Rotork Regulatory News (ROR)

21 Jun 2005 07:02

Rotork PLC21 June 2005 PART 2 Rotork p.l.c. Audited 2004 accounts restated under International Financial Reporting Standards Index 1 Consolidated Income Statement2 Consolidated Balance Sheet3 Consolidated Statement of Cash Flows4 Consolidated Statement of Recognised Income and expense5 - 9 Accounting Policies10 - 32 Other notes to the Financial Statements Consolidated Income Statementfor the year ended 31 December 2004 Notes £'000 Revenue 2 146,883 Cost of sales (79,097) _____Gross profit 67,786 Other income 4 136Distribution costs (1,816)Administrative expenses (35,638)Other expenses 5 (36) _____ Profit from operations 2 30,432 Financial income 7 4,766Financial expenses 7 (3,692) _____Profit before tax 8 31,506 Tax expense 9 (10,508) _____ Net profit for the year 20,998 ==== Pence Basic earnings per share 17 24.5 Diluted earnings per share 17 24.3 Consolidated Balance Sheetat 31 December 2004 Notes £'000Assets Property, plant and equipment 10 13,877Intangible assets 11 20,169Deferred tax assets 12 6,988 Other receivables 489 _____Total non-current assets 41,523 Inventories 13 21,015Trade receivables 34,060Current tax 14 2,176Other receivables 14 2,525Cash and cash equivalents 15 25,298 _____Total current assets 85,074 ______Total assets 126,597 ====== EquityIssued capital 4,300Preference shares 47Share premium 4,993Reserves 425Retained earnings 58,489 ______ Total equity 16 68,254 ----______ Liabilities Interest-bearing loans and borrowings 18 268Employee benefits 19 23,569Deferred tax liabilities 12 1,155Provisions 20 521 ______ Total non-current liabilities 25,513 Bank overdraft 15 473Interest bearing loans and borrowings 18 253Trade payables 21 15,609Current tax 21 5,779Other payables 21 9,674Provisions 20 1,042 ______ Total current liabilities 32,830 Total liabilities 58,343 ______Total equity and liabilities 126,597 ====== Consolidated Statement of Cash Flowsfor the year ended 31 December 2004 Notes £'000 £'000Cash flows from operating activities Profit for the year 20,998Adjustments for:Amortisation of intangibles 70Amortisation of development costs 322Depreciation 2,577Charge for share schemes 208Profit on sale of fixed assets (72)Financial income (4,766)Financial expenses 3,692Income tax expense 10,508 _____ 33,537 Increase in inventories (2,600)Increase in trade and other receivables (6,228)Increase in trade and other payables 4,130Difference between pension charge and cash contribution (5,633)Decrease in provisions (130)Increase in other employee benefits 748 _____ 23,824Income taxes paid (10,441) _____Cash flows from operating activities 13,383 Investing activitiesPurchase of tangible fixed assets (3,099)Development costs capitalised (102)Sale of tangible fixed assets 295Acquisition of subsidiary net of cash acquired (912)Interest received 973 _____Cash flows from investing activities (2,845) Financing activitiesIssue of ordinary share capital 458Purchase of ordinary share capital (691)Purchase of own preference shares (5)Interest paid (136)Repayment of amounts borrowed 188Repayment of finance lease liabilities (58)Dividends paid on ordinary shares (17,751)Dividends paid on preference shares (4) ______ Cash flows from financing activities (17,999) ______ Net decrease in cash and cash equivalents (7,461)Cash and cash equivalents at 1 January 2004 32,134Effect of exchange rate fluctuations on cash held 152 ______Cash and cash equivalents at 31 December 2004 15 24,825 ====== Consolidated Statement of Recognised Income and ExpenseFor the year ended 31 December 2004 £'000 Foreign exchange translation differences (1,212)Actuarial loss in pension scheme (5,792)Movement on deferred tax relating to actuarial loss 237 _____ Net loss recognised directly in equity (6,767) Net profit for the year 20,998 _____Total recognised income and expense 14,231 ===== Notes to the Financial Statementsfor the year ended 31 December 2004 Except where indicated, values in these notes are in £'000 Rotork plc is a Company domiciled in England. The consolidated financialstatements of the Company for the year ended 31 December 2004 comprise theCompany and its subsidiaries (together referred to as the Group). 1. Accounting policies Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the company, for the year ended 31 December 2005, beprepared in accordance with International Financial Reporting Standards (IFRS)adopted for use in the EU ("adopted IFRS"). These special purpose consolidated financial statements have been prepared onthe basis of the recognition and measurement requirements of IFRS in issue thatare either endorsed by the EU and effective (or available for early adoption) at31 December 2005 or are expected to be endorsed and effective (or available forearly adoption) at 31 December 2005, the Group's first annual reporting date atwhich it is required to use adopted IFRS. Based on these adopted and unadoptedIFRS, the directors have made assumptions about the accounting policies expectedto be applied, which are set out below, when the first IFRS financial statementsare prepared for the year ending 31 December 2005. In particular, the directors have assumed that the December 2004 amendment toIAS 19 -Employee Benefits and the April 2005 amendment to IAS39 - Cash FlowHedge Accounting of Intra-group Forecast Transactions will be adopted by the EUin sufficient time that they will be available for use in the IFRS financialstatements for the year ending 31 December 2005. In addition, the adopted IFRSthat will be effective (or available for early adoption) in the financialstatements are still subject to change and to additional interpretations andtherefore cannot be determined with certainty. Accordingly the accountingpolicies for the year ended 31 December 2005 will be determined finally onlywhen the financial statements for that year are prepared. As permitted by IFRS 1, the following standards: IFRS 5 - Non-current AssetsHeld for Sale and Discontinued Operations, IAS 32 - Financial Instruments:Disclosure and Presentation and IAS 39 - Financial Instruments: Recognition andMeasurement are not expected to be applied until 1 January 2005 and accordinglyhave not been applied in these special purpose consolidated IFRS financialstatements for the year ended 31 December 2004. These special purpose consolidated financial statements are not the Group'sfirst consolidated financial statements as defined by IFRS 1. For this reasonamounts are presented for the year to 31 December 2004 only and comparativeinformation as would normally be required under IFRS is not given. An explanation of how the transition to IFRS has affected the reported financialposition, financial performance and cash flows of the Group is provided in note28. Basis of accounting The financial statements have been prepared under the historical cost conventionsubject to the items referred to in the derivative financial instruments notebelow. The accounting policies set out below have been consistently applied inpreparing an opening IFRS balance sheet at 1 January 2004 for the purposes oftransition to IFRS. The accounting policies have been applied consistently byGroup entities. The preparation of financial statements in conformity with IFRSs requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. The key areas where estimates have been used and the assumptionapplied are in the impairment testing of goodwill (note 11) and in assessing thedefined benefit pension scheme liabilities (note 19). Consolidation The consolidated financial statements incorporate the financial statements ofthe Company and its subsidiaries for the year to 31 December 2004. Thefinancial statements of subsidiaries are included in the consolidated financialstatements from the date that control commences until the date control ceases.Intragroup balances and any unrealised gains or losses or income and expensesarising from intragroup transactions, are eliminated in preparing theconsolidated financial statements. Foreign currencies Transactions in foreign currencies are translated at the foreign exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated tosterling at the foreign exchange rate ruling at that date. Foreign exchangedifferences arising on translation are recognised in the income statement.Non-monetary assets and liabilities that are measured in terms of historicalcost in a foreign currency are translated using the exchange rate at the date ofthe transaction. Non-monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated to sterling at foreignexchange rates ruling at the dates the values were determined. Assets and liabilities of foreign subsidiaries, including goodwill and fairvalue adjustments arising on consolidation, are translated into sterling atrates of exchange ruling at the balance sheet date. The revenues and expensesof foreign subsidiaries are translated to sterling at rates approximating thoseruling at the date of the transactions. Differences on exchange arising fromthe retranslation of the opening net investment in subsidiaries, and from thetranslation of the results of those subsidiaries at average rate, are recogniseddirectly in equity. Any differences that have arisen since 1 January 2004, the date of transition toIFRS, are presented as a separate component of equity. Translation differencesthat arose before the date of transition to IFRS in respect of all foreignentities are not presented as a separate component. Revenue Revenue from the sale of goods is recognised in the income statement when thesignificant risks and rewards of ownership have been transferred to the buyer.Revenue from services rendered is recognised in the income statement inproportion to the stage of completion of the transaction at the balance sheetdate. The stage of completion is assessed by reference to surveys of workperformed. No revenue is recognised if there are significant uncertaintiesregarding recovery of the consideration due, associated costs or the possiblereturn of goods also continuing management involvement with the goods. Intangible assets i) Goodwill Goodwill represents amounts arising on acquisition of subsidiaries. In respectof acquisitions that have occurred since I January 2004, goodwill represents thedifference between the cost of the acquisition and the fair value of the netidentifiable assets acquired. Negative goodwill arising on acquisitions wouldbe recognised directly in profit and loss. In respect of acquisitions prior to this date, goodwill is included on the basisof its deemed cost, which represents the amount recorded under UK GAAP ontransition. The classification and accounting treatment of businesscombinations that occurred prior to 1 January 2004 has not been reconsidered inpreparing the Group's opening IFRS balance sheet at 1 January 2004. Goodwill isstated at cost or deemed cost less any impairment losses. The carrying value ofgoodwill is reviewed at each balance sheet date and is allocated tocash-generating units. An impairment loss is recognised whenever the carryingvalue of an asset or its cash-generating unit exceeds its recoverable amount.Impairment losses are recognised in the income statement. ii) Research and development Expenditure on research activities, undertaken with the prospect of gaining newscientific or technical knowledge and understanding, is recognised in the incomestatement as an expense as incurred. Development costs incurred after the pointat which the commercial and technical feasibility of the product have beenproven, and the decision to complete the development has been taken andresources made available, are capitalised. The expenditure capitalised includesthe cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulatedamortisation and impairment losses. Development expenditure has and estimateduseful life of 5 years and is written off on a straight-line basis. iii) Other intangible assets Other intangible assets that are acquired by the Group are stated at cost lessaccumulated amortisation and impairment losses. The useful life of each ofthese assets is assessed on an individual basis and they range from 1 to 15years. Amortisation is charged on a straight-line basis over the estimateduseful life of the assets. Property, plant and equipment Freehold land is not depreciated. Long leasehold buildings are amortised overfifty years or the expected useful life of the building where less than fiftyyears. Other assets are depreciated by equal annual instalments by reference totheir estimated useful lives and residual values at the following annual rates: Freehold buildings 2% to 4%Short leasehold buildings period of leaseMachinery, plant and equipment 10% to 30% Items of property, plant and equipment are stated at cost or deemed cost lessaccumulated depreciation. Certain items of property that had been revalued tofair value on or prior to 1 January 2004, the date of transition to IFRS, aremeasured on the basis of deemed cost, being the revalued amount at the date ofthat revaluation. Leases Where fixed assets are financed by leasing agreements, which give rightsapproximating to ownership, the assets are treated as if they had been purchasedand the capital element of the leasing commitments is shown as obligations underfinance leases. Assets acquired under finance leases are initially recognisedat the present value of the minimum lease payments. The rentals payable areapportioned between interest, which is charged to the income statement, andliability, which reduces the outstanding obligation so as to give a constantrate of charge on the outstanding lease obligations. Costs in respect ofoperating leases are charged on a straight-line basis over the term of the leasein arriving at the operating profit. Taxation Income tax on the profit for the year comprises current and deferred tax.Income tax is recognised in the income statement except to the extent that itrelates to items recognised directly in equity, in which case it is recognisedin equity. Current tax is the expected tax payable on the taxable income forthe year, using tax rates enacted or subsequently enacted at the balance sheetdate, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. Thefollowing temporary differences are not provided for: goodwill not deductiblefor tax purposes, the initial recognition of assets or liabilities that affectneither accounting nor taxable profits, and differences relating to investmentsin subsidiaries to the extent that they will probably not reverse in theforeseeable future. The amount of deferred tax provided is based on theexpected manner of realisation or settlement of the carrying amount of assetsand liabilities, using tax rates enacted or substantively enacted at the balancesheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. Inventory and work in progress Inventory and work in progress is valued at the lower of cost, on a 'first in,first out' basis, and net realisable value. In respect of work in progress andfinished goods, cost includes all production overheads and the attributableproportion of indirect overhead expenses which are required to bring inventoriesto their present location and condition. Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term (with anoriginal maturity less than three months) deposits. Bank overdrafts that arerepayable on demand form part of cash and cash equivalents for the purpose ofthe statement of cash flows. Share capital Equity comprises issued capital, share premium and reserves and for the purposesof these accounts, preference shares. IAS32 will be applied from 1 January 2005and at that time the preference shares will be reclassified as debt. When issued capital recognised as equity is repurchased, the amount paid,including directly attributable costs, is recognised as a change in equity.Repurchased shares are classified as treasury shares and presented as adeduction from retained earnings. Provisions A provision for warranties is recognised when the underlying products orservices are sold. The provision is based on historical warranty cost data,known issues and management expectations of future costs. Employee benefits i) Pension plans The Group operates a number of defined benefit pension schemes and contributesto these schemes in accordance with qualified actuaries' recommendations. Allactuarial gains and losses as at 1 January 2004, the date of transition to IFRS,were recognised. In respect of all actuarial gains and losses that arise afterthat date in calculating the Group's obligation in respect of the plan, theseare recognised in equity. Interest on pension scheme liabilities has beenrecognised within financing expenses and the expected return on scheme assetswithin financing income in the consolidated income statement. The Group also operates a number of defined contribution pension schemes. Thecosts for these schemes are recognised in the income statement as incurred. ii) Share-based payment transactions The Rotork Share Option Scheme allows certain employees to acquire shares inRotork plc. This scheme is now closed and the last grant of new options tookplace in 2004. Details of the scheme are given in note 19. The fair value ofoptions granted is recognised as an employee expense with a correspondingincrease in equity. The fair value is measured at grant date and spread overthe period during which employees become unconditionally entitled to theoptions. The fair value of the options granted is measured using a binomialmodel, taking into account the terms and conditions upon which the options weregranted. The amount recognised as an expense is adjusted to reflect the actualnumber of share options that vest. The Rotork Sharesave Plan, introduced in 2004, offers certain employees theopportunity to purchase shares in Rotork plc at a discounted price compared withthe market price at the time of grant. Details of the scheme are given in note19. The fair value of the right / option is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grantdate and spread over the period between grant and maturity. The right / optionreaches maturity when the employee becomes unconditionally entitled. The fairvalue of the grant is measured using a Black-Scholes model, taking into accountthe terms and conditions upon which the rights were granted. The amountrecognised as an expense is adjusted to reflect the actual number of shareoptions that vest. The Rotork Long-Term Share Incentive Plan grants awards of shares to executivedirectors and senior managers. These awards may vest after a period of fouryears dependent upon both market and non-market performance conditions beingmet. Details of the grants are given in note 19. This plan gives share awardsor cash awards (of equivalent value to the share awards) dependent upon theemployees country of residence at date of grant. The fair value of the award ismeasured at grant date, using a Monte Carlo simulation model which takes intoaccount the market based performance criteria, and spread over the vestingperiod. The fair value of the award is recognised as an employee expense with acorresponding increase in equity for the share settled award and a provisionwithin employee benefits for the cash settled award. The amount recognised asan expense is adjusted to exclude options that do not vest as a result ofnon-market performance conditions not being met. Accruals in respect of scheme years pre-dating the implementation of IFRS2 areheld in employee benefits. iii) Long-term service leave The Group's net obligation in respect of long-term service leave is the amountof future benefit that employees have earned in return for their service in thecurrent and prior periods. iv) Other employee incentive schemes In addition to the above schemes the Group offers a number of other bonus andincentive schemes to employees around the world. The costs of these schemes arerecognised in the income statement as incurred. This includes the ShareIncentive Plan and Overseas Profit Linked Share Scheme both of which are a knownliability at the year end. Derivative financial instruments The Group uses forward exchange contracts to hedge its exposure to foreignexchange risk arising from operational and financing activities. These are theonly form of derivative financial instruments used by the Group. In accordancewith its treasury policy, the Group does not hold or issue forward exchangecontracts for trading purposes. However, forward contracts that do not qualifyfor hedge accounting are accounted for as trading instruments. In these special purpose accounts, since IAS39 has not been applied, forwardexchange contracts are held at cost (usually zero). Gains and losses on foreigncurrency hedges are recognised in the income statement when the hedgedtransaction is recognised. As from 1 January 2005 the following policy will apply. Forward exchangecontracts are recognised initially at cost and then subsequently re-measured atfair value. Where a forward exchange contract is designated as a hedge of thevariability in cash flows of a recognised liability, a firm commitment or ahighly probable forecasted transaction, the effective part of any gain or losson the forward contract is recognised directly in equity. The cumulative gainor loss is removed from equity and recognised in the income statement at thesame time as the hedged transaction. The ineffective part of any gain or lossis recognised in the income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedgedtransaction still is expected to occur, the cumulative gain or loss at thatpoint remains in equity and is recognised in accordance with the above policywhen the transaction occurs. If the hedged transaction is no longer expected totake place, the cumulative unrealised gain or loss held in equity is recognisedin the income statement immediately. Notes to the Financial Statements 2. Analysis of turnover, profit and net assets The primary format used for segmental reporting is by business segment as thisreflects the internal management structure and reporting of the Group. Segmentresults, assets and liabilities include items directly attributable to a segmentas well as those that can be allocated on a reasonable basis. Unallocatedexpenses comprise corporate expenses and unallocated assets and liabilitiescomprise cash, borrowings tax assets and liabilities respectively. Inter grouptrading is determined on an arm's length basis. Business segmentsThe Group comprises the following business segments:Electrics - the design, manufacture and sale of electric valve actuatorsGears - the design, manufacture and sale of gearboxes, adaption and ancillariesfor the valve industryFluid system - the design, manufacture and sale of heavy duty pneumatic andhydraulic valve actuators Geographic segments Rotork has a worldwide presence in all three business segments through itssubsidiary selling offices and through an agency network. A full list oflocations can be found at www.rotork.com. Analysis by operation: Electrics Gears Fluid system Eliminations Consolidated Revenue from external 109,345 13,736 23,802 - 146,883customersInter-segment revenue - 4,070 - (4,070) -Total revenue 109,345 17,806 23,802 (4,070) 146,883 Segment result 26,054 3,203 3,016 - 32,273Unallocated expenses (1,841)Profit from operations 30,432Net financing income 1,074Income tax expense (10,508)Net profit for the 20,998year Electrics Gears Fluid system Unallocated Consolidated Segment assets 60,665 9,927 21,542 34,463 126,597 Segment liabilities 40,451 2,467 7,497 7,928 58,343Depreciation 1,881 284 412 - 2,577Non-cash items 39 9 57 332 437Capital expenditure 2,628 177 294 - 3,099 Analysis by Geographical segment Europe Americas Rest of the Unallocated Consolidated World Revenue from external customers by 66,036 41,704 39,143 - 146,883location of customer Segment assets by location of assets 63,651 20,146 8,337 34,463 126,597 Capital expenditure by location of 2,380 201 518 - 3,099assets All of the activities of the Group in the year arise from continuing operations. 3. Acquisition of subsidiary Acquisitions On 13 January 2004 the Group acquired all of the business and assets of DeanquipValve Automation Pty Ltd for £818,000 from Deanquip Sales Pty Ltd. £692,000 waspaid on completion and the remaining £126,000 paid in January 2005. DeanquipValve Automation Pty Ltd was renamed Rotork Fluid System Pty Ltd in January2005. The company markets and sell pneumatic and hydraulic actuators, controlsand associated products in Australia. The acquisition was accounted for usingthe purchase method of consolidation. In the 12 months to 31 December 2004 thesubsidiary contributed £1,622,000 to Group revenue and £43,000 to theconsolidated net profit for the year. The value of intangibles is based on anassessment by management. Goodwill has arisen on this acquisition as a resultof the synergies Rotork will derive from the business being part of the Grouprather than an independent distributor. Effect of acquisitions and disposals The acquisition had the following effect on the Group's assets and liabilities. Recognised Fair value Carrying values adjustments amounts Property, plant and equipment 32 - 32Intangible assets - 349 349Deferred tax assets 17 - 17Inventories 248 - 248Employee liabilities (56) - (56) _____ _____ _____ 241 349 590Goodwill on acquisition 322 _____Consideration paid, satisfied in cash (including £94k expenses) 912 ==== 4. Other income Gain on disposal of plant and equipment 80Other 56 _____ 136 ==== 5. Other expenses Losses on sale of fixed assets 8Other 28 _____ 36 ==== 6. Personnel expenses Wages and salaries (including bonus and incentive plans) 29,243Compulsory social security contributions 2,950Current service cost for defined benefit plans 1,502Contributions to defined contribution plans 533Share based payments (note 19) 390Increase in liability for long-service leave 15 _____ 34,633 ==== A total of £208,000 of the above are equity settled, comprising £41,000 for theshare option scheme, £8,000 for the Sharesave plan and £160,000 of the Long-termincentive plan. The cash settled portion (£181,000) all related to theLong-term incentive plan. No.During the year, the average weekly number of employees, analysed by businessactivity, was:Electrics 865Gears 124Fluid system 151 _____ 1,140 ==== UK 419Overseas 721 _____ 1,140 ====7. Net financing income Interest income 849Expected return on assets in the pension schemes 3,477Net foreign exchange gain 440 _____ 4,766 ==== Interest expense (136)Interest charge on pension schemes liabilities (3,556) _____ (3,692) ==== 8. Profit before tax Profit before tax is stated after charging / (crediting) the following: Notes:Depreciation and other amounts written off tangible fixed assets:owned assets a 2,497 assets held under finance lease contracts a 80Amortisation of intangibles b 392Research and development expenditure b 2,332Hire of plant and machinery a 538Other operating lease rentals a 619Exchange differences realised c (411)Auditors: b audit fees and expenses 206 other fees paid to KPMG Audit Plc and its associates analysed between: further assurance services 15 taxation services 41 other 61 The auditors' remuneration in respect of the Company was £34,000. These costs can be found under the following headings in the Consolidated incomestatement: a) Both within cost of sales and administrative expenses b) Within administrative expenses c) Within financing income and expenses 9. Income tax expense Recognised in the income statement Current tax:UK Corporation tax on profits for the year 6,258Double tax relief (1,995)Adjustment in respect of prior years 156 _____ 4,419 _____ Overseas tax on profits for the year 5,879Adjustment in respect of prior years 21 _____ 5,900 _____Total current tax 10,319 _____ Deferred tax:Origination and reversal of other timing differences 129Adjustment to estimated recoverable amounts of deferred tax assets arising in 60previous periods _____Total deferred tax 189 _____ Tax charge on profit on ordinary activities 10,508 ==== Effective tax rate (based on profit before tax) 33.4% Profit before tax 31,506 Profit on ordinary activities multiplied by standard rate of corporation tax in the 9,452UK of 30% Effects of:Non deductible expenses 150Unrelieved losses 25Higher tax rates on overseas earnings 644Adjustments to tax charge in respect of prior periods 237 _____Current tax charge for period 10,508 ==== Deferred tax of £175,000 in respect of share based payments has been recogniseddirectly in equity. The Group continues to expect its effective rate of corporation tax to beslightly higher than the standard UK rate due to higher rates of tax in the US,Canada, France, Germany, Italy and India. No deferred tax is recognised on the unremitted earnings of overseassubsidiaries. As the unremitted earnings are continually reinvested by theGroup, no tax is expected to be payable on them in the foreseeable future. There is an unrecognised deferred tax liability for temporary timing differencesassociated with investments in subsidiaries. Rotork plc controls the dividendpolicies of its subsidiaries and subsequently the timing of the reversal of thetemporary differences. It is not practical to quantify the unrecogniseddeferred tax liability as acknowledged within paragraph 40 of IAS12. 10. Property, plant and equipment Land and Plant and buildings equipment Total CostAt 1 January 2004 10,490 17,544 28,034Exchange differences (158) (221) (379)Additions 939 2,307 3,246Disposals (173) (882) (1,055)Acquisition through business combinations - 32 32 _____ _____ _____At 31 December 2004 11,098 18,780 29,878 ===== ===== ===== DepreciationAt 1 January 2004 3,078 11,316 14,394Exchange differences (23) (132) (155)Charge for year 333 2,244 2,577Disposals (24) (791) (815) _____ _____ _____At 31 December 2004 3,364 12,637 16,001 ===== ===== ===== Net book value 7,734 6,143 13,877at 31 December 2004 ===== ===== ===== The net book value of the Group's plant and machinery includes £186,000 inrespect of assets held under finance leases. On conversion to IFRS the fair value of fixed assets held at a valuation wasdeemed to be their cost. The aggregate of adjustments from carrying value underprevious GAAP was nil. 11. Intangible assets Goodwill Development Acquired Total costs intangibles CostBalance at 1 January 25,919 1,610 - 27,529Exchange differences (269) - - (269)Internally developed during the year - 102 - 102Acquisition through business combinations 322 - 349 671 _____ _____ _____ ____Balance at 31 December 25,972 1,712 349 28,033 Amortisation and impairment lossesBalance at 1 January 6,862 618 - 7,480Exchange differences (8) - - (8)Amortisation for the year - 322 70 392 _____ _____ _____ _____Balance at 31 December 6,854 940 70 7,864 Carrying amount at 31 December 19,118 772 279 20,169 ===== ===== ===== ===== Carrying amount at 1 January 19,057 992 - 20,049 ===== ===== ===== ===== The amortisation charge is recognised in the following lines of the incomestatement: Cost of sales 50Administrative expenses 342 _____ 392 ===== Impairment tests for cash generating units containing goodwillThe following businesses have significant carrying amounts of goodwill: Rotork Fluid System Srl 6,476Exeeco Ltd 4,776Jordan Controls Inc 3,769Rotork Gears BV 2,014 _____ 17,035Multiple businesses without significant goodwill 2,083 _____ 19,118 ===== The recoverable amounts of all cash-generating units are based on value in usecalculations. These calculations use cash flow projections and are based onactual operating results and the latest Group three-year plan. The three-yearplan is based on management's view of the future and experience of pastperformance. Cash flows for the remainder of the next twenty years areextrapolated using a two per cent growth rate which reflects the long-termnature of many of the markets the Group serves. This rate has been consistentlybettered in the past so is believed to represent a prudent estimate. A pre-taxdiscount rate of 9%, being the Groups weighted average cost of capital, has beenused in discounting the projected cash flows. On this basis no impairment writedowns are required. 12. Recognised deferred tax assets and liabilities Assets Liabilities Net Property, plant and equipment 47 (1,054) (1,007)Intangible assets 21 (231) (210)Employee benefits 6,234 - 6,234Provisions 897 - 897Other items 116 (197) (81) _____ _____ _____Net tax assets/ (liabilities) 7,315 (1,482) 5,833Set off of tax (327) 327 - _____ _____ _____ 6,988 (1,155) 5,833 ===== ===== ===== A deferred tax asset of £6,988,000 has been recognised at 31 December 2004.