98
IMI plc
2.2 Exceptional items
The Group uses the exceptional items category in the income statement to
classify separately items of both income and expense which are sufficiently
large, volatile or one-off in nature to assist the reader of the financial statements
to gain a better understanding of the underlying performance of the Group.
The following items are considered to be exceptional in these
financial statements.
2.2.1 Reversal of net economic hedge
contract losses/gains
For segmental reporting purposes, changes in the fair value of economic
hedges which are not designated as hedges for accounting purposes, together
with the gains and losses on their settlement, are included in the segmental
revenues and operating profit of the relevant business segment. The exceptional
items at the operating level reverse this treatment. The financing exceptional
items reflect the change in value or settlement of these contracts with the
financial institutions with whom they were transacted. The former comprised
a reversal of a loss of £3.9m (2013: reversal of gain of £5.1m) and the latter
amounted to a loss of £6.7m (2013: gain of £2.7m).
2.2.2 Restructuring costs
The restructuring costs treated as exceptional of £8.6m (2013: £14.2m) include
£4.2m costs for the closure of IMI Components, announced in August 2014
and £4.4m on the completion of the IMI Norgren UK factory move. Other
restructuring costs of £2.6m have been charged below segmental operating
profit and included in the underlying operating profit as, based on their
quantum, they do not meet our definition of exceptional items.
2.2.3 Gains on special pension events
As described on page 125, the UK Fund was split into two newly formed
schemes one for pensioners and one for deferred members resulting in a
one-off settlement gain of £3.5m. In addition, the insurance buy-out of one
of our Swedish schemes resulted in a further settlement gain of £3.5m.
Both of these gains have been treated as exceptional items.
2.2.4 Impairment losses and acquired
intangible amortisation
As reported at the half-year and prior to its disposal in October 2014 (see 3.5),
due to reduced expectations for the future performance of AFP, the Group
carried out a review of the recoverable amount of the business. Alongside
this, we also reassessed the amounts to be paid based on the business’s
performance in the three to five years following the acquisition. This review
led to the recognition of an exceptional net impairment loss of £10.8m,
partially offset by a deferred tax credit of £3.8m.
As reported on page 106, following completion of the Group’s annual
impairment review an exceptional impairment loss has been recorded for
£26.9m reflecting a deterioration in the current trading base of Remosa.
Additional exceptional impairment losses were recognised of £1.1m on
announcement of the proposed closure of IMI Components and £2.0m for
the impairment of legacy IT software as Hydronic Engineering implements
a new ERP system.
An analysis by segment of acquired intangible amortisation is included in
section 2.1.1.
2.2.5 Gain on disposal of subsidiaries
Gains on the disposals of Eley and AFP are discussed in section 3.5.
2.2.6 Acquisition and disposal costs
Acquisition and disposal costs comprise £2.2m of fees associated with the
acquisition of Bopp & Reuther which were incurred in the year and a net release
of £0.4m relating to deferred remuneration included within the post-employment
contracts of the vendors for the AFP and NPSL acquisitions (2013: charge of £1.9m).
Preparatory costs for the sale of the Retail Dispense businesses in the prior year
amounted to £8.0m and principally represented costs payable to the legal and
financial advisors assisting with the origination and completion of the transaction,
in addition to the advisory costs borne in 2013 relating to the return of cash.
2.2.7 Taxation
The tax effects of the above items are included in the exceptional column
of the income statement. In addition, during the year the Group incurred
a one-off charge of £2.8m in respect of a prior year tax audit. In 2013,
exceptional tax charges of £14.7m were incurred in association with the
pre-sale restructuring of certain of the Retail Dispense businesses and
were included in discontinued operations.
SECTION 2 – RESULTS FOR THE YEAR
Continued
2.1.3.5 Audit Fees
The Group engages its auditor, EY, to perform assignments in addition to their statutory audit duties where their expertise, experience and knowledge of the
Group should enable them to perform these assignments more efficiently than other similar service providers.
The Group’s policy on such assignments is set out in the Audit Committee Report on page 53. Fees earned by EY and its associates during the year are set out below:
2014
2013
Continuing
Continuing Discontinued
Business
Business
Business
Total
£m
£m
£m
£m
Fees earned by the Company’s auditor for the audit of the Company’s annual accounts
0.2
0.2
-
0.2
The audit of the Company’s subsidiaries, pursuant to legislation
2.5
2.6
0.5
3.1
Tax compliance services
0.3
0.1
-
0.1
Other assurance services
-
0.1
-
0.1
Total
3.0
3.0
0.5
3.5
