notes 6-10

6 exceptional items – continuing operations

	2011 £m	2010 £m
Restructuring	(14)	(11)
Impairment of property, plant and equipment (net of reversals)	(2)	3
Exceptional items before tax	(16)	(8)
Tax on exceptional items	4	1
Total exceptional items after tax	(12)	(7)

Exceptional items before tax include £9m (2010: £6m) for restructuring costs and £2m for impairment of property, plant and equipment (2010: £3m reversal of impairment) in Plastic Packaging in respect of previously announced plant closures and restructuring of some of the remaining continuing businesses following the disposal of the Closures division. They also include £5m (2010: £5m) of restructuring costs in Beverage Cans in respect of previously announced plant closures.

7 interest

	2011 £m	2010 £m
Interest expense
Bank overdrafts	(9)	(8)
Bank loans	(8)	(26)
US public bond	(24)	(25)
US private placement	(9)	(9)
Subordinated bond	(45)	(41)
Medium term notes	(25)	(31)
Interest on financing derivatives	24	21
Foreign exchange (losses)/gains	(3)	2
Underlying interest expense	(99)	(117)
Fair value gains/(losses) on financing derivatives	23	(12)
	(76)	(129)
Interest income
Cash and cash equivalents	7	4

Bank loans in 2010 included £10m of capitalised facility fees written off on the cancellation of related bank facilities.

An analysis of fair value gains/(losses) on financing derivatives is set out below.

	2011 £m	2010 £m
Fair value hedges
Interest rate swaps	(3)	(1)
Cross currency swaps	30	11
Fair value adjustment to borrowings	(18)	(5)
	9	5
Not hedge accounted
Interest rate swaps	5	(7)
Cross currency swaps	9	(10)
	14	(17)

Fair value gains/(losses) on financing derivatives	23	(12)

The net gain on fair value hedges of £9m (2010: £5m) represents the total hedge ineffectiveness for the year.

8 tax

(i) tax included in the consolidated income statement

	2011 Underlying profit £m	2011 Exceptional and other items¹ £m	2011 Total £m	2010 Underlying profit £m	2010 Exceptional and other items¹ £m	2010 Total £m
Other items comprise the amortisation of certain acquired intangible assets and fair value changes on financing derivatives.
Continuing operations
Current and non current tax	(82)	(5)	(87)	(82)	6	(76)
Adjustment in respect of prior years	2	–	2	7	–	7
Current and non current tax	(80)	(5)	(85)	(75)	6	(69)

Origination and reversal of temporary differences	(55)	12	(43)	(38)	8	(30)
Adjustment in respect of prior years	–	–	–	(3)	–	(3)
Deferred tax	(55)	12	(43)	(41)	8	(33)

Total continuing operations	(135)	7	(128)	(116)	14	(102)
*Discontinued operations*	(5)	39	34	(9)	74	65
	(140)	46	(94)	(125)	88	(37)

(ii) tax credited/(charged) in equity

	2011 £m	2010 £m
Actuarial losses	30	24
Cash flow hedges	28	(4)
Annuitisation of certain pension obligations	(1)	–
Tax included in equity	57	20

(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 26.5% (2010: 28%) with the tax charge on continuing operations based on the Group’s effective rate is set out below.

	2011 Underlying profit/tax £m	2011 Exceptional and other items¹ £m	2011 Total £m	2010 Underlying profit/tax £m	2010 Exceptional and other items¹ £m	2010 Total £m
Other items comprise the amortisation of certain acquired intangible assets and fair value changes on financing derivatives.
Profit/(loss) before tax on continuing operations	450	(19)	431	390	(52)	338

Tax on continuing operations at the UK statutory rate	(119)	5	(114)	(109)	14	(95)
Non deductible and non taxable items	(2)	(1)	(3)	6	(2)	4
(Higher)/lower domestic tax rates on overseas earnings	(16)	3	(13)	(17)	2	(15)
Tax overprovided in prior years	2	–	2	4	–	4
Tax in the consolidated income statement	(135)	7	(128)	(116)	14	(102)

Effective rate of tax on continuing operations	30%		30%	30%		30%

(iv) analysis of deferred tax

	2011 £m	2010 £m
Deferred tax assets	294	252
Deferred tax liabilities	(63)	(77)
Net deferred tax assets	231	175

	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 2011	146	59	(90)	50	10	175
Exchange differences	–	–	(1)	2	1	2
(Charge)/credit for the year	(7)	(22)	(15)	25	15	(4)
Credit to equity	30	–	–	–	28	58
At 31 December 2011	169	37	(106)	77	54	231

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

Deferred tax assets and liabilities are presented as non current in the consolidated balance sheet. Of the total deferred tax assets, £36m (2010: £29m) 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 £80m (2010: £61m) have not been recognised in respect of losses 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, including capital losses, of £288m (2010: £227m) of which £57m (2010: £nil) expire within five years.

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 £20m (2010: £25m) would be payable.

9 earnings/(loss) per share

(i) basic and diluted earnings/(loss) per share

	Basic 2011 Pence	Diluted 2011 Pence	Basic 2010 Pence	Diluted 2010 Pence
Continuing operations	34.7	34.5	27.1	27.0
Discontinued operations	8.4	8.3	(12.9)	(12.9)
Total	43.1	42.8	14.2	14.1

	2011 £m	2010 £m
Profit/(loss) for the financial year attributable to equity shareholders of Rexam PLC
Continuing operations	303	237
Discontinued operations	73	(113)
Total	376	124

	2011 Millions	2010 Millions
Weighted average number of shares in issue	872.6	875.6
Dilution on conversion of outstanding share options	6.2	2.6
Weighted average number of shares in issue on a diluted basis	878.8	878.2

(ii) underlying earnings per share

	2011 Pence	2010 Pence
Continuing operations	36.1	31.4
Discontinued operations	0.9	1.4
Total	37.0	32.8

	2011 Continuing operations £m	2011 Discontinued operations £m	2010 Continuing operations £m	2010 Discontinued operations £m
Underlying profit before tax	450	13	390	22
Tax on underlying profit	(135)	(5)	(116)	(9)
Underlying profit for the financial year	315	8	274	13
Attributable to:
Shareholders of Rexam PLC	315	8	275	12
Non controlling interests	–	–	(1)	1
	315	8	274	13

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 sale of the discontinued Closures division completed on 1 September 2011. In 2010 the division was reported in the consolidated balance sheet within assets and liabilities classified as held for sale.

A summary of results, exceptional items, profit on disposal, cash flows and other comprehensive loss are set out below.

(i) summary of results

	2011 £m	2010 £m
Sales	205	343
Operating expenses	(231)	(520)
Underlying operating profit	13	22
Exceptional items (note ii)	(39)	(185)
Amortisation of certain acquired intangible assets	–	(14)
Loss before tax	(26)	(177)
Tax on underlying profit	(5)	(9)
Tax on exceptional items (note ii)	13	68
Tax on amortisation of certain acquired intangible assets	–	6
Tax	8	65
Loss after tax	(18)	(112)
Profit on disposal (note iii)	91	–
Net profit/(loss)	73	(112)

(ii) exceptional items

	2011 £m	2010 £m
Impairment of Closures	(28)	(171)
Other impairment	(6)	(8)
Restructuring	(5)	(6)
Exceptional items before tax	(39)	(185)
Tax on impairment of Closures	10	63
Tax on other impairment and restructuring	3	5
Exceptional items after tax	(26)	(117)

Impairment of Closures comprises goodwill of £nil (2010: £59m), intangible assets of £16m (2010: £65m) and property, plant and equipment of £12m (2010: £47m). Other impairment in 2011 comprises £4m related to the write off of certain software licenses and £2m related to the write down of a plastic packaging plant in Poland. Other impairment in 2010 of £8m comprised the closure of a facility in Constantine, US.

(iii) profit on disposal

	2011 £m
Gross proceeds (net of costs of £10m)	207
Cash and cash equivalents disposed	(2)
Net cash inflow in the cash flow statement	205
Net assets disposed (net of tax)	(197)
Accrued costs	(6)
Exchange differences recognised in the income statement on disposal	89
Profit on disposal	91

(iv) cash flows

	2011 £m	2010 £m
Net cash flows from operating activities	(19)	30
Net cash flows from investing activities	(14)	(12)
Net cash flows from financing activities	(1)	–
Net cash (outflow)/inflow	(34)	18

(v) other comprehensive loss

	2011 £m	2010 £m
Exchange differences recognised in the income statement on disposal	(89)	–
Disposal of non controlling interests	(2)	–
Total other comprehensive loss	(91)	–