Lonmin Plc Adoption of International Financial Reporting Standards Unaudited Restatement of Accounts
Financial highlights Relatively limited impacts on profitability for the year to 30 September 2005 under IFRS: Operating profit increases by $3 million to $350 million Profit for the year decreases by $4 million to $201 million Underlying earnings increase by $3 million to $168 million and underlying EPS increases 2.1 cents to 118.5 cents Shareholders equity at 30 September 2005 increases by $26 million to $838 million Fair value movements on the embedded derivate in the convertible bonds will result in a significant impact in the current reporting period due to the marked increase in the share price 2
First-time adoption Business combinations prior to 1 October 2004 not restated Cumulative translation differences for foreign operations deemed to be zero at the transition date Net book value of previously revalued assets treated as deemed cost on transition Share-based payments applied to grants post 7 November 2002 unvested at 1 January 2005 Actuarial gains on defined benefit schemes recognised in full Financial instrument treatment under IAS 32 and 39 adopted from 1 October 2004 (the exemption has not been taken) 3
Adjusting items Financial instruments: Convertible bonds equity conversion feature is an embedded derivative which is included at fair value in non-current liabilities (cash settlement option). Movements in fair value are charged to the income statement Non interest bearing loans to Historically Disadvantaged South Africans (HDSAs) previously carried at historic cost less repayments is now measured at fair value. Movements in fair value are charged to the income statement In-process inventory adjustment reflected in half 2 of 2005 under UK GAAP has been treated as a change of measurement basis under IFRS and applied retrospectively Dividends recognised when authorised by the shareholders, or for interims when paid. An asset has been recognised on the balance sheet in respect of the defined benefit pension scheme. Actuarial gains or losses are reflected in full through the statement of recognised income and expense ( SORIE ) Share based payments under the Group s share option schemes are recognised at fair value at the date of grant (rather than the intrinsic value under UK GAAP) and charged to income over the relevant vesting periods Goodwill is not amortised under IFRS but is tested for impairment on an annual basis. This resulted in a small write-back of amortisation previously reflected under UK GAAP 4
Impact on consolidated income statement Year to 30 September 2005 Operating Profit Profit for the Period Underlying Earnings UK GAAP 1 347 205 165 Post employment benefits (1) 0 0 Share based payments (2) (1) (1) Goodwill and intangible assets 2 2 2 Financial instruments 0 (8) 0 Inventory valuation basis 4 3 2 IFRS 350 201 168 1 UK GAAP as presented in the 2005 financial statements as adjusted for IFRS presentation purposes 5
Impact on underlying earnings Year to 30 September 2005 UK GAAP IFRS Adjustments IFRS Basic earnings 163 (5) 158 Reorganisation costs 12-12 Taxation on re-organisation costs (2) - (2) Tax rate change effect on opening deferred tax balance (11) - (11) Exchange on tax balances 2-2 Convertible bond debt - 1 1 Embedded derivative - 8 8 Other financial instruments - (1) (1) Minority interest 1-1 Underlying earnings 165 3 168 Number of shares 141,727,124 141,727,124 141,727,124 Basic EPS 115.0c (3.5)c 111.5c Underlying EPS 116.4c 2.1c 118.5c 6
Impact on shareholders equity UK GAAP 1 812 Post employment benefits 12 Share based payments 2 Goodwill and intangible assets 2 Financial instruments (50) Dividends 60 IFRS 838 1 UK GAAP as presented in the 2005 financial statements as adjusted for IFRS presentation purposes 7
Share price increases since year end The fair value of the embedded derivative related to the convertible bonds is shown within non-current liabilities due to the cash settlement option An increasing share price increases the fair value of the embedded derivative and this results in a charge through the income statement If the current share price is maintained this will result in a charge in excess of $100 million through the income statement This does not relate to the operations of the Group and will be excluded from the calculation of underlying earnings 8
Lonmin Plc Adoption of International Financial Reporting Standards Appendix
Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidated financial statements of the company, for the year ending 30 September 2006, be prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the EU ( adopted IFRSs ). The Group s transition date, therefore, is 1 October 2004 This unaudited restatement of the financial information for the six months to 31 March 2005 and the year to 30 September 2005 has been prepared on the basis of the recognition and measurement requirements of adopted IFRSs as at 15 February 2006 that are effective (or available for early adoption) at 30 September 2006, the Group s first annual reporting date at which it is required to use adopted IFRSs. Based on these adopted IFRSs, the directors have applied the accounting policies, as set out below, which they expect to apply when the first annual IFRS financial statements are prepared for the year ending 30 September 2006 It is intended that this information will be included as comparative information in the Group s 2006 interim and annual accounts. However, the adopted IFRSs that will be effective (or available for early adoption) in the annual financial statements for the year ending 30 September 2006 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 30 September 2006 10
Reclassifications Tangible assets mineral rights reclassified as tangibles ($286m at 30 September 2005) Software is reclassified from tangible to intangible ($11 million at 30 September 2005) The planned sale of housing to employees has resulted in a transfer from P,P&E to noncurrent assets held for sale in accordance with IFRS 5 ($16 million at 30 September 2005) Fixed asset investment - $41m at 30 Sept 2005 classified under IFRS as: Available for sale investments $5m Loans and receivables $33m Financial asset $3m Current asset investment - rehabilitation trust fund classified as held to maturity investments Debtors tax receivable on the sale of Braksprut analysed as income tax receivable Share of associates profits - shown on one line net of interest and tax 11