REG-M&C Saatchi PLC IFRS Impact Statement - Part 1
Released : 21/09/2007 09:42
.
RNS Number:2576E
M&C Saatchi PLC
21 September 2007
M&C SAATCHI PLC
21 September 2007
IMPACT OF IFRS ON FINANCIAL STATEMENTS
TWELVE MONTHS TO 31 DECEMBER 2006 AND SIX MONTHS TO 30 JUNE 2006
Reconciliation of 2006 annual and interim statements from UK GAAP to IFRS
following the adoption of IFRS on 1 January 2007.
M&C Saatchi plc today restates its consolidated results for the year ended 31
December 2006 and half year ended 30 June 2006. M&C Saatchi plc formally adopted
IFRS from 1 January 2007 with its date of transition being 1 January 2006.
Future consolidated reporting will be in accordance with IFRS as adopted by the
European Union.
This announcement is unaudited.
Key Adjustments
-IAS 12 deferred tax on employee options, reduces 2006 annual tax charge
by £0.03m (£0.02m for 2006 half year).
-IAS 19 employee benefits (holiday pay) has no effect on 2006 annual
results. It caused 2006 half year statutory and headline profit before tax
to be reduced by £0.4m.
-Under IFRS 3 business combinations, goodwill is not amortised and is
tested annually for impairment. This increased 2006 annual statutory
operating profit by £1.7m (£0.9m for 2006 half year).
-IAS 32 and IAS 39 financial instruments requires us to value put options
held by minority shareholders, and this has reduced statutory profit before
and after tax by £9.0m in the 2006 annual results (£0.4m for 2006 half
year). It has also created a balance sheet liability of £22.3m in the 2006
annual results (£13.6m for 2006 half year).
A reconciliation from statutory profit before tax to headline profit before tax
can be seen on the following page.
IFRS 1 Relevant exemptions taken
-We have not restated our business combinations prior to 1 January 2006
(IFRS 3).
-Cumulative translation differences on all foreign operations as at 1
January 2006 are treated as nil (IAS 21)
For further information please call:
M&C Saatchi plc 020 7544 3693
Andy Blackstone, Company Secretary
NUMIS 020 7260 1000
Lee Aston
RECONCILIATION HEADLINE TO STATUTORY PROFIT BEFORE TAX
31 December 30 June 2006
2006 annual half year
£000 £000
UK GAAP statutory profit before tax 6,037 2,002
Add back amortisation of goodwill 1,735 854
----------- -----------
Headline UK GAAP profit before tax 7,772 2,856
IAS 1 - adjustment to associate presentation (2) -
IAS19 & IAS 34 holiday pay accrual - (436)
----------- -----------
Headline IFRS profit before tax 7,770 2,420
IAS 38 - amortisation of intangible assets (20) -
IAS 32 & IAS 39 - fair value adjustments on
minority shareholders put option liabilities (8,970) (384)
----------- -----------
IFRS statutory (loss) / profit before tax (1,220) 2,036
=========== ===========
Under UK GAAP the difference between headline and statutory profits was that
headline profits excluded amortisation of goodwill. Under IFRS the difference
between headline and statutory profits is that headline profits excludes the
impact of fair value adjustments on minority shareholders put option liabilities
and amortisation of intangible assets.
The financial information included in this report does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985, and is unaudited.
The year ended 31 December 2006 accounts, which were prepared under UK GAAP,
have been reported on by the Company's auditors and delivered to the Registrar
of Companies. The auditor's report on those statutory accounts was unqualified,
did not include references to any matters to which the auditors drew attention
by way of emphasis without qualifying their report, and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
YEAR ENDED 31 DECEMBER 2006 - IFRS RECONCILIATION
UNAUDITED CONSOLIDATED INCOME STATEMENT
UK GAAP IFRS 3 IAS 38 IAS 1 IAS 12 IAS 32 & IAS 39 IFRS
Year ended 31 Business Intangible Presentation of Deferred tax Put options Year ended
December 2006 Combinations assets financial on options 31 December
statements - 2006
Associates
Notes (1) (2) (3) (8) (9)
£000 £000 £000 £000 £000 £000 £000
Turnover
(billings) 369,490 369,490
======= ======== ======= ======== ======= ======= =========
Revenue 75,877 75,877
Operating
profit before
goodwill
amortisation 6,258 6,258
Goodwill
amortisation
and impairment (1,735) 1,735 (20) - - - (20)
------- -------- ------- -------- ------- ------- --------
Operating
profit 4,523 1,735 (20) - - - 6,238
Share of
results of
associate 15 - - (10) - - 5
Financial
income 1,540 1,540
Financial costs (41) - - 8 - (8,970) (9,003)
------- -------- ------- -------- ------- ------- ---------
Profit /
(loss) before
taxation 6,037 1,735 (20) (2) - (8,970) (1,220)
Taxation on
profits (2,886) - - 2 32 - (2,852)
------- -------- ------- -------- ------- ------- ---------
Profit /
(loss) for the
financial
period 3,151 1,735 (20) - 32 (8,970) (4,072)
======= ======== ======= ======== ======= ======= =========
Attributable to:
Equity holders
of the Group 2,003 1,735 (20) - 32 (8,970) (5,220)
Minority
interests 1,148 1,148
------- -------- ------- -------- ------- ------- ---------
3,151 1,735 (20) - 32 (8,970) (4,072)
======= ======== ======= ======== ======= ======= =========
Earnings /
(loss) per share
- Basic 3.73p 3.23p (0.04)p - 0.06p (16.71)p (9.73)p
- Diluted 3.69p 3.19p (0.04)p - 0.06p (16.51)p (9.73)p
Average number
of shares -
Basic 53,677,484 53,677,484 53,677,484 53,677,484 53,677,484 53,677,484 53,677,484
Average number
of shares -
Diluted 54,347,216 54,347,216 54,347,216 54,347,216 54,347,216 54,347,216 53,677,484
Under IAS 33, earnings per share can be diluted by the LTIP and put options. In
2006 this effect is nil, see notes (7a) and (7b) for details. IAS 33 does not
allow the diluted EPS to be more than basic EPS due to more shares sharing a
loss thus diluted EPS is (9.73)p rather than (9.61)p had our issued options been
taken account of.
The numbers in the titles in brackets relate to the explanations in the notes to
these reconciliations. These explanations deal with the effects to all the
statements.
YEAR ENDED 31 DECEMBER 2006 - IFRS RECONCILIATION
UNAUDITED CONSOLIDATED BALANCE SHEET
UK GAAP IFRS 3 IFRS 3 IAS 1 & IAS 12 IAS 32 & IFRS
IAS 39 IAS 39
Year ended 31 Business Business Presentation of Deferred Tax on Put options Year ended 31
December 2006 Combinations Combinations - financial Options December 2006
- Goodwill Intangible statements
amortisation assets
Notes (1) (2) (4), (5) & (6) (8) (9)
£000 £000 £000 £000 £000 £000 £000
Non current assets
Goodwill 13,555 1,735 (20) - - - 15,270
Intangible
assets - - - 87 - - 87
Plant and
equipment 3,618 - - (87) - - 3,531
Deferred tax
assets 693 - - - 29 - 722
Investments 93 - - (93) - - -
Other non
current 448 - - 12 - - 460
assets -------- --------- --------- -------- -------- -------- --------
18,407 1,735 (20) (81) 29 20,070
-------- --------- --------- -------- -------- -------- --------
Current assets
Work in
progress 2,416 2,416
Trade and
other
receivables 45,987 - - 5 - - 45,992
Cash and cash
equivalents 31,284 31,284
-------- --------- --------- -------- -------- -------- --------
79,687 - - 5 - 79,692
-------- --------- --------- -------- -------- -------- --------
Current liabilities
Trade and
other (63,430) (63,430)
payables
Current tax
liabilities (1,036) (1,036)
Provision for
put options - - - - - (11,077) (11,077)
-------- --------- --------- -------- -------- -------- --------
(64,466) - - - - (11,077) (75,543)
-------- --------- --------- -------- -------- -------- --------
Net current
assets 15,221 - - 5 - (11,077) 4,149
Total assets
less current
liabilities 33,628 1,735 (20) (76) 29 (11,077) 24,219
Non Current
liabilities
Other non
current
liabilities (746) - - 76 - - (670)
Deferred tax
liabilities (141) (141)
Employment
benefits (221) (221)
Provision for
put options - - - - - (11,211) (11,211)
-------- --------- --------- -------- -------- -------- --------
Net assets 32,520 1,735 (20) - 29 (22,288) 11,976
======== ========= ========= ======== ======== ======== ========
Capital and reserves
Share capital 542 542
Share premium
account 9,618 9,618
Merger 13,553 1,203 - - - - 14,756
reserve
Treasury
reserve (792) (792)
Put option
reserve - - - - - (13,318) (13,318)
Share option
reserve 812 - - - 33 - 845
Foreign
currency
translation
reserve - - - (371) - - (371)
Retained
earnings 7,625 532 (20) 371 (4) (8,970) (466)
-------- --------- --------- -------- -------- -------- --------
Total
shareholders'
equity 31,358 1,735 (20) - 29 (22,288) 10,814
Minority
interest in
equity 1,162 1,162
-------- --------- --------- -------- -------- -------- --------
Total equity 32,520 1,735 (20) - 29 (22,288) 11,976
======== ========= ========= ======== ======== ======== ========
The numbers in the titles in brackets relate to the explanations in the notes to
these reconciliations. These explanations deal with the effects to all the
statements.
HALF YEAR ENDED 30 JUNE 2006 - IFRS RECONCILIATION
UNAUDITED CONSOLIDATED INCOME STATEMENT
UK GAAP IFRS 3 IAS 19 IAS 1 IAS 12 IAS 32 & IAS 39 IFRS
Half year ended Business Holiday Presentation of Deferred tax on Put options Half year
30 June 2006 Combinations Pay financial options ended 30
accrual statements - June 2006
Associates
Notes (1) (10) (3) (8) (9)
£000 £000 £000 £000 £000 £000 £000
Turnover
(billings) 150,256 150,256
======= ======== ======= ======== ======= ======= =======
Revenue 34,655 34,655
Operating
profit before
goodwill
amortisation 2,192 - (436) - - - 1,756
Goodwill
amortisation
and impairment (854) 854 - - - - -
------- -------- ------- -------- ------- ------- -------
Operating
profit 1,338 854 (436) - - - 1,756
Share of
results of
associate 3 - - (1) - - 2
Financial
income 675 675
Financial costs (14) - - 1 - (384) (397)
------- -------- ------- -------- ------- ------- -------
Profit on
ordinary
activities
before
taxation 2,002 854 (436) - - (384) 2,036
Taxation on
profits from
ordinary
activities (1,293) - 133 - 18 - (1,142)
------- -------- ------- -------- ------- ------- -------
Profit on
ordinary
activities
after taxation
for financial
period 709 854 (303) - 18 (384) 894
======= ======== ======= ======== ======= ======= =======
Attributable to
Equity holders
of the Group 264 854 (291) - 18 (384) 461
Minority
interests 445 - (12) - - - 433
------- -------- ------- -------- ------- ------- -------
Profit for the
financial
period 709 854 (303) - 18 (384) 894
======= ======== ======= ======== ======= ======= =======
Earnings per
share
- Basic 0.49p 1.58p (0.54)p - 0.03p (0.71)p 0.85p
- Diluted 0.48p 1.56p (0.53)p - 0.03p (0.70)p 0.84p
Average number
of shares -
Basic 54,206,799 54,206,799 54,206,799 54,206,799 54,206,799 54,206,799 54,206,799
Average number
of shares -
Diluted 54,644,954 54,644,954 54,644,954 54,644,954 54,644,954 54,644,954 54,644,954
Under IAS 33, earnings per share can be diluted by the LTIP and put options. In
2006 this effect is nil, see notes (7a) and (7b) for details.
The numbers in the titles in brackets relate to the explanations in the notes to
these reconciliations. These explanations deal with the effects to all the
statements.
HALF YEAR ENDED 30 JUNE 2006 - IFRS RECONCILIATION
UNAUDITED CONSOLIDATED BALANCE SHEET
UK GAAP IFRS 3 IAS 19 IAS 1 & IAS 12 IAS 32 & IFRS
IAS 39 IAS 39
Half year ended Business Holiday Presentation of Deferred Tax on Put options Half year ended
30 June 2006 Combinations Pay financial Options 30 June 2006
- Goodwill accrual statements
amortisation
Notes (1) (10) (4), (5) & (6) (8) (9)
£000 £000 £000 £000 £000 £000 £000
Non current assets
Goodwill 13,773 854 - - - - 14,627
Intangible
assets - - - 88 - - 88
Plant and
equipment 3,363 - - (88) - - 3,275
Deferred tax
assets 426 - - - (18) - 408
Investments 93 - - (93) - - -
Other non
current 356 - - 12 - - 368
assets -------- --------- --------- -------- -------- -------- --------
18,011 854 - (81) (18) - 18,766
-------- --------- --------- -------- -------- -------- --------
Current assets
Work in
progress 1,759 1,759
Trade and
other
receivables 40,653 40,653
Cash and cash
equivalents 23,742 23,742
-------- --------- --------- -------- -------- -------- --------
66,154 - - - - - 66,154
-------- --------- --------- -------- -------- -------- --------
Current liabilities
Trade and
other (50,379) - (436) - - - (50,815)
payables
Current tax
liabilities (948) - 133 - - - (815)
Provision for
put options - - - - - (6,821) (6,821)
-------- --------- --------- -------- -------- -------- --------
(51,327) - (303) - - (6,821) (58,451)
-------- --------- --------- -------- -------- -------- --------
Net current
assets 14,827 - (303) - - (6,821) 7,703
Total assets
less current
liabilities 32,838 854 (303) (81) (18) (6,821) 26,469
Non Current liabilities
Other non
current
liabilities (668) - - 81 - - (587)
Deferred tax
liabilities (182) (182)
Employment
benefits (274) (274)
Provision for
put options - - - - - (6,782) (6,782)
-------- --------- --------- -------- -------- -------- --------
Net assets 31,714 854 (303) - (18) (13,603) 18,644
======== ========= ========= ======== ======== ======== ========
Capital and reserves
Share capital 542 542
Share premium
account 9,618 9,618
Merger 14,144 612 - - - - 14,756
reserve
Put option
reserve - - - - - (13,219) (13,219)
Share option
reserve 718 718
Foreign
currency
translation
reserve - - - (264) - - (264)
Retained
earnings 5,740 242 (291) 264 (18) (384) 5,553
-------- --------- --------- -------- -------- -------- --------
Total
shareholders'
equity 30,762 854 (291) - (18) (13,603) 17,704
Minority
interest in
equity 952 (12) 940
-------- --------- --------- -------- -------- -------- --------
Total equity 31,714 854 (303) - (18) (13,603) 18,644
======== ========= ========= ======== ======== ======== ========
The numbers in the titles in brackets relate to the explanations in the notes to
these reconciliations. These explanations deal with the effects to all the
statements.
1 JANUARY 2006 - IFRS RECONCILIATION
UNAUDITED CONSOLIDATED BALANCE SHEET
UK GAAP IAS 1 IAS 1 & IAS 12 IAS 32 & IFRS
IAS 39 IAS 39
1 January 2006 Presentation of Presentation of Deferred Tax on Put options 1 January 2006
financial financial Options
statements statements
Notes (5) (4) (8) (9)
£000 £000 £000 £000 £000 £000
Non current assets
Goodwill 14,592 14,592
Intangible
assets - 87 - - - 87
Plant and
equipment 3,194 (87) - - - 3,107
Deferred tax
assets 354 (36) 318
Investments 100 - (100) - - -
Other non
current 224 - 19 - - 243
assets -------- -------- -------- -------- -------- --------
18,464 - (81) (36) - 18,347
-------- -------- -------- -------- -------- --------
Current assets
Work in
progress 3,277 3,277
Trade and
other
receivables 50,552 50,552
Cash and cash
equivalents 20,486 20,486
-------- -------- -------- -------- -------- --------
74,315 74,315
-------- -------- -------- -------- -------- --------
Current liabilities
Trade and
other (56,209) (56,209)
payables
Current tax
liabilities (2,760) (2,760)
Provision for
put options - - - - (5,540) (5,540)
-------- -------- -------- -------- -------- --------
(58,969) - - - (5,540) (64,509)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Net current
assets 15,346 - - - (5,540) 9,806
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total assets
less current
liabilities 33,810 - (81) (36) (5,540) 28,153
-------- -------- -------- -------- -------- --------
Non Current liabilities
Trade and
other
payables
falling due
after more (949) - 81 - - (868)
than one year
Deferred tax
liabilities (21) (21)
Employment
benefits (302) (302)
Provision for
put options - - - - (7,679) (7,679)
-------- -------- -------- -------- -------- --------
Net assets 32,538 - - (36) (13,219) 19,283
======== ======== ======== ======== ======== ========
Capital and reserves
Share capital 542 542
Share premium
account 9,618 9,618
Merger 14,756 14,756
reserve
Put option
reserve - (13,219) (13,219)
Share option
reserve 599 599
Foreign - -
currency
translation
reserve
Retained
earnings 6,101 - - (36) - 6,065
-------- -------- -------- -------- -------- --------
Total
shareholders'
equity 31,616 - - (36) (13,219) 18,361
Minority
interest in
equity 922 922
-------- -------- -------- -------- -------- --------
Total equity 32,538 - - (36) (13,219) 19,283
======== ======== ======== ======== ======== ========
The numbers in the titles in brackets relate to the explanations in the notes to
these reconciliations. These explanations deal with the effects to all the
statements.
Cash flow statements
The IFRS Cash Flow Statement, prepared under IAS 7, presents cash flows in three
categories; operating activities, investing activities and financing activities.
This is fewer than the previous seven categories under UK GAAP. Other than the
reclassification of cash flow items into the new disclosure categories, there
are no significant differences between the Group's Cash Flow Statement under UK
GAAP and IFRS. Consequently, the revised Cash Flow Statement has not been
presented in this document.
Notes to the reconciliations between UK GAAP and IFRS
(1) Business Combinations - Goodwill amortisation
The Group has elected not to apply IFRS 3 retrospectively to business
combinations completed prior to 1 January 2006. In accordance with IFRS 1 the
2006 UK GAAP amortisation of goodwill entries have been reversed as follows:-
December 2006 June 2006
Annual Interim
£000 £000
Income statement
Operating profit increased 1,735 854
Balance sheet
Goodwill increased 1,735 854
Equity items
Merger reserve increased 1,203 612
Retained earnings increased 532 242
When we reorganised in 2004 prior to our AiM listing, we increased our holding
to greater than 90% in many of our subsidiaries, through an equity swap. The
share premium on these acquisitions was credited to merger reserve. The merger
reserve was released to retained earnings when the related asset is expensed to
the income statement. Under IFRS the 2006 amortisation of goodwill is reversed
together with the adjustments to merger reserve.
In 2006 and in future we will not amortise goodwill, however we will continue to
conduct an annual impairment review. In 2006 we identified no impairments.
More to follow