BusinessCorporate FinanceMarconi eyes £46m goodwill windfall

Marconi eyes £46m goodwill windfall

Reporting under IFRS would have reduced Marconi's recent operating loss.

Marconi would have reduced its £63m operating loss for the half-year ending 31 September 2004, if it had reported under IFRS.

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Speaking at a Marconi presentation, the company’s chief financial officer Pavi Binning said that scrapping a goodwill amortisation charge of £46m contributed most to the £44m reduction in the operating loss for the half-year period.

But he said that the impact of this and other changes made necessary by the new standards ‘will have limited impact on Marconi’s balance sheet and profit/loss account’.

Binning’s remarks came on Tuesday as Marconi released IFRS comparative figures for the half-year ending 30 September 2004.

In addition to the cessation of goodwill amortisation, the company would also be affected by standards relating to the capitalisation of development costs and share option costs. None of these is expected to affect the underlying value of Marconi.

The group is likely to derive a minimal benefit from no longer having to expense research and development costs. Under IFRS, Marconi will capitalise any future R&D only when there are expected to be future economic benefits. The R&D asset will then be amortised over its useful life.

This would have seen Marconi increase its net assets by between £5m and £10m on the half-year balance sheet, as it would have reflected its R&D spend as intangible assets. The increase to operating profit would have been a more modest £1m because of the amortisation factor.

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