IFRS 5, discontinued operations disclosures, assets held for sale, post balance sheet disposal

Greencore Group plc – Annual report – 28 September 2018

Industry: food and drink

  1. DISCONTINUED OPERATIONS AND DISPOSAL GROUP HELD FOR SALE

On 15 October 2018, the Group announced that it had reached an agreement to sell Greencore’s US business to Hearthside Food Solutions LLC for cash consideration of $1,075m, subject to customary adjustments for cash, debt and working capital. On 7 November 2018 the shareholders approved disposal and the transaction subsequently completed on 25 November 2018.

At 28 September 2018, the disposal of Greencore’s US business met the recognition criteria under IFRS 5 Non-current assets held for sale and discontinued operations. The results of the US business are presented as discontinued and are shown separately from continuing operations. The comparative 2017 financial information in the Group Income Statement has also been presented as discontinued for the purposes of enabling meaningful comparison.

Greencore’s US business is included within the Convenience Foods US operating segment which has been presented as a discontinued reporting segment (Note 2).

RESULTS OF DISCONTINUED OPERATIONS

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The profit from discontinued operations of £23.9 million (2017: loss of £3.4 million) is attributable entirely to the owners of the Company.

EMPLOYMENT RELATING TO DISCONTINUED OPERATIONS

The average monthly number of persons employed by the discontinued operation during the year was:

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The staff costs for the year for the above employees was:

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CASH INFLOWS/(OUTFLOWS) FROM DISCONTINUED OPERATIONS

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ASSETS AND LIABILITIES OF DISPOSAL GROUP HELD FOR SALE

At 28 September 2018, the following assets and liabilities were classified as held for sale:

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CUMULATIVE INCOME OR EXPENSE INCLUDED IN OTHER COMPREHENSIVE INCOME

The movement in Other Comprehensive Income in the year is a credit of £43.7m related to disposal group held for sale (2017: charge of £55.7m).

The total cumulative amount carried in the foreign currency translation reserve at year end related to the disposal group held for sale is a gain of £8.2m.

MEASUREMENT OF FAIR VALUE

The disposal group was measured at its carrying value which was lower than its fair value less costs to sell. No impairment to the disposal group was necessary at 28 September 2018.

FAIR VALUE HIERARCHY AND VALUATION TECHNIQUE

Fair value less costs to sell is based on the agreed consideration for Greencore’s US business as per the Stock Purchase Agreement with the vendor. This is a Level 3 on the fair value hierarchy.

  1. EARNINGS PER ORDINARY SHARE

BASIC EARNINGS PER ORDINARY SHARE

Basic earnings per Ordinary Share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period, excluding Ordinary Shares purchased by the Company and held in trust in respect of the Annual Bonus Scheme, the Performance Share Plan and the Executive Share Option Scheme. The adjusted figures for basic and diluted earnings per Ordinary Share is calculated as profit attributable to equity holders of the Company adjusted to exclude exceptional items (net of tax), the effect of foreign exchange (‘FX’) on intercompany and certain external balances where hedge accounting is not applied, the movement in the fair value of all derivative financial instruments and related debt adjustments, the amortisation of acquisition related intangible assets (net of tax) and the effect of the interest expense relating to legacy defined benefit pension liabilities, net of tax.

NUMERATOR FOR EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE CALCULATION

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DENOMINATOR FOR EARNINGS PER SHARE CALCULATION

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DILUTED EARNINGS PER ORDINARY SHARE

Diluted earnings per Ordinary Share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares. Employee Performance Share Plan awards, which are performance based, are treated as contingently issuable shares, because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently issuable Ordinary Shares are excluded from the computation of diluted earnings per Ordinary Share where the conditions governing exercisability have not been satisfied as at the end of the reporting period. A total of 12,886,062 (2017: 6,619,322) unvested shares were excluded from the diluted earnings per share calculation as they were either antidilutive or contingently issuable Ordinary Shares which had not satisfied the performance conditions attaching at the end of the 2018 financial year.

DENOMINATOR FOR DILUTED EARNINGS PER SHARE CALCULATION

A reconciliation of the weighted average number of Ordinary Shares used for the purpose of calculating the diluted earnings per share amounts is as follows:

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  1. SUBSEQUENT EVENTS

DISPOSAL OF DISCONTINUED OPERATIONS

The transaction to dispose of Greencore’s US business was completed on 25 November 2018, of which details have been included at Note 9. The disposal will be recognised in the Greencore Group plc half year Financial Statements for the period ended 29 March 2019. The transaction will be accounted for as a 100% disposal of Greencore’s US business in consideration for the cash payments outlined above.

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