Operating expenses (Tables)

12 Months Ended

Dec. 31, 2018

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Summary of Operating Expenses by Function

All figures in £ millions	2018			2017			2016
By function:
Cost of goods sold		1,943			2,066			2,093
Operating expenses
Distribution costs		88			84			88
Selling, marketing and product development costs		759			896			908
Administrative and other expenses		1,039			1,207			1,240
Restructuring costs		90			79			329
Other income		(69	)		(64	)		(85	)
Total net operating expenses		1,907			2,202			2,480
Other net gains and losses		(230	)		(128	)		25
Impairment of intangible assets		—			—			2,548
Total		3,620			4,140			7,146

Summary of Analysis of Restructuring Costs

An analysis of major restructuring costs is as follows:

All figures in £ millions	2018			2017		2016
By nature:
Product costs		12			15		32
Employee costs		56			11		139
Depreciation and amortisation		1			13		29
Property and facilities		(5	)		24		43
Technology and communications		1			2		7
Professional and outsourced services		9			12		31
General and administrative costs		16			2		48
Total restructuring – operating expenses		90			79		329
Share of associate restructuring		12			—		9
Total		102			79		338

Summary of Operating Expenses by Nature

All figures in £ millions	Notes		2018			2017			2016
By nature:
Royalties expensed				236			246			264
Other product costs				516			564			616
Employee benefit expense		5		1,637			1,805			1,888
Contract labour				161			152			206
Employee-related expense				115			127			122
Promotional costs				233			229			217
Depreciation of property, plant and equipment		10		66			90			95
Amortisation of intangible assets – pre-publication		20		338			338			350
Amortisation of intangible assets – software		11		88			85			84
Amortisation of intangible assets – other		11		99			138			185
Impairment of intangible assets				—			—			2,548
Property and facilities				147			202			243
Technology and communications				192			218			188
Professional and outsourced services				396			322			378
Other general and administrative costs				85			140			140
Costs capitalised to intangible assets				(390	)		(324	)		(318	)
Other net gains and losses				(230	)		(128	)		25
Other income				(69	)		(64	)		(85	)
Total				3,620			4,140			7,146

Summary of Services From the Group's Auditors

During the year the Group obtained the following services from the Group’s auditors:

All figures in £ millions	2018		2017		2016
The audit of parent company and consolidated financial statements		4		4		5
The audit of the company’s subsidiaries		2		2		2
Total audit fees		6		6		7
Audit-related and other assurance services		1		1		1
Other non-audit services		—		1		1
Total other services		1		2		2
Total non-audit services		1		2		2
Total		7		8		9

Summary of Reconciliation Between Audit and Non-Audit Service Fees

Reconciliation between audit and non-audit service fees is shown below:

All figures in £ millions	2018		2017		2016
Group audit fees including fees for attestation under section 404 of the Sarbanes-Oxley Act		6		6		7
Non-audit fees		1		2		2
Total		7		8		9