64
McPHERSON’S LIMITED
ANNUAL REPORT 2015
NOTE 14. DISPOSAL, ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
AND INTEREST IN JOINT VENTURE
(A) HOUSEWARES DISPOSAL
On 19 August 2014, the Group announced its plan to divest 51% of its Housewares business to the Fackelmann Group. The Fackelmann Group is a
global manufacturer and distributor of kitchen, baking, home, leisure and bathroom products. The new business would be run as a joint venture
between the parties.
On 31 October 2014 the Group transferred its Australian, Singapore and Hong Kong Housewares business into a new venture and then sold 51% of
this venture to the Fackelmann Group. The new venture markets and distributes the combined ranges of housewares products.
As part of the disposal the parties entered into a reciprocal put/call option whereby, the Group has the option to put its remaining shares to the
Fackelmann Group, and the Fackelmann Group has the option to call the Group to sell its remaining shares. The put and call options can be
exercised by either party at any time after the first anniversary of the sale.
As a result of the disposal, and based on the terms of the contract, the new venture is deemed to represent a joint venture on the basis that both
shareholders need to agree on decisions in several key areas. Consequently, the Group does not consolidate the results of this joint venture, rather
it equity accounts for its share of the joint venture’s profit or loss and movements in other comprehensive income. Any dividends received from
the joint venture in future periods will be recognised as a reduction in the carrying amount of the Group’s investment in this entity.
The details of the disposal are set out below:
$’000
Cash received
6,571
Fair value of put option
1,347
Total sale consideration
7,918
Fair value of 49% interest retained
7,607
Carrying amount of net assets disposed
(15,525)
Gain on sale
-
Put option
As previously noted, the Group has entered into a reciprocal put/call option as part of the sale. The put and call options can be exercised by either
party at any time from 1 January 2016. The final amount to be received by the Group upon sale of its remaining shares will be dependent upon the
earnings before interest and tax (EBIT) generated by the joint venture in the financial year prior to when the option is exercised.
In accordance with Australian Accounting Standards the Group was required to estimate the value of the put option at the date of disposal. This
amount has been included as part of the gain on sale calculation and has been recognised as an asset by the Group. The value of this option has
changed since the date of disposal and may continue to change over time up until the date the option is exercised. The final payment received
may significantly differ from the current estimate made. The Group is required to reassess the value of the put option at each balance date, with
any changes being recognised through profit or loss. At 30 June 2015 the Group determined that the value of the option was $2,587,000
representing a gain of $1,240,000 which has been recognised in the income statement.
The carrying amounts of assets and liabilities disposed of:
$’000
Inventories
12,998
Property, plant and equipment
255
Intangible assets
3,435
Deferred tax assets
144
Total assets
16,832
Employee benefits
510
Deferred tax liabilities
797
Total liabilities
1,307
Net assets
15,525
The fair value of the net assets sold was determined to be equivalent to their carrying value. As such the Group’s 49% retained share was valued
at $7,607,000. This amount was recognised as the carrying value of the Group’s investment in the joint venture immediately after the disposal.
During the period from 1 November 2014 to 30 June 2015 the Group has equity accounted for its share of the joint venture’s net profit and
movements in other comprehensive income. The Group has therefore recognised $1,060,000 in profit in the current period and $162,000 in other
comprehensive income.
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS CONTINUED