REG - Burberry Group PLC - Preliminary Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 2
18/05/2016 07:06
- Part 2: For the preceding part double click ID:nRSR5323Ya
209.8 207.6
Capital reserve 20 41.1 45.3
Hedging reserve 20 8.1 (0.3)
Foreign currency translation reserve 20 164.9 147.3
Retained earnings 1,140.9 1,000.8
Equity attributable to owners of the Company 1,565.0 1,400.9
Non-controlling interest in equity 55.9 50.6
Total equity 1,620.9 1,451.5
Group statement of changes in equity
Attributable to owners
of the Company
Note Ordinary share capital Share premium account Other reserves Retained earnings Total Non-controlling interest Total equity
£m £m £m £m £m £m £m
Balance as at 31 March 2014 0.2 204.8 150.3 810.1 1,165.4 42.6 1,208.0
Profit for the year - - - 336.3 336.3 4.8 341.1
Other comprehensive income:
Cash flow hedges 20 - - (7.4) - (7.4) - (7.4)
Foreign currency translation differences - - 46.5 - 46.5 5.5 52.0
Tax on other comprehensive income - - (2.9) - (2.9) - (2.9)
Total comprehensive income for the year - - 36.2 336.3 372.5 10.3 382.8
Transfer between reserves - - 5.8 (5.8) - - -
Transactions with owners:
Employee share incentive schemes
Value of share options granted - - - 21.0 21.0 - 21.0
Value of share options transferred to liabilities - - - (0.8) (0.8) - (0.8)
Tax on share options granted - - - 5.2 5.2 - 5.2
Exercise of share options - 2.8 - - 2.8 - 2.8
Purchase of own shares by ESOP trusts - - - (19.2) (19.2) - (19.2)
Acquisition of additional interest in subsidiary fromnon-controlling interest - - - (1.1) (1.1) (2.3) (3.4)
Capital contribution by non-controlling interest - - - - - 0.4 0.4
Dividends paid in the year - - - (144.9) (144.9) (0.4) (145.3)
Balance as at 31 March 2015 0.2 207.6 192.3 1,000.8 1,400.9 50.6 1,451.5
Profit for the year - - - 309.5 309.5 5.1 314.6
Other comprehensive income:
Cash flow hedges 20 - - 10.8 - 10.8 - 10.8
Net investment hedge - - (0.8) - (0.8) - (0.8)
Foreign currency translation differences - - 19.5 - 19.5 0.9 20.4
Tax on other comprehensive income - - (3.5) - (3.5) - (3.5)
Total comprehensive income for the year - - 26.0 309.5 335.5 6.0 341.5
Disposal of subsidiaries - - (6.2) 6.2 - - -
Transfer between reserves - - 2.0 (2.0) - - -
Transactions with owners:
Employee share incentive schemes
Value of share options granted - - - (0.3) (0.3) - (0.3)
Value of share options transferred to liabilities - - - (0.2) (0.2) - (0.2)
Tax on share options granted - - - (4.5) (4.5) - (4.5)
Exercise of share options - 2.2 - - 2.2 - 2.2
Purchase of own shares by ESOP trusts - - - (10.9) (10.9) - (10.9)
Dividends paid in the year - - - (157.7) (157.7) (0.7) (158.4)
Balance as at 31 March 2016 0.2 209.8 214.1 1,140.9 1,565.0 55.9 1,620.9
Group statement of cash flows
Note Year to Year to
31 March 31 March
2016 2015
£m £m
Cash flows from operating activities
Operating profit 402.9 440.3
Depreciation 111.9 104.0
Amortisation 35.2 34.6
Net impairment charges 26.5 4.1
Loss on disposal of property, plant and equipment and intangible assets 1.2 2.1
Loss/(gain) on derivative instruments 3.1 (2.0)
(Credit)/charge in respect of employee share incentive schemes (0.3) 21.0
Payment from settlement of equity swap contracts (1.6) (0.2)
Increase in inventories (49.3) (15.1)
Increase in receivables (31.7) (43.8)
Increase in payables and provisions 5.1 23.1
Cash generated from operating activities 503.0 568.1
Interest received 4.8 3.8
Interest paid (1.7) (2.6)
Taxation paid (94.8) (114.4)
Net cash generated from operating activities 411.3 454.9
Cash flows from investing activities
Purchase of property, plant and equipment (107.3) (127.8)
Purchase of intangible assets (30.7) (27.9)
Proceeds from sale of property, plant and equipment 0.5 -
Proceeds from sale of intangible assets - 1.3
Net cash outflow from investing activities (137.5) (154.4)
Cash flows from financing activities
Dividends paid in the year 11 (157.7) (144.9)
Dividends paid to non-controlling interest (0.7) (0.4)
Capital contributions by non-controlling interest - 0.4
Payment to acquire additional interest in subsidiary from non-controlling interest - (3.4)
Issue of ordinary share capital 2.2 2.8
Purchase of own shares by ESOP trusts (10.9) (19.2)
Net cash outflow from financing activities (167.1) (164.7)
Net increase in cash and cash equivalents 106.7 135.8
Effect of exchange rate changes 1.4 13.9
Cash and cash equivalents at beginning of year 552.2 402.5
Cash and cash equivalents at end of year 660.3 552.2
Analysis of net cash
Note As at As at
31 March 31 March
2016 2015
£m £m
Cash and cash equivalents as per the Balance Sheet 16 711.8 617.4
Bank overdrafts 19 (51.5) (65.2)
Net cash 660.3 552.2
Notes to the financial information
1. Basis of preparation
The financial information contained within this report has been prepared in
accordance with the European Union endorsed International Financial Reporting
Standards (IFRSs), IFRS Interpretations Committee (IFRS IC) interpretations
and parts of the Companies Act 2006 applicable to companies reporting under
IFRS. This financial information does not constitute the Burberry Group's (the
Group) Annual Report and Accounts within the meaning of Section 435 of the
Companies Act 2006.
Statutory accounts for the year ended 31 March 2015 have been filed with the
Registrar of Companies, and those for 2016 will be delivered in due course.
The reports of the auditors on those statutory accounts for the years ended 31
March 2015 and 31 March 2016 were unqualified, did not contain an emphasis of
matter paragraph and did not contain a statement under either section 400(2)
or section 498(3) of the Companies Act 2006.
The principal accounting policies applied in the preparation of the
consolidated financial statements are consistent with those set out in the
statutory accounts for the year ended 31 March 2015.
2. Translation of the results of overseas businesses
The results of overseas subsidiaries are translated into the Group's
presentation currency of Sterling each month at the weighted average exchange
rate for the month according to the phasing of the Group's trading results.
The weighted average exchange rate is used, as it is considered to approximate
the actual exchange rates on the date of the transactions. The assets and
liabilities of such undertakings are translated at the year end exchange
rates. Differences arising on the retranslation of the opening net investment
in subsidiary companies, and on the translation of their results, are taken
directly to the foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
The principal exchange rates used were as follows:
Average rate Closing rate
Year to Year to As at As at
31 March 31 March 31 March 31 March
2016 2015 2016 2015
Euro 1.36 1.28 1.26 1.38
US Dollar 1.50 1.60 1.44 1.48
Chinese Yuan Renminbi 9.57 9.94 9.29 9.21
Hong Kong Dollar 11.67 12.42 11.16 11.51
Korean Won 1,740 1,709 1,640 1,646
The average exchange rate achieved by the Group on its Yen royalty income,
taking into account its use of Yen forward foreign exchange contracts executed
on a monthly basis approximately 12 months in advance of royalty receipts, was
Yen 177.1: £1 in the year to 31 March 2016 (2015: Yen 164.2: £1).
Notes to the financial information
3. Adjusted Profit before taxation
In order to provide additional consideration of the underlying performance of
the Group's ongoing business, the Group's results include a presentation of
Adjusted Profit before Taxation ('adjusted PBT'). Adjusted PBT is defined as
profit before taxation and before adjusting items. Adjusting items are those
items which, in the opinion of the directors, should be excluded in order to
provide a consistent and comparable view of the underlying performance of the
Group's ongoing business. Generally this will include those items that are
largely one-off and material in nature and any fair value movements on options
over equity interests held for non-speculative purposes. Adjusting items are
identified and presented on a consistent basis each year and a reconciliation
of adjusted PBT to profit before tax is included in the financial statements.
Adjusting items and their related tax impacts are added back to/deducted from
profit attributable to owners of the Company to arrive at adjusted earnings
per share.
4. Segmental analysis
The Chief Operating Decision Maker has been identified as the Board of
Directors. The Board reviews the Group's internal reporting in order to assess
performance and allocate resources. Management has determined the operating
segments based on the reports used by the Board.
The Board considers the Group's business through its two channels to market,
being retail/wholesale and licensing.
Retail/wholesale revenues are generated by the sale of luxury goods through
Burberry mainline stores, concessions, outlets and digital commerce as well as
Burberry franchisees, prestige department stores globally and multi-brand
specialty accounts. The flow of global product between retail and wholesale
channels and across our regions is monitored and optimised at a corporate
level and implemented via the Group's inventory hubs situated in Asia, Europe
and the USA.
Licensing revenues are generated through the receipt of royalties from the
Group's partners in Japan and global licensees of eyewear, timepieces and
European childrenswear.
The Board assesses channel performance based on a measure of adjusted
operating profit. This measurement basis excludes the effects of adjusting
items. The measure of earnings for each operating segment that is reviewed by
the Board includes an allocation of corporate and central costs. Interest
income and charges are not included in the result for each operating segment
that is reviewed by the Board.
Retail/Wholesale Licensing Total
Year to Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March 31 March
2016 2015 2016 2015 2016 2015
£m £m £m £m £m £m
Retail 1,837.7 1,807.4 - - 1,837.7 1,807.4
Wholesale 634.6 648.1 - - 634.6 648.1
Licensing - - 44.7 70.1 44.7 70.1
Total segment revenue 2,472.3 2,455.5 44.7 70.1 2,517.0 2,525.6
Inter-segment revenue1 - - (2.3) (2.4) (2.3) (2.4)
Revenue from external customers 2,472.3 2,455.5 42.4 67.7 2,514.7 2,523.2
Depreciation and amortisation2 132.2 123.8 - - 132.2 123.8
Net impairment charges 26.5 4.1 - - 26.5 4.1
Other non-cash items:
Share based payments (0.3) 17.8 - 3.2 (0.3) 21.0
Adjusted operating profit 380.9 399.2 36.9 56.0 417.8 455.2
Adjusting items3 (5.0) (11.2)
Finance income 5.1 4.4
Finance expense (2.3) (3.8)
Profit before taxation 415.6 444.6
1 Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would be available to unrelated third
parties.
2 Amortisation of £14.9m relating to the fragrance and beauty licence
intangible asset is presented as an adjusting item and excluded from the
segmental analysis.
3 Refer to note 7 for details of adjusting items.
Notes to the financial information
4. Segmental analysis (continued)
Segmental asset analysis
Retail/Wholesale Licensing Total
Year to Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March 31 March
2016 2015 2016 2015 2016 2015
£m £m £m £m £m £m
Additions to non-current assets 146.2 157.1 - - 146.2 157.1
Total segment assets 1,365.5 1,300.6 3.5 2.6 1,369.0 1,303.2
Goodwill 88.8 88.8
Cash and cash equivalents 711.8 617.4
Taxation 137.4 156.3
Assets relating to discontinued Spanish operations 7.3 7.5
Total assets per Balance Sheet 2,314.3 2,173.2
Additional revenue analysis
Revenue by product division Year to Year to
31 March 31 March
2016 2015
£m £m
Accessories 901.7 892.5
Womens 729.0 743.0
Mens 548.4 557.5
Childrens/Other 90.7 77.7
Beauty 202.5 184.8
Retail/Wholesale 2,472.3 2,455.5
Licensing 42.4 67.7
Total 2,514.7 2,523.2
Revenue by destination Year to Year to
31 March 31 March
2016 2015
£m £m
Asia Pacific 932.9 938.1
EMEIA1 878.5 869.0
Americas 660.9 648.4
Retail/Wholesale 2,472.3 2,455.5
Licensing 42.4 67.7
Total 2,514.7 2,523.2
1 EMEIA comprises Europe, Middle East, India and Africa.
Entity-wide disclosures
Revenue derived from external customers in the UK totalled £250.2m for the
year to 31 March 2016 (2015: £233.3m).
Revenue derived from external customers in foreign countries totalled
£2,264.5m for the year to 31 March 2016 (2015: £2,289.9m). This amount
includes £562.1m of external revenues derived from customers in the USA (2015:
£551.6m) and £350.9m of external revenues derived from customers in China
(2015: £346.2m).
The total of non-current assets other than financial instruments and deferred
tax assets located in the UK is £194.6m (2015: £197.7m). The remaining £452.6m
of non-current assets are located in other countries (2015: £455.4m), with
£153.1m located in the USA (2015: £174.9m) and £82.0m located in China (2015:
£87.8m).
Notes to the financial information
5. Net operating expenses
Note Year to Year to
31 March 31 March2015£m
2016
£m
Selling and distribution costs 816.7 762.9
Administrative expenses 528.2 547.4
Adjusting items
Amortisation of the fragrance and beauty licence intangible asset 7 14.9 14.9
Total 1,359.8 1,325.2
6. Profit before taxation
Note Year to Year to
31 March 31 March
2016 2015
£m £m
Adjusted profit before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment
Within cost of sales 1.4 1.0
Within selling and distribution costs 98.7 88.8
Within administrative expenses 11.8 14.2
Amortisation of intangible assets
Within selling and distribution costs 1.8 1.7
Within administrative expenses 18.5 18.0
Loss on disposal of property, plant and equipment and intangible assets 1.2 2.1
Net impairment charge 13 26.5 4.1
Employee costs 396.4 468.1
Operating lease rentals
Minimum lease payments1 235.3 190.9
Contingent rents 86.1 87.5
Net exchange gain on revaluation of monetary assets and liabilities (1.6) (1.4)
Net exchange loss/(gain) on derivatives held for trading for the year 5.8 (1.4)
Trade receivables net impairment charge 3.1 0.1
Adjusting items
Amortisation of the fragrance and beauty licence intangible asset 7 14.9 14.9
Put option liability finance income 7 (9.9) (3.7)
1 Included within minimum lease payments are amounts of £20.1m (2015:
£6.5m) relating to net charges for onerous lease provisions (refer to note
18).
7. Adjusting items
Amortisation of the fragrance and beauty licence intangible asset
During the year ended 31 March 2013, an intangible asset of £70.9m was
recognised on the Balance Sheet, relating to the present value of the
anticipated incremental income to be earned by the Group as a result of
selling Beauty products through retail and wholesale channels rather than
under licence, following the termination of the existing licence relationship
with Interparfums SA. This asset is amortised on a straight-line basis over
the period 1 April 2013 to 31 December 2017. The amortisation is presented as
an adjusting item, which is consistent with the treatment of the cost
recognised on termination of the licence relationship in the year ended 31
March 2013. The amortisation expense recognised for the year ended 31 March
2016 is £14.9m (2015: £14.9m) (refer to note 12). A related tax credit of
£2.8m (2015: £3.1m) has also been recognised in the current period.
Notes to the financial information
7. Adjusting items (continued)
Put option liability finance income
The financing income of £9.9m for the year ended 31 March 2016 (2015: £3.7m)
relates to fair value movements and the unwinding of the discount on the put
option liability over the non-controlling interest in Burberry (Shanghai)
Trading Co., Ltd. Refer to note 17 for further details of the carrying value
of the put option liability. No tax has been recognised on this item, as the
value of the option on exercise is not considered to be deductible for tax
purposes.
8. Financing
Note Year to Year to
31 March 31 March
2016 2015
£m £m
Bank interest income 4.6 3.7
Other finance income 0.5 0.7
Finance income 5.1 4.4
Interest expense on bank loans and overdrafts (1.5) (1.8)
Bank charges (0.7) (1.8)
Other finance expense (0.1) (0.2)
Finance expense (2.3) (3.8)
Other financing income - put option liability 7 9.9 3.7
Net finance income 12.7 4.3
9. Taxation
Analysis of charge for the year recognised in the Group Income Statement:
Year to Year to
31 March 31 March
2016 2015
£m £m
Current tax
UK corporation tax
Current tax on income for the year to 31 March 2016 at 20% (2015: 21%) 52.8 58.8
Double taxation relief (0.8) (0.7)
Adjustments in respect of prior years (3.1) (2.4)
48.9 55.7
Foreign tax
Current tax on income for the year 49.1 60.9
Adjustments in respect of prior years (2.0) 6.9
Total current tax 96.0 123.5
Deferred tax
UK deferred tax
Origination and reversal of temporary differences 9.9 2.1
Impact of changes to tax rates 1.3 -
Adjustments in respect of prior years (0.7) 0.9
10.5 3.0
Foreign deferred tax
Origination and reversal of temporary differences (13.1) (21.3)
Adjustments in respect of prior years 7.6 (1.7)
Total deferred tax 5.0 (20.0)
Total tax charge on profit 101.0 103.5
Notes to the financial information
9. Taxation (continued)
Analysis of charge for the year recognised in other comprehensive income and
directly in equity:
Year to Year to
31 March 31 March
2016 2015
£m £m
Current tax
Recognised in other comprehensive income
Current tax charge on exchange differences on loans (foreign currency translation reserve) 1.9 4.4
Total current tax recognised in other comprehensive income 1.9 4.4
Recognised in equity
Current tax credit on share options (retained earnings) (2.0) (5.6)
Total current tax recognised directly in equity (2.0) (5.6)
Deferred tax
Recognised in other comprehensive income
Deferred tax charge/(credit) on cash flow hedges deferred in equity (hedging reserve) 1.5 (1.3)
Deferred tax charge/(credit) on cash flow hedges transferred to income (hedging reserve) 0.7 (0.2)
Deferred tax credit on net investment hedges deferred in equity (hedging reserve) (0.1) -
Deferred tax credit on net investment hedges transferred to income (hedging reserve) (0.5) -
Total deferred tax recognised in other comprehensive income 1.6 (1.5)
Recognised in equity
Deferred tax charge on share options (retained earnings) 6.5 0.4
Total deferred tax recognised directly in equity 6.5 0.4
The tax rate applicable on profit varied from the standard rate of corporation
tax in the UK due to the following factors:
Year to Year to
31 March 31 March
2016 2015
£m £m
Profit before taxation 415.6 444.6
Tax at 20% (2015: 21%) on profit before taxation 83.1 93.4
Rate adjustments relating to overseas profits 3.4 1.8
Permanent differences 5.5 5.6
Tax on dividends not creditable 1.6 -
Current year tax losses not recognised 4.7 2.4
Prior year tax losses recognised in the year (0.4) (3.4)
Adjustments in respect of prior years 1.8 3.7
Adjustments to deferred tax relating to changes in tax rates 1.3 -
Total taxation charge 101.0 103.5
Total taxation recognised in the Group Income Statement arises on:
Year to Year to
31 March 31 March
2016 2015
£m £m
Adjusted profit before taxation 103.8 106.6
Adjusting items (2.8) (3.1)
Total taxation charge 101.0 103.5
Notes to the financial information
10. Earnings per share
The calculation of basic earnings per share is based on profit or loss
attributable to owners of the Company for the year divided by the weighted
average number of ordinary shares in issue during the year. Basic and diluted
earnings per share based on adjusted profit before taxation are also disclosed
to indicate the underlying profitability of the Group.
Year to Year to
31 March 31 March
2016 2015
£m £m
Attributable profit for the year before adjusting items1 311.7 344.4
Effect of adjusting items1 (after taxation) (2.2) (8.1)
Attributable profit for the year 309.5 336.3
1 Refer to note 7 for details of adjusting items.
The weighted average number of ordinary shares represents the weighted average
number of Burberry Group plc ordinary shares in issue throughout the year,
excluding ordinary shares held in the Group's ESOP trusts.
Diluted earnings per share is based on the weighted average number of ordinary
shares in issue during the year. In addition, account is taken of any options
and awards made under the employee share incentive schemes, which will have a
dilutive effect when exercised.
Year to Year to
31 March 31 March
2016 2015
Millions Millions
Weighted average number of ordinary shares in issue during the year 441.9 440.0
Dilutive effect of the employee share incentive schemes 4.2 7.8
Diluted weighted average number of ordinary shares in issue during the year 446.1 447.8
11. Dividends paid to owners of the Company
Year to Year to
31 March 31 March
2016 2015
£m £m
Prior year final dividend paid 25.5p per share (2015: 23.2p) 112.5 102.1
Interim dividend paid 10.2p per share (2015: 9.7p) 45.2 42.8
Total 157.7 144.9
A final dividend in respect of the year to 31 March 2016 of 26.8p (2015:
25.5p) per share, amounting to £118.5m, has been proposed for approval by the
shareholders at the Annual General Meeting subsequent to the balance sheet
date. The final dividend to Burberry Group plc shareholders has not been
recognised as a liability at the year end and will be paid on 5 August 2016 to
shareholders on the register at the close of business on 8 July 2016.
Notes to the financial information
12. Intangible assets
Cost Goodwill Trade marks, licences and other intangible assets Computersoftware£m Intangible assetsin the course ofconstruction£m Total
£m £m £m
As at 31 March 2014 80.2 98.9 98.5 9.3 286.9
Effect of foreign exchange rate changes 8.6 (1.1) 0.8 - 8.3
Additions - 1.8 16.6 8.9 27.3
Disposals - (12.6) (0.1) (0.8) (13.5)
Reclassifications from assets in the course - - 5.2 (5.2) -
of construction
As at 31 March 2015 88.8 87.0 121.0 12.2 309.0
Effect of foreign exchange rate changes - 0.5 0.2 - 0.7
Additions - 0.6 9.0 21.6 31.2
Disposals - (0.2) (7.3) - (7.5)
Reclassifications from assets in the course - - 10.8 (10.8) -
of construction
As at 31 March 2016 88.8 87.9 133.7 23.0 333.4
Accumulated amortisation and impairment
As at 31 March 2014 - 32.3 59.2 - 91.5
Effect of foreign exchange rate changes - (0.7) 1.1 - 0.4
Charge for the year - 16.4 18.2 - 34.6
Net impairment charge on assets (note 13) - 0.2 - - 0.2
Disposals - (11.1) (0.1) - (11.2)
As at 31 March 2015 - 37.1 78.4 - 115.5
Effect of foreign exchange rate changes - 0.3 0.3 - 0.6
Charge for the year - 16.0 19.2 - 35.2
Disposals - (0.2) (7.3) - (7.5)
As at 31 March 2016 - 53.2 90.6 - 143.8
Net book value
As at 31 March 2016 88.8 34.7 43.1 23.0 189.6
As at 31 March 2015 88.8 49.9 42.6 12.2 193.5
Notes to the financial information
12. Intangible assets (continued)
Fragrance and beauty licence intangible asset
During the year ended 31 March 2013, an intangible asset of £70.9m was
recognised on the Balance Sheet, relating to the present value of the
anticipated incremental income to be earned by the Group as a result of
selling Beauty products through retail and wholesale channels rather than
under licence following the termination of the existing licence relationship
with Interparfums SA. This asset is presented within the intangible asset
category 'trade mark, licences and other intangible assets', and is being
amortised on a straight-line basis over the period 1 April 2013 to 31 December
2017. The carrying value of the Beauty intangible at 31 March 2016 is £26.1m
(2015: £41.1m). No impairment has been recorded in the current period.
Management has considered the impact of a decrease in the future revenue
estimates used in the latest value-in-use calculation. Based on this
sensitivity, a decrease of 14% in future revenue projections, with no change
in operating profit margin, would imply an impairment of £10m as at 31 March
2016.
Impairment testing of goodwill
The carrying value of the goodwill allocated to cash generating units:
As at As at
31 March 31 March
2016 2015
£m £m
China1 45.4 45.8
Korea 25.1 25.1
Other 18.3 17.9
Total 88.8 88.8
1 The goodwill reported for China does not include any goodwill
attributable to the non-controlling interest.
The Group tests goodwill for impairment annually or where there is an
indication that goodwill might be impaired. The recoverable amount of all cash
generating units has been determined on a value-in-use basis. Value-in-use
calculations for each cash generating unit are based on projected three year
pre-tax discounted cash flows together with a discounted terminal value. The
cash flows have been discounted at pre-tax rates reflecting the Group's
weighted average cost of capital adjusted for country-specific tax rates and
risks. Where the cash generating unit has a non-controlling interest which was
recognised at a value equal to its proportionate interest in the net
identifiable assets of the acquired subsidiary at the acquisition date, the
carrying amount of the goodwill has been grossed up, to include the goodwill
attributable to the non-controlling interest, for the purpose of impairment
testing the goodwill attributable to the cash generating unit. The key
assumptions contained in the value-in-use calculations include the future
revenues, the margins achieved, the assumed life of the business and the
discount rates applied.
The value-in-use calculations have been prepared using management's approved
financial plans for the three years ending 31 March 2019. These plans contain
management's best view of the expected performance for the year ending 31
March 2017 and the expected growth rates for the two years ending 31 March
2018 and 31 March 2019. The plans are based on the performance achieved in the
current year and management's knowledge of the market environment and future
business plans. A terminal value has been included in the value-in-use
calculation based on the cash flows for the year ending
31 March 2019 incorporating the assumption that there is no growth beyond 31
March 2019.
For the material goodwill balances of China and Korea, a sensitivity analysis
has been performed on the value-in-use calculations by assuming no growth
beyond the year ending 31 March 2017. This sensitivity analysis indicated
significant headroom between the recoverable amount under this scenario and
the carrying value of goodwill and therefore management considered no further
detailed sensitivity analysis was required.
The pre-tax discount rates for China and Korea were 16.1% and 13.6%
respectively (2015: 16.8%; 14.3%).
The other goodwill balance of £18.3m (2015: £17.9m) consists of amounts
relating to eight cash generating units, none of which have goodwill balances
exceeding £10m as at 31 March 2016.
No impairment has been recognised in respect of the carrying value of the
goodwill balance in the year as, for each cash generating unit, the
recoverable amount of goodwill exceeds its carrying value.
Notes to the financial information
13. Property, plant and equipment
Cost Freehold land and buildings Leasehold improvements Fixtures, Assets in the course of construction Total
£m £m fittings and £m £m
equipment1
£m
As at 31 March 2014 96.3 329.6 404.4 19.0 849.3
Effect of foreign exchange rate changes 3.3 23.2 3.7 1.0 31.2
Additions 7.0 48.7 48.1 26.0 129.8
Disposals - (18.3) (20.7) (1.0) (40.0)
Reclassification from assets in the course 1.1 8.1 8.0 (17.2) -
of construction
Reclassification2 29.8 (29.8) - - -
As at 31 March 2015 137.5 361.5 443.5 27.8 970.3
Effect of foreign exchange rate changes 6.2 11.7 15.3 (0.5) 32.7
Additions 15.3 49.5 41.7 8.5 115.0
Disposals - (12.6) (26.7) (0.5) (39.8)
Reclassification from assets in the course - 8.2 17.7 (25.9) -
of construction
As at 31 March 2016 159.0 418.3 491.5 9.4 1,078.2
Accumulated depreciation and impairment
As at 31 March 2014 36.7 157.6 256.6 - 450.9
Effect of foreign exchange rate changes (0.5) 11.5 2.4 - 13.4
Charge for the year 2.8 37.5 63.7 - 104.0
Disposals - (18.0) (20.4) - (38.4)
Net impairment charge on assets - 1.9 2.0 - 3.9
Reclassification2 9.2 (9.2) - - -
As at 31 March 2015 48.2 181.3 304.3 - 533.8
Effect of foreign exchange rate changes 2.8 4.9 10.7 - 18.4
Charge for the year 3.3 45.9 62.7 -
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