IFRS restatement
Balfour Beatty PLC
23 June 2005
23 June 2005
BALFOUR BEATTY PLC
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
RESTATEMENT OF 2004 FINANCIAL INFORMATION
Balfour Beatty plc has adopted International Financial Reporting Standards with
effect from January 2005, in accordance with European Union regulations. Balfour
Beatty will therefore publish its 2005 Interim Report and 2005 Annual Report and
Accounts in accordance with IFRS. Today's announcement provides restated
consolidated financial information for the full year 2004. It also includes
indicative 2004 numbers to show the impact of adopting the financial instruments
standards and draft interpretations relating to PFI/PPP concession accounting
had the Group implemented these in 2004. Information for the first half-year
2004 is available on the Group's website.
The key points for Balfour Beatty plc from today's announcement are:
- IFRS has no impact on strategy, business operations, risk management, cash,
financing or profit recognition policy on contracting and service
activities
- Indicative adjusted eps is in line with the position under UK GAAP
- Net assets are reduced by the inclusion of pension scheme deficits.
HIGHLIGHTS
+-------------------------------------+----------+----------+----------+
| | UK GAAP | IFRS |Indicative|
| | | | IFRS ** |
+-------------------------------------+----------+----------+----------+
|2004 Underlying profit from | | | |
|continuing | £150m | £110m | £106m |
|operations* | | | |
+-------------------------------------+----------+----------+----------+
|2004 Profit for the year | £203m | £250m | £248m |
+-------------------------------------+----------+----------+----------+
|2004 Basic earnings per ordinary | 43.8p | 55.1p | 59.1p |
|share | | | |
+-------------------------------------+----------+----------+----------+
|2004 Adjusted earnings per ordinary | | | |
|share+ | 23.4p | 20.2p | 21.9p |
+-------------------------------------+----------+----------+----------+
|Shareholders' funds at 31 December | £413m | £273m | £247m |
|2004 | | | |
+-------------------------------------+----------+----------+----------+
|2004 Cash generated from operations | £171m | £171m | £171m |
+-------------------------------------+----------+----------+----------+
|Cash and cash equivalents at 31 | | | |
|December | £406m | £406m | £406m |
|2004 | | | |
+-------------------------------------+----------+----------+----------+
* before exceptional items and taxation (under UK GAAP, before goodwill
amortisation and impairment, and including £8m results of discontinued
operations)
+ before exceptional items and the premium arising on buy-back of preference
shares, and including the results of discontinued operations (under UK
GAAP, before goodwill charges)
** including IAS 32 and IAS 39 ('Financial Instruments')
This announcement summarises:
1. the impact of restatement in accordance with IFRS on the Group's previously
reported 2004 results and financial position under UK GAAP;
2. the principal differences between UK GAAP and IFRS which affect the Group;
3. the basis on which Balfour Beatty has effected the transition to IFRS; and
4. indicative comparator IFRS results including the impact of IAS 32 and IAS
39 'Financial Instruments' and draft interpretations on PFI/PPP concession
accounting, which will be adopted from 1 January 2005.
1. OVERVIEW AND IMPACT OF IFRS
The following summarises the impact of IFRS on the Group's 2004 profit, earnings
per share and net assets.
Profit
+--------------------------------------------------------+---------+-----------+
|Impact of IFRS | Pre-tax |Profit for |
|For the year ended 31 December 2004 |profits* | the year |
| | £m | £m |
+--------------------------------------------------------+---------+-----------+
| | | |
|UK GAAP | 150 | 203 |
|Joint ventures' and associates' tax | (18)| - |
|Exceptional items classified as operating loss | (2)| - |
|IFRS 3 - Goodwill amortisation not charged | - | 17 |
| - Goodwill previously written off under UK GAAP | - | 38 |
|IAS 19 - Additional retirement benefit costs | (12)| (12)|
| - Exceptional curtailment gain | - | 8 |
|IFRS 2/ - Share-based payments/tax effects | - | (3)|
|IAS 12 | | |
|IAS 21 - Disposal of businesses/exchange movements | - | (1)|
| +---------+-----------+
|IFRS restated | 118 | 250 |
| +---------+-----------+
| | | |
|Comprising: | | |
|Profit for the year from continuing operations | 110 | 82 |
|Profit for the year from discontinued operations | 8 | 168 |
| +---------+-----------+
| | 118 | 250 |
+--------------------------------------------------------+---------+-----------+
* before goodwill amortisation and impairment, and exceptional
items
Earnings per share
+------------------------------------------+----------+----------+
|For the year ended 31 December 2004 | Basic| Adjusted*|
| | (pence) | (pence) |
+------------------------------------------+----------+----------+
|UK GAAP | 43.8 | 23.4 |
+------------------------------------------+----------+----------+
|IFRS restated | 55.1 | 20.2 |
+------------------------------------------+----------+----------+
|Change | 11.3 | (3.2) |
+------------------------------------------+----------+----------+
|Due to: | | |
+------------------------------------------+----------+----------+
|Goodwill amortisation not charged | 3.9 | - |
+------------------------------------------+----------+----------+
|Goodwill previously written off under UK | | |
|GAAP | 9.1 | - |
+------------------------------------------+----------+----------+
|Disposal of business - exchange movements | (0.1) | - |
+------------------------------------------+----------+----------+
|Increased retirement benefit obligations | | |
|charge | (0.7) | (1.9) |
+------------------------------------------+----------+----------+
|Share-based payments - additional tax | (0.9) | (0.9) |
|charge | | |
+------------------------------------------+----------+----------+
|Exceptional items classified as operating | | |
|loss | - | (0.4) |
+------------------------------------------+----------+----------+
|Change on adoption of IFRS | 11.3 | (3.2) |
+------------------------------------------+----------+----------+
* before exceptional items and the premium arising on buy-back of preference
shares, and including the results of discontinued operations (under UK
GAAP, before goodwill charges)
Net assets
+----------------------------------------------------------+-------+
| Reconciliation of net assets | £m |
+----------------------------------------------------------+-------+
| Net assets - UK GAAP at 31 December 2004 | 413 |
|IFRS 3 - Goodwill amortisation not charged | 17 |
|IAS 19 - Retirement benefit obligations (net of tax) | (174)|
|IFRS 2/ - Share-based payments - tax effects | 5 |
|IAS 12 | |
|IAS 10 - Elimination of provision for proposed dividend | 16 |
|IAS 12 - Deferred taxation | (4)|
| +-------+
|Net assets - IFRS restated at 31 December 2004 | 273 |
+----------------------------------------------------------+-------+
Further amendments to the figures set out above will be necessary as the Group
has maintained in the restated 2004 IFRS financial information UK GAAP
accounting for five of its PFI/PPP concessions. This restatement awaits
completion of the required conversion work on all the concessions resulting from
the adoption of IAS 32 and IAS 39 'Financial Instruments' and the draft
interpretations on PFI/PPP concession accounting from 1 January 2005.
2. PRINCIPAL DIFFERENCES BETWEEN UK GAAP AND IFRS
There are five principal differences which give rise to changes in the
Group's reported profit and net assets for the year ended 31 December 2004:
1. Goodwill
Under UK GAAP, goodwill was amortised on a straight line basis over
its economic useful life of up to 20 years, tested for impairment and
provided for as necessary. Under IFRS 3 'Business Combinations',
goodwill is no longer amortised but is carried at cost and subject to
annual review for impairment at 31 December. The following adjustments
result from these changes:
- £17m of goodwill amortisation charged under UK GAAP in 2004 is
credited back to income under IFRS. £2m of this charge occurred
in respect of joint ventures and associates.
- The Group's carrying value of 'Goodwill' and 'Investments in
joint ventures and associates' at 31 December 2004 are
correspondingly increased by £15m and £2m respectively.
During 2004 the Group took into account under UK GAAP £38m of goodwill
previously written-off to reserves in determining the gain on the
disposal of businesses. This entry is no longer required under IFRS
and so has been reversed in the Income statement. There is no effect
on 'Net assets'.
2. Defined benefit pension schemes
Under UK GAAP, the Group accounted for its defined benefit pension
schemes in accordance with SSAP 24 'Accounting for pension costs'.
The cost of providing the defined benefit pensions was charged against
'Operating profit' with surpluses and deficits arising in the funds
amortised to 'Operating profit' over the remaining service lives of
participating employees. Under IAS 19 'Employee Benefits', the cost of
providing pension benefits (current service cost) for defined benefit
pension schemes is recognised in the Income statement and the defined
benefit pension obligation is determined annually by independent
actuaries and recognised on the Balance sheet. The Group has elected
to include within 'Group operating profit' the interest cost arising
on the projected obligations and the returns on the schemes' assets in
addition to the current service cost. Actuarial gains and losses are
recognised in the Statement of recognised income and expense in the
period in which they occur.
The financial impacts arising from these changes are:
- a reduction in net assets of £174m will be reported on the
restated 31 December 2004 Balance sheet to reflect the additional
pension liability
- the charge to the Income statement will increase by £4m,
comprising a charge of £12m and an exceptional curtailment gain of £8m.
These impacts are substantially the same as those arising under the UK
GAAP standard FRS 17, details of which have been disclosed in the
notes to the Group's 2004 Financial Statements.
3. Share-based payments
Income statement: Under IFRS 2 'Share-based Payment', a charge is
recognised in the Income statement for all share-based payments
granted after 7 November 2002, but not vested, based on the fair
values of the grants and the number expected to become exercisable.
£3m of current and deferred tax credits recognised in the Income
statement for the full year 2004 under UK GAAP are, under IAS 12
'Income Taxes', required to be credited directly to Equity. As a
result 'Profit for the year' is reduced through the revised
recognition of these credits.
Balance sheet: In the UK, the tax relief arising from share-based
payments is not related to the expense recognised under IFRS 2.
IAS 12 specifies how both the current tax relief and deferred tax
arising on share-based payments should be assessed. A deferred tax
asset of £4m arises on transition at 1 January 2004 which is increased
by £1m in 2004, giving a total increase of £5m in 'Net assets' at
31 December 2004 from that reported under UK GAAP.
4. Proposed dividends
Under UK GAAP, proposed dividends are recognised as a liability in the
period to which they related. Under IAS 10 'Events after the Balance
Sheet Date', dividends are not recognised as a liability until they
are declared. 'Net assets' at 31 December 2004 included provision for
the 2004 final dividend of £16m. This dividend was not declared until
the Annual General Meeting on 12 May 2005 and as a result 'Net assets'
at 31 December 2004 under IFRS increase by £16m as the accrual for the
final dividend is reversed.
5. Deferred tax
IAS 12 requires the recognition of deferred tax on property
revaluations and, subject to certain conditions, on the undistributed
reserves of foreign subsidiaries, associates and joint ventures. Under
UK GAAP such provisions were not required. The impact arising from
these changes results in an additional deferred tax provision of £6m,
comprising £1m for property revaluations and £5m for foreign
undistributed reserves, with a £4m resulting reduction in 'Net assets'.
3. BASIS OF PREPARATION
The transition to IFRS is governed by the requirements of IFRS 1
'First-time Adoption of IFRS'. The opening IFRS balance sheet on 1 January
2004 (the date of transition to IFRS) has been prepared using accounting
policies which the Directors expect to be applicable as at 31 December 2005
except as referred to above.
IFRS 1 permits companies adopting IFRS for the first time to take certain
exemptions from full retrospective application of IFRS accounting policies.
Balfour Beatty has adopted the following key exemptions:
a) Business combinations: The Group has chosen not to restate business
combinations that occurred prior to 1 January 2004 to comply with IFRS
3 'Business Combinations'. As a result the carrying value of goodwill
recorded under UK GAAP as at 1 January 2004 has been fixed at
transition date. Also goodwill previously written off to reserves
under UK GAAP will be deemed to be zero and will not be taken into
account in determining any gain or loss on the disposal of the
acquired entity.
b) Fixed assets: Fixed assets that were revalued under UK GAAP are deemed
to be carried at cost for subsequent accounting under IFRS.
c) Employee benefits: All cumulative actuarial gains and losses on
defined benefit pension schemes have been recognised in Equity at the
transition date, 1 January 2004.
d) Share-based payments: IFRS 2 'Share-based Payment' has been applied
retrospectively to equity-settled awards that had not vested as at 1
January 2005 and were granted on or after 7 November 2002.
e) Cumulative foreign currency translation: All cumulative foreign
currency translation differences arising on the re-translation into
Sterling of the Group's net investments in foreign operations have
been deemed to be zero at 1 January 2004 for all overseas
subsidiaries, joint ventures and associates.
f) Financial instruments: The Group has elected to apply IAS 32
'Financial Instruments: Disclosure and Presentation' and IAS 39
'Financial Instruments: Recognition and Measurement' from 1 January
2005.
In addition, the Group has adopted the following disclosure principles:
a) Joint venture entities: The Group has chosen, as permitted by IAS 31
'Interests in Joint Ventures', to use the equity method to consolidate
its interests in joint venture entities. This disclosure format is the
same as the Group is required to adopt under IAS 28 'Investments in
Associates', for its interests in associate companies. The Group
considers that the clearest presentation of its interests in its
PFI/PPP associate and joint venture entities is achieved by having a
common disclosure format which permits grouping and comparison of the
financial information of these businesses.
b) Exceptional items: Consistent with IAS 1 'Presentation of Financial
Statements', Balfour Beatty considers that items which are both
material and non-recurring should be presented and disclosed as what
the Group will term 'exceptional items'. Examples of items which may
give rise to the classification as exceptional items include gains or
losses on the disposal of businesses, investments and fixed assets,
costs of restructuring and reorganisation of businesses, asset
impairments and pension fund settlements and curtailments.
4. INDICATIVE COMPARATOR IFRS RESULTS
Financial instruments (IAS 32 and IAS 39) - from 1 January 2005
IAS 32 and IAS 39 govern the accounting for and disclosure of financial
instruments. IAS 32 covers disclosure and presentation, while IAS 39 covers
recognition and measurement.
These standards have a significant impact on Balfour Beatty and
particularly affect:
- The Group's convertible redeemable preference shares
- The hedging activities of the Group and those of the PFI/PPP
concessions
- The assets and income of the PFI/PPP concessions.
The Group has elected not to adopt these standards until 1 January 2005.
Indicative IFRS financial statements, which include their impact as if the
Group had adopted them for the year ended 31 December 2004, are included in
this statement along with the IFRS financial statements. The specific
changes arising from IAS 32 and IAS 39 are set out below.
Preference shares:
The Group's £136m outstanding convertible redeemable preference shares
included within 'Shareholders' funds' at 31 December 2004 under UK GAAP
are, under IAS 32, regarded as a compound instrument consisting of a
liability (£112m, including £10m deferred tax) and an equity component
(£19m). The preference dividend is shown in the Income statement as an
interest expense.
The £6m premium incurred in 2004 on the buy-back of preference shares was
reported as an appropriation of profit under UK GAAP. Under IFRS it is
treated as an interest expense and has been classified as exceptional.
Derivatives - hedging activities:
Under UK GAAP, the derivatives used by the Group in treasury management are
not recognised as assets and liabilities on the Balance sheet and gains and
losses are not reported in the Profit and loss account until realised.
Under IFRS, derivatives appear on the Balance sheet at their fair value.
Derivatives used in managing the Group's foreign currency denominated debt
have not been designated for hedge accounting, so the movement in their
fair value is recognised in the Income statement. The fair value liability
of these derivatives, net of tax, at 31 December 2004 was £2m.
The Group's PFI/PPP concessions have entered into substantial swap
contracts. These derivative contracts will qualify for hedge accounting, so
the movement in their fair value is recognised in Equity. The fair value
liability of these derivatives, net of tax, at 31 December 2004 was £43m,
of which £9m arises in Group subsidiaries and £34m in joint ventures and
associates.
PFI/PPP concession assets and income:
Under UK GAAP, PFI/PPP assets are classified as either tangible fixed
assets or long-term finance assets. Under IFRS and the draft
interpretations of accounting for service concession arrangements, Balfour
Beatty considers that its PFI/PPP concessions would be classified as
financial assets.
The indicative effect on the Group's reported results in 2004 of
reclassifying its PFI/PPP concessions would have been an £18m increase in
'Profit for the year from continuing operations', of which £9m arises from
a revaluation of the interest acquired in Connect Roads and would be
classified as exceptional. The impact on the Balance sheet is an increase
in 'Net assets' of £131m, which arises mainly through the increase in the
fair value of the financial assets.
Impact of IAS 32 and IAS 39
The following summarises the indicative impact on the Group's 2004 income,
earnings per share and net assets at 31 December 2004, had the Group
adopted IAS 32 and IAS 39 and the draft interpretations in respect of the
PFI/PPP financial assets from 1 January 2004.
Income
+-------------------------------------------+----------+------------+
|For the year ended 31 December 2004 | Pre-tax |Profit for |
| |profits* | the year |
| | £m | £m |
+-------------------------------------------+----------+------------+
|IFRS restated | 110 | 250 |
+-------------------------------------------+----------+------------+
| | | |
+-------------------------------------------+----------+------------+
|Preference shares | | |
|- dividend restated as a finance cost | (13) | (13) |
|- additional accrued interest | (1) | (1) |
|- premium on buy-back restated as a finance| - | (6) |
|cost+ | | |
+-------------------------------------------+----------+------------+
| | | |
+-------------------------------------------+----------+------------+
|PFI/PPP concessions - financial assets | | |
|- Group PFI/PPP concessions | 8 | 6 |
|- Group PFI/PPP concessions - gain on share| - | 9 |
|purchase+ | | |
|- JV & associate PFI/PPP concessions | 3 | 3 |
+-------------------------------------------+----------+------------+
| | | |
+-------------------------------------------+----------+------------+
|Derivatives | | |
|- Group interest rate swaps | (1) | - |
+-------------------------------------------+----------+------------+
| | | |
+-------------------------------------------+----------+------------+
|Indicative IFRS profit for the year | 106 | 248 |
+-------------------------------------------+----------+------------+
+ classified as exceptional items
* from continuing operations - before exceptional items
Earnings per share
+-----------------------------------------------------+--------+-----------+
|For the year ended 31 December 2004 | Basic |Adjusted* |
| |(pence) | (pence) |
+-----------------------------------------------------+--------+-----------+
|IFRS restated | 55.1 | 20.2 |
|Indicative IFRS | 59.1 | 21.9 |
| +--------+-----------+
|Change resulting from IAS 32 and IAS 39 | 4.0 | 1.7 |
|Due to: +--------+-----------+
|Preference shares - additional accrued interest | (0.2) | (0.2) |
|PFI/PPP concessions - financial assets | | |
|- Group PFI/PPP concessions | 1.2 | 1.2 |
|- Group PFI/PPP concessions - gain on share purchase | 2.3 | - |
|- JV & associate PFI/PPP concessions | 0.7 | 0.7 |
| +--------+-----------+
| | 4.0 | 1.7 |
+-----------------------------------------------------+--------+-----------+
* before exceptional items and including the results of discontinued
operations
Net assets
+---------------------------------------------------------+----------+
|Reconciliation of net assets | £m |
+---------------------------------------------------------+----------+
|IFRS restated net assets at 31 December 2004 | 273 |
|Preference shares - liability element and deferred tax | (112) |
|Group derivatives | (2) |
| | |
|PFI/PPP concessions - derivatives | (43) |
|PFI/PPP concessions - financial assets | 131 |
| +----------+
|Indicative IFRS net assets at 31 December 2004 | 247 |
+---------------------------------------------------------+----------+
The draft interpretations in respect of PFI/PPP concessions have
fundamental accounting implications for how the Group values and accounts
for its interests in PFI/PPP concessions. The timing of these draft
interpretations has not permitted the Group to complete the required
conversion work on all the PFI/PPP concession companies in which the Group
has an interest. The above indicative figures have been prepared for 2004
to show the impact of these proposals, but these will be further refined
before publication of the Group's 2005 Interim Report.
5. RESTATED FINANCIAL STATEMENTS
Group financial statements showing the restated IFRS position, along with
the comparator UK GAAP results (in IFRS format), are appended:
Restated IFRS
- Income statement
- Statement of recognised income and expense
- Balance sheet
- Statement of changes in shareholders' equity
- Cash flow statement
Indicative IFRS
- Income statement
- Balance sheet.
The Group has today placed on its website (at
www.balfourbeatty.com/bbeatty/ir/) its IFRS Report 'Transition from UK GAAP
to International Financial Reporting Standards'. This includes:
- comprehensive details on the way the Group has implemented IFRS
- the principal differences between UK GAAP and IFRS affecting Balfour
Beatty
- the new accounting policies adopted
- copies of the restated financial information for the full year 2004
and the first half-year 2004
- detailed reconciliations showing the changes between UK GAAP and IFRS
disclosure format and the changes arising from the adoption of IFRS.
In addition, a webcast of the presentation made to analysts on 23 June 2005
is also available on the website.
ENDS
Enquiries to:
Anthony Rabin, Finance Director
Tim Sharp, Director of Corporate Communications
Tel: 020 7216 6800
www.balfourbeatty.com
Group income statement
For the year ended 31 December 2004
UK GAAP IFRS
in IFRS format
------------------------------- -------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2004 2004 2004 2004 2004 2004
£m £m £m £m £m £m
Continuing operations
------------------------------- -------------------------------
Revenue including share of joint ventures and associates 4,120 - 4,120 4,120 - 4,120
Share of revenue of joint ventures and associates (672) - (672) (672) - (672)
------------------------------- -------------------------------
------------------------------- -------------------------------
Group revenue 3,448 - 3,448 3,448 - 3,448
Cost of sales (3,137) 7 (3,130) (3,137) 7 (3,130)
------------------------------- -------------------------------
Gross profit 311 7 318 311 7 318
Net operating expenses (254) - (254) (233) (9) (242)
------------------------------- -------------------------------
Group operating profit 57 7 64 78 (2) 76
Share of results of joint ventures and associates 30 - 30 32 - 32
------------------------------- -------------------------------
Profit from operations 87 7 94 110 (2) 108
Investment income 23 - 23 23 - 23
Finance costs (23) - (23) (23) - (23)
------------------------------- -------------------------------
Profit before taxation 87 7 94 110 (2) 108
------------------------------- -------------------------------
Profit before goodwill amortisation, impairment and
taxation 122 7 129 110 16 126
Goodwill amortisation and impairment (35) - (35) - (18) (18)
------------------------------- -------------------------------
Taxation (21) (2) (23) (22) (4) (26)
------------------------------- -------------------------------
Profit for the year from continuing operations 66 5 71 88 (6) 82
Profit for the year from discontinued operations 8 124 132 8 160 168
------------------------------- -------------------------------
Profit for the year 74 129 203 96 154 250
Preference dividends (13) - (13) (13) - (13)
Premium paid on buy-back of preference shares (6) - (6) (6) - (6)
------------------------------- -------------------------------
Profit for the year attributable to equity shareholders 55 129 184 77 154 231
=============================== ===============================
p p
Basic earnings per ordinary share from continuing operations 12.4 15.0
Basic earnings per ordinary share from discontinued operations 31.4 40.1
------- -------
Basic earnings per ordinary share 43.8 55.1
======= =======
Diluted earnings per ordinary share from continuing operations 12.3 14.9
Diluted earnings per ordinary share from discontinued operations 31.1 39.7
------- -------
Diluted earnings per ordinary share 43.4 54.6
======= =======
Dividends per ordinary share 6.6 6.6
======= =======
Group statement of recognised income and expense
For the year ended 31 December 2004
Total Total
2004 2004
£m £m
Profit for the year from continuing operations 71 82
Profit for the year from discontinued operations 132 168
Exchange adjustments - 1
Actuarial gains and losses on pension obligations - (17)
Tax on items taken directly to equity (2) 3
------- -------
Total recognised income for the year 201 237
======= =======
Group balance sheet
At 31 December 2004
UK GAAP
in IFRS
format IFRS
£m £m
Non-current assets
Goodwill 265 280
Property, plant and equipment - PFI/PPP constructed assets 288 288
- other 149 149
Investments in joint ventures and associates 181 169
Investments 42 42
Deferred tax assets 20 86
Trade and other receivables 75 49
-------- --------
1,020 1,063
-------- --------
Current assets
Inventories 50 50
Due from customers for contract work 218 218
Trade and other receivables 564 563
Cash and cash equivalents - PFI/PPP subsidiaries 30 30
- other 388 388
-------- --------
1,250 1,249
-------- --------
-------- --------
Total assets 2,270 2,312
-------- --------
Current liabilities
Trade and other payables (962) (946)
Due to customers for contract work (264) (264)
Current tax liabilities (38) (38)
Borrowings - PFI/PPP non-recourse term loans (13) (13)
- other (15) (15)
-------- --------
(1,292) (1,276)
-------- --------
Non-current liabilities
Borrowings - PFI/PPP non-recourse term loans (261) (261)
- other (62) (62)
Trade and other payables (84) (81)
Deferred tax liabilities (2) (2)
Retirement benefit obligations - (254)
Long-term provisions (156) (103)
-------- --------
(565) (763)
-------- --------
-------- --------
Total liabilities (1,857) (2,039)
-------- --------
Net assets 413 273
======== ========
Capital and reserves
Called-up share capital 213 213
Share premium account 150 150
Share of joint ventures' and associates' reserves 68 52
Special reserve 181 181
Other reserves 6 9
Accumulated losses (205) (332)
-------- --------
Shareholders' funds 413 273
======== ========
Group statement of changes in shareholders' equity
For the year ended 31 December 2004
UK GAAP
in IFRS
format IFRS
£m £m
Profit for the year from continuing operations 71 82
Profit for the year from discontinued operations 132 168
Preference dividends (13) (13)
Ordinary dividends (28) (26)
Premium paid on buy-back of preference shares (6) (6)
Exchange adjustments - 1
Actuarial gains and losses on pension obligations - (17)
Tax on items taken directly to equity (2) 3
Goodwill on businesses sold 38 -
Issue of ordinary shares 4 4
Buy-back of preference shares - carrying value (14) (14)
Movements relating to share-based payments - 4
-------- --------
182 186
Opening shareholders' funds 231 87
-------- --------
Closing shareholders' funds 413 273
======== ========
Group cash flow statement
For the year ended 31 December 2004
IFRS
£m
Cash flows from operating activities
Cash generated from operations 171
Income taxes paid (41)
-------
Net cash from operating activities 130
-------
Cash flows from investing activities
Dividends received from joint ventures and associates 8
Acquisition of businesses, net of cash and cash equivalents acquired (17)
Purchase of property, plant and equipment (110)
Investment in and loans made to joint ventures and associates (11)
Disposal of businesses, net of cash and cash equivalents disposed 217
Disposal of property, plant and equipment 13
Disposal of investments 51
-------
Net cash from investing activities 151
-------
Cash flows from financing activities
Proceeds from issue of ordinary shares 4
Purchase of ordinary shares (2)
Proceeds from new loans 6
Repayment of loans (12)
Finance lease principal repayments (2)
Buy-back of preference shares (20)
Ordinary dividends paid (25)
Interest received 18
Interest paid (24)
Preference dividends paid (15)
-------
Net cash used in financing activities (72)
-------
-------
Net increase in cash and cash equivalents 209
Cash and cash equivalents at beginning of year 198
Effects of exchange rate changes (1)
-------
Cash and cash equivalents at end of year 406
=======
Notes to the cash flow statement
(a) Cash generated from operations comprises: £m
Profit from continuing operations 108
Profit from discontinued operations 8
Share of results of joint ventures and associates (32)
Depreciation 50
Goodwill impairment 18
Loan on disposal of property, plant and equipment 1
Profit on disposal of businesses (1)
Movements relating to share-based payments 2
Working capital decrease 17
-------
Cash generated from operations 171
=======
(b) Cash and cash equivalents comprise: At 1 At 31
January December
2004 2004
£m £m
Cash and cash equivalents 202 418
Bank overdrafts (4) (12)
------- -------
198 406
======= =======
Indicative IFRS Group income statement including IAS 32 and IAS 39
For the year ended 31 December 2004
Indicative IFRS
IFRS including IAS 32 & IAS 39
--------------------------------- ---------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
2004 2004 2004 2004 2004 2004
£m £m £m £m £m £m
Continuing operations
--------------------------------- ---------------------------------
Revenue including share of joint ventures and associates 4,120 - 4,120 4,237 - 4,237
Share of revenue of joint ventures and associates (672) - (672) (748) - (748)
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
Group revenue 3,448 - 3,448 3,489 - 3,489
Cost of sales (3,137) 7 (3,130) (3,198) 7 (3,191)
--------------------------------- ---------------------------------
Gross profit 311 7 318 291 7 298
Net operating expenses (233) (9) (242) (233) - (233)
--------------------------------- ---------------------------------
Group operating profit 78 (2) 76 58 7 65
Share of results of joint ventures and associates 32 - 32 35 - 35
--------------------------------- ---------------------------------
Profit from operations 110 (2) 108 93 7 100
Investment income 23 - 23 51 - 51
Finance costs (23) - (23) (38) (6) (44)
--------------------------------- ---------------------------------
Profit before taxation 110 (2) 108 106 1 107
--------------------------------- ---------------------------------
Profit before goodwill impairment and taxation 110 16 126 106 19 125
Goodwill impairment - (18) (18) - (18) (18)
--------------------------------- ---------------------------------
Taxation (22) (4) (26) (23) (4) (27)
--------------------------------- ---------------------------------
Profit for the year from continuing operations 88 (6) 82 83 (3) 80
Profit for the year from discontinued operations 8 160 168 8 160 168
--------------------------------- ---------------------------------
Profit for the year 96 154 250 91 157 248
Preference dividends (13) - (13) - - -
Premium paid on buy-back of preference shares (6) - (6) - - -
--------------------------------- ---------------------------------
Profit for the year attributable to equity
shareholders 77 154 231 91 157 248
================================= =================================
p p
Basic earnings per ordinary share from continuing operations 15.0 19.0
Basic earnings per ordinary share from discontinued operations 40.1 40.1
------- -------
Basic earnings per ordinary share 55.1 59.1
======= =======
Diluted earnings per ordinary share from continuing operations 14.9 18.8
Diluted earnings per ordinary share from discontinued operations 39.7 39.7
------- -------
Diluted earnings per ordinary share 54.6 58.5
======= =======
Indicative IFRS Group balance sheet including IAS 32 and IAS 39
At 31 December 2004
Indicative
IFRS
including
IAS 32 &
IFRS IAS 39
£m £m
Non-current assets
Goodwill 280 274
Property, plant and equipment - PFI/PPP constructed assets 288 -
- other 149 149
Investments in joint ventures and associates 169 202
Investments 42 42
PFI/PPP financial assets - 368
Deferred tax assets 86 56
Trade and other receivables 49 41
-------- --------
1,063 1,132
-------- --------
Current assets Inventories 50 50
Due from customers for contract work 218 218
Trade and other receivables 563 563
Cash and cash equivalents - PFI/PPP subsidiaries 30 30
- other 388 388
-------- --------
1,249 1,249
-------- --------
-------- --------
Total assets 2,312 2,381
-------- --------
Current liabilities
Trade and other payables (946) (946)
Due to customers for contract work (264) (264)
Derivative financial instruments - PFI/PPP subsidiaries - (13)
- other - (3)
Current tax liabilities (38) (38)
Borrowings - PFI/PPP non-recourse term loans (13) (13)
- other (15) (15)
-------- --------
(1,276) (1,292)
-------- --------
Non-current liabilities
Borrowings - PFI/PPP non-recourse term loans (261) (261)
- other (62) (62)
Liability component of preference shares - (102)
Trade and other payables (81) (58)
Deferred tax liabilities (2) (2)
Retirement benefit obligations (254) (254)
Long-term provisions (103) (103)
-------- --------
(763) (842)
-------- --------
-------- --------
Total liabilities (2,039) (2,134)
-------- --------
-------- --------
Net assets 273 247
======== ========
Capital and reserves
Called-up share capital 213 212
Share premium account 150 15
Equity component of preference shares - 19
Share of joint ventures' and associates' reserves 52 85
Special reserve 181 181
Other reserves 9 49
Accumulated losses (332) (314)
-------- --------
Total equity 273 247
======== ========
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