Marks and Spencer 2012 Annual Report Download - page 86

Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 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, significant and distort
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 rules whereby members’
future pensionable pay increases have been capped at 4.0%;
–IAS 36 impairment of assets – due to the continuing decline of the Greek economy, the carrying value of the Marks and
Spencer Marinopoulos B.V. goodwill has been fully impaired to reflect its recoverable value (note 14) and the net book value
of property, plant and equipment in loss making stores in the Greece group have been impaired (note 15). Last year, the value
of an investment property was 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 three year
businessplan;
–IAS 39 fair value movement of the embedded derivative in a lease contract based upon the expected future RPI 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 costs associated
with the Focus on the UK plans. This includes brand segmentation and business integration costs, asset write-offs,
accelerated depreciation and exit from technology in the prior year. 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
2012
£m
2011
£m
Profit on property disposals – 2.9
IAS 19 Ireland one-off pension credit 11 – 10.7
IAS 36 Impairment of assets 14,15 (44.9) (6.3)
IAS 39 Fair value movement of financial instrument 6, 21 15.6 54.3
IAS 39 Fair value movement of embedded derivative 21 (0.2) 20.3
Strategic programme costs (18.4) (15.6)
Total adjustments (47.9) 66.3
6 Finance income/costs
2012
£m
2011
restated
£m
Bank and other interest receivable 7.1 4.7
Pension finance income (net) (see note 11E) 25.6 37.6
Underlying finance income 32.7 42.3
Fair value movement on financial instrument (see note 5) 15.6 54.3
Finance income 48.3 96.6
Fee payable on the transfer of derivative assets to the pension fund – (8.5)
Interest on bank borrowings (5.5) (7.7)
Interest payable on syndicated bank facility (3.0) (1.8)
Interest payable on medium-term notes (126.4) (126.9)
Interest payable on finance leases (0.7) (4.2)
Unwind of discounts on financial instruments (1.2) (3.8)
Finance costs (136.8) (152.9)
Net finance costs (88.5) (56.3)
The fair value movement on financial instrument represents 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 21).