Carphone Warehouse 2015 Annual Report Download - page 127

Dixons Carphone plc Annual Report and Accounts 2014/15
Financial statements
125
23 Merger and acquisition continued
2014/15: All-share merger of Dixons and Carphone continued
(i) The fair value of trade and other receivables represents gross trade receivables of £324 million less amounts not considered collectible of
£19 million.
(ii) Assets held for sale included cash and cash equivalents of £8 million.
(iii) Provisions include the recognition of contingent liabilities of £7 million mainly in relation to lease covenants relating to premises assigned or
sublet to third parties and legal claims. It is anticipated that the majority of any utilisation associated with these contingent liabilities will be
incurred over the next five years. No utilisation of these provisions has occurred between the acquisition date and 2 May 2015.
(iv) The finalisation of the fair value of the acquired assets and liabilities will be completed within 12 months of the acquisition and therefore
remains provisional until 5 August 2015 owing to the extensive nature of the valuation process as well as the requirement to re-assess
the status of contingent liabilities which have been provided for. It is therefore possible that adjustments to goodwill could arise up until
5 August 2015.
(v) The goodwill arising on acquisition is not deductible for income tax purposes. The provisional goodwill of £2,629 million reflects the fact that
Dixons’ value is based on its cash generating potential rather than its existing assets and the fact that many of its key strengths, such as its
scale and expertise, do not represent intangible assets as defined by IFRS. The goodwill furthermore reflects the main reasons the directors
of Dixons and Carphone proposed the Merger, being:
• The markets in which Carphone and Dixons operate are converging and the combination of the two complementary businesses will create
the opportunity for compelling end-to-end propositions and long term relationships with customers;
• The Group will have improved scale and reach;
• Significant synergies will arise with operating synergies of at least £80 million on a recurring basis expected to be delivered in full by
2016/17; and
• The Merger will provide a stronger platform for growth through the provision of services to customers and businesses.
(vi) On 6 August 2014 the Company issued 574,723,226 shares with a mid-market share price of £3.432 as consideration to Dixons
shareholders, resulting in an increase to share capital and share premium of £1,972 million. In addition, the Company assumed the
obligation to satisfy outstanding share options within the Dixons Carphone business for which a fair value of £11 million has been
included as part of the consideration. This has been partially offset by shares with a value of £1 million included within Dixons Retail
Employee Share Trust.
b) Other information
Transaction related charges of £9 million incurred by the Group in respect of the Merger have been included in Non-Headline
operating expenses as set out in note 4.
The results of Dixons have been consolidated from 6 August 2014, contributing £5,586 million of revenue and profit after tax
of £200 million in the period to 2 May 2015. If the acquisition had completed at the beginning of Dixons’ financial year, being
1 May 2014, the Group’s revenue would have been £9,936 million and the Group’s Headline profit after tax would have been
£293 million. Non-Headline items included within Dixons results in the period prior to the Merger comprised £11 million in
respect of the acceleration of share-based payment charges which vested on the Merger, £12 million of merger related
professional fees, £5 million of merger integration costs, £42 million of debt restructuring costs, £5 million of provision releases
relating to discontinued operations and £4 million of pension interest costs. A tax credit of £11 million was recognised against
these charges.