Babcock International Group PLC · LSE:BAB
Babcock International — Investor Presentation (July 2005)
22 slides from Babcock International's investor presentation, Jul 7, 2005
Slide 1: Babcock International Group PLC IFRS Update
Babcock International Group PLC IFRS Update 7 July 2005 1
Slide 2: Agenda
Agenda • Transition overview • Itemised transition adjustments • Summary • Questions Bill Tame Franco Martinelli 2
Slide 3: Overview
Overview Most significant changes: • Recognition on balance sheet of pension scheme liabilities under IAS 19 • Share based payments based on fair values • The cessation of goodwill amortisation • The creation and amortisation of intangibles acquired in the year ending 31 March 2005 • Dividend recogn
Slide 4: Summary
Summary - No significant changes from previous update UK Share based Pension Goodwill Intangibles Dividends Other IFRS/IAS GAAP payments schemes £m £m £m £m £m £m £m £m Profit before interest, tax, goodwill amortisation and exceptional items 41.3 (0.5) 0.1 0.1 41.0 Net interest and similar charges (
Slide 5: Transition adjustments - Underlying profit before tax
Transition adjustments - Underlying profit before tax Long term Debtor Holiday Pensions contracts discounting pay £0.1m £(0.1)m JV £(0.1)m £0.6m accounting £(0.1)m £35.1m £35.0m Share based UK GAAP payments 2004/5 IFRS £(0.5)m 2004/5 • Underlying profit is before goodwill, exceptional items and amor
Slide 6: Transition adjustments - Profit after tax
Transition adjustments - Profit after tax Pensions Acquired ordinary intangibles Holiday £0.1m £(11.9)m Pensions pay exceptional £0.5m £4.2m Goodwill reversed £6.2m Share Long based term payment contracts £20.7m £(0.4)m £(0.1)m £19.2m Debtor discounting UK GAAP £(0.1)m IFRS 2004/5 2004/5 •Unadjusted
Slide 7: Transition adjustments - Net assets
Transition adjustments - Net assets £174m £112.4m UK GAAP IFRS Dividend 31/3/05 31/3/05 Acquired £5.4m Intangibles £9.0m Goodwill Holiday £7.7m pay and other £(1.1)m Pension £(82.6)m 7
Slide 8: Pensions
Pensions • IFRS similar to FRS17 • Some technical differences • Pension deficit on balance sheet - £14.4m post tax • Full recognition, deferred recognition, corridors: choice • Full recognition shown • Finance credit in interest or operating profit: choice • Operating profit shown – final choice to
Slide 9: Pensions - Balance Sheet March 2005
Pensions - Balance Sheet 31 March 2005 UK GAAP IFRS Net assets Adjustment Net liabilities • Pre tax 98.1 (118.3) (20.2) • Post tax 68.2 (82.6) (14.4) 9
Slide 10: Pensions - Defined benefit
Pensions - Defined benefit • Underlying profit adjustment of £0.1m after financing credit of £8.8m • Exceptional credit of £5.6m (curtailment gain) (£4.2m after tax) • IAS 19 outlook based on reduced scheme assets at beginning of year and service cost inflation • Government supported scheme accounti
Slide 11: Share based payments
Share based payments • Under IFRS, cost based on fair value • No charge under UK GAAP if options granted at market value or under SAYE arrangements • £0.5m additional charge in 2004/5 – 2 years of schemes • Next year additional year extant IFRS Adjustments 2004/5 Underlying profit £(0.5)m Net assets
Slide 12: Dividends
Dividends • Dividends are accounted for in the period in which they are declared • 2003/4 final dividend of £3.1m reversed in 2003/4 and charged in 2004/5 • 2004/5 final dividend of £5.4m reversed in 2004/5 and charged in 2005/6 IFRS Adjustments 2004/5 Underlying profit - Net assets £5.4m 12
Slide 13: Contract accounting
Contract accounting • Existing policies largely consistent with IFRS • All such contracts, regardless of materiality, require contract accounting – UK GAAP materiality applies • Impact is to decrease turnover by £1.1m in 2004/5 • Accelerated recognition of profits on some contracts into 2003/4 rever
Slide 14: Goodwill
Goodwill • No amortisation of goodwill under IFRS from 1 April 2004 • Reversal of £6.6m charge in 2004/5 • Goodwill is subject to annual impairment review • Higher number due to; IFRS/UK GAAP differences on Pensions/Other • Negative goodwill transfer to reserves - £4.7m • Lower number due to carve o
Slide 15: Acquisitions
Acquisitions • Goodwill is analysed between other intangible assets and goodwill (from 1 April 2004) • Intangible assets reflect estimated value of order book and customer relationships • Intangible assets are amortised over estimated useful life – reducing charge over time • £25.9m of these intangi
Slide 16: Taxation
Taxation • Underlying tax rate* for 2004/5 and 2005/6 unchanged from previous guidance • Deferred tax credit on share based payments – small • Increase in balance sheet deferred tax provision – deferred tax on property valuations at acquisition - £0.3m • Other adjustments have been tax effected and
Slide 17: Other items
Other items • Holiday pay; prescriptive rules require accruals to be made • Debtor discounting: intrinsic financing on invoicing separated from service/product invoicing - i.e. payment terms = financing • Joint ventures: share of tax shown on JV line IFRS Adjusting 2004/5 Underlying profit - Holiday
Slide 18: IAS 32 and IAS 39
IAS 32 and IAS 39 • Foreign currency hedging • Embedded derivatives • Interest rate hedging • Adoption 1 April 2005 (restatement) 18
Slide 19: Foreign exchange hedging
Foreign exchange hedging • Policy to hedge all firm transactional exposures • Embedded derivatives - Non functional currency • Hedges marked-to-market each period end • Embedded derivatives marked-to-market • ‘Hedging achieved’ • Effect expected to be insignificant 19
Slide 20: Interest rate hedging
Interest rate hedging • Instruments used to manage the exposure to interest rate fluctuations • Hedge accounting not achieved • Hedges marked-to-market each period end – changes in market value taken to P&L as interest • Effect expected to be insignificant 20
Slide 21: Overview
Overview Most significant changes: • Recognition on balance sheet of pension scheme liabilities under IAS 19 • Share based payments based on fair values • The cessation of goodwill amortisation • The creation and amortisation of intangibles acquired in the year ending 31 March 2005 • Dividend recogn
Slide 22: The rules are still being written
The rules are still being written Babcock International Group PLC IFRS Update 7 July 2005 22
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