Financial Statements

Notes to the Group financial statements

for the year ended 31 March 2006

6. Net operating expenses

(a) by function		2006 £m	2005 £m
Net operating expenses comprise:
Distribution costs		1,693	1,472
Administrative expenses		812	678
		2,505	2,150
(b) by nature	Notes	2006 £m	2005 £m
Profit before tax is stated after charging/(crediting):
Net operating lease rental expense		336	293
Cost of goods sold		3,354	3,204
Depreciation of property, plant and equipment		159	140
Amortisation of intangible assets		128	99
Employee benefit costs	7	1,350	1,156
Research expenditure		3	2
Exchange differences		1	1
Store impairment charges	8	13	–
Argos OFT fine		–	16
Homebase reorganisation costs		–	18
Audit fees – statutory audit		2	2
Auditors' remuneration for non-audit services – further assurance services		4	1
Auditors' remuneration for non-audit services – tax advisory services		3	2

Depreciation and amortisation as shown above are for continuing operations. Amortisation of intangible assets is charged to administrative expenses except for the amortisation of databases which is charged to cost of sales.

The guidelines covering the use of the Company's auditors for non-audit services are set out in the Corporate Governance Report on page 35.