Annual Report and Accounts 2009

Notes to the Consolidated Financial Statements for the year to 31 December 2009

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

Net operating expenses, continuing operations: 2009
£m
2008
£m
Administration expenses 198.9 269.0
Net other income (6.4) (25.8)
Exceptional items 53.7 871.7
  246.2 1,114.9

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

Exceptional items, continuing operations: 2009
£m
2008
£m
Net land and work in progress write downs 527.0 1,012.8
Goodwill impairment 699.8
Other intangible impairments 116.3
Restructuring costs 8.9 35.1
Refinancing costs 44.8 20.5
Exceptional items 580.7 1,884.5

Whilst current market conditions are stable, there remains the possibility of further increases in unemployment, continuing scarcity of mortgage finance and the prospect of interest rates rising from their current historic lows. Therefore, the Group considered it appropriate to adjust downward some of the previous assumptions in relation to future selling prices in the first half of 2009. The Group have, inter alia, also reviewed in detail and revised where appropriate the previous assumptions for costs and other risks. This has resulted in further land and work in progress net write downs of £527.0m (31 December 2008: £1,012.8m) to the lower of cost and net realisable value in the first half of 2009. During the year the Group reversed £29.8m of write downs (2008: £59.0m) where management's estimates of the recoverable value for certain land and work in progress had improved. This reversal is treated as exceptional income and netted off the exceptional charge.

Restructuring costs of £8.9m (31 December 2008: £35.1m) are predominantly in relation to the ongoing rationalisation of the UK business. The costs incurred in both years include redundancy costs and costs incurred in relocating certain functions and operations. Refinancing costs of £44.8m (31 December 2008: £20.5) were predominantly exceptional fees in relation to the refinancing of the Group's debt. Additional refinancing interest related costs of £23.1m (31 December 2008: £10.5m) are included within exceptional finance costs in the Income Statement.

In the year to 31 December 2008, the group fully wrote down goodwill by £699.8m and other intangible assets by £116.3m following a detailed impairment review.

Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting): 2009
£m
2008
£m
Cost of inventories recognised as expense in cost of sales, before write downs of inventories 2,244.1 2,946.9
Write downs of inventories 556.8 1,071.8
Reversal of specific write downs of inventories (29.8) (59.0)
Depreciation – plant and equipment 4.7 7.5
Amortisation – intangibles* 123.0
Minimum lease payments under operating leases recognised in income for the year 7.5 8.8

* The amortisation of intangibles in 2008 includes the impairments of the George Wimpey brand of £103.9m and of software development costs of £12.4m.

The remuneration paid to Deloitte LLP, the Group's external auditors, is as follows: 2009
£m
2008
£m
Fees payable to the Company's auditors for the audit of the Company's annual accounts and consolidated financial statements 0.2 0.2
The audit of the Company's subsidiaries pursuant to legislation 0.6 0.6
Total audit fees 0.8 0.8
Other services pursuant to legislation 0.1 0.1
Tax services 0.6 0.3
Corporate finance services 0.4 2.2
Other services 0.5 0.6
Total non-audit fees 1.6 3.2
Total fees 2.4 4.0

Non-audit services in 2009 predominantly relate to work undertaken as a result of Deloitte LLP's role as auditors, or work resultant from knowledge and experience gained as part of the role. Corporate finance services include necessary work related to the Group's 2009 equity raise and advice and support with bank renegotiations. Their work was either the subject of a competitive tender or was best performed by the Group's auditors because of their knowledge of the Group. Tax services include tax compliance work and advisory services for Taylor Wimpey plc and subsidiaries. Other services include advice in respect of the Group's forecasting and cash management procedures. See Corporate Governance Report page for details of the Group's policies in respect of non-audit services and approval by the Audit Committee.