BT 2016 Annual Report Download - page 190

196 BT Group plc
Annual Report 2016
14. Business combinations continued
Purchase consideration net of cash acquired
Of the total £10,971m consideration, £3,464m was satisfied in cash and a reconciliation between this amount and the net cash outflow
arising on the acquisition of EE is as follows:
£m
Outflow of cash to acquire subsidiary
Cash consideration 3,464
Less: cash and cash equivalents acquired 93
Net outflow of cash – investing activities 3,371
Goodwill
Goodwill of £6,430m arising from the acquisition is attributable to the revenue synergies expected to be generated from new cross-
selling and bundling opportunities across the enlarged customer base as well as EE’s ability to generate a new subscriber base in the future
to replace subscribers churn. It also includes expected benefits from the existing workforce skills and expertise, and savings on operating
costs and capital expenditure as a result of joint efficiencies expected from being part of the enlarged group. None of the goodwill
recognised is expected to be deductible for income tax purposes.
For the year ended 31 March 2016, goodwill arising on the acquisition has been allocated to the EE, BT Consumer and BT Business CGUs.
BT Consumer and BT Business have been allocated a portion of the goodwill as a result of the benefits that we expect to arise in these
CGUs, mainly from synergies. Note 12
Intangible assets sets out the goodwill allocation for the year ended 31 March 2016 including the
outcome of the impairment reviews. From 1 April 2016, certain businesses within EE will be integrated into the other lines of business as
part of the reorganisation disclosed in note 31. The goodwill relating to EE will therefore be reallocated to other CGUs for the year ended
31 March 2017.
Acquired receivables
The fair value of acquired trade receivables was £696m. The gross contractual amount for trade receivables due is £784m of which £88m
is expected to be uncollectible.
Revenue and profit contribution
From the date of acquisition to 31 March 2016, EE contributed revenues before specific items of £1,038m and EBITDA before specific
items of £261m to the group. If the acquisition had occurred on 1 April 2015, the consolidated pro-forma revenue and EBITDA for the
year ended 31 March 2016 would have been £23,722m and £7,948m respectively. These amounts have been calculated using EE’s
consolidated results and adjusting them for differences in accounting policies, and are net of any intercompany transactions with the wider
BT group.
Acquisition-related costs included within specific items amounted to £107m in the year (2014/15: £26m). These mainly comprised
advisory and transaction fees, financial advisory costs, stamp duty, legal fees, due diligence, reporting and assurance services.
15. Programme rights
Total
£m
At 1 April 2014 108
Additions 340
Amortisation (330)
At 1 April 2015 118
Additions 651
Amortisation (544)
At 31 March 2016 225
Additions reflect TV programme rights for which the legally enforceable licence period has started during the year. Payments made for
programme rights for which the legally enforceable licence period has not yet started are included within prepayments (see note 17).
TV programme rights commitments are disclosed in note 30.
16. Inventories
At 31 March
2016
£m
2015
£m
Consumables 26 25
Work in progress 11 10
Finished goods 152 59
189 94
Inventories recognised as an expense during the year ended 31 March 2016 amounted to £1,220m (2014/15: £924m). These were
included in ‘Operating costs’ in the income statement.