Carphone Warehouse 2006 Annual Report Download - page 49

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3 Profit before interest and taxation
a) Profit before interest and taxation is stated after charging:
2006 2005
£’000 £’000
Depreciation of property, plant and equipment (see note 13) 49,585 40,792
Amortisation of acquisition intangibles (see note 12) 17,998 7,506
Amortisation of other intangible fixed assets (before reorganisation costs) (see notes 4 and 12) 51,127 27,309
Goodwill expense (see note 12) 1,825 958
Amounts written off stock 12,324 9,144
Share-based payments (see note 6) 10,665 3,608
Other employee costs (see note 5) 393,023 289,775
Rentals under operating leases – property 71,885 57,975
Auditors’ remuneration for audit services 1,129 934
Auditors’ remuneration for non-audit services 144 214
Further auditors’ remuneration of £15,000 in respect of due diligence was capitalised within the cost of investments in the previous period.
A more detailed analysis of auditors’ remuneration is provided in the Corporate Governance Report on pages 22 to 25.
b) Analysis of operating expenses
2006 2005
£’000 £’000
Operating expenses excluding amortisation and depreciation 763,180 550,808
Depreciation 49,585 40,792
Amortisation 82,082 34,815
Goodwill expense 1,825 958
Total operating expenses 896,672 627,373
4 Reorganisation costs
The following items have been shown separately given their size or one-off nature:
2006 2005
Note £’000 £’000
Reorganisation costs a22,288 –
Accelerated amortisation b12,957 –
35,245 –
a) As detailed in note 14, the Group acquired Onetel in December 2005. Since then, the Group has commenced a reorganisation programme to integrate Onetel
with the rest of the Group. The costs of this integration are estimated at £22.3m, comprising the following:
£’000
Redundancy and other employee costs 11,934
Contract termination costs 4,977
Network and customer migration costs 4,919
Other 458
22,288
b) The substantial customer growth achieved through the acquisition of Onetel and Tele2 UK, together with the Group’s major investment plans in respect of local
loop unbundling and billing platforms, prompted a review during the period of the Group’s systems and network infrastructure.
This review represented a consideration of the extent to which the carrying value of the Group’s assets should be reduced either because they have no further
use or because their useful economic lives have reduced significantly. The result of this review was an accelerated or one-off amortisation charge in respect of
the following assets:
£’000
Billing infrastructure and customer management systems 8,908
Other 4,049
12,957
Both these items are expected to attract tax relief at 30% and accordingly a tax credit of £10.6m has been recognised at 1 April 2006.
Notes to the Financial Statements continued www.cpwplc.com 45
Financial Statements