Chemring Group PLC |Annual Report and Accounts 2012

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Financial statements
Notes to the group financial statements
5. Business segments continued
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment profit
represents the profit earned by each segment, without allocation of corporate costs including directors’ salaries, exceptional items, the share
of profit of associates, finance income and expense, and income tax expense. This is the measure reported to the Group Chief Executive for
the purpose of resource allocation and assessment of segment performance.
Unallocated corporate costs
Unallocated corporate costs were £10.5 million, slightly up on 2011, due largely to the costs associated with the Group’s London office,
which has been vacated since the year end.
Intra-group transactions
There are no material intra-group transactions included within the above figures for revenue and profit.
Restructuring and incident costs
In 2012, the restructuring costs related to the closure of the Group’s Marshall, Texas site (£3.3 million), the restructuring of the Group’s US
countermeasures businesses (£2.5 million), the restructuring of the Group’s UK operations (£2.6 million), and an additional £1.5 million
relating to several smaller restructuring projects. There were also a number of Board changes during the year, resulting in associated
costs of £2.0 million. Further details of the compensation for loss of office payments of £1.1 million and deferred share awards worth
£0.3 million received by two of the former executive directors are set out in the directors’ remuneration report. The balance of the costs
relate to recruitment, and various other legal and professional fees. There is a £1.8 million difference between the expense in the income
statement and the amount appearing in the cash flow statement which relates to timing differences and non-cash movements.
Information about major customers
Included in revenues arising from the segments are revenues of approximately £289.6 million (2011: £246.6 million) and £89.7 million
(2011: £103.6 million), which arose from sales to the Group’s two largest customers respectively. The largest customer had sales reported
in all four of the Group’s reporting segments, whilst sales to the second largest customer were primarily from the Munitions segment.
These were the only individual customers where direct sales account for more than 10% of the total Group revenue for the year.
The Group does not disclose assets or liabilities by segment in the monthly management accounts provided to the Executive Committee
or the Board of Directors. The Improvements to IFRSs issued in April 2009 only requires information provided to the chief operating
decision maker as a key decision making tool to be disclosed. The Group has adopted this amendment in order to clarify that the
chief operational decision makers do not use this as a key decision tool. IFRS 8 Operating Segments requires a geographic analysis of
non‐current assets, and a disclosure of non-current assets by location is therefore shown below.
Non-current assets by location
UK 219.7 221.1
USA 283.6 314.8
Europe 138.7 150.3
Australia and Far East 29.6 26.6
2012
£m
2011
£m
671.6 712.8
6. Operating profit
The following table shows a reconciliation of cost by function:
2012
£m
2011
£m
Revenue from continuing operations 740.3 724.1
Cost of sales (552.5) (510.5)
Administrative expenses (99.5) (77.8)
Acquisition and disposal related costs (see note 32) (8.2) (5.7)
Business restructuring and incident costs (11.9) (7.2)
Profit on disposal of business (see note 33) 10.3 -
Impairment of goodwill (see note 13) (22.5) -
Intangible amortisation arising from business combinations (see note 14) (20.9) (24.3)
Gain on fair value movements on derivatives (see note 24) 1.9 2.4
Non-underlying items (51.3) (34.8)
Operating profit from continuing operations 37.0 101.0
Chemring Group PLC Report and Accounts 2012