Review of performance.

Other financial information.

Corporate costs

Corporate costs, which comprise the costs of stewardship of the Group and operating charges and credits associated with the Group’s legacy businesses, were £16 million (2010: £14 million).

Restructuring and impairment charges

There were no Group restructuring and impairment charges during the year (2010: £39 million).

Change in value of derivative and other financial instruments

The Group enters into foreign exchange contracts to hedge much of its transactional exposure. At 31 December 2011, the net fair value of such instruments was a liability of £84 million (2010: £54 million liability). Where hedge accounting has not been applied, the change in fair value resulted in a charge of £29 million (2010: £3 million charge). There was a £3 million charge arising from the change in the fair value of embedded derivatives in the year (2010: £3 million credit) and a net gain of £2 million attributable to the currency impact on Group funding balances (2010: £12 million net gain). There was a £1 million loss on the change in the fair value of GKN Powder Metallurgy commodity contracts (2010: nil).

Amortisation of non-operating intangible assets arising on business combinations

The charge for the amortisation of non-operating intangible assets (for example, customer contracts, order backlogs and intellectual property rights) arising on business combinations was £22 million (2010: £19 million). The increase relates to the impact of the acquisitions of Getrag Driveline Products and Stromag.

Gains and losses on changes in Group structure

During the year the Group sold its 49% share in a joint venture company, GKN JTEKT Limited realising a profit of £4 million and its Aerospace Engineering Services business realising a further profit of £4 million. In 2010, the loss of £4 million principally related to the sale and closure of the Axles business.

Post-tax earnings of joint ventures

In management figures, the sales and trading profits of joint ventures are included pro-rata in the individual divisions to which they relate, although shown separately post-tax in the accounts. The Group’s share of post-tax earnings of joint ventures in the year was £38 million (2010: £35 million). Post-tax earnings on a management basis were £40 million (2010: £36 million), with trading profit of £49 million (2010: £44 million). The Group’s share of the tax charge amounted to £8 million (2010: £7 million) with an interest charge of £1 million (2010: £1 million). Underlying trading profit increased £7 million due to strong performance in our Chinese joint ventures, which increased by £6 million, and improvements in Emitec, which increased by £2 million.

Net financing costs

Net financing costs totalled £61 million (2010: £75 million) and include the non-cash charge on post-employment benefits of £17 million (2010: £31 million) and unwind of discounts of £2 million (2010: £4 million). Interest payable was £47 million (2010: £46 million), whilst interest receivable was £5 million (2010: £6 million) resulting in net interest payable of £42 million (2010: £40 million). Capitalised interest costs attributable to the Group’s A350 investment were £6 million (2010: £4 million) and interest charged on UK Government refundable advances was £2 million (2010: £2 million).

The non-cash charge on post-employment benefits arises as the expected return on scheme assets of £153 million (2010: £145 million) was more than offset by interest on post-employment obligations of £170 million (2010: £176 million). Details of the assumptions used in calculating post-employment costs and income are provided in note 14 to the financial statements.

Profit before tax

The management profit before tax was £417 million (2010: £363 million), including the net £19 million impact from the temporary closure of the Hoeganaes Gallatin plant, described in Hoeganaes’ Gallatin plant, USA. The profit before tax on a statutory basis was £351 million (2010: £345 million).

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