Sutton Harbour Holdings Regulatory News (SUH)

29 Nov 2007 07:00

Sutton Harbour Holdings PLC29 November 2007 Sutton Harbour Holdings plc ("Sutton Harbour" or the "Company") Transition Statement to Adopted International Financial Reporting Standards Introduction The Group's interim financial statements for the period ended 30 September 2007have been prepared in accordance with Adopted International Financial ReportingStandards ("Adopted IFRSs") for the first time. This statement explains the Group's approach to Adopted IFRS, the new accountingpolicies in accordance with Adopted IFRS and the impact that the adoption ofAdopted IFRS has had on the Group's financial statements. In accordance with the AIM rules, all AIM listed companies must prepare andpresent their consolidated financial statements for financial periods commencingon or after 1 January 2007 in accordance with IFRSs as adopted by the EuropeanUnion. The first set of financial statements that the Group will need toprepare under Adopted IFRS will be for the year commenced 1 April 2007. Theinterim statements for the period ended 30 September 2007 are also required tobe prepared under Adopted IFRS. Comparative numbers will also be needed and anopening balance sheet prepared as at 1 April 2006, the Group's date oftransition to Adopted IFRS. The Adopted IFRS accounting policies set out below have been applied inpreparing the interim financial statements for the period ended 30 September2007, the comparative information presented in the interim financial statementsfor both the period ended 30 September 2006 and the year ended 31 March 2007 andin the preparation of the opening balance sheet at 1 April 2006. In preparing its opening Adopted IFRS balance sheet, the Group has adjustedamounts reported previously in financial statements prepared in accordance withits old basis of accounting (UK GAAP). An explanation of how the transitionfrom UK GAAP to Adopted IFRSs has affected the Group's financial position,financial performance and cash flows is set out in the tables and notes thatfollow. Accounting policies under Adopted IFRS Sutton Harbour Holdings plc (the "Company") is a company incorporated in the UK. The Group financial statements consolidate those of the Company and itssubsidiaries (together referred to as the "Group") and equity account theGroup's interest in associates. The Group financial statements have been prepared and approved by the directorsin accordance with International Financial Reporting Standards as adopted by theEU ("Adopted IFRSs"). The Company has elected to prepare its parent companyfinancial statements in accordance with UK GAAP. The accounting policies set out below have, unless otherwise stated, beenapplied consistently to all periods presented in the Group interim financialstatements for the period ended 30 September 2007 and in preparing an openingAdopted IFRS balance sheet at 1 April 2006 for the purposes of the transition toAdopted IFRSs. Judgements made by the directors, in the application of these accountingpolicies that have significant effect on the financial statements and estimateswith a significant risk of material adjustment in the next year are discussed innote 1 of the interim financial statements. Estimates and judgements have notbeen changed since the signing of the previous UK GAAP financial statements. Transition to Adopted IFRSs The Group is preparing its financial statements in accordance with Adopted IFRSfor the first time and consequently has applied IFRS 1 'First-time Adoption ofInternational Financial Reporting Standards'. An explanation of how thetransition to Adopted IFRSs has affected the reported financial position,financial performance and cash flows of the Group is provided below. IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs inthe transition period. The following exemption has been taken in the financialstatements: - Share-based payments - IFRS 2 'Share-based Payment' is being applied only to equity instruments that were granted after 7 November 2002 that had not vested by 1 April 2006. Measurement convention The financial statements are prepared on the historical cost basis except thatthe following assets and liabilities are stated at their fair value: derivativefinancial instruments, financial instruments classified as fair value throughthe profit or loss and investment property. Non-current assets held for saleare stated at the lower of previous carrying amount and fair value less costs tosell. Basis of consolidation The consolidated accounts include the accounts of Sutton Harbour Holdings plcand entities controlled by the Company (its subsidiaries) at each reportingdate. Control exists when the Group has the power, directly or indirectly, togovern the financial and operating policies of an entity so as to obtainbenefits from its activities. In assessing control, potential voting rights thatare currently exercisable or convertible are taken into account. The financialstatements of subsidiaries are included in the consolidated financial statementsfrom the date that control commences until the date that control ceases. Associates Associates are those entities in which the Group has significant influence, butnot control, over the financial and operating policies. The consolidatedfinancial statements include the Group's share of the total recognised incomeand expense of associates on an equity accounted basis, from the date thatsignificant influence commences until the date that significant influenceceases. When the Group's share of losses exceeds its interest in an associate,the Group's carrying amount is reduced to nil and recognition of further lossesis discontinued except to the extent that the Group has incurred legal orconstructive obligations or made payments on behalf of an associate. The Grouphas a 62% holding in LIFT Investments Limited which, in turn, has a 60% holdingin ReSound (Health) Limited, ReSound (Mount Gould) Limited and ReSound(Cattedown) Limited. Although the Group has a 62% holding in LIFT InvestmentsLimited, it only has 50% of the voting rights of the company. The investment inLIFT Investments Limited has therefore been treated as an associate inaccordance with IAS 28 'Investments in Associates'. The loan to the associatecompany is considered to be part of the investment. Property, plant and equipment Plant and machinery, fixtures and fittings and aircraft at the date oftransition to Adopted IFRS are stated at cost less accumulated depreciation andimpairment losses. Land and buildings were revalued under UK GAAP and the Group has elected to keeprevaluing these assets to fair value under Adopted IFRS. At the date oftransition, these assets have been brought onto the balance sheet at fair value. Property, plant and equipment can be divided into the following classes: - Freehold land and buildings - Long leasehold land and buildings - Freehold investment property in the course of construction - Plant and machinery - Fixtures and fittings - Aircraft Freehold and long leasehold land and buildings Freehold and long leasehold land and buildings fall into three categories: i) Freehold properties that are mainly owner occupied, or that are an integral part of the Group's harbour operations ii) Specialised freehold properties that are an integral part of the Group's harbour operations (fish market, harbour lock and quays) iii) Leasehold properties that are mainly owner occupied and are an integral part of the Group's airport operations. The properties are initially recorded at cost and are subsequently revalued andstated at their fair value less accumulated depreciation and impairment losses.Fair value is based on regular valuations by either an external independentvaluer or an internal valuer and is determined from market-based evidence byappraisal. Specialised properties have no market-based value because of theirspecialised nature. A depreciated replacement cost valuation is used instead.Valuations are performed with sufficient regularity to ensure that the fairvalue of a revalued asset does not differ materially from its carrying amount.The latest revaluation was incorporated in the accounts for the year ended 31March 2006. This valuation was an internal valuation. The valuation wasundertaken in accordance with the Valuation and Appraisal Manual of the RoyalInstitution of Chartered Surveyors. A full external independent valuationperformed by Stratton Creber Commercial was incorporated in the accounts for theyear ended 31 March 2004. Both valuations were carried out by RICS qualifiedsurveyors. Any revaluation surplus is credited to the revaluation reserve except to theextent that it reverses a decrease in the carrying value of the same assetpreviously recognised in the income statement, in which case the increase isrecognised in the income statement. Any revaluation deficits are recognised inthe income statement, except to the extent of any existing surplus in respect ofthat asset in the revaluation reserve. Freehold investment property in the course of construction Property that is being constructed for future use as investment property isaccounted for as property, plant and equipment until it is ready for use, atwhich time it is remeasured to fair value and reclassified as investmentproperty. Any gain or loss arising on remeasurement is recognised in the incomestatement. Plant and machinery, fixtures and fittings and aircraft Plant and machinery, fixtures and fittings and aircraft are all stated at costless accumulated depreciation and impairment losses. Leased assets Leases in which the Group assumes substantially all the risks and rewards ofownership of the leased asset are classified as finance leases. Where buildingsare held under finance leases the accounting treatment of leases of anyassociated land is considered separately from that of the buildings. Leasedassets acquired by way of finance lease are stated initially at an amount equalto the lower of their fair value and the present value of the minimum leasepayments at inception of the lease, less accumulated depreciation and impairmentlosses. Leased properties are subsequently revalued to their fair value. The treatment of assets held under operating leases where the lessor maintainsthe risks and rewards of ownership is described in the operating lease paymentsaccounting policy below. Depreciation Depreciation is charged to the income statement over the estimated useful livesof each part of an item of property, plant and equipment. Where parts of an itemof property, plant and equipment have different useful lives, they are accountedfor as separate items of property, plant and equipment. Land is notdepreciated. The Group have a policy of depreciating freehold buildings but thecharge is not material so is not included in the financial statements. Theestimated useful lives and depreciation basis of assets are as follows: leasehold buildings (straight line) remaining period of leaseplant and machinery (reducing balance)10% to 25%fixtures and fittings (straight line) 10 - 25 yearsrotable aircraft components (straight line) 10 yearsdash 8 aircraft (straight line) 6 yearsdash 8 maintenance (straight line) over period until next overhaul The cost of major maintenance overhauls on owned aircraft is capitalised to thebalance sheet and amortised over the period until the next overhaul. For aircraft held under operating leases, provision is made for majormaintenance overhauls based on estimated costs. Intangible assets Intangible assets that are acquired by the Group are stated at cost lessaccumulated amortisation and impairment losses. Amortisation is charged to theincome statement on a straight-line basis over the estimated useful lives of theassets. The estimated useful lives are as follows: Landing rights 20 yearsLicences 20 years Investment property Investment properties are properties which are held either to earn rental incomeand/or for capital appreciation. Investment properties are initially measured atcost and subsequently revalued to fair value which reflects market conditions atthe balance sheet date. Any gains or losses arising from changes in fair valueare recognised in the income statement in the period in which they arise. Fairvalue is the estimated amount for which a property could be exchanged on thedate of valuation between a willing buyer and a willing seller, in an arm'slength transaction, after proper marketing, in which both parties had actedknowledgeably, prudently and without compulsion. Some properties are held both to earn rental income and for the supply of goodsand services and administration purposes. Where the different portions of theproperty cannot be sold separately, the property is accounted for as aninvestment property only if an insignificant portion is held for the productionand supply of goods and services and administration purposes. The portfolio is valued on an annual basis by either an internal valuer or anexternal independent valuer, both of whom are RICS qualified. The valuer willalso have recent experience in the location and category of property beingvalued. The valuations, which are supported by market evidence, are prepared byconsidering the aggregate of the net annual rents receivable from the propertiesand where relevant, associated costs. A yield which reflects the specific risksinherent in the net cash flows is then applied to the net annual rentals toarrive at the property valuation. Rental income from investment property is accounted for as described in therevenue accounting policy. Investment property that is redeveloped for continued future use as aninvestment property remains classified as an investment property while theredevelopment is being carried out. While redevelopment is taking place, theproperty will continue to be valued on the same basis as an investment property. All tenant leases have been examined to determine if there has been any transferof the risks and rewards of ownership from the Group to the tenant in accordancewith IAS 17 'Leases'. All tenant leases were determined to be operating leases. Accordingly, all the Group's leased properties are classified as investmentproperties and included in the balance sheet at fair value. In accordance with IAS 40 'Investment Property', no depreciation is provided inrespect of investment properties. Inventories Inventories are stated at the lower of cost and net realisable value. Cost isbased on the first-in first-out principle and includes expenditure incurred inacquiring the inventories and bringing them to their existing location andcondition. Inventories - land and properties held for resale Land identified for development and sale, and properties under construction ordevelopment and held for resale, are included in current assets at the lower ofcost and net realisable value. Cost includes all expenditure related directly tospecific projects and an allocation of fixed and variable overheads incurred inthe Group's contract activities based on normal operating capacity. Construction contract debtors Construction contract debtors are stated at cost plus profit recognised to date(see the revenue accounting policy) less a provision for foreseeable losses andless progress billings. Cash and cash equivalents Cash in the balance sheet comprises cash at bank and in hand. Bank overdraftsthat are repayable on demand and form an integral part of the Group's cashmanagement are included as a component of cash and cash equivalents for thepurpose only of the statement of cash flows. Offset arrangements across groupbusinesses are applied to arrive at the net overdraft figure. Non-current assets held for sale A non-current asset or a group of assets containing a non-current asset isclassified as held for sale if its carrying amount will be recovered principallythrough sale rather than through continuing use, it is available for immediatesale and sale is highly probable within one year. Immediately beforeclassification as held for sale the asset is remeasured and thereafter measuredat the lower of carrying amount and fair value less costs to sell with anyadjustments taken to the income statement. Impairment The carrying amounts of the Group's assets other than investment property andinventories are considered at each balance sheet date to determine whether thereis any indication of impairment. If any such indication exists, the asset'srecoverable amount is estimated. Where the carrying amount of an asset exceedsits recoverable amount it is impaired and is written down to its recoverableamount. Impairment losses are recognised in the income statement. The recoverable amount of the Group's financial assets is calculated as thepresent value of estimated future cash flows, discounted at the originaleffective interest rate (i.e., the effective interest rate computed at initialrecognition of these financial assets). The recoverable amount of non-financialassets is the higher of their fair value less costs to sell and their value inuse. Value in use is the present value of the future cash flows expected to bederived from the asset. No indication of impairment existed at the date of transition, 1 April 2006, andno assets have been impaired since that date. Derivative financial instruments and hedging Derivative financial instruments, comprising foreign exchange derivatives andfuel hedging derivatives are recognised at fair value. Derivatives are carriedas assets when the fair value is positive and as liabilities when the fair valueis negative. The fair value of forward exchange and fuel hedging contracts istheir quoted market price at the balance sheet date. The gain or loss on remeasurement to fair value is recognised immediately inprofit or loss. However, where derivatives qualify for hedge accounting,recognition of any resultant gain or loss depends on the nature of the itembeing hedged. For those derivatives designated as hedges and for which hedgeaccounting is desired, the hedging relationship is documented at its inception.This documentation identifies the hedging instrument, the hedged item ortransaction, the nature of the risk being hedged and how effectiveness will bemeasured throughout its duration. Such hedges are expected at inception to behighly effective. - Cash flow hedges Where a derivative financial instrument is designated as a hedge of thevariability in cash flows of a recognised asset or liability, or a highlyprobable forecast transaction, the effective part of any gain or loss on thederivative financial instrument is recognised directly in the hedging reserve.Any ineffective portion of the hedge is recognised immediately in the incomestatement. The Group does not have any hedges that qualify for cash flow hedge accounting. - Fair value hedges It is not the Group's policy to use fair value hedges. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any differencebetween cost and redemption value being recognised in the income statement overthe period of the borrowings on an effective interest basis. Own shares Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of ordinary shares and share options are recognised asa deduction from equity. Revenue Revenue comprises the fair value of the consideration received or receivable,net of value-added-tax, rebates and discounts. Revenue is recognised once thevalue of the transaction can be reliably measured and the significant risks andrewards of ownership have been transferred. The following criteria must also bemet before revenue is recognised: Rent and marina and berthing fees Rent and marina and berthing fees are typically invoiced in advance and areaccounted for as deferred income and recorded to revenue during the period towhich they relate. Lease incentives and costs associated with entering into tenant leases areamortised over the lease term. Other marine related revenue Fuel sales, landing dues and other ancillary incomes, are recorded to revenue atthe point of sale. Airline Advance flight bookings, net of passenger taxes, are treated as deferred incomein the balance sheet until the service has been provided, at which point theincome is recognised as revenue in the income statement. Ancillary incomeincluding credit card fees, excess baggage charges, sporting equipment fees,change fees, in-flight sales of food and beverages, commissions received fromproducts and services sold such as hotel and car hire and travel insurance lesschargebacks, are recognised in revenue on the date that the right to receive theconsideration occurs. For commission received on hotel bookings and car hire,the date that the right to receive the consideration occurs is the date that thehotel or car booking becomes non-refundable. As the airline is acting as anagent, the only revenue recognised on these bookings is the commission earned. Airport The majority of airport income is received from aircraft landing fees and fuelsales. Fuel sales are recognised at the point of sale. Aircraft landing feesare levied as the aircraft lands and are recognised as income immediately. Construction contracts and project management services Where the outcome of a construction contract can be estimated reliably, revenueand costs are recognised by reference to the stage of completion of the contractat the balance sheet date. The stage of completion of a contract is determinedby an internal survey of the work performed. Where the contract outcome cannotbe measured reliably, revenue is recognised only to the extent of the expensesrecognised that are recoverable. When it is probable that total contract costswill exceed total contract revenue, the expected loss is recognised as anexpense immediately. This policy also covers the treatment of profit arising from the provision ofproject management services. The stage of completion is determined by referenceto achievement of milestone events. Fees for management services may berecognised to the extent that they are non-refundable and the milestone eventswhich triggered them becoming receivable have passed. Property sales Revenue from property sales is recognised when the significant risks and rewardsof ownership and effective control of the asset have passed to the buyer. Thiswill be at the point of legal completion. Government grants Government grants are recognised when there is reasonable assurance that thegrant will be received and that the Group will comply with all conditionsassociated with the grant. Government grants in respect of capital expenditureare credited to a deferred income account and released to the income statementover the estimated useful economic lives of the assets to which they relate.Grants of a revenue nature are credited to income so as to match them with theexpenditure to which they relate. Operating lease payments Payments made under operating leases are recognised in the income statement on astraight-line basis over the term of the lease. Lease incentives received arerecognised in the income statement as an integral part of the total leaseexpense over the term of the lease. Net financing costs Net financing costs comprise interest payable and interest receivable on fundsinvested. Interest income and interest payable is recognised in profit or lossas it accrues, using the effective interest method. The fair value movement ofderivative financial instruments and the ineffective portion of cash flow hedgesare also included within net financing costs. Borrowing costs Borrowing costs are capitalised on qualifying assets. A qualifying asset is onethat takes more than twelve months to complete. The borrowing rate applied isthat specifically applied to fund the development. In the case of bankborrowings this is the weighted average cost of debt capital. Capitalisationceases when substantially all the activities that are necessary to get theproperty ready for use are complete. Employee benefits: defined contribution plans Obligations for contributions to defined contribution pension plans arerecognised as an expense in the income statement as incurred. Employee benefits: share-based payment transactions The share option programme allows Group employees to acquire shares of theultimate parent company; these awards are granted by the ultimate parent. Theshare-based payments are all equity-settled and are measured at fair value. Thefair value of options granted is recognised as an employee expense with acorresponding increase in equity. The fair value is measured at grant date andspread over the period during which the employees become unconditionallyentitled to the options. The fair value of the options granted is measured usingthe Black-Scholes option pricing model, taking into account the terms andconditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options that vestexcept where forfeiture is due only to share prices not achieving the thresholdfor vesting. Foreign currency 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 atthe foreign exchange rate ruling at that date. Foreign exchange differencesarising on translation are recognised in the income statement. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. For aircraft held under operating leases, provision is made for majormaintenance overhauls that are contractually required based on estimated costs. Taxation Tax on the profit for the year comprises current and deferred tax. Tax isrecognised in the income statement except to the extent that it relates to itemsrecognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable profit for the year,using tax rates enacted or substantively enacted at the balance sheet date, andany adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amountsof assets and liabilities for financial reporting purposes and the amounts usedfor taxation purposes. 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 is recognised on all temporary differences except: - on the initial recognition of goodwill; or - on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Dividends Dividends unpaid at the balance sheet date are only recognised as a liability atthat date if they have been declared. Unpaid dividends that have not yet beendeclared are disclosed in the notes to the financial statements. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for itsordinary shares. Basic EPS is calculated by dividing the profit or lossattributable to ordinary shareholders of the Company by the weighted averagenumber of ordinary shares outstanding during the period. Diluted EPS isdetermined by adjusting the profit or loss attributable to ordinary shareholdersand the weighted average number of ordinary shares outstanding for the effectsof all dilutive potential ordinary shares including share options granted toemployees. Segment reporting A segment is a distinguishable component of the Group that is engaged either inproviding related products or services (business segment), or in providingproducts or services within a particular economic environment (geographicalsegment), which is subject to risks and rewards that are different from those ofother segments. The Group's primary format for segment reporting is based onbusiness segments. Restatement of the opening Consolidated Balance Sheet as at 1 April 2006 --------------1 April 2006-------------- UK GAAP Effect of Adopted transition to IFRSs Adopted IFRSs Note £000 £000 £000Non-current assetsProperty, plant and equipment a 42,008 42,008Intangible assets 611 611Investment property 14,651 14,651Investment in joint venture Share of gross assets l 7,952 (7,952) - Share of gross liabilities l (8,006) 8,006 -Investment in associate b,l - 717 717Other financial assets c - 130 130 57,216 901 58,117 Current assetsInventories 3,145 3,145Trade and other receivables b 4,939 (771) 4,168Cash and cash equivalents 4 4Non-current assets held for sale - - 8,088 (771) 7,317 Total assets 65,304 130 65,434 Current liabilitiesBank overdraft c,d 6,399 (896) 5,503Other interest-bearing loans and borrowings d - 1,026 1,026Trade and other payables e,l 4,033 4,033Deferred income 3,240 3,240Deferred government grants 35 35Tax payable n 348 348 14,055 130 14,185 Non-current liabilitiesOther interest-bearing loans and borrowings 10,532 10,532Deferred income 10 10Deferred government grants 293 293Deferred tax liabilities m 2,396 3,698 6,094 13,231 3,698 16,929 Total liabilities 27,286 3,828 31,114 Net assets 38,018 (3,698) 34,320 Equity and reservesShare capital 6,086 6,086Share premium 2,797 2,797Revaluation reserve m 13,056 (2,134) 10,922Investment property revaluation reserve h 9,435 (9,435) -Other reserves o,p 274 (23) 251Retained earnings h,m,p 6,370 7,894 14,264 Total equity 38,018 (3,698) 34,320 Restatement of the comparative Consolidated Balance Sheet as at 30 September 2006 --------30 September 2006--------- UK GAAP Effect of Adopted transition to IFRSs Adopted IFRSs Note £000 £000 £000Non-current assetsProperty, plant and equipment a,i 32,684 32,684Intangible assets 594 594Investment property i,j 14,736 14,736Investment in joint venture Share of gross assets l 8,362 (8,362) - Share of gross liabilities l (8,419) 8,419 -Investment in associate b,l - 799 799Other financial assets c - 130 130 47,957 986 48,943 Current assetsInventories i 15,804 (11,400) 4,404Trade and other receivables b 4,575 (856) 3,719Cash and cash equivalents 3 3Non-current assets held for sale j - 13,600 13,600 20,382 1,344 21,726 Total assets 68,339 2,330 70,669 Current liabilitiesBank overdraft c,d 9,294 (1,735) 7,559Other interest-bearing loans and borrowings d - 1,865 1,865Trade and other payables e,f,l 2,606 (19) 2,587Deferred income 2,739 2,739Deferred government grants g 4 18 22Tax payable n 618 618 15,261 129 15,390 Non-current liabilitiesOther interest-bearing loans and borrowings 11,120 11,120Deferred government grants g 391 (18) 373Provisions f - 19 19Deferred tax liabilities m 2,692 4,189 6,881 14,203 4,190 18,393 Total liabilities 29,464 4,319 33,783 Net assets 38,875 (1,989) 36,886 Equity and reservesShare capital 6,086 6,086Share premium 2,797 2,797Revaluation reserve m 13,056 (2,093) 10,963Investment property revaluation reserve h 9,435 (9,435) -Other reserves o,p 314 (63) 251Retained earnings h,i,m,p 7,187 9,602 16,789 Total equity 38,875 (1,989) 36,886 Restatement of the comparative Consolidated Balance Sheet as at 31 March 2007 -----------31 March 2007---------- UK GAAP Effect of Adopted IFRSs transition to Adopted IFRSs Note £000 £000 £000Non-current assetsProperty, plant and equipment a 33,342 33,342Intangible assets 576 576Investment property 15,923 15,923Investment in joint venture Share of gross assets l 8,956 (8,956) - Share of gross liabilities l (9,023) 9,023 -Investment in associate b,l - 828 828Other financial assets c - 130 130 49,774 1,025 50,799Current assetsInventories 3,898 3,898Trade and other receivables b 6,377 (895) 5,482Cash 6 6Non-current assets held for sale - -Derivatives k - 14 14 10,281 (881) 9,400 Total assets 60,055 144 60,199 Current liabilitiesBank overdraft c,d 7,000 (939) 6,061Other interest-bearing loans and borrowings d - 1,069 1,069Trade and other payables e,f 3,778 (40) 3,738Deferred income 3,336 3,336Deferred government grants g 3 18 21Tax payable n 306 306Derivatives k - 7 7 14,423 115 14,538 Non-current liabilitiesOther interest-bearing loans and borrowings 2,293 2,293Deferred government grants g 351 (18) 333Provisions f - 40 40Deferred tax liabilities m 2,828 3,383 6,211 5,472 3,405 8,877 Total liabilities 19,895 3,520 23,415 Net assets 40,160 (3,376) 36,784 Equity and reservesShare capital 6,112 6,112Share premium 2,843 2,843Revaluation reserve m 13,056 (2,019) 11,037Investment property revaluation reserve h 9,435 (9,435) -Other reserves o,p 348 (97) 251Retained earnings h,k,m,p 8,366 8,175 16,541 Total equity 40,160 (3,376) 36,784 Notes to the restatement of equity from UK GAAP to Adopted IFRS: Presentation adjustments: a) Under Adopted IFRS, paintings and antiques held by the Group have beenreclassified as property, plant and equipment. b) The loan to the associate company of £895,000 as at 31 March 2007 (30September 2006: £856,000, 1 April 2006: £771,000) has been reclassified fromdebtors due in more than one year to investment in associate within non-currentassets. c) The Group has given guarantees and placed a bond in favour of BECAviations to the sum of £130,000. Previously, the bond was shown as a deductionfrom bank overdrafts. The bond has now been shown within non-current financialassets. d) Under Adopted IFRS, loans of £1,069,000 as at 31 March 2007 (30 September2006: £1,865,000, 1 April 2006: £1,026,000) are disclosed separately from bankoverdrafts. Under UK GAAP, they were shown together under the caption 'bankoverdraft and loans'. e) Under Adopted IFRS, trade and other payables includes trade creditors,accruals, VAT and social security costs and other creditors. Deferred incomeand corporation tax payable are shown separately on the face of the balancesheet. f) Provisions for aircraft maintenance overhauls were previously includedwithin accruals. It has been decided it is more appropriate to show themseparately as provisions on the face of the balance sheet. g) Deferred government grants have been split between current liabilitiesand non-current liabilities. Numerical adjustments: h) Under Adopted IFRS, the surplus or deficit arising on the revaluation ofinvestment properties is recorded in the income statement as opposed to theinvestment property revaluation reserve under UK GAAP. The investment propertyrevaluation reserve under UK GAAP is therefore aggregated with retained earningsunder Adopted IFRS. i) Under Adopted IFRS, an investment property in the course of constructionshould be classified as property, plant and equipment in accordance with IAS 16'Property, Plant and Equipment' until construction is complete. Accordingly,£11,400,000 has been reclassified from inventories to property, plant andequipment in the six months to 30 September 2006. When an investment property is ready for use, it is reclassified from property,plant and equipment to investment property and remeasured to fair value. Anysurplus or deficit on remeasurement is recorded in the income statement. Acompleted investment property of cost £11,400,000 was moved from property, plantand equipment to investment property in the six months to 30 September 2006.The property was then remeasured to it's fair value of £13,600,000 and the£2,200,000 surplus was recorded in the income statement. j) Under Adopted IFRS, certain assets held for sale meet the definition ofnon-current asset held for sale. Accordingly, in the period to 30 September2006, £13,600,000 has been reclassified from investment property to non-currentasset held for sale. k) The fair value of derivatives has been recorded in the financialstatements for the year ended 31 March 2007. A financial asset of £14,000 and afinancial liability of £7,000 have been recorded in the balance sheet with thecorresponding £14,000 gain and £7,000 loss being shown in the income statementwithin financial income and financial expense respectively. Under UK GAAP, thefair values were disclosed but not included in the financial statements as thevalues were immaterial. Under Adopted IFRS, it has been decided to include thefair values in the financial statements. l) Under UK GAAP, the Group's investment in LIFT Investments Limited wastreated as a joint venture. For an investment to be classified as a jointventure, UK GAAP requires that "decisions on financial and operating policiesessential of that venture must require each venturer's consent". All decisionsmade by the Board of the LIFT Investments Limited are, as a matter of fact, madeon a unanimous basis. Although the Group's economic interest in Lift is 62%, the unanimous votingarrangements that in fact operated at board level meant that under FRS 9 'Associates and joint ventures' it was appropriate to regard the interest as ajoint venture for UK GAAP purposes. However, Adopted IFRS focuses more on theprecise terms of relevant agreements to establish whether control, joint controlor significant influence exists. Accordingly it is necessary to examine theterms of the LIFT shareholder agreement to determine the appropriate accountingtreatment. As the terms of the shareholder agreement provide for majorityvoting on key decisions affecting the business, and the Group has 50% of thevoting rights, it has neither control nor joint control under Adopted IFRS. Ithas significant influence and hence has been treated as an associated company. As at 1 April 2006, 30 September 2006, 31 March 2007 and 30 September 2007, theassociate was in a net liability position. The Group's share of the associate'snet liabilities has been shown as a deduction from the loan to the associate,which is considered as part of the investment in the associate. The Group'sshare of the associate's losses have been shown as one line in the incomestatement under Adopted IFRS. m) Under Adopted IFRS, deferred tax liabilities are provided on the gainthat would crystallise if an investment property or other asset was sold. UKGAAP required that this potential liability was disclosed but not provided inthe balance sheet. The deferred taxation on investment property is recorded inthe income statement and the deferred taxation on property, plant and equipmentis charged to the revaluation reserve. The revaluation reserve has beenpreserved for owner-occupied property carried at revalued amount. The amount ofthis reserve on transition was the difference between the fair value and theAdopted IFRS cost. n) Current tax is still calculated based on the UK GAAP profit. There istherefore no adjustment made to the current tax charge in the income statementor the corporation tax liability in the balance sheet in translating theaccounts to Adopted IFRS. o) Under UK GAAP, a merger reserve and a capital reserve were created on theacquisition of a subsidiary. Under Adopted IFRS, the two merger reserves havebeen combined. No adjustment has been made to them, as they arose on businesscombinations that were not required to be restated on transition. p) Under UK GAAP, the share-based payment reserve was shown within otherreserves. Under Adopted IFRS, the share-based payment reserve has beenaggregated with retained earnings. Reconciliation of shareholders equity from UK GAAP to Adopted IFRS Note As at 1 As at 30 As at 31 April September March 2006 2006 2007 £'000 £'000 £'000 Shareholders equity under UK GAAP 38,018 38,875 40,160Fair value adjustments of investment property a - 2,200 -Fair value movement on financial instruments b - - 7Deferred taxation on properties that was not provided forunder UK GAAP c (3,698) (4,189) (3,383) Shareholders equity under Adopted IFRS 34,320 36,886 36,784 Notes to the reconciliation of shareholders equity from UK GAAP to Adopted IFRS: a) See note i above in the notes to the restatement of equity from UK GAAP to Adopted IFRS. b) See note k above in the notes to the restatement of equity from UK GAAP to Adopted IFRS. c) See note m above in the notes to the restatement of equity from UK GAAP to Adopted IFRS. Restatement of the Consolidated Income Statement for the six months to 30September 2006 UK GAAP Effect of Adopted IFRSs transition to Note Adopted IFRSs £000 £000 £000 Revenue a 16,774 (146) 16,628Less share of joint ventures revenue a (146) 146 - Group revenue 16,628 - 16,628 Cost of sales e,f (13,707) (7) (13,714) Gross profit 2,921 (7) 2,914 Other operating income f - 11 11Administrative expenses (503) (503) Other operating expenses e - (4) (4) Fair value adjustments of investment property b - 2,200 2,200 Share of operating loss in joint ventures a (4) 4 - Operating profit before net financing costs 2,414 2,204 4,618 Financial income 60 60Financial expense (472) (472)Share of financial expense of joint venture a - - - Net financing costs (412) - (412) Share of loss of associate using the equityaccounting method a - (4) (4) Profit before tax 2,002 2,200 4,202 Taxation c (600) (533) (1,133) Profit for the period attributable to the equityshareholders 1,402 1,667 3,069 Restatement of the Consolidated Income Statement for the year to 31 March 2007 UK GAAP Effect of Adopted IFRSs transition to Note Adopted IFRSs £000 £000 £000 Revenue a 30,688 (499) 30,189Less share of joint ventures revenue a (499) 499 - Group revenue 30,189 - 30,189 Cost of sales f (26,297) (22) (26,319) Gross profit 3,892 (22) 3,870 Other operating income f - 22 22Administrative expenses (954) (954)Other operating expenses g - (59) (59)Fair value adjustments of investment property g - 2,200 2,200Share of operating profit in joint ventures a 288 (288) -Profit on sale of fixed assets g 2,141 (2,141) - Operating profit before net financing costs 5,367 (288) 5,079 Financial income d 105 14 119Financial expense d (958) (7) (965)Share of financial expense of joint venture a (302) 302 - Net financing costs (1,155) 309 (846) Share of loss of associate using the equityaccounting method a - (14) (14) Profit before tax 4,212 7 4,219 Taxation c (1,266) 200 (1,066) Profit for the period attributable to the equityshareholders 2,946 207 3,153 Notes to the restatement of profit from UK GAAP to Adopted IFRS: a) See note l above in the notes to the restatement of equity from UK GAAP toAdopted IFRS. b) See note i above in the notes to the restatement of equity from UK GAAP toAdopted IFRS. c) See note m above in the notes to the restatement of equity from UK GAAP toAdopted IFRS. d) See note k above in the notes to the restatement of equity from UK GAAP toAdopted IFRS. e) Loss on sale of fixed assets of £4,000 has been shown separately from costof sales for the six month period to 30 September 2006. f) The release of government grants to the income statement has been shownseparately from cost of sales. g) Profit on sale of fixed assets totalling £2,141,000 as at 31 March 2007has been split between fair value adjustments of investment property of£2,200,000 and a loss on sale of fixed assets of £59,000 shown within otheroperating expenses. The fair value adjustment to investment property of£2,200,000 is discussed in note i above in the notes to the restatement ofequity from UK GAAP to Adopted IFRS. Explanation of material adjustments to the cash flow statement comparatives for31 March 2007 The transition from UK GAAP to Adopted IFRS has no effect upon the reported cashflows generated by the Group. The Adopted IFRS cash flow statement is presentedin a different format from that required under UK GAAP with cash flows splitinto three categories of activities - operating activities, investing activitiesand financing activities. In preparing the cash flow statement under Adopted IFRS, cash and cashequivalents include cash at bank and bank overdrafts. The Group has givenguarantees and placed a bond in favour of BEC Aviations to the sum of £130,000.Under UK GAAP, the bond was classified as part of bank overdrafts. UnderAdopted IFRS, the bond does not meet the definition of cash and cash equivalentsand therefore has not been included within cash and cash equivalents in the cashflow statement. Key differences for Sutton Harbour Holdings plc between UK GAAP and Adopted IFRS This section sets out the main impacts of Adopted IFRS. This information hasnot been audited and is provided for information purposes only. Investment property revaluations Under UK GAAP, any surplus or deficit arising from the revaluation of investmentproperties was recorded in the investment property revaluation reserve on thebalance sheet. Under Adopted IFRS, any surplus or deficit arising from the revaluation ofinvestment properties is recorded directly in the income statement. The investment property portfolio was last revalued as at 31 March 2006increasing the investment property revaluation reserve to £9,435,000. Thisreserve has been aggregated with retained earnings under Adopted IFRS and hasincreased the retained earnings reserve by £9,435,000. All future revaluations of the investment property portfolio will be recordeddirectly in the income statement. This may lead to future profits being morevolatile. Treatment of the sale of the office building occupied by the Department for Workand Pensions Under UK GAAP, the building was held at cost during construction. When it wasready for use it was reclassified as an investment property. The property washeld as an investment property for a short period of time during which theinvestment property portfolio was not revalued. The decision was then made tosell the building and in the second six months of the year the building was soldfor a profit of £2,200,000. The profit was shown in the profit and loss accountin the second half of the year as 'profit on sale of fixed assets'. Under Adopted IFRS, the building is held at cost in accordance with IAS 16 'Property, Plant and Equipment' while being constructed. Once the property isready for use it is transferred to investment property and, in accordance withIAS 40 'Investment Property', is remeasured to it's fair value of £13,600,000.The fair value uplift of £2,200,000 is recorded in the income statement in thefirst six months of the year as 'fair value adjustments of investment property'. The transition from UK GAAP to Adopted IFRS has had the effect of bringing theprofit from the sale of the building of £2,200,000 forward from the second halfof the year ended 31 March 2007 to the first six months of the year. The profithas also been reclassified from 'profit on the sale of fixed assets' to 'fairvalue adjustments of investment property'. Deferred taxation Under Adopted IFRS, deferred tax liabilities are provided on the gain that wouldcrystallise if an investment property or other asset was sold. UK GAAP requiredthat this potential liability was disclosed but not provided in the balancesheet. The deferred taxation on investment properties is recorded in the incomestatement and the deferred taxation on property, plant and equipment is chargedto the revaluation reserve. This has had the effect of increasing the deferred tax liability in the balancesheet from £2,828,000 under UK GAAP to £6,211,000 under Adopted IFRS as at 31March 2007. Treatment of the Group's investment in LIFT Investments Limited Under UK GAAP, the investment in LIFT Investments Limited was treated as a jointventure. The Group's share of the joint ventures gross assets and grossliabilities was disclosed on the face of the balance sheet and the Group's shareof the joint ventures operating profit and interest payable was shown on theface of the profit and loss account. Under Adopted IFRS, for the reasons explained above, the investment is treatedas an associate. The Group's share of the associates losses is shown on theface of the income statement. This loss reduces the Group's interest in theassociate on the face of the balance sheet. This information is provided by RNS The company news service from the London Stock Exchange