Vp Regulatory News (VP.)

18 Nov 2005 16:00

Vp PLC18 November 2005 Press Release 7 November 2005 Vp plc ("Vp" or "the Group") The Impact of International Financial Reporting Standards ("IFRS") Introduction The European Union ("EU") has approved the application of InternationalFinancial Reporting Standards for listed companies for periods beginning on orafter 1 January 2005. For Vp the financial statements for the year ended 31March 2006 will be the first to be prepared in accordance with IFRS adopted foruse in the EU. The adoption of IFRS requires the restatement of the comparativeresults for the year ended 31 March 2005 and the associated interim period. Thisannouncement sets out the effect of this restatement and explains the maindifferences between UK GAAP and IFRS as applicable to Vp. Basis of Preparation The financial information presented in this statement has been prepared byapplying all IFRS and International Accounting Standards ("IAS") that areexpected to be applicable to the Group's reporting for the year ended 31 March2006. The standards are still subject to ongoing review and possible amendment.In addition, some of them are still subject to endorsement by the EU, inparticular the Group has adopted the amendment to IAS19 which allows actuarialgains and losses to be reflected in the Statement of Recognised Income andExpense. This amendment has not yet been endorsed by the EU. It is thereforepossible that further standards, amendments, interpretations and/or changes inpractical application of IFRS could affect the year ended 31 March 2006 and theassociated comparative figures. Vp will continue to monitor these changes and ifappropriate amend its accounting policies. The UK GAAP figures presented in this announcement relating to the 31 March 2004balance sheet and for the year ended 31 March 2005 are not the company'sstatutory accounts. Those accounts, which were prepared under UK GAAP, havebeen reported on by the company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was unqualified and did not containstatements under Section 237(2) or (3) of the Companies Act 1985. Accounting Policies Vp's accounting policies have been applied consistently to all years presentedand are in line with those applied in the last annual financial statements forthe year ended 31 March 2005, with the exception of the following changes to theaccounting policies which have been adopted in order to comply with IFRS. Goodwill Goodwill represents the excess of the fair value of the purchase price over thefair value of the net assets acquired as part of a business combination.Goodwill is assumed to have an indefinite useful economic life and under IFRS 3,"Business Combinations", is not amortised, but is reviewed annually forimpairment and carried in the balance sheet at cost less any accumulatedimpairment losses. The Group has applied the exemption under IFRS 1 that allows goodwill in respectof acquisitions made prior to 1 April 2004 to remain at deemed cost as statedunder UK GAAP, that is net of amortisation to that date. Dividends In accordance with IAS 10, "Events after the Balance Sheet Date", dividendsdeclared after the balance sheet date are not accrued at that balance sheet datebecause the liability does not represent an obligation as defined by IAS 37, "Provisions, Contingent Liabilities and Contingent Assets". Each dividend willtherefore be recognised in the period in which it is approved rather than in theperiod to which it relates. Share Based Payments IFRS 2, "Share-based Payments", requires that the fair value of share options becharged to the Income Statement based upon their fair value at the date ofgrant. The charge is recognised evenly over the vesting period of the options. The fair values are calculated using an appropriate option pricing model. TheGroup's Approved, Unapproved and Save as you Earn (SAYE) schemes have beenvalued using the Black-Scholes model and the Income Statement charge is adjustedto reflect the expected number of options that will vest based on expectedlevels of performance and the expected number of employees leaving the Group.The fair values of the Group's Long Term Incentive Plan (LTIP) and ShareMatching options are calculated using a discounted grant price model againadjusted for expected performance and employees leaving the Group. The Group has chosen to adopt the exemption whereby IFRS 2 is only applied tooptions granted after 7 November 2002. Financial Instruments The Group's only financial instrument is an interest rate swap. Under IAS 39, "Financial Instruments: Recognition and Measurement" this is accounted for in thebalance sheet at fair value and any movement in fair value is taken to theIncome Statement, unless the transaction is designated as part of a hedgingrelationship in which case any changes to that fair value are accounted for inequity and then released to the Income Statement to match the settlement ofinterest under the swap. Employee Benefits Under IAS 19, "Employee Benefits" the Group's pension deficits are recorded asbalance sheet liabilities and the actuarial gains and losses associated withthis liability are to be recognised in the Statement of Recognised Income andExpense as they arise. All actuarial gains and losses at 1 April 2004, the dateof transition to IFRS, were recognised. Actuarial gains and losses occur whenthe actual returns on scheme assets differ from those initially expected by theactuary. Taxation The charge for taxation is based on the results for the year and takes intoaccount full provision for deferred taxation due to temporary timing differencesbetween the carrying value of an asset or liability and its tax base. Explanation of IFRS Adjustments Goodwill Under UK GAAP goodwill was amortised over its expected useful life of twentyyears. Under IFRS, goodwill is assumed to have an indefinite useful life, butis reviewed for impairment on an annual basis and any such impairment is chargedto the Income Statement. At the date of transition the Group has applied theexemption under IFRS1 not to reinstate goodwill to original cost and has carriedforward the book value of goodwill relating to acquisitions prior to 1 April2004 totalling £7,136k . The impact on the Income Statement for the year ending 31 March 2005 is thatgoodwill amortisation of £429k that was previously charged under UK GAAP hasbeen reversed such that no charge has been provided and hence net assets at 31March 2005 have increased by this amount. In addition the 31 March 2004 balance sheet has also been adjusted to reflectgoodwill of £298k, recorded in the year ended 31 March 2005, which related toprior year acquisitions for which fair values had previously been provisionallyestimated. This has no impact on net assets as it is purely a balance sheetreclassification. As at the 31 March 2005 there was no indication of impairment of any of theremaining goodwill. Dividends Under IFRS dividends are now charged in the period in which they are approvedrather than the period to which they relate, therefore the final dividend forthe year ended 31 March 2004 of £1,452k has been reversed in the opening balancesheet and reflected in equity in the half year ended 30 September 2004.Similarly the interim dividend of £761k for 30 September 2004 has been reversedfrom the half year balance sheet and reflected in equity in the year ended 31March 2005 and the final dividend of £1,740k accrued for 31 March 2005 has beenreversed in the IFRS balance sheet and will be reflected in the half year ending30 September 2005. Share Based Payments Under UK GAAP the cost of options was based on the cost of shares held by theemployee trust, whereas under the IFRS the fair values per share are calculatedfor options granted since 7 November 2002 on the basis stated above and chargedto the Income Statement over their respective vesting periods. The additional charge arising from adoption of IFRS 2 on the Group's IncomeStatement was £18k for the half year ended 30 September 2004 and £23k in totalfor the year ended 31 March 2005. Financial Instruments The Group's only derivative instrument is an interest rate swap held for hedgingpurposes in order to reduce the risk of exposure to changes in interest rates.The movements in fair value have been taken to the Income Statement. As at 31 March 2004 a liability of £49k has been recognised reducing net assetsto reflect the fair value of this instrument at that date. For the year ended 31March 2005, the fair value improved by £40k due to an increase in interest ratesat that date and this has been credited to the Income Statement for the period. The Group has not applied the exemption under IAS39 which would have allowedapplication of the standard to be deferred until 1 April 2005. Employee Benefits Under UK GAAP pension costs were accounted for against the operating profit byspreading the cost of providing the benefits, including actuarial gains andlosses, over the estimated average remaining service lives of employees withinthe pension schemes in accordance with SSAP24. IAS 19, "Employee Benefits",requires that the Group's pension deficits be recorded as balance sheetliabilities and that all actuarial gains and losses are recognised, under theamendment to IAS 19, in the Statement of Recognised Income and Expense as theyarise. The deficit on the balance sheet for 31 March 2004, under IAS 19, reduced netassets by £2,391k with a deferred tax asset of £778k being accounted for withindeferred tax liabilities. The impact of IAS 19 for the year ended 31 March 2005 is to reduce the pensioncharge in the Income Statement by £231k. The deficit recognised in the balancesheet at 31 March 2005 increased by £1,322k to £3,916k. The Statement ofRecognised Income and Expense reflects £1,310k of this adjustment, the balancebeing reflected through the Income Statement. Deferred Tax Deferred Tax, under UK GAAP, was provided for on the basis of timing differencesbetween accounting profit and taxable profit. IAS 12, "Income Taxes" requiresthat deferred tax is to be based on temporary differences between the carryingvalue of an asset or liability and its tax base. The effect of IFRS on the deferred tax liability is to reduce the liability at31 March 2004 by £300k, with a corresponding increase in equity which is splitbetween retained earnings and the revaluation reserve. The decrease related todeferred tax assets on pensions and share options of £1,000k less liabilities onasset revaluations and rolled over capital gains together with the reversal ofthe SSAP24 deferred tax asset which in total were £700k. During the year ended 31 March 2005 the deferred tax liability under IFRSreduced by £951k of which £317k was credited to the Income Statement and thebalance was credited to equity. Cash Flow Since IFRS do not affect the underlying figures, purely the presentation of theinformation, this announcement does not contain any restated cash flowstatements. Presentation All the UK GAAP figures stated below have been reformatted in accordance withthe presentation under IFRS. Consolidated Income StatementFor the year ended 31 March 2005 IFRS adjustments Employee Financial Share Based Goodwill Benefits Instruments Payments Deferred Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Revenue 90,044 90,044Cost of sales (61,958) (61,958)Gross profit 28,086 0 0 0 0 0 28,086Administration expenses (18,383) 429 231 (23) (17,746)Operating profit before 9,703 429 231 0 (23) 0 10,340financing costsNet finance expenses (348) 40 (308)Profit before tax 9,355 429 231 40 (23) 0 10,032Income tax expense (2,831) 7 (2,824)Profit for the year 6,524 429 231 40 (23) 7 7,208attributable to equityholders of the parent Earnings per shareBasic 15.04p 16.62pDiluted 14.56p 16.09p Consolidated Income StatementFor the half year ended 30 September 2004 IFRS adjustments Employee Financial Share Based Goodwill Benefits Instruments Payments Deferred Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Revenue 45,601 45,601Cost of sales (31,486) (31,486)Gross profit 14,115 0 0 0 0 0 14,115Administration expenses (9,217) 211 (18) (9,024)Operating profit before 4,898 211 0 0 (18) 0 5,091financing costsNet finance expenses (188) 32 (156)Profit before tax 4,710 211 0 32 (18) 0 4,935Income tax expense (1,460) 43 (1,417)Profit for the period 3,250 211 0 32 (18) 43 3,518attributable to equityholders of the parent Earnings per shareBasic 7.52p 8.14pDiluted 7.26p 7.86p Consolidated Statement of Recognised Income and ExpenseFor the year ended 31 March 2005 IFRS adjustments Employee Share Based Financial Goodwill Benefits Payments Instruments Deferred Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Actuarial losses on (1,310) (1,310)defined benefitpension schemes Tax on items taken 393 393directly to equity Foreign exchange 4 4translationdifference Net income recognised 4 (1,310) 393 (913)direct to equity Profit for the year 6,524 429 231 (23) 40 7 7,208 Total recognised 6,528 429 (1,079) (23) 40 400 6,295income and expensefor the year Statement of Changes in EquityFor the year ended 31 March 2005 IFRS adjustments Employee Share Based Financial Dividends Goodwill Benefits Payments Instruments Deferred Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 £000 Total recognised 6,528 429 (1,079) (23) 40 400 6,295income and expensefor the year Tax movements to 241 241equity Share option 253 23 276charge in the yearand gains/losseson share optionsand disposal ofshares Net movement in 153 153shares held by VpEmployee Trust atcost Dividends to (2,502) 288 (2,214)shareholders 4,432 288 429 (1,079) 40 641 4,751As at 1 April 2004 51,803 1,452 (2,391) (49) 300 51,115As at 31 March 56,235 1,740 429 (3,470) (9) 941 55,8662005 Consolidated Statement of Recognised Income and ExpenseFor the half year ended 30 September 2004 IFRS adjustments Employee Share Based Financial Goodwill Benefits Payments Instruments Deferred Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Foreign exchange 5 5translation differenceNet income recognised 5 5direct to equity Profit for the period 3,250 211 (18) 32 43 3,518Total recognised income 3,255 211 (18) 32 43 3,523and expense for theperiod Statement of Changes in EquityFor the half year ended 30 September 2004 IFRS adjustments Employee Share Based Financial Deferred Dividends Goodwill Benefits Payments Instruments Tax IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 £000 Total recognised 3,255 211 (18) 32 43 3,523income and expensefor the period Tax movement to 171 171equity Share option charge 139 18 157in the year and gains/losses on shareoptions and disposalof shares Net movement in (53) (53)shares held by VpEmployee Trust atcost Dividends to (761) (691) (1,452)shareholders 2,580 (691) 211 0 32 214 2,346As at 1 April 2004 51,803 1,452 (2,391) (49) 300 51,115As at 30 September 54,383 761 211 (2,391) (17) 514 53,4612004 Consolidated Balance SheetAs at 31 March 2004 IFRS adjustments Employee Financial Goodwill Benefits Deferred Tax Dividends Instruments IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Non-current assetsProperty, plant and 49,911 (354) 49,557equipmentIntangible assets 7,136 298 7,434 57,047 (56) 56,991 Current assetsInventories 2,018 2,018Trade and other 21,694 78 21,772receivablesCash and cash 1,087 1,087equivalents 24,799 78 24,877 Current liabilitiesInterest bearing (469) (469)loans and borrowingsIncome tax payable (1,641) (1,641)Trade and other (15,274) (22) 1,452 (49) (13,893)payablesNet current assets 7,415 56 1,452 (49) 8,874 Total assets less 64,462 0 1,452 (49) 65,865current liabilities Non-currentliabilitiesInterest bearing (8,110) (8,110)loans and borrowingsEmployee benefits (203) (2,391) (2,594)Deferred tax (4,319) 300 (4,019)liabilityNet assets 51,830 0 (2,391) 300 1,452 (49) 51,142 EquityIssued capital 2,309 2,309Share premium 16,192 16,192Revaluation reserve 599 (180) 419Retained earnings 32,703 (2,391) 480 1,452 (49) 32,195Total equity 51,803 (2,391) 300 1,452 (49) 51,115attributable toequity holders ofthe parent Minority interest 27 27 Total equity 51,830 (2,391) 300 1,452 (49) 51,142 Consolidated Balance SheetAs at 30 September 2004 IFRS adjustments Employee Financial Goodwill Benfits Deferred Tax Dividends Instruments IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Non-current assetsProperty, plant and 48,073 (172) 47,901equipmentIntangible assets 7,052 382 7,434 55,125 210 55,335 Current assetsInventories 2,098 2,098Trade and other 23,131 23,131receivablesCash and cash 4,794 4,794equivalents 30,023 30,023 Current liabilitiesInterest-bearing (238) (238)loans and borrowingsIncome tax payable (1,925) (1,925)Trade and other (16,328) 1 761 (17) (15,583)payablesNet current assets 11,532 1 761 (17) 12,277 Total assets less 66,657 211 761 (17) 67,612current liabilities Non currentliabilitiesInterest-bearing (8,000) (8,000)loans and borrowingsEmployee benefits (203) (2,391) (2,594)Deferred tax (4,044) 514 (3,530)liabilityNet assets 54,410 211 (2,391) 514 761 (17) 53,488 EquityIssued capital 2,309 2,309Share premium 16,192 16,192Revaluation reserve 599 (180) 419Retained earnings 35,283 211 (2,391) 694 761 (17) 34,541Total equity 54,383 211 (2,391) 514 761 (17) 53,461attributable toequity holders ofthe parent Minority interest 27 27 Total equity 54,410 211 (2,391) 514 761 (17) 53,488 Consolidated Balance Sheet As at 31 March 2005 IFRS adjustments Employee Financial Goodwill Benefits Deferred Tax Dividends Instruments IFRS UK GAAP (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 £000 £000 £000 Non current assetsProperty, plant and 48,676 48,676equipmentIntangible assets 7,039 429 7,468 55,715 429 56,144Current assetsInventories 2,136 2,136Trade and other 22,069 22,069receivablesCash and cash 5,755 5,755equivalents 29,960 29,960Current liabilitiesInterest-bearing (159) (159)loans and borrowingsIncome tax payable (1,628) (1,628)Trade and other (15,138) 1,740 (9) (13,407)payablesNet current assets 13,035 1,740 (9) 14,766 Total assets less 68,750 429 1,740 (9) 70,910current liabilities Non currentliabilitiesInterest-bearing (8,033) (8,033)loans and borrowingsEmployee benefits (446) (3,470) (3,916)Deferred tax (4,009) 941 (3,068)liabilityNet assets 56,262 429 (3,470) 941 1,740 (9) 55,893 EquityIssued capital 2,309 2,309Share premium 16,192 16,192Revaluation reserve 430 (129) 301Retained earnings 37,304 429 (3,470) 1,070 1,740 (9) 37,064Total equity 56,235 429 (3,470) 941 1,740 (9) 55,866attributable toequity holders ofthe parent Minority interest 27 27 Total equity 56,262 429 (3,470) 941 1,740 (9) 55,893 - Ends - For further information please contact:Vp plc Mike Holt, Group Finance Director Tel: +44 (0) 1423 533 445mike.holt@vpplc.com www.vpplc.com AbchurchHenry Harrison-Topham Tel: +44 (0) 20 7398 7700henry.ht@abchurch-group.com www.abchurch-group.com Notes to Editors: The principal activity of the Group is equipment rental and associated servicesalmost entirely conducted within the UK. Vp plc listed on the London StockExchange in 1973. For the year ended 31 March 2005, Group turnover was £90.0million. The Group is now focused on six businesses: TPA TPA is a leading supplier of portable roadway systems, bridging, fencing andbarriers primarily to the UK market, but also in Ireland and mainland Europe.For further information, please visit www.tpa-ltd.co.uk Hire Station Tools and specialist products for industry, construction and home owners. Torrent Trackside Infrastructure equipment and services for the railway renewals and maintenanceindustry. Groundforce Excavation support systems and specialist products for the water, civilengineering and construction industries. UK Forks Rough terrain material handling equipment for industry, residential and generalconstruction. Airpac Oilfield Services Equipment and service providers to the international oil and gas exploration anddevelopment markets. 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