Notes to the Financial Statements
| 11. Exceptionals |
| 12. Finance Costs and Finance Income |
| 13. Foreign Currency |
| 14. Share of Associates’ Profit after Tax |
| 15. Income Tax Expense |
2009 |
2008 €’000 |
|
| Restructuring costs and other | (13,045) | (5,158) |
| Closure of Days Healthcare Germany | (9,046) | - |
| Impairment of goodwill | (2,433) | - |
| Legal fees | (1,491) | - |
| Profit on disposal of associate | 6,176 | - |
| Profit on disposal of Manor Park Homebuilders | - | 94,763 |
| Costs of legal actions with Fyffes plc | - | (50,000) |
| Operating exceptional items | (19,839) | 39,605 |
| Mark to market gains (included in interest) | 3,919 | - |
| Net exceptional items before taxation | (15,920) | 39,605 |
| Exceptional taxation charge | (1,500) | (1,756) |
| Net exceptional items after taxation | (17,420) | 37,849 |
Exceptional restructuring costs, mainly comprising redundancy costs, were incurred in relation to recently acquired and existing Group businesses.
DCC Healthcare closed its subsidiary in Germany at a cost of €9.046 million, which includes redundancies and other exit costs, asset write offs and an impairment of acquisition goodwill of €3.028 million.
There was a non-cash goodwill impairment charge. An impairment review is performed annually for each cash-generating unit to which a carrying amount of goodwill has been allocated. The Group has written down the carrying value of goodwill amounts in relation to certain Healthcare and Food & Beverage subsidiaries and accordingly a charge of €2.433 million has been taken in the year ended 31 March 2009.
The disposal of a small US associate company gave rise to an exceptional profit of €6.176 million and a cash inflow of €8.481 million.
Most of the Group’s debt has been raised in the US Private Placement debt market and swapped, using long term interest, currency and cross currency derivatives to floating rate sterling and euro. Under IAS 39, after ‘marking to market’ swaps designated as fair value hedges and the related fixed rate debt, the level of ineffectiveness is taken to the Income Statement. The recent volatility in capital markets has given rise to a mark to market ineffectiveness gain of €3.919 million. This significant gain will unwind as a loss over the remaining life of the relevant swaps and the Group regards this gain and similar movements in the future as exceptional in nature.
An exceptional deferred tax charge of €1.500 million arises in relation to a recent change in UK tax legislation providing for the withdrawal of industrial building allowances.
12. Finance Costs and Finance Income
2009 |
2008 €’000 |
|
| Finance costs | ||
| On bank loans, overdrafts and Unsecured Notes | ||
| - repayable within 5 years, not by instalments | (13,116) | (18,880) |
| - repayable within 5 years, by instalments | (165) | (72) |
| - repayable wholly or partly in more than 5 years | (21,373) | (19,727) |
| On loan notes | ||
| - repayable within 5 years, not by instalments | (74) | (3) |
| On finance leases | (157) | (532) |
| Other interest | (946) | (547) |
| (35,831) | (39,761) | |
| Other finance costs: | ||
| Interest on defined benefit pension scheme liabilities (note 32) | (5,006) | (4,405) |
| Unwinding of discount applicable to deferred acquisition consideration | (425) | (648) |
| Mark-to-market of swaps and related debt* | - | (98) |
| (41,262) | (44,912) | |
| Finance income | ||
| Interest on cash and term deposits | 15,724 | 21,886 |
| Other income receivable | 156 | 245 |
| Expected return on defined benefit pension scheme assets (note 32) | 4,272 | 4,989 |
| Mark-to-market of swaps and related debt* (note 11) | 3,919 | - |
| 24,071 | 27,120 | |
| Net finance cost | (17,191) | (17,792) |
| * Mark-to-market of swaps and related debt | ||
| - interest rate swaps designated as fair value hedges | 15,649 | 15,056 |
| - cross currency interest rate swaps designated as fair value hedges | 104,431 | 18,140 |
| - adjusted hedged fixed rate debt | (140,928) | (9,043) |
| - currency swaps not designated as hedges | 24,744 | (24,301) |
| - interest rate swaps not designated as hedges | 23 | 50 |
| 3,919 | (98) |
13. Foreign Currency
The exchange rates used in translating sterling Balance Sheets and
Income Statement amounts were as follows:
2009 |
2008 €1=Stg£ |
|
| Balance Sheet (closing rate) | 0.930 | 0.795 |
| Income Statement (average rate) | 0.826 | 0.702 |
14. Share of Associates’ Profit after Tax
The Group’s share of associates’ profit after tax is equity-accounted
and is presented as a single line item in the Group Income Statement.
The profit after tax generated by the Group’s associates is analysed
as follows:
2009 |
2008 €’000 |
|
| Group share of: | ||
| Revenue | 9,725 | 14,609 |
| Profit before finance costs | 340 | 1,041 |
| Finance (costs)/income (net) | (52) | 2 |
| Profit before income tax | 288 | 1,043 |
| Income tax expense | (120) | (404) |
| Profit after tax | 168 | 639 |
(i) Income
tax expense recognised in the Income Statement |
2009 |
2008 €’000 |
| Current taxation | ||
| Irish Corporation Tax at 12.5% | 5,589 | 10,859 |
| Less manufacturing relief | (308) | (251) |
| Exceptional taxation charge (note 11) | - | 1,756 |
| United Kingdom Corporation Tax at 28% (2008: 30%) | 2,353 | 6,973 |
| Other overseas tax | 5,869 | 2,708 |
| Total current taxation | 13,503 | 22,045 |
| Deferred tax | ||
| Irish at 12.5% | (555) | (2,080) |
| United Kingdom at 28% | 4,990 | (444) |
| Exceptional taxation charge (note 11) | 1,500 | - |
| Other overseas deferred tax | (158) | (91) |
| Under/(over) provision in respect of prior years | 1,656 | (2,900) |
| Total deferred tax charge/(credit) | 7,433 | (5,515) |
| Total income tax expense | 20,936 | 16,530 |
(ii)
Deferred tax recognised directly in Equity |
2009 |
2008 €’000 |
| Defined benefit pension obligations | (911) | (1,200) |
| Share based payments | - | (25) |
| Cash flow hedges | (204) | 46 |
| (1,115) | (1,179) |
(iii)
Reconciliation of effective tax rate |
2009 |
2008 €’000 |
| Profit on ordinary activities before taxation | 137,815 | 181,704 |
| Share of associates’ profit after tax | (168) | (639) |
| Amortisation of intangible assets | 5,719 | 7,928 |
| 143,366 | 188,993 | |
| Total income tax expense | 20,936 | 16,530 |
| Deferred tax attaching to amortisation of intangible assets | 1,271 | 1,659 |
| 22,207 | 18,189 | |
| Taxation as a percentage of profit before share of associates’ profit after tax, amortisation of intangible assets and net exceptionals | 13.0% | 11.0% |
| Impact of net exceptionals | 2.5% | (1.4%) |
| Taxation as a percentage of profit before share of associates’ profit after tax and amortisation of intangible assets | 15.5% | 9.6% |
The following table relates the applicable Republic of Ireland statutory tax rate to the effective tax rate of the Group:
2009 |
2008 % |
|
| Irish corporation tax rate | 12.5 | 12.5 |
| Manufacturing relief | (0.1) | (0.1) |
| Effect of earnings taxed at different rates and other | 3.1 | (2.8) |
| 15.5 | 9.6 |
(iv) Factors that may affect future tax rates and other disclosures
The standard rate of corporation tax in Ireland is 12.5% and in the
UK the standard rate of corporation tax is 28%.
No provision for tax has been recognised in respect of the unremitted earnings of subsidiaries as there is no commitment to remit earnings. Similarly, no deferred tax assets or liabilities have been recognised in respect of temporary differences associated with investments in subsidiaries.