Notes to the Consolidated Financial Statements

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for the year to 31 December 2007

5. Net operating expenses and profit on ordinary activities before finance costs

2007 2006
Net operating expenses: £m £m
Administration expenses 302.4 200.1
Net other income (12.9) (9.1)
Exceptional items 90.0
379.5 191.0

Net other income includes profits on the sale of property, plant & equipment and broker fees from mortgage origination services.

Exceptional items:    
Restructuring costs 60.0
Brand impairments 30.0
Land and work in progress write-downs 289.7
Exceptional items 379.7

The exceptional charge in respect of restructuring costs arose following the merger with George Wimpey Plc on 3 July 2007. It consists of costs relating to the reorganisation and restructuring of the UK and US Housing businesses, including redundancy costs.

Profit on ordinary activities before financing costs has been arrived at after charging/(crediting): 2007
Cost of inventories recognised as expense in cost of sales 4,148.0 2,903.8
Specific write-downs of inventories 289.7 35.3
Reversal of specific write-downs of inventories (5.7)
Depreciation – plant and equipment 8.3 7.7
Amortisation – intangibles* 35.7
Minimum lease payments under operating leases recognised in income for the year 6.1 13.6

*The amortisation of intangibles includes impairment losses of 10.0m on the Laing Homes brand and 20.0m on the Morrison Homes brand following their current retirements.

The remuneration paid to Deloitte & Touche LLP, the Group’s principal auditors, is as follows: 2007
Fees payable to the company’s auditors for the audit of the company’s annual accounts and consolidated financial statements 0.3 0.3
The audit of the company’s subsidiaries pursuant to legislation 0.7 0.4
Total audit fees 1.0 0.7
Other services pursuant to legislation 0.1 0.1
Tax services 0.3 0.1
Corporate finance services 0.7
Other services 0.1 0.1
Total non-audit fees 1.2 0.3
Total fees 2.2 1.0

Corporate finance services include reporting accountants' work performed in connection with the merger.