- Financial Statements
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 £m |
2006 £m |
| 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 £m |
2006 £m |
| 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.