SuperGroup Regulatory News (SGP)

6 Jul 2006 07:00

Sanctuary Group PLC06 July 2006 6 July 2006 The Sanctuary Group plc UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS The Sanctuary Group plc (the Group or Sanctuary) will be reporting its financialresults in accordance with International Financial Reporting Standards asadopted by the European Union ('Adopted IFRS') from 1 October 2005. The Group'sfirst results published using the measurement and recognition principles of IFRSwill be the interim results for the six months ended 31 March 2006 with thefirst Annual Report under Adopted IFRS being the year ended 30 September 2006.The Group's date of transition to IFRS is 1 October 2004. The purpose of thisupdate is to present the effect of Adopted IFRS on the Group at the date oftransition and for the full year to 30 September 2005. The financial informationin this update is unaudited. The Group's interim results for the six months ended 31 March 2006 will bepublished in late July 2006. The interim results including relevant comparativeswill be prepared in accordance with Adopted IFRS. Adopted IFRS does not affect the underlying business performance of the Groupand has no impact on cash generated from operations. The principal changes toSanctuary's financial information under UK GAAP arising from the adoption ofIFRS are as a result of: •requirement not to amortise goodwill: •creation of a translation reserve: •inclusion of a 'Fair Value' charge in relation to employee share options •recognition of holiday pay entitlement: and, •recognition of deferred tax assets and liabilities on certain IFRS adjustments. Paul Wallace, Finance Director of The Sanctuary Group plc, commented: 'The unaudited information provided today details how adopted IFRS impact uponSanctuary's recent results in advance of their adoption in the 2006 financialyear. The most significant change to the results for the year ended 30 September2005 relates to the reversal of goodwill amortisation. The net impact due to theadoption of IFRS is expected to decrease the loss for the period by £3,917,000,comprising the reversal of goodwill amortisation of £3,804,000 and £113,000 ofother adjustments. Looking ahead and with regards to the current financial year there will be asimilar impact on our financial statements resulting from the change from UKGAAP to adopted IFRS. These will in the main relate to; no annual goodwillamortisation, employee share based payments and a timing adjustment to theholiday pay accrual which normalises at year end.' Enquiries: Paul Wallace. Finance DirectorThe Sanctuary Group plc Tel + 44 (0)207 300 6515 Philip Ranger. Director, Corporate & Investor RelationsThe Sanctuary Group plc Tel + 44 (0)207 300 1323/07768 534641 1. SUMMARY Impact of adopted IFRS on full year 2005 Loss and EPS - Unaudited Description UK GAAP IFRS IFRS ImpactUK GAAP in IFRS FORMAT £'000 £'000 £'000Revenue 156,144 - 156,144Cost of sales (153,182) - (153,182) -------- -------- ---------Gross profit 2,962 - 2,962 Administration expenses (136,317) 3,569 (132,748) -------- -------- ---------Operating loss (133,355) 3,569 (129,786) Net financing costs (9,204) - (9,204) -------- -------- ---------Loss before tax (142,559) 3,569 (138,990) Tax (311) 348 37 -------- -------- ---------Loss for the year (142,870) 3,917 (138,953) ======== ======== ========= Earnings per share:Basic (40.14)p (39.04)pDiluted (40.14)p (39.04)p INTRODUCTION The Sanctuary Group plc and its subsidiaries (together 'the Group') arepreparing for the adoption of IFRS as its primary accounting basis for itsconsolidated financial statements, following the adoption of Regulation No.1606/2002 by the European Parliament on 19 July 2002. The financial information contained in this update has been prepared inaccordance with applicable International Financial Reporting Standards ('IFRS'),including International Accounting Standards ('IAS') and interpretations issuedby the Standing Interpretations Committee ('SIC') of the InternationalAccounting Standards Board ('IASB') and its committees. These standards aresubject to ongoing amendment by the IASB. Amendments to existing standards andnew standards are subject to subsequent endorsement by the European Union. As aresult, the information contained within these statements may require amendmentat a future date. Therefore it is possible that the comparative informationincluded in the first complete set of IFRS financial statements as at 30September 2006 may not be consistent with the disclosures below. This update explains how the Group's previously reported consolidated UK GAAPfinancial performance and position are reported under adopted IFRS. It providesreconciliations from UK GAAP to adopted IFRS for the following: • the Group's unaudited consolidated IFRS income statement for the year ended 30September 2005; • the Group's unaudited consolidated IFRS balance sheet as at 30 September 2005;and • the Group's unaudited consolidated IFRS balance sheet as at 1 October 2004. The consolidated opening balance sheet as at 1 October 2004, consolidatedbalance sheet as at 30 September 2005, and the consolidated income statement forthe year ended 30 September 2005, are prepared on the basis set out in section 2'Basis of preparation'. Attention is drawn to the fact that only a complete set of financial statementscomprising a balance sheet, income statement, statement of changes in equity,cash flow statement, together with comparative information and explanatorynotes, can provide a fair presentation of the Group's financial position,results of operations and cash flows. As such, the financial information presented in this document does notconstitute the Group's statutory accounts for the years ended 30 September2005 or 2004. Those accounts, which were prepared under UK GAAP, have beenreported on by the company's previous auditors. Their report on the statutoryaccounts for the year ended 30 September 2005 was qualified and that on thestatutory accounts for the year ended 30 September 2004 was unqualified.Neither report contained statements under section 237(2) or (3) of theCompanies Act 1985. Those accounts have been delivered to the registrarof companies. The financial information as set out in section 4 'Financial Information' hasbeen prepared by management using their best knowledge and judgement of theexpected standards and interpretations of the IASB, facts and circumstances,andaccounting policies that will be adopted when the company prepares its firstcomplete set of IFRS financial statements as at 30 September 2006. The Group'sfinancial results for the six month period ended 31 March 2006 will be preparedunder adopted IFRS. The financial information presented is unaudited. 2. BASIS OF PREPARATION The statutory accounts of the Group for the year ended 30 September 2005 (the'2005 financial statements') restated the comparative financial information forthe year ended 30 September 2004 (the '2004 restated comparatives'). Therestatements reflected a number of prior year adjustments and it is the 2004restated comparatives that form the basis of the 'UK GAAP Balances in UK GAAPFormat' set out in the 'Opening balance sheet - unaudited' section of 'Part 4Financial Information' of this document. As noted above, the audit opinion on the 2005 financial statements wasqualified on the basis that the auditors did not agree with certain of theprior year adjustments. This qualification therefore included the 2004restated comparatives. The 2005 financial statements are currently the subjectof an enquiry by the Financial Reporting Review Panel ('FRRP'). Inresponse to this investigation, the Group has carried out a review of the 2005restatements. As a result of this review the Directors concluded that theprior year adjustments arose as a result of the correction of fundamentalerrors, not as a result of changes in accounting policies, as was stated in the2005 financial statements. No adjustments were required to be made to the UK GAAP consolidated balancesheet of the Group as at 30 September 2005 as a result of this review.However, the profit and loss account for that year and the balance sheet as at30 September 2004 may have to be adjusted as a result of thecertain exceptionalitems included in the 2005 financial statements being recognised in prior years - an investigation of this area is still ongoing. In addition, the Group'sdiscussions with the FRRP have not concluded and the 2004 restated comparativesand the 2005 financial statements are potentially subject to change once thesediscussions have concluded. The financial information presented in this document has been prepared based onthe adoption of IFRS, including IAS and interpretations issued by the IASB andits committees, and as interpreted by regulatory bodies applicable to the Group.These are subject to ongoing amendment by the IASB and subsequent endorsementby the European Union and are therefore subject to possible change. As aresult, information contained within this document may need updating for anysubsequent amendment to IFRS required for first time adoption, or those newstandards that the Group may elect to adopt early. IFRS 1 exemptions IFRS 1, 'First-time Adoption of International Financial Reporting Standards'sets out the procedures that the Group must follow when it adopts IFRS for thefirst time as the basis for preparing its consolidated financial statements. TheGroup is required to establish its accounting policies under adopted IFRS as at30 September 2006 and, in general, apply these retrospectively to determine theIFRS opening balance sheet at its date of transition, 1 October 2004. This standard provides a number of optional exceptions to this generalprinciple. The most significant of these are set out below, together with adescription in each case of the exception adopted by the Group in thesestatements. a) Business combinations (IFRS 3, 'Business Combinations') The Group has elected not to apply IFRS 3 retrospectively to businesscombinations prior to 1 October 2004. Therefore business combinations prior tothis date have not been revisited in order to separately identify specificintangible assets acquired. All other business combinations since 1 October 2004have been accounted for under adopted IFRS. No impairment was identified as at 1October 2004 following our review. b) Share-based payment transactions (IFRS 2, 'Share-based Payment) The Group has elected to apply IFRS 2 to all relevant share-based paymenttransactions granted after 7 November 2002 that had not fully vested at 1January 2005. c) Financial Instruments (IAS 39, 'Financial Instruments: Recognition andMeasurement'and IAS 32, 'Financial Instruments: Disclosure and Presentation') The Group has taken advantage of the exemption in IFRS 1 that enables the Groupto only apply these standards from 1 October 2005. As such, the measurement, recognition and presentation requirements previouslyapplied to financial instruments under UK GAAP have been retained in preparingcomparative information. d) Fair value or revaluation as deemed cost The Group has elected for Property, plant and equipment and Intangible assets totake their cost as shown previously under UK GAAP as their deemed cost underadopted IFRS. e) Cumulative translation differences The Group has taken the option to set the cumulative level of translationdifferences relating to foreign operations, held within reserves, to nil at 1October 2004. In addition to the IFRS exemptions above, the Group has chosen early adoption ofIFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' from 1October 2004. 3. KEY IMPACT ANALYSIS The analysis below sets out the most significant adjustments arising from thetransition to adopted IFRS. a) Presentation of Financial Statements The format of the Group's primary financial statements has been prepared inaccordance with IAS 1, 'Presentation of Financial Statements'. b) Goodwill IFRS 3 prohibits the amortisation of goodwill. The standard requires goodwill tobe carried at cost. Impairment reviews are required annually and when there areindications that the carrying value may not be recoverable. Goodwill amortised under UK GAAP during the year ended 30 September 2005included an amount of £1,472,000 that has been reclassified to goodwillimpairment under adopted IFRS. The Group has reversed the remaining goodwillamortisation charge for the year ended 30 September 2005, resulting in adecrease in loss before tax of £4,964,000. The Group has elected not to apply IFRS 3 retrospectively to businesscombinations prior to the transition date. From 1 October 2004, businessacquisitions have been accounted for in accordance with IFRS 3 'BusinessCombinations'. This requires that the acquirer allocates the purchase price across theacquiree's identifiable assets and liabilities. As a result, intangible assetshave been recognised on acquisition. c) Deferred and Current Taxes The scope of IAS 12, 'Income Taxes' is wider than the corresponding UK GAAPstandards, and requires deferred tax to be provided on all temporary differencesrather than just timing differences under UK GAAP. A requirement of IAS 12 is to provide a full deferred tax liability in respectof intangible assets, other than goodwill, which were recognised on acquisitionssince 1 October 2004 to the extent that their carrying amounts in the financialstatements exceed their tax base. IAS 12 also requires deferred tax to be recognised in respect of the Group'semployee benefits such as share option schemes. The net result under adoptedIFRS would be to increase the deferred tax asset over that already recognisedunder UK GAAP due to the different method of valuing share options under adoptedIFRS. However, there is no increase in the deferred tax asset recorded in thebalance sheet under adopted IFRS due to the uncertainty as assessed at that timeover its recoverability. d) Share-based payments IFRS 2, 'Share-based Payment', requires that an expense for equity instrumentsgranted be recognised in the financial statements based on their fair value atthe date of grant. This expense which is in relation to employee options andperformance share schemes is recognised over the vesting period of the relevantscheme. IFRS 2 has been applied to all options granted after 7 November 2002 and notfully vested by 1 January 2005. The main impact for the Group is that executiveshare option awards are now recorded as an expense in the income statement atfair value .The Group has used the Binomial model for the purposes of computingthe fair value of options under adopted IFRS. As at 1 October 2004 the Group has reduced its retained earnings and created ashare option reserve totalling £200,000. The charge relating to these sharebased payments for the year ended 30 September 2005 was £82,000. e) Post Balance Sheet Events IAS 10, 'Events after the Balance Sheet Date', requires that dividends declaredafter the balance sheet date should not be recognised as a liability at thatbalance sheet date as the liability does not represent a present obligation asdefined by IAS 37, 'Provisions, Contingent Liabilities and Contingent Assets'. The impact of this change is to increase net assets as 30 September 2004 by£1,550,000, the final dividend declared in January 2005 in relation to thefinancial year ended 30 September 2004 having been reversed in the openingbalance sheet, and will be charged to equity in the balance sheet as at 30September 2005. f) Holiday pay accrual Under IAS 19 'Employee Benefits', all accumulating employee compensated absencesthat are unused at the balance sheet date must be recognised as a liability. Inline with common practice, the group did not make a similar accrual under UKGAAP. A provision of £647,000 was made at 1 October 2004, the company's date oftransition, to recognise the holiday pay accrual which increased to £800,000 at30 September 2005. g) Translation differences IAS 21 has been applied with effect from 1 October 2004 with exchangedifferences arising from the net investment in foreign operations being taken toa separate translation reserve. 4. FINANCIAL INFORMATION The Sanctuary Group plcOPENING BALANCE SHEET - unaudited Reconciliation showing the effects of IFRS 1 on the UK GAAP balance sheet at 30September 2004 restated to IFRS format at 1 October 2004. UK GAAP Balances in UK IFRS UK GAAP Balances in IFRS FormatGAAP Format Reclassification £'000 £'000 £'000Fixed assets Non-current assets Intangibleassets 22,653 - 22,653 Intangible assetsGoodwill 84,185 - 84,185 GoodwillTangibleassets 13,652 - 13,652 Property, plant and equipment 159 159 Interest in associatesInvestments 17,907 (159) 17,748 Available for sale investments 3,683 3,683 Other receivables 1,294 1,294 Deferred tax assetJV's Share ofgross assets 2,135 (2,135) -JV's Share ofgrossliabilities (2,135) 2,135 - -------- --------- -------- 138,397 4,977 143,374 -------- --------- --------Current Current assetsassetsStock 10,524 - 10,524 InventoriesDebtors duewithin oneyear 56,346 17,352 73,698 Trade and other receivablesDebtors dueafter one year 22,329 (22,329) -Cash at Bankand in hand 20,046 - 20,046 Cash and cash equivalents -------- --------- -------- 109,245 (4,977) 104,268 Current assets -------- --------- -------- 247,642 - 247,642 Total assets ======== ========= ======== Current liabilitiesCreditors:amountsfalling duewithin oneyear (92,631) 24,177 (68,454) Trade and other payables (4,376) (4,376) Current tax liabilities (747) (747) Obligations under finance leases (19,054) (19,054) Bank overdraft and loans -------- --------- -------- (92,631) - (92,631) -------- --------- --------Net currentassets 16,614 (4,977) (11,637) -------- --------- -------- Non-current liabilities (52,000) (52,000) Bank loans (21,500) (21,500) Convertible loan notesCreditors:amountsfalling dueafter morethan one year (78,876) 73,847 (5,029) Trade and other payables (597) (597) Obligations under finance -------- --------- -------- leases (78,876) (250) (79,126) -------- --------- -------- (171,507) (250) (171,757) Total liabilities -------- --------- --------Net assets 76,135 (250) 75,885 Net assets ======== ========= ======== Capital and EquityreservesCalled upshare capital 41,997 - 41,997 Share capitalShares to beissued 250 (250) -Share premiumaccount 81,493 - 81,493 Share premium accountProfit andloss account (47,948) - (47,948) Retained earnings -------- --------- --------Equityshareholders'funds 75,792 (250) 75,542 Equity attributable to equity holders of the parentMinorityinterests 343 - 343 Minority Interest -------- --------- --------Total capitalemployed 76,135 (250) 75,885 Total Equity ======== ========= ======== The Sanctuary Group plcOPENING BALANCE SHEET - unaudited Reconciliation of UK GAAP consolidated balance sheet in IFRS format to IFRSconsolidated balance sheet as at 1 October 2004. This reconciliation ispresented in the format required by IFRS 1 and is unaudited. UK GAAP IFRS 2 IAS 10 IAS 19 IFRS IFRS Balances in (i) (ii) (iii) Total IFRS Format Share Events Employee Adjustment (unaudited) Based after Benefits (unaudited) Payment Balance Sheet (unaudited) DateAssets £'000 £'000 £'000 £'000 £'000 £'000 Non-currentassets Goodwill 84,185 - - - - 84,185Intangible assets 22,653 - - - - 22,653Property, plant andequipment 13,652 - - - - 13,652Interest in associates 159 - - - - 159Other Investments 17,748 - - - - 17,748Other receivables 3,683 - - - - 3,683Deferred tax asset 1,294 - - - - 1,294 ------- ------- ------- ------- ------- -------Total non-current assets 143,374 - - - - 143,374 ------- ------- ------- ------- ------- ------- Current assetsInventories 10,524 - - - - 10,524Trade and otherreceivables 73,698 - - - - 73,698Cash and cash equivalents 20,046 - - - - 20,046 ------- ------- ------- ------- ------- -------Total current assets 104,268 - - - - 104,268 ------- ------- ------- ------- ------- -------Total assets 247,642 - - - - 247,642 ======= ======= ======= ======= ======= ======= Current liabilitiesTrade and other payables (68,454) - 1,550 (647) 903 (67,551)Current tax liabilities (4,376) - - - - (4,376)Obligations under financeleases (747) - - - - (747)Bank overdraft and loans (19,054) - - - - (19,054) ------- ------- ------- ------- ------- -------Total current liabilities (92,631) - 1,550 (647) 903 (91,728) ------- ------- ------- ------- ------- ------- Non-current liabilitiesBank loans (52,000) - - - - (52,000)Convertible loan notes (21,500) - - - - (21,500)Trade and other payables (5,029) - - - - (5,029)Obligations under financeleases (597) - - - - (597) ------- ------- ------- ------- ------- -------Total non-currentliabilities (79,126) - - - - (79,126) ------- ------- ------- ------- ------- -------Total liabilities (171,757) - 1,550 (647) 903 (170,854) ------- ------- ------- ------- ------- -------Net assets 75,885 - 1,550 (647) 903 76,788 ======= ======= ======= ======= ======= ======= EquityShare capital 41,997 - - - - 41,997Share premium 81,493 - - - - 81,493Share option reserve - 200 - - 200 200Retained earnings (47,948) (200) 1,550 (647) 703 (47,245) ------- ------- ------- ------- ------- -------Equity attributable toequity holders of theparent 75,542 - 1,550 (647) 903 76,445Minority Interest 343 - - - - 343 ------- ------- ------- ------- ------- -------Total Equity 75,885 - 1,550 (647) 903 76,788 ======= ======= ======= ======= ======= ======= (i) = Fair value charge relating to employee share options(ii) = Reversal of dividends(iii)= Holiday pay accrual The Sanctuary Group plcINCOME STATEMENT - unaudited Reconciliation of UK GAAP consolidated profit and loss account to IFRSconsolidated income statement for the year ended 30 September 2005. Thisreconciliation is presented in the format required by IFRS 1 and is unaudited. UK GAAP IFRS 2 IFRS 3 IAS 19 IFRS IFRS Balances (i) (ii) (iii) Total (unaudited) in IFRS Share Business Employee Adjustment Format Based Combin- Benefits (unaudited) (unaudited) Payment ations £'000 £'000 £'000 £'000 £'000 £'000 Revenue 156,144 - - - - 156,144 Cost of sales (153,182) - - - - (153,182) ------- ------ -------- ------- ------- -------Gross profit 2,962 - - - - 2,962 Administration expenses (136,317) (82) 3,804 (153) 3,569 (132,748) ------- ------ -------- ------- ------- -------Operating loss (133,355) (82) 3,804 (153) 3,569 (129,786) ------- ------ -------- ------- ------- ------- ========= ======= ====== ======== ======= ======= =======Analysed as:Loss before exceptionalitems (44,221) (82) 3,804 (153) 3,569 (40,652)Exceptional items (89,134) - - - - (89,134)========= ======= ====== ======== ======= ======= ======= Investment income 575 - - - - 575Finance costs (9,779) - - - - (9,779) ------- ------ -------- ------- ------- -------Loss before tax (142,559) (82) 3,804 (153) 3,569 (138,990) Tax (311) - 348 - 348 37 ------- ------ -------- ------- ------- -------Loss for the period (142,870) (82) 4,152 (153) 3,917 (138,953) ======= ====== ======== ======= ======= ======= Attributable to:Equity holders of theparent (142,835) (82) 4,152 (153) 3,917 (138,918)Minority interests (35) - - - - (35) ------- ------ -------- ------- ------- ------- (142,870) (82) 4,152 (153) 3,917 (138,953) ======= ====== ======== ======= ======= ======= Basic earnings pershare (pence) (40.14) (39.04)Diluted earnings pershare (pence) (40.14) (39.04) (i) = Fair value charge relating to employee share options(ii) = Fair value adjustment net of reversal of goodwill amortisation recordedunder UK GAAP(iii) = Holiday pay accrual The Sanctuary Group plcBALANCE SHEET - unaudited Reconciliation of UK GAAP consolidated balance sheet to IFRS consolidatedbalance sheet as at 30 September 2005. This reconciliation is presented in theformat required by IFRS 1 and is unaudited. UK GAAP IFRS 2 IFRS 3 IAS 19 IAS 21 IFRS IFRS Balances in (i) (ii) (iii) (iv) Total (unaudited) IFRS Format Share Business Employee Effects Adjustment (unaudited) based Combin- Benefits of (unaudited) payment ations changes in foreign exchange rates £'000 £'000 £'000 £'000 £'000 £'000 £'000Non-currentassets Goodwill 78,287 - (3,157) - - (3,157) 75,130Intangibleassets 14,896 - 10,441 - - 10,441 25,337Property,plant andequipment 8,957 - - - - - 8,957Available forsaleinvestments 2,572 - - - - - 2,572Otherreceivables 1,706 - - - - - 1,706Deferred taxasset 3,163 - - - - - 3,163 ------- ------ ------- ------ ------ ------- -------Totalnon-currentassets 109,581 - 7,284 - - 7,284 116,865 ------- ------ ------- ------ ------ ------- ------- CurrentassetsInventories 5,296 - - - - - 5,296Trade andotherreceivables 57,253 - - - - - 57,253Cash and cashequivalents 9,739 - - - - - 9,739 ------- ------ ------- ------ ------ ------- -------Total currentassets 72,288 - - - - - 72,288 ------- ------ ------- ------ ------ ------- -------Total 181,869 - 7,284 - - 7,284 189,153assets ======= ====== ======= ====== ====== ======= ======= CurrentliabilitiesTrade andother (69,332) - - (800) - (800) (70,132)payablesCurrent taxliabilities (3,577) - - - - - (3,577)Obligationsunder financeleases (654) - - - - - (654)Bankoverdraft (36,952) - - - - - (36,952)and loans ------- ------ ------- ------ ------ ------- -------Total currentliabilities (110,515) - - (800) - (800) (111,315) ------- ------ ------- ------ ------ ------- ------- Non-currentliabilitiesBank loans (82,000) - - - - - (82,000)Convertibleloan notes (30,000) - - - - - (30,000)Trade andother (2,828) - - - - - (2,828)payablesObligationsunder financeleases (535) - - - - - (535)Deferred taxliabilities - - (3,132) - - (3,132) (3,132)Provisions (11,255) - - - - - (11,255) ------- ------ ------- ------ ------ ------- -------Totalnon-currentliabilities (126,618) - (3,132) - - (3,132) (129,750) ------- ------ ------- ------ ------ ------- -------Totalliabilities (237,133) - (3,132) (800) - (3,932) (241,065) ------- ------ ------- ------ ------ ------- -------Netliabilities (55,264) - 4,152 (800) - 3,352 (51,912) ======= ====== ======= ====== ====== ======= ======= EquityShare 46,388 - - - - - 46,388capitalShare 91,079 - - - - - 91,079premiumShare optionreserve - 282 - - - 282 282Translationreserve - - - - (2,271) (2,271) (2,271)Retainedearnings (193,039) (282) 4,152 (800) 2,271 5,341 (187,698) ------- ------ ------- ------ ------ ------- -------Equityattributableto equityholders ofthe (55,572) - 4,152 (800) - 3,352 (52,220)parentMinorityInterest 308 - - - - - 308 ------- ------ ------- ------ ------ ------- -------Total (55,264) - 4,152 (800) - 3,352 (51,912)Equity ======= ====== ======= ====== ====== ======= =======(i) = Share option reserve(ii) = Adjustment to recognise intangible assets and deferred tax onacquisitions(iii) = Holiday pay accrual(iv) = Reclassification of foreign exchange translation of subsidiaries fromretained earnings to reserves The Sanctuary Group plc Notes 1. Earnings per Share UK GAAP Balances in IFRS format IFRS (unaudited) (unaudited) £'000 £'000 Losses forearnings pershare (142,835) (138,918) =============== ============= Number of shares Number of shares Average numberof ordinaryshares 355,830,453 355,830,453Dilutiveeffect ofshares to beissued 711,238 711,238Dilutiveeffect of BMGWarrants 13,893 13,893Dilutiveeffect ofConvertibleLoan 46,818,182 46,818,182Dilutiveeffect ofshare options 437,847 437,847 --------------- -------------Dilutedaverage numberof ordinaryshares 403,811,614 403,811,614 =============== ============= Pence PenceBasic earningsper share (40.14) (39.04)Dilutedearnings pershare (40.14) (39.04) Diluted earning per share is equivalent to basic earning per share as the effectof potential ordinary shares would decrease the net loss per share and so thepotential ordinary shares cannot be treated as dilutive in accordance with IAS33 'Earnings per share'. 2. Reconciliation of goodwill and intangible assets at 30 September 2005 fromUK GAAP to adopted IFRS Intangible Goodwill Total Assets £'000 £'000 £'000 Net intangible assets, including goodwillunder UK GAAP 14,896 78,287 93,183Reversal of goodwill amortisation charge underUK GAAP - 6,436 6,436Intangible assets identified on acquisitionsduring 2005 11,601 (11,601) -Amortisation of intangible assets identifiedon acquisitions during 2005 (1,160) - (1,160)Goodwill impairment - (1,472) (1,472)Deferred tax liability recognised onintangible assets - 3,480 3,480 ------- ------- -------Net intangible assets and goodwill - IFRS 25,337 75,130 100,467 ======= ======= ======= The £3,804,000 credit to the income statement for the year ended 30 September2005 includes the reversal of goodwill amortisation charge under UK GAAP of£6,436,000, net of the amortisation charge on intangible assets identified on2005 acquisitions of £1,160,000 and the goodwill impairment charge of£1,472,000. 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