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Marks and Spencer Group plc Annual report and financial statements 2011
84
Notes to the financial statements continued
5 Non-GAAP performance measures
The adjustments made to reported profit before tax are income and charges that are one-off in nature, significance and impact the
Group’s underlying performance. These adjustments include:
–Profit and loss on the disposal of properties – these are one-off in nature and therefore create volatility in reported earnings;
–IAS 19 credit arising from changes to the Marks and Spencer Ireland defined benefit pension scheme whereby members’ future
pensionable pay increases have been capped at 4%;
–IAS 36 impairment of investment property – the value of an investment property has been impaired to reflect its recoverable value,
in line with its current market value;
–IAS 39 fair value movement on the Czech put option – the put option value has been revised to reflect the latest five year
business plan;
–IAS 39 initial recognition of the embedded derivative in a lease contract based upon the expected future RPI at the inception of the
lease versus the lease contract in which rent increases are capped at 2.5%, with a floor of 1.5%; and
–Strategic programme costs relate to the strategy announcements made in November 2010 and include the write-off of technology
store fit-out and associated costs, due to the Group’s withdrawal of this department in stores, and also the costs associated with the
Focus on UK plans. These costs are not considered normal operating costs of the business.
The adjustments made to reported profit before tax to arrive at underlying profit before tax are:
Note
2011
£m
2010
£m
Profit on property disposals 2.9 8.1
IAS 19 Ireland one-off pension credit 11 10.7 –
IAS 36 Impairment of investment property 16 (6.3) –
IAS 39 Fair value movement of financial instrument 6 54.3 –
IAS 39 Recognition of embedded derivative 23 20.3 –
Strategic programme costs (15.6) –
Total adjustments 66.3 8.1
6 Finance income/costs
2011
£m
2010
£m
Bank and other interest receivable 4.7 2.1
Pension finance income (net) (see note 11E) 37.6 10.8
Finance income 42.3 12.9
Fee payable on the transfer of derivative assets to the pension fund (8.5) –
Premium on repurchase of debt –(13.5)
Interest on bank borrowings (7.7) (7.1)
Interest payable on syndicated bank facility (1.8) (5.9)
Interest payable on medium-term notes (126.9) (117.9)
Interest payable on finance leases (4.2) (5.3)
Unwind of discounts on financial instruments (3.8) (12.5)
Underlying finance costs (152.9) (162.2)
Fair value gain on financial instrument (see note 5) 54.3 –
Finance costs (98.6) (162.2)
Net finance costs (56.3) (149.3)
The fair value gain on financial instruments represents the fair value movement on the valuation of the put option over the 49% non-
controlling interest in the share capital of Marks and Spencer Czech Republic a.s. This excludes the annual unwind of the discount on
the financial instrument which is included in underlying finance costs (see note 23).