REG - Connect Group Plc - Preliminary Results year ended 31 August 2015 <Origin Href="QuoteRef">CNCTC.L</Origin> - Part 3
14/10/2015 07:00
- Part 3: For the preceding part double click ID:nRSN1677Cb
scheme.
The weighted average duration of the schemes is 17 years for the Pension Trust, 20 years for the Consortium Care scheme, 29
years for the Platinum scheme and 21 years for the Tuffnells Parcels Express scheme.
The principal long-term assumptions used to calculate scheme liabilities on all Group schemes are:
% p.a. 2015 2014
Discount rate 3.80 3.85
Inflation assumptions - CPI 2.25 2.25
Inflation assumptions - RPI 3.25 3.25
Demographic assumptions for WH Smith pension trust:
Life expectancy at age 65 Male Female Male Female
Member currently aged 65 21.7 23.7 21.7 23.9
Member currently aged 45 23.0 25.2 23.1 25.4
A summary of the movements in the net balance sheet asset/ (liability) and amounts recognised in the Group Income Statement
and Other Comprehensive Income are as follows:
£m Fair value of scheme assets Defined benefit obligation Impact of IFRIC 14 on defined benefit pension schemes Total
At 31 August 2013 469.6 (419.2) (73.5) (23.1)
Current service cost (1.3) 1.2 - (0.1)
Net interest cost 20.6 (18.2) (3.3) (0.9)
Total amount recognised in income statement 19.3 (17.0) (3.3) (1.0)
Actual less expected return on scheme assets 44.6 - - 44.6
Actuarial losses arising from experience - 0.8 - 0.8
Actuarial loss arising from changes in financial assumptions - (33.3) - (33.3)
Actuarial loss arising from changes in demographic assumptions - 2.6 - 2.6
Change in surplus not recognised - - (16.2) (16.2)
Amount recognised in other comprehensive income 44.6 (29.9) (16.2) (1.5)
Employer contributions 4.6 - - 4.6
Benefit payments (15.4) 15.4 - -
Amounts included in cash flow statement (10.8) 15.4 - 4.6
At 31 August 2014 522.7 (450.7) (93.0) (21.0)
Current service cost (0.5) - (0.5)
Net interest cost 20.0 (17.2) (3.6) (0.8)
Total amount recognised in income statement 19.5 (17.2) (3.6) (1.3)
Actual less expected return on scheme assets 28.7 - - 28.7
Actuarial gains arising from experience - 25.1 - 25.1
Actuarial loss arising from changes in financial assumptions - (2.2) - (2.2)
Actuarial gains arising from changes in demographic assumptions - 1.9 - 1.9
Change in surplus not recognised - - (52.8) (52.8)
Amount recognised in other comprehensive income 28.7 24.8 (52.8) 0.7
Employer contributions 5.3 0.1 - 5.4
Employee contributions 0.1 (0.1) - -
Benefit payments (23.6) 23.6 - -
Amounts included in cash flow statement (18.2) 23.6 - 5.4
Acquisition of subsidiary 10.6 (12.5) (1.9)
At 31 August 2015 563.3 (432.0) (149.4) (18.1)
Included within Non-current assets 0.4
Included within Current liabilities (3.3)
Included within Non-current liabilities (15.2)
The charge for the current service cost is included within administrative expenses. 'Net interest costs' are calculated by
applying a discount rate to the net defined benefit asset or liability scheme assets and are included within finance income
and expense.
An analysis of the assets at the balance sheet date is detailed below:
£m 2015 2014
Swap financing portfolio (1) Unquoted 431.9 477.0
Interest rate and inflation swaps Unquoted 79.5 6.2
Loan fund (2) Unquoted 25.4 24.2
Equities (CARE, Tuffnells) Unquoted 21.0 10.4
Bonds (CARE, Platinum) Unquoted 5.0 4.7
Cash (CARE,Platinum, Tuffnells) 0.5 0.2
563.3 522.7
(1) Investments with the aim of generating a return above LIBOR to finance the interest and inflation swaps in the Pension
Trust. At 31 August 2015 this comprised £179m total return swap and £252m in a fund comprising a range of assets from
government bonds, hedge funds and equities that targets a return above LIBOR.
(2) The loan fund looks to generate a return over a portfolio of loans.
The assets held in the swap financing portfolio provide a swap-based hedge against the change in value of a proportion of
the Trust's liabilities for changes in long-term interest rates and inflation expectations.
The actual return on scheme assets during 2015 was a gain of £48.7m (2014: a gain of £65.2m).
The value of the assets held by the trust in Connect Group PLC issued financial instruments is £nil (2014: £nil).
Sensitivity of results to changes in the main assumptions:
Assumption Change in assumption Impact on IAS 19 liabilities
Discount rate +/- 0.5% -£34.8m/ +£39.1m
Rate of inflation +/- 0.5% +£36.3m/ -£33.3m
Life expectancy +/- 1 year +£15.2m/ -£15.2m
The sensitivity analysis for each significant actuarial assumption has been determined based on reasonably possible changes
to the assumptions at the end of the reporting period. It is based on a change in the key assumption while holding all
other assumptions constant. The effect of a change in more than one assumption will be different to the sum of the
individual changes. When calculating the sensitivities, the same methodology used to calculate the liability recognised in
the balance sheet has been applied. The methodology and types of assumptions used in preparing the sensitivity analysis is
consistent with the previous period.
The history of experience adjustments is as follows:
£m 2015 2014 2013 2012 2011
Present value of defined benefit obligation (432.0) (450.7) (419.2) (395.3) (348.3)
Fair value of assets 563.3 522.7 469.6 433.1 375.1
Impact of IFRIC 14 on defined benefit pension schemes (149.4) (93.0) (73.5) (73.8) (63.1)
Net deficit in the schemes (18.1) (21.0) (23.1) (36.0) (36.3)
Experience adjustments on scheme liabilities 25.1 0.8 (1.4) (1.0) (4.1)
Experience adjustments on scheme assets 28.7 44.6 27.9 34.0 (45.8)
The cumulative amount of actuarial gains and losses recognised in the statement of comprehensive income since the adoption
of IFRS is a loss of £20.7m (2014: a loss of £21.4m).
Defined contribution schemes
The Group operates a number of defined contribution schemes. For the year ended 31 August 2015, participating employer
contributions totalled £3.0m (2014: £2.8m) which is included in the Income Statement.
6. Investment revenue and finance costs
£m Note 2015 2014
Net change in fair value of derivative assets - 0.4
Investment revenue - 0.4
Interest on bank overdrafts and loans (5.8) (4.7)
Net interest expense on defined benefit obligation 5 (0.8) (0.9)
Interest payable on finance leases (0.4) (0.2)
Net change in fair value of derivative assets (0.2) -
Unwinding of discount on provisions - trading (0.1) (0.1)
Finance costs (7.3) (5.9)
Net finance costs (7.3) (5.5)
7. Income tax expense
£m 2015 2014
Adjusted Non-recurring and other items Total Adjusted Non-recurring and other items Total
Current tax 12.4 (2.3) 10.1 12.3 (1.0) 11.3
Adjustment in respect of prior year UK corporation tax (1.1) (0.9) (2.0) (2.4) - (2.4)
Total current tax charge 11.3 (3.2) 8.1 9.9 (1.0) 8.9
Deferred tax - current year (0.2) (0.3) (0.5) (0.4) - (0.4)
Deferred tax - prior year - - - (0.2) - (0.2)
Total tax on profit 11.1 (3.5) 7.6 9.3 (1.0) 8.3
Effective tax rate 19.7% 26.3% 18.7% 19.4%
The effective adjusted income tax rate for the year was 19.7% (2014: 18.7%). After adjusting for the impact of
non-recurring and other items of £3.5m (2014: £1.0m), the effective statutory income tax rate was 26.3% (2014: 19.4%).
The tax rates used in the 2015 and 2014 reconciliations of the tax charge are the main rates of UK corporation tax, those
being 20.6% (2014: 22.2%).
Reconciliation of the tax charge
£m 2015 2014
Profit before tax 29.0 43.1
Tax on profit at the standard rate of UK corporation tax 20.6% (2014: 22.2%) 5.9 9.5
Permanent differences 3.5 1.3
Share schemes - (0.2)
Adjustment in respect of prior year UK corporation tax (2.0) (2.6)
Impact of overseas tax rates 0.2 0.3
Total tax charge 7.6 8.3
Tax charges to other comprehensive income and directly in equity
£m 2015 2014
Current tax relating to the defined benefit pension scheme (0.8) (0.7)
Current tax relating to share based payments (0.6) (0.5)
Deferred tax relating to derivative financial instruments - 0.1
Deferred tax relating to share based payments 0.6 (0.5)
Deferred tax relating to retirement benefit obligations 0.9 0.6
Tax charges to other comprehensive income and directly in equity 0.1 (1.0)
8. Dividends
Amounts paid & proposed as distributions to equity shareholders in the years:
Paid & proposed dividends for the year 2015 2014 2015 2014
Per share Per share (5) £m £m
Interim dividend - paid 2.9p 2.8p 7.0 5.8
Final dividend - proposed 6.3p 6.0p 15.4 12.3
9.2p 8.8p 22.4 18.1
Recognised dividends for the year
Final dividend - prior year 6.0p 5.7p 14.4 11.9
Interim dividend - current year 2.9p 2.8p 7.0 5.8
8.9p 8.5p 21.4 17.7
(5) Rebased dividend per share adjusts last year's reported figures by the rights issue bonus factor adjustment of 0.9015
following the 2 for 7 rights issue in December 2014
The proposed final dividend for the year ended 31 August 2015 of 6.3p is subject to approval by shareholders at the Annual
General Meeting on 4 February 2016 and in line with IAS 10 - 'Events after the reporting period', this dividend has not
been included as a liability in these accounts. The proposed dividend, if approved, will be paid on 12 February 2016 to
shareholders on the register at close of business on 15 January 2016.
9. Earnings per share
2015 2014
£m Pence £m Pence
Earnings Weighted average number of shares million per share Earnings Weighted average number of shares million Rebased (1) per share
Weighted average number of shares in issue 233.9 208.0
Shares held by the ESOP (weighted) (3.0) (1.6)
Basic earnings per share (EPS)
Adjusted earnings attributable to ordinary shareholders 45.5 230.9 19.7p 40.5 206.4 19.6p
Non-recurring and other items (24.0) (5.9)
Earnings attributable to ordinary shareholders 21.5 230.9 9.3p 34.6 206.4 16.8p
Diluted earnings per share (EPS)
Effect of dilutive share options 7.6 7.0
Diluted adjusted EPS 45.5 238.5 19.0p 40.5 213.4 19.0p
Diluted EPS 21.5 238.5 9.0p 34.6 213.4 16.2p
(1) Rebased Earnings per share and rebased Dividends per share adjust last year reported figures by the rights issue bonus
factor adjustment of 0.9015 following the 2 for 7 rights issue in December 2014
Dilutive shares increased the basic number of shares at 31 August 2015 by 7.6m to 238.5m (31 August 2014: 213.4m).
The calculation of diluted EPS reflects the potential dilutive effect of employee incentive schemes of 4.1m dilutive shares
(31 August 2014: 5.4m) and a weighted 3.5m shares being the time apportioned share capital relating to the deferred
consideration for the acquisition of The Big Green Parcel Holding Company Limited.
10. Intangible assets
Acquired Intangibles Internally generated development costs Computer software costs
£m Goodwill Customer relationships Trade name Software Total
Cost:
At 1 September 2014 44.2 22.0 3.0 0.7 6.0 6.8 82.7
Additions - - - - 1.6 3.6 5.2
Acquisition of subsidiary 52.1 26.8 30.5 0.8 - - 110.2
Transfers between asset classes - - - - 2.3 5.1 7.4
Disposals - - - - (0.8) (1.7) (2.5)
At 31 August 2015 96.3 48.8 33.5 1.5 9.1 13.8 203.0
Accumulated amortisation:
At 1 September 2014 - 8.5 1.4 0.6 3.9 2.6 17.0
Amortisation charge - 5.1 2.6 0.2 1.6 1.9 11.4
Transfers between asset classes - - - - 0.7 1.6 2.3
Disposal - - - - (0.8) (1.7) (2.5)
At 31 August 2015 - 13.6 4.0 0.8 5.4 4.4 28.2
Net book value at 31 August 2015 96.3 35.2 29.5 0.7 3.7 9.4 174.8
Cost:
At 1 September 2013 44.2 21.7 3.0 0.7 5.6 25.3 100.5
Additions - 0.3 - - 1.6 1.9 3.8
Disposals - - - - (1.2) (20.4) (21.6)
At 31 August 2014 44.2 22.0 3.0 0.7 6.0 6.8 82.7
Accumulated amortisation:
At 1 September 2013 - 5.6 0.9 0.5 3.5 21.8 32.3
Amortisation charge - 2.4 0.5 0.1 1.6 1.2 5.8
Impairment - 0.5 - - - - 0.5
Disposals - - - - (1.2) (20.4) (21.6)
At 31 August 2014 - 8.5 1.4 0.6 3.9 2.6 17.0
Net book value at 31 August 2014 44.2 13.5 1.6 0.1 2.1 4.2 65.7
0.1
2.1
4.2
65.7
During the year to 31 August 2015, goodwill and intangibles totalling £110.2m arose on the Group's acquisition of Tuffnells
on 19 December 2014. Further details are disclosed in note 11. The Group leases software under various finance lease
arrangements. The net book value of finance leases contained within the software balance above is £0.7m (2014: £0.9m).
In prior year the Group acquired the trade and assets of Martin Lavell giving rise to the recognition of an intangible
asset of £0.3m for customer relationships.
Goodwill and Intangibles by CGU
Goodwill of £4.1m and acquired intangibles totalling £5.1m arose from the acquisition of the business and assets of
Bertrams on 20 March 2009 have been allocated to the Connect Books combined cash generating unit (CGU).
The acquisition of Dawson Holdings PLC on 23 August 2011, resulted in goodwill of £18.1m and acquired intangibles of £7.8m.
These have been allocated to the two remaining individual CGU's identified at the time of the acquisition; Dawson Books and
Media Direct.
On the acquisition of Hedgelane Limited on 23 April 2012, the Group recognised goodwill of £20.9m and acquired intangibles
of £10.4m which have been allocated to the Education and Care CGU.
The acquisition of 100% of the issued share capital of Houtschild Internationale Boekhandel B.V. on 13 June 2012 produced a
further £0.3m of goodwill.
The acquisition of Erasmus on 17 January 2013 generated £0.8m of goodwill and £0.3m of acquired intangible assets.
The acquisition of certain Blackwell contracts on 20 May 2013 generated £2.0m of acquired intangibles.
The acquisition of trade and assets of Martin Lavell acquired on 1 September 2013 generated acquired intangibles of £0.3m.
The acquisition of Tuffnells on 19 December 2014 generated £52.1m of goodwill and £58.1m of intangible assets. Further
details are disclosed in note 11. None of the goodwill arising on the acquisition in the year is expected to be deductible
for tax purposes.
Goodwill is not amortised, but tested annually for impairment or more frequently if there are indications that goodwill
might be impaired with the recoverable amount being determined from value in use calculations. The recoverable amounts of
the combined cash generating units are determined from the value in use calculations. The Group prepares cash flow
forecasts derived from the most recent budgets and forecasts for the following 3 years as approved by the Board and
extrapolates these cash flows on an estimated growth rate of 1% into perpetuity. The rate used to discount the forecast
cash flows range from 12.1% to 12.5%, being the Group's risk adjusted pre-tax WACC, specific for each cash generating unit.
Pre-tax discount rates are derived from the Group's post-tax WACC of 8% risk adjusted by 2%. The calculation of value in
use is sensitive to the discount rate and growth rates used. Given the improved outlook in the performance of Connect
Books, higher growth rates included in the assumptions for this division increase the value in use. Management believes
that no reasonable potential change in the above key assumptions would cause the carrying value to exceed its recoverable
amount.
Goodwill Acquired Intangibles Total
£m 2015 2014 On acquisition 2015 2014 On acquisition 2015 2014 On acquisition
Connect Books 17.6 17.6 17.6 4.2 5.6 12.7 21.8 23.2 30.3
Connect Media 5.7 5.7 5.7 1.2 1.6 2.6 6.9 7.3 8.3
Connect News - - - 0.2 0.2 0.3 0.2 0.2 0.3
Connect Education and Care 20.9 20.9 20.9 6.2 7.8 10.4 27.1 28.7 31.3
Connect Parcel Freight 52.1 - 52.1 53.6 - 58.1 105.7 - 110.2
96.3 44.2 96.3 65.4 15.2 84.1 161.7 59.4 180.4
The individual material intangible assets relate to the customer relationships and brand acquired on the acquisition of
Tuffnells. The carrying value of these assets at 31 August 2015 is £24.5m and £28.5m respectively with a remaining
amortisation period of 7 and 9.5 years respectively.
11. Acquisitions
The acquisition of Tuffnells made during the period contributed £114.4m to the Group's revenue and £9.7m to the Group's
operating profit before acquired intangible amortisation and acquisition related costs.
The estimated contributions of the acquired business to the results of the Group, as if the acquisition had been made at
the beginning of the period, are as follows:
£m
Revenue 159.8
Operating profit before intangible amortisation and acquisition related costs 14.4
The net cash outflow in respect of the acquisition of the Big Green Parcel Holding Company Limited (Tuffnells) in the year
comprised:
£m
Cash consideration (114.0)
Cash acquired 8.3
Net cash outflow relating to acquisition (105.7)
Acquisition related costs (recorded in non-recurring and other items) (3.2)
Total cash outflow in respect of acquisitions (108.9)
Acquisitions are accounted for under the acquisition method of accounting. The Group undertakes a process to identify the
fair values of the assets acquired and the liabilities assumed, including the separate identification of intangible assets
in accordance with IFRS 3 'Business Combinations'. Until this assessment is complete, the allocation period remains open up
to twelve months from the acquisition date.
On 19 December 2014, Smiths News Holdings Limited acquired 100% of the issued share capital of The Big Green Parcel Holding
Company Limited (Tuffnells) for a cash consideration of £114.0m and deferred contingent consideration of up to £15.3m,
payable over 3 years following the acquisition contingent on both profit targets and the continued employment of certain
former owners. The acquisition has been accounted for in accordance with IFRS 3 Business Combinations. The Big Green Parcel
Holding Company Limited's main trading subsidiary is Tuffnells Parcels Express Limited. Tuffnells Parcels Express Limited
is a leading UK provider of next-day B2B delivery of mixed freight and parcel consignments, specialising in items of
irregular dimension and weight, examples of which include bulky furnishings, building materials and automotive parts.
The initial cash cost of the acquisition was £114.0m, financed by a combination of increased debt facilities and a c.£55m
Rights Issue. The initial cash cost of £114.0m plus £0.5m of deferred consideration is consideration as defined by IFRS 3
and has been allocated against the identified net assets with the balance recorded as goodwill.
IFRS 3 requires that any payments that are contingent on future employment be charged to the income statement. The total
£15.3m of deferred consideration includes £14.8m that is contingent on both profit targets and the continued employment of
the former owners of The Big Green Parcel Holding Company Limited. This comprises:
- Up to £4.8m of deferred share capital and £3.8m in cash being the fair value of deferred contingent consideration
payable conditional on the financial performance and on continued employment in the 12 month period from 1 September 2014
to 31 August 2015;
- Up to a further £2.0m of deferred share capital and £1.1m of cash payable conditional on the financial performance and
continued employment in the 12 month period from 1 September 2015 to 31 August 2016; and
- Up to a further £2.0m of deferred share capital and £1.1m of cash payable conditional on the financial performance and
continued employment in the 12 month period from 1 September 2016 to 31 August 2017.
The remaining £0.5m deferred consideration is contingent solely upon future profit targets across the 36 month period from
1 September 2014 to 31 August 2017 and is included on the Director's best estimate of the likely overall payment. The
provisional effect of the acquisition on the Group's assets and liabilities is as follows:
Allocation of purchase price
£m Acquired balance sheet Fair value adjustments Fair value
Fixed assets 21.7 (3.1) 18.6
Stock 0.6 - 0.6
Trade and other receivables 13.1 (0.1) 13.0
Acquired intangible assets - 58.1 58.1
Deferred tax 0.9 (9.9) (9.0)
Other liabilities (4.6) (4.2) (8.8)
Trade and other payables (14.4) (2.1) (16.5)
Net debt 8.3 - 8.3
Pensions (1.9) - (1.9)
Net assets 62.4
Cash consideration 114.0
Contingent purchase consideration 0.5
Total Consideration 114.5
Goodwill arising on acquisition 52.1
The fair value of receivables acquired (shown above) approximate to the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial.
The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by
customer related intangibles of £26.8m, the value of the 'Big Green Parcel Machine' trade name of £30.5m and other
intangibles of £0.8m with residual goodwill arising of £52.1m. The goodwill represents:
- The value of the acquired workforce
- Potential to leverage the expertise and achieve synergies with other Connect Group distribution businesses
The potential undiscounted amount of all future payments that Connect Group plc could be required to make under the
contingent consideration arrangement, which has been measured based on current expectations of future performance is £15.3m
and the fair value is £15.3m.
In the prior year the Group acquired the trade and assets from Martin Lavell Ltd on 1 September 2013, a significant
distributor in the Business-to-Business sector of newspaper and magazine supplies in London, for a consideration of £0.3m.
The acquisition gave rise to the recognition of a £0.3m intangible asset for customer relationships.
12. Acquisition of non-controlling interests
On 27 August 2015, the Group purchased the remaining 49% of shares in Magpie Investments Limited for an initial cash
consideration of £5.1m with a deferred consideration of £3.3m which is contingent on both profit targets and continued
employment of the former owners. This deferred contingent consideration will be charged to the income statement over a five
year period to August 2020.
13. Cash and borrowings
Cash and borrowings by currency (Sterling equivalent) are as follows:
£m Sterling Euro US Dollar Other Total 2015 2014
Cash and cash equivalents 6.2 3.2 0.9 0.6 10.9 20.4
Term loan - disclosed within current liabilities - - - - - -
Term loan - disclosed within non-current liabilities (98.4) - - - (98.4) (48.4)
Revolving credit facility (55.0) (1.5) - - (56.5) (60.9)
Total borrowings (153.4) (1.5) - - (154.9) (109.3)
Net borrowings (147.2) 1.7 0.9 0.6 (144.0) (88.9)
Total borrowings
Amount due for settlement within 12 months (55.0) (1.5) - - (56.5) (60.9)
Amount due for settlement after 12 months (98.4) - - - (98.4) (48.4)
(153.4) (1.5) - - (154.9) (109.3)
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less. The carrying amount of these assets approximates their fair value.
At 31 August 2015, the Group had £95.1m (2014: £90.7m) of undrawn committed borrowing facilities in respect of which all
conditions precedents had been met. Interest payable under the current facility is calculated as the cost of one month
LIBOR plus an interest margin of between 1.35% and 2.35% dependent on the net debt/ adjusted EBITDA covenant ratio.
As at 31 August 2015, the Group had £250m committed bank facilities in place (2014: £200m). The facility was extended in
November 2014 to £250m to support the acquisition of Tuffnells.
Bank facilities now comprise:
· a £100m syndicated term loan with £10m repayable in February 2017, August 2017, February 2018 and August 2018 with
the balance repayable in November 2018;
· a £150m syndicated revolving credit facility which expires in November 2018;
14. Provisions
£m Reorganisation provisions Insurance provision Deferred contingent consideration Property provisions Total
Gross provision:
At 1 September 2014 0.7 1.4 - 3.6 5.7
Additions 2.3 0.1 5.2 1.0 8.6
Acquisition of business - 1.3 - 4.1 5.4
Released (0.2) - - (0.2) (0.4)
Utilised in year (1.8) - - (0.6) (2.4)
At 31 August 2015 1.0 2.8 5.2 7.9 16.9
Discount:
At 1 September 2014 - - - (0.4) (0.4)
Additions - - - - -
Acquisition of business - - - (0.1) (0.1)
Unwinding of discount utilisation - - - - -
At 31 August 2015 - - - (0.5) (0.5)
Net book value at 31 August 2015 1.0 2.8 5.2 7.4 16.4
Gross provision:
At 1 September 2013 1.4 1.4 1.9 6.4 11.1
Additions 0.7 0.2 0.2 1.3 2.4
Released (0.1) - - (1.5) (1.6)
Utilised in year (1.3) (0.2) (2.1) (2.6) (6.2)
At 31 August 2014 0.7 1.4 - 3.6 5.7
Discount:
At 1 September 2013 - - - (0.8) (0.8)
Additions - - - (0.1) (0.1)
Disposals - - - 0.4 0.4
Unwinding of discount utilisation - - - 0.1 0.1
At 31 August 2014 - - - (0.4) (0.4)
Net book value at 31 August 2014 0.7 1.4 - 3.2 5.3
£m 2015 2014
Included within current liabilities 10.4 3.4
Included within non-current liabilities 6.0 1.9
Total 16.4 5.3
Reorganisation provisions include amounts for programmes which consist primarily redundancy costs, that have been announced
prior to the year end and are all expected to be utilised during the following financial year.
Insurance provisions represent the expected future costs of employer's liability, public liability and motor accident
claims.
The property provision represents the estimated future cost of the Group's onerous and reversionary leases in non-trading
properties based on known and estimated rental sub-leases. This provision has been discounted at a risk adjusted rate and
this discount will be unwound over the life of the leases. The provision is expected to be utilised over the period to
2024, when all of the leases provisions will have expired. Deferred contingent consideration relates to amounts provided in
relation to the acquisition of The Big Green Parcel Holding Company Limited (Tuffnells) on 19 December 2014, the cost being
contingent upon achievement of profit targets and the future employment of the former owners of the business.
15. Operating lease commitments
The group as lessee:
Minimum lease payments under non-cancellable operating leases are as follows:
2015 2014
£m Land & buildings Equipment & vehicles Total Land & buildings Equipment & vehicles Total
Within one year 7.9 3.2 11.1 7.7 2.1 9.8
In the second to fifth years inclusive 24.5 10.6 35.1 25.6 1.5 27.1
In more than five years 22.1 - 22.1 24.3 - 24.3
54.5 13.8 68.3 57.6 3.6 61.2
The Group leases various distribution properties and plant and equipment under non-cancellable operating lease agreements.
The leases have varying terms, escalation clauses and renewal rights.
The group as lessor:
At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:
£m 2015 2014
Within one year 0.1 0.1
In the second to fifth years inclusive 0.1 0.2
0.2 0.3
Property rental income earned during the year was £0.1m (2014: £0.1m).
16. Net cash inflow from operating activities
£m 2015 2014
Operating profit 36.3 48.6
Losses on disposal of assets 0.2 -
Share of profits of jointly controlled entities (0.3) (0.3)
Adjustment for pension funding (5.4) (4.6)
Depreciation of property, plant and equipment 7.3 5.2
Amortisation and impairment of intangible assets 11.4 6.3
Share based payments 8.0 1.1
Decrease/(increase) in inventories 3.8 (1.7)
Increase in receivables (7.5) (2.4)
(Increase)/decrease in payables (4.4) 7.3
Income tax paid (8.7) (9.8)
Increase/(decrease) in provisions 5.8 (2.3)
Net cash inflow from operating activities 46.5 47.4
17. Share Capital
(a) Share capital
£m 2015 2014
Authorised:
300.0m ordinary shares of 5p each 15.0 15.0
Issued and fully paid:
At 1 September 9.5 9.2
Shares issued during the year 2.7 0.3
244.1m ordinary shares of 5p each (2014:189.3m) 12.2 9.5
(b) Movement in share capital
Number (m) Ordinary shares of 5p each
31 August 2014 189.3
Shares issued during the year 54.8
At 31 August 2015 244.1
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at the general meetings of the Company. The Company has one class of ordinary shares, which carry no right to
fixed income.
During the year to 31 August 2015, 54,855,669 ordinary 5p shares were issued for a consideration of £55,765,415 resulting
in a share premium of £49,889,432 after accounting for equity issue related costs of £3.1m. 54,137,236 shares were
allotted as a result of the rights issue in December 2014.
During the year to 31 August 2014, 4,959,905 ordinary 5p shares were issued for a consideration of £4,373,469, resulting in
a share premium of £4,125,474. Of these 4,530,012 related to the deferred share capital payable to the former owners of
Hedgelane Limited following its acquisition in April 2012, the remainder were issued to satisfy share scheme exercises.
(c) Share premium
£m 2015 2014
Balance at 1 September 5.3 1.2
Premium arising on issue of equity shares 49.9 4.1
Balance at 31 August 55.2 5.3
18. Reserves
(a) Demerger reserve
£m 2015 2014
At 1 September (280.1) (280.1)
At 31 August (280.1) (280.1)
This relates to reserves created following the capital re-organisation undertaken as part of the demerger of WH Smith PLC
in 2006. The balance represented the difference between the share capital and reserves of the Group restated on a pro-forma
basis as at 31 August 2004 and the previously reported share capital.
(b) Own shares reserve (formerly referred to as ESOP reserve)
£m 2015 2014
Balance at 1 September (5.2) (1.5)
Acquired in the period (4.2) (6.3)
Disposed of on exercise of options 5.3 2.6
Balance at 31 August (4.1) (5.2)
The reserve represents the cost of shares in Connect Group PLC purchased in the market and held by the Smiths News Employee
Benefit Trust to satisfy awards and options granted under the Group's Executive Share Schemes. The number of ordinary
shares held by the Trust at 31 August 2015 was 2,807,124 (2014: 2,203,191).
(c) Hedging & translation reserve
£m 2015 2014
Balance at 1 September (0.3) (0.6)
Net movement in cash flow hedges (net of tax) (0.6) 0.5
Amounts previously recognised in the consolidated statement of comprehensive income 0.5 -
Exchange differences on translating net assets of foreign operations (0.1) (0.2)
Balance at 31 August (0.5) (0.3)
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash
flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in the profit or loss only when
the hedged transaction ceases to be effective.
19. Related party transactions
Transactions between businesses within this Group, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.
Transactions with the Group's pension schemes are disclosed in note 5.
Trading transactions
Sales to related parties Amounts owed by related parties
£m 2015 2014 2015 2014
Jointly controlled entities 3.2 3.2 0.6 0.6
Sales to related parties are for management fees, payment is due on the last day of the month following the date of
invoice.
Non-trading transactions
Loans to related parties
£m 2015 2014
Jointly controlled entities 0.3 0.4
The loans to related parties have no set date for repayment and accrue interest at LIBOR +2%.
Aggregate remuneration of key management personnel
The remuneration of the Directors and the executive management team, who are the key management personnel of the Group, is
set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures.'
£m 2015 2014
Short-term employee benefits 4.1 3.0
Post-employment benefits - -
Share based payments 0.8 0.8
4.9 3.8
This information is provided by RNS
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