Impact of IFRS

30 Jun 2005 15:56

Kiln PLC30 June 2005 Kiln plcImpact of IFRS Kiln plc (Kiln) will prepare its first full financial statements underInternational Financial Reporting Standards (IFRS) for the year ending 31December 2005 and will also issue its interim results to 30 June 2005 inaccordance with IFRS requirements. Kiln does not believe that there will be any significant impact on thefundamental economics of its business, its capital solvency or on its ability topay dividends; although the overall impact of IFRS will change the way in whichKiln accounts for and reports on certain aspects of its financial data. Themain areas where IFRS has an impact on the reporting of Kiln's results are asfollows: Pension scheme Kiln has two pension arrangements. Under IFRS, the defined contribution schemewill be accounted for in a similar way to its current treatment, whereasaccounting for the defined benefit (final salary) scheme will change. Theliability for the defined benefit scheme will now be accounted for on the Kilnbalance sheet. A proportion of this net liability will be transferred to thebalance sheets of the company's Lloyd's managed syndicates with effect from 1January 2005, thereby reducing Kiln's overall pension liability. Performance related remuneration (PRR) Under UK GAAP, Kiln has charged PRR in full to the financial year to which itrelates. PRR, inclusive of employer's national insurance contributions, iscalculated as 20% of Kiln's group profit before tax in excess of 10% of openingshareholders' funds. Under IFRS PRR is recognised in the accounts in equalinstalments, typically over three years, with the first instalment charged tothe current financial year. The second and third instalments fall within the IAS19 definition of long term employee benefits and as such are not recognisedwithin the financial statements, but are disclosed by way of a note. Foreign exchange Currency translation differences between revenue rates and balance sheet rates,arising from the translation of our profit and loss result for the year, werepreviously recognised directly through the balance sheet. Under IFRS, these willbe charged to the profit and loss account. Intangible assets Under IFRS, syndicate capacity will be treated as having an indefinite life, soit will be carried at its initial cost and will be subject to an annualimpairment review. The table below shows the company's key results and performance indicators(unaudited) and the impact of IFRS on them: UK GAAP IFRS Difference Difference (%) 31 December 2004 31 December 2004Combined operating ratio 85.5% 85.5% - -Profit before taxation £38.1m £37.0m (£1.1m) -3Return on equity (post tax) 21.2% 21.4% 0.2% 1Earnings per share (rounded) 13.3p 12.3p (1.0p) -8 UK GAAP IFRS Difference Difference 31 December 2004 1 January (%) 2005Net assets* £145.2m £148.9m £3.7m 2Net tangible assets* £135.9m £133.4m (£2.5m) -2Net tangible assets per share* 67p 65p (2p) -3Gearing (Debt/NTA)* 29.4% 30.0% *Numbers relate to 1 January 2005 (being 31 December 2004 balances adjusted forthe allocation of a proportion of the Pension Scheme deficit to the syndicatebalance sheets). Kiln will be conducting meetings with analysts, starting today, to discuss theimplications of the implementation of IFRS on its financial results for 2004 andon the accounting policies. A copy of the presentation is available on thecompany website (www.kilnplc.com). Kiln expects to report its interim results for the six months to 30 June 2005 on13 September 2005. 30 June 2005 Enquiries: Kiln plc 020 7886 9000Peter Haynes, CFOKate Rogers, Head of Corporate Communications College Hill 020 7457 2020 Tony FriendRoddy Watt This information is provided by RNS The company news service from the London Stock Exchange