directors report and accounts 2006 - Profit from operations like-for-like


 Profit from operations like-for-like

The reported Group profit from operations was 8 per cent higher at £2,622 million. The table below shows like-for-like operating profit after excluding exceptional items and the impact arising from the change in terms of trade in Italy following the sale of Etinera in December 2004. 

As reported (Group income statement)2,622 2,420
Restructuring costs (Group income statement)216 271
Losses/(gains) on impairment of a business and disposal of brands and joint venture (Group income statement)(41)(72)
 2,797 2,619
Etinera – change in terms of trade (12)
Like-for-like2,797 2,607

Profit from operations like-for-like

On this basis, the operating profit for 2006 of £2,797 million would represent growth of 7 per cent. The overall impact of foreign exchange for the year as a whole was not material.

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Details of the Group’s operating performance excluding exceptional items can be found in the Regional review.

The Group continued its review of manufacturing operations and organisational structure, including the initiative to reduce overheads and indirect costs. Further restructurings continued in 2006 and on 22 September agreement was reached on the closure of the plant at Zevenaar in the Netherlands. The plant will close by the end of 2008 with the production being transferred to Bayreuth in Germany and Augustow in Poland. The total restructuring costs of £216 million for 2006 principally comprise costs in respect of Zevenaar and further costs for the UK and Canadian restructurings announced in 2005.

The agreement to sell the Italian cigar business described in Changes in the group resulted in the recognition of a loss of £19 million, including an impairment charge of £15 million.

In 2006, the Group sold its Muratti Ambassador brand in certain markets, as well as the L&M and Chesterfield trademarks in Hong Kong and Macao, while acquiring the Benson & Hedges trademark in certain African countries. The transactions resulted in a gain of £60 million.

Profit from operations in 2005 benefited from a £72 million gain, principally in respect of the disposal of certain trademarks in Malta, Cyprus and Lithuania.

Below profit from operations, net finance costs at £289 million were £61 million higher than last year, principally reflecting the impact of higher interest rates as well as derivatives.