Annual Report 2008 in PDF - GKN

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92 Notes to the Financial Statements continued 5 Taxation continued The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below: GKN plc Annual Report 2008 Assets Liabilities Total Pensions Tax losses Other Fixed assets Other £m £m £m £m £m £m At 1 January 2007 102 20 28 (94) (5) 51 Included in the income statement 3 27 45 (31) (9) 35 Included in equity (84) — — (6) (2) (92) Subsidiaries acquired — — — (2) (6) (8) Other movements — — (6) — 6 — Currency variations — — 2 (7) — (5) At 31 December 2007 21 47 69 (140) (16) (19) Other movements 11 (11) — — — — Included in the income statement 5 (29) (19) 34 9 — Included in equity — — — 3 3 6 Currency variations 7 20 37 (63) 1 2 At 31 December 2008 44 27 87 (166) (3) (11) Deferred tax assets totalling £14 million (2007 – £35 million) have been recognised relating to territories where tax losses have been incurred in the year. It is anticipated that future profitability arising from restructuring and other actions will result in their realisation. (e) Unrecognised deferred tax assets Deferred tax assets have not been recognised in relation to certain taxable losses and other temporary differences on the basis that their future economic benefit is uncertain. The gross and tax values of these unrecognised assets together with any expiry dates where relevant are shown below. The tax value of the assets has been calculated using tax rates enacted or substantively enacted at the balance sheet date. 2008 2007 Tax value Gross Expiry Tax value Gross Expiry £m £m period £m £m period Tax losses — with expiry: national 300 867 2019–2028 186 532 2019–2027 Tax losses — with expiry: local 44 532 2009–2028 40 813 2008–2027 Tax losses — without expiry 66 202 118 402 Other temporary differences 71 215 32 113 Unrecognised deferred tax assets 481 1,816 376 1,860 Included above are tax losses of £756 million with a tax value of £187 million (2007 – £677 million with a tax value of £109 million) that are severely restricted for future use and management, based on the Group’s current profile, believes they are unlikely to be utilised in the foreseeable future. No deferred tax is recognised on the unremitted earnings of overseas subsidiaries except where the distribution of such profits is planned. If the earnings were remitted in full tax of £28 million (2007 – £25 million) would be payable. (f) Franked Investment Income — Litigation In September 2003 GKN filed a claim in the High Court of England and Wales (‘the High Court’) in respect of various Advance Corporation Tax payments made and Corporate Tax paid on certain foreign dividend receipts which, in its view, were levied by HMRC in breach of GKN’s EU community law rights. GKN joined a Group Litigation Order (‘GLO’) with several other claimants and a test case was selected from the members of the GLO to proceed to trial on a representative basis. At the commencement of that trial in June 2004 the High Court referred the test case to the European Court of Justice (‘ECJ’) for guidance on the issues raised. In December 2006 the ECJ issued its guidance to the High Court and the test case returned to the High Court for the full trial in July 2008. The High Court issued its judgment on 27 November 2008. The November High Court judgment held in favour of the claimants on certain key aspects of the claim. Both parties, however, have appealed to the Court of Appeal and depending upon the outcome of this a further reference to the ECJ may be required before the issue is ultimately resolved. Given the importance of the matters at issue it is expected that appeals will ultimately be taken to the House of Lords and that this process may take several more years to complete. Given the complexity of the case and uncertainty over the issues raised it is not possible to predict with any reasonable degree of certainty what the final outcome could be. The range of possible outcomes is so wide that it is potentially misleading to quote any estimates of the possible recoveries at this stage. As a result no contingent asset has been recognised and disclosed in these financial statements.
Financial Statements Notes to the Financial Statements 6 Discontinued operations In August 2008, the Group reached agreement with Finmeccanica regarding the £35 million deferred consideration placed into escrow in November 2004, the date of disposal of the Group’s 50% share of AgustaWestland. Under the agreement the £35 million, together with accrued interest, was shared equally. As a result, £21 million was received, of which £3 million was recognised as interest and £18 million recognised as profit on sale of discontinued operations. The interest represents the cumulative interest on the escrow monies earned during the period from initial disposal to final agreement. Tax of £5 million was charged against the profit on sale. 7 Earnings per share 2008 2007 Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share £m m pence £m m pence Continuing operations Basic eps (122) 704.7 (17.3) 196 703.4 27.9 Dilutive securities — 1.1 — — 2.9 (0.1) Diluted eps Discontinued operations (122) 705.8 (17.3) 196 706.3 27.8 Basic eps 13 704.7 1.8 — — — Dilutive securities — 1.1 — — — — Diluted eps 13 705.8 1.8 — — — Adjusted earnings per share — continuing operations 2008 2007 £m pence £m pence Adjusted earnings and adjusted basic earnings per share Profit attributable to equity shareholders — continuing operations Adjustments for: (122) (17.3) 196 27.9 Restructuring and impairment charges 153 21.7 31 4.4 Amortisation of non-operating intangibles on business combinations 10 1.4 8 1.1 Profits and losses on sale or closures of businesses — — 7 1.0 Change in value of derivative and other financial instruments 124 17.6 10 1.4 Impairment of joint ventures 10 1.4 — — Taxation on adjustments (7) (1.0) (5) (0.7) Adjusted earnings attributable to equity shareholders — continuing operations 168 23.8 247 35.1 The Directors consider adjusted earnings per share, as calculated above, gives a useful additional indicator of underlying performance. 8 Dividends Paid or proposed in respect of: Recognised in: 2008 2007 2008 2007 pence pence £m £m 2006 final year dividend paid (8.7 pence per share) — — — 61 2007 interim dividend paid — 4.3 — 30 2007 final year dividend paid — 9.2 65 — 2008 interim dividend paid 4.5 — 32 — 2008 final year dividend — — — — 4.5 13.5 97 91 The Directors have decided not to pay a final dividend in respect of the financial year ended 31 December 2008. www.gkn.com 93
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GKN plc Annual Report and Accounts
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Our Objective GKN is committed to p
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2008 Performance* Group results sig
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Although we expect 2009 to be a ver
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Constant velocity joints (CVJs) rev
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Off-highway driveshaft Blended wing
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Strategy and business objectives Th
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Operating cash flow performance of
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Restructuring and impairment costs
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2008 2007 Tax charge analysis % % W
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Overseas pensions The principal cou
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GKN received the prestigious Nissan
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GKN Driveline manufactures across a
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2008 2007 GKN Driveline £m £m Sal
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Continuing evolution of powder meta
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Despite a £6 million positive impa
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GKN OffHighway is a first tier supp
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Trading profit of subsidiaries of
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In January 2009 GKN completed the a
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Divisional strategy GKN Aerospace
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Financing The following section des
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Competitive markets and competition
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Page 131 and 132: Unsolicited mail GKN is obliged by
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