6 exceptional items – continuing operations
| 2010 £m |
2009 restated £m |
|
|---|---|---|
| Restructuring of businesses | (8) | (99) |
| Impairment of goodwill | – | (3) |
| Loss on disposal of subsidiaries | – | (5) |
| Exceptional items included in operating profit | (8) | (107) |
| Tax on exceptional items | 1 | 26 |
| Total exceptional items after tax | (7) | (81) |
The restructuring of businesses charge of £8m in 2010 comprises £5m of employee related costs in Beverage Cans and £6m of costs less £3m reversal of impairment in Plastic Packaging in respect of previously announced plant closures.
The restructuring of businesses charge of £99m in 2009 comprised £56m relating to the closure of the Dmitrov and Dunkirk beverage can facilities and for the reorganisation of the North American beverage can business, £36m relating to the closure and consolidation of plastic packaging plants within Personal Care and Healthcare and a redundancy programme in Healthcare, and £7m in respect of a reduction in corporate staff, including cancellation of certain long term incentives. Impairment of goodwill of £3m related to the India beverage can business. The loss on disposal of subsidiaries of £5m related to the disposal of the Petainer plastic bottle business and a plastic packaging Personal Care business based in the US.
7 interest
| 2010 £m |
2009 £m |
|
|---|---|---|
| Interest expense | ||
| Bank overdrafts | (8) | (7) |
| Bank loans | (26) | (33) |
| US public bond | (25) | (24) |
| US private placement | (9) | (8) |
| Subordinated bond | (41) | (43) |
| Medium term notes | (31) | (37) |
| Interest on financing derivatives | 21 | 20 |
| Foreign exchange gains/(losses) | 2 | (2) |
| Underlying interest expense | (117) | (134) |
| Fair value (losses)/gains on financing derivatives | (12) | 14 |
| (129) | (120) | |
| Interest income | ||
| Cash and cash equivalents | 4 | 3 |
Interest expense in 2010 includes £10m (2009: £nil) of capitalised facility fees written off on the cancellation of related bank facilities.
An analysis of fair value (losses)/gains on financing derivatives is set out below.
| 2010 £m |
2009 £m |
|
|---|---|---|
| Fair value hedges | ||
| Interest rate swaps | (1) | 5 |
| Cross currency swaps | 11 | – |
| Fair value adjustment to borrowings | (5) | (9) |
| 5 | (4) | |
| Not hedge accounted | ||
| Interest rate swaps | (7) | (3) |
| Cross currency swaps | (10) | 21 |
| (17) | 18 | |
| Fair value (losses)/gains on financing derivatives | (12) | 14 |
The net gain on fair value hedges of £5m (2009: net loss £4m) represents the total hedge ineffectiveness for the year.
8 tax
(i) tax included in the income statement
| 2010 Underlying profit £m |
2010 Exceptional and other items1 £m |
2010 Total £m |
2009 restated Underlying profit £m |
2009 restated Exceptional and other items1 £m |
2009 restated Total £m |
|
|---|---|---|---|---|---|---|
|
||||||
| Continuing operations | ||||||
| Current and non current tax charge | (82) | 6 | (76) | (65) | – | (65) |
| Adjustment in respect of prior years | 7 | – | 7 | 5 | – | 5 |
| Current and non current tax | (75) | 6 | (69) | (60) | – | (60) |
| Origination and reversal of temporary differences | (38) | 8 | (30) | (14) | 33 | 19 |
| Adjustment in respect of prior years | (3) | – | (3) | (3) | – | (3) |
| Deferred tax | (41) | 8 | (33) | (17) | 33 | 16 |
| Total continuing operations | (116) | 14 | (102) | (77) | 33 | (44) |
| Discontinued operations | (9) | 74 | 65 | (8) | 82 | 74 |
| (125) | 88 | (37) | (85) | 115 | 30 | |
(ii) tax included in equity
| 2010 £m |
2009 £m |
|
|---|---|---|
| Retirement benefit obligations | 24 | 61 |
| Cash flow hedges | (4) | (48) |
| Tax included in equity | 20 | 13 |
(iii) tax reconciliation
A reconciliation of the tax charge applicable to the Group's profit/(loss) before tax on continuing operations at the UK statutory rate of 28% (2009: 28%) with the tax charge on continuing operations based on the Group's effective rate is set out below.
| 2010 Underlying profit/tax £m |
2010 Exceptional and other items1 £m |
2010 Total £m |
2009 restated Underlying profit/tax £m |
2009 restated Exceptional and other items1 £m |
2009 restated Total £m |
|
|---|---|---|---|---|---|---|
|
||||||
| Profit/(loss) before tax on continuing operations | 390 | (52) | 338 | 258 | (124) | 134 |
| Tax on continuing operations at the UK statutory rate | (109) | 14 | (95) | (72) | 34 | (38) |
| Non deductible and non taxable items | 6 | (2) | 4 | (3) | (8) | (11) |
| (Higher)/lower domestic tax rates on overseas earnings | (17) | 2 | (15) | (4) | 7 | 3 |
| Tax overprovided in prior years | 4 | – | 4 | 2 | – | 2 |
| Tax in the consolidated income statement | (116) | 14 | (102) | (77) | 33 | (44) |
| Effective rate of tax on continuing operations | 30% | 30% | 30% | 33% | ||
(iv) analysis of deferred tax
| 2010 £m |
2009 £m |
|
|---|---|---|
| Deferred tax assets | 252 | 201 |
| Deferred tax liabilities | (77) | (99) |
| Net deferred tax assets | 175 | 102 |
| Retirement benefit obligations £m |
Tax losses £m |
Accelerated tax depreciation £m |
Goodwill and other intangible assets £m |
Other temporary differences £m |
Total £m |
|
|---|---|---|---|---|---|---|
| At 1 January 2010 | 117 | 61 | (106) | 12 | 18 | 102 |
| Exchange differences | 4 | 2 | (1) | 1 | 1 | 7 |
| Credit/(charge) for the year | 1 | (4) | 13 | 37 | (6) | 41 |
| Credit/(charge) to equity | 24 | – | – | – | (4) | 20 |
| Transfer to liabilities classified as held for sale | – | – | 4 | – | 1 | 5 |
| At 31 December 2010 | 146 | 59 | (90) | 50 | 10 | 175 |
| At 1 January 2009 | 58 | 32 | (109) | (63) | 68 | (14) |
| Exchange differences | (6) | – | 8 | 7 | (4) | 5 |
| Credit/(charge) for the year | 4 | 23 | (5) | 68 | 8 | 98 |
| Credit/(charge) to equity | 61 | – | – | – | (48) | 13 |
| Reclassifications | – | 6 | – | – | (6) | – |
| At 31 December 2009 | 117 | 61 | (106) | 12 | 18 | 102 |
Deferred tax assets and liabilities are presented as non current in the consolidated balance sheet. Of the total deferred tax assets, £29m (2009: £40m) are recoverable within one year. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balance net.
Deferred tax assets have been recognised where it is probable that they will be recovered. In recognising deferred tax assets, the Group has considered if it is more likely than not that sufficient future profits will be available to absorb tax losses and other temporary differences. Deferred tax assets of £26m (2009: £26m) have not been recognised in respect of losses, tax credits on dividends and other temporary differences due to the uncertainty of the availability of suitable profits in the foreseeable future. The principal items on which no deferred tax assets have been recognised are tax losses of £92m (2009: £97m). There is no expiry date on these tax losses.
No deferred tax has been recognised on the unremitted earnings of overseas subsidiaries except where it is probable that the temporary difference will reverse in the forseeable future. If the earnings were remitted in full, tax of £25m (2009: £34m) would be payable.
9 earnings/(loss) per share
(i) basic and diluted earnings/(loss) per share
| Basic 2010 Pence |
Diluted 2010 Pence |
Basic 2009 restated Pence |
Diluted 2009 restated Pence |
|
|---|---|---|---|---|
| Continuing operations | 27.1 | 27.0 | 11.4 | 11.4 |
| Discontinued operations | (12.9) | (12.9) | (15.1) | (15.1) |
| Total | 14.2 | 14.1 | (3.7) | (3.7) |
| 2010 £m |
2009 £m |
|
|---|---|---|
| Profit/(loss) for the financial year attributable to equity shareholders of Rexam PLC | ||
| Continuing operations | 237 | 90 |
| Discontinued operations | (113) | (119) |
| Total | 124 | (29) |
| 2010 Millions |
2009 restated Millions |
|
|---|---|---|
| Weighted average number of shares in issue | 875.6 | 786.5 |
| Dilution on conversion of outstanding share options | 2.6 | 0.2 |
| Weighted average number of shares in issue on a diluted basis | 878.2 | 786.7 |
(ii) underlying earnings per share
| 2010 Pence |
2009 restated Pence |
|
|---|---|---|
| Continuing operations | 31.4 | 23.0 |
| Discontinued operations | 1.4 | 2.4 |
| Total | 32.8 | 25.4 |
| 2010 Continuing operations £m |
2010 Discontinued operations £m |
2009 Continuing operations £m |
2009 Discontinued operations £m |
|
|---|---|---|---|---|
| Underlying profit before tax | 390 | 22 | 258 | 27 |
| Tax on underlying profit | (116) | (9) | (77) | (8) |
| Underlying profit for the financial year | 274 | 13 | 181 | 19 |
| Attributable to: | ||||
| Shareholders of Rexam PLC | 275 | 12 | 181 | 19 |
| Non controlling interests | (1) | 1 | – | – |
| 274 | 13 | 181 | 19 |
Underlying earnings per share is based on underlying profit for the financial year attributable to shareholders of Rexam PLC divided by the weighted average number of shares in issue. Underlying profit for the financial year is profit before exceptional items, the amortisation of certain acquired intangible assets and fair value changes on financing derivatives. Underlying earnings per share is included as it is felt that adjusting basic earnings per share for exceptional items, the amortisation of certain acquired intangible assets and fair value changes on financing derivatives provides a better indication of the Group's performance.
10 discontinued operations
The Plastic Packaging Closures division is currently being marketed for disposal. Indicative offers have been received and an impairment loss has been recorded reflecting the value of these offers. In accordance with IFRS5 'Non Current Assets Held For Sale and Discontinued Operations' the business has been classified in the consolidated balance sheet within assets and liabilities classified as held for sale (note 21), and presented as discontinued operations.
The consolidated income statement, analysis of exceptional items and summary of cash flows of this division are set out below.
(i) consolidated income statement
| 2010 £m |
2009 £m |
|
|---|---|---|
| Sales | 343 | 333 |
| Operating expenses | (520) | (521) |
| Underlying operating profit | 22 | 28 |
| Exceptional items | (185) | (202) |
| Amortisation of certain acquired intangible assets | (14) | (14) |
| Operating loss | (177) | (188) |
| Share of underlying post tax losses of associates and joint ventures | – | (1) |
| Exceptional items | – | (4) |
| Share of post tax losses of associates and joint ventures | – | (5) |
| Underlying profit before tax | 22 | 27 |
| Exceptional items | (185) | (206) |
| Amortisation of certain acquired intangible assets | (14) | (14) |
| Loss before tax | (177) | (193) |
| Tax on underlying profit | (9) | (8) |
| Tax on exceptional items | 68 | 77 |
| Tax on amortisation of certain acquired intangible assets | 6 | 5 |
| Tax | 65 | 74 |
| Loss for the financial year | (112) | (119) |
(ii) exceptional items
| 2010 £m |
2009 £m |
|
|---|---|---|
| Impairment of goodwill | (59) | (193) |
| Impairment of intangible assets | (65) | – |
| Impairment of property, plant and equipment | (55) | (3) |
| Total impairment | (179) | (196) |
| Restructuring of businesses | (6) | (6) |
| Exceptional items included in operating profit | (185) | (202) |
| Disposal of associate | – | (4) |
| Exceptional items before tax | (185) | (206) |
| Tax | 68 | 77 |
| Exceptional items after tax | (117) | (129) |
Total impairment of £179m in 2010 comprises £171m to write down the value of the Closures division to fair value less costs to sell at 31 December 2010, and £8m arising on the closure of a facility located in Constantine, US. The restructuring of businesses in 2010 relates to the closure of the Constantine facility, and in 2009 related to the closure of a facility located in Hamlet, US.
(iii) summary of cash flows
| 2010 £m |
2009 £m |
|
|---|---|---|
| Net cash flows from operating activities | 30 | 69 |
| Net cash flows from investing activities | (12) | (19) |
| Net cash flows from financing activities | – | (36) |
| Net cash inflow | 18 | 14 |
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