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Notes to the consolidated financial statements
Year ended 31 July 2007
9. Non-GAAP measures of performance
Trading profit is defined as operating profit before the amortisation and impairment of acquired intangibles and is a non-GAAP measure. The current businesses within the Group have arisen through internal organic growth and through acquisition. Operating profit includes only the amortisation and impairment of acquired intangibles arising on those businesses that have been acquired subsequent to 31 July 2004 and as such does not reflect equally the performance of businesses acquired prior to 31 July 2004 (where no amortisation of acquired intangibles was recognised), businesses that have developed organically (where no intangibles are attributed) and those businesses more recently acquired (where amortisation of acquired intangibles is charged). The Group believes that trading profit provides valuable additional information for users of the financial statements in assessing the Group’s performance since it provides information on the performance of the business that local managers are more directly able to influence and on a basis consistent across the Group. The Group uses trading profit, and certain key performance indicators calculated by reference to trading profit, for planning, budgeting and reporting purposes and for its internal assessment of the operating performance of individual businesses within the Group.
| 2007 £m |
2006 £m |
|
|---|---|---|
| Operating profit | 753 | 834 |
| Add back: amortisation and impairment of acquired intangibles | 124 | 48 |
| Trading profit | 877 | 882 |
| Profit before tax | 634 | 769 |
| Add back: amortisation and impairment of acquired intangibles | 124 | 48 |
| Profit before tax and the amortisation and impairment of acquired intangibles | 758 | 817 |