Morgan Advanced Materials plc · LSE:MGAM
Morgan Advanced Materials — Investor Presentation (April 2005)
29 slides from Morgan Advanced Materials's investor presentation, Apr 18, 2005
Slide 1: Update on adoption of IFRS
Update on adoption of IFRS Hanau, 18 April 2005
Slide 2: IFRS introduction: where we are
IFRS introduction WHERE WE ARE • February Prelims Announcement - one-page view of key line areas of impact • Today - elaboration of those key areas and what they mean for us including directional quantification of impact • Late June - published IFRS numbers for 2004 • Early August - interim announce
Slide 3: IFRS introduction
IFRS introduction • Date of transition - 5 January 2004, beginning of earliest comparative period presented • Date of adoption - 5 January 2005 • First IFRS interim report – half year ending 4 July 2005 • First IFRS annual report – year ending 4 January 2006 • 1 year of comparative information prese
Slide 4: IFRS conversion - project stages
IFRS conversion - project stages IFRS vs. UK GAAP – initial high level review • September 2002. Aimed to focus attention on the areas of greatest impact. IFRS vs. UK GAAP – detailed comparisons • Detailed assessment of the differences in accounting and disclosure to establish additional data require
Slide 5: IFRS conversion - project stages (continued)
IFRS conversion - project stages (continued) Training all financial controllers worldwide • 2-day comprehensive training sessions, by region, for each of Asia, the Americas and Europe, attended by all site financial controllers in the Group. Implement changes to consolidation system • Amendments mad
Slide 6: IFRS – principal areas of impact for Morgan
IFRS – principal areas of impact for Morgan • Employee benefits (IAS 19) • Share-based payment (IFRS 2) • Research and development (IAS 38) • Goodwill (IFRS 3) • Other intangibles (IAS 38) • Financial instruments (IAS 32 and IAS 39) • Leases (IAS 17) • Deferred taxation (IAS 12) • Foreign currency t
Slide 7: First time adoption – exemptions taken
First time adoption – exemptions taken Employee benefits • The corridor approach to the recognition of actuarial gains/losses has not been applied prior to the date of transition. Actuarial gains/losses are recognised outside profit or loss in the ‘statement of recognised income and expense’. Share-
Slide 8: First time adoption – exemptions taken (continued)
First time adoption – exemptions taken (continued) Financial instruments • IAS 32 and IAS 39 have been applied from the date of adoption. The comparative period has not been restated for IAS 32 and IAS 39. Foreign currency translation • Cumulative gains/losses arising on the translation of the resul
Slide 9: Changes in accounting policy – Employee benefits
Changes in accounting policy – Employee benefits UK GAAP • Accounting for pensions schemes under SSAP 24. Transitional disclosures presented under FRS 17 for 2002, 2003 and 2004. IFRS • Wider scope covering all short-term and long-term employee benefits. • Similar methodology to FRS 17. Impact • Ope
Slide 10: Changes in accounting policy – Share-based payment
Changes in accounting policy – Share-based payment UK GAAP • LTIP – Under UITF Abstract 17 (Revised) the fair value of shares at grant date is charged to the profit and loss over the vesting period. 2004 charge: £1.8m. • Share options – no charge is recognised as the exercise price is based on the m
Slide 11: Changes in accounting policy – Research and development
Changes in accounting policy – Research and development UK GAAP • Morgan’s preference has been to write off all expenditure on research and development in the year in which it is incurred. 2004 charge: £11.7m. IFRS • Expenditure on development must be capitalised if it meets all the criteria include
Slide 12: Changes in accounting policy – Goodwill
Changes in accounting policy – Goodwill UK GAAP • Goodwill in respect of acquisitions since 4 January 1998 is capitalised as an intangible asset and amortised to nil by equal annual instalments over its estimated useful life, normally 20 years. • On disposal or termination of a business acquired up
Slide 13: Changes in accounting policy – Other intangibles
Changes in accounting policy – Other intangibles UK GAAP • Morgan did not recognise any intangible assets other than purchased goodwill arising on acquisitions. IFRS • Additional intangible assets will be recognised such as: - purchased computer software, that is not integral to plant and equipment,
Slide 14: Changes in accounting policy – Financial instruments
Changes in accounting policy – Financial instruments UK GAAP • Cash, borrowings, and financial investments recorded on the balance sheet at cost. • Derivative contracts not recorded on the balance sheet. • Hedged foreign currency assets/liabilities translated at the forward contract rate. IFRS • All
Slide 15: Changes in accounting policy – Leases
Changes in accounting policy – Leases UK GAAP • Determination of a finance lease – presumed risks/rewards of ownership have transferred to the lessee if, at inception, the present value of the minimum lease payments equates to 90% or more of the fair value of the leased asset. • Operating lease ince
Slide 16: Changes in accounting policy – Deferred taxation
Changes in accounting policy – Deferred taxation UK GAAP • DT is recognised in respect of all timing differences between the amounts used for tax purposes and the carrying amounts for accounting purposes. IFRS • Wider scope. DT is recognised in respect of all temporary differences between the amount
Slide 17: Changes in accounting policy – Foreign currency translation
Changes in accounting policy – Foreign currency translation UK GAAP • Cumulative translation gains/losses arising on consolidation are recorded in equity. IFRS • Cumulative translation gains/losses arising on consolidation are recorded in equity, and must be ‘recycled’ through the income statement o
Slide 18: Changes in accounting policy – Post-balance sheet events: Dividends
Changes in accounting policy – Post-balance sheet events: Dividends UK GAAP • Financial statements incorporate transactions that are determined to be ‘adjusting’ post-balance sheet events e.g. the proposal of a dividend relating to the period recently ended. IFRS • Dividends proposed after the perio
Slide 19: IFRS - key points summary
IFRS - key points summary Area Impact on Financial Comment Position/Results at Transition (range) Employee FRS 17 – 2004 Reduction in net assets due to the recognition of Benefits • Deficit £82m deficits on defined benefit schemes. • P&L charge £15.8m Share-based ≈ 2004 P/L charge Fair value charge
Slide 20: IFRS - key points summary (continued)
IFRS - key points summary (continued) Area Impact on financial Comment position/results at transition (range) Other intangibles Reclassification only Reclassification of certain software from tangible fixed assets to intangible assets. Financial instruments Not expected to Recognition of all derivat
Slide 21: IFRS – next steps
IFRS – next steps • Full IFRS restatements announcement to be made at the end of June, including: Accounting policies applied under IFRS; Reconciliations of equity at 5 January 2004, 4 July 2004 and 4 January 2005; Reconcilations of net income for the half year to 4 July 2004 and full year to
Slide 22: Update on bank refinancing
Update on bank refinancing Hanau, 18 April 2005
Slide 23: Bank refinancing
Bank refinancing • New US$ 350m facility • Replaces existing 3-year syndication • Removes other legacy financing e.g. bi-laterals • Extends maturity from 3 years to 5 years • Covenants now in line with Morgan’s improved credit • Reduced costs of financing going forward 23
Slide 24: Update on adoption of IFRS: Appendices
Update on adoption of IFRS Appendices Hanau, 18 April 2005
Slide 25: First time adoption – background to selected exemptions
First time adoption – background to selected exemptions Employee benefits Exemption: The corridor approach to the recognition of actuarial gains/losses has not been applied prior to the date of transition. Benefit: Precludes the need to calculate the cumulative actuarial gain/loss position at the da
Slide 26: First time adoption – background to selected exemptions
First time adoption – background to selected exemptions Foreign currency translation Exemption: Cumulative gains/losses arising on the translation of the results of foreign entities are reset to zero at the date of transition. Benefit: Precludes the requirement to calculate the cumulative translatio
Slide 27: Employee benefits – background to accounting
Employee benefits – background to accounting UK GAAP: Accounting for defined contribution and defined benefit pension obligations under SSAP 24 • Contributions are charged to the profit and loss account so as to spread the pension cost over the anticipated period of service of the pension scheme mem
Slide 28: IAS 38 criteria for capitalisation of development expenditure
Development expenditure and other internally generated intangibles – IAS 38 criteria for capitalisation Under IAS 38 the criteria for the recognition of an intangible asset are that the business can demonstrate:- • the technical feasibility of completing the intangible asset so that it will be avail
Slide 29: IFRS – background to deferred taxation
IFRS – background to deferred taxation IFRS has wider scope for recognition of deferred taxation. Temporary differences = all timing differences plus further temporary differences E.g. DT is also recognised on: • Fair value adjustments • Non-depreciatory assets e.g. land, even if there is no intenti
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