RNS Number:3683J
Air Music & Media Group PLC
07 December 2007
7 DECEMBER 2007
AIR MUSIC AND MEDIA GROUP PLC
("Air Group" or the "Group")
Unaudited Interim Financial Statements for the Six Months Ended
30 September 2007
The Board of Air Group, the UK distributor of home entertainment products, is
pleased to announce its interim results for the six months ended
30 September 2007.
Key Points
* Sales increased to #29.0 million (2006: #25.8 million);
* PBT increased to #1,865,000 (2006: #1,770,000);
* EPS for the period 7.4p (2006: 4.1p);
* Operating profit #1,931,000 (2006: #2,062,000);
* Sales at Music Box Leisure, the core of the Group, have performed strongly
benefiting from the continued growth in DVD sales;
* Underperforming North American operation disposed in June 2007; and
* Trading update on the headline performance through to 31 December 2007
expected in late January 2008.
Commenting, Peter Cowgill, Chairman of Air Group, said: "The results for the
first half of the year are encouraging. We are pleased at the underlying growth
in sales we have been able to generate and are working hard to translate this to
underlying growth in profitability.
The Group is currently in its most critical trading period of the year and
remains dependent on the performance of a relatively small number of UK
retailers. Trading since the half year has continued to show an increase in
sales (of more than 40% compared to the comparable period). This continues to
reflect the changing product mix towards lower margin products which, combined
with retail price pressure, is resulting in gross margins declining in a similar
magnitude to the first half of the year."
--ENDS--
Enquiries:
AIR MUSIC & MEDIA GROUP PLC Tel: 0161 767 1620
Peter Cowgill (Chairman)
BISHOPSGATE COMMUNICATIONS LIMITED Tel: 020 7562 3350
Dominic Barretto Mobile: 07930 450 156
SEYMOUR PIERCE LIMITED Tel: 020 7107 8032
Mark Percy
CHAIRMAN'S STATEMENT
I am pleased to announce the interim results for the six months to 30 September
2007. During the period, the Board has completed Air Group's strategy of
exiting from the poorer performing aspects of the Group with the sale of our
North American operations in June 2007 whilst absorbing the profitable elements
of our predominantly export led distributor of low priced own label music, Air
Music and Media Sales Limited (AMM Sales), into our wholesale business ESD
Wholesale Limited ("ESD").
Financials
This is our first results period following the adoption of International
Financial Reporting Standards (IFRS) as adopted in the EU and consequently we
have an extended disclosure reconciliation. As shown in the reconciliation, the
primary impacts of the transition to IFRS has been our treatment of goodwill,
which is subject to a periodic impairment review rather than regular
amortisation and our disclosure of discontinued operations, which are presented
on a disaggregated basis.
Sales for the period were #29.0 million (2006: #25.8 million). Operating profit
was #1,931,000 (2006: #2,062,000). Net financing costs were #66,000 (2006:
#292,000). Profit before tax was #1,865,000 (2006: #1,770,000). Earnings per
share for the period was 7.4p (2006: 4.1p).
A summary of the performance of the Group is shown in the table below:
30 30 30 30
September September September September
2007 2006 2007 2006
Sales Sales Operating Operating
profit profit
Activity # million # million Change # million # million Change
Distribution 25.3 19.5 29.7% 2.0 2.2 -9.1%
Wholesale 3.6 6.2 -41.9% 0.2 0.3 -33.3%
Other 0.1 0.1 n/a 0.0 -0.2 n/a
Central costs 0.0 0.0 n/a -0.3 -0.2 -50.0%
29.0 25.8 12.4% 1.9 2.1 -9.5%
OPERATIONAL UPDATE
Distribution
Sales at Music Box Leisure ("MBL"), the core of the Group, have performed
strongly benefiting from the continued growth in DVD sales, in part stimulated
by lower retail price points. DVD's now represent approximately 80% of sales at
MBL (CD accounting for approximately 10% of sales and PC and console software
for approximately 10% sales). This contrasts with 2006, where DVD accounted for
approximately 65% of sales. During the period, sales at MBL have also benefited
from the addition of three new customers. These customers accounted for
approximately #1.2 million sales in the period, with the balance of the increase
in sales being generated from the existing customer base.
Gross profit margins have dropped by 3.6% to 17.2% compared to the period to 30
September 2006. Margins have been negatively impacted by the lowering of retail
price points and a change in mix to lower margin products. We continued to use
our buying skills to mitigate the impact of falling margins. The increased
level of activity has resulted in a relatively small increase in overheads.
Wholesale
ESD has continued to see sales to independent retailers fall in the period. The
remaining retailers in the music and film specialist sector continue to
experience sales and margin pressure arising from the competitive efforts of the
supermarkets. In addition, the internet and the sector are very much out of
favour with the major credit insurers. The sales mix in ESD has moved away from
CD to DVD (which accounted for approximately 55% of sales, compared to
approximately 43% of sales in 2006).
Recognising the continued general decline in CD sales, in early July the Board
effectively closed the operations of AMM Sales and absorbed the profitable
elements of its activity in to ESD. Sales attributed to former AMM Sales
elements represented #0.3 million of wholesale sales (2006: #1.3 million).
Discontinued activities
Discontinued activities represent results from the North American subsidiary
disposed of in the year and, in the prior year comparative, results from a pilot
retail operation closed in September 2006.
Funding position
The Group continued to repay its borrowings and remained comfortably within its
banking covenants in the period. As a consequence of 30 September 2007 falling
on a weekend, cash receipts from customers totalling almost #5.3 million that
would normally have been received and accounted for at the period end were
received and accounted for on 1 October 2007. Therefore, although the balance
sheet shows Net Debt (the aggregate of cash and cash equivalents and interest
bearing loans and borrowings) of #6.7 million at 30 September 2007, on a
comparable basis the Group's Net Debt would have been #1.5 million (30 September
2006: #4.1 million; 31 March 2007: #0.6 million).
Current trading and outlook
The results for the first half of the year are encouraging. We are pleased at
the underlying growth in sales we have been able to generate and are working
hard to translate this to underlying growth in profitability.
The Group is currently in its most critical trading period of the year and
remains dependent on the performance of a relatively small number of UK
retailers. Trading since the half year has continued to show an increase in
sales (of more than 40% compared to the comparable period). This continues to
reflect the changing product mix towards lower margin products which, combined
with retail price pressure, is resulting in gross margins declining in a similar
magnitude to the first half of the year.
The Board is disappointed to note that the UK credit insurance market appears to
be classifying our operations on a similar basis to the specialist music and
film retailers who have struggled over the past 18 months. As a consequence,
insured limits provided on Music Box Leisure have been significantly cut
compared to previous years. This has had a recent and significant impact on the
cash position of the Group during our critical trading period as the Group has
been forced to make advance payments in order to secure product supply. We are
in the fortunate position of having adequate working capital facilities to meet
this cash requirement, however remain mindful that cash generation and the
availability of adequate credit terms is of paramount importance to supporting
further growth of the Group.
I look forward to issuing a trading update on the headline performance through
to December at the end of January 2008.
Peter Cowgill
Chairman
7 December 2007
Consolidated Income Statement
for the six months ended 30 September 2007
Unaudited Unaudited Unaudited
Six months to 30 Six months to 30 Year ended 31
September 2007 September 2006 March 2007
#'000 #'000 #'000
Continuing operations
Revenue 28,979 25,848 61,507
Cost of sales (24,005) (20,468) (49,973)
Gross profit 4,974 5,380 11,534
Distribution expenses (573) (581) (1,467)
Administrative expenses (2,470) (2,737) (8,119)
Operating profit 2 1,931 2,062 1,948
Financial income 38 24 53
Financial expenses (104) (316) (478)
Net financing costs (66) (292) (425)
Profit before tax 1,865 1,770 1,523
Taxation 3 (592) (294) (967)
Profit for the period from continuing
operations 1,273 1,476 556
Loss for the period from discontinued 6
operations, net of income tax - (780) (2,010)
Profit/ (loss) for the period
attributable to equity holders of the
parent 1,273 696 (1,454)
Continuing operations
Basic and diluted earnings per share 4 7.4p 8.6p 3.2p
Discontinued operations
Basic and diluted earnings per share 4 0.0p (4.5)p (11.7)p
Total
Basic and diluted earnings per share 4 7.4p 4.1p (8.5)p
Consolidated Balance Sheet
at 30 September 2007
Unaudited Unaudited Unaudited
Six months to 30 Six months to Year ended 31
September 2007 30 September March 2007
2006
#'000 #'000 #'000
Non-current assets
Intangible assets 29,423 34,028 29,423
Property, plant and equipment 348 344 326
Deferred tax asset 192 90 212
Total non-current assets 29,963 34,462 29,961
Current assets
Inventories 6,664 5,958 6,650
Trade and other receivables 5 14,427 8,914 6,803
Cash and cash equivalents - 1,544 2,269
21,091 16,416 15,722
Current assets and disposal groups held for sale - - 1,168
Total current assets 21,091 16,416 16,890
Total assets 51,054 50,878 46,851
Current liabilities
Trade and other payables (8,340) (8,823) (8,924)
Current tax payable (1,038) (366) (1,101)
Accruals and deferred income (1,616) (1,242) (1,381)
Interest-bearing loans and borrowings (6,628) (4,536) (2,715)
Provisions - (627) -
Total current liabilities (17,622) (15,594) (14,121)
Liabilities directly associated with current assets
and disposal groups held for sale - - (521)
(17,622) (15,594) (14,642)
Non-current liabilities
Interest-bearing loans and borrowings (90) (1,059) (144)
Total non-current liabilities (90) (1,059) (144)
Total liabilities (17,712) (16,653) (14,786)
Net assets 33,342 34,225 32,065
Equity
Share capital 12,872 12,872 12,872
Share premium 21,453 21,453 21,453
Other reserves (2,800) (2,800) (2,800)
Translation reserve - (15) (35)
Retained earnings 1,817 2,715 575
Total equity attributable to equity shareholders of the
parent 33,342 34,225 32,065
Consolidated Cash Flow Statement
for the six months ended 30 September 2007
Unaudited Unaudited Unaudited
Six months to 30 Six months to Year ended
September 2007 30 September
2006 31 March 2007
#'000 #'000 #'000
Cash flows from operating activities
Profit/ (loss) for the period/year:
Continuing operations 1,273 1,476 556
Discontinued operations - (780) (2,010)
1,273 696 (1,454)
Adjustments for:
Depreciation 77 107 193
Amortisation - 114 4,717
Financial income (42) (33) (69)
Financial expense 104 316 478
Loss on sale of property, plant and equipment - 248 248
Foreign exchange (income)/ losses (27) 5 38
Taxation 592 301 1,486
Operating profit before changes in working capital and 1,977 1,754 5,637
provisions
(Increase)/ decrease in trade and other receivables (7,467) 2,007 3,765
(Increase)/ decrease in inventories (13) 2,130 1,110
Decrease in trade and other payables (349) (2,437) (1,825)
Decrease in provisions - - (226)
Cash (absorbed)/ generated by the operations (5,852) 3,454 8,461
Tax paid (635) (697) (1,349)
Net cash (outflow)/ inflow from operating activities (6,487) 2,757 7,112
Cash flows from investing activities
Interest received 42 33 69
Acquisition of property, plant and equipment (95) (109) (274)
Acquisition of intangible assets - (1) (1)
Proceeds from sale of property, plant and equipment - - 29
Proceeds from sale of subsidiary 72 - -
Cash and cash equivalents disposed of with subsidiary (146) (35) (36)
Net cash outflow from investing activities (127) (112) (213)
Cash flows from financing activities
Interest paid (105) (316) (450)
Proceeds from new borrowings 2,500 - -
Repayment of borrowings (1,801) (2,984) (5,744)
Capital element of finance lease liabilities (1) - (11)
Net cash inflow/ (outflow) from financing activities 593 (3,300) (6,205)
Net (decrease)/ increase in cash and cash equivalents (6,021) (655) 694
Opening cash and cash equivalents 2,862 2,205 2,205
Effect of exchange rate fluctuations on cash held - (6) (37)
Cash and cash equivalents held in continuing operations (3,159) 1,544 2,862
Cash and cash equivalents held in a disposal group - - (593)
Closing cash and cash equivalents (3,159) 1,544 2,269
Statement of Recognised Income and Expense
Unaudited Unaudited Unaudited
Six months to Six months to 30 Year ended
30 September September 2006
2007 31 March 2007
#'000 #'000 #'000
Foreign exchange adjustments - (15) (33)
Net expense recognised directly in equity - (15) (33)
Profit/ (loss) for the period 1,273 696 (1,454)
Total recognised income and expense for the period 1,273 681 (1,487)
Statement of Changes in Shareholders' Equity
Unaudited Unaudited Unaudited
Six months to Six months to 30 Year ended
30 September September 2006
2007 31 March 2007
#'000 #'000 #'000
Total equity at beginning of period 32,065 33,544 33,544
Total recognised income and expense 1,273 681 (1,487)
Share issue:
Shares to be issued - (206) (206)
Share capital - 199 199
Share premium - 7 7
Share based payment charge 4 - 8
Total equity at end of period attributable to equity
holders of the parent 33,342 34,225 32,065
Notes
(forming part of the interim financial statements)
1 Basis of preparation
The consolidated interim financial statements of the Group for the period ended
30 September 2007 are unaudited and do not comprise statutory accounts within
the meaning of Section 240 of the Companies Act 1985.
From 1 April 2007, Air Group is required to prepare its consolidated financial
statements in accordance with adopted International Financial Reporting
Standards (IFRS) as adopted by the European Union ('adopted IFRS').
Reconciliations and descriptions of the effect of the transition from UK GAAP to
adopted IFRS on the Group's balance sheet and its income statement are provided
on pages iii to vii of the IFRS Restatement Report.
This consolidated interim financial information has been prepared on the basis
of the recognition and measurement requirements of adopted IFRS as at 30
September 2007 that are effective (or available for early adoption) at 31 March
2008, the Group's first annual reporting date at which it is required to apply
adopted IFRS. Based on these adopted IFRS, the directors have applied the
accounting policies set out in the restatement report, included in this
document, which they expect to apply when the first annual financial statements
are prepared in accordance with adopted IFRS 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 comparative figures for the financial year ended 31 March 2007 are not the
Company's statutory accounts for that financial year. 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 a 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.
2 Operating profit
Operating profit for continuing operations is stated after charging the
following exceptional items:
Unaudited Unaudited Unaudited
Six months to 30 Six months to 30 Year ended
September 2007 September 2006 31 March 2007
#'000 #'000 #'000
Impairment of goodwill associated with Air
Music and Media Sales business - - 2,137
Accelerated amortisation of copyright costs
capitalised as intangible assets - - 1,670
- - 3,807
3 Taxation
The taxation charge has been estimated by the Company based on adjustments to
tax payable in respect of previous years and the tax rate for the year ended 31
March 2008. The tax charge for the periods to 30 September 2006 and 31 March
2007 benefited from tax relief on operations classified as discontinued.
Notes
(forming part of the interim financial statements)
4 Earnings per share
The calculation of the basic earnings per share is based on the profit after
taxation divided by the weighted average number of shares in issue, being
17,162,735 (period ended 30 September 2006: 17,162,735; year ended 31 March
2007: 17,162,735).
The diluted earnings per share takes the weighted average number of ordinary
shares in issue during the period and adjusts this for dilutive share options
existing at the period end. The diluted weighted average number of shares in
the period ended 30 September 2007 was 17,162,735 (period ended 30 September
2006: 17,163,218; year ended 31 March 2007: 17,171,280).
Adjusted earnings per share, as disclosed below, are calculated using the profit
after tax for the period, having added back exceptional items (after adjusting
for the effect of tax) and goodwill amortisation charge over the basic and
diluted weighted average number of shares in issue during the six month period.
Unaudited Unaudited Unaudited
Six months to 30 Six months to 30 Year ended
September 2007 September 2006 31 March 2007
#'000 #'000 #'000
Profit/(loss) after taxation 1,273 696 (1,454)
Accelerated amortisation of intangible - - 1,670
assets
Impairment of goodwill - - 2,137
Taxation on exceptionals - - (501)
Adjusted profit 1,273 696 1,852
Loss from discontinued operations - 780 2,010
Adjusted profit attributable from continuing
operations 1,273 1,476 3,862
Basic and diluted earnings/ (loss) per share 7.4p 4.1p (8.5)p
Loss per share from discontinued operations - 4.5p 11.7p
Basic and diluted earnings per share from
continuing operations 7.4p 8.6p 3.2p
Basic and diluted adjusted earnings/ (loss)
per share 7.4p 4.1p 10.8p
Loss per share from discontinued operations - 4.5p 11.7p
Basic and diluted adjusted earnings per
share from continuing operations 7.4p 8.6p 22.5p
5 Trade and other receivables
As a consequence of 30 September 2007 falling on a weekend, cash receipts from
customers totalling almost #5.3 million that would normally have been received
and accounted for at the period end were received and accounted for on 1 October
2007.
6 Discontinued operations
Discontinued operations in the period to 30 September 2007 relate to a Canadian
subsidiary, Legacy Entertainment Inc., which was sold on 15 June 2007.
Discontinued operations for the year to 31 March 2007 and the period to 30
September 2006 relate to Legacy Entertainment Inc. and Play Media Limited. Play
Media Limited was placed into voluntary liquidation on 20 September 2006.
7 Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and rewards that are different
from those of other business segments. The primary format is based upon the
Group's management and internal reporting structure which reflects the statutory
subsidiaries of the Group.
Segment results constitute items directly attributable to the business.
Unallocated items comprise mainly central costs and net interest expense
The Group comprises the following main business segments:
* Distribution. The full service, merchandising and sale of home
entertainment products (primarily pre-recorded films, music and computer and
console games) to general retailers for whom these products are not the primary
focus of the retailer.
* Wholesale. The sale of home entertainment products to specialist
independent and internet retailers.
* Other. Dormant companies and holding companies.
Notes
(forming part of the interim financial statements)
Segmental Analysis
Profit and Continuing Operations Total
Loss
Account
Distribution Wholesale Other
6 months 6 months year 6 months 6 months Year 6 months 6 months Year 6 months 6 months Year
ended ended ended ended ended ended ended ended ended ended ended ended
30.09.07 30.09.06 31.03.07 30.09.07 30.09.06 31.03.07 30.09.07 30.09.06 31.03.07 30.09.07 30.09.06 31.03.07
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Revenue
from 25,310 19,519 48,491 3,595 6,217 12,879 74 112 137 28,979 25,848 61,507
external
customers
Inter
-segment 3,181 4,726 10,306 454 1,104 1,745 301 - 672 3,936 5,830 12,723
revenue
Total
revenue 28,491 24,245 58,797 4,049 7,321 14,624 375 112 809 32,915 31,678 74,230
Segment 1,994 2,160 6,430 178 287 (215) 33 (182) (1,730) 2,205 2,265 4,485
result
Central costs (274) (203) (2,537)
Operating 1,931 2,062 1,948
profit
Net financing (66) (292) (425)
costs
Taxation (592) (294) (967)
Discontinued - (780) (2,010)
operations
Profit for 1,273 696 (1,454)
the period
Air Music and Media Group plc
IFRS Restatement report
IFRS Restatement report (unaudited)
Air Music and Media Group plc transition to IFRS
From 1 April 2007 the Group is required to prepare its consolidated accounts
under International Financial Reporting Standards (collectively referred to as "
adopted IFRS" throughout this document) as adopted by the European Union ("EU")
having previously prepared its accounts under UK Generally Accepted Accounting
Principles ("UK GAAP"). The transition date for the Group is 1 April 2006 and
this report covers the restatement of the opening consolidated balance sheet as
at 1 April 2006, the consolidated accounts for the year ended 31 March 2007 and
the consolidated accounts for the six months ended 30 September 2006. This
report shows the impact of the transition to adopted IFRS on the Group's
reported performance and financial position; reconciles this to previously
reported financial information; and explains the reasons for the adjustments.
Transitional arrangements - Application of IFRS 1
The Group's financial statements for the year ended 31 March 2008 will be the
Group's first annual financial statements in compliance with adopted IFRS. The
Group's transition date is 1 April 2006 and the Group prepared its opening IFRS
balance sheet at that date.
On transition to adopted IFRS an entity is generally required to apply adopted
IFRS retrospectively, except where an exemption is available under IFRS 1 '
First-time Adoption of International Financial Reporting Standards'.
The Group has considered the key elections from IFRS 1 and has elected to adopt
the IFRS 1 exemption in relation to business combinations and will only apply
IFRS 3 'Business Combinations' prospectively from 1 April 2006. As a result the
balance of goodwill under UK GAAP as at 31 March 2006 will be deemed the cost of
goodwill at 1 April 2006.
The interim results for the period ended 30 September 2007 have been prepared in
accordance with accounting policies under adopted IFRS. The Group's revised
accounting policies under IFRS are included in note 2 to this restatement
report. IFRS Restatement report (continued)
Reconciliation of income statement from UK GAAP to adopted IFRS (unaudited)
UKGAAP IFRS
30-Sep-06 Goodwill Discontinued 30-Sep-06
amortisation(note operations
1)
#'000 #'000 #'000 #'000
Revenue 27,796 - -1,948 25,848
Cost of sales -21,786 - 1,318 -20,468
Gross profit 6,010 - -630 5,380
Distribution -635 - 54 -581
expenses
Administration -4,972 877 1,358 -2,737
expenses
Operating profit 403 877 782 2,062
Financial income 33 - -9 24
Financial -316 - - -316
expenses
Net financing -283 - -9 -292
costs
Profit before tax 120 877 773 1,770
Taxation -301 - 7 -294
(Loss)/ profit -181 877 780 1,476
from continuing
operations
Loss for the - - -780 -780
period from
discontinued
operations
(Loss)/ profit
for the period -181 877 - 696
IFRS Restatement report (continued)
Reconciliation of income statement from UK GAAP to adopted IFRS (unaudited)
UK GAAP IFRS
Goodwill
amortisation
and impairment
(note 1)
31-Mar Discontinued 31-Mar
operations
2007 2007
#'000 #'000 #'000 #'000
Revenue 64,593 - -3,086 61,507
Cost of sales -52,245 - 2,272 -49,973
Gross profit/ 12,348 - -814 11,534
(loss)
Distribution -1,564 - 97 -1,467
expenses
Administration -11,933 1,590 2,224 -8,119
expenses
Operating (loss) -1,149 1,590 1,507 1,948
/ profit
Financial income 69 - -16 53
Financial -478 - - -478
expenses
Net financing -409 - -16 -425
costs
(Loss)/ profit -1,558 1,590 1,491 1,523
before tax
Taxation -1,486 - 519 -967
(Loss)/ profit -3,044 1,590 2,010 556
from continuing
operations
Loss for the - - -2,010 -2,010
period from
discontinued
operations
(Loss)/ profit -3,044 1,590 - -1,454
for the period
IFRS Restatement report (continued)
Reconciliation of balance sheet from UK GAAP to adopted IFRS (unaudited)
UK GAAP IFRS
30-Sep-06 30-Sep-06
Goodwill Translation
amortisation reserve
(note 1)
#'000 #'000 #'000 #'000
Non current
assets
Property plant 344 - - 344
and equipment
Intangible assets 33,151 877 - 34,028
Deferred tax 90 - - 90
asset
Total non current 33,585 877 - 34,462
assets
Current assets
Inventories 5,958 - - 5,958
Trade and other 8,914 - - 8,914
receivables
Cash and cash 1,544 - - 1,544
equivalents
Assets classified - - - -
as held for
resale
Total current 16,416 - - 16,416
assets
Total assets 50,001 877 - 50,878
Current
liabilities
Trade and other -8,823 - - -8,823
payables
Current tax -366 - - -366
payable
Accruals and -1,242 - - -1,242
deferred income
Interest-bearing -4,536 - - -4,536
loans and
borrowings
Provisions -627 - - -627
Liabilities - - - -
classified as
held for resale
Total current -15,594 - - -15,594
liabilities
Non current
liabilities
Interest-bearing -1,059 - - -1,059
loans and
borrowings
Total non current -1,059 - - -1,059
liabilities
Total liabilities -16,653 - - -16,653
Net assets 33,348 877 - 34,225
Equity
Issued capital 12,872 - - 12,872
Share premium 21,453 - - 21,453
Reserves -2,800 - - -2,800
Translation - - -15 -15
reserve
Retained earnings 1,823 877 15 2,715
Total equity
attributable to
equity
shareholders
33,348 877 - 34,225
IFRS Restatement report (continued)
Reconciliation of balance sheet from UK GAAP to adopted IFRS (unaudited)
UK GAAP IFRS
Goodwill Goodwill Assets
impairment held for
sale
31-Mar-07 amortisation (note 1) Translation 31-Mar-07
(note 1) reserve
#'000 #'000 #'000 #'000 #'000 #'000
Non current
assets
Property plant 388 - - - -62 326
and equipment
Intangible assets 27,833 4,388 -2,798 - - 29,423
Deferred tax 212 - - - - 212
asset
Total non current 28,433 4,388 -2,798 - -62 29,961
assets
Current assets
Inventories 6,855 - - - -205 6,650
Trade and other 7,278 - - - -475 6,803
receivables
Cash and cash 2,862 - - - -593 2,269
equivalents
Assets classified - - - - 1,168 1,168
as held for
resale
Total current 16,995 - - - -105 16,890
assets
Total assets 45,428 4,388 -2,798 - -167 46,851
Current
liabilities
Trade and other -9,279 - - - 355 -8,924
payables
Current tax -1,017 - - - -84 -1,101
payable
Accruals and -1,381 - - - - -1,381
deferred income
Interest-bearing -2,715 - - - - -2,715
loans and
borrowings
Provisions -417 - - - 417 -
Liabilities - - - - -521 -521
classified as
held for resale
Total current -14,809 - - - 167 -14,642
liabilities
Non current
liabilities
Interest-bearing -144 - - - - -144
loans and
borrowings
Total non current -144 - - - - -144
liabilities
Total liabilities -14,953 - - - 167 -14,786
Net assets 30,475 4,388 -2,798 - - 32,065
Equity
Issued capital 12,872 - - - - 12,872
Share premium 21,453 - - - - 21,453
Reserves -2,800 - - - - -2,800
Translation - - - -35 - -35
reserve
Retained earnings -1,050 4,388 -2,798 35 - 575
Total equity
attributable to
equity
shareholders
30,475 4,388 -2,798 - - 32,065
IFRS Restatement report (continued)
Reconciliation of balance sheet from UK GAAP to adopted IFRS (unaudited)
(continued)
The balance sheet as at 1 April 2006 is unchanged from that presented under UK
GAAP.
Reconciliation of cash flow statements from UK GAAP to adopted IFRS (unaudited)
With the exception of reclassifications, there were no material differences
between cash flows presented under adopted IFRS and the cash flows presented
under UK GAAP.
Reconciliation of retained earnings from UK GAAP to adopted IFRS (unaudited)
UK GAAP IFRS
Goodwill
amortisation
(note 1)
30-Sep 30-Sep-06
2006
#'000 #'000 #'000
(Loss)/ profit for
the financial period -181 877 696
Translation -15 - -15
difference
Total recognised
income and expense in
the period -196 877 681
Opening retained 2,019 - 2,019
earnings
Closing retained
earnings 1,823 877 2,700
UK GAAP IFRS
Goodwill Goodwill
impairment
31-Mar amortisation (note 1) Assets 31-Mar
(note 1) held for
sale
2007 2007
#'000 #'000 #'000 #'000 #'000
(Loss)/
profit for
the
financial -3,044 4,388 -2,798 - -1,454
period
Share based
payment
charge 8 - - - 8
Translation -33 - - - -33
difference
Total
recognised
income in -3,069 4,388 -2,798 - -1,479
the period
Opening 2,019 - - - 2,019
retained
earnings
Closing
retained
earnings -1,050 4,388 -2,798 - 540
Notes to the IFRS Restatement report
1. IFRS 3 'Business combinations' - income statement
The Group has elected to take the exemption available under IFRS 1 in respect of
restating business combinations and therefore the net book value of goodwill as
at the transition date, 1 April 2006, is deemed to be cost.
The adoption of IFRS 3 'Business Combinations' has resulted in the write back of
goodwill amortised since 1 April 2006 (see note 2). In the six months ended 30
September 2006 #877,000 amortisation has been added back and #4,388,000 has been
added back for the year ended 31 March 2007.
At 31 March 2007 it was considered appropriate to make an impairment charge of
#2,798,000.
2. Accounting policies
The following accounting policies represent the Group's revised policies under
IFRS which will be adopted by the Group in its financial statements for the year
ended 31 March 2008.
Basis of preparation
The financial statements are presented in sterling, to the nearest thousand and
are prepared on a historical costs basis.
Basis of consolidation
The Group financial statements comprise the financial statements of the Company
and all of its subsidiary undertakings made up to the financial year end.
Subsidiaries are entities controlled by the Group. Control exists when the Group
has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that are currently exercisable or convertible
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 results of subsidiary undertakings acquired or disposed of in the year are
included in the Group Income Statement from the effective date of acquisition or
to the effective date of disposal. Accounting policies are consistently applied
throughout the Group. Inter-company balances and transactions have been
eliminated. Material profits from inter company sales, to the extent that they
are not yet realised outside the Group, have also been eliminated.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short term highly liquid investments. Bank overdrafts are shown
within borrowings in current liabilities on the balance sheet.
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 only of the statement of cash flows.
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional
currencies of group entities at the foreign exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated to sterling at the foreign
exchange rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the income statement.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to sterling at
foreign exchange rates ruling at the balance sheet date. The revenues and
expenses of foreign operations are translated to sterling at rates approximating
to the foreign exchange rates ruling at the dates of the transactions. Foreign
exchange differences arising on retranslation are recognised directly in a
separate component of equity.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Notes to the IFRS Restatement report (continued)
2. Accounting policies (continued)
Leases in which the Group assumes substantially all the risks and rewards of
ownership of the leased asset are classified as finance leases. Where land and
buildings are held under finance leases the accounting treatment of the land is
considered separately from that of the buildings. Leased assets acquired by way
of finance lease are stated at an amount equal to the lower of their fair value
and the present value of the minimum lease payments at inception of the lease,
less accumulated depreciation and impairment losses. Lease payments are
accounted for as described below.
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment. Land is not depreciated. The estimated useful lives are as follows:
Building leasehold - over the lease term
Plant, machinery and equipment - 10% - 33.3% per annum on straight line basis
Motor vehicles - 25% per annum on straight line basis
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is
calculated as the direct costs incurred in bringing the stocks to their their
present location and condition.
Intangible assets
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries. In respect
of business acquisitions that have occurred since 1 April 2006, goodwill
represents the difference between the cost of the acquisition and the fair value
of the identifiable assets, liabilities and contingent liabilities acquired.
Identifiable intangibles are those which can be sold separately or which arise
from legal rights regardless of whether those rights are separable.
Goodwill on acquisition of subsidiaries is included in intangible assets.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash generating units and is not amortised, but is tested annually
for impairment. An impairment charge is recognised for any amount by which the
carrying value of goodwill exceeds its recoverable amount.
In respect of acquisitions prior to 1 April 2006, goodwill is included at 1
April 2006 on the basis of its deemed cost, which represents the amount recorded
under UK GAAP which was broadly comparable save that only separable intangibles
were recognised and goodwill was amortised. On transition, amortisation of
goodwill has ceased as required by IFRS 3.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses.
Revenue
Revenue represents the invoiced value of goods sold net of customer returns,
rebates and settlement discount and is net of value added tax. Revenue from the
sale of goods is recognised in the income statement when the significant risks
and rewards of ownership have been transferred to the buyer.
Taxation
Tax comprises current and deferred tax. Tax is recognised in the income
statement 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 balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is recognised on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax on the following temporary differences are
not recognised for: the initial recognition of goodwill; the initial recognition
of assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
Notes to the IFRS Restatement report (continued)
2. Accounting policies (continued)
Interest bearing borrowings
Interest bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent initial recognition, interest
bearing borrowings are stated at amortised cost with any difference between cost
and redemption value being recognised in the income statement over the period of
the borrowings on an effective interest basis.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, that can be
estimated reliably and it is probable that an outflow of economic benefits will
be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and the risks
specific to the liability.
Impairment of assets
The carrying amounts of the Group's assets, other than inventories and deferred
tax assets, are reviewed at each balance sheet date to determine whether there
is any indication of impairment. If any such indication exists, the asset's
recoverable amount is estimated.
For goodwill the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash-generating
units and then to reduce the carrying amount of the other assets in the unit on
a pro rata basis. A cash generating unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Goodwill was tested for impairment at 1 April 2006, the date of transition to
Adopted IFRS, though no indication of impairment existed.
i) Calculation of recoverable amount
The recoverable amount of the Group's investments and receivables carried at
amortised cost is calculated as the present value of estimated future cash
flows, discounted at the original effective interest rate (i.e., the effective
interest rate computed at initial recognition of these financial assets).
Receivables with a short duration are not discounted.
The recoverable amount of other assets is the greater of their fair value less
cost to sell and value in use. 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 an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
ii) Reversals of impairment
An impairment loss in respect of a receivable carried at amortised cost is
reversed if the subsequent increase in recoverable amount can be related
objectively to an event occurring after the impairment loss was recognised.
Notes to the IFRS Restatement report (continued)
2. Accounting policies (continued)
ii) Reversals of impairment (continued)
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, an impairment loss is reversed when there is an indication that the
impairment loss may no longer exist and 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.
Non-current assets held for sale and discontinued operations
A non-current asset or a group of assets containing a non-current asset (a
disposal group) is classified as held for sale if its carrying amount will be
recovered principally through sale rather than through continuing use, it is
available for immediate sale and sale is highly probable within one year.
On initial classification as held for sale, non-current assets and disposal
groups are measured at the lower of previous carrying amount and fair value less
costs to sell with any adjustments taken to profit or loss. The same applies to
gains and losses on subsequent re-measurement. In accordance with IFRS 1, the
above policy is effective from 1 April 2006; no reclassifications are made in
prior periods.
A discontinued operation is a component of the Group's business that represents
a separate major line of business or geographical area of operations or is a
subsidiary acquired exclusively with a view to resale, that has been disposed
of, has been abandoned or that meets the criteria to be classified as held for
sale.
Discontinued operations are presented on the income statement (including the
comparative period) as a column analysing the post tax profit or loss of the
discontinued operation and the post tax gain or loss recognised on the
re-measurement to fair value less costs to sell or on disposal of the assets/
disposal groups constituting discontinued operations.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease
expense.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge 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.
Net financing costs
Net financing costs comprise interest payable, finance charges on shares
classified as liabilities and finance leases, interest receivable on funds
invested, dividend income and foreign exchange gains and losses that are
recognised in the income statement.
Interest income and interest payable is recognised in profit or loss as it
accrues, using the effective interest method. Dividend income is recognised in
the income statement on the date the entity's right to receive payments is
established. The interest expense component of finance lease payments is
recognised in the income statement using the effective interest rate method.
Employee benefits
Defined contribution plan
The Group operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Group. The annual
contributions payable are charged to the income statement.
Notes to the IFRS Restatement report (continued)
2. Accounting policies (continued)
Share based payments
The share option programme allows Group's employees to acquire shares of the
ultimate parent company; these awards are granted by the ultimate parent. The
fair value of options granted is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using
an option valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense is adjusted
to reflect the actual number of share options that vest except where forfeiture
is due only to share prices not achieving the threshold for vesting.
This statement will be available at the Company's registered office at Unit 9
Enterprise Court, Lancashire Enterprise Business Park, Centurion Way, Leyland
PR26 6TZ and on the website www.airmusicandmedia.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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