Tesco 1998 Annual Report Download - page 38

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Note 26 Post-retirement benefits other than pensions
The company operates a scheme offering post-retirement healthcare benefits. The cost of providing for these benefits has been
accounted for on a basis similar to that used for defined benefit pensions schemes.
The liability as at 24 February 1996 of £10m, which was determined in accordance with the advice of qualified actuaries, is being
spread forward over the service lives of relevant employees and £1m (1997 – £1m)has been charged to the profit and loss account.
A provision of £4m (1997 – £3m)is being carried in the balance sheet. It is expected that payments will be tax deductible, at the
company’s tax rate, when made.
Note 27 Capital commitments
At 28 February 1998 there were commitments for capital expenditure contracted for but not provided of £214m (1997 – £233m).
Note 28 Contingent liabilities
Certain bank loans and overdraft facilities of associated undertakings have been guaranteed by Tesco PLC. At 28 February 1998,
the amounts outstanding on these facilities were £15m (1997 – £14m).
The company has irrevocably guaranteed the liabilities as defined in Section 5(c) of the Republic of Ireland (Amendment Act) 1986
of various subsidiary undertakings incorporated in the Republic of Ireland.
Note 29 Related party transactions
During the year there were no material transactions or amounts owed or owing with any of the Group’s key management or
members of their close family.
During the year the Group traded with its five associated undertakings, Shopping Centres Limited, BLT Properties Limited, Tesco
British Land Property Partnership, Tesco Personal Finance Group Limited and Tesco Personal Finance Life Limited.The main
transactions during the year were:
i) Equity funding of £32m (£20m in Tesco Personal Finance Group Limited and £12m in Tesco Personal Finance Life Limited).
ii) The sale of seven properties to Tesco British Land Property Partnership worth £213m. The company received £63m from the
Partnership, resulting in a net investment of £150m. In addition the Group purchased back one property from Shopping Centres
Limited for £33m and one property from BLT Properties Limited for £12m.
iii) The Group made rental payments of £3m (1997 – £4m) and £9m (1997 – £2m) to Shopping Centres Limited and BLT
Properties Limited respectively.
iv) The Group has charged Tesco Personal Finance Limited (a 100% subsidiary of Tesco Personal Finance Group Limited) an
amount totalling £6m in respect of services and assets transferred, of which £4m was outstanding at 28 February 1998. Tesco Personal
Finance Limited received fees totalling £5m from the Group for managing certain financial products, £1m of this was outstanding at
28 February 1998. In addition, the Group charged Tesco Personal Finance Limited £6m for a licensing agreement to operate within
Tesco stores. At 28 February 1998, £5m of this was outstanding.
Note 25 Pension commitments c o n t i n u e d
The Group also operates a defined contribution pension scheme for part-time employees which was introduced on 6 April 1988.
The assets of the scheme are held separately from those of the Group, being invested with an insurance company. The pension cost
represents contributions payable by the Group to the insurance company and amounted to £15m (1997 – £13m). There were no
material amounts outstanding to the insurance company at the year end.
The Group also operates defined contribution schemes in the Republic of Ireland and France. The contributions payable under these
schemes of £3m (1997 – £3m)have been fully expensed against profits in the current year.
Notes to the financial statements
c o n t i n u e d