Company GTL Resources PLC TIDM GTL Headline Adoption of IFRS Released    16:07 14-Nov-07 Number 7496H

RNS Number:7496H

GTL Resources PLC

14 November 2007

 

 

 

For Immediate Release

14 November 2007

 GTL Resources PLC

 ("GTL" or the "Company)

First Time Adoption of International Financial Reporting standards ('IFRS')

 

GTL Resources Plc (AIM: GTL), the project development company focused on ethanol production in the United States, today announces its first time adoption of International Financial Reporting Standards (‘IFRS’).

GTL Resources has historically prepared its consolidated financial statements under UK Generally Accepted Accounting Practice (“UK GAAP”). The AIM rules require the financial statements to be prepared in accordance with Adopted IFRSs.

References to “Adopted IFRS” throughout this document refer to the application of International Financial Reporting Standards as adopted by the EU (“Adopted IFRS”).

Adopted IFRS will apply for the first time in the Group’s financial statements for the year ending 31 March 2008. Accordingly the financial results for the six months ended 30 September 2007 have been prepared and reported under adopted IFRS. As the Group publishes comparative information in its Annual Report and Interim Statement, the date of transition to adopted IFRS is 1 April 2006.

To explain how the Group’s reported performance and financial position are affected by this change, information previously published under UK GAAP is restated on the basis of adopted IFRS in the attached appendices as follows:

Appendix 1 – Adopted IFRS accounting policies

Appendix 2 - Explanation of key UK GAAP to adopted IFRS differences

Appendix 3 - Reconciliation of consolidated balance sheet at 1 April 2006

Appendix 4 - Reconciliation of consolidated income statement for six months ended 30 September 2006

Appendix 5 - Reconciliation of consolidated balance sheet at 30 September 2006

Appendix 6 - Reconciliation of consolidated income statement for year ended 31 March 2007

Appendix 7 - Reconciliation of consolidated balance sheet at 31 March 2007

This unaudited financial information has been prepared on the basis of adopted IFRSs expected to be applicable at 31 March 2008. These are subject to ongoing review and endorsement by the EU or possible amendment by interpretive guidance from the IASB and are therefore still subject to change. We will update our restated information for any such changes when they occur.

For further information, please contact:

GTL Resources PLC

Peter Middleton, Executive Chairman Tel: 020 3170 5736

Michael Brennan, Finance Director Tel: 01642 794 000

 

Morgan Stanley

Alastair Maxwell, Tel: 020 7425 8000

Jon Bathard-Smith, Tel: 020 7425 8000

 

Buchanan Communications

Charles Ryland, Tel: 020 7466 5000

Ben Romney, Tel: 020 7466 5000

 

Basis of preparation

The unaudited financial information has been prepared on the basis of adopted IFRS. The accounting policies expected to be applied in the adopted IFRS financial statements for the year ending 31 March 2008 are set out in Appendix 1.

The auditors have issued unqualified opinions on the Group’s UK GAAP financial statements for the years ended 31 March 2007 and 31 March 2006. Both the transition balance sheet as at 1 April 2006 and the financial information for the year ended 31 March 2007 as prepared on the basis of adopted IFRS, will be audited as part of the audit of the financial statements for the year ending 31 March 2008. Subject to that audit and no further changes from the IASB, this information is expected to form the basis for comparatives when reporting financial results for 2008, and for subsequent reporting periods.

Overview of impact

For the year ended 31 March 2007 the net impact on total recognised income and expense attributable to equity holders of the Company as a result of the conversion to IFRS was $285,000 loss.  The details of these adjustments are given in Appendix 7.

Based on accounting policies detailed in Appendix 1, the effect on key reported results is as follows:

	Six months to		Year ended
	30 September 2006		31 March 2007
	IFRS	UKGAAP	IFRS	UK GAAP
Operating loss ($000)	(2,451)	(2,108)	(1,362)	(1,077)
Loss for period ($000)	(2,088)	(1,745)	(2,285)	(2,000)
Net assets ($000)	41,218	41,218	41,580	41,470
Basic EPS ($)	(0.0920)	(0.0800)	(0.1006)	(0.0880)

The main areas where IFRS has impacted on the results are as follows:

• Goodwill arising on acquisitions is no longer amortised, decreasing reported losses and increasing net assets.
• Exchange differences arising on the translation of net investments in foreign operations are taken to a translation reserve.

• Revenue and Cost of sales for the year ended 31 March 2007 have been restated gross of certain costs in accordance with IAS 18 ‘Revenue’.  These had previously been presented net under UK GAAP consistent with the industry norm.  This has no effect upon reported profit or net assets

Full details of the adjustments required are given in appendices 4-7.

Other key accounting aspects of the Group’s activities will remain unaffected by the transition to adopted IFRS, in particular:

Cash flow              

The adoption of IFRS will not affect the cash flows statement.

IFRS 1 exemptions                               

IFRS 1 ‘First time adoption of International Financial Reporting Standards’ permits those companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. The Group has utilised the following exemptions:

a) Share based payments – the Group has elected to apply IFRS 2 ‘Share based payments’, only to relevant share based payment transactions granted after 7 November 2002.

b)Business combinations – the Group has chosen not to restate business  combinations prior to the transition date.

c)Cumulative translation differences – the Group has adopted the exemption which allows the cumulative translation differences to be zero at the date of transition.  

Consolidated Income Statement

	Six months	Year to
	30 September 2006	31-Mar-07
	Unaudited	Unaudited
	$000	$000
Revenue	-	25,940
Cost of sales	-	(20,200)
	–––––––––––	–––––––––––
Gross profit	-	5,740
Administrative expenses	(2,451)	(7,102)
	–––––––––––	–––––––––––
Results from operating activities	(2,451)	(1,362)
Finance income	237	395
Finance expenses	-	(954)
	–––––––––––	–––––––––––
	237	(559)
Loss before income tax	(2,214)	(1,921)
Income tax expense	-	(168)
	–––––––––––	–––––––––––
Loss for the period	(2,214)	(2,089)
	–––––––––––	–––––––––––
Loss for the period attributable to:
Equity holders of the parent	(2,088)	(2,285)
Minority interest	(126)	196
	–––––––––––	–––––––––––
Loss for the period	(2,214)	(2,089)
	–––––––––––	–––––––––––

 

Consolidated Balance Sheet

	01-Apr-06	30-Sep-06	31-Mar-07
	Unaudited	Unaudited	Unaudited
	$000	$000	$000
Assets
Property, plant and equipment	24,771	57,770	69,430
Intangible assets	6,595	6,595	6,595
	–––––––––––	–––––––––––	–––––––––––
Total non-current assets	31,366	64,365	76,025
	–––––––––––	–––––––––––	–––––––––––
Inventories	-	-	3,797
Trade and other receivables	60	387	5,183
Prepayments for current assets	364	35	825
Cash and cash equivalents	19,936	8,600	6,236
	–––––––––––	–––––––––––	–––––––––––
Total current assets	20,360	9,022	16,041
	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––
Total assets	51,726	73,387	92,066
	–––––––––––	–––––––––––	–––––––––––
Equity
Share capital	41,046	41,046	41,046
Share premium	33,886	33,886	33,886
Special reserve	3,508	3,508	3,508
Currency translation reserve		343	395
Retained earnings	(40,190)	(41,978)	(41,988)
	–––––––––––	–––––––––––	–––––––––––
Total equity attributable to equity holders	38,250	36,805	36,847
of the company
Minority interest	4,539	4,413	4,733
	–––––––––––	–––––––––––	–––––––––––
Total equity	42,789	41,218	41,580
	–––––––––––	–––––––––––	–––––––––––
Non-current liabilities
Interest-bearing loans and borrowings	-	21,220	38,524
	–––––––––––	–––––––––––	–––––––––––
Trade and other payables	6,803	7,325	5,791
Interest-bearing loans and borrowings	-	1,250	3,752
Accruals and deferred income	314	547	1,618
Other liabilities	1,789	1,792	749
Taxation liabilities	31	35	52
	–––––––––––	–––––––––––	–––––––––––
Total current liabilities	8,937	10,949	11,962
	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––
Total liabilities	8,937	32,169	50,486
	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––
Total equity and liabilities	51,726	73,387	92,066
	–––––––––––	–––––––––––	–––––––––––

 

Consolidated Statement of Changes in Equity

	Six months	Year to
	to 30 September 2006	31-Mar-07
	Unaudited	Unaudited
	$000	$000
Loss for the period	(2,088)	(2,285)
Share based payments	300	487
Foreign currency translation differences	343	395
	–––––––––––	–––––––––––
Net increase/(decrease) in total equity	(1,445)	(1,403)
Total equity at beginning of period	38,250	38,250
	–––––––––––	–––––––––––
Total equity at end of period	36,805	36,847
	–––––––––––	–––––––––––

 

Consolidated Statement of Cash Flows

	Six Months to	Year ended
	30-Sep-06	31-Mar-07
	Unaudited	Unaudited
	$000	$000
Cash flows from operating activities
Loss for period	(2,214)	(2,089)
Adjustments for:
Depreciation	16	1,143
Net finance expense	(237)	559
Equity-settled share based payment transactions	300	487
Income tax expense		168
	–––––––––––	–––––––––––
	(2,135)	268
Change in inventories		(3,797)
Change in trade and other receivables	2	(5,123)
Change in prepayments	-	(461)
Change in trade and other payables	175	(4,524)
	–––––––––––	–––––––––––
	(1,958)	(13,637)
Effect of exchange rate fluctuations	343	395
Interest paid		(954)
Income tax paid		(168)
	–––––––––––	–––––––––––
Net cash from operating activities	(1,615)	(14,364)
	–––––––––––	–––––––––––
Cash flows from investing activities
Interest received	237	395
Acquisition of property, plant and equipment	(32,428)	(42,007)
	–––––––––––	–––––––––––
Net cash from investing activities	(32,191)	(41,612)
	–––––––––––	–––––––––––
Cash flows from financing activities
New borrowings	22,470	42,276
	–––––––––––	–––––––––––
Net cash from financing activities	22,470	42,276
	–––––––––––	–––––––––––
Net increase in cash and cash equivalents	(11,336)	(13,700)
Cash and cash equivalents at beginning of period	19,936	19,936
	–––––––––––	–––––––––––
Cash and cash equivalents at end of period	8,600	6,236
	–––––––––––	–––––––––––

 

Appendix 1: Adopted IFRS accounting policies

This section provides a summary of the Group’s new accounting policies under adopted IFRS for the year ended 31 March 2008.

Basis of preparation

The preliminary IFRS information presented here does not constitute the Company’s statutory accounts for the year ended 31 March 2007. Those accounts, which were prepared under UK GAAP, have been reported on by the Company’s auditors and delivered to the Registrar of Companies. The report of the auditors was:

i) unqualified;

ii) did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and

iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The financial information is presented in US dollars, rounded to the nearest thousand, and is prepared on the historical cost basis with some exceptions, as detailed in the accounting policies set out below.

This preliminary information has been prepared on the basis of the recognition and measurement requirements of IFRSs in issue that either are endorsed by the EU and effective (or available for early adoption) at 31 March 2007 or available for early adoption at 31 March 2008, the Group’s first annual reporting date at which it is required to use Adopted IFRS. Based on these adopted IFRSs, the directors have made assumptions about the accounting policies expected to be applied, which are as set out below, when the first annual IFRS financial statements are prepared for the year ending 31 March 2008.

However the Adopted IFRSs that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 March 2008 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 31 March 2008.

The accounting policies below have been applied consistently throughout the Group to all periods presented in the financial information.

Use of estimates and judgements

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Basis of consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating polices of the entity so as to obtain benefit from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial information.

 

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

 

Foreign operations

The assets and liabilities of foreign operations, including goodwill arising on acquisition, are translated to US dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to US dollars at exchange rates at the dates of the transactions.

 

Foreign currency differences are recognised directly in equity. Since 1 April 2006, the Group’s date of transition to IFRSs, such differences have been recognised in the foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.

 

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the FCTR.

 

Financial Instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

 

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

 

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

 

Derivative financial instruments

The Group holds derivative financial instruments to hedge interest rate risk exposures.

 

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

 

Economic hedges

Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in profit or loss as part of foreign currency gains and losses.

 

Pricing risk

Ethanol and DDGS

From time to time the Group enters into fixed price contracts for ethanol at agreed prices for some of its expected future sales. The Group's exposure to market volatility is therefore reduced on this volume.

 

Corn

The Group works with its corn supplier to reduce future price volatility by the supplier entering into futures and options contracts such to enable it to offer the Group limited exposure to price movements.

 

Natural gas

The Group works with its natural gas supplier to reduce future price volatility by entering into futures and options contracts itself. The March 2007 year end was the first accounting period to include these options.  The Group's exposure under these contracts was not significant.

 

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

 

Property, plant and equipment

 

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within administrative expenses in the income statement.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

 

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

 

The estimated useful lives for the current and comparative periods are as follows:

 

• land improvements                                    20 years
• buildings and improvements                   20-30 years
• leasehold improvements                          3 years
• plant and equipment                                  7-15 years
• fixtures and fittings                                      4-5 years
• computer equipment                                  2-4 years
• vehicles                                                         5 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

 

Intangible assets

 

Goodwill

Goodwill (negative goodwill) arises on the acquisition of subsidiaries.

 

Acquisitions prior to 1 April 2006

As part of its transition to IFRSs, the Group has elected to restate only those business combinations that occur on or after 1 April 2006. In respect of acquisitions prior to 1 April 2006, goodwill represents the amount recognised under the Group’s previous accounting framework, (UK GAAP).

 

Purchased goodwill arising on consolidation in respect of acquisitions before 1 April 1998, when FRS10 ‘Goodwill and intangible assets’ was adopted, was written off to reserves in the year of acquisition.  When a subsequent disposal occurs any related goodwill previously written off to reserves is written back through the profit and loss account as part of the profit or loss on disposal.

 

Purchased goodwill (representing the excess of the fair value of the consideration given and associated cost over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions since 1 April 1998 was capitalised

 

Acquisitions on or after 1 April 2006

For acquisitions on or after 1 April 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss.

 

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.  In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment.

 

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss when incurred.

 

Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

 

Other leases are operating leases and the leased assets are not recognised on the Group’s balance sheet.

 

Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.  In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

 

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Impairment

 

Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.  A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

 

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

 

All impairment losses are recognised in profit or loss

 

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

 

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill that has indefinite life and intangible assets not yet available for use, the recoverable amount is estimated at each reporting date.

 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

 

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

Employee benefits

 

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

 

Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

 

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

 

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

Share-based payment transactions

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

Revenue

Goods sold

Revenue represents the amounts derived from the provision of goods to third party customers.  The Group’s revenue derives from it’s principal activity which is carried out in the United States of America.  Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. This is usually on dispatch.

 

Revenue is stated gross of freight and marketing fees.

 

Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

 

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

 

Finance income and expenses

Finance income comprises interest income on funds invested, dividend income, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

 

Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

 

Foreign currency gains and losses are reported on a net basis.

 

Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

 

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

 

Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employ

Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments. Segment information is presented in respect of the Group’s business and geographical segments. The Group’s primary format for segment reporting is based on business segments. The business segments are determined based on the Group’s management and internal reporting structure.

 

Inter-segment pricing is determined on an arm’s length basis.  

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments (other than investment property) and related revenue, loans and borrowings and related expenses, corporate assets (primarily the Company’s headquarters) and head office expenses, and income tax assets and liabilities.

 

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

 

Appendix 2 - Explanation of key UK GAAP to adopted IFRS differences

 

IFRS 3 – Business combinations

Under UK GAAP, the Group amortised the cost of goodwill arising on the acquisition of subsidiaries over its useful life. Under IFRS 3, goodwill on acquisition is no longer amortised but is held at its carrying value and is then subject to impairment review at each reporting date.

The Group has restated the value of goodwill in its balance sheet to that at the transition date (1 April 2006) and has carried out impairment review as at 30 September 2006 and 31 March 2007. The impact has been to increase reported profit by $110,000 in the year to 31 March 2007, which relates to the reversal of UK GAAP goodwill amortisation.

 

IAS 21 – The effects of changes in foreign exchange rates

In accordance with IAS 21 “The effects of changes in foreign exchange rates”, exchange differences arising from the translation of the net investment in foreign operations are taken to a translation reserve whilst under UK GAAP they were presented within retained earnings.

Any differences arising prior to 1 April 2006 are not presented as a separate component of equity, consistent with UK GAAP.

 

IAS 18 – Revenue

In accordance with IAS 18 “Revenue”, revenue is stated gross of freight and marketing fees.  Previously revenue was stated net under normal industry practice.  This has no impact on reported profit or net assets. 

 

Appendix 3 - Reconcilliation of Consolidated Balance Sheet at 1 April 2006

 

	Previously	IFRS3		restated under
	reported under	Business	Currency	IFRS
	UK GAAP	Combinations	translation	Unaudited
	$000	$000	$000	$000
Assets
Non-current assets
Property, plant and equipment	24,771			24,771
Intangible assets	6,595			6,595
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total non-current assets	31,366	-	-	31,366
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Inventories	-			-
Trade and other receivables	60			60
Prepayments for current assets	364			364
Cash and cash equivalents	19,936			19,936
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total current assets	20,360	-	-	20,360
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total assets	51,726	-	-	51,726
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Equity
Share capital	41,046			41,046
Share premium	33,886			33,886
Special reserve	3,508			3,508
Currency translation reserve	-			-
Retained earnings	(40,190)			(40,190)
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total equity attributable to	38,250	-	-	38,250
equity holders of the company
Minority interest	4,539			4,539
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total equity	42,789	-	-	42,789
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Non-current liabilities
Interest-bearing loans        and borrowings	-	-	-	-
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Trade and other payables	6,803			6,803
Accruals for current liabilities	314			314
Other payables	1,820			1,820
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total current liabilities	8,937	-	-	8,937
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total liabilities	8,937	-	-	8,937
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
Total equity and liabilities	51,726	-	-	51,726
	–––––––––––	–––––––––––	–––––––––––	–––––––––––

 

 

Appendix 4: Reconcilliation of Consolidated Statement for Six months ended 30 September 2006

 

	Previously	Foreign	30-Sep-06
	reported under	Currency	restated under
	UK GAAP	Translation	IFRS
		on Consolidation	(Unaudited)
	$000	$000	$000
Revenue	-	-	-
Cost of sales	-	-	-
	–––––––––––	–––––––––––	–––––––––––
Gross profit	-	-	-
Administrative expenses	(2,108)	(343)	(2,451)
	–––––––––––	–––––––––––	–––––––––––
Results from operating activities	(2,108)	(343)	(2,451)
Finance income	237	-	237
Finance expenses	-	-	-
	–––––––––––	–––––––––––	–––––––––––
Loss before income tax	(1,871)	(343)	(2,214)
Income tax expense	-	-	-
	–––––––––&n