Introduction
Pace announced at the time of its 2010 preliminary results announcement that the Board had decided to change the group's reporting currency to US Dollars in 2011. Accordingly, the key financial information for 2010 and 2009 represented in US Dollars (“USD”) is set out for comparative purposes.
Background
The group and company now expect a significant majority of revenues and costs to be sourced and incurred in USD. The change of the company’s functional currency and group and company’s presentational currency has been accounted for in accordance with IAS21, The Effects of Changes in Foreign Exchange Rates.
The change will be effective from the results for the six months to 30 June 2011 which will be reported on 26 July 2011 in USD. All comparatives will be restated in USD.
As a consequence of this change, future dividends will be determined in USD. Dividends will continue to be paid to all shareholders in British Pounds Sterling (“GBP”), translated at the exchange rate prevailing when the dividend is declared. Optionally, shareholders can elect to receive their dividends in USD.
Pace, which is registered and has its headquarters in England, will maintain its primary listing on the London Stock Exchange, with the shares quoted in GBP.
The full year group income statements, balance sheets and cashflows for the financial years ending 31 December 2010 and 31 December 2009 have been restated in USD and are presented below together with the restated interim group income statements, balance sheets and cashflows for the half years ended 30 June 2010 and 30 June 2009. Details of the basis of preparation including the methodology used for the retranslation and the key exchange rates are provided on page 2.
Selected retranslated financial highlights are also provided below.
Financial Highlights
| Year ended 31 Dec 2010 | Year ended 31 Dec 2009 | Half year ended 30 Jun 2010 | Half year ended 30 Jun 2009 |
| $m | $m | $m | $m |
| Revenue | 2062.9 | 1779.6 | 978.2 | 779.2 |
| Operating profit pre-exceptionals | 142.5 | 109.5 | 69.4 | 45.6 |
| Underlying earnings (note 1) | 160.6 | 120.0 | 73.3 | 50.6 |
| Profit before tax | 110.2 | 109.8 | 69.9 | 45.9 |
| Return on sales (note 2) | 7.8% | 6.7% | 7.5% | 6.5% |
| Adjusted basic EPS - cents (note 3) | 37.1 | 30.3 | 17.9 | 12.3 |
- Underlying earnings are operating profit before exceptional costs and amortisation of other intangibles and are also expressed as adjusted EBITA
- Adjusted EBITA as a per cent of sales is expressed as return on sales
- Adjusted EPS is based on earnings before the post-tax value of exceptional costs and amortisation of other intangibles
For further information, please contact:
Analysts
Paul Entwistle
Head of Investor Relations
+44 1274 537030
Stuart Hall
Chief Financial Officer
+44 1274 532000
Helen Kettleborough
Director of Communications
+44 1274 532000
Basis of preparation
This unaudited financial information for the years ended 31 December 2010 and 31 December 2009 and for the 6 month periods ended 30 June 2010 and 30 June 2009 has been prepared due to the change in the functional currency of Pace plc as at 1 January 2011. This financial information has been prepared by translating the British Pound Sterling (“GBP”) functional currency amounts included in the primary statements of the 31 December 2010 statutory financial statements and 30 June 2010 interim financial statements into a US dollar (“USD”) presentational currency.
The retranslation has been conducted as a result of the decision to change the presentational currency of Pace plc to USD, in order to provide a basis of comparison for results in future periods. Further details of this change are provided below.
The USD financial information now provided for the financial year ended 31 December 2010 does not comprise the company's statutory accounts for that financial year. Those statutory accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Accounting policies
The accounting policies used in the preparation of this financial information are consistent with those noted on pages 40 to 46 of the statutory financial statements for the year ended 31 December 2010, except for the change in presentational and functional currency as noted below. No account has been taken of events occurring after the date on which these statutory financial statements were signed.
Change in functional currency
IAS 21 describes functional currency as ‘the currency of the primary economic environment in which an entity operates’. The group and company now expect a significant majority of revenues and costs to be sourced and incurred in USD.
The change in functional currency reflects the accumulation over time of those factors which are the main determinants of functional currency. Having considered the aggregate effect of all relevant factors, the directors concluded that this point was reached in the first quarter of 2011, following the integration of 2Wire Inc into the Pace Group. Accordingly, the directors determined that the functional currency of Pace plc had changed to USD from 1 January 2011.
In accordance with IAS21 this change will be accounted for prospectively from this date.
Change in presentational currency
The financial information contained herein has been prepared by translating the GBP functional currency amounts into USD in accordance with the guidance in IAS21 using the procedures outlined below:
- Assets and liabilities were translated into USD at closing rates of exchange (FY2010: £1=$1.55, HY2010: £1=$1.49, FY2009: £1=$1.61, HY2009: £1=$1.64. Trading results were translated into USD at the rates of exchange prevailing at the dates of transaction, or average rates where they are a suitable proxy (FY2010: £1=$1.55, HY2010: £1=$1.54, FY2009: £1=$1.57, HY2009: £1=$1.48).
- Share capital, share premium and other capital reserves were translated at the historic rates prevailing at the dates of transactions.
- Differences resulting from the retranslation have been taken to reserves.
Consolidated Income Statement Restated
For the years ended 31 December 2010 and 31 December 2009, half years ended 30 June 2010 and 30 June 2009
| 31 Dec 2010 | 31 Dec 2009 | 30 Jun 2010 | 30 Jun 2009 |
| $m | $m | $m | $m |
| Revenue | 2062.9 | 1779.6 | 978.2 | 779.2 |
| Cost of sales | (1,667.8) | (1,466.4) | (796.6) | (645.0) |
| Gross Profit | 395.1 | 313.2 | 181.6 | 134.2 |
| Administrative expenses:Research and Development expenditure | (120.0) | (108.0) | (55.5) | (46.0) |
| Other administrative expenses:Before exceptional costs | (114.5) | (86.0) | (52.7) | (38.3) |
| Excepetional costs | (29.5) | - | - | - |
| Amortisation of other intangibles | (18.1) | (10.5) | (3.9) | (5.0) |
| Total Administrative expenses | (282.1) | (204.5) | (112.2) | (89.3) |
| Other operating income | - | 0.8 | - | 0.7 |
| Operating Profit | 113.0 | 109.5 | 69.4 | 45.6 |
| Financial income - interest receivable | 1.2 | 0.5 | 0.5 | 0.3 |
| Financial expenses - interest payable | (4.0) | (0.2) | - | - |
| Profit before tax | 110.2 | 109.8 | 69.9 | 45.9 |
| Tax charge | (32.9) | (29.0) | (21.3) | (13.8) |
| Profit after tax | 77.3 | 80.8 | 48.6 | 32.1 |
| Attributable to:Equity holders of the Company | 77.3 | 80.8 | 48.6 | 32.1 |
| Earnings per ordinary share:Basic earnings cents per share | 26.4 | 27.8 | 16.5 | 11.6 |
| Diluted earnings cents per share | 25.0 | 27.0 | 15.7 | 11.2 |
Consolidated Balance Sheet Restated
As at 31 December 2010 and 31 December 2009, 30 June 2010 and 30 June 2009
| 31 Dec 2010 | 31 Dec 2009 | 30 Jun 2010 | 30 Jun 2009 |
| $m | $m | $m | $m |
| Assets | | | | |
| Non-Current Assets | | | | |
| Property, plant and equipment | 52.7 | 31.6 | 35.0 | 25.9 |
| Intangible assets - goodwill | 338.4 | 113.3 | 105.5 | 110.4 |
| Intangible assets - other intangibles | 273.7 | 22.5 | 16.4 | 27.1 |
| Intangible assets - development expenditure | 44.6 | 46.2 | 43.2 | 44.8 |
| Deferred tax assets | 69.9 | 10.3 | 3.6 | 15.3 |
| Total Non-Current Assets | 779.3 | 223.9 | 203.7 | 223.5 |
| Current Assets | | | | |
| Inventories | 222.7 | 140.2 | 105.2 | 133.7 |
| Trade and other receivables | 433.8 | 340.8 | 416.2 | 288.3 |
| Cash and cash equivalents | 131.4 | 118.3 | 140.2 | 80.2 |
| Current tax assets | 1.9 | 4.2 | 3.3 | 4.8 |
| Total Current Assets | 789.8 | 603.5 | 664.9 | 507.0 |
| Total Assets | 1,569.1 | 827.4 | 868.6 | 730.5 |
| Equity | | | | |
| Issued capital | 28.2 | 28.2 | 28.2 | 27.9 |
| Share premium | 72.6 | 71.5 | 72.0 | 68.5 |
| Merger reserve | 109.9 | 109.9 | 109.9 | 109.9 |
| Hedging reserve | (2.1) | 1.6 | 21.7 | (13.1) |
| Translation reserve | (44.0) | (35.5) | (66.2) | (31.9) |
| Retained earnings | 211.3 | 140.2 | 187.9 | 97.1 |
| Total Equity | 375.9 | 315.9 | 353.5 | 258.4 |
| Liabilities | | | | |
| Non-Current Liabilities | | | | |
| Other payables | 6.2 | 3.7 | - | 3.3 |
| Deferred tax liabilities | 108.5 | 23.7 | 22.8 | 20.5 |
| Provisions | 43.9 | 31.1 | 33.2 | 25.7 |
| Borrowings | 219.8 | - | - | - |
| Total Non-Current Liabilities | 378.4 | 58.5 | 56.0 | 49.5 |
| Current Liabilities | | | | |
| Trade and other payables | 541.6 | 422.8 | 420.6 | 395.9 |
| Current tax liabilities | 7.6 | 6.9 | 12.4 | 7.2 |
| Provisions | 42.9 | 23.3 | 26.1 | 19.5 |
| Borrowings | 222.7 | - | - | - |
| Total Current Liabilities | 814.8 | 453.0 | 459.1 | 422.6 |
| Total Liabilities | 1,193.2 | 511.5 | 515.1 | 472.1 |
| Total Equity and Liabilities | 1,569.1 | 827.4 | 868.6 | 730.5 |
Consolidated Statement of Cash Flows
For the years ended 31 December 2010 and 31 December 2009, half years ended 30 June 2010 and 30 June 2009
| 31 Dec 2010 | 31 Dec 2009 | 30 Jun 2010 | 30 Jun 2009 |
| $m | $m | $m | $m |
| Cash flows from operating activities | | | | |
| Profit before tax | 110.2 | 109.8 | 69.9 | 45.9 |
| Adjustments for: | | | | |
| Share based payments charge | 9.4 | 3.9 | 4.7 | 1.1 |
| Depreciation of property, plant and equipment | 16.3 | 12.0 | 7.0 | 5.0 |
| Amortisation and impairment of development expenditure | 52.0 | 62.1 | 27.4 | 25.5 |
| Amortisation of other intangibles | 18.1 | 10.5 | 3.9 | 5.0 |
| Loss/(profit) on sale of property, plant and equipment | 0.5 | (0.9) | - | (0.9) |
| Net financial expense/(income) | 2.8 | (0.3) | (0.5) | (0.3) |
| Movement in trade and other receivables | (15.6) | 33.3 | (90.6) | 72.6 |
| Movement in trade and other payables | (23.4) | (22.4) | 35.2 | (54.3) |
| Movement in inventories | (32.2) | (47.1) | 30.4 | (31.9) |
| Movement in provisions | (0.3) | 3.3 | 10.3 | (10.3) |
| Cash generated from operations | 137.8 | 164.2 | 97.7 | 57.4 |
| Interest paid | (2.8) | (0.2) | - | - |
| Tax paid | (39.2) | (19.3) | (14.8) | (6.3) |
| Net cash generated from operating activities | 95.8 | 144.7 | 82.9 | 51.1 |
| Cash flows from investing activities | | | | |
| Acquisition of subsidiaries, net of cash acquired | (422.4) | - | (10.1) | - |
| Purchase of property, plant and equipment | (30.6) | (19.5) | (12.5) | (8.8) |
| Proceeds from disposal of property, plant and equipment | - | 1.9 | - | 1.4 |
| Development expenditure | (56.9) | (66.5) | (30.6) | (28.6) |
| Interest received | 1.2 | 0.5 | 0.5 | 0.3 |
| Net cash used in investing activities | (508.7) | (83.6) | (52.9) | (35.7) |
| Cash flows from financing activities | | | | |
| Proceeds from external borrowings | 442.6 | - | - | - |
| Proceeds from issue of share capital | 1.1 | 4.2 | 0.5 | 0.9 |
| Dividends paid | (8.0) | (5.0) | - | - |
| Proceeds from exercise of employee share options | - | 3.6 | - | 2.0 |
| Purchase of own shares by employee benefit trust | (5.3) | (6.3) | - | - |
| Net cash from/ (used in) financing activities | 430.4 | (3.5) | 0.5 | 2.9 |
| Net change in cash and cash equivalents | 17.5 | 57.6 | 30.7 | 18.3 |
| Cash and cash equivalents at start of period | 118.3 | 54.7 | 118.3 | 56.6 |
| Effect of exchange rate fluctuations on cash held | (4.4) | 6.0 | (8.8) | 5.3 |
| Cash and cash equivalents at end of period | 131.4 | 118.3 | 140.2 | 80.2 |
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