BP plc · LSE:BP.
BP — Investor Presentation (March 2004)
29 slides from BP's investor presentation, Mar 11, 2004
Slide 1: Presentation to the financial community: technical briefing, 2004 reporting changes
presentation to the financial community technical briefing 2004 reporting changes 11th March 2004
Slide 2: Forward Looking Statements Cautionary Statement
Forward Looking Statements Cautionary Statement This presentation and the associated slides and discussion contain forward looking statements particularly those regarding capital employed, cash flow, costs, debt equity ratio, discounts on benefit liabilities, dividends, development of international
Slide 3: Agenda
agenda z FRS 17 (pension & benefit reporting) z ESOP accounting z NGL asset transfer z earnings reporting format z cash flow reporting format z q&a
Slide 4: Summary
summary z 2004 reporting changes responding to new accounting standards industry practices and investor feedback z further changes expected in 2005 under IFRS (International Financial Reporting Standards) z no cash flow impact z no change in BP financial framework
Slide 5: FRS 17
FRS 17 z new UK standard for pension & benefit reporting optional but encouraged similar to expected IFRS in 2005 z move from ‘smoothed’ to ‘mark-to-market’ reflects economic reality used by bond rating agencies z separates operating and financing impacts current service cost operating (RCOP) benefi
Slide 6: Income statement
income statement pension & post-retirement benefit credit / (charge) $m FAS87/SSAP24 ‘smoothed’ 2002 2003 current service cost (699) (807) early retirement & changes (33) (86) medical plan changes z all earnings impacts treated financing impacts 292 (43) as operating results RCOP (440) (936) (report
Slide 7: FRS 17 – RCOP impact
FRS 17 – RCOP impact pension & post-retirement benefit credit / (charge) $m FAS87/SSAP24 change due to FRS 17 ‘smoothed’ FRS 17 ‘mark to market’ 2002 2003 2002 2003 2002 2003 current service cost (699) (807) - - (699) (807) early retirement & changes (33) (86) 78 3 45 (83) medical plan changes 648 6
Slide 8: FRS 17 – financing impact
FRS 17 – financing impact pension & post-retirement benefit credit / (charge) $m FAS87/SSAP24 change due to FRS 17 ‘smoothed’ FRS 17 ‘mark to market’ 2002 2003 2002 2003 2002 2003 current service cost (699) (807) - - (699) (807) early retirement & changes (33) (86) 78 3 45 (83) medical plan changes
Slide 9: FRS 17 – earnings impact
FRS 17 – earnings impact pension & post-retirement benefit credit / (charge) $m FAS87/SSAP24 change due to FRS 17 ‘smoothed’ FRS 17 ‘mark to market’ 2002 2003 2002 2003 2002 2003 current service cost (699) (807) - - (699) (807) early retirement & changes (33) (86) 78 3 45 (83) medical plan changes 6
Slide 10: FRS 17 – 2004 earnings estimate
FRS 17 – 2004 earnings estimate pension & post-retirement benefit credit / (charge) $m z continuing increase FRS 17 in current service 2002 2003 2004* cost current service cost (699) (807) (900) early retirement & changes 45 (83) - z no material benefit medical plan changes - 648 - plan changes fina
Slide 11: Balance sheet
balance sheet pension & post-retirement benefit asset / (liability) $bn FAS87/SSAP24 ‘smoothed’ 2002 2003 funded pension plans 3.9 6.8 unfunded pension plans (3.1) (4.0) retiree medical plans (2.8) (2.9) total - pre-tax (2.0) (0.1) income tax - (0.9) total - post-tax (2.0) (1.0) average capital empl
Slide 12: FRS 17 - balance sheet impact
FRS 17 - balance sheet impact pension & post-retirement benefit asset / (liability) $bn FAS87/SSAP24 change due FRS 17 ‘smoothed’ to FRS 17 ‘mark to market’ 2002 2003 2002 2003 2002 2003 funded pension plans 3.9 6.8 (6.6) (6.7) (2.7) 0.1 unfunded pension plans (3.1) (4.0) (0.1) (0.2) (3.3) (4.1) ret
Slide 13: FRS 17 – capital employed impact
FRS 17 – capital employed impact pension & post-retirement benefit asset / (liability) $bn FAS87/SSAP24 change due FRS 17 ‘smoothed’ to FRS 17 ‘mark to market’ 2002 2003 2002 2003 2002 2003 funded pension plans 3.9 6.8 (6.6) (6.7) (2.7) 0.1 unfunded pension plans (3.1) (4.0) (0.1) (0.2) (3.3) (4.1)
Slide 14: FRS 17 – 2004 earnings estimate
FRS 17 – 2004 earnings estimate pension & post-retirement benefit credit / (charge) $m z continuing increase FRS 17 in current service 2002 2003 2004* cost current service cost (699) (807) (900) early retirement & changes 45 (83) - z no material benefit medical plan changes - 648 - plan changes fina
Slide 15: ESOP accounting change
ESOP accounting change z mandatory under UK law z applies retroactively impact on BP financial statements $m 1999 2000 2001 2002 2003 ESOP share repurchases 77 64 33 18 63 previously: capital expenditures now treated as: share buybacks year end ESOP share holdings 456 360 266 159 96 previously: long
Slide 16: Summary of changes
summary of changes proforma basis FRS 17 ESOP accounting economic why change? mandated reality 2003 group impact group result $215m - cash flow - - year end capital employed $(5.5)bn $(0.1)bn ROACE 1.5% - gearing 1.7% - segments impacted all ob&c
Slide 17: Transfer of NGL operations
transfer of NGL operations z move from e&p to gp&r z restated historical data 1999 2000 2001 2002 2003 financial results $m moved from e&p to gp&r RCOP 43 118 84 68 106 capex excl. acquisitions 11 18 8 40 82 year end operating 244 330 314 322 389 capital employed NGL sales volumes* kb/d 10 27 34 122
Slide 18: Summary of changes
summary of changes proforma basis FRS 17 ESOP NGL accounting transfer economic mandated business why change? synergies reality 2003 group impact group result $215m - - cash flow - - - year end capital employed $(5.5)bn $(0.1)bn - ROACE 1.5% - - gearing 1.7% - - segments impacted all ob&c e&p / gp&r
Slide 19: Earnings reporting format
earnings reporting format z include all non-operating items in proforma result reflects shift from ‘inorganic’ to ‘organic’ growth comparable with emerging industry practices z required UK GAAP disclosures (exceptional items) gains and losses on disposals closure of sites or exits from lines of busi
Slide 20: Summary of changes
summary of changes proforma basis FRS 17 ESOP NGL results accounting transfer format economic mandated business transparency & why change? synergies comparability reality 2003 group impact group result $215m - - $264m cash flow - - - - year end capital employed $(5.5)bn $(0.1)bn - - ROACE 1.5% - - 0
Slide 21: Impact of reporting changes
impact of reporting changes proforma basis post-tax earnings year end capital $m employed $bn 2002 2003 2002 2003 previous result 8,715 12,379 75.4 86.0 special items (1,443) (444) - - exceptional items 1,043 708 - - subtotal 8,315 12,643 75.4 86.0 FRS 17 (50) 215 (5.6) (5.5) ESOP accounting change
Slide 22: ROACE impact of reporting changes
ROACE impact of reporting changes proforma return on average capital employed* % 25 20 15 10 5 0 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 before 2004 reporting changes after 2004 reporting changes 0.1% lower ROACE in 2002 1.8% higher ROACE in 2003 * proforma ROACE = proforma RCP before post-tax finan
Slide 23: Gearing impact of reporting changes
gearing impact of reporting changes proforma net debt ratio* % 40 no change in 25-35% target gearing band 35 30 25 20 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 before 2004 reporting changes after 2004 reporting changes 2.4% higher gearing at end 2002 1.7% higher gearing at end 2003 * proforma net debt
Slide 24: Operating cash flow
operating cash flow z BP to offer additional cash flow disclosure separate income tax between operations & disposals more inclusive view of operating cash flow: existing UK GAAP additional disclosure excludes dividend receipts includes dividend receipts excludes financing includes financing post-tax
Slide 25: Operating cash flow
operating cash flow $bn 1999 2000 2001 2002 2003 cash from operating activities (pre-tax) 10.3 20.4 22.4 19.3 21.7 dividends received 1.2 1.1 0.8 0.7 0.7 net interest and MSI dividend paid (1.0) (0.9) (1.1) (1.0) (0.9) operating cash flow (pre-tax) 10.5 20.6 22.1 19.0 21.5 income tax on operations*
Slide 26: Net cash flow
net cash flow 2003 sources and uses of cash $bn 35 30 disposals operations* 25 pension funding 20 acquisitions 15 organic capex net buybacks 10 dividends 5 tax / int. / div. / MSI 0 *cash from operations sources uses sources uses before pension funding existing format new disclosure (UK GAAP) ( IFRS
Slide 27: Conclusion
conclusion z several changes in 2004; more in 2005 (IFRS) new accounting standards industry practices and investor feedback z voluntary disclosures to inform investors TNK-BP historical restatements exceptional & identified non-operating items impacting earnings additional cash flow information z no
Slide 28: Further information
further information z BP investor centre (www.bp.com) FRS 17, ESOP and NGL restatements exceptional items on a geographical basis z BP 2004 financial & operating information report (to be published in early April) z FRS 17 - UK Accounting Standards Board (www.asb.org.uk/asb/technical/standards.cfm)
Slide 29: Q&A session
q&a session Byron Grote chief financial officer Mike Starkie chief accountant Fergus MacLeod vice president, investor relations