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International Financial Reporting Standards. 29 Sep 2005. Cautionary statement.

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cautionary statement
Cautionary statement

International Financial Reporting standards (‘IFRS’) are being applied in the European Union for the first time. This presentation has been prepared on the basis of IFRSs expected to be available at 30 April 2006. New standards and interpretations may be issued by the IASB and / or endorsed by the EU prior to the completion of our first full reporting period under IFRS on 30 April 2006. There are a number of new and revised standards included within the body of Standards that comprise IFRS. There is not yet any significant established practice upon which to draw in forming opinions regarding their interpretation and application. Accordingly practice is continuing to evolve. At this stage, therefore, the full financial effect of reporting under IFRS, as it will be applied and reported on in the Group’s first IFRS financial statements, cannot be determined with certainty and may be subject to change. The financial information which follows represents our current view and may be impacted by changes in the business or to IFRS or the interpretation thereof. This presentation should be treated with appropriate caution.

introduction
Introduction

All EU listed companies are required to prepare IFRS financial statements for accounting periods beginning on or after 1 January 2005

  • IFRS full financial statements required for Stagecoach financial year ending 30 April 2006
  • Comparative amounts required for year ended 30 April 2005
  • Opening Balance Sheet at 1 May 2004
  • First published results Oct 2005 interim (restated Oct 2004 interim)
introduction 2
Introduction (2)
  • Prepared on basis of IFRSs expected to be endorsed at 30 April 2006
  • Ongoing monitoring of latest interpretations and/or industry practice
  • All numbers quoted are preliminary and unaudited
  • Although IFRS changes financial reporting – it does not impact underlying value drivers of our business- Business strategy unaffected- Cash generation unaffected
key areas of financial impact
Key areas of financial impact
  • IAS 19 – Pensions
  • IFRS 3 & IAS 38 – Goodwill, intangible assets & business combinations
  • IFRS 2 – Share based payments
  • IAS 10 – Dividends
  • IAS 32/39 – Financial instruments
ifrs 1 first time adoption and transitional arrangements
IFRS 1 First time adoption and transitional arrangements

Key exemptions

  • IFRS 3 not applied retrospectively to business combinations prior to 1 May 2004
  • All actuarial gains and losses recognised at date of transition (IAS 19)
  • IFRS 2 only applied to awards from 7 November 2002
  • No restatement of comparative information with respect to IAS 32 and 39
  • Accumulated translation differences at the date of transition set to zero
  • Fair value of certain fixed assets treated as deemed cost at 1 May 2004
ias 19 employee benefits financial impact
IAS 19 – Employee benefitsFinancial Impact

Profit

Statement of recognised income and expense

Equity

30 April 2005

£m

31 October 2004

£m

30 April 2005

£m

30 April 2005

£m

31 October 2004

£m

1 May 2004

£m

Operating profit

Tax

Profit for the period

Recognised gains and losses

Net assets

5.1

(1.8)

3.3

-

-

2.3

(0.8)

1.5

-

-

-

-

-

(42.0)

-

-

-

-

-

(182.7)

-

-

-

-

(142.5)

-

-

-

-

(144.0)

ias 19 employee benefits cont
IAS 19 – Employee benefits (cont)
  • Full recognition of actuarial gains and losses (SORIE)
  • Defined benefit schemes full deficit/surplus recognised on balance sheet
  • No change to defined contribution schemes
  • Special treatment for rail pension schemes
ias 19 rail pension scheme
IAS 19 – Rail pension scheme
  • Only recognise deficit that expect to fund over remainder of franchise term
  • On transition/commencement of a franchise – intangible asset recognised that matches pension deficit that obliged to fund
    • Represents economic benefit derived from the franchise agreement that is attributable to share of pension deficit
    • Amortised on a straight line basis until end of the franchise
ifrs 3 business combinations ias 38 intangible assets financial impact
IFRS 3 – Business combinationsIAS 38 – Intangible assetsFinancial Impact

Profit

Statement of recognised income and expense

Equity

30 April 2005

£m

31 October 2004

£m

30 April 2005

£m

31 October 2004

£m

30 April 2005

£m

31 October 2004

£m

1 May 2004

£m

Operating profit

Loss on disposal of operations

Tax

Profit for the period

Recognised gains and losses

Net assets

7.2

(0.4)

(0.9)

5.9

-

-

3.7

(0.2)

(0.5)

3.0

-

-

-

-

-

-

(0.2)

-

-

-

-

-

(0.2)

-

-

-

-

-

-

6.5

-

-

-

-

-

3.6

-

-

-

-

-

0.8

ifrs 3 business combinations ias 38 intangible assets cont
IFRS 3 – Business combinationsIAS 38 – Intangible assets (cont)
  • Goodwill carried at cost (no amortisation), subject to annual impairment reviews
  • Wider definition of intangibles resulting in reclassifications from goodwill - £2.0m reclassed to intangibles at 1 May 2004 and a further £2.0m reclassified in the year to 30 April 2005
  • VRG – continuation of amortisation due to finite life of franchises
  • Reversal of VRG’s negative goodwill
ifrs 2 share based payments financial impact
IFRS 2 – Share based paymentsFinancial Impact

Profit

Equity

30 April 2005

£m

31 October 2004

£m

30 April 2005

£m

31 October 2004

£m

1 May 2004

£m

Operating profit

Profit for the period

Net assets

(1.4)

(1.4)

-

(0.6)

(0.6)

-

-

-

Nil

-

-

Nil

-

-

Nil

ifrs 2 share based payments cont
IFRS 2 – Share based payments (cont)
  • Applies to options granted after 7 November 2002, not yet vested by 1 May 2004.
  • Requires expense (based on fair value) to be recognised in income statement for all share based payments (no exemption for SAYE)
  • Valuation model used to calculate fair value – Black Scholes
  • Expense spread over vesting period – typically 3 years
ias 10 events after the balance sheet date financial impact
IAS 10 - Events after the balance sheet dateFinancial Impact

Equity

30 April 2005

£m

31 October 2004

£m

1 May 2004

£m

Net assets

24.4

10.6

26.5

ias 10 events after the balance sheet date cont
IAS 10 - Events after the balance sheet date (cont)
  • Dividends declared after balance sheet date not recognised as a liability at balance sheet date
  • Group’s dividend policy will remain unchanged
other impacts
Other impacts

IAS 28 – Investments in associates

  • If losses of an associate/joint venture exceed interest in the associate/joint venture – discontinue recognising share of losses (increase in net assets of £1.0m at 1 May 2004)
  • On subsequent disposal, loss on disposal of operations increased by £1.0m and net assets decreased by £1.0m

IFRS 5 – Non current assets held for sale and discontinued operations

  • Assets or disposal groups held for sale separately disclosed
  • No depreciation
  • 1 May 2004 reclassify net £7.3m of assets to ‘held for sale’, and reclass of £0.1m from depreciation charge to loss on disposal during the year ended 30 April 2005
other impacts 2
Other impacts (2)

IFRS 1- First time adoption of international financial reporting standards

  • As a result of including fair value of certain fixed assets as deemed cost – reduction in depreciation.
  • Increase in profit and net assets of £0.3m

IAS 31 – Interests in joint ventures

  • No requirement to split share of results between turnover, operating profit, interest and taxation
  • Reclass of £5.2m of tax charges and £1.7m of finance income into a single line item in income statement
ias 32 39 financial instruments financial impact
IAS 32/39 – Financial instrumentsFinancial Impact

Equity

1 May 2005

£m

31 October 2004

£m

1 May 2004

£m

Net assets

(7.2)

-

-

  • Recognition of fair value of fuel swaps resulting in net £6.6m increase to net assets
  • Reclassification of redeemable ‘B’ preference shares to debt reduces net assets by £13.9m
  • Other immaterial adjustments increase net assets by £0.1m
ias 32 39 financial instruments cont
IAS 32/39 – Financial instruments (cont)
  • Applied from 1 May 2005
  • No restatement of April 2005 comparatives
  • Derivatives recorded on balance sheet, use of fair value
  • Measurement depends on classification
  • Potential for some volatility, as gains and losses are recognised through income statement, except where qualify for hedge accounting
net debt as at 1 may 2005
Net debt as at 1 May 2005

Previously reported as net debt under UK GAAP

£m

Previously reported in accruals under UK GAAP

£m

Previously reported in equity under UK GAAP

£m

Adjustment to bond value on transition to IFRS

£m

IFRS

£m

Cash

Cash collateral

Hire purchase and lease obligations

Bank loans and loan stock

Bonds - principal

- accrued interest

- FX contract

Redeemable ‘B’ shares

Net debt

Unamortised gain on early settlement of interest rate swaps

Net borrowings shown on IFRS balance sheet

104.2

34.3

(66.1)

(112.1)

(174.9)

-

-

-

(214.6)

-

(214.6)

-

-

-

-

-

(6.9)

-

-

(6.9)

(23.5)

(30.4)

-

-

-

-

-

-

-

(13.9)

(13.9)

-

(13.9)

-

-

-

-

-

-

0.4

-

0.4

-

0.4

104.2

34.3

(66.1)

(112.1)

(174.9)

(6.9)

0.4

(13.9)

(235.0)

(23.5)

(258.5)

summary year ended 30 april 2005
Summary – year ended 30 April 2005
  • Adjusted EPS 4% higher at 9.4p
  • Net assets decreased by £97.6m to £121.4m
  • No impact on overall cashflow
  • No impact on dividend policy going forward