Annual Report and Accounts 2014

 

Notes to the Financial Statements

31. Deferred Income Tax
32. Post Employment Benefit Obligations
33. Deferred and Contingent Acquisition Consideration
34. Provisions for Liabilities and Charges
35. Government Grants

31. Deferred Income Tax

The following is an analysis of the movement in the major categories of deferred tax liabilities/(assets) recognised by the Group for the year ended 31 March 2014:

 

Short term

 

temporary

 

Property

Retirement

differences

 

plant and

Intangible

Tax losses

benefit

and other

 

equipment

assets

and credits

obligations

differences

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

At 1 April 2013 (restated)

11,411

18,294

(1,319)

(3,209)

(1,758)

23,419

Consolidated Income Statement movement

(1,737)

(5,841)

(1,815)

879

(321)

(8,835)

Recognised in Other Comprehensive Income

-

-

-

(152)

(288)

(440)

Arising on acquisition

-

2,402

-

-

106

2,508

Exchange differences and other

(85)

(417)

125

62

(71)

(386)

At 31 March 2014

9,589

14,438

(3,009)

(2,420)

(2,332)

16,266

 

Analysed as:

Deferred tax asset

(998)

-

(3,009)

(2,638)

(4,615)

(11,260)

Deferred tax liability

10,587

14,438

-

218

2,283

27,526

 

9,589

14,438

(3,009)

(2,420)

(2,332)

16,266

 

 

 

 

 

 

 

The following is an analysis of the movement in the major categories of deferred tax liabilities/(assets) recognised by the Group for the year ended 31 March 2013 (restated):

 

Short term

 

temporary

 

Property

Retirement

differences

 

plant and

Intangible

Tax losses

benefit

and other

 

equipment

assets

and credits

obligations

differences

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

At 1 April 2012 (restated)

10,342

14,731

(997)

(2,142)

(574)

21,360

Consolidated Income Statement movement

705

(2,751)

276

482

(887)

(2,175)

Recognised in Other Comprehensive Income

-

-

-

(1,506)

(202)

(1,708)

Arising on acquisition

235

6,380

(564)

-

(122)

5,929

Exchange differences

129

(66)

(34)

(43)

27

13

At 31 March 2013 (restated)

11,411

18,294

(1,319)

(3,209)

(1,758)

23,419

 

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

 

Deferred tax asset

(863)

-

(1,319)

(3,376)

(3,920)

(9,478)

Deferred tax liability

12,274

18,294

-

167

2,162

32,897

 

11,411

18,294

(1,319)

(3,209)

(1,758)

23,419

 

 

 

 

 

 

 

Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular, significant judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income in the relevant jurisdiction. The majority of the net deferred tax asset at 31 March 2014 of £11.260 million is expected to be settled/recovered more than twelve months after the balance sheet date.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax has not been recognised for withholding and other taxes that may be payable on the unremitted earnings of certain subsidiaries as the timing of the reversal of these temporary differences is controlled by the Group and it is probable that these temporary differences will not reverse in the foreseeable future.

32. Post Employment Benefit Obligations

Group

The Group operates defined benefit and defined contribution schemes. The pension scheme assets are held in separate trustee administered funds.

The Group operates eight defined benefit pension schemes in the Republic of Ireland and four in the UK. The projected unit credit method has been employed in determining the present value of the defined benefit obligation arising, the related current service cost and, where applicable, past service cost.

Full actuarial valuations were carried out between 1 January 2010 and 1 May 2013. In general, actuarial valuations are not available for public inspection, although the results of valuations are advised to the members of the various pension schemes. Actuarial valuations have been updated to 31 March 2014 for IAS 19 by a qualified actuary.

The schemes expose the Group to a number of risks, the most significant of which are as follows:

Discount rates

The calculation of the present value of the defined benefit obligation is sensitive to changes in the discount rate. The discount rate is based on the interest yield at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the post employment benefit obligation. Changes in the discount rate can lead to volatility in the Group’s Balance Sheet, Income Statement and Statement of Comprehensive Income.

Asset volatility

The scheme assets are reported at fair value using bid prices where relevant. The majority of the Group’s scheme assets comprise of bonds. A decrease in corporate bond yields will increase the value of the Group’s bond holdings although this will be partially offset by an increase in the value of the scheme’s liabilities. The Group also holds a significant proportion of equities which are expected to outperform corporate bonds in the long term while providing some volatility and risk in the short term. External consultants periodically conduct investment reviews to determine the most appropriate asset allocation, taking account of asset valuations, funding requirements, liability duration and the achievement of appropriate returns.

Inflation risk

The majority of the Group’s defined benefit obligations are linked to inflation and higher inflation will lead to higher scheme liabilities although caps are in place to protect the schemes against extreme inflation.

Mortality risk

The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy of the plan participants will increase the defined benefit obligation.

The principal actuarial assumptions used were as follows:

 

2014

2013

Republic of Ireland schemes

Rate of increase in salaries

2.00% - 3.00%

2.00% - 3.25%

Rate of increase in pensions in payment

2.50%

2.50%

Discount rate

3.40%

3.70%

Inflation assumption

2.00%

2.25%

 

UK schemes

Rate of increase in salaries

3.50%

4.20%

Rate of increase in pensions in payment

1.75% - 3.50%

2.20% - 3.50%

Discount rate

4.50%

4.40%

Inflation assumption

3.50%

3.50%

 

 

The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 are set based on advice from published statistics and experience in both geographic regions and are in accordance with the underlying funding valuations. The average future life expectancy factored into the relevant valuations, based on retirement at 65 years of age, for current and future retirees is as follows:

 

2014

2013

Current retirees

Male

23.7

23.6

Female

25.3

25.1

 

Future retirees

Male

26.6

26.5

Female

27.8

27.7

 

The Group does not operate any post-employment medical benefit schemes.

The net pension liability recognised in the Balance Sheet is analysed as follows:

 

2014

 

ROI

UK

Total

 

£’000

£’000

£’000

 

 

 

 

Equities

30,011

8,398

38,409

Bonds

50,670

11,144

61,814

Property

725

1,027

1,752

Cash

1,002

945

1,947

Total fair value at 31 March 2014

82,408

21,514

103,922

Present value of scheme liabilities

(94,940)

(25,015)

(119,955)

Net pension liability at 31 March 2014

(12,532)

(3,501)

(16,033)

 

 

 

 

 

2013 (restated)

 

ROI

UK

Total

 

£’000

£’000

£’000

 

 

 

 

Equities

26,510

7,693

34,203

Bonds

50,940

10,523

61,463

Property

668

918

1,586

Cash

700

894

1,594

Total fair value at 31 March 2013

78,818

20,028

98,846

Present value of scheme liabilities

(92,920)

(25,278)

(118,198)

Net pension liability at 31 March 2013

(14,102)

(5,250)

(19,352)

 

 

 

 

The amounts recognised in the Group Income Statement in respect of defined benefit pension schemes are as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Current service cost

(870)

(975)

Past service costs

316

-

Administration expenses

(60)

-

Total, included in employee benefit expenses (note 9)

(614)

(975)

 

 

Exceptional curtailment and settlement gains

1,435

-

Total, included in exceptional items (note 11)

1,435

-

 

Interest cost on scheme liabilities

(4,517)

(4,366)

Interest income on scheme assets

3,844

3,309

Net interest expense, included in finance costs (note 12)

(673)

(1,057)

 

 

 

Based on the assumptions employed for the valuation of assets and liabilities at 31 March 2014, the net charge in the Group Income Statement in the year ending 31 March 2015 (excluding the exceptional item above) is expected to be broadly in line with the current year figures.

Remeasurements recognised in Other Comprehensive Income are as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

Return on scheme assets excluding interest income

1,110

6,388

Experience variations

818

1,368

Actuarial loss from changes in financial assumptions

(2,763)

(17,335)

Total, included in Other Comprehensive Income

(835)

(9,579)

 

 

 

There were no changes to the demographic assumptions underlying the Group’s defined benefit pension liabilities and, consequently, there were no actuarial gains or losses arising from changes in demographic assumptions in the current year (2013: nil).

Cumulatively since transition to IFRS on 1 April 2004, £38.904 million has been recognised as a charge in the Group Statement of Comprehensive Income.

The movement in the fair value of plan assets is as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

At 1 April

98,846

84,681

Interest income on scheme assets

3,844

3,309

Remeasurements:

 

- return on scheme assets excluding interest income

1,110

6,388

Contributions by employers

3,741

4,888

Contributions by members

268

378

Administration expenses

(60)

-

Benefits paid

(2,105)

(2,112)

Exchange

(1,722)

1,314

At 31 March

103,922

98,846

 

 

 

The actual return on plan assets was a gain of £4.954 million (2013: gain of £9.697 million).

The movement in the present value of defined benefit obligations is as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

At 1 April

118,198

96,977

Current service cost

870

975

Past service costs

(316)

-

Interest cost

4,517

4,366

Remeasurements:

 

- experience variations

(818)

(1,368)

- actuarial loss from changes in financial assumptions

2,763

17,335

Contributions by members

268

378

Benefits paid

(2,105)

(2,112)

Curtailment and settlement gains

(1,435)

-

Exchange and other

(1,987)

1,647

At 31 March

119,955

118,198

 

 

 

The weighted average duration of the defined benefit obligation at 31 March 2014 was 21.6 years (2013: 22.9 years).

Employer contributions for the forthcoming financial year are estimated at £5.0 million. The difference between the actual employer contributions paid in the current year of £3.7 million and the expectation of £4.9 million included in the 2013 Annual Report was primarily due to the timing of contributions in certain of the Group’s pension schemes which could not have been anticipated at the time of preparation of the 2013 financial statements.

Sensitivity analysis for principal assumptions used to measure scheme liabilities

There are inherent uncertainties surrounding the financial assumptions adopted in calculating the actuarial valuation of the Group’s defined benefit pension schemes. The following table analyses, for the Group’s Irish and UK pension schemes, the estimated impact on plan liabilities resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.

Assumption

Change in assumption

Impact on Irish plan liabilities

Impact on UK plan liabilities

Discount rate

Increase/decrease by 0.25%

Decrease/increase by 5.4%

Decrease/increase by 5.4%

Price inflation

Increase/decrease by 0.25%

Increase/decrease by 2.4%

Increase/decrease by 4.8%

Mortality

Increase/decrease by one year

Increase/decrease by 3.0%

Increase/decrease by 2.6%

Split of scheme assets

 

Year ended 31 March

 

UK

Republic of Ireland

Total

 

2014

2013

2014

2013

2014

2013

 

£’000

£’000

£’000

£’000

£’000

£’000

Investments quoted in active markets:

 

 

 

 

 

 

Equity instruments:

 

 

 

 

 

 

- developed markets

7,524

6,915

28,874

26,293

36,398

33,208

- emerging markets

874

778

1,137

217

2,011

995

Debt instruments:

 

 

 

- non government debt instruments

7,142

6,978

15,447

17,796

22,589

24,774

- government debt instruments

4,019

3,545

35,206

33,144

39,225

36,689

Cash and cash equivalents

928

894

1,019

700

1,947

1,594

 

 

 

 

Unquoted investments:

 

 

 

Property

1,027

918

725

668

1,752

1,586

 

21,514

20,028

82,408

78,818

103,922

98,846

 

 

 

 

 

 

 

33. Deferred and Contingent Acquisition Consideration

Group

The Group’s deferred and contingent acquisition consideration of £53.323 million (2013: £75.959 million) as stated on the Balance Sheet consists of £46.997 million of sterling floating rate financial liabilities (2013: £60.284 million), £5.374 million of euro floating rate financial liabilities (2013: £8.493 million) and £0.952 million of swedish krona floating rate financial liabilities (2013: £7.182 million) payable as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Within one year

16,374

19,401

Between one and two years

2,972

7,620

Between two and five years

33,977

48,938

 

53,323

75,959

Analysed as:

 

Non-current liabilities

36,949

56,558

Current liabilities

16,374

19,401

 

53,323

75,959

 

 

 

The movement in the Group’s deferred and contingent acquisition consideration is as follows:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

At 1 April

75,959

82,305

Arising on acquisition

4,257

12,829

Amounts no longer required (adjustment to goodwill, note 20)

(208)

(1,559)

Amounts no longer required (recognised in the Income Statement, note 11)

(16,165)

(5,601)

Paid during the year

(10,196)

(11,970)

Exchange and other

(324)

(45)

At 31 March

53,323

75,959

 

 

 

34. Provisions for Liabilities and Charges

The reconciliation of the movement in provisions for liabilities and charges for the year ended 31 March 2014 is as follows:

 

Rationalisation,

 

restructuring

Environmental

 

and

and

Insurance

 

redundancy

remediation

and other

Total

Group

£’000

£’000

£’000

£’000

 

 

 

 

 

At 1 April 2013 (restated)

13,589

8,801

6,795

29,185

Provided during the year

16,675

(750)

3,000

18,925

Utilised during the year

(16,606)

(288)

(1,405)

(18,299)

Arising on acquisition

-

1,930

-

1,930

Exchange and other

(393)

(84)

(261)

(738)

At 31 March 2014

13,265

9,609

8,129

31,003

 

Analysed as:

Non-current liabilities

7,177

9,352

7,628

24,157

Current liabilities

6,088

257

501

6,846

 

13,265

9,609

8,129

31,003

 

 

 

 

 

The reconciliation of the movement in provisions for liabilities and charges for the year ended 31 March 2013 (restated) is as follows:

 

Rationalisation,

 

restructuring

Environmental

 

and

and

Insurance

 

redundancy

remediation

and other

Total

Group

£’000

£’000

£’000

£’000

 

At 1 April 2012 (restated)

8,694

8,242

4,249

21,185

Provided during the year

9,665

899

1,419

11,983

Utilised during the year

(6,253)

(289)

(626)

(7,168)

Arising on acquisition (note 45)

1,460

-

1,599

3,059

Exchange and other

23

(51)

154

126

At 31 March 2013 (restated)

13,589

8,801

6,795

29,185

 

 

 

 

 

Analysed as:

 

 

 

 

Non-current liabilities

3,102

8,691

5,348

17,141

Current liabilities

10,487

110

1,447

12,044

 

13,589

8,801

6,795

29,185

 

 

 

 

 

Rationalisation, restructuring and redundancy

This provision relates to various rationalisation and restructuring programs across the Group. The Group expects that the majority of this provision will be utilised within one year.

Environmental and remediation

This provision relates to obligations governing site remediation and improvement costs to be incurred in compliance with environmental regulations. The net present value of the estimated costs is capitalised as property, plant and equipment. The unwinding of the discount element on the provision is reflected in the Income Statement. Provision is made for the net present value of post closure costs based on the quantity of waste input into the landfill during the year. Ongoing costs incurred during the operating life of the sites are written off directly to the Income Statement and are not charged to the provision. The majority of the obligations will unwind over a 30-year timeframe but the exact timing of settlement of these provisions is not certain.

Insurance and other

The insurance provision relates to employers liability, motor liability and public and products liability and reflects an estimation of the excess not recoverable from insurers arising from claims against Group companies. A significant element of the provision is subject to external assessments. The claims triangles applied in valuation indicate that these provisions have an average life of four years (2013: four years).

35. Government Grants

 

Restated

 

2014

2013

Group

£’000

£’000

 

 

 

At 1 April

1,631

2,106

Amortisation in year

(383)

(476)

Received in year

100

-

Exchange and other adjustments

(5)

1

At 31 March

1,343

1,631

Disclosed as due within one year (note 25)

(20)

(57)

 

1,323

1,574

 

 

 

Government grants relate to capital grants received and are amortised to the Income Statement over the estimated useful lives of the related capital assets.