Clear benefits for Pilkington

Pilkington, one of the world’s largest manufacturers of glass and glazing products, has added £1m to its operating profit for 2004 after revamping the way in which it accounts for investment in its shares.

Reporting an increase in pre-tax profit on ordinary activities from £137m in 2004 to £165m in 2005, Pilkington also restated its 2004 figures for a number of profit indicators to comply with UITF reporting requirements.

The requirements saw the company reclassify the accounting for investment in its shares from trade investments to shareholders’ equity.

The glassmaker will also reflect the difference between the exercise price of the share options and the market value of shares on the grant date in the profit and loss account.

As result of the changes, operating profit for the 2004 financial year increased from £179m to £180m, while adjusted earnings per share, excluding exceptionals and goodwill amortisation, increased from 7.4p to 7.5p.

The UITF revision will change the balance sheet too, where trade investments are reduced from £13m to £10m. The profit and loss reserve falls from £46m to £43m. The cash flow statement, meanwhile, was impacted by £2m, as the new purchases of Pilkington shares are now reported as part of financing rather than purchase of investments as previously reported.

Pilkington chairman Sir Nigel Rudd also advised investors that the results for the year to 31 March 2005 would be the last the company would present under UK GAAP.

Emphasising that IFRS would not affect Pilkington’s underlying business drivers, Rudd said the company had been working on the transition project over the last 24 months and would provide a full restatement of its 2005 results in September.

‘Pilkington has planned for this transition for over two years and, although there will be changes to the UK GAAP results and balance sheet as previously reported, the changes will not mask the underlying improving trends in the robustness of Pilkington’s business,’ Rudd said.

In IFRS guidance for the half-year to 30 September 2004, Pilkington revealed that, under the new standards, revenues and operating profits would be marginally down as it would have to exclude the contributions of joint ventures.

Under IFRS, Pilkington’s revenue for the half-year was £1.1bn, down from the £1.3bn reported under UK GAAP. Operating profit for the period was also reduced, dropping from £113m to £102m when international accounting standards were applied.

COMPANY REPORTS

Some bad news, at last, for supermarket superpower, while brand consultant is forced to suspend share

FTSE100
Tesco has seen millions of pounds wiped off its balance sheet due to the treatment of employee benefits under IFRS. In its 2004/05 figures restated last week, net assets fell by £400m, mainly due to a £735m hit in accounting for its pension deficit. Despite this, the retailer?s bottom line has been barely dented, with profit after tax for 2004/05 falling by £19m compared to UK GAAP results. The retailer also suffered actuarial losses on its defined benefit scheme of £230m after applying the amended IAS19. Its first sole IFRS results will be interims published on 20 September.

Simon Ball, group finance director of venture capitalists 3i, has earned £128,000 since joining the group in February. Ball, a former director of general finance at the constitutional affairs department, earned a £59,000 salary, £9,000 worth of ‘salary supplements’ and a £60,000 bonus.

Man Group says it will have to reclassify unamortised sales commissions from pre-payments to intangible assets when it applies international accounting standards. The change is expected to reduce the fund manager’s ‘regulatory capital headroom’ from $550m (£302m) to approximately $440m. Man Group reported an increase in pre-tax profit for the year ended 31 March 2005. Profits were up from $715m in 2004 to $784m in 2005.

Barclays is expecting its bad debts for the first quarter of 2005 to be in line with 2004 figures despite a slowdown across the UK consumer credit sector. The bank said the slowdown did result in ‘a rise in potential credit risk loans’, but added that ‘market risk continues to be well controlled’.

FTSE ALL-SHARE
Danka Business Systems has warned investors that it is anticipating a fourth-quarter operating loss of approximately £25m because of the costs of compliance with Sarbanes-Oxley. The office services provider said it had spent £5m in the fourth quarter on compliance and implementation of the Act. The group said an adjustment to its US trade debtors would also contribute to the loss, as it had reviewed its debtor portfolio and decided to increase estimates of reserves.

AIM
Embattled oil company Regal Petroleum has slashed it reserves estimates for the Kavala field in Greece from 80 million barrels of recoverable reserves to 24 million barrels. The company, which reported a $13.7m (£7.5m) loss for the year ended 31 March 2005, made the decision to cut reserves forecasts after findings by auditors McDaniel & Associates indicated that a more conservative estimate should be used.

SP Holdings, brand consultant to Manchester United and the IOC, has suspended its shares after having to call in advisers to ‘assist in clarifying the financial situation of the company’. SP Holdings, formerly known as World Sport Solutions, has had its last set of audited accounts qualified. The business reported a £2.5m loss for the year ended 31 October 2004.