Tesco 1999 Annual Report Download - page 41

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TESCO PLC ANNUAL REPORT 1999 39
Note 31 Reconciliation of operating profit to net cash 1999 1998
inflow from operating activities £m £m
Operating profit 934 849
Depreciation and goodwill amortisation 406 358
Increase in goods held for resale (69)(6)
Increase/(decrease) in development property 13 (108)
Increase in debtors (12)(36)
Increase in trade creditors 81 97
(Decrease)/increase in other creditors (32)2
Increase in working capital (19)(51)
Net cash inflow from operating activities 1,321 1,156
Note 32 Acquisitions
On 20 May 1998 the company acquired a controlling interest in Lotus, a chain of hypermarkets in Thailand, from the CP Group
for £206m. The results of this business from this date to 31 December 1998 have been consolidated within the Group profit and
loss account. In the period from 1 January 1998 to 20 May 1998 they made a loss after taxation of £3m, and in the year to
31 December 1997 they made a loss after taxation of £71m with no minority interests.
This acquisition has been accounted for using acquisition accounting and has been consolidated into the Tesco Group balance sheet
as follows:
Balance sheet Fair value Fair value
at acquisition adjustments balance sheet
£m £m £m
Fixed assets 185 (38) 147
Stock 23 – 23
Debtors 3–3
Net cash 2–2
Loans (19) – (19)
Creditors (67) – (67)
Shareholders’ funds 127 (38) 89
Goodwill 117
Total purchase consideration 206
The fair value adjustments of £38m relate to revaluation of the property portfolio.
The outflow of cash for the purchase of the Thailand business comprises:
£m
Cash consideration 117
Bank overdraft of acquired subsidiary undertakings (including loans of £19m) 89
206
The £206m purchase consideration comprises net cash outflow, £182m, acquired loans, £19m, and accrued acquisition costs, £5m.
Note 33 Post Balance Sheet event
On 23 March 1999, the Group announced it is to form a partnership company with Samsung Corporation to develop hypermarkets
in South Korea. The Group will invest £80m in cash for 51% of the business and a further £50m for an additional 30% holding in
June 1999.