NOTES TO FINANCIAL STATEMENTS
1. General information
Games Workshop Group PLC (the 'Company') and its subsidiaries (together the 'Group') designs and manufactures miniature figures and
games and distributes these through its own network of hobby stores, through independent retailers and direct, via the internet and mail
order. The Group has manufacturing activities in the UK and the US, and sells mainly in Western Europe, North America and Asia
Pacific.
The Company is a limited liability company, incorporated and domiciled in the United Kingdom. The address of its registered office is Willow Road, Lenton, Nottingham, NG7 2WS, United Kingdom.
The Company has its listing on the London Stock Exchange.
These financial statements have been approved for issue by the board of directors on 30 July 2007.
2. Summary of significant accounting policies
The principal accounting policies applied in these consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
With effect from 30 May 2005, the Company had moved to reporting its financial results in accordance with International Financial
Reporting Standards (IFRS) as adpoted by the European Union.
These financial statements are prepared in accordance with IFRS and the International Financial Reporting Interpretations Committee interpretations and with those parts of the Companies Act 1985 applicable to those companies reporting under IFRS. The principal exemptions on transition to IFRS relate to business combinations, cumulative foreign currency translation and share-based payments.
The consolidated financial statements are prepared in accordance with the historical cost convention, except for the revaluation of certain financial instruments to their fair value.
Basis of consolidation
The consolidated financial statements include the Company and its subsidiary undertakings drawn up for the 53 weeks ended 3 June
2007 and for the 52 weeks ended 28 May 2006. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group.
Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are eliminated on consolidation.
Accounting policies of subsidiaries are consistent with the policies adopted by the Group. The financial statements of all subsidiaries are prepared to the same reporting date as the parent company.
Goodwill
Goodwill arising on acquisition of subsidiaries, represents any excess of the fair value of the consideration given over the fair value of the
Group's share of identifiable net assets acquired.
Goodwill is tested annually for impairment and is carried at cost less accumulated impairment losses. Provision is made or any impairment by comparing the individual carrying values to the expected value in use discounted at the Group's weighted average cost of capital.
Goodwill arising on acquisitions prior to 31 May 1998 was written off to reserves in accordance with the accounting standard then in force. As permitted by the current accounting standard, the goodwill previously written off to reserves has not been reinstated in the balance sheet.
Other intangible assets
Development expenditure
Costs incurred in respect of product design and development activities are recognised as intangible assets provided that a number of
criteria are satisfied. These include the intention to use or sell the asset, technical feasibility, adequate resources being available to
complete the development and probable future economic benefits being generated.
Product development costs recognised as intangible assets are amortised on a straight line basis over periods ranging between 6 to 48 months to match the expenditure incurred to the expected revenue generated from the subsequent product release.
Research expenditure is written off as incurred.
Computer software
Acquired computer software licences and related development expenditure are capitalised on the basis of the costs incurred to acquire and bring in
to use the specific software. Computer software licences are held at cost and amortised over the expected useful lives of the assets
concerned. The principal annual rates used for this purpose are:
| % | |
|---|---|
 |
|
| Core business systems computer software | 15-33 |
| Other computer software | 33-50 |
Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. The cost of
property, plant and equipment is their purchase cost, together with any incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of property, plant and equipment, less any assigned residual value, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:
| % | |
|---|---|
|
|
| Freehold buildings | 2-4 |
| Plant and equipment | 15-33 |
| Motor vehicles | 33 |
| Fixtures and fittings | 20-25 |
| Moulding tools | 25 |
Leasehold premises are amortised over the period of the lease. Freehold land is not depreciated.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Trade receivables
Trade receivables are recognised and carried at original invoice amount less provision for impairment. A provision for impairment of
trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to
the original terms of receivables. The amount of the provision is recognised in the income statement immediately.
Finance costs
Finance costs are recognised as an expense in the period in which they are incurred.
Leases
Operating leases
Leases in which a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. The Group’s commitment in respect of its Hobby stores is included within this category.
Payments in respect of operating leases and any benefits received as an incentive to sign a lease, are charged or credited to the income statement on a straight line basis over the period of the entire lease term.
Finance leases
Finance leases which transfer to the Group substantially all the benefits and risks of ownership of an asset are treated as if the asset
had been purchased outright. The assets are included in property, plant and equipment at the lower of the fair value of the leased
property and the present value of minimum lease payments. The corresponding rental obligations, net of finance charges, are included
in borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a
constant rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under
finance leases is depreciated over the shorter of the asset's life and the lease term.
Inventories
Inventories are valued at the lower of cost and net realisable value. In respect of finished goods, cost includes appropriate production
overheads. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling
expenses.
Where necessary, provision is made for obsolete, slow moving and defective inventories.
Foreign currency translation
The consolidated financial statements are presented in sterling, which is the Company's functional and presentation currency. Items
included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment
in which the entity operates (the functional currency).
Monetary assets and liabilities expressed in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date. Translation differences on monetary items are recognised in the income statement with the exception of differences on transactions that are subject to effective cash flow or net investment hedges.
The results of overseas subsidiary companies are translated into sterling as follows:
- Assets and liabilities are translated at the closing rate at the date of the balance sheet;
- Income and expenses are translated at the average rate for the period;
- All resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings and other currency instruments designated as hedges of such investments, are taken to equity. Tax charges and credits attributable to those differences are taken directly to equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.
Financial instruments
Derivative financial instruments are recognised at fair value at inception and are subsequently re-measured at their fair value by
reference to quoted market values for similar instruments at the balance sheet date. Derivative financial instruments are classified as
non-current assets or liabilities if the remaining maturity of the hedged item is more than 12 months from the balance sheet date.
The recognition of the resulting gain or loss depends on whether hedge accounting is permitted. Where derivatives do not qualify for
hedge accounting, any gains or losses on re-measurement are recognised immediately in the income statement.
In order to apply hedge accounting, the Group designates certain derivatives as:
- Cash flow hedges: hedges of highly probable forecast transactions; or
- Fair value hedges: hedges of the fair value of recognised assets or liabilities; or
- Net investment hedges: hedges of net investments in foreign operations.
The Group documents the relationship between the hedging instruments and hedged items at the hedge inception, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of hedged items.
Cash flow hedges
Forward foreign currency contracts that are in place to hedge future transactions are designated as cash flow hedges. The effective
element of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain
or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
Net investment hedges
Any gain or loss on the hedging instrument relating to the effective portion of the hedge of a net investment in a foreign operation is
recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and bank and cash balances, net
of overdrafts. In the balance sheet, bank overdrafts are included in current financial liabilities.
Other borrowings are classified as current financial liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Share-based payment
The Group operates a number of equity-settled employee sharesave schemes. Options are granted on an annual basis and are subject
to either a two or three year service vesting condition. The fair value of the employee services received under such schemes, which is
determined by use of the Black-Scholes Option Pricing Model, is recognised as an expense in the income statement with a
corresponding increase in equity over the vesting period. At each balance sheet date, the Group revises its estimates of the number of
share options that are expected to vest, with any revisions being recognised in the income statement. No further charge is recognised from the point when an employee ceases saving and withdraws from the sharesave scheme.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
Other employee benefits
Pension costs
The Group operates defined contribution schemes and a group personal pension plan. Pension contributions are charged to the income
statement as they accrue.
Bonus and incentive plans
The costs of annual bonus schemes are charged to the income statement as they accrue. For those incentive plans which are based upon performance criteria measured over a period in excess of one year, costs are charged to the income statement based upon the
directors' estimate of the likely future outcome of those criteria.
Long service benefits
The Group operates a long service incentive scheme under which employees receive a one off additional holiday entitlement of two
weeks when they reach ten years of employment (10 Year Veterans). The costs of these benefits are accrued over the period of
employment based on expected staff retention rates and the anticipated future employment costs discounted to present value.
Investments
Shares and loans in subsidiary undertakings are stated at cost less provision for impairment. Own shares are held in treasury and
recorded in shareholders' equity.
Revenue
Revenue, which excludes value added tax and sales between group companies, represents the invoiced value of goods and services
supplied.
Revenue on goods sold to customers on a sale or return basis is recognised after making full provision for the level of expected returns, based on past experience. The level of returns is reviewed on a regular basis and the provision is amended accordingly. Revenue on a sale or return basis represents no more than 2% of consolidated revenue.
Where the Group operates a customer loyalty scheme, such as the redemption of loyalty card points, revenue is adjusted to show sales net of all related discounts. A provision is recognised based on the fair value of expected free goods given to customers. The fair value is measured as the retail value to the customer
Royalty income
Royalty income is recognised by spreading the guarantees and advances receivable over the term of the licence agreement, and
recognising all other income receivable by reference to the underlying licensee performance.
Segment reporting
The primary reporting segments are the main geographic areas in which the Group operates. These are Continental Europe, the United
Kingdom, the Americas and Asia Pacific. The geographical segments identified engage in providing products to customers within a
particular economic environment that is subject to risks and returns that are different from those of segments operating in other
economic environments. Manufacturing income, expenses, assets and liabilities are allocated to the specific segments on the basis of
the profits earned on internal sales to each geographical area.
Our vertically integrated manufacturing and supply function is dedicated to the supply of products to the sales function. We consider that the risks and rewards of each function are similar, and that the Group has a single reporting segment, the Games Workshop Hobby.
Taxation
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is
calculated using rates that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are 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. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income statement, except where it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Dividends
Final equity dividends are recognised in the period that they are approved by the shareholders. Interim equity dividends are recognised
in the period that they are paid.
Impairment of assets
Assets that have an indefinite useful economic life are not subject to amortisation but tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. For the purposes of
assessing impairment, assets are grouped together at the lowest levels for which there are separately identifiable cash flows (cash-generating
units). Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.
Provisions
Provisions are made when:
- the Group has a present legal or constructive obligation as a result of past events;
- it is more likely than not that an outflow of resources will be required to settle the obligation; and
- the amount has been reliably estimated.
Provision is made for committed costs outstanding under onerous or vacant property leases. The estimated liability is discounted at the Group's weighted average cost of capital.
Provisions are made for property dilapidations where a legal obligation exists and when the decision has been made to exit a property, or where the end of the lease commitment is imminent and a reliable estimate of the exit liability can be made.
The estimated employee benefit liability arising from the '10 Year Veterans' incentive scheme is classified within provisions. Amounts relating to employees who reach 10 years service in more than one year are classified as non-current.
Provisions are made for redundancy costs once the employees affected have a valid expectation that their role will become redundant.
Exceptional items
Costs which are both material and non-recurring, whose significance is sufficient to warrant separate disclosure in the financial
statements, are referred to as exceptional items. These items are costs that have been incurred in relation to the cost reduction
programme.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and disclosure of contingencies at the balance sheet date. If in future
such estimates and assumptions, which are based on management's best judgement at the date of the consolidated financial
statements, deviate from actual circumstances, the original estimates and assumptions will be modified, as appropriate, in the period in
which the circumstances change. The following areas are considered of greater complexity and/or particularly subject to the exercise
of judgement:
Management estimates and judgements are required in assessing the impairment of assets, particularly in relation to the forecasting of future cash flows and the discount rate applied to the cash flows.
Judgement is involved in assessing the exposures in provisions and hence in setting the level of the required provisions.
New accounting standards
Changes to accounting standards and interpretations and their likely impact on the Group's future accounting policies are set out below:
IFRS 7 'Financial instruments: disclosures' is effective for accounting periods beginning on or after 1 January 2007, and will therefore be applicable for the year ending May 2008, and IFRS 8 'Operating segments', effective for accounting periods beginning on or after 1 January 2010, will be applicable in the year ending May 2011. These amendments to disclosure requirements will have no effect on the Group's reported results.
The Group does not consider that any other standards or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statments.
3. Segmental analysis
The Group has one business segment, the Games Workshop Hobby. Geographical segments represent the dominant source and nature
of the Group's risks and returns and is therefore provided below as the primary reporting format.
53 weeks ended 3 June 2007 |
Continental Europe £000 |
United Kingdom £000 |
The Americas £000 |
Asia Pacific £000 |
Rest of the world £000 |
Central/ unallocated £000 |
Design and development £000 |
Royalty income £000 |
Group £000 |
|---|---|---|---|---|---|---|---|---|---|
|
|||||||||
| Total gross segment sales by operation | 45,221 |
34,104 |
24,540 |
7,618 |
- |
- |
- |
- |
111,483 |
| Inter-segment sales | 554 |
(3,356) |
2,100 |
502 |
200 |
- |
- |
- |
- |
|
|||||||||
| Total gross segment sales by location of customers | 45,775 |
30,748 |
26,640 |
8,120 |
200 |
- |
- |
- |
111,483 |
 |
|||||||||
| Pre-exceptional operating profit / segment of result by location of customers | 5,408 |
4,032 |
(137) |
32 |
84 |
(4,958) |
(3,931) |
1,423 |
1,953 |
| Exceptional items | (800) |
(2,084) |
(1,120) |
(24) |
- |
- |
- |
- |
(4,028) |
|
|||||||||
| Operating profit/segment result by location of customers | 4,608 |
1,948 |
(1,257) |
8 |
84 |
(4,958) |
(3,931) |
1,423 |
(2,075) |
|
|||||||||
| Finance income | - |
- |
- |
- |
- |
326 |
- |
- |
326 |
| Finance costs | - |
- |
- |
- |
- |
(1,110) |
- |
- |
(1,110) |
| Income tax expense | - |
- |
- |
- |
- |
(622) |
- |
- |
(622) |
|
|||||||||
| (Loss)/profit attributable to equity shareholders | 4,608 |
1,948 |
(1,257) |
8 |
84 |
(6,364) |
(3,931) |
1,423 |
(3,481) |
|
|
|||||||||
| Gross assets and liabilities by location of customers: | |||||||||
| Assets | 21,748 |
19,021 |
9,131 |
3,392 |
- |
9,717 |
2,642 |
- |
65,651 |
| Liabilities | (4,744) |
(7,478) |
(4,049) |
(1,457) |
- |
(18,066) |
- |
- |
(35,794) |
|
|||||||||
| Net assets by location of customers | 17,004 |
11,543 |
5,082 |
1,935 |
- |
(8,349) |
2,642 |
- |
29,857 |
|
|||||||||
| Capital expenditure by location of customers | 3,058 |
2,205 |
1,001 |
718 |
- |
- |
2,937 |
- |
9,919 |
| Depreciation and amortisation by location of customers | (3,294) |
(2,167) |
(1,605) |
(579) |
- |
- |
(2,525) |
- |
(10,170) |
| Impairment of property, plant and equipment. | (68) |
(13) |
(225) |
- |
- |
- |
- |
- |
(306) |
| Impairment of trade receivables | (79) |
(111) |
(31) |
1 |
- |
- |
- |
- |
(220) |
| Share-based payments | (1) |
(42) |
(1) |
2 |
- |
- |
- |
- |
(42) |
|
|||||||||
| Gross assets and liabilities by location of operation: | |||||||||
| Assets | 4,243 |
40,329 |
7,207 |
1,513 |
- |
9,717 |
2,642 |
- |
65,651 |
| Liabilities | (2,608) |
(10,110) |
(3,705) |
(1,305) |
- |
(18,066) |
- |
- |
(35,794) |
|
|||||||||
| Net assets by location of operation | 1,635 |
30,219 |
3,502 |
208 |
- |
(8,349) |
2,642 |
- |
29,857 |
|
|||||||||
| Capital expenditure by location of operation | 729 |
4,773 |
633 |
847 |
- |
- |
2,937 |
- |
9,919 |
| Depreciation and amortisation by location of operation | (939) |
(4,653) |
(1,705) |
(348) |
- |
- |
(2,525) |
- |
(10,170) |
| Impairment of property, plant and equipment | (68) |
(13) |
(225) |
- |
- |
- |
- |
- |
(306) |
| Impairment of trade receivables | (79) |
(111) |
(31) |
1 |
- |
- |
- |
- |
(220) |
| Share based payments | (1) |
(42) |
(1) |
2 |
- |
- |
- |
- |
(42) |
|
|||||||||
52 weeks ended
28 May 2006 |
Continental Europe £000 |
United Kingdom £000 |
The Americas £000 |
Asia Pacific £000 |
Rest of the world £000 |
Central/ unallocated £000 |
Design and development £000 |
Royalty income £000 |
Group £000 |
|---|---|---|---|---|---|---|---|---|---|
|
|||||||||
| Total gross segment sales by operation | 48,112 |
33,507 |
26,121 |
7,410 |
- |
- |
- |
- |
115,150 |
| Inter-segment sales | 1,348 |
(3,489) |
1,645 |
444 |
52 |
- |
- |
- |
- |
|
|||||||||
| Total gross segment sales by location of customers | 49,460 |
30,018 |
27,766 |
7,854 |
52 |
- |
- |
- |
115,150 |
|
|||||||||
| Operating profit/segment result by location of customers |
8,154 |
3,799 |
(487) |
470 |
22 |
(4,872) |
(4,039) |
1,170 |
4,217 |
|
|||||||||
| Finance income | - |
- |
- |
- |
- |
238 |
- |
- |
238 |
| Finance costs | - |
- |
- |
- |
- |
(797) |
- |
- |
(797) |
| Income tax expense | - |
- |
- |
- |
- |
(1,660) |
- |
- |
(1,660) |
|
|||||||||
| Profit attributable to equity shareholders | 8,154 |
3,799 |
(487) |
470 |
22 |
(7,091) |
(4,039) |
1,170 |
1,998 |
| |
|||||||||
| Gross assets and liabilities
by location of customers: |
|||||||||
| Assets | 21,759 |
19,792 |
12,443 |
3,930 |
- |
7,418 |
2,230 |
- |
67,572 |
| Liabilities | (4,483) |
(4,942) |
(3,956) |
(1,074) |
- |
(13,181) |
- |
- |
(27,636) |
|
|||||||||
| Net assets by location of customers | 17,276 |
14,850 |
8,487 |
2,856 |
- |
(5,763) |
2,230 |
- |
39,936 |
|
|||||||||
| Capital expenditure by location of customers | 3,788 |
2,403 |
1,696 |
744 |
- |
- |
2,505 |
- |
11,136 |
| Depreciation and amortisation by location of customers | (3,280) |
(1,770) |
(2,266) |
(565) |
- |
- |
(2,289) |
- |
(10,170) |
| Impairment of trade receivables | (108) |
60 |
196 |
20 |
- |
- |
- |
- |
168 |
| Share-based payments | (4) |
(131) |
(21) |
(12) |
- |
- |
- |
- |
(168) |
|
|||||||||
| Gross assets and liabilities
by location of operation: |
|||||||||
| Assets | 4,729 |
40,744 |
10,724 |
1,727 |
- |
7,418 |
2,230 |
- |
67,572 |
| Liabilities | (3,516) |
(6,134) |
(3,792) |
(1,013) |
- |
(13,181) |
- |
- |
(27,636) |
|
|
|||||||||
| Net assets by location of operation | 1,213 |
34,610 |
6,932 |
714 |
- |
(5,763) |
2,230 |
- |
39,936 |
|
|||||||||
| Capital expenditure by location of operation | 816 |
6,060 |
1,388 |
367 |
- |
- |
2,505 |
- |
11,136 |
| Depreciation and amortisation by location of operation | (1,202) |
(4,328) |
(2,085) |
(266) |
- |
- |
(2,289) |
- |
(10,170) |
| Impairment of trade receivables | (108) |
60 |
196 |
20 |
- |
- |
- |
- |
168 |
| Share-based payments | (4) |
(131) |
(21) |
(12) |
- |
- |
- |
- |
(168) |
|
|||||||||
Central/unallocated segment costs comprise the business support expenses arising in the United Kingdom that cannot be directly attributed to an individual operating segment.
Central/unallocated assets and liabilities consist of the following:
2007 £000 |
2006 £000 |
|
|
||
| Cash and cash equivalents | 6,103 |
6,444 |
| Deferred income tax assets | 2,314 |
2,121 |
| Current tax assets | 1,056 |
382 |
| Central/eliminations | 244 |
(1,529) |
|
||
| Gross assets | 9,717 |
7,418 |
| Current tax liabilities | (38) |
(415) |
| Bank loans and overdrafts | (16,258) |
(8,627) |
| Central/eliminations | (1,770) |
(4,139) |
|
||
| Net liabilities | (8,349) |
(5,763) |
|
||
2007 £000 |
2006 £000 |
|
|
||
| Selling costs | 47,759 |
46,314 |
| Administrative expenses | 29,594 |
27,485 |
| Design and development costs - amortisation | 2,525 |
2,289 |
| Design and development costs - not capitalised | 1,406 |
1,750 |
|
||
| Operating expenses | 81,284 |
77,838 |
|
||
Continuing pre-exceptional £000 |
Continuing exceptional items £000 |
Total 2007 £000 |
Total 2006 £000 |
|
|
||||
| Revenue | 111,483 |
- |
111,483 |
115,150 |
| Cost of sales | (33,475) |
(222) |
(33,697) |
(34,265) |
|
||||
| Gross profit | 78,008 |
(222) |
77,786 |
80,885 |
| Selling costs | (45,843) |
(1,916) |
(47,759) |
(46,314) |
| Administrative costs | (27,704) |
(1,890) |
(29,594) |
(27,485) |
| Design and development costs - amortisation | (2,525) |
- |
(2,525) |
(2,289) |
| Design and development costs - not capitalised | (1,406) |
- |
(1,406) |
(1,750) |
| Other operating income - royalties receivable | 1,423 |
- |
1,423 |
1,170 |
|
||||
| Operating profit/(loss) | 1,953 |
(4,028) |
(2,075) |
4,217 |
|
||||
The exceptional item relates to the cost reduction programme announced in May 2007. As part of this programme, £1,613,000 has been incurred in closing loss making stores, £700,000 in rationalising the manufacturing and supply chain and £1,715,000 in simplifying the support infrastructure.
2007 £000 |
2006 £000 |
|
|
||
| Total directors and employees costs: | ||
| Wages and salaries | 44,101 |
45,309 |
| Social security costs | 5,341 |
5,537 |
| Other pension costs | 1,143 |
1,312 |
| Share-based payments | 42 |
168 |
|
||
50,627 |
52,326 |
|
|
||
Key management compensation
The remuneration of the directors and other key management personnel of the Group is set out below in aggregate for each of
the categories specified in IAS 24 'Related Party Disclosures'.
2007 £000 |
2006 £000 |
|
|
||
| Salaries and other short-term employee benefits | 1,035 |
1,035 |
| Post-employment benefits | 94 |
97 |
| Share-based payments | 1 |
3 |
| Other employee benefits | 37 |
22 |
|
||
1,167 |
1,157 |
|
|
||
Further information relating to directors’ emoluments, shareholdings and share options is disclosed in the audited section of the remuneration report.
Key management are the directors of the Company and the head of sales and the head of operations.
Employee numbers
2007 Number |
2006 Number |
|
|
||
| Design and development | 93 |
92 |
| Production | 195 |
197 |
| Selling: | ||
| - Full time | 1,453 |
1,467 |
| - Part time | 347 |
543 |
| Administration | 468 |
495 |
|
||
2,556 |
2,794 |
|
|
||
2007 £000 |
2006 £000 |
|
|
||
| Interest income: | ||
| - On cash and cash equivalents | 305 |
234 |
| - Other | 21 |
4 |
|
||
326 |
238 |
|
|
||
2007 £000 |
2006 £000 |
|
|
||
| Interest expense: | ||
| - Bank loans and overdrafts | 1,099 |
874 |
| - Finance lease charges | 11 |
11 |
| - Unwinding of discount on provisions | 27 |
9 |
| - Other | 31 |
14 |
| Net foreign exchange transaction (gains)/losses | (58) |
(111) |
|
||
1,110 |
797 |
|
|
||
9. (Loss)/profit before taxation
2007 £000 |
2006 £000 |
|
|
||
| (Loss)/profit before taxation is stated after charging/(crediting): | ||
| Depreciation: | ||
| - Owned property, plant and equipment | 6,889 |
7,024 |
| - Property, plant and equipment under finance leases | 36 |
121 |
| Impairment of property, plant and equipment | 306 |
- |
| Amortisation: | ||
| - Owned computer software | 720 |
736 |
| - Development costs | 2,525 |
2,289 |
| Non-capitalised development costs | 1,406 |
1,750 |
| Impairment of trade receivables | 220 |
(168) |
| Operating leases: | ||
| - Hobby stores | 8,344 |
8,525 |
| - Other property | 1,245 |
1,251 |
| - Plant and equipment | 365 |
395 |
| - Other | 318 |
217 |
| Loss on disposal of property, plant and equipment | 95 |
113 |
|
||
Auditors' remuneration and services provided
Services provided by the Group's auditor and network firms are analysed as follows:
| Group | 2007 £000 |
2006 £000 |
|
||
| Audit services | ||
| Audit of the Group and Company’s accounts | 62 |
59 |
|
||
| Other services | ||
| The audit of the Company's subsidiaries pursuant to legalisation | 219 |
222 |
| Other services relating to taxation | 3 |
2 |
| All other services | 10 |
29 |
|
||
| Total services provided | 294 |
312 |
|
||
2007 £000 |
2006 £000 |
|
|
||
| Current UK taxation: | ||
| - UK corporation tax on profits for the year | 55 |
949 |
| - Over provision in respect of prior years | (5) |
(419) |
|
||
50 |
530 |
|
| Current overseas taxation: | ||
| - Overseas corporation tax on profits for the year | 726 |
945 |
| - Under provision in respect of prior years | 22 |
127 |
|
||
| Total current taxation | 798 |
1,602 |
|
||
| Deferred taxation: | ||
| - Origination and reversal of temporary differences | (24) |
180 |
| - Under provision in respect of prior years | (152) |
(122) |
|
||
| Income tax expense recognised in the income statement | 622 |
1,660 |
|
||
2007 £000 |
2006 £000 |
|
|
||
| Current tax credit on cash flow hedges | (26) |
(73) |
| Deferred tax credit on cash flow hedges | (26) |
- |
|
||
| Credit taken directly to the statement of recognised income and expense | (52) |
(73) |
|
||
2007 £000 |
2006 £000 |
|
|
||
| (Loss)/profit before taxation | (2,859) |
3,658 |
|
||
| (Loss)/profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% | (858) |
1,097 |
| Effects of: | ||
| Expenses not deductible for tax purposes | 393 |
274 |
| Movement in deferred tax not recognised | 1,282 |
677 |
| Higher tax rates on overseas earnings | (60) |
26 |
| Adjustments to tax charge in respect of previous years | (135) |
(414) |
|
||
| Total tax charge for the year | 622 |
1,660 |
|
||
11. (Loss)/earnings per share
Basic (loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity shareholders of the Company by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares.
2007 |
2006 |
|
|
||
| (Loss)/profit attributable to equity shareholders (£000) | (3,481) |
1,998 |
| |
||
| Weighted average number of ordinary shares in issue (thousands) | 31,116 |
30,959 |
|
||
| Basic (loss)/earnings per share (pence per share) | (11.2) |
6.5 |
|
||
Diluted (loss)/earnings per share
The calculation of diluted (loss)/earnings per ordinary share has been based on (loss)/profit attributable to equity shareholders and the
weighted average number of shares in issue throughout the year, adjusted for the dilution effect of share options outstanding at the year
end.
2007 |
2006 |
|
|
||
| (Loss)/profit attributable to equity shareholders and profit used to determine diluted earnings per share (£000) | (3,481) |
1,998 |
|
|
||
| Weighted average number of ordinary shares in issue (thousands) | 31,116 |
30,959 |
| Adjustment for share options (thousands) | - |
|