IFRS restatement 2006/07

5 Nov 2007 07:01

Dart Group PLC05 November 2007 Dart Group PLC Dart Group restates its 2006/2007 Financial Information under IFRS On 22 November 2007, Dart Group PLC ("the Group") will be announcing its interimresults for the six months ended 30 September 2007. As required by AIM Rules, results for this and subsequent periods will be reported under International Financial Reporting Standards. In those interim results, the Group will also restate its financial information under IFRS for the year ended 31 March 2007 and for the six months ended 30 September 2006. Whilst there is no change in the Group's cash flows, this restatement has aparticular impact on the treatment of contracts taken out to hedge the Group'sexposure to fuel and foreign currency movements, the effect of which is to alterthe timing of recognition of changes in value of these contracts. To highlight the effect of the restatement under IFRS and how the Group willpresent this in future results announcements, the headline consolidatedfinancial results for the Group under IFRS for the year ended 31 March 2007 aresummarised below, alongside the equivalent numbers reported under UK GAAP forthat period. In addition, in the final column the results for the same periodare shown for information, as if hedge accounting under IFRS had been possiblein the period for all relevant derivative contracts. Dart Group will present its future results, including the interim results to bereleased on 22 November 2007, in the same manner, showing both the actual IFRSpresentation and, for information purposes, as if hedge accounting under IFRScould have been adopted in 2006/7 for all relevant derivative contracts. IFRS restatement £m (except as UK IFRS assuming hedgeindicated) GAAP restatement accounting (audited) (unaudited) (unaudited) Income Statement Turnover 352.0 349.0 349.0 EBITDA (1) 40.0 22.1 39.8 Operating Profit(1) 18.6 1.2 18.9 Profit/(loss) beforetaxation (1) 15.9 (3.6) 14.1 Profit attributableto equity shareholders 13.6 0.7 13.1 Balance sheet Net assets 71.1 59.0 59.0 Earnings per Share (p) 9.73 0.53 9.37 Notes (1) The above UK GAAP figures for EBITDA, Operating Profit and Profit beforetaxation exclude the £2.2m profit which the group made on the sale of ChannelExpress (CI) Limited during the year ended 31 March 2007. This is to make themcomparable to the equivalent IFRS figures which only show profits in relation todiscontinued operations below the Profit before tax line. Treatment of Derivative Transactions Dart Group utilises foreign exchange contracts and fuel forward contracts tohedge its exposure to US$ and Euro exchange rates and Jet Fuel prices as aresult of its aviation activities. The Group's policy is to hedge these risks inadvance of the relevant cash expenditure in order to minimise variation in theGroup's cost base. Under UK GAAP, the Group hedge accounted for such instruments, deferringrecognition of the contract until maturity and reporting the underlyingtransaction at the contracted rate. The fair value of these instruments wasreported in Note 18 to the Accounts. Under IFRS, from 1 April 2007, the Group will also hedge account for theseinstruments, having put the necessary documentation in place to meet therequirements of the new Standards. As such, any movements in the fair value ofthese contracts, prior to maturity, will be reported in Reserves (withoutimpacting the Profit & Loss Account for the relevant period), as long as theseinstruments effectively hedge the relevant risks. The hedge documentation required under IFRS differs from that required under UKGAAP and this was not in place for the year ended 2006/7. As a result, hedgeaccounting cannot be adopted in restating the results for this period inaccordance with IFRS and therefore fair value movements must be reported withinthe Profit & Loss Account. Impact on Restatement of 2006/7 Results The unavailability of hedge accounting under IFRS for derivative contractsresults in a timing difference in the recognition of changes in the value ofthese contracts which will reverse in subsequent accounting periods. The aggregate impact of the restatement of derivative transactions on the yearended 31 March 2007 is to reduce profit by £19.3m and decrease net assets atthat date by £12.6m. This reflects the movement in the fair value of derivativesin the period and an adjustment to the carrying value of aircraft and engines toreflect the use of spot rather than hedged exchange rates in establishing the pound sterling value of these assets. Of this aggregate adjustment, £17.7m is the timing difference, which relates tocontracts that would have been eligible for hedge accounting under IFRS ifappropriate documentation had been in place. Accordingly, the final column abovepresents 2006/7 results as if hedge accounting had been applied to thesecontracts to allow a comparison of the underlying performance of the businessgoing forward. Under the required IFRS treatment, the £17.7m charge to Profit & Loss Account in2006/07 will reverse in future periods (via a reduction in the fuel costs,depreciation and other operating costs that the business would otherwise haverecorded) as the relevant contracts mature. Again in those future periods, thesemovements will also be presented, for information purposes, on a fully hedgeaccounted basis to allow a comparison of the underlying performance of thebusiness. The remaining £1.6m of the adjustment relates to the differing treatment underIFRS of hedging instruments which include option structures and over-hedgedpositions. A similar level of difference between UK GAAP and IFRS is to beexpected in respect of these positions for 2007/8. Other Impacts of the adoption of IFRS In addition to the changes in the treatment of derivatives, goodwill is nolonger amortised under IFRS, increasing the 2006/7 operating profit by £0.5m. Inpresentation terms only, there are also changes to the treatment of a businesswhich was discontinued in 2006/7 and to the classification of certain spareparts. For full details of the restatement please visit the Dart Group websitewww.dartgroup.co.uk. For further information, please contact: Andrew MerrickGroup Finance Director 07788 5653580113 238 7444 Andy PedretteSmith & Williamson Corporate Finance Limited 020 7131 4368 This information is provided by RNS The company news service from the London Stock Exchange