Caffè Nero Group Plc
Transcript of Caffè Nero Group Plc
Caffè Nero Group Plc
Impact of the adoption of International Financial Reporting Standards
Caffè Nero Group Plc (“Caffè Nero” or “the Group”) today announces that it has completed preparations to adopt International Financial Reporting Standards (“IFRS”). For accounting periods commencing from 1 June 2005, Caffè Nero will prepare consolidated financial statements in line with IFRS. As part of the transition to IFRS, Caffè Nero today presents its comparative information for the full year to 31 May 2005 and the half year to 30 November 2004 under IFRS.
Adoption of IFRS is an accounting change only and has no impact on the underlying operations or cash flows of the Group
The primary changes to Caffè Nero’s reported Income Statement are:
Increased rent charge due to the spreading of lease incentives over the term of the lease rather than to first rent review
Inclusion of a charge for share based payments under IFRS 2
Reversal of charge for amortisation of goodwill
Non recurring goodwill write off in the year to 31 May 2005 relating to the recognition of pre acquisition deferred tax in Aroma Limited
For the year ended 31 May 2005 the impact on profit from the adoption of IFRS excluding the non recurring goodwill write off is to reduce profit before tax by £33,000 or 0.6%.
After the non recurring goodwill write off, profit before tax for the year ended 31 May 2005 is reduced by £1,284,000 but this charge will not be repeated in future years.
20 January 2006
Enquiries:
Caffè Nero Tel: 020 7520 5150Gerry Ford, ChairmanBen Price, Finance Director
College Hill Tel: 020 7457 2020Justine WarrenTom Baldock
Preliminary IFRS financial statements
Introduction
Implementation of International Financial Reporting Standards (“IFRS”).
From the year ending 31 May 2006 Caffè Nero Group Plc (“the Group”) will prepare its consolidated accounts in accordance with IFRS. This release has been prepared to illustrate the differences that will arise when the financial statements are prepared under IFRS rather than UK GAAP.
The Group’s first IFRS results will be its interim results for 30 November 2005 and the first Annual Report under IFRS will be for the year to 31 May 2006. Attached as Schedule 1 are the reconciliations of the Group’s UK GAAP balance sheets to its preliminary IFRS balance sheets at 1 June 2004 (the “opening balance sheet”), 30 November 2004 and 31 May 2005 together with reconciliations of the Group’s UK GAAP income statements to its preliminary IFRS income statements for the six months to 30 November 2004 and for the year to 31 May 2005. The preliminary IFRS financial statements will form the basis of the comparative information in the first IFRS accounts and have been prepared on the basis of IFRS expected to be in issue at 31 May 2006 but are still subject to change. We will update the restated information for any such change. The accounting policies applied in preparing the preliminary IFRS financial statements are set out below.
The preliminary IFRS financial statements for the full year ended 31 May 2005 have been audited by Ernst & Young LLP. The interim preliminary IFRS financial information for November 2004 has been reviewed by Ernst & Young LLP. Their reports, which draw attention to the fact that there is a possibility that the preliminary financial statements may require adjustment before constituting final IFRS financial statements and that only a complete set of financial statements can provide a fair presentation of the Group’s financial position, are set out at the end of this report.
The significant changes as a result of the transition to IFRS and of adopting the IFRS group accounting policies are described below. In addition to these changes there are a number of other assets and liabilities that are classified differently under IFRS. These reclassifications are shown in the reconciliations below.
IAS 17 LeasesIAS 17 requires the benefit of all incentives granted at the outset of a lease to be spread over the term of the lease. Under UK GAAP the benefit of such incentives was taken over the period to the first rent review, typically 5 years. This has the effect of increasing the rental charge in the early part of a lease and reducing the charge in the latter part of the lease. Over the whole lease term the total charge remains the same.
The impact of this change for the Group, where the majority of leases are less than five years old, has been an increased charge to operating profits of £176,000 in the year to May 2005, of £88,000 in the six months to November 2004 and a reduction in net current assets of £498,000 in the opening balance sheet at 1 June 2004.
In addition IAS 16 requires lease premiums to be taken out of Property Plant and Equipment and reclassified as prepayments. This requires a balance sheet reclassification of £1,372,000 at 1 June 2004 and £2,939,000 at 31 May 2005.
IFRS 2 Share-Based Payments
In accordance with IFRS 2 and the transitional exemption permitted by IFRS 1, the Group has recognised a charge reflecting the fair value of outstanding share options granted to employees since 7 November 2002. The fair value is assessed at grant date and has been calculated using a Black-Scholes valuation model and is charged to profit over the relevant option vesting period, adjusted to reflect actual and expected levels of vesting.
The impact of this change has been a charge of £286,000 to operating profit for the year to 31 May 2005 and of £128,000 for the six months to 30 November 2004.
IFRS 3 Business CombinationsIFRS 3 prohibits the amortisation of goodwill. The standard requires goodwill to be carried at cost with impairment reviews both annually and when there are indications that the carrying value may not be recoverable.
As permitted by IFRS1 the Group has chosen to apply IFRS 3 prospectively from the date of transition (1 June 2004) and has chosen not to restate previous business combinations. Therefore, goodwill is stated in the opening balance sheet (at 1 June 2004) at £2,082,000 being its UK GAAP carrying value of £2,742,000 less an adjustment of £660,000 relating to deferred taxation which is described below. Subsequent amortisation has been reversed, increasing operating profit by £502,000 for the year to 31 May 2005 and by £249,000 for the six months to 30 November 2004.
IAS 12 Income TaxesIAS 12 requires that an adjustment is made to goodwill when a group recognises a deferred tax asset that relates to a subsidiary company’s trading prior to its acquisition by the group and that was not recognised in calculating the goodwill at acquisition.
On acquisition of Aroma Limited in 2002 the Group did not include the potential deferred tax asset of the company in its calculation of goodwill due to the history of losses incurred by Aroma Limited. The asset was recognised in the years ending 31 May 2004 and 31 May 2005 as Aroma Limited became profitable.
As a result, goodwill on the opening balance sheet has been reduced by £660,000. Goodwill has been reduced by a further £1,251,000 at both 30 November 2004 and 31 May 2005, with a corresponding charge to operating profit for the year to 31 May 2005 and the six months to 30 November 2004. The acquired deferred tax asset has been fully recognised at 31 May 2005 and these adjustments will therefore not recur in future years.
IFRS also requires that a deferred tax asset is recognised in relation to the tax deduction available to the Group for the profit that employees make on exercising options. This asset was not recognised under UK GAAP. The associated tax credit is recognised through the income statement to the extent that a charge has been recognised in the income statement in respect of the options. The remaining credit is recognised directly in equity. In the year to 31 May 2005 and the six months to 30 November 2004 deferred tax credits of £93,000 and £42,000 respectively are recognised through the income statement. The asset recognised through equity was £3,090,000 at 1 June 2004. £3,555,000 at 30 November 04 and £8,488,000 at 31 May 2005.
IAS 19 Employee BenefitsIAS 19 requires an accrual to be made for earned but unpaid holiday pay. The Group’s holiday year runs from January to December so that at each May year end there is a holiday pay accrual required. Accruals of £157,000 and of £206,000 have been made at 1 June 2004 and 31 May 2005 respectively and of £100,000 at 30 November 2004. The movement in this accrual creates a charge of £49,000 to the
income statement for the year to 31 May 2005 and a credit of £57,000 to the income statement for the six months to 30 November 2004.
ACCOUNTING POLICIES
Basis of preparationThe preliminary IFRS balance sheets and income statements shown in the reconciliations below have been prepared on the basis of IFRS expected to be in issue at 31 May 2006.
The preliminary IFRS Financial Statements have been prepared on an historical cost basis, except for the measurement of balances at fair value as disclosed in the accounting policies below.
First-time applicationThe Group has adopted IFRS from 1 June 2004 (“the date of transition”) with the exception of IAS 32 and IAS 39.
In accordance with IFRS 1 the Group is entitled to a number of voluntary and mandatory exemptions from full restatement, which have been adopted as follows:
Business combinationsThe basis of accounting for pre-transition combinations under UK GAAP has not been revisited.
Share-based paymentsIFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that had not vested at 1 January 2005.
Basis of consolidationThe Group financial statements comprise the financial statements of Caffè Nero Group Plc and all its subsidiary undertakings drawn up to 31 May each year, using consistent accounting policies. Subsidiary undertakings have been included in the Group financial statements using the acquisition method of accounting. Accordingly the Group Income Statement includes the results of subsidiaries from the date of acquisition. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition and any excess has been capitalised as goodwill.
Property, plant and equipmentProperty, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any impairment in value.
DepreciationDepreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful life, as follows:
Leasehold improvements - over the lease termFurniture, fittings and equipment - over 3 to 5 years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
The asset’s residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year end.
GoodwillGoodwill represents the excess of the cost of acquisition over the share of the fair value of identifiable net assets (including intangible assets) of a subsidiary, associate or joint venture at the date of acquisition.
In accordance with IFRS 3, with effect from 1 June 2004, goodwill is not amortised but reviewed annually for impairment and as such is stated at cost less any provision for impairment in value.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The Group considers each of its stores to be a cash generating unit.
ImpairmentThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount , less any residual value, on a systematic basis over its remaining useful life.
Fixed Asset InvestmentsThis policy is stated under UK GAAP applying the IFRS 1 exemption from applying IAS 32 and 39 to comparative amounts. Fixed asset investments are stated at cost. The carrying value of fixed asset investments is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
Store Opening CostsOperating costs incurred by stores prior to opening are written off to the income statement in the period in which they are incurred.
InventoriesInventories are stated at the lower of cost and net realisable value. Inventories comprise food and packaging goods for resale. The group applies a first in first out basis of inventory valuation.
Employee share incentive plansThe Group issues equity-settled share-based payments to certain employees (including directors). These payments are measured at fair value at the date of grant by use of a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Caffè Nero Group Plc (‘market conditions'), if applicable. This fair value cost
of equity-settled awards is recognised on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
No cost is recognised for awards that do not ultimately vest.
LeasesLeases taken by the Group are assessed individually as to whether they are finance leases or operating leases.
Leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item are capitalised at the inception of the lease at the fair value of the leased property, or if lower at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease rental payments, other than contingent rentals, are recognised as an expense in the income statement on a straight-line basis over the lease term. The benefit of lease incentives is spread over the term of the lease.
Contingent rentals, which are determined by revenue of individual stores, are charged when incurred. Where a minimum guarantee exists, a charge is made to the income statement, based on planned performance, to the extent that the individual store is expected to exceed minimum guarantee levels, or at the minimum guarantee level if there is a projected shortfall in performance.
Current Tax
Current tax is the amount of income tax payable on the taxable profit for the period. Current tax assets and liabilities for the current and prior periods are measured at the amounts expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred taxDeferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts with the exception of:
Goodwill The initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
Taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred tax balances are not discounted
Capital instrumentsShares are included in Equity. Other instruments are classified as liabilities if they contain an obligation to transfer economic benefits and if they are not included in equity. The finance costs recognised in the Income Statement in respect of capital instruments other than equity shares are allocated to periods over the term of the instrument at a constant rate on the carrying amount applying the effective interest method.
Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of GoodsRevenue is recognised when the goods have passed to the buyer.
Interest IncomeRevenue is recognised as interest accrues applying the effective interest method.
CAFFE NERO GROUP PLC
Reconciliation of UK GAAP to preliminary IFRS income statement for the year ended 31 May 2005
Preliminary
IFRS
IAS 19 IAS 12 IFRS 2 IAS 12 IFRS 3Income
Statement
UK
GAAP IAS 17Employee
BenefitsIncome
TaxShare-based
Income Tax Business
exc Non recurring IAS 12
Preliminary IFRS
(IFRS format)
Leases Holiday Pay
Leases &
Holiday Pay
Payments Share options
Combinations Goodwill adjustment
Good-will
Income Statement
£000 £000 £'000 £000 £000 £000 £000 £000 £000 £000
Revenue 70,117 - - - - - - 70,117 - 70,117 Cost of sales (53,059) (176) (49) - - - - (53,284) - (53,284)Gross profit 17,058 (176) (49) - - - - 16,833 - 16,833 Administrative expenses excluding depreciation and goodwill amortisation and write off (5,241) - - (310) - - (5,551) - (5,551)
EBITDA 11,817 (176) (49) - (310) - - 11,282 - 11,282 Administrative expenses - depreciation (5,306) - - - - - - (5,306) - (5,306) Operating profit before goodwill amortisation and write off 6,511 (176) (49) - (310) - - 5,976 - 5,976 Administrative expenses - goodwill amortisation (502) - - - - - 502 - - - Administrative expenses - goodwill write off - - - - - - - -
(1,251) (1,251)
Total administrative expenses (11,049) - - - - - - (11,049)
(1,251) (12,300)
Operating profit
6,009 (176) (49) - (310) - 502 5,976 (1,251
) 4,725 Bank interest receivable 108 - - - - - - 108 - 108 Interest payable and similar charges (1,016) - - - - - - (1,016) - (1,016)
Profit before taxation 5,101 (176) (49) - (310) - 502 5,068 (1,251
) 3,817
Tax on profit (148) - - 68 - 93 - 13 - 13 Profit attributable to shareholders 4,953 (176) (49) 68 (310) 93 502 5,081
(1,251) 3,830
Earnings per Share - basic (pence) 7.49 7.69 5.79 Earnings per Share - diluted (pence) 6.18 6.37 4.80
Pre-tax earnings per share - basic (pence) 7.72 7.67 5.77 Pre-tax earnings per diluted - basic (pence) 6.37 6.35 4.78
CAFFÈ NERO GROUP PLC
Reconciliation of UK GAAP to preliminary IFRS balance sheet at 31 May 2005
IAS 16 IAS 17 IAS 19 IAS 12 IAS 12 IAS 12 IFRS 3 Preliminary
UK
GAAP Lease LeasesEmployee
BenefitsIncome
TaxIncome
TaxIncome
Tax GoodwillIFRS
balance
(IFRS format)
Premiums Rent-free
period
Holiday Pay Leases & Holiday
Pay
Share options
Goodwill Amortisation sheet
£000 £000 £000 £000 £000 £000 £000 £000
Non-current assets
Goodwill 2,240 - - - - - (1,911) 502 831 Property, plant and equipment 36,910 (2,939) - - - - - - 33,971
Investments - - - - - - - - -
Deferred tax asset 628 - - - 264 8,488 - - 9,380
Lease Premiums - 2,634 - - - - - - 2,634
39,778 (305) - - 264 8,488 (1,911) 502 46,816
Current Assets
Inventories 542 - - - - - - - 542
Lease Premiums - 305 - - - - - - 305
Trade and other receivables 1,459 - - - - - - - 1,459
Cash and cash equivalents 3,982 - - - - - - - 3,982
5,983 305 - - - - - - 6,288
Total assets 45,761 - - - 264 8,488 (1,911) 502 53,104
Current liabilities
Trade and other payables (14,006) - (674) (206) - - - - (14,886)
(14,006) - (674) (206) - - - - (14,886)
Non-current Liabilities Interest bearing loans and borrowings (15,535) - - - - - - - (15,535)
Provisions (430) - - - - - - - (430)
(15,965) - - - - - - - (15,965)
Total liabilities (29,971) - (674) (206) - - - - (30,851)
Net Assets 15,790 - (674) (206) 264 8,488 (1,911) 502 22,253
Equity
Called up share capital 334 - - - - - - - 334
Share premium account 7,596 - - - - - - - 7,596
Capital redemption reserve 15 - - - - - - - 15
Options Tax reserve - - - - - 8,488 - - 8,488
Other reserve 6,249 - - - - - - - 6,249
Retained earnings 1,596 - (674) (206) 264 - (1,911) 502 (429)
Total equity 15,790 - (674) (206) 264 8,488 (1,911) 502 22,253
CAFFE NERO GROUP PLCReconciliation of UK GAAP to preliminary IFRS balance sheet at 1 June 2004
IAS 16 IAS 17 IAS 19 IAS 12 IAS 12 IAS 12 Preliminary
UK
GAAP Lease LeasesEmployee
Benefits Income TaxIncome
TaxIncome
TaxIFRS
balance
(IFRS
format)Premiums Rent-free
periodHoliday Pay Leases &
Holiday PayShare
optionsGoodwill sheet
£000 £000 £000 £000 £000 £000
Non-current assets
Goodwill 2,742 - - - - (660) 2,082
Property, plant and equipment 23,456 (1,372) - - - - - 22,084
Investments 854 - - - - - 854
Deferred tax asset 776 - - 196 3,090 - 4,062
Lease Premiums - 1,213 - - - - - 1,213
27,828 - - 196 3,090 (660) 30,295
Current Assets
Inventories 408 - - - - - 408
Lease Premiums - 159 - - - - - 159
Trade and other receivables 1,495 - - - - - 1,495
Cash and cash equivalents 3,171 - - - - - 3,171
5,074 159 - - - - - 5,233
Total assets 32,902 - - - 196 3,090 (660) 35,528
Current liabilities
Interest Bearing Loans (1,400) (1,400)
Trade and other payables (9,519) (498) (157) - - - (10,174)
(10,919) (498) (157) - - - (11,574)
Non-current Liabilities Interest bearing loans and borrowings (11,166) - - - - - (11,166)
Provisions (495) - - - - - (495)
(11,661) - - - - - (11,661)
Total liabilities (22,580) (498) (157) - - - (23,235)
Net Assets 10,322 (498) (157) 196 3,090 (660) 12,293
Equity
Called up share capital 328 - - - - - 328
Share premium account 7,121 - - - - - 7,121
Capital redemption reserve 15 - - - - - 15
Options Tax reserve - - - - 3,090 - 3,090
Other reserve 6,249 - - - - - 6,249
Retained earnings (3,391) (498) (157) 196 - (660) (4,510)
Total equity 10,322 (498) (157) 196 3,090 (660) 12,293
CAFFE NERO GROUP PLC
Reconciliation of UK GAAP to preliminary IFRS income statement for the 6 months ended 30 November 2004
Preliminary
IFRS
Income
Statement
IAS 19 IAS 12 IFRS 2 IAS 12 IFRS 3exc Non
recurring Preliminary
IFRS
UK
GAAP IAS 17Employee
BenefitsIncome
TaxShare-based
Income Tax Business
Goodwill adjustment IAS 12
Income Statement
(IFRS format)
Leases Holiday Pay
Leases &
Holiday Pay
Payments Share options
Combinations (unaudited) Good-will
(unaudited)
£000 £000 £'000 £000 £000 £000 £000 £000 £000 £000
Revenue 32,789 - - - - - - 32,789 - 32,789 Cost of sales (25,295
) (88) 57 - - - - (25,326) - (25,326)Gross profit 7,494 (88) 57 - - - - 7,463 - 7,463 Administrative expenses excluding depreciation and goodwill amortisation and write off (2,527) - - (140) - - (2,667) - (2,667)
EBITDA 4,967 (88) 57 - (140) - - 4,796 - 4,796 Administrative expenses - depreciation (2,377) - - - - - - (2,377) - (2,377) Operating profit before goodwill amortisation and write off 2,590 (88) 57 - (140) - - 2,419 - 2,419
Administrative expenses - goodwill amortisation (249) - - - - - 249 - - - Administrative expenses - goodwill write off - - - - - - - -
(1,251) (1,251)
Total administrative expenses (5,153) - - - - - - (5,153)
(1,251) (6,404)
Operating profit
2,341 (88) 57 - (140) - 249 2,419 (1,251
) 1,168 Bank interest receivable 42 - - - - - - 42 - 42 Interest payable and similar charges (493) - - - - - - (493) - (493)
Profit before taxation 1,890 (88) 57 - (140) - 249 1,968 (1,251
) 717
Tax on profit 342 - - 9 - 42 - 393 - 393 Profit attributable to shareholders 2,232 (88) 57 9 (140) 42 249 2,361
(1,251) 1,110
Earnings per Share - basic (pence) 3.39 3.59 1.69
Earnings per Share - diluted (pence) 2.84 3.02 1.42
Pre-tax earnings per share - basic (pence) 2.87 2.99 1.09 Pre-tax earnings per diluted - basic (pence) 2.41 2.52 0.92
CAFFÈ NERO GROUP PLC
Reconciliation of UK GAAP to preliminary IFRS balance sheet at 30 November 2004
Preliminary
IAS 16 IAS 17 IAS 19 IAS 12 IAS 12 IAS 12 IFRS 3 IFRS balance
UK GAAP Lease LeasesEmployee
Benefits Income TaxIncome
TaxIncome
Tax Goodwill sheet
(IFRS format)
Premiums Rent-free
period
Holiday Pay
Leases & Holiday
Pay
Share options
Goodwill Amortisation (unaudited)
£000 £000 £000 £000 £000 £000 £000 £000
Non-current assets
Goodwill 2,492 - - - - - (1,911) 249 830 Property, plant and equipment 30,957 (2,887) - - - - - - 28,070
Investments - - - - - - - - -
Deferred tax asset 1,118 - - - 206 3,555 - - 4,879
Lease Premiums - 2,598 - - - - - - 2,598
34,567 (289) - - 206 3,555 (1,911) 249 36,377
Current Assets
Inventories 425 - - - - - - - 425
Lease Premiums - 289 - - - - - - 289 Trade and other receivables 1,512 - - - - - - - 1,512
Cash and cash equivalents 3,341 - - - - - - - 3,341
5,278 289 - - - - - - 5,567
Total assets 39,845 - - 206 3,555 (1,911) 249 41,944
Current liabilities
Trade and other payables (11,824) - (586) (100) - - - - (12,510)
(11,824) - (586) (100) - - - - (12,510)
Non-current Liabilities Interest bearing loans and borrowings (14,672) - - - - - - - (14,672)
Provisions (495) - - - - - - - (495)
(15,167) - - - - - - - (15,167)
Total liabilities (26,991) - (586) (100) - - - - (27,677)
Net Assets 12,854 - (586) (100) 206 3,555 (1,911) 249 14,267
Equity
Called up share capital 331 - - - - - - - 331
Share premium account 7,384 - - - - - - - 7,384
Capital redemption reserve 15 - - - - - - - 15
Options Tax reserve - - - - - 3,555 - - 3,555
Other reserve 6,249 - - - - - - - 6,249
Retained earnings (1,125) - (586) (100) 206 - (1,911) 249 (3,267)
Total equity 12,854 - (586) (100) 206 3,555 (1,911) 249 14,267
Independent Auditors’ Report to the Caffè Nero Group Plc on the preliminary IFRS Financial Statements for the year ended 31 May 2005We have audited the accompanying preliminary International Financial Reporting Standards (“IFRS”) consolidated financial statements of Caffè Nero Group Plc (“the Company”) and its subsidiaries (together “the Group”) for the year ended 31 May 2005 which comprise the opening consolidated IFRS balance sheet as at 1 June 2004, the consolidated IFRS income statement for the year ended 31 May 2005 and the consolidated IFRS balance sheet as at 31 May 2005, together with the related accounting policies note. This report is made solely to the Company in accordance with our engagement letter dated 23 December 2005. Our audit work has been undertaken so that we might state to the Company those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility or liability to anyone other than the Company for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditorsThese preliminary IFRS consolidated financial statements are the responsibility of the Company’s directors and have been prepared as part of the Company’s conversion to IFRS. They have been prepared in accordance with the basis set out in the accounting policies note, which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 May 2006. Our responsibility is to express an independent opinion on the preliminary IFRS financial statements based on our audit. We read the other information accompanying the preliminary IFRS financial statements and consider whether it is consistent with the preliminary IFRS financial statements. This other information comprises the description of significant changes. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the preliminary IFRS financial statements. Our responsibilities do not extend to any other information. Basis of audit opinionWe conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the preliminary IFRS financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the preliminary IFRS financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the preliminary IFRS financial statements. We believe that our audit provides a reasonable basis for our opinion. Emphasis of matterWithout qualifying our opinion, we draw attention to the fact that the accounting policies note explains why there is a possibility that the preliminary IFRS financial statements may require adjustment before constituting the final IFRS financial statements. Moreover, we draw attention to the fact that, under IFRS only a complete set of financial statements with comparative financial information and explanatory notes can provide a fair presentation of the Company’s financial position, results of operations and cash flows in accordance with IFRS.OpinionIn our opinion, the preliminary IFRS financial statements for the year ended 31 May 2005 have been prepared, in all material respects, in accordance with the basis set out in the accounting policies note, which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31May 2006.
Ernst & Young LLPLondon
Independent review report to Caffè Nero Group plc on the preliminary IFRS financial information for the six months ended 30 November 2004.IntroductionWe have reviewed the preliminary International Financial Reporting Standards (“IFRS”) consolidated financial information of Caffè Nero Group plc (“the Company”) and its subsidiaries (together “the Group”) for the six months ended 30 November 2004 which comprises the consolidated IFRS balance sheet at 30 November 2004 and the consolidated IFRS income statement for the six months ended 30 November 2004. We have read the other information accompanying the preliminary IFRS consolidated financial information and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.This report is made solely to the Company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by the law, we do not accept or assume responsibility to anyone other than the Company for our work, for this report, or for the conclusions we have formed.
Directors’ responsibilities The preliminary IFRS consolidated financial information is the responsibility of the Company’s directors and has been prepared as part of the Company’s conversion to IFRS. It has been prepared in accordance with the basis of preparation set out in the accounting policies note, which describes how IFRS has been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the polices expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 31 May 2006.
Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquires 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 consistently 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 performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the preliminary IFRS consolidated financial information.
Emphasis of matterWithout modifying our review conclusion, we draw attention to the fact that the accounting policies note explains why there is a possibility that the preliminary IFRS financial information may require adjustment before constituting the final IFRS financial statements. Moreover, we draw attention the fact that, under IFRS only a complete set of financial statements with comparative financial information and explanatory notes can provide a fair presentation of the Company’s financial position, results of operations and cash flows in accordance with IFRS.
Review conclusionOn the basis of our review we are not aware of any material modifications that should be made to the preliminary IFRS financial information as presented for the six months ended 30 November 2004.
Ernst & Young LLPLondon