International Financial Reporting Standards Presentation to Analysts & Investors 4 May 2005
Kath Kyle Investor Relations
Disclaimers This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares. This presentation may contain certain forward-looking statements with respect to the…
Agenda Transition to IFRS Standards with particular relevance to Centrica 2004 income statement and balance sheet 2005 opening balance sheet Summary financials restated 2005 dividends under IFRS Summary Q&As 4
We have adopted IFRS from 1 January 2005 2004 comparatives (excluding IAS 39 & IAS 32) Early adopted where practical IAS 39 & IAS 32 adopted from 1 January 2005 15 September 2005: 2005 interim results under IFRS 5
Phil Bentley Group Finance Director
Although IFRS changes some of our financial reporting it does not impact the underlying value drivers of our business Changed recognition of some assets and liabilities Consequent impact on timing of profit recognition Business…
Changes arise from a number of standards, with four of particular relevance to Centrica IAS 39 Energy sales & purchase contracts IAS 12 Petroleum Revenue Tax IAS 17 / IFRIC 4 Humber & Spalding tolling arrangements IAS 32 / IFRIC 2…
IFRS requires us to make changes to the way we account for certain types of transactions Type of transaction UK GAAP IFRS Proprietary trading MTM MTM no change (Accord & N.America) Physical commodity sales & Accrual accounted a)…
Many of our physical commodity purchases and sales qualify as own use under IAS 39 Principle Accounting Application to Centrica treatment Own use Accrual Purchase contracts used purely to supply own customers or meet demand in our…
The marked to market value of contracts will change in line with future movements in commodity prices Commodity price move Estimated (1) UK Energy (2) annualised MTM move (3) Gas: increase by 1p/therm + 1 million Oil: increase…
PRT liabilities are accounted for as taxes, changing the timing of recognition PRT moves from cost of sales to tax Cash payments & calculation of lifetime charges unchanged Charge was previously based on Life of Field approach with…
IFRS requires our dedicated gas-to-power tolling arrangements be brought onto the balance sheet Under IFRS, the power tolling arrangements with Humber & Spalding are finance leases The fixed assets and the corresponding lease…
Minority interests in the Consumers Waterheater Income Fund can no longer be reported as non-equity minority interests Centrica holds a 19.9% interest in the fund Under UK GAAP (FRS 5) we fully consolidated the fund - no change…
Alisdair Cameron Director of Financial Control
A number of the new standards affect Centricas reported results IAS 39 Energy sales & purchase contracts IAS 12 Petroleum Revenue Tax IAS 17 / IFRIC 4 Humber & Spalding tolling arrangements IAS 32 / IFRIC 2 Consumers Waterheater…
Under UK GAAP our 2004 earnings* were 839m and net assets at 31 December 2004 were 2,571m m 2004 earnings* Net assets at 31 December 2004 m 800 2,500 2,000 600 1,500 839 2,571 400 1,000 200 500 0 0 UK GAAP PRT…
The change to the calculation of deferred PRT takes 48m off earnings in 2004 and has a small impact on net assets m m (48) 19 800 2,500 Higher operating profit 209m 2,000 600 Higher tax charge (257m) 1,500 839 2,571 400…
Bringing Humber & Spalding onto the balance sheet has a small net impact on earnings and the balance sheet m m 4 12 800 2,500 Higher operating profit 87m Increased assets 810m 2,000 600 Higher interest (83m) Increased…
We have previously accounted for pensions under SSAP 24. Moving to IAS 19 is in line with previous FRS 17 disclosures m m (41) (559) 800 2,500 2,000 600 Increased assets 154m 1,500 Increased liabilities (713m) 839 2,571…
The other impacts on 2004 earnings* are minor, giving an overall net impact of 81m (10%) m (48) 800 4 (41) 4 600 IFRS 5 discontinued operations 4m IAS 12 deferred tax 1m IFRS 2 share schemes (1m) 839 758 400…
Statutory earnings* increase due to the reversal of previously amortised goodwill and higher IFRS profit on the AA disposal m 171 1,500 (48) 119 4 (41) 4 1,000 1,382 1,591 500 0 UK GAAP PRT leases pensions…
Net assets at 31 Dec 2004 reduce by 263m mainly as a result of pensions liabilities coming onto the balance sheet 3,000 m (528) 2,500 230 1 82 (48) 2,000 1,500 2,308 2,571 1,000 500 0 UK GAAP PRT, leases & goodwill…
We are adopting IAS 39 and IAS 32 from 1 January 2005 with an overall impact on net assets of 343m 2,500 m (79) (11) (9) (244) 2,000 1,500 2,308 1,965 1,000 500 0 UK energy N.America Other IAS 39 Income Fund 24
At 1 January 2005 the inclusion of liabilities for Humber & Spalding and the Income Fund turns net cash into net debt m 200 296 (804) 79 0 (217) -200 (513) -400 (974) -600 (5) (244) (461) -800 -1,000 UK GAAP leases…
Phil Bentley
Summary impact UK GAAP IFRS Full year 2004 (exc. IAS39) Operating profit 1,227m 1,365m Statutory EPS 33.0p 38.0p Adjusted EPS 20.0p 18.1p At 1 Jan 05 Shareholders funds 2,352m 1,910m Net cash/(debt) 79m (974m) - excluding Income Fund…
2005 dividend under IFRS Commitment to 50% dividend payout ratio made under UK GAAP 2005 dividend will honour that commitment based on a combination of: increase in payout ratio increase in earnings from 2004 to 2005 Proposed…
Summary IFRS changes some reporting treatments, with impact on: Asset & liability recognition Timing of profit recognition Cash generation unaffected No impact on business strategy or underlying economics 29
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