SPO.L Regulatory News (SPO)

26 Sep 2005 14:25

Sportech PLC26 September 2005 IFRS RESTATEMENT INFORMATION Transition to International Financial Reporting Standards (IFRS) Sportech plc today releases restated financial information prepared underInternational Financial Reporting Standards (IFRS) for the year to 31 December2004 (53 weeks ended 7 January 2005) and for the six months to 30 June 2004 (26weeks ended 2 July 2004). This is the first year that the Group is required to present its results underIFRS and the first published financial information under IFRS will be in respectof the six months to 30 June 2005. The 2005 Annual Report will report the firstfull year results prepared on that basis. The following disclosures are thosethat are required to be made in the year of transition from United KingdomGenerally Accepted Accounting Principles (UK GAAP) to IFRS. The Group's IFRSadoption date is 8 January 2005, and the date of transition to IFRS is 3 January2004. The financial information presented in this document is unaudited. This document includes explanations of the impact of the transition from UK GAAPto IFRS on the financial statements of Sportech plc and contains reconciliationsfrom UK GAAP to IFRS of the Group's net assets at 3 January 2004, 30 June 2004and 7 January 2005, and of the Group's net profit or loss for the 6 months ended30 June 2004 and year ended 31 December 2004. Summary of Impact of Transition to IFRS 2004 2004 Full Year Half Year UK GAAP IFRS UK GAAP IFRS £m £m £m £m Group turnover 497.0 497.0 254.5 254.5Operating profit 6.3 15.5 4.6 9.1Profit/(loss) before tax (0.8) 8.2 1.3 5.7Profit/(loss) attributable to equityshareholders (3.3) 5.6 (0.4) 4.0 EPS (0.56)p 0.96p (0.06)p 0.67p Net assets 28.0 37.1 30.9 35.6Net debt 112.8 112.8 114.8 114.8 Reconciliation of Profit/(loss) attributable to equity shareholders 2004 2004 Full Year Half Year £m £m Loss for the financial period under UK GAAP (3.3) (0.4)Non - amortisation of goodwill 9.2 4.6Other adjustments (0.3) (0.2) ------- -------Profit for the financial period under IFRS 5.6 4.0 ======= ======= Reconciliation of Movement in Net Assets 31 December 30 June 1 January 2004 2004 2004 £m £m £m Net assets under UK GAAP 28.0 30.9 31.3Non - amortisation of goodwill 9.2 4.6 -Other adjustments (0.1) 0.1 0.2 --------- ------- -------Net assets under IFRS 37.1 35.6 31.5 ========= ======= ======= Impact on Group Cash Flows The move from UK GAAP to IFRS does not change any of the cash flows of theGroup, although there are presentational changes to the format of the cash flowstatement. Basis of Accounting The financial information presented in this transition document has beenprepared in accordance with the accounting policies and presentation required bythose International Financial Accounting Standards, incorporating InternationalAccounting Standards (IAS's) and interpretations (collectively IFRS) publishedby the International Accounting Standards Board (IASB), which are expected to beendorsed by the EU and applicable for use in the Group's annual financialstatements for the year ended 31 December 2005, the Group's first annualreporting date at which it is required to use IFRS. The financial informationfor the six months ended 30 June 2004 and for the year ended 31December 2004 hasbeen restated on an IFRS basis. The endorsed IFRS that will be effective (oravailable for early adoption) in the annual financial statements for the yearended 31 December 2005 are still subject to change and to additionalinterpretations and therefore cannot be determined with certainty. Accordingly,the accounting policies for the period will only be determined finally when theannual consolidated financial statements are prepared for the year ended 31December 2005. Sportech plc's transition date to IFRS is 3 January 2004. The Group prepared itsopening IFRS balance sheet at that date. The Group's IFRS adoption date is 8January 2005. The principal UK GAAP to IFRS adjustments relate to: • Goodwill is no longer amortised , but is subject to an impairment review, in line with IFRS 3 'Business Combinations'. • Adoption of IAS 19 'Employee Benefits', recognising employee benefit obligations, particularly pensions on the balance sheet. • Recognition of the cost of share based payments granted after 7 November 2002 in line with IFRS 2 'Share-Based Payment'. • Recognition of fair value of financial Instruments, in line with IAS 39 'Financial Instruments: Recognition and Measurement'. • Tax implications of the adjustments outlined above in accordance with IAS 12 'Income Taxes'. On transition to IFRS, an entity is generally required to apply IFRSretrospectively, except where an exemption is available under IFRS1 ' First timeAdoption of International Financial Reporting Standards'. The Group has appliedthe mandatory exemptions and certain of the optional exemptions from fullretrospective application of IFRS. The following is a summary of the keyelections from IFRS1 that were made by the Group: • The Group has elected to adopt the IFRS 1 exemption in relation to business combinations and will only apply IFRS 3 'Business Combinations' prospectively from 3 January 2004. As a result, the balance of goodwill under UK GAAP as at 31December 2003 will be deemed to be the cost of goodwill at 3 January 2004. • The Group has elected to apply the share based payment exemption. It has applied IFRS 2 to those options that were issued after 7 November 2002 but have not vested by 8 January 2005. • The Group has applied IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' for all periods presented and has therefore not taken advantage of the exemption in IFRS1 that would enable the Group to only apply these standards from 8 January 2005. In addition to the above, there are presentational changes arising from the moveto IFRS. The financial statements will be presented in accordance with IAS 1 'Presentation of Financial Statements'. In respect of cash flows, the transition from UK GAAP to IFRS does not changeany of the cash flows of the Group. The IFRS cash flow format is similar to UKGAAP but presents various cash flows in different categories and in a differentorder from the UK cash flow statement. All of the IFRS accounting adjustmentsnet out within cash generated from operations. No cash flow statements arepresented in this document. Accounting policies A summary of the more important Group accounting policies is set out below. (a) Basis of consolidationThe consolidated financial statements include the accounts of the Company andits subsidiaries. (b) TurnoverTurnover represents: * the value of entry fees receivable in respect of Football Pools recognised on the date of the event; * the value of bets received in relation to fixed odds betting and casino gaming activities based on the date of the event; * Poker revenues represent the commission ('rake') charged or tournament entry fees where the player has concluded his participation in the tournament , both based on the date of the event; and * the value of goods and services sold to external customers, including management fees to registered charities for the management of charity lotteries, exclusive of value added tax. (c) Deferred incomeDeferred income is recognised as the value of entry fees receivable in respectof competitions and sporting events held subsequent to the end of the financialperiod. (d) Deferred taxationDeferred tax is provided in full, using the liability method on temporarydifferences arising between the tax bases of assets and liabilities, and theircarrying amounts in the financial statements. Deferred tax is measured at therates expected to apply when the asset is realised or liability settled. (e) InventoriesStocks are valued at the lower of cost or estimated realisable value. Cost isbased on the first in, first out method of valuation. (f) Foreign currenciesTransactions in foreign currencies are translated into sterling at the rate ofexchange ruling at the date of the transaction. Monetary assets and liabilitiesin foreign currencies are translated at the rates of exchange ruling at thebalance sheet date. (g) Tangible fixed assetsTangible fixed assets are carried at historical cost less accumulateddepreciation. (h) DepreciationDepreciation is provided on a straight-line basis to write-off the cost of fixedassets down to residual value over their anticipated useful lives at thefollowing annual rates: Long leasehold land Nil Long leasehold buildings Over remaining estimated useful life (12 years) Buildings' fixtures and fittings 4.0% - 20.0% Plant, equipment and other fixtures and fittings 10.0% - 33.3% Leasehold improvements 10.0% or the period of the lease, if shorter Computers 14.3% - 33.3% Motor vehicles 12.5% - 25.0% Hand-held Pools bet captureequipment 8.3% (i) GoodwillGoodwill arising on consolidation represents the excess of the fair value ofconsideration given over the fair value of the separable net assets acquired.Goodwill arising on acquisitions before the date of transition to IFRS (3January 2004) has been frozen at the previous UK GAAP net book value at date oftransition subject to being tested for impairment at that date, and annually. (j) Other intangible fixed assetsOther intangible fixed assets comprises computer software and externallygenerated costs incurred in respect of developing interactive television gamingproducts. These costs are amortised through the profit and loss account overtheir estimated useful lives (five years) once trading has commenced. Onadoption of IFRS, computer software that under UK GAAP was classified astangible fixed assets has now been reclassified as intangible fixed assets. (k) Advance commissionsAdvance commissions paid to television broadcasters in accordance with the termsof broadcasting contracts are held within prepayments and are recovered againstcommissions due to broadcasters over the life of the relevant contract. TheDirectors consider that sufficient revenue will be generated over the lives ofthe contracts concerned to recover these payments. (l) Development costsPre-design and development costs are charged to the profit and loss account asincurred. An internally generated intangible asset arising from the Group's development ofcomputer systems is recognised only if all of the following conditions are met; *- An asset is created that can be identified (such as software and newprocesses)*- It is probable that the asset will generate future economic benefits; and*- The development cost of the asset can be measured reliably. These costs are being amortised on a straight-line basis over their anticipateduseful lives (four years). Where no internally generated asset can berecognized, development expenditure is recognized as an expense in the period inwhich it is incurred. (m) Impairment of fixed assets and goodwillFixed assets and goodwill are subject to an annual review for impairment inaccordance with IAS 36 'Impairment of Assets '. Any impairment losses arerecognised in the profit and loss account in the year in which they occur. (n) Leased assetsRentals payable under operating leases are charged to the profit and lossaccount on a straight-line basis over the lease term.Tangible fixed assets acquired under hire purchase agreements are capitalisedand depreciated over their expected useful lives as it is anticipated that theoption to purchase the asset outright will be taken. The interest element of therental obligations is charged to the profit and loss account over the period ofthe agreement. (o) Pension contributionsThe Group operates two pension scheme arrangements for its employees andaccounts for pensions under IAS 19 'Employee Benefits'. In respect of thedefined contributions scheme, payments to employees' defined contributionschemes are charged to the profit and loss account as incurred. For the definedbenefit scheme, actuarial valuations are carried out at each annual balancesheet date and actuarial gains and losses are recognised in full in reserves inthe period in which they occur. (p) Financial instrumentsThe Group uses derivative financial instruments to reduce exposure to interestrate movements. The Group does not hold or issue derivative financialinstruments for speculative purposes. Financial assets and liabilities arerecognized on the Group's balance sheet initially at fair value when the Groupbecomes party to the contractual provisions of the instrument. Subsequentmeasurement depends on the designation of the instrument in accordance withIAS39 'Financial Instruments: Recognition and Measurement' (q) Share Based PaymentsThe Group has elected to apply IFRS 2 'Share-Based Payment' to all relevantshare based payment transactions granted after 7 November 2002 but not fullyvested at 8 January 2005. The fair value of employee option plans is calculatedusing the Black-Scholes model. In accordance with IFRS 2, the resulting cost ischarged to the income statement over the vesting period of the options. Thevalue of the charge is adjusted to reflect expected and actual levels of optionvesting. RECONCILIATION OF CONSOLIDATED profit and loss account For the year ended 31 December 2004 Effect of Notes UK transition GAAP to IFRS IFRS £m £m £mContinuing operationsRevenue 497.0 - 497.0 Cost of sales (439.9) - (439.9) ------- ------- ------- Gross profit 57.1 - 57.1 Distribution costs (0.1) - (0.1)Administrative expenses 1, 6, 9 (50.7) 9.2 (41.5) ------- ------- -------Operating profit before restructuring costs 7.5 9.2 16.7Restructuring costs (1.2) - (1.2) ------- ------- ------- Operating profit 6.3 9.2 15.5 Interest payable and similar items 4 (7.6) 0.2 (7.4) Interest receivable 4 0.5 (0.4) 0.1 ------- ------- -------Profit/(loss) before taxation (0.8) 9.0 8.2 Taxation 5 (2.5) (0.1) (2.6) ------- ------- ------- Profit/(loss) for the year fromcontinuing operations (3.3) 8.9 5.6 ------- ------- -------Profit/(loss) for the financial year (3.3) 8.9 5.6 ======= ======= ======= Profit/(loss) attributable to equityshareholders (3.3) 8.9 5.6 ======= ======= ======= Earnings per shareBasic and diluted (0.56)p 1.52p 0.96p ======= ======= ======= Earnings per share from continuingoperationsBasic and diluted (0.56)p 1.52p 0.96p ======= ======= ======= IFRS RESTATEMENT INFORMATIONRECONCILIATION OF CONSOLIDATED profit and loss accountFor the six months to 30 June 2004 Effect of Notes UK transition GAAP to IFRS IFRS £m £m £mContinuing operationsRevenue 254.5 - 254.5 Cost of sales (225.5) - (225.5) ------- ------- ------- Gross profit 29.0 - 29.0 Distribution costs (0.1) - (0.1)Administrative expenses 1,6,9 (24.3) 4.5 (19.8) ------- ------- -------Operating profit before restructuring costs 4.9 4.5 9.4Restructuring costs (0.3) - (0.3) ------- ------- ------- Operating profit 4.6 4.5 9.1 Interest payable and similar items 4 (3.5) 0.1 (3.4) Interest receivable 4 0.2 (0.2) - ------- ------- -------Profit before taxation 1.3 4.4 5.7 Taxation 5 (1.7) - (1.7) ------- ------- ------- Profit/(loss) for the period fromcontinuing operations (0.4) 4.4 4.0 ------- ------- -------Profit/(loss) for the financial period (0.4) 4.4 4.0 ======= ======= ======= Profit/(loss) attributable to equityshareholders (0.4) 4.4 4.0 ======= ======= ======= Earnings per shareBasic and diluted (0.06)p 0.75p 0.67p ======= ======= ======= Earnings per share from continuingoperationsBasic and diluted (0.06)p 0.75p 0.67p ======= ======= ======= IFRS RESTATEMENT INFORMATIONRECONCILIATION OF EQUITYAs at 1 January 2004 Effect of transition Notes UK GAAP to IFRS IFRS £m £m £m ASSETSNon-current assetsGoodwill 1 145.2 - 145.2Other intangible assets 2 1.2 1.5 2.7Property, plant and equipment 2 9.1 (1.5) 7.6Retirement benefit assets 7 - 0.2 0.2Deferred tax assets 5 0.7 (0.1) 0.6 ------- ------- ------- 156.2 0.1 156.3 ------- ------- ------- Current assetsTrade and other receivables 8.9 - 8.9Financial assets - derivative financialinstruments 4 0.6 0.1 0.7Cash and cash equivalents 4.1 - 4.1 ------- ------- ------- 13.6 0.1 13.7 ------- ------- ------- LIABILITIESCurrent liabilitiesFinancial liabilities: - borrowings (22.8) - (22.8)Trade and other payables (19.8) - (19.8)Current tax liabilities (1.7) - (1.7) ------- ------- ------- (44.3) - (44.3) ------- ------- ------- ------- ------- -------Net current liabilities (30.7) 0.1 (30.6) ------- ------- ------- Non-current liabilitiesFinancial liabilities: - borrowings (94.2) - (94.2) ------- ------- -------NET ASSETS 31.3 0.2 31.5 ======= ======= ======= SHAREHOLDERS' EQUITY Ordinary shares 29.6 - 29.6Retained earnings 8 1.7 0.2 1.9 ------- ------- -------TOTAL SHAREHOLDERS' FUNDS 31.3 0.2 31.5 ======= ======= ======= IFRS RESTATEMENT INFORMATIONRECONCILIATION OF EQUITYAs at 30 June 2004 Effect of transition Notes UK GAAP to IFRS IFRS £m £m £m ASSETSNon-current assetsGoodwill 1 140.6 4.6 145.2Other intangible assets 2 1.5 2.0 3.5Property, plant and equipment 2 8.9 (2.0) 6.9Retirement benefit assets 7 - 0.2 0.2Deferred tax assets 5 0.7 (0.1) 0.6 ------- ------- ------- 151.7 4.7 156.4 ------- ------- ------- Current assetsTrade and other receivables 10.8 - 10.8Financial assets - derivative financialinstruments 4 0.4 - 0.4Cash and cash equivalents 2.9 - 2.9 ------- ------- ------- 14.1 - 14.1 ------- ------- ------- LIABILITIESCurrent liabilitiesFinancial liabilities: - borrowings (8.5) - (8.5)Trade and other payables (17.4) - (17.4)Current tax liabilities (1.8) - (1.8) ------- ------- ------- (27.7) - (27.7) ------- ------- -------Net current liabilities (13.6) - (13.6) ------- ------- -------Non-current liabilitiesFinancial liabilities: - borrowings (107.2) - (107.2) ------- ------- -------NET ASSETS 30.9 4.7 35.6 ======= ======= ======= SHAREHOLDERS' EQUITY Ordinary shares 29.6 - 29.6Retained earnings 8 1.3 4.7 6.0 ------- ------- -------TOTAL SHAREHOLDERS' FUNDS 30.9 4.7 35.6 ======= ======= ======= IFRS RESTATEMENT INFORMATIONRECONCILIATION OF EQUITYAs at 31 December 2004 Effect of transition Notes UK GAAP to IFRS IFRS £m £m £m ASSETSNon-current assetsGoodwill 1 136.0 9.2 145.2Other intangible assets 2 1.3 1.5 2.8Property, plant and equipment 2 9.0 (1.5) 7.5Prepayments 3 5.9 - 5.9Retirement benefit assets 7 - 0.2 0.2Deferred tax assets 5 0.5 (0.2) 0.3 ------- ------- ------- 152.7 9.2 161.9 ------- ------- ------- Current assetsTrade and other receivables 4.4 - 4.4Financial assets - derivative financialinstruments 4 0.3 (0.1) 0.2Cash and cash equivalents 2.4 - 2.4 ------- ------- ------- 7.1 (0.1) 7.0 ------- ------- ------- LIABILITIESCurrent liabilitiesFinancial liabilities: - borrowings (11.5) - (11.5)Trade and other payables (17.4) - (17.4)Current tax liabilities (1.3) - (1.3) ------- ------- ------- (30.2) - (30.2) ------- ------- -------Net current liabilities (23.1) (0.1) (23.2) ------- ------- ------- Non-current liabilitiesFinancial liabilities: - borrowings (101.6) - (101.6) ------- ------- ------- (101.6) - (101.6) ------- ------- -------NET ASSETS 28.0 9.1 37.1 ======= ======= ======= SHAREHOLDERS' EQUITY Ordinary shares 29.6 - 29.6Retained earnings 8 (1.6) 9.1 7.5 ------- ------- -------TOTAL SHAREHOLDERS' FUNDS 28.0 9.1 37.1 ======= ======= ======= IFRS RESTATEMENT INFORMATIONNotes to the Restatements 1. Goodwill Impact on profit & loss accounts 6 months to Year to 31 30 June December 2004 2004 (Unaudited) (Unaudited) £m £m Non-amortisation of goodwill 4.6 9.2 ========= ========= Impact on balance sheet 30 June 31 December 1 January 2004 2004 2004 (Unaudited) (Unaudited) (Unaudited) £m £m £m Increase in Goodwill 4.6 9.2 - ========= ========= ========= UK GAAP required Goodwill to be written off over its estimated useful life,which the Group determined to be no longer than 20 years. Under IFRS, Goodwillis considered to have an indefinite life and is not amortised, but is subject toannual impairment tests. This adjustment reverses the goodwill amortisationcharged under UK GAAP. This adjustment increases profit before tax for the sixmonths to 30 June 2004 by £4.6m and profit before tax for the year to 31December 2004 increases by £9.2m. The carrying value of the goodwill in thebalance sheets at the end of each of those periods is correspondingly increased. 2. Software classification Computer software that had been included as tangible fixed assets under UK GAAPis included within intangible assets under IFRS. 3. Prepayments Prepayments recoverable in more than one year classified as current assets duewithin one year under UK GAAP have been reclassified as non-current assets 4. Financial instruments Impact on profit & loss accounts 6 months to Year to 31 30 June December 2004 2004 (Unaudited) (Unaudited) £m £m Non amortisation of interest rate cap andadjustment to fair value - reduction in interest payable 0.1 0.2Adjustment of interest rate swap to fair value- reduction in interest receivable (0.2) (0.4) --------- --------- (0.1) (0.2) ========= ========= Impact on balance sheet 30 June 31 December 1 January 2004 2004 2004 (Unaudited) (Unaudited) (Unaudited) £m £m £m Adjustment of interest rate cap tofair value (0.4) (0.3) (0.5)Adjustment of interest rate swap tofair value 0.4 0.2 0.6 --------- --------- --------- - (0.1) 0.1 ========= ========= ========= All derivative financial instruments are required to be carried on the balancesheet at fair value. Under IFRS, hedge accounting for derivatives is onlyallowed where detailed documentation in accordance with IAS 39 is in place. TheGroup is not able to satisfy these documentation requirements in respect ofinterest rate swaps and caps entered into as economic hedges, and accordinglythe change in fair values of these derivatives is reflected in the profit andloss account. The carrying value of the interest rate cap under UK GAAP at 31December 2003 was £0.6m being the un-amortised part of the cap premium (at cost,£0.9m) IFRS RESTATEMENT INFORMATIONNotes to the ResTATEMENTS (continued) 5. Deferred tax Impact on profit & loss accounts 6 months to Year to 31 30 June December 2004 2004 (Unaudited) (Unaudited) £m £m Reduction in tax charge, consequentialfrom IFRS changes - (0.1) ========= ========= Impact on balance sheet 30 June 31 December 1 January 2004 2004 2004 (Unaudited) (Unaudited) (Unaudited) £m £m £m Reduction in deferred tax balances,consequential from IFRS changes (0.1) (0.2) (0.1) ========= ========= ========= Deferred tax charges and balances have moved as a consequence of changes arisingfrom the adoption of IFRS. 6. Share based payments Impact on profit & loss accounts 6 months to Year to 31 30 June December 2004 2004 (Unaudited) (Unaudited) £m £m Increase in administration costs 0.1 - ========= ========= The profit and loss account has been charged for share-based remuneration inrespect of share options, which have been valued using an option-pricing model.IFRS 2, "Share Based Payments", requires the assignment of fair values at thedate of grant of options awarded to employees after 7 November 2002, which hadnot vested by 1 January 2005. The expense is spread over the vesting period ofthe options 7. Pensions Impact on balance sheet 30 June 31 December 1 January 2004 2004 2004 (Unaudited) (Unaudited) (Unaudited) £m £m £m Recognition of pension surplus 0.2 0.2 0.2 ========= ========= ========= 8. Reserves Impact on balance sheet 30 June 31 December 1 January 2004 2004 2004 (Unaudited) (Unaudited) (Unaudited) £m £m £m Non-amortisation of goodwill (seenote 1) 4.6 9.2 -Recognition of pension surplus (seenote 7) 0.2 0.2 0.2Derivative financial instruments(see note 4) - (0.1) 0.1Increase in deferred tax (see note5) (0.1) (0.2) (0.1) --------- --------- --------- 4.7 9.1 0.2 ========= ========= ========= 9. Profit & Loss account - administrative expenses 6 months to Year to 31 30 June December 2004 2004 (Unaudited) (Unaudited) £m £m Reduction in Goodwill amortisation (4.6) (9.2)Share options charge 0.1 - --------- ---------Reduction in administration expenses (4.5) (9.2) ========= ========= This information is provided by RNS The company news service from the London Stock Exchange