Notes to the Financial Statements

 

11. Exceptionals

  2011
€’000
2010
€’000
     
Net profit on disposal of subsidiaries 894 -
Cumulative foreign exchange translation losses relating to subsidiaries disposed of (3,145) -
Restructuring of Group defined benefit pension schemes 4,976 -
Impairment of property, plant and equipment (6,074) -
Acquisition related fees (3,566) -
Restructuring costs and other (5,735) (8,683)
Impairment of goodwill - (1,908)
Profit on disposal of associate - 827
Operating exceptional items (12,650) (9,764)
     
Mark to market losses (included in interest) (1,623) (1,285)
Net exceptional items before taxation (14,273) (11,049)
     
Exceptional taxation charge (1,354) -
Net exceptional items after taxation (15,627) (11,049)

 

During the first half of the financial year, DCC Healthcare disposed of its Mobility & Rehabilitation businesses and DCC Food & Beverage disposed of one of its smaller Irish businesses. The net cash impact of these transactions (€28.431 million) resulted in a pre-tax gain on their book carrying values, including goodwill, of €0.894 million. These businesses accounted for less than 1% of DCC’s operating profit for the year ended 31 March 2010.

 

IAS 21 requires that any foreign exchange translation differences which have been written off directly to reserves in prior years be recycled through the Income Statement on the disposal of the related asset. The amount of such differences relating to the above disposals, which did not have any impact on the Group’s total equity, was €3.145 million.


Restructuring of certain of the Group’s pension arrangements during the year gave rise to a net reduction in pension liabilities and an exceptional gain of €4.976 million.

 

The Group made a provision of €6.074 million against the carrying value of one of its buildings.

IFRS 3 Revised requires that the professional (legal and financial due diligence) and tax costs (such as stamp duty) relating to the evaluation and completion of an acquisition are expensed in the Income Statement whereas previously they were capitalised as part of the acquisition cost. During the year these costs amounted to €3.566 million.

 

Most of the Group’s debt has been raised in the US Private Placement market and swapped, using long term interest, currency and cross currency derivatives, to floating rate sterling and euro. The level of ineffectiveness calculated under IAS 39 by marking to market swaps designated as fair value hedges and the related fixed rate debt, together with gains or losses arising from marking to market swaps not designated as fair value hedges offset by gains or losses on that related fixed rate debt, is charged or credited as an exceptional item. In the year to 31 March 2011 this amounted to a total exceptional charge of €1.623 million.

 

The balance of the net exceptional charge relates primarily to restructuring costs arising from the integration of recently acquired businesses.

 

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12. Finance Costs and Finance Income

  2011
€’000
2010
€’000
Finance costs    
On bank loans, overdrafts and Unsecured Notes    
- repayable within 5 years, not by instalments (16,950) (13,381)
- repayable within 5 years, by instalments (87) (146)
- repayable wholly or partly in more than 5 years (26,174) (13,255)
On loan notes    
- repayable within 5 years, not by instalments (30) (23)
On finance leases (122) (147)
Other interest (861) (1,901)
  (44,224) (28,853)
Other finance costs:    
Interest on defined benefit pension scheme liabilities (note 32) (5,347) (4,997)
Unwinding of discount applicable to deferred and contingent acquisition consideration (note 33) (946) (450)
Mark-to-market of swaps and related debt* (note 11) (1,623) (1,285)
  (52,140) (35,585)
Finance income    
Interest on cash and term deposits 4,306 3,537
Net income on interest rate and currency swaps 26,813 16,317
Other income receivable 129 105
Expected return on defined benefit pension scheme assets (note 32) 4,691 3,456
  35,939 23,415
     
Net finance cost (16,201) (12,170)
     
* Mark-to-market of swaps and related debt    
- interest rate swaps designated as fair value hedges (986) (3,962)
- cross currency interest rate swaps designated as fair value hedges (19,821) (22,465)
- adjusted hedged fixed rate debt 26,733 27,066
- currency swaps not designated as hedges (7,549) (1,924)
  (1,623) (1,285)

 

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13. Foreign Currency

The exchange rates used in translating sterling Balance Sheets and Income Statement amounts were as follows:

  2011
€1=Stg£
2010
€1=Stg£
     
Balance Sheet (closing rate) 0.884 0.889
Income Statement (average rate) 0.852 0.887

 

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14. Share of Associates’ (Loss)/Profit after Tax
The Group’s share of associates’ (loss)/profit after tax is equity-accounted and is presented as a single line item in the Group Income Statement. The (loss)/profit after tax generated by the Group’s associates is analysed as follows:

  2011
€’000
2010
€’000
     
Group share of:    
Revenue 10,977 10,778
     
(Loss)/profit before finance costs (225) 203
Finance costs (net) (45) (46)
(Loss)/profit before income tax (270) 157
Income tax credit/(charge) 31 (5)
(Loss)/profit after tax (239) 152

 

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15. Income Tax Expense

(i) Income tax expense recognised in the Income Statement 2011
€’000
2010
€’000
     
Current taxation    
Irish corporation tax at 12.5% 4,395 9,097
Manufacturing relief (113) (165)
Exceptional taxation charge (note 11) 1,354 -
United Kingdom corporation tax at 28% 29,153 15,332
Other overseas tax 9,444 7,778
(Over)/under provision in respect of prior years (401) 3,870
Total current taxation 43,832 35,912
     
Deferred tax    
Irish at 12.5% (3,329) (1,196)
United Kingdom at 26% 1,797 3,321
Other overseas deferred tax (1,140) 85
Under/(over) provision in respect of prior years 2,611 (4,915)
Total deferred tax credit (61) (2,705)
     
Total income tax expense 43,771 33,207
     
(ii) Deferred tax recognised directly in Equity    
     
Defined benefit pension obligations (336) (861)
Cash flow hedges 341 107
  5 (754)
(iii) Reconciliation of effective tax rate    
     
Profit on ordinary activities before taxation 189,568 164,901
Share of associates’ profit after tax 239 (152)
Amortisation of intangible assets 10,962 6,150
  200,769 170,899
     
Total income tax expense 43,771 33,207
Deferred tax attaching to amortisation of intangible assets 2,742 1,363
  46,513 34,570
Taxation as a percentage of profit before share of associates’ (loss)/profit after tax, amortisation of intangible assets and net exceptionals 21.0% 19.0%
Impact of net exceptionals 2.2% 1.2%
Taxation as a percentage of profit before share of associates’ (loss)/profit after tax and amortisation of intangible assets 23.2% 20.2%

 

The following table relates the applicable Republic of Ireland statutory tax rate to the effective tax rate of the Group:

  2011
%
2010
%
     
Irish corporation tax rate 12.5 12.5
Manufacturing relief (0.1) (0.1)
Effect of earnings taxed at different rates and other 10.8 7.8
  23.2 20.2

 

(iv) Factors that may affect future tax rates and other disclosures
No significant change is expected to the standard rate of corporation tax in the Republic of Ireland which is currently 12.5%. The standard rate of corporation tax in the UK reduced from 28% to 26% on 1 April 2011 and will reduce by a further 1% per annum up to April 2014 when the tax rate will be 23%.

 

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.

 

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