproportion of the fair values of the assets and liabilities recognised.Subsequently, any losses applicable to the minority interest in excess of theminority interest are allocated against the interests of the parent. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary,adjustments are made to the financial statements of subsidiaries to bring theaccounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenditures are eliminatedon consolidation. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in the income statement andis not subsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRSs has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date. Revenue recognition Revenue comprises the invoiced value of goods and services supplied net of valueadded tax and other sales taxes. Licence fees are recognised when earned on anaccruals basis. Long term contracts are recognised on a progressive basis withprofit taken in proportion to the stage of completion of work. Interest income is accrued on a time basis, by reference to the principaloutstanding and the effective interest rate applicable, which is the rate thatexactly discounts estimated future cash receipts through the expected life ofthe financial asset to that asset's net carrying amount. Leasing Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance charges and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balanceof the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Foreign currencies Transactions in currencies other than pounds sterling are recorded at the ratesof exchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Non-monetaryassets and liabilities carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fairvalue was determined. Gains and losses arising on retranslation are included inthe income statement for the period, except for exchange differences arising onnon-monetary assets and liabilities where the changes in fair value arerecognised directly in equity. On consolidation, the assets and liabilities of the Group's overseas operationsand borrowings and other currency instruments designated as hedges of suchinvestments are translated at exchange rates prevailing on the balance sheetdate. Income and expense items are translated at the average exchange rates forthe period unless exchange rates fluctuate significantly. Exchange differencesarising, if any, are classified as equity and transferred to the Group'stranslation reserve. Such translation differences are recognised as income orexpenditure or as expenses in the period in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. Borrowing costs All other borrowing costs are recognised in profit or loss in the period inwhich they are incurred. Government grants Government grants for the development of new products are recognised as incomeover the periods necessary to match them with the related costs and are deductedin reporting the related expense. Government grants relating to property, plant and equipment are treated asdeferred income and released to the income statement over the expected usefullives of the assets concerned. Profit from operations Profit from operations is stated after charging restructuring costs and afterthe share of results of associates but before investment income and financecosts. Retirement benefit costs Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. Payments made to state-managed retirement benefitschemes are dealt with as payments to defined contribution schemes where theGroup's obligations under the schemes are equivalent to those arising in adefined contribution retirement benefit scheme. For defined benefit retirement schemes, the cost of providing benefits isdetermined using the Projected Unit Credit Method, with actuarial valuationsbeing carried out at each balance sheet date. Actuarial gains and losses arerecognised in full in the period in which they occur. They are recognisedoutside the income statement and presented in the statement of recognised incomeand expense. Past service cost is recognised immediately to the extent that the benefits arealready vested, and otherwise is amortised on a straight-line basis over theaverage period until the benefits become vested. The retirement benefit obligation in the balance sheet represents the presentvalue of the defined benefit obligation as adjusted for unrecognised pastservice cost, and as reduced by the fair value of scheme assets. Any assetresulting from this calculation is limited to past service cost, plus thepresent value of available refunds and reductions in future contributions to theplan. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otherperiods and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than abusiness combination) of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Exceptional items In accordance with IAS1 ("presentation of financial statements"), the Grouppresents certain items as "exceptional". These are material items which derivefrom events or transactions that fall within the Group's ordinary activities andwhich individually or, if of a similar type, in aggregate, need to be disclosedby virtue of their size, nature or incidence if the financial statements are togive a true and fair view. Property, plant and equipment Land and buildings held for use in the production or supply of goods orservices, or for administrative purposes, are stated in the balance sheet attheir cost less any subsequent accumulated depreciation and subsequentaccumulated impairment losses. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost,less any recognised impairment loss. Cost includes professional fees and, forqualifying assets, borrowing costs capitalised in accordance with the Group'saccounting policy. Depreciation for these assets, on the same basis as otherproperty assets, commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and anyrecognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets,other than land and properties under construction, over their estimated usefullives, using the straight-line method, on the following bases: Buildings 2.5 - 3%Fixtures and equipment 10 - 30%Motor vehicles 25% Assets held under finance leases are depreciated over their expected usefullives on the same basis as owned assets or, where shorter, over the term of therelevant lease. The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theassets and is recognised in income. Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period inwhich it is incurred. An internally-generated intangible asset arising from the Group's productdevelopment is recognised only if all of the following conditions are met: • an asset is created that can be identified• it is probable that the asset created will generate future economic benefits; and• the development cost of the asset can be measured reliably Internally-generated intangible assets are amortised on a straight-line basisover their useful lives. Where no internally-generated intangible asset can berecognised, development expenditure is recognised as an expense in the period inwhich it is incurred. Patents and trademarks Patents and trademarks are measured initially at purchase cost and are amortisedon a straight-line basis over their estimated useful lives. Impairment of tangible and intangible assets excluding goodwill The Group reviews annually the carrying amounts of its tangible and intangibleassets to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverableamount of the asset is estimated in order to determine the extent of theimpairment loss (if any). Where the asset does not generate cash flows that areindependent from other assets, the Group estimates the recoverable amount of thecash-generating unit to which the asset belongs. An intangible asset with anindefinite useful life is tested for impairment annually and whenever there isan indication that the asset may be impaired. 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 risks specific to theasset for which the estimates of future cash flows have not been adjusted. Ifthe recoverable amount of an asset (or cash-generating unit) is estimated to beless than its carrying amount, the carrying amount of the asset (orcash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. When an impairment loss subsequently reverses, the carrying amount of the asset(or cash-generating unit) is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does not exceedthe carrying amount that would have been determined had no impairment loss beenrecognised for the asset (or cash generating unit) in prior years. A reversal ofan impairment loss is recognised as income immediately. 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. Cost is calculated using the weighted average method.Net realisable value represents the estimated selling price less all estimatedcosts of completion and costs to be incurred in marketing, selling anddistribution. Loans and receivables Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They are includedin current assets, except for those with maturities greater than 12 months afterthe balance sheet date. These are classified as non-current assets. Loans areclassified as "other receivables" in the balance sheet. Trade receivables Trade receivables are recognised initially at fair value. A provision forimpairment of trade receivables is established when there is objective evidencethat the Group will not be able to collect all amounts due according to theoriginal terms of receivables. The amount of the provision is the differencebetween the asset's carrying amount and the present value of the estimatedfuture cash flows, discounted at the effective interest rate. The amount of theprovision is recognised in the income statement within administrative expenses. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccruals basis to the income statement using the effective interest method andare added to the carrying amount of the instrument to the extent that they arenot settled in the period in which they arise. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. Derivative financial instruments and hedge accounting The group's activities expose it primarily to the financial risks of changes inforeign currency exchange rates. The group uses foreign exchange forwardcontracts contracts to hedge these exposures. The group does not use derivativefinancial instruments for speculative purposes. The use of financial derivatives is governed by the group's policies approved bythe board of directors, which provides written principles on the use offinancial derivatives. Changes in the fair value or derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Derivatives embedded in other financial instruments or other host contracts aretreated as separate derivatives when their risks and characteristics are notclosely related to those of host contracts and the host contracts are notcarried at fair value with unrealised gains or losses reported in the incomestatement. Provisions Provisions for warranty costs are recognised at the date of sale of the relevantproducts, at the directors' best estimate of the expenditure required to settlethe Group's liability. Provisions for restructuring costs are recognised when the Group has a detailedformal plan for the restructuring that has been communicated to affectedparties. Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2005. The Group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of the equity-settled,share-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Thecharge is then credited back to reserves. Fair value is measured by use of a Black-Scholes model. The expected life usedin the model has been adjusted, based on management's best estimate, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. This information is provided by RNS The company news service from the London Stock Exchange