RNS Number:9257R
Alpha Airports Group PLC
29 September 2005
Alpha Airports Group Plc
Results for the Six Months ended 31 July 2005
Unaudited 29 September 2005
* Encouraging overall revenue growth of 12.4% to #268.8m (2004/5:
#239.2m), driven primarily by 8.4% growth in like-for-like international
passengers at UK regional airports, and excellent 27% growth in Inflight
Retail.
* Adjusted* profit before tax down 34.7% to #6.6m (2004/5: #10.1m) due to
new contract start-up costs in UK Flight Services, enhanced business
development costs in UK Retail, and subdued Asian Retail trading post-tsunami.
Profit before tax down 42% to #6.2m (2004/5: #10.7m).
* Recent acquisitions in Turkey, Romania and Bulgaria performing to plan.
* New #100 million five year debt financing secured.
* UK pensions deficit has increased due primarily to lower long-term
interest rates. This deficit will require increased future company funding and
higher charges in our future results.
* The Board has recommended a dividend of 1.0p per share (31 July 2004:
1.0p per share) to be paid on 4 November 2005 to shareholders on the register
as at 7 October 2005.
* From continuing operations before separately disclosable items, goodwill
impairment and after adjustments for tax on associates.
Commenting on the interim results, Kevin Abbott, Chief Executive, said:
"Even though these results are broadly in line with our own expectations, we are
disappointed to report a profits decline. We are pleased with the underlying
progress made on many of last year's Flight Services initiatives, and we remain
committed both to ongoing active development of our existing strongly positioned
businesses and to further acquisitions. Despite our first half result and a
weakening UK retail environment, we anticipate a strong second half recovery and
are cautiously optimistic for overall Group progress for the full year."
Enquiries:
Alpha Airports Group Plc
Kevin Abbott, Chief Executive Tel: 020 7554 1400 (today)
Heather McRae, Finance Director Tel: 020 8580 3200 (thereafter)
Gavin Anderson & Company
Deborah Walter / Amelia Ward Tel: 020 7554 1400
Website: www.alpha-group.com
Introduction
Alpha's business is providing retailing and catering services to the world's
airlines and airports. Our essence is "people making travel special". Alpha
currently operates from over 150 retail and catering outlets at 83 airports in
15 countries across the globe.
Group
For the first time, the Group's results are reported under International
Financial Reporting Standards ("IFRS") for the six months ended 31 July 2005 and
the comparative results have been restated accordingly.
We are pleased to report an overall increase in revenue of 12.4% to #268.8m
(2004/5: #239.2m) benefiting from ongoing passenger growth in the UK regional
airports and the acquisition of new businesses in Turkey, Romania and Bulgaria.
Adjusted profit before tax (from continuing operations before exceptional items,
goodwill impairment and excluding tax on associates) is down 34.7% to #6.6m
(2004/5: #10.1m). We expected a weaker first half profit compared to last year
due to a combination of new contract start-up costs for American Airlines in UK
Flight Services, increased business development costs in UK Retail, and subdued
Asian trading post-tsunami. We have benefited from a first time profit
contribution from our recent Romanian and Bulgarian acquisition. However, our
first half profit is slightly below our expectations due to subdued underlying
UK Retail profits caused by weakening penetration levels.
UK revenue is 8.9% ahead of the same period last year at #218.5m (2004/5:
#200.6m) and revenue from international locations is up 30.3% to #50.3m (2004/5:
#38.6m) benefiting from the acquisitions made during the last 8 months.
Flight Services
Overall Flight Services revenue increased 9.8% to #146.9m (2004/5: #133.8m). A
significant part of the increase arose from the 27% like-for-like ongoing growth
of our Inflight Retail business serving UK and European low-fare passengers,
which now represents 36% of our total Flight Services business. Adjusted
operating profit before interest and tax declined 15.7% to #4.3m (2004/5:#5.1m).
In our major UK Flight Catering business, whilst the number of aircraft serviced
increased, overall revenue has declined slightly, as our airline customers
continue to seek cost-savings in meal service design. UK Flight Catering
successfully launched its largest ever programme of new services to American
Airlines at Heathrow and Gatwick and incurred significant one-off start-up
costs. However, in a challenging London employment market - now easing - we also
had to rely on substantial levels of overtime working to meet the increased
service requirements, resulting in a significant first half profit decline in UK
Flight Catering.
UK Flight Catering is delighted to confirm the extension of major customer
contracts with both British Airways CitiExpress and Continental Airlines for a
further 3 and 7 years respectively, and existing major customers have committed
to our Blue Sky Service concept, starting both this winter and next summer.
Inflight Retail maintained its strong growth record in the UK and Europe,
despite a difficult and costly start-up to the peak summer trading season, as
many vendor partners struggled initially to provide adequate stock coverage. In
Australia, the new and extended contract for Qantas' inflight duty-free
programme from March 2005 has generated a small profit contribution compared to
last year's significant start-up costs. After a costly 12 months, during which
we have established our Australian operation and upgraded our UK Bond
infrastructure and IT support systems, we anticipate strong second half progress
throughout our fast growing Inflight Retail business.
Internationally, our Middle East business in Jordan has continued to prosper,
and has successfully opened four Alpha-designed World News Cafes at Queen Alia
International Airport, Amman. In Amsterdam, after significant restructuring last
year, the business has achieved a break-even result. The recently acquired
Flight and Airport Retail Catering businesses in Romania and Bulgaria have
performed in line with our expectations; in addition, new World News Cafe, Deli
Sandwich Bar and Food Hall contracts have been awarded as part of exciting local
airport development plans. In Australia, we have secured new flight catering
contracts for both Lauda Air and Air Tahiti Nui, and are actively seeking
further major international airline customers for our excellent flight kitchen
network. In Italy, our joint-venture company has secured several new customers
for its recently opened Rome Fiumicino flight kitchen. We anticipate ongoing
strong profits performances across our International Flight businesses in the
second half.
Retail
Overall Retail revenue increased an excellent 15.7% to #121.9m (2004/5: #105.4m)
but adjusted operating profit declined by 38% to #3.6m (2004/5: #5.8m). UK
Retail revenue was up 9.2%. On a "like-for-like" basis, Alpha Airport Shopping
increased revenue 6.2% on passenger growth of 9.2%, despite last year's EU
expansion reducing the growth in sales of duty free liquor and tobacco. Whilst
we have continued to achieve significant growth in average transaction spend for
those passengers visiting our Alpha 'pink shops', we have experienced a decline
in the percentage of passengers shopping in our airport outlets reflecting, we
believe, weakening UK consumer confidence.
We have committed significant extra people resources to continue to drive our UK
Retail performances and to support expansion into Europe. In addition, we have
incurred significant tender and due diligence costs associated with our European
development plans.
We are in the pre-implementation phase of our upgraded and integrated IT systems
and tills project (IRIS) which will be rolled out across the UK Retail estate
this winter. The costs of this capital project in the first half, combined with
increased business development costs, gave rise to a substantial decline in
profits from our UK Retail business compared with the previous year.
We are delighted to have been awarded numerous new UK Retail concessions, many
of which are already successfully trading;
Alpha Airport Shopping- new 'pink shops' in Doncaster Robin Hood and Belfast
City, and an expanded offer and contract extension at Leeds Bradford.
World News - new outlets and contracts at Birmingham International Airport and
Doncaster Robin Hood Airport.
Retail Catering - new Alpha-designed World News Cafe at Birmingham
International,new 'Bar O8' bars at Doncaster Robin Hood and Eurotunnel, new Deli
Sandwich Bars at Belfast City and Inverness, and a new Food Court at Nottingham
East Midlands.
We are also delighted that our fantastic Glorious Britain gift offer was voted
'Best of the Best' in the prestigious Gift Retailer of the Year awards.
Internationally, our Sri Lankan business, post the devastation caused by the
tsunami, has only suffered a 6.6% decline in arrivals passengers. With the
benefit of the recently opened and expanded arrivals shop and with an upgraded
focus on value offers and promotions, the profit decline has been limited to
7.1%. We anticipate that the better located departures shop which opened in
September will help to stabilise both revenue and profit over the next six
months.
In the USA, revenue was 2.4% ahead of last year. Our major reinvestment in
upgraded and expanded Alpha pink duty free shops is currently underway and this
will maximise opportunities from our five year contract extension starting in
the second half. Our recently acquired Turkish business traded in line with
expectations. As we have said, a key strategic ambition across Retail is to
develop in Europe, and we are pleased to have been awarded our first mainland
European retail contract for seven speciality retail boutiques, six of which are
now open at Rome Fiumicino and Ciampino airports.
Overall, our International Retail businesses registered a 42.5% revenue increase
(due primarily to our Turkish acquisition) and a 1.3% increase in profit which
reflects the Asian profit decline and Italian start-up costs offsetting the
first time contribution from Turkey. We anticipate stronger second half
performances from all our International Retail businesses.
Acquisitions
During the first half we acquired two small businesses in Romania and Bulgaria.
Both businesses provide flight catering services to airlines and operate retail
catering outlets at the main capital city airports in each country. The total
consideration, including acquisition costs was #3.9m and net assets acquired
totalled #0.4m. In Romania we are in partnership with the major state airline,
Tarom, and the Bucharest airport authority, with Alpha owning 64% of the
company. Bulgaria is a wholly owned subsidiary. Both businesses have performed
well since acquisition and have been successful in winning new retail catering
contracts.
Financing
During the first half, the Group renegotiated its existing banking facility and
replaced it with a new #100m revolving five year multi-currency facility with
three banks, LloydsTSB, Royal Bank of Scotland and Allied Irish Bank.
This new facility gives us capacity to organically grow the existing business
and for future investment opportunities.
Pensions
Our biggest change under IFRS is the recognition of the pension fund deficit on
the balance sheet. Up until 31 January 2005 the deficit was disclosed in the
financial statements but not recognised.
The deficit at 31 July, net of deferred tax, is #24.8m (31 July 2004: #15.7m).
The principal reason for the increase in the deficit is lower returns on gilts
which means the scheme liabilities are discounted at a lower rate compared with
January and July last year. We have a relatively immature scheme and the Group
still considers it appropriate to have a significant part of the assets invested
in equities.
The total profit and loss charge in the first half, including the financing cost
was #2.3m (2004/5: #1.9m).
We are currently conducting our triennial valuation of the UK pension fund and
await the outcome of this, however, given the increased deficit under IAS 19 we
are likely to see a significant increase in contributions going forward. We
anticipate finalising the outcome of the valuation and the full cash funding
position by 31 January 2006.
Dividend
The Board has recommended the payment of an interim dividend of 1.0 pence per
ordinary share (2004/5: 1.0p per share) which will be payable on 4 November 2005
to shareholders on the register on 7 October 2005.
IFRS
The Group has adopted IFRS for the first time in reporting the half year
results. The areas that have impacted the results are shown below:-
1. Pensions
The net pensions deficit has been recorded in the accounts at 31 July. This
has reduced net equity in total by #24.8m albeit the prior periods have been
restated to reflect this change.
The profit and loss account in the first half has seen an additional charge
of #0.8m over and above the SSAP 24 charge reflecting the size of the deficit
compared with 31 January 2005. This additional charge is split between
operating profit and interest expense.
2. Share Based Payments
The Group has recognised the cost of share based payments within the results.
A charge of #0.1m has been made in the first half result.
3. Goodwill
Under IFRS, acquisition goodwill is considered to have an indefinite life
and is not amortised, however, it is subject to an annual impairment review.
The half year amortisation charge under UK GAAP (2004/5: #1.6m) has been
reversed out of the comparative periods' profit and loss account and an
impairment review conducted.
There was no impairment charge in the six months ended 31 July 2005.
4. Dividends
Dividends are not recognised in the accounts until they are approved for
payment hence the interim figures do not contain an interim dividend
provision but recognise the 2004/5 final dividend.
5. Tax on Associates
Previously, operating profit included the results of associates and joint
ventures on a pre-tax basis. IFRS requires operating profit to include the
results on a post-tax basis. This has the effect of reducing profit before
tax by #0.4m in the first half.
Outlook
Ongoing progress in relation to last year's Flight Services development projects
both in the UK and Internationally combined with the absence of the first half's
significant one-off start-up costs, gives us confidence for a strong second half
Flight Services recovery. In addition, we are seeking further UK cost-savings
this winter, as we upgrade and rationalise our UK Flight Services facilities at
Manchester, and extend our Blue Sky Service customer base. We believe UK
consumer confidence in the retail sector will remain cautious, and thus our UK
Retail environment will continue to be challenging. However, we anticipate
significantly improved second half International Retail performances. Despite
our upgraded investment in business development - including the #7m
implementation of new IT systems across our UK Retail estate this winter - we
remain cautiously optimistic for overall Group progress for the full year.
Group Income Statement
Unaudited
for the six months ended 31 July 2005
Six months Six months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005*
Notes #m #m #m
------------------------------------------------------------------------------------------------------
Continuing operations
Revenue 2 268.8 239.2 487.8
Cost of sales (176.4) (157.0) (317.6)
------------------------------------------------------------------------------------------------------
Gross profit 92.4 82.2 170.2
Administrative expenses (85.2) (70.8) (155.5)
------------------------------------------------------------------------------------------------------
Operating profit 7.2 11.4 14.7
Interest payable and similar charges (1.6) (0.9) (2.0)
Interest receivable 0.3 0.1 -
Income from interests in associated undertakings after tax 0.1 0.1 0.3
Share of profit from joint ventures after tax 0.2 - 0.1
------------------------------------------------------------------------------------------------------
Profit before tax 6.2 10.7 13.1
Taxation (1.7) (3.2) (4.3)
------------------------------------------------------------------------------------------------------
Profit for the period 4.5 7.5 8.8
------------------------------------------------------------------------------------------------------
Attributable to:
Equity shareholders 2.9 6.6 6.5
Minority interests 1.6 0.9 2.3
------------------------------------------------------------------------------------------------------
Profit for the period 4.5 7.5 8.8
------------------------------------------------------------------------------------------------------
Earnings per share (note 5)
- Basic 1.65p 3.84p 3.78p
- Diluted 1.62p 3.79p 3.73p
* Separately disclosable items in relation to the year ended 31 January 2005 are
disclosed in note 3.
Group Statement of Recognised Income and Expense
Unaudited
for the six months ended 31 July 2005
Six Six
months months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005
#m #m #m
-----------------------------------------------------------------------------------------------
Profit for the period 4.5 7.5 8.8
Currency translation differences on foreign currency net 1.1 (0.5) (0.9)
assets
Actuarial (losses)/gains on defined benefit pension schemes (6.5) 2.3 (3.2)
Deferred tax on pension scheme 1.9 (0.7) 0.9
-----------------------------------------------------------------------------------------------
Total recognised income relating to the period 1.0 8.6 5.6
-----------------------------------------------------------------------------------------------
Attributable to:
Equity shareholders (0.6) 7.7 3.5
Minority interests 1.6 0.9 2.1
1.0 8.6 5.6
Group Reconciliation of Equity
Unaudited
for the six months ended 31 July 2005
Six Six
months months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005
#m #m #m
-----------------------------------------------------------------------------------------------
At start of period 42.4 42.8 42.8
Total recognised income (as above) 1.0 8.6 5.6
Minority interests - dividends (1.3) (0.9) (2.2)
Minority interests - acquisition 0.2 - 1.1
Minority interests - part disposal of subsidiary - 0.2 0.1
Share options
- proceeds from share options 0.2 0.9 1.3
- value of employee services 0.1 - 0.1
Credit in respect of long term incentive plan amortisation - 0.1 0.2
charge
Dividends (5.2) (4.8) (6.6)
-----------------------------------------------------------------------------------------------
At end of period 37.4 46.9 42.4
-----------------------------------------------------------------------------------------------
Group Balance Sheet
Unaudited
At 31 July 2005
31 July 31 July 31 Jan
2005 2004 2005
Notes #m #m #m
-----------------------------------------------------------------------------------------------------
Non-current assets
Goodwill 6 16.4 10.1 12.9
Intangible assets 4.5 1.8 2.6
Property, plant and equipment 59.9 57.8 56.8
Investments in associates and joint ventures 6.6 3.5 6.5
Other receivables 2.3 2.2 2.1
Deferred tax 10.7 6.7 8.6
-----------------------------------------------------------------------------------------------------
100.4 82.1 89.5
-----------------------------------------------------------------------------------------------------
Current assets
Inventories 39.6 28.9 32.1
Trade and other receivables 55.2 39.7 36.6
Cash and cash equivalents 10.9 8.3 10.8
-----------------------------------------------------------------------------------------------------
105.7 76.9 79.5
-----------------------------------------------------------------------------------------------------
Current liabilities
Bank and other borrowings (33.9) (10.4) (30.6)
Trade and other payables (94.6) (71.7) (61.4)
Current tax liabilities (2.6) (3.1) (3.1)
Provisions for liabilities and charges (0.3) (1.5) (1.5)
-----------------------------------------------------------------------------------------------------
(131.4) (86.7) (96.6)
-----------------------------------------------------------------------------------------------------
Net current liabilities (25.7) (9.8) (17.1)
-----------------------------------------------------------------------------------------------------
Non-current liabilities
Bank and other borrowings (0.5) (0.9) (0.7)
Other non-current liabilities (0.5) (0.1) (0.5)
Provisions for liabilities and charges (0.3) (1.1) (0.3)
Retirement benefit obligations (35.5) (22.4) (28.2)
Deferred tax (0.5) (0.9) (0.3)
-----------------------------------------------------------------------------------------------------
(37.3) (25.4) (30.0)
-----------------------------------------------------------------------------------------------------
Net assets 37.4 46.9 42.4
-----------------------------------------------------------------------------------------------------
Shareholders' equity
Ordinary shares 17.4 17.3 17.4
Share premium 44.4 43.8 44.1
Capital redemption reserve 0.4 0.4 0.4
Other reserves 0.2 (0.5) (0.9)
Retained earnings (27.9) (15.6) (21.0)
-----------------------------------------------------------------------------------------------------
Total shareholders' equity 34.5 45.4 40.0
Minority interests 2.9 1.5 2.4
-----------------------------------------------------------------------------------------------------
Total equity 37.4 46.9 42.4
-----------------------------------------------------------------------------------------------------
Group Cash Flow Statement
Unaudited
At 31 July 2005
Six months Six months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005
Notes #m #m #m
----------------------------------------------------------------------------------------------------------------
Net cash from operating activities 7.1 16.0 7.0 7.8
----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Acquisition and disposal of businesses (3.9) - (7.1)
Part disposal of subsidiary - continuing operations - 1.7 1.7
Cash acquired on purchase of business 8.1 0.3 - 0.4
Disposal of associate - 0.5 0.5
Proceeds from sale of property, plant and equipment - - 0.1
Expenditure on intangible assets (software) (1.9) (0.5) (0.8)
Purchase of property, plant and equipment (7.3) (7.1) (15.4)
Dividends received from associates 0.2 0.1 0.2
Dividends received from joint ventures - - 0.1
----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (12.6) (5.3) (20.3)
----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 0.2 0.9 1.3
Repayment of long term #60m facility 11 (39.9) - -
Loans from #100m facility 11 39.9 - -
Repayment of finance leases (0.3) (0.4) (0.7)
Increase in loans 8.8 2.0 21.1
Dividends paid to shareholders (5.2) (4.6) (6.6)
----------------------------------------------------------------------------------------------------------------
Dividends paid to minority interests (1.3) (0.9) (2.2)
----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities 2.2 (3.0) 12.9
----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and bank overdrafts 5.6 (1.3) 0.4
Cash and bank overdrafts at opening period 4.8 4.9 4.9
Effects of exchange rates (0.1) (0.1) (0.5)
----------------------------------------------------------------------------------------------------------------
Total cash and bank overdrafts at closing period 10.3 3.5 4.8
----------------------------------------------------------------------------------------------------------------
Notes to the Group Interim Financial Statements
Unaudited
1. Accounting policies
Accounting policies for the six months ended 31 July 2005
The principal accounting policies adopted in the preparation of these interim
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
(1) Basis of preparation
The financial information presented in this document has been prepared in
accordance with the accounting policies the Group expects to be
applicable at 31 January 2006 and the interpretations of those standards are set
out below. These interim financial statements have been
prepared in accordance with those IFRS and IFRIC interpretations issued and
effective or, issued and early adopted, as at the time of preparing these
statements. The IFRS standards and IFRIC interpretations that will be applicable
at 31 January 2006, including those that will be applicable on an optional
basis, are not known with certainty at the time of preparing these interim
financial statements. These figures may therefore require amendment to change
the basis of accounting or presentation of certain financial information, before
their inclusion in the IFRS financial statements for the year ending 31 January
2006, which will be the Group's first full set of IFRS financial statements.
The financial statements of the Company and its subsidiaries have been prepared
under the historical cost convention.
The comparative figures for the year ended 31 January 2005 do not constitute
statutory accounts for the purposes of s240 of the Companies
Act 1985. A copy of the statutory accounts for the year ended 31 January 2005,
prepared under UK GAAP, has been delivered to the
Registrar of Companies and contained an unqualified auditors' report in
accordance with s235 of the Companies Act 1985.
A summary of the more important group accounting policies is set out below,
together with an explanation of where changes have been made to previous
policies on the adoption of the IFRS accounting standards in the year.
The preparation of financial statements in conformity with IFRS accounting
principles requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The Board has reviewed the accounting policies set out below and considers them
to be the most appropriate to the Group's business activities.
(2) Changes in accounting policies - Introduction of IFRS
Previously the Group prepared its financial statements in accordance with UK
GAAP. The impact of the transition between UK GAAP and IFRS is disclosed in note
10 to the financial statements.
The comparative financial statements of the Group for the six months ended 31
July 2004 and the year ended 31 January 2005 have been restated in accordance
with IFRS.
The date of transition to IFRS is 1 February 2004.
(3) First time adoption
The rules for first time adoption of IFRS are set out in IFRS 1, First-time
Adoption of International Financial Reporting Standards. In general, selected
accounting policies must be applied retrospectively in determining the opening
balance sheet under IFRS. However, IFRS 1 allows a number of exemptions to this
general principle.
Exemptions which the Group have taken advantage of, are noted below:
a) Post-employment employee benefits
In accordance with IFRS 1, the Group has elected to fully recognise all
actuarial gains and losses at the date of transition to IFRS. Subject to the
endorsement by the European Union of IAS 19 (revised), ongoing actuarial gains
and losses will be recognised in the Statement of Recognised Income and
Expense.
Notes to the Group Interim Financial Statements
Continued
1. Accounting policies (continued)
(3) First Time Adoption (continued)
b) Goodwill
Under the transitional arrangements of IFRS 1, there is the option of
applying IFRS 3, Business Combinations, prospectively from the date of
transition. The Group has exercised this option and has not restated past
business combinations prior to the transition date.
c) Cumulative translation differences
Under IAS 21, The Effects of Changes in Foreign Exchange Rates, certain
translation differences are classified as a separate component of equity,
and on disposal of foreign operations, these are transferred to the relevant
cumulative translation difference to the income statement as part of the gain
or loss on disposal. In accordance with IFRS 1, the Group has elected to
reset the cumulative translation differences for all foreign operations to be
zero at the date of transition to IFRS.
d) Adoption date for subsidiaries
The Group has prepared its consolidated financial statements in accordance
with IFRS but has elected not to adopt IFRS for the accounts of Alpha
Airports Group Plc or its subsidiaries as permitted by IFRS 1.
The Group plans to prepare all subsidiaries financial statements in
accordance with IFRS from 1 February 2007.
e) Fixed asset valuation
The Group has elected not to measure fixed assets at fair value on the date
of transition.
f) Leases
The Group has reviewed its lease arrangements for land and buildings and
other assets at the date of transition to determine whether the lease
arrangement is a finance or operating lease under IAS 17. Certain finance
leases have been identified which have been recognised prospectively
from the date of transition.
g) Share based payments
The Group has recognised the costs of share based payments in the income
statement for share options granted after 7 November 2002.
(4) Basis of consolidation
The Group financial statements for the six months ended 31 July 2005 include the
accounts of Alpha Airports Group Plc and all of its subsidiary undertakings, and
the relevant proportion of the results of associated companies, accounted for on
an equity basis, in which the Group holds an equity interest and over which it
exercises significant influence.
(5) Joint Ventures
Joint ventures are those enterprises over whose activities Alpha has joint
control, established by contractual agreement or the Articles of Association.
The consolidated financial statements include Alpha's share of the total
recognised gains and losses of joint ventures on an equity accounted basis, from
the date that significant influence or joint control commences until the date
significant influence ceases.
(6) Business combinations
The results of businesses acquired are consolidated from the effective date of
acquisition using acquisition accounting, whereby the acquisition of a business
or an associate cost is allocated to the fair value of net tangible assets after
adjustments to bring accounting policies in line with those of the Group.
(7) Foreign currency accounting
The income statements and cash flows of overseas subsidiaries and associates are
translated into sterling at average rates of exchange during the accounting
period. Overseas net assets and UK loans denominated in foreign currencies are
expressed in sterling at the rates of exchange ruling at the balance sheet date.
Exchange differences arising on the retranslation, at closing rates, of the
opening balance sheets of overseas subsidiaries and associates, together with
the year end adjustment to closing rates of the income statements translated at
average rates, are taken to reserves.
Exchange differences arising in the normal course of trading and on the
translation of monetary assets and liabilities are dealt with in the income
statement. Differences arising on the translation of foreign currency borrowings
are taken directly to reserves where there is a corresponding exchange
difference on the translation of the related net investment in overseas
subsidiaries and associates
Notes to the Group Interim Financial Statements
Continued
1. Accounting policies (continued)
(8) Goodwill
On the acquisition of a subsidiary, joint venture, associate or business, the
purchase consideration is allocated between the net tangible and intangible
assets on a fair value basis, with any excess purchase consideration
representing goodwill. Goodwill is recognised as an asset and reviewed for
impairment at least annually. Any impairment is recognised immediately in the
income statement and will not be subsequently reversed. On disposal of a
subsidiary, joint venture, associate or business, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS is
included in the balance sheet at the previously stated net book value amount
under UK GAAP. The net book value of goodwill on transition was #11.3m. An
impairment review was carried out as at the transition date and no impairment
identified.
(9) Intangible assets
Intangible assets consist of computer application software. Application software
is amortised over its expected economic life. The amortisation rates used range
from 3 to 5 years. In connection with the introduction of new systems, costs are
capitalised once the Group is committed to the implementation. Costs incurred in
respect of new systems are written-off in equal annual instalments over the
expected useful life of the system, commencing in the year in which the benefits
arise.
(10) Property, plant and equipment
All property, plant and equipment is stated at cost less depreciation. Cost
includes all relevant external expenditure incurred in acquiring the asset.
The Group selects its depreciation rates carefully and reviews them regularly to
take account of any changes in circumstances. When determining expected economic
lives, the Group considers the expected rate of technological developments and
the intensity at which the assets are expected to be used. All assets are
subject to annual review and where necessary, further provision is made for any
impairment in value.
In line with the above depreciation policy, freehold properties are amortised
over a period of 50 years and leasehold properties amortised over the unexpired
lease term. Depreciation is provided on other assets on a straight line basis at
annual rates estimated to write-off their book values over their expected
economic lives. The depreciation rates range from 10-15 years for plant and
machinery and 4-10 years for furniture and equipment.
Assets under construction are not depreciated until they are ready for use, when
they are transferred to the relevant asset class and depreciated over their
useful economic lives.
(11) Leases
Where a Group company enters into a lease, which entails taking substantially
all the risks and rewards of ownership of an asset, the lease is treated as a
"finance lease". The asset is recorded in the balance sheet as a tangible fixed
asset and is depreciated over its estimated useful life or the term of the
lease, whichever is shorter. Future instalments under such leases, net of
finance charges, are included within creditors. Rentals payable are apportioned
between the finance element, which is charged to the income statement, and the
capital element, which reduces the outstanding creditor.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the lease.
(12) Investments
Investments in subsidiary undertakings are stated at historic cost less any
required provision for impairment. The Directors review the carrying value of
the Group's investments in subsidiary undertakings at least annually or whenever
an event occurs that would indicate a possible impairment.
(13) Impairment
At each balance sheet date, reviews are carried out of the carrying amounts of
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent, if any, of the impairment loss. Where the asset does not generate cash
flows that are independent from other assets, estimates are made of the cash
flows of the cash generating unit to which the asset belongs. Intangible assets
with an indefinite useful life are tested for impairment at least annually and
whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value, less costs to sell, and
value in use. In assessing value in use, estimated future cash flows are
discounted to their present value using a discount rate appropriate to the
specific asset or cash generating unit.
Notes to the Group Interim Financial Statements
Continued
1. Accounting policies (continued)
(13) Impairment (continued)
If the recoverable amount of an asset or cash generating unit is estimated to be
less that its carrying amount, the carrying amount of the asset or cash
generating unit is reduced to its recoverable amount. Impairment losses are
recognised immediately in the income statement.
(14) Inventories
Inventories for resale are held at an average weighted cost and raw materials
and consumables are held at FIFO. Provision is made, where necessary, against
identified slow moving and obsolete inventories.
(15) Taxation including deferred tax
The tax expense represents the sum of the tax payable on the current year
taxable profits and the movements on deferred tax. The tax payable on the
current year taxable profits is calculated using the applicable tax rates that
have been enacted, or substantively enacted, by the balance sheet date.
Deferred tax is the tax arising on differences between the carrying amounts of
assets and liabilities in the financial statements and their corresponding tax
bases used in the computation of taxable profits, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax is not recognised on temporary differences arising in respect of
goodwill that is not deductible for tax purposes.
No provision is made for deferred tax which would become payable on the
distribution of retained profits by foreign subsidiaries, joint ventures, or
associates, unless there is an intention to distribute such retained profits.
Deferred tax is calculated using tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Movements in
deferred tax are charged or credited in the income statement, except when they
relate to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
(16) Onerous contracts
Where the benefits to be derived from a contract are lower than the unavoidable
costs of meeting the Group's obligation under the contract, a provision is
recognised. The provision is stated at the discounted present value of the
future net cash outflows expected to be incurred in respect of the contract. The
provision is utilised as cash outflows are incurred under the contract and an
amount is charged to the income statement for interest incurred on the unwinding
of the discounted provision over time.
(17) Employee benefits
The expense of defined benefit schemes and other post-retirement employee
benefits is determined using the projected unit credit method and charged to the
income statement as an operating expense, based on actuarial assumptions
reflecting market conditions at the beginning of the financial year. Actuarial
gains and losses are recognised in full in the statement of recognised income
and expense in the period in which they occur. Past service costs are recognised
immediately to the extent that benefits have vested, or, if not vested, on a
straight line basis over the period until the benefits vest.
Net pension obligations in respect of defined benefit schemes are included in
the balance sheet at the present value of scheme liabilities, less the fair
value of scheme assets. Where assets exceed liabilities, any net pension asset
is limited to the extent that the asset is not recoverable through reductions in
future contributions.
The expense of defined contribution benefit schemes and other employee benefits
are charged in the income statement as incurred.
The Group operates an employee share option scheme (Sharing in Success) which
rewards employees' long service by the issue of share options. Provisions for
the Group's employee loyalty scheme are based upon the service levels of the
employees and the number of share options that are expected to vest. The share
options are valued in accordance with the Group's share based payment policy
(note1(19)).
(18) Revenue recognition
Revenue represents the amounts receivable for goods sold and services provided,
net of discounts and excluding VAT and similar sales taxes. In respect of goods
sold, revenue is recognised at the point of sale to the customer in the Group's
retail or retail catering outlets, or on-board aircraft in the case of inflight
sales. For the supply of airline catering services, revenue is recognised at the
point of delivery of meals and drinks to the aircraft.
Notes to the Group Interim Financial Statements
Continued
1. Accounting policies (continued)
(19) Share based payments
The fair value of share-based remuneration is determined at date of grant and
recognised as an expense in the income statement on a straight line basis over
the vesting period, taking account of the estimated number of shares that will
vest. The fair value is determined by use of a Black-Scholes model.
In the case of the Group's Long Term Incentive Plan, the consideration paid for
the shares, which equated to open market value at the date of grant, is deducted
in arriving at shareholders' equity and amortised through the income statement
on a straight line basis over the vesting period, until the shares held by the
trust vest unconditionally to employees.
(20) Separately disclosable items
Items that are both material in size and unusual and infrequent in nature are
presented as separately disclosable items in the income statement or separately
disclosed in the notes to the financial statements. The directors are of the
opinion that the separate recording of these items provides helpful information
about the Group's underlying business performance.
Notes to the Group Interim Financial Statements
Continued
2. Segment reporting
2 (a). Business segments
The Group operates in two main business segments:
- Flight Services - the provision of Flight Catering and In flight
Retailing to the airline industry
- Retail - Retailing and Catering at airports
The business segment reporting reflects the Group's management and
internal reporting structure.
Flight Services Retail Group
------------------------ -------------------- ---------------------
Six Six Year Six Six Year Six Six
months months months months months months Year
ended ended ended ended ended ended ended ended ended
31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan
2005 2004 2005 2005 2004 2005 2005 2004 2005
#m #m #m #m #m #m #m #m #m
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
Revenue 146.9 133.8 268.5 121.9 105.4 219.3 268.8 239.2 487.8
-----------------------------------------------------------------------------------------------------------------------
Profit before separately 3.6 4.9 7.1 3.6 5.8 11.6 7.2 10.7 18.7
disclosable items
Separately disclosable items - cost - - (2.3) - - - - - (2.3)
of sales
Separately disclosable items - - - (3.9) - - 1.5 - - (2.4)
admin expenses
Profit on part disposal of - 0.3 0.3 - - - - 0.3 0.3
subsidiary undertaking
Profit on disposal of associate - 0.4 0.4 - - - - 0.4 0.4
-----------------------------------------------------------------------------------------------------------------------
Operating profit 3.6 5.6 1.6 3.6 5.8 13.1 7.2 11.4 14.7
Share of associates/joint venture 0.3 0.1 0.4 - - - 0.3 0.1 0.4
after tax
-----------------------------------------------------------------------------------------------------------------------
Segment profit before tax and 3.9 5.7 2.0 3.6 5.8 13.1 7.5 11.5 15.1
interest
Interest expense (1.6) (0.9) (2.0)
Interest income 0.3 0.1 -
-----------------------------------------------------------------------------------------------------------------------
Profit before tax 6.2 10.7 13.1
Taxation (1.7) (3.2) (4.3)
-----------------------------------------------------------------------------------------------------------------------
Profit for the period 4.5 7.5 8.8
-----------------------------------------------------------------------------------------------------------------------
There are no material sales between the business segments.
Interest (payable)/receivable has not been allocated recognising the centre's
role and responsibility in allocating financial resources.
2 (b) Geographical UK Rest of the World Group
segments ------------ ------------------------ -----------
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan
2005 2004 2005 2005 2004 2005 2005 2004 2005
#m #m #m #m #m #m #m #m #m
-----------------------------------------------------------------------------------------------------------------------
Continuing
operations
Revenue 218.5 200.6 404.9 50.3 38.6 82.9 268.8 239.2 487.8
-----------------------------------------------------------------------------------------------------------------------
Notes to the Group Interim Financial Statements
Continued
3. Separately disclosable items
The results for the year ended 31 January 2005 include separately disclosable
items of #4.7m charged against operating profit which are analysed below:
Year
Ended
31 Jan
2005
#m
----------------------------------------------------------------------------------
Redundancy payments
UK Flight operations 0.9
Netherlands Flight operations 1.4
Impairment charge - freehold property 3.9
Release of onerous contract provision (1.5)
----------------------------------------------------------------------------------
4.7
----------------------------------------------------------------------------------
There were no separately disclosable items for the half years ended 31 July 2005
and 31 July 2004.
In April 2004 a Group company disposed of 19.6% of its investment in Alpha
Flight Services Overseas Limited (a subsidiary which owns 51% of Jordan Flight
Catering Company Limited), for a net consideration of #1.7m. The Group's profit
on disposal, including disposal of related goodwill, was #0.3m. In July 2004 the
Group disposed of its 20% shareholding in Calibre Airline Services Limited (an
information technology company), for a net consideration of #0.5m, realising a
profit on disposal of #0.4m.
4. Equity dividends
The Board has approved an interim dividend of 1.0 pence (2004/05: 1.0 pence) per
ordinary share, which will be paid on 4 November 2005 to shareholders on the
register at the close of business on 7 October 2005.
5. Earnings per share
a). Basic and diluted earnings per share
The calculation of basic and diluted earnings per ordinary share are based on
the earnings for the period attributable to ordinary shareholders and the
weighted average number of shares as follows:
Weighted average no. of
Profit for the period shares Earnings per Share
----------------------- ----------------------- --------------------
Six Six Year Six Six Year Six Six Year
months months ended months months ended months months ended
ended ended ended ended ended ended
31 July 31 July 31 Jan 31 July 31 July 31 Jan 31 July 31 July 31 Jan
2005 2004 2005 2005 2004 2005 2005 2004 2005
#m #m #m m m m p p p
-----------------------------------------------------------------------------------------------------------------------
Basic EPS 2.9 6.6 6.5 174.1 171.7 172.4 1.65 3.84 3.78
Effect to reflect - - - 3.4 2.0 2.1 (0.03) (0.05) (0.05)
dilutive ordinary
shares under options
-----------------------------------------------------------------------------------------------------------------------
Diluted EPS 2.9 6.6 6.5 177.5 173.7 174.5 1.62 3.79 3.73
-----------------------------------------------------------------------------------------------------------------------
b). Underlying earnings per share
The calculation of underlying profit for the financial period and underlying earnings per share are as follows:
Profit for the period Earnings per Share
--------------------- -----------------------
Six Six Year Six Six Year
months months ended months months ended
ended ended ended ended
31 July 31 July 31 Jan 31 July 31 July 31 Jan
2005 2004 2005 2005 2004 2005
#m #m #m p p p
-----------------------------------------------------------------------------------------------------------------------
Basic EPS 2.9 6.6 6.5 1.65 3.84 3.78
Adjustments for:
separately disclosable - - 4.7 - - 2.73
items (note 3)
profit on disposal of - (0.4) (0.4) - (0.23) (0.23)
associate
profit on part disposal - (0.3) (0.3) - (0.17) (0.17)
of subsidiary undertaking
Taxation relating to - - (0.8) - - (0.46)
these items
Add back goodwill - - 0.3 - - 0.17
impairment
-----------------------------------------------------------------------------------------------------------------------
Underlying EPS 2.9 5.9 10.0 1.65 3.44 5.82
-----------------------------------------------------------------------------------------------------------------------
Notes to the Group Interim Financial Statements
Continued
6. Goodwill
Net book
Cost Impairment value
#m #m #m
---------------------------------------------------------------------------------
At 1 February 2005 23.8 (10.9) 12.9
Additions
- Abela Rocas SA (note 8.1) 3.5 - 3.5
- Abela Airport Services EOOD (note 8.2) - - -
---------------------------------------------------------------------------------
At 31 July 2005 27.3 (10.9) 16.4
---------------------------------------------------------------------------------
7. Notes to the Group statement of cash flows
7.1 Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005
#m #m #m
---------------------------------------------------------------------------------
Profit before tax 6.2 10.7 13.1
Share of profit from joint ventures after tax (0.2) - (0.1)
Income from interests in associated (0.1) (0.1) (0.3)
undertakings after tax
Interest payable and similar charges 1.6 0.9 2.0
Interest receivable (0.3) (0.1) -
Profit on part disposal of subsidiary - (0.3) (0.3)
undertaking - continuing operations
Profit on disposal of associate - (0.4) (0.4)
Depreciation 5.4 5.3 10.6
Share options 0.1 - 0.1
Fixed Asset impairment - - 3.9
Goodwill impairment - - 0.3
LTIP - 0.1 0.2
Increase in provisions - - (3.4)
Increase in inventories (6.7) (6.4) (7.3)
Increase in trade and other receivables (18.7) (13.8) (10.3)
Increase in creditors 31.0 15.0 6.0
---------------------------------------------------------------------------------
Cash flows from operating activities 18.3 10.9 14.1
Interest received 0.3 0.1 -
(1.3) (0.7) (1.6)
Interest paid
Tax paid (1.3) (3.3) (4.7)
---------------------------------------------------------------------------------
Net cash from operating activities 16.0 7.0 7.8
---------------------------------------------------------------------------------
7.2 Reconciliation of net cash flow to movement in net debt
Analysis of net (debt)/cash
Six months Six months Year
ended ended ended
31 July 31 July 31 Jan
Total debt position 2005 2004 2005
#m #m #m
---------------------------------------------------------------------------------
Increase/(decrease) in cash and bank 5.6 (1.3) 0.4
overdrafts in the period
Increase in bank borrowings (8.8) (2.0) (21.1)
Decrease in borrowings under finance leases 0.3 0.4 0.7
---------------------------------------------------------------------------------
Change in net debt from cashflows (2.9) (2.9) (20.0)
Currency translation (0.1) (0.1) (0.5)
---------------------------------------------------------------------------------
Movements in net (debt) in the period (3.0) (3.0) (20.5)
Opening net debt (20.5) - -
---------------------------------------------------------------------------------
Closing net debt (23.5) (3.0) (20.5)
---------------------------------------------------------------------------------
Notes to the Group Interim Financial Statements
Continued
8. Acquisition of businesses
8.1 Romania
Acquisition of 64.18% of Abela Rocas SA
On 12 April 2005, the Group acquired 64.18% of the share capital of Abela Rocas
SA, a small flight and retail catering business in Romania.
The goodwill arising on the acquisition was #3.5m as follows:
Book Fair Value Provisional
Value adjustments fair value
#m #m #m
-------------------------------------------------------------------------------------------------------
Investment in Associate (0.1) -
0.1
Tangible fixed assets - 0.3
0.3
Inventories - 0.2
0.2
Trade receivables - 0.6
0.6
Creditors - (0.6)
(0.6)
Cash at bank and in hand 0.1 0.3
0.2
Taxation (0.2) (0.2)
-
-------------------------------------------------------------------------------------------------------
Total net assets at acquisition (0.2) 0.6
0.8
-------------------------------------------------------------------------------------------------------
Minority Interests (0.2)
Total net assets acquired 0.4
Goodwill 3.5
-------------------------------------------------------------------------------------------------------
Consideration 3.9
-------------------------------------------------------------------------------------------------------
Consideration satisfied by:
Cash (including costs of acquisition) 3.9
-------------------------------------------------------------------------------------------------------
The book value of the assets and liabilities has been taken from the management
accounts of Abela Rocas SA at 12 April 2005 at actual exchange rates on that
date. The fair value adjustments contain some provisional amounts as indicated
below, which will be finalised in the 2006 financial statements when the
detailed acquisition investigation has been completed.
The provisional fair value adjustments principally comprise #0.1m for the write
off of a small investment in an associated company, the results for which had
never been consolidated into the results of Abela Rocas SA, an exchange
adjustment in respect of cash balances and a provision for dividend taxes in
respect of 2004 and 2005
The profit after tax of Abela Rocas SA was #0.2m for the period from 1 January
2005 to 12 April 2005 and #1.0m for the year ending 31 December 2004.
8.2 Bulgaria
Acquisition of 100% of Abela Airport Services EOOD
On 28 April 2005, the Group acquired 100% of the share capital of Abela Airport
Services EOOD, a small flight and retail catering business based in Bulgaria,
for a consideration of Euro1 and costs of #15,000.The only assets acquired were
fixed assets of #0.3m against which a full impairment was provisionally booked
which will be finalised in the 2006 financial statements when the detailed
acquisition investigation has been completed. As a result there was no goodwill
generated on this acquisition.
The losses after tax of Abela Airport Services EOOD were #0.1m for the period
from 1 January 2005 to 28 April 2005 and #0.3m for the year ending 31 December
2004.
Notes to the Group Interim Financial Statements
Continued
9. Adjusted figures
Alpha uses adjusted figures as key underlying performance measures. Adjusted
figures are stated before related tax effects and movements in deferred taxation
assets and liabilities that are not expected to crystallise in the near future.
Adjusted operating profits are also grossed up to include the pre tax equity
share of profits of joint ventures and associates so that they are comparable to
other businesses of the Group and to exclude non trading items such as the
impairment of intangible fixed assets, rationalisation and restructuring costs
and other separately disclosable items.
Six Six
months months Year
ended ended ended
31 July 31 July 31 Jan
2005 2004 2005
#m #m #m
-------------------------------------------------------------------------------------------------------
Operating profit 7.2 11.4 14.7
Adjustments:
Share of profit from associates/joint venture 0.3 0.1 0.4
Reclassification of tax on associates/joint venture 0.4 0.1 0.6
Goodwill impairment - - 0.3
Separately disclosable items (note 3) - - 4.7
Profit on disposal of associate - (0.4) (0.4)
Profit on part disposal of subsidiary undertaking - (0.3) (0.3)
-------------------------------------------------------------------------------------------------------
Adjusted operating profit 7.9 10.9 20.0
-------------------------------------------------------------------------------------------------------
Profit before tax 6.2 10.7 13.1
Adjustments:
Reclassification of tax on associates/joint venture 0.4 0.1 0.6
Goodwill impairment - - 0.3
Separately disclosable items (note 3) - - 4.7
Profit on disposal of associate - (0.4) (0.4)
Profit on part disposal of subsidiary undertaking - (0.3) (0.3)
-------------------------------------------------------------------------------------------------------
Adjusted profit before tax 6.6 10.1 18.0
-------------------------------------------------------------------------------------------------------
Profit attributable to equity shareholders 2.9 6.6 6.5
Adjustments:
Goodwill impairment - - 0.3
Profit on disposal of associate - (0.4) (0.4)
Profit on part disposal of subsidiary undertaking - (0.3) (0.3)
Separately disclosable items (note 3) - - 4.7
Taxation on these items - - (0.8)
-------------------------------------------------------------------------------------------------------
Adjusted attributable profit 2.9 5.9 10.0
-------------------------------------------------------------------------------------------------------
Notes to the Group Interim Financial Statements
continued
10. Reconciliation to UK GAAP for comparative periods
The following reconciliations provide quantification of the effect of transition
to IFRS on retained profit for the periods ended 31 July 2004 and 31 January
2005 and the effect on total equity for 31 January 2004, 31 July 2004 and 31
January 2005.
Six months Year
ended ended
31 July 31 Jan
2004 2005
Note #m #m
-----------------------------------------------------------------------------------------
Retained profit/(loss) under UK GAAP 3.6 (2.7)
IFRS 3 - non amortisation of goodwill (i) 1.6 3.2
IAS 36 - goodwill impairment (i) - (0.3)
IAS 19 - pension costs (iii) (0.3) (0.6)
IFRS 2 - share based payments (iv) (0.1) (0.1)
IAS 7 - post balance sheet events - (v) (3.0) 0.4
dividends
-----------------------------------------------------------------------------------------
Retained profit under IFRS 1.8 (0.1)
-----------------------------------------------------------------------------------------
Profit for the period 7.5 8.8
Minority interests (0.9) (2.3)
Dividends (4.8) (6.6)
-----------------------------------------------------------------------------------------
Retained profit under IFRS 1.8 (0.1)
-----------------------------------------------------------------------------------------
Retained profit is not separately disclosed under IFRS. The reconciliation
between profit for the period in the income statement and IFRS retained profit
is shown above.
1 Feb 31 July 31 Jan
2004 2004 2005
#m #m #m
Note
---------------------------------------------------------------------------------------------------------
Total equity under UK GAAP 55.2 60.1 55.4
IFRS 3 - non amortisation of goodwill (i) - 1.6 3.2
IAS 36 - goodwill impairment (i) - - (0.3)
IFRS 3 - no recycling of goodwill from (ii) - (0.6) (1.2)
equity
IAS 19 - pension costs (iii) (24.2) (22.4) (28.2)
IAS 7 - post balance sheet events - (v) 4.8 1.8 5.2
dividends
IAS 17 - finance leases (vi) (0.1) (0.1) (0.1)
IAS 12 - deferred taxation (vii) 7.3 6.7 8.6
IAS 37 - dilapidations (viii) (0.2) (0.2) (0.2)
---------------------------------------------------------------------------------------------------------
Total equity under IFRS 42.8 46.9 42.4
---------------------------------------------------------------------------------------------------------
(i) Under IFRS, acquisition goodwill is considered to have an
indefinite life and is not amortised, but is subject to an impairment
review on transition and annually thereafter. As a result of the impairment
review at 31 Jan 2005 #0.3m of goodwill in relation to a part of the
Australian flight operation was written off.
(ii) Goodwill of #10.3m which arose on the acquisition of the
original shareholding of Orient Lanka Limited in 1996 was written off to
reserves under the transitional arrangements of FRS 10. Under UK GAAP this
was being amortised through the profit and loss account resulting in an
annual profit and loss charge of #1.2m, which was added back into
shareholders' funds. IFRS does not allow this treatment.
(iii)Under UK GAAP, the Group provided for pensions in accordance
with SSAP 24 'Accounting for pension costs' and also provided the detailed
disclosures included in the transitional requirements of FRS 17 'Retirement
benefits'. Under IFRS, IAS 19 'Employee benefits' uses a similar approach
compared to FRS 17 to calculate a current service cost, interest cost and
expected return on assets for defined benefit pension plans.
(iv) IFRS 2 requires the fair value of the equity instruments to be
charged to profit and loss. The cost is calculated using option price
methods and applies to all options granted after 7 November 2002.
(v) The dividends declared at the date of the approval of the
financial statements are treated as post balance sheet events under IFRS.
Notes to the Group Interim Financial Statements
continued
10. Reconciliation to UK GAAP for comparative periods (continued)
(vi) Under UK GAAP, a lease is classified as a finance lease if it
transfers substantially all the risks and rewards of ownership. Conversely
it is classified as an operating lease if it does not transfer
substantially all the risks and rewards of ownership. This is similar under
IFRS although there are differences particularly in the treatment of land
and buildings finance leases. The Group has identified a small number of
specialised leases which were reclassified on transition from finance to
operating leases.
(vii)Deferred tax under IFRS is the tax arising on differences
between the carrying value of assets and liabilities in the financial
statements and their corresponding tax bases used in the computation of
taxable profits, and is accounted for using the balance sheet liability
method. The main element of the reconciliation adjustment is the deferred
tax arising on the pension adjustment under IAS 19 ((iii) above)
(viii) Under IFRS certain dilapidation costs arising on leasehold
property should be provided from the date when the contractual obligation
arises where it is probable that the dilapidation costs will be payable.
Explanation of IFRS net debt adjustments
The move from UK GAAP does not significantly change the cash flows of the Group.
The IFRS cash flow format is similar to UK GAAP but presents various cash flows
in different categories and in a different order from the UK GAAP cash flow
statement. All the IFRS accounting adjustments net out within cash generated
from operations.
Under IFRS the analysis of net debt is as follows:
31 Jan 31 July 31 Jan
2004 2004 2005
#m #m #m
----------------------------------------------------------------------------------------
Cash at bank and in hand 8.6 8.3 10.8
Bank borrowings (6.7) (9.8) (30.1)
----------------------------------------------------------------------------------------
Net cash/(debt) under UK GAAP 1.9 (1.5) (19.3)
Operating leases reclassified as finance leases
- obligations due within one year (0.7) (0.6) (0.5)
- obligations due after more than one year (1.2) (0.9) (0.7)
----------------------------------------------------------------------------------------
Net debt under IFRS - (3.0) (20.5)
11. Bank borrowings
On 22 July 2005 the Group secured committed borrowing facilities of #100m with a
consortium of three major banks, which will expire in July 2010. At 31 July 2005
the Group had drawn down #38.8m including, guarantees under this facility.
The Group's previous #60m facility was repaid and cancelled on 27 July 2005.
12. Approval of Group Interim Financial Information
The Group interim financial information was approved by the Board of Directors
on 29 September 2005.
Independent review report to Alpha Airports Group Plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 July 2005 which comprises the Group balance sheet as at
31 July 2005 and the Group income statement, Group cash flow statement, Group
reconciliation of equity and Group statement of recognised income and expense
for the six months then ended and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 1, the next financial statements of the Group will be
prepared in accordance with accounting standards adopted for use in the European
Union. This interim report has been prepared in accordance with the basis set
out in note 1.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 1, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC interpretations that will be applicable and adopted
for use in the European Union at 31 January 2006 are not known with certainty at
the time of preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies have been applied.
A review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance. Accordingly we do not
express an audit opinion on the financial information. This report, including
the conclusion, has been prepared for and only for the Company for the purpose
of the Listing Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 July 2005
Chartered Accountants
The Atrium
1 Harefield Road
Uxbridge
Middlesex UB8 1EX
29 September 2005
Notes:
(a) The maintenance and integrity of the Alpha Airports Plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
Financial Calendar
Addresses
29 September 2005 Company Secretary
Announcement of interim results H McRae
5 October 2005 Registered Office
Ex-dividend date Europa House, 804 Bath Rd,
Cranford, Middlesex, TW5 9US
7 October 2005 Telephone 020 8580 3200
Dividend record date Facsimile 020 8580 3201
Registered in England
4 November 2005 Company Number 2854090
Interim dividend payment date
Registrars
March/April 2006 Lloyds TSB Registrars
Preliminary announcement of full year The Causeway, Worthing,
results West Sussex, BN99 6DA
Telephone 0870 6003970
May 2006
Posting of Annual Report to shareholders
Solicitors
May 2006 Berwin Leighton Paisner
Annual General Meeting Adelaide House
London Bridge
June 2006 London EC4R 9HA
Final dividend payable
Auditors
PricewaterhouseCoopers LLP
Chartered Accountants & Registered
Auditors
The Atrium
1 Harefield Road
Uxbridge
Middlesex UB8 1EX
Stockbrokers
Panmure Gordon
Moorgate Hall
155 Moorgate
London EC2M 6XB
Merchant Bankers & Financial
Advisors
Close Brothers Corporate Finance
Limited
10 Crown Place
London EC2A 4FT
Principal Bankers
National Westminister Bank plc
City of London Office
PO Box 12258
1 Princes Street
London EC4R 9HA
Website
www.alpha-group.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKLBLEKBXBBD
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