Marks and Spencer 2016 Annual Report Download - page 121

119
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
OUR BUSINESSOUR PERFORMANCEGOVERNANCEFINANCIAL STATEMENTS
24 ORDINARY SHARE CAPITAL
2016 2015
Shares £m Shares £m
Issued and fully paid ordinary shares of 25p each
At start of year 1,647,814,746 412.0 1,632,247,974 408.1
Shares issued on exercise of share options 6,797,209 1.7 15,566,772 3.9
Shares cancelled through share buyback (31,647,148) (7.9) ––
At end of year 1,622,964,807 405.8 1,647,814,746 412.0
Issue of new shares
6,797,209 (last year 15,567,772) ordinary shares having a nominal value of £1.7m (last year £3.9m) were allotted during the year under the
terms of the Company’s schemes which are described in note 13. The aggregate consideration received was £20.6m (last year £40.8m).
Share buyback
31,647,148 (last year nil) ordinary shares having a nominal value of £7.9m (last year £nil) were bought back and subsequently cancelled during
the year in accordance with the authority granted by shareholders in the Annual General Meeting in July 2015. The aggregate consideration
paid, including directly attributable costs, was £150.7m (last year £nil).
25 BUSINESS COMBINATIONS
On 29 February 2016, Marks and Spencer plc purchased the remaining 50% share in the joint venture Lima (Bradford) S.à r.l. This company
owned an automated distribution centre in Bradford used by the Group. The distribution centre was transferred to another group company
on the same day and on 1 March 2016 Lima (Bradford) S.à r.l. was put into liquidation.
This purchase has been accounted for as a stepped acquisition under IFRS 3 'Business Combinations.' The deemed disposal of the original
50% share of the joint venture resulted in the recognition of a £27.1m gain in the period, which has been recognised as a non-underlying
credit in the consolidated income statement as disclosed in note 5. This gain arose as a result of the requirement to f air value the initial
50% share held by Marks and Spencer plc.
A summary of how the gain arose is detailed below:
2016
£m
Fair value of previously owned 50% interest 56.2
Repayment of intercompany loan (24.0)
Deemed proceeds received by Marks and Spencer plc for the existing 50% interest 32.2
Carrying value of the investment in the joint venture (5.1)
Gain arising on acquisition 27.1
The acquisition resulted in the recognition of goodwill, as shown below:
2016
£m
Property, plant and equipment 112 .6
Other net liabilities (62.6)
Total identifi able assets 50.0
Cash paid 56.2
Goodwill arising on acquisition 6.2
This acquisition resulted in the recognition of £6.2m of goodwill, as a result of the consideration paid exceeding the fair value of the net
assets acquired, attributable to the recognition of a deferred tax liability in relation to the property. The goodwill is not expected to be
deductible for income tax purposes.
The purchase of this entity resulted in the distribution centre being fully owned by the Group. Therefore the embedded derivative
previously recognised by the Group in relation to the lease agreement for the distribution centre has been eliminated. The derecognition
of this embedded derivative resulted in the recognition of a £21.7m loss in the consolidated income statement. This has been recognised as
a non-underlying item, as disclosed in notes 5 and 21.
26 CONTINGENCIES AND COMMITMENTS
A. Capital commitments
2016
£m
2015
£m
Commitments in respect of properties in the course of construction 129.2 102.9
Software capital commitments 17.1 25.5
146.3 128.4
B. Other material contracts
In the event of a material change in the trading arrangements with certain warehouse operators, the Group has a commitment to purchase
property, plant and equipment which is currently owned and operated by the warehouse operators on the Group’s behalf (at values ranging
from historical net book value to market value).
See note 12 for details on the partnership arrangement with the Marks & Spencer UK Pension Scheme.