Carphone Warehouse 2014 Annual Report Download - page 92

Carphone Warehouse Group plc
Annual Report 2014
90
FINANCIAL STATEMENTS
Notes to the Group financial statements continued
23 CPW EUROPE ACQUISITION continued
b) CONSIDERATION
i) IFRS  ‘Business Combinations’ requires that the Group’s existing % interest in CPW Europe be revalued to its fair value aspart
of the acquisition accounting process. The fair value of this interest is considered to be equal to the gross consideration of£m
paid by the Group to acquire Best Buy’s % interest in CPW Europe. As the carrying value of the Group’s investment inCPW Europe
was £m at the acquisition date, a gain of £m was recognised in non-Headline operating expenses in respectof this revaluation.
ii) Gross cash consideration of £m was settled on completion, offset by payments from Best Buy of £m in respect of the prepayment
or termination of the Group’s other interests with Best Buy.
iii) The £m of deferred cash consideration, which bears interest at .% per annum, is payable to Best Buy in two equal instalments
of £m in June  and June .
iv) A further £m of consideration was provided through the issue on completion of .m shares to Best Buy, at a price of £. per share.
The Group had the right to place the Consideration Shares on Best Buy’s behalf during the  month period to June , and to retain
any upside on disposal. The value of the Consideration Shares on completion was £m, based on a share price at that date of £.,
and this value is recorded as consideration, with the value associated with the right to place the Consideration Shares recognised as
a derivative financial asset of £m. The Consideration Shares were placed in July  at an average price of £., resulting in a net
cash gain of £m for the Group. The difference between the disposal proceeds and the value of the derivative financial asset has
been recognised as a gain of £m in non-Headline operating expenses.
As part of the transaction, the Group agreed to satisfy Best Buy’s obligations in relation to certain incentive schemes. Shares with
avalue of £m were issued in respect of Best Buy’s obligations and have been included in consideration.
c) OTHER INFORMATION
The results of CPW Europe have been consolidated into the Group’s income statement from  June , contributing £,m of revenue
and a profit before tax of £m in the period to  March . If the acquisition had completed on  April , being the first day of the
financial year, the Group’s revenue would have been £,m and the Group’s profit before tax would have been £m.
Transaction-related charges of £m, comprising banking and professional fees of £m and cash and non-cash charges relating
toincentive schemes of £m have been included in non-Headline operating expenses.
24 INTERESTS IN JOINT VENTURES AND ASSETS HELD FOR SALE
Interests in joint ventures are as follows:
Country of 2014 2013
Business Principal activities incorporation interest interest
CPW Europe Retail, distribution, insurance, telecoms services England and Wales n/a 50.0%
Virgin Mobile France MVNO England and Wales 46.3% 46.3%
The Group acquired Best Buy’s % interest in CPW Europe on  June , following which the Group’s joint venture interest in CPW
Europe was derecognised and the Group consolidated the results of CPW Europe. Refer to note  for further details.
Management of Virgin Mobile France hold share options in the business as explained in note b. In addition to share options, management
of Virgin Mobile France hold warrants that give them the right to acquire new shares at a price based on the value of existing shareholder
funding and an additional amount which increases with the quantity of shares being acquired. The maximum potential dilution to the Group’s
stake if all existing share options and warrants were exercised is approximately .%, although thevalue of this dilution would be partially
offset by cash inflows in relation to the proceeds on exercise.
On  May  the Group announced that it had entered into an exclusivity agreement for the sale of Virgin Mobile France (see note ).
Theresults of Virgin Mobile France are therefore presented within discontinued operations and the Group’s interest in that business
ispresented as an asset held for sale.