Royal Kpn Nv · EURONEXT:KPN
Royal Kpn Nv — KPN — IFRS conference call (April 2005)
39 slides from Royal Kpn Nv's conference presentation, Apr 18, 2005
Slide 1: IFRS transition
IFRS transition Marcel Smits CFO IFRS conference call April 18, 2005
Slide 2: Safe harbor
Safe harbor This presentation provides a general overview of the impact of IFRS on KPN’s financial reporting. It does not replace any formal reporting. Investment considerations should continue to be based on the periodical reportings and other information that KPN is required to disclose by law or
Slide 3: Agenda
Agenda •Introduction •Summary of impact •Reclassifications 2004 •Key areas of impact and balance sheet 2004 •Impact on the income statement and KPIs •Impact on opening balance sheet 2005 •Outlook 2005 based on IFRS •Q&A 3
Slide 4: Introduction
Introduction
Slide 5: The IFRS conversion project
The IFRS conversion project • Start May 2003 • Phases 1 Preliminary study and impact analysis (May 2003 – Dec. 2003) 2 Conversion (2004) 3 Training and embedding (2004 - present) 5
Slide 6: IFRS Timetable
IFRS Timetable •KPN adopted the International Financial Reporting Standards (IFRS) as its primary accounting basis for its consolidated financial information as of January 1, 2005 •Consequently, KPN converted its comparative consolidated financial information covering the year 2004 to IFRS, except f
Slide 7: Key messages
Key messages •Accounting and disclosure adjustments only •No impact on operational performance of underlying business •No significant impact on free cash flow and distribution policy •Main areas of impact – Revaluation Property, Plant and Equipment – Goodwill – Revenue recognition – Employee benefit
Slide 8: Summary of impact
Summary of impact
Slide 9: Main impact on consolidated results and balance sheet
Main impact on consolidated results and balance sheet € mn P&L 2004 Balance sheet 20051 Operating Operating Net result 2 Net Debt 3 Group equity revenue result Dutch GAAP 12,102 2,457 1,511 7,869 6,965 IFRS change - 283 188 246 75 - 554 IFRS 11,819 2,645 1,757 7,944 6,411 •No material change in EBIT
Slide 10: Impact on net debt
Impact on net debt1 € mn Jan. 1, 2004 Dec. 31, 2004 Jan. 1, 2005 Dutch GAAP 8,320 7,869 7,869 Financial instruments2 - - 70 Assets held for sale - - - 55 Deconsolidation joint ventures 31 22 22 Other 45 38 38 Total impact 76 60 75 IFRS 8,396 7,929 7,944 1 Net debt is defined as the value of interest
Slide 11: Impact on group equity
Impact on group equity € mn Jan. 1, 2004 Dec. 31, 2004 Jan. 1, 2005 Dutch GAAP 7,359 6,965 6,965 Employee benefits - 836 - 755 - 755 Revaluation cables 567 487 487 Revenue recognition - 485 - 484 - 484 Borrowing costs - 122 - 136 - 136 Goodwill - 254 254 Financial instruments - - - 239 Other - 25 -7
Slide 12: Impact on opening balance sheet 2004
Impact on opening balance sheet 2004 € mn Dutch GAAP IFRS changes IFRS Assets Non current assets 20,020 929 20,949 Current assets 4,105 - 127 3,978 Total assets 24,125 802 24,927 Equity and liabilities Shareholders’ equity 7,163 - 628 6,535 Minority interest 196 - 11 185 Group equity 7,359 - 639 6,7
Slide 13: Impact on closing balance sheet 2004
Impact on closing balance sheet 2004 € mn Dutch GAAP IFRS changes IFRS Assets Non current assets 18,634 1,044 19,678 Current assets 4,102 - 119 3,983 Total assets 22,736 925 23,661 Equity and liabilities Shareholders’ equity 6,821 - 410 6,411 Minority interest 144 1 145 Group equity 6,965 - 409 6,55
Slide 14: Reclassifications 2004
Reclassifications 2004
Slide 15: Reclassifications: Main impact on P&L
Reclassifications Main impact on P&L Dutch GAAP IFRS Impact P&L 2004 Own work capitalized Part of Deducted from -/- 180 mn on operating operating operating revenues and revenues expenses expenses Minority interest Part of net Separately 47 mn result disclosed on the Net result face of the income
Slide 16: Reclassifications: Main impact on balance sheet
Reclassifications Main impact on balance sheet Impact on balance Dutch GAAP IFRS sheet 2004 Deferred taxes Current and All non-current January 1 : 58 mn non- current December 31 : 59 mn Provisions for other All non-current Current and non- January 1 : 127 mn liabilities and charges liabilities
Slide 17: Key areas of impact and balance sheet 2004
Key areas of impact and balance sheet 2004
Slide 18: Revaluation Property, Plant & Equipment
Revaluation Property, Plant & Equipment • KPN elected the IFRS 1 optional exemption to revalue its cables at January 1, 2005 •Impact on PP&E in balance sheet (non-current assets) as at – January 1, 2004 567 mn – December 31, 2004 487 mn •Impact on P&L 2004 is an additional depreciation charge of
Slide 19: Goodwill
Goodwill Dutch GAAP IFRS Goodwill is amortized and Goodwill is not amortized but subject to impairment test upon subject to annual impairment triggering event test •KPN reversed goodwill amortization in the 2004 P&L of 254 mn •No impairments have been identified at January 1 and December 31, 2004
Slide 20: Revenue recognition
Revenue recognition •Main difference is accounting for fees related to connection and installation Dutch GAAP IFRS Directly recorded as revenue Deferred over the estimated lifetime of the customer relationship •Impact on balance sheet equity as at – January 1, 2004 -/- 485 mn – December 31, 2004 -
Slide 21: Share based payments
Share based payments •Fair value charge calculated using binomial model •Total costs spread over vesting period Dutch GAAP IFRS Only charged if on date of grant Costs charged to P&L during market value of common stock vesting period based on fair exceeds exercise price or repricing value (with corre
Slide 22: Accounting for employee benefits (1)
Accounting for employee benefits (1) General •Accounting and calculation method under IFRS is generally similar to US GAAP •KPN recorded all cumulative gains and losses in retained earnings using the exemption of IFRS 1 Balance sheet •Pension-obligations minus pension fund assets (‘funded’) •Early r
Slide 23: Accounting for employee benefits (2)
Accounting for employee benefits (2) P&L •Pension expenses are based on actuarial calculations in accordance with IFRS (P&L effect) •Interest costs for unfunded early retirement obligations reclassified to salary costs •Cash contribution to the pension fund is based on Dutch funding regulations for
Slide 24: Accounting for employee benefits (3) - Impact on KPN
Accounting for employee benefits (3) - Impact on KPN Dutch GAAP IFRS Early retirement obligation Pension-obligations minus (‘unfunded’) in balance sheet plus pension fund assets accrual pension obligation Early retirement obligations and other long term employee benefits(‘unfunded’) •Interest costs
Slide 25: Borrowing costs
Borrowing costs •KPN elected not to capitalize borrowing costs Dutch GAAP IFRS Borrowing costs on PP&E are All borrowing costs directly capitalized charged to the P&L •Impact on balance sheet as at – January 1, 2004 -/- 122 mn – December 31, 2004 -/- 136 mn •Impact on 2004 P&L -/- 14 mn operat
Slide 26: Joint ventures and taxes
Joint ventures and taxes Joint ventures Dutch GAAP IFRS Proportionally consolidated Equity method •Biggest impact from joint ventures Mobirail and Tetranet Tax •The IFRS conversion adjustments have a tax effect •Impact on balance sheet (equity) as at – January 1, 2004 262 mn – December 31, 2004
Slide 27: Impact on the income statement and KPIs
Impact on the income statement and KPIs
Slide 28: Impact on P&L 2004
Impact on P&L 2004 Dutch GAAP IFRS IFRS € mn adjustment Operating revenue 12,102 - 283 11,819 Own work capitalized 0 147 147 D&A - 2,397 207 - 2,190 Other operating expenses - 7,248 117 - 7,131 Operating expenses - 9,645 471 - 9,174 Operating profit 2,457 188 2,645 Finance costs -620 31 - 589 Share
Slide 29: Impact on operating revenue
Impact on operating revenue € mn P&L 2004 Operating revenue Dutch GAAP 12,102 Reclassification own work capitalized -/- 180 Joint venture accounting (equity method) -/- 55 Revenue recognition -/- 49 Other adjustments 1 Total impact -/- 283 Operating revenue under IFRS 11,819 29 p
Slide 30: Impact on operating expenses
Impact on operating expenses € mn P&L 2004 Operating expenses Dutch GAAP -/- 9,645 Reversal goodwill amortization 254 Reclassification own work capitalized 180 Revenue recognition 50 Employee benefits 46 Joint ventures accounting 44 Borrowing costs -/- 14 Share based compensation -/- 22 Increase dep
Slide 31: Impact on 2004 KPIs
Impact on 2004 KPIs •Significant change in E-Plus ARPU resulting from definition alignment with IFRS revenue recognition 2004 reported 2004 IFRS % Change ARPU (blended) € 24 € 22 - 9% Postpaid 41 38 - 7% Prepaid 8 7 - 13% •Slight changes in – ARPU (KPN Mobile NL en BASE) – Non-voice % ARPU (al
Slide 32: Impact on 2004 Cash flow statement
Impact on 2004 Cash flow statement •Impact on free cash flow negligible ( 18 mn) and the result of no longer consolidating joint ventures Dutch IFRS € mn IFRS GAAP changes Net cash flow from operating activities 3,969 -12 3,957 Net cash flow from investing activities -1,594 -20 -1,574 -of which Cap
Slide 33: Impact on opening balance sheet 2005
Impact on opening balance sheet 2005
Slide 34: Impact on opening balance sheet 2005
Impact on opening balance sheet 2005 IFRS closing IFRS opening € mn IFRS changes balance 2004 balance 2005 Assets Non-current assets 19,678 - 254 19,424 Current assets 3,983 702 4,685 Non-current assets held for sale 0 121 121 Total assets 23,661 569 24,230 Equity and liabilities Shareholders’ equit
Slide 35: Financial instruments
Financial instruments Dutch GAAP IFRS •Loans stated at face value •Loans stated at amortized cost •Hedged foreign currency loans at •Hedged foreign currency loans at swap rate closing rate •Hedging instruments off-balance •Fair value of hedging instruments •Attributable costs capitalized and stated
Slide 36: Non-current assets held for sale
Non-current assets held for sale Dutch GAAP IFRS Assets and liabilities consolidated Presented separately in the in balance sheet (not separately balance sheet as current assets disclosed) and current liability held for sale Impact on balance sheet as at January 1, 2005 •From (non) current assets to
Slide 37: Outlook 2005 based on IFRS
Outlook 2005 based on IFRS
Slide 38: 2005 Outlook based on IFRS
2005 Outlook1 based on IFRS •2004 IFRS figures form the basis for the IFRS restated outlook Dutch GAAP IFRS Group revenue flat, including MTA Unchanged reduction Group EBITDA1,2 expected to Unchanged decline by high single digit figure, with greatest impact in Q1 CAPEX ≈ 1.7 bn Unchanged3 Free cas
Slide 39: Q&A
Q&A