The following draft financial statements relate to the Duke Group plc:
|
2000 |
1999 |
|
|
£m |
£m |
|
|
Fixed Assets: |
||
|
Intangible assets – goodwill |
90 |
83 |
|
Tangible assets |
1239 |
1010 |
|
Investments |
780 |
270 |
|
2109 |
1363 |
|
|
Current Assets: |
||
|
Stocks |
750 |
588 |
|
Debtors |
660 |
530 |
|
Cash at bank and in hand |
45 |
140 |
|
1455 |
1258 |
|
|
Creditors: amounts falling due within one year |
(1501) |
(1213) |
|
Net Current Assets |
(46) |
45 |
|
Total assets less current liabilities |
2063 |
1408 |
|
Creditors: amounts falling due after more than one year |
(1262) |
(930) |
|
Minority interests – equity |
(250) |
(150) |
|
551 |
328 |
|
|
Capital and Reserves: |
||
|
Called up share capital: |
||
|
– ordinary shares of £1 |
100 |
70 |
|
– 7% redeemable preference shares of £1 each |
136 |
130 |
|
Share premium account |
85 |
15 |
|
Revaluation reserve |
30 |
10 |
|
Profit and loss account |
200 |
103 |
|
551 |
328 |
|
|
Draft Group Profit and Loss Account for the year ended 31 May 2000 |
||
|
£m |
£m |
|
|
Turnover– continuing operations |
5795 |
|
|
– acquisitions |
1515 |
|
|
7310 |
||
|
Cost of sales |
(5920) |
|
|
Gross profit |
1390 |
|
|
Distribution and administrative expenses |
(772) |
|
|
Share of operating profit in associate |
98 |
|
|
Operating profit– continuing operations |
598 |
|
|
– acquisitions |
118 |
716 |
|
Profit on sale of tangible fixed assets |
15 |
|
|
Interest receivable |
34 |
|
|
Interest payable |
(22) |
|
|
12 |
||
|
Profit on ordinary activities before taxation |
743 |
|
|
Tax on profit on ordinary activities |
(213) |
|
|
(including tax on income from associated undertakings £15 million) |
||
|
Profit on ordinary activities after taxation |
530 |
|
|
Minority interests – equity |
(97) |
|
|
Profit attributable to members of the parent company |
433 |
|
|
Dividends |
135 |
|
|
Other non equity appropriations |
6 |
(141) |
|
Retained profit for the year |
292 |
|
|
Group Statement of Total Recognised Gains and Losses for the year ended 31 May 2000 |
||
|
£m |
||
|
Profit attributable to members of the parent company |
433 |
|
|
Surplus on revaluation of fixed assets |
20 |
|
|
Exchange difference on retranslation of foreign equity investment |
205) |
|
|
Exchange difference on loan to finance foreign equity investment |
10 |
|
|
258 |
||
|
Reconciliation of Shareholders’ Funds for the year ended 31 May 2000 |
||
|
Total recognised gains and losses |
258 |
|
|
Dividends |
(135) |
|
|
Other movements: |
||
|
New shares issued |
100 |
|
|
Total movements during the year |
223 |
|
|
Shareholders funds at 1 June 1999 |
328 |
|
|
Shareholders funds at 31 May 2000 |
551 |
|
The following information is relevant to the Duke Group plc:
(i) Duke acquired an eighty per cent holding in Regent plc on 1 June 1999. The fair values of the assets of Regent on 1 June 1999 were as follows:
|
£m |
|
|
Tangible fixed assets |
60 |
|
Stocks |
30 |
|
Debtors |
25 |
|
Cash at bank and in hand |
35 |
|
Trade Creditors |
(20) |
|
Corporation Tax |
(30) |
|
100 |
The purchase consideration was £97 million and comprised 20 million ordinary shares of £1 in Duke, valued at £4, and £17 million in cash. The group amortises goodwill over ten years.
(ii) The tangible fixed asset movement for the period comprised the following amounts at net book value:
|
£m |
|
|
Balance at 1 June 1999 |
1010 |
|
Additions (including Regent) |
278 |
|
Revaluations of properties |
20 |
|
Disposals |
(30) |
|
Depreciation |
(39) |
|
1239 |
(iii) There have been no sales of fixed asset investments in the year. The investments included under fixed assets comprised the following items:
|
£m |
£m |
|
|
2000 |
1999 |
|
|
Investment in associated company |
300 |
220 |
|
Trade investment (including purchase of foreign equity |
480 |
50 |
|
investment of £400m equivalent during year |
||
|
to 31 May 2000) |
||
|
780 |
270 |
(iv) Interest receivable included in debtors was £15m as at 31 May 1999 and £17m as at 31 May 2000.
(v) Creditors: amounts falling due within one year comprised the following items:
|
£m |
£m |
|
|
2000 |
1999 |
|
|
Trade creditors (including interest payable £9m (2000) Nil (1999)) |
1193 |
913 |
|
Corporation tax |
203 |
200 |
|
Dividends |
105 |
100 |
|
1501 |
1213 |
(vi) Duke had allotted 10 million ordinary shares of £1 at a price of £2 upon the exercise of directors’ options during the year.
(vii) Included in creditors: amounts payable after more than one year is a bill of exchange for £100 million (raised 30 June 1999) which was given to a supplier on the purchase of fixed assets and which is payable on 1 July 2001.
(viii) The exchange differences included in the Statement of Total Recognised Gains and Losses relate to a transaction involving a foreign equity investment. A loan of £300 million was taken out during the year to finance a foreign equity investment in Peer of £400 million. Both amounts are after retranslation at 31 May 2000.
(ix) The preference share dividends are always paid in full on 1 July each year and at 31 May 2000 the preference shares have a par value of £130 million.
Required
(a) Prepare a group cash flow statement using the indirect method for the Duke Group plc for the year ended 31 May 2000 in accordance with the requirements of FRS 1 (Revised), Cash Flow Statements.
Your answer should include the following:
(i) a reconciliation of operating profit to operating cash flows;
(ii) an analysis of cash flows for any headings netted in the cash flow statement.
The notes regarding the acquisition of the subsidiary and a reconciliation of net cash flow to movement in net debt are not required.
(b) Discuss the nature of the additional information which is provided by the Group Cash Flow Statement of the Duke group in (a) above as compared to the Group Profit and Loss Account and Group Balance Sheet of Duke.