97
Annual Report and Accounts 2014
2.1.2
Operating costs by function
The following table is included to show how much of the operating costs
deducted from revenue to arrive at the Group’s post-exceptional operating
profit, relate to cost of sales, selling and distribution costs, administrative
expenses and exceptional items.
2014
£m
2013
£m
Segmental revenue
1,686.0
1,744.0
Cost of sales
(919.6)
(948.8)
Segmental gross profit
766.4
795.2
Selling and distribution costs
(211.5)
(220.0)
Administrative expenses
(256.8)
(253.6)
Restructuring costs
(2.6)
-
Operating profit before exceptional items
295.5
321.6
Exceptional items*
(25.7)
(51.1)
Operating profit
269.8
270.5
* The exceptional costs are analysed in detail in section 2.2.
2.1.3
Specific elements of operating costs
Certain specific items of operating expenses are disclosed to provide the
reader of financial statements with more information regarding these costs.
This section provides this analysis.
2.1.3.1 Employee information
The average number of people employed by the Group during the year was:
2014
2013
IMI Critical Engineering
3,971
3,845
IMI Precision Engineering
5,748
5,760
IMI Hydronic Engineering
1,878
1,926
Corporate
151
176
Total continuing
11,748
11,707
Retail Dispense
-
2,759
Total Group
11,748
14,466
The aggregate employment cost charged to operating profit for the year was:
2014
£m
2013
£m
Wages and salaries*
436.7
514.8
Share based payments
4.4
11.2
Social security costs
84.3
88.0
Pension costs**
10.1
16.1
Total
535.5
630.1
* Wages and salaries include £nil (2013: £1.0m) for contingent consideration
payments to the vendors of AFP and NPSL.
** In 2014, pension costs above include the £3.5m gain on settlement of one of
our Swedish pension schemes but exclude the gain of £3.5m arising from the
split of the UK Pension Fund as this amount is in respect of former employees.
Both items were disclosed as exceptional items, see section 2.2.3.
The aggregate gains made by directors on the exercise of share options was
£10.6m (2013: £13.4m). The remuneration, as defined in the Companies Act
2006 Schedule 5, for the executive directors’ comprises fixed and annual
variable pay as set out in the table on page 69 of the Remuneration Report.
For details of the non-executive directors’ remuneration please refer to
page 77 of the Remuneration Report.
2.1.3.2 Operating lease charges and operating lease commitments
The Group enters into leases for property, plant and equipment assets when
doing so represents a more cost-effective or lower risk option than purchasing
them. This leads to an income statement charge for the year and future
commitments for the Group in respect of these leases.
Continuing operating costs include a charge of £14.4m (2013: £14.3m)
relating to the lease of properties and a charge of £7.8m (2013: £7.1m) relating
to the lease of plant and machinery. The continuing commitments in respect
of non-cancellable operating leases in place are shown in the following table
by time period:
2014
2013
Land and
Land and
buildings
Others
buildings
Others
£m
£m
£m
£m
Within one year
13.4
7.5
14.3
6.7
In the second to fifth year
41.3
10.8
41.6
11.1
After five years
35.0
1.5
34.0
2.0
89.7
19.8
89.9
19.8
The comparative disclosures above exclude commitments for the Retail
Dispense businesses, which the Group disposed of on 1 January 2014.
2.1.3.3 Research and development expenditure
The continuing cost of research and development expenditure charged directly
to the income statement was £45.4m (2013: £50.0m). In addition, amortisation
of capitalised intangible development costs amounted to £2.3m (2013: £2.1m)
and across the Group a further £6.4m (2013: £3.3m) was capitalised.
2.1.3.4 Exchange gains on operating activities net of
hedging arrangements
The transactional foreign exchange losses in the Group were £1.8m
(2013: gains of £0.6m).
