Inchcape Plc · LSE:INCH
Inchcape — Investor Presentation (May 2005)
39 slides from Inchcape's investor presentation, May 13, 2005
Slide 1: International Financial Reporting Standards
Inchcape International Financial Reporting Standards 13 May 2005
Slide 2: Alan Ferguson, Group Finance Director
Alan Ferguson Group Finance Director
Slide 3: Agenda
Agenda • Introduction and overview • Key areas of impact • Questions and answers
Slide 4: Introduction
Introduction • IFRS applied from 1 January 2005 to Inchcape plc’s consolidated financial statements, with 2004 comparative information restated • Rigorous and complex conversion project has resulted in significant internal work, supported throughout by external advisors • All numbers are unaudited
Slide 5: Introduction continued
Introduction continued • Currently limited established practice on application of IFRS – best practice and interpretative guidance continue to evolve • Further standards and interpretations of existing standards may be issued • Given this, the financial information published may be subject to change
Slide 6: Overview
Overview • No impact on business fundamentals – Cash flows – Financial strength and flexibility – Business and economic risks • Broadly neutral impact on profit before tax and earnings, subject to achievement of hedge effectiveness • Reduction in net assets, mainly due to recognition of pension defi
Slide 7: Key areas of impact
Key areas of impact • Share-based Payment (IFRS 2) • Goodwill (IFRS 3/IAS 27) • Business Combinations (IFRS 3)/Intangible Assets (IAS 38) • Pensions (IAS 19) • Financial Instruments (IAS 32/39) • Stock Holding Interest (IAS 2) • Contract Hire (IAS 18) • Property Leases (IAS 17) • Tax (IAS 12) • Divi
Slide 8: IFRS 2 Share-based Payment
IFRS 2 Share-based Payment • UK GAAP Policy – Nil charge for Executive Share Option Scheme (ESOS) based on options granted at market value – Save As You Earn (SAYE) excluded from UK options accounting – Deferred Bonus Plan (DBP) fully expensed in year of award based on value of shares awarded • IFRS
Slide 9: IFRS 2 Share-based Payment continued
IFRS 2 Share-based Payment continued • Financial impact Income statement – £0.1m increase in charge for the year ended 31 December 2004 – Ongoing annualised basis c.£2.0m - £3.0m additional charge Balance sheet – Nil
Slide 10: IFRS 3/IAS 27 Goodwill
IFRS 3/IAS 27 Goodwill • UK GAAP Policy – Any excess of value paid over net assets for a business attributed to goodwill – Capitalised goodwill amortised to income statement over useful economic life – Test for impairment in first full year following acquisition and if indications of impairment exis
Slide 11: IFRS 3/IAS 27 Goodwill continued
IFRS 3/IAS 27 Goodwill continued • Financial impact Income statement – Reversal of goodwill amortisation of £5.5m, offset by accelerated amortisation charge of £1.3m treated as impairment under IFRS, giving net increase in profit before tax of £4.2m for the year ended 31 December 2004 – Goodwill in
Slide 12: IFRS 3 Business Combinations/IAS 38 Intangible Assets
IFRS 3 Business Combinations/ IAS 38 Intangible Assets • UK GAAP Policy – Any excess in value paid over net assets for a business attributed to goodwill – Software development costs capitalised where appropriate as property, plant and equipment • IFRS Policy – Transitional arrangements – not applied
Slide 13: IFRS 3/IAS 38 continued
IFRS 3 Business Combinations/ IAS 38 Intangible Assets continued • Financial impact Income statement – Amortisation charge of £0.6m for the year ended 31 December 2004 relating to other intangible assets separated from goodwill Balance sheet – Reduction in net assets of £0.6m as a consequence of amo
Slide 14: IAS 19 Pensions
IAS 19 Pensions • UK GAAP Policy – Accounting under SSAP 24 based on triennial actuarial valuation – Income statement charge reflects service cost and spreading of valuation surplus/deficit – FRS 17 valuation disclosed separately in notes to financial statements • IFRS Policy – Basis of valuation si
Slide 15: IAS 19 Pensions continued
IAS 19 Pensions continued • Financial impact Income statement – Increased service cost of £1.3m for the year ended 31 December 2004 – Net financing income of £0.5m for the year ended 31 December 2004 – Overall net decrease in profit before tax of £0.8m Balance sheet – Recognition of net deficit of £
Slide 16: IAS 32/39 Financial Instruments – Hedge Accounting
IAS 32/39 Financial Instruments – Hedge Accounting • UK GAAP Policy – Hedging derivatives generally off balance sheet – Forward foreign exchange rate applied to translate relevant transactions – FRS 13 disclosures provided • IFRS Policy – Transitional arrangements adopted in full from 1 January 2005
Slide 17: IAS 32/39 Hedge Accounting continued
IAS 32/39 Financial Instruments – Hedge Accounting continued • Financial impact Income statement – Limited impact on profit before tax on the basis that hedge effectiveness is achieved Balance sheet – Net assets at 1 January 2005 reduced by £5.5m reflecting £9.8m value of derivatives brought onto ba
Slide 18: IAS 32/39 Financial Instruments - Offsetting
IAS 32/39 Financial Instruments - Offsetting • UK GAAP Policy – Offset of assets and liabilities which can be legally netted (e.g. cash pooling facilities) • IFRS Policy – Balance sheet netting only where there is both the legal ability and intention to settle net – No effect on cash flows
Slide 19: IAS 32/39 Offsetting continued
IAS 32/39 Financial Instruments - Offsetting continued • Financial impact Income statement – Nil Balance sheet – Gross up of cash and borrowings of £66.4m at 1 January 2005 – No overall impact on net assets
Slide 20: IAS 2 Stock Holding Interest
IAS 2 Stock Holding Interest • UK GAAP Policy – Stock holding interest included as part of operating expenses • IFRS Policy – Stock holding interest to be charged to finance costs
Slide 21: IAS 2 Stock Holding Interest continued
IAS 2 Stock Holding Interest continued • Financial impact Income statement – Reclassification from operating expenses to finance costs of £7.2m for the year ended 31 December 2004 – No overall impact on profit before tax Balance sheet – Nil
Slide 22: IAS 18 Contract Hire
IAS 18 Contract Hire • UK GAAP Policy – FRS 5 allows separation of initial sale of vehicle and subsequent repurchase of vehicle at agreed residual value – Profit recognised on initial sale – Residual value commitment recognised in inventories/ payables relating to vehicles sourced from both within a
Slide 23: IAS 18 Contract Hire continued
IAS 18 Contract Hire continued • IFRS Policy – No equivalent partial derecognition override where significant risks and rewards do not pass, initial sale cannot be recognised – Vehicle classified within property, plant and equipment and written down to residual value over life of lease – Vehicle pro
Slide 24: IAS 18 Contract Hire continued
IAS 18 Contract Hire continued • Financial impact Income statement – Profit before tax increased by £0.1m for the year ended 31 December 2004 Balance sheet – Net assets reduced by £1.2m at 31 December 2004, relating to the deferral of profit in respect of buy back vehicles – Gross assets and liabili
Slide 25: IAS 17 Property Leases
IAS 17 Property Leases • UK GAAP Policy – Leases that cover both land and buildings treated as a single lease – Finance leases/leasehold properties capitalised as property, plant and equipment and depreciated – Carrying value of leases included any previous revaluation • IFRS Policy – Land and build
Slide 26: IAS 17 Property Leases continued
IAS 17 Property Leases continued • Financial impact Income statement – Profit before tax increased by £0.3m for the year ended 31 December 2004 Balance sheet – Decrease in net assets of £11.2m at 31 December 2004, reflecting the reversal of previous revaluations
Slide 27: IAS 12 Tax
IAS 12 Tax • UK GAAP Policy – Generally full provision on ‘timing’ differences • No deferred tax provided on revaluations or rolled over gains on property where no binding commitment to sell the asset • No deferred tax provided on non-qualifying properties acquired as part of a business combination
Slide 28: IAS 12 Tax continued
IAS 12 Tax continued • Financial impact Income statement – Impact on tax charge of £2.0m for year ended 31 December 2004 – Ongoing impact likely to be less Balance sheet – Decrease in net assets of £2.8m at 31 December 2004
Slide 29: IAS 10 Dividends
IAS 10 Dividends • UK GAAP Policy – Dividends recognised as an adjusting post balance sheet event • IFRS Policy – Proposed dividends are not a liability under IFRS – Dividends charged to shareholders' equity when declared or ratified
Slide 30: IAS 10 Dividends continued
IAS 10 Dividends continued • Financial impact Income statement – Dividends presented as a deduction in shareholders' equity under IFRS rather than as a deduction in the income statement as under UK GAAP Balance sheet – Net assets increased by £28.2m at 31 December 2004 reflecting the reversal of the
Slide 31: IAS 14 Segmental
IAS 14 Segmental • Under IFRS the Group’s primary basis of segmentation is by geography • Geographical segments disclosed under UK GAAP have been refined under IFRS as below: – UK – Greece – Belgium – Australia – Singapore – Hong Kong – Other
Slide 32: IAS 14 Segmental continued
IAS 14 Segmental continued • The Group’s secondary basis of segmentation is by business (e.g. Retail, Financial Services) • Additional voluntary disclosure will be given for UK Retail • The following slides show the geographical split for 2002, 2003 and 2004, segmented on an IFRS basis (excluding jo
Slide 33: IAS 14 Segmental continued
IAS 14 Segmental continued • The 2002 and 2003 revenue and operating profit numbers are provided for illustrative purposes only and have been adjusted for the principal IFRS differences that impact the income statement (namely stock holding interest and pensions)
Slide 34: Revenue – Year ended December 2004
Revenue Year ended 31 December 2004 Pro Pro forma forma 2004 2003 2002 £m £m £m UK 1,331.3 1,244.8 1,201.9 Greece 348.0 312.2 288.3 Belgium 462.7 465.1 408.9 Australia 567.3 505.0 435.0 Hong Kong 237.2 224.3 289.7 Singapore 652.5 577.0 454.4 Other 520.5 464.8 335.6 4,119.5 3,793.2 3,413.8
Slide 35: Revenue – Six months ended June 2004
Revenue Six months ended 30 June 2004 Pro Pro forma forma 2004 2003 2002 £m £m £m UK 683.5 634.9 603.1 Greece 197.4 154.4 130.6 Belgium 257.9 252.8 239.6 Australia 302.1 247.6 221.1 Hong Kong 118.9 112.7 154.1 Singapore 338.2 280.6 235.6 Other 260.5 227.7 171.2 2,158.5 1,910.7 1,755.3
Slide 36: Operating profit – Year ended December 2004
Operating profit* Year ended 31 December 2004 Pro Pro forma forma 2004 2003 2002 £m £m £m UK 25.8 20.0 17.2 Greece 17.7 13.7 12.2 Belgium 12.6 13.8 6.3 Australia 28.1 22.8 18.6 Hong Kong 25.6 18.0 24.9 Singapore 53.5 45.4 30.6 Other 26.7 18.2 13.5 190.0 151.9 123.3 Group costs (17.9) (18.2) (14.5) 1
Slide 37: Operating profit – Six months ended June 2004
Operating profit* Six months ended 30 June 2004 Pro Pro forma forma 2004 2003 2002 £m £m £m UK 13.9 11.0 9.5 Greece 8.3 7.4 4.9 Belgium 8.0 7.4 6.9 Australia 14.2 12.1 10.2 Hong Kong 11.8 7.7 13.4 Singapore 28.4 19.2 9.4 Other 15.1 10.6 6.9 99.7 75.4 61.2 Group costs (10.7) (9.6) (6.1) 89.0 65.8 55.
Slide 38: Thank you for your attention!
Thank you for your attention!
Slide 39: International Financial Reporting Standards
Inchcape International Financial Reporting Standards 13 May 2005