Notes
Forming part of the financial statements

11. EARNINGS PER ORDINARY SHARE

Denominator computations
Number
‘000

Number
‘000
Number of shares at beginning of year 334,068 328,583
Shares issued in lieu of dividend 2,538 1,852
Shares issued in respect of options exercised 590 433
Shares issued and held in trust in respect of the Joint Share Ownership Plan - 3,200
     
Number of shares at end of year 337,196 334,068
     
     
Weighted average number of ordinary shares (basic)* 321,579 316,763
Adjustment for the effect of conversion of options 8,492 7,000
     
Weighted average number of ordinary shares, including options (diluted) 330,071 323,763

* excludes 12.6m treasury shares (2010: 16.0m)

Profit attributable to ordinary shareholders 2011
€m
2010
€m
Earnings as reported 300.4 73.5
Adjustment for exceptional items, net of tax (note 6) (216.4) (0.1)
     
Earnings as adjusted for exceptional items, net of tax 84.0 73.4

Basic earnings per share Cent Cent
Basic earnings per share 93.4 23.2
Adjusted basic earnings per share 26.1 23.2
     
Diluted earnings per share    
Diluted earnings per share 91.0 22.7
Adjusted diluted earnings per share 25.4 22.7

Continuing operations €m €m
Earnings from continuing operations as reported 70.9 57.7
Adjustment for exceptional items, net of tax (note 6) 9.1 2.6
     
Earnings from continuing operations as adjusted for exceptional items, net of tax 80.0 60.3

Basic earnings per share Cent Cent
Basic earnings per share 22.0 18.2
Adjusted basic earnings per share 24.9 19.0
     
Diluted earnings per share    
Diluted earnings per share 21.5 17.8
Adjusted diluted earnings per share 24.2 18.6

Discontinued operations €m €m
Earnings from discontinued operations as reported 229.5 15.8
Adjustment for exceptional items, net of tax (note 6) (225.5) (2.7)
     
Earnings from discontinued operations as adjusted for exceptional items, net of tax 4.0 13.1

Basic earnings per share Cent Cent
Basic earnings per share 71.4 5.0
Adjusted basic earnings per share 1.2 4.1
     
Diluted earnings per share    
Diluted earnings per share 69.5 4.9
Adjusted diluted earnings per share 1.2 4.0

Basic earnings per share is calculated by dividing the profit attributable to the ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased/issued by the Company and held as treasury shares on the basis that these shares do not rank for dividend (at 28 February 2011: 12.6m shares; at 28 February 2010: 16.0m shares).

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period of the year that the options were outstanding.

Employee share options, 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. In accordance with IAS 33 Earnings per Share, these contingently issuable shares (totalling 324,487 at 28 February 2011 and 551,100 at 28 February 2010) are excluded from the computation of diluted earnings per share where the vesting conditions would not have been satisfied as at the end of the reporting period. Vesting of certain Interests awarded under the Joint Share Ownership Plan (totalling 750,000 at 28 February 2011 and 1,100,000 at 28 February 2010) is also contingent upon satisfaction of specified performance conditions and these have also been excluded from the computation of diluted earnings per share.

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12. BUSINESS COMBINATIONS
There were no business acquisitions during the current financial year.

Details of acquisitions completed during the previous financial year and accounted for using IFRS 3 (2004) Business Combinations, together with the completion dates, are as follows:

- the assets and goodwill of the Tennent’s beer business, including the rights to the Tennent’s brand worldwide (with the exception of Tennent’s Super and Tennent’s Pilsner), the Wellpark Brewery in Glasgow and certain distribution rights in relation to AB InBev products in Ireland, Northern Ireland and Scotland. This acquisition was completed on 28 September 2009.
- the assets and goodwill of the Gaymer Cider business, an established manufacturer and supplier of cider in the UK, including the rights to the Gaymers, Blackthorn, Olde English and other brands. This acquisition was completed on 15 January 2010.

Given the timing of the closure of the prior year business combinations, the assignment of fair values to identifiable net assets acquired was performed on a provisional basis, and as permitted under IFRS 3 (2004) Business Combinations, these provisional valuations were amended during the current financial year. The adjustments to the original fair values are set out below and relate to the costs of acquisition, the fair values of trade receivables & accruals and the recognition of an onerous lease obligation. The Directors do not believe that these fair value adjustments have a material impact on the financial performance or position of the Group and therefore the adjustments have been reflected in the current financial year only.

  Initial fair
value
assigned
€m
Adjustment
to initial
fair value
€m
Revised
fair
value
€m
Tennent’s      
Property, plant & equipment 65.5 - 65.5
Brands & other intangible assets 70.8 - 70.8
Inventories 6.0 - 6.0
Trade & other receivables – current 49.4 0.7 50.1
Trade & other receivables – non current 23.6 - 23.6
Trade & other payables (25.0) 4.0 (21.0)
Deferred tax assets 0.5 - 0.5
       
Net identifiable assets and liabilities acquired 190.8 4.7 195.5
       
Goodwill arising on acquisition 25.7 (4.3) 21.4
       
Total consideration 216.5 0.4 216.9

  Initial fair
value
assigned
€m
Adjustment
to initial
fair value
€m
Revised
fair
value
€m
Gaymers      
Property, plant & equipment 35.8 - 35.8
Brands & other intangible assets 10.9 - 10.9
Inventories 12.5 - 12.5
Trade & other receivables – current 1.4 - 1.4
Trade & other payables (2.4) - (2.4)
Provisions (5.3) (6.3) (11.6)
Deferred tax liabilities (4.5) - (4.5)
       
Net identifiable assets and liabilities acquired 48.4 (6.3) 42.1
       
Goodwill arising on acquisition 3.7 6.7 10.4
       
Total consideration 52.1 0.4 52.5

  Initial fair
value
assigned
€m
Adjustment
to initial
fair value
€m
Revised
fair
value
€m
Total      
Property, plant & equipment 101.3 - 101.3
Brands & other intangible assets 81.7 - 81.7
Inventories 18.5 - 18.5
Trade & other receivables – current 50.8 0.7 51.5
Trade & other receivables – non current 23.6 - 23.6
Trade & other payables (27.4) 4.0 (23.4)
Provisions (5.3) (6.3) (11.6)
Deferred tax liabilities (net) (4.0) - (4.0)
       
Net identifiable assets and liabilities acquired 239.2 (1.6) 237.6
       
Goodwill arising on acquisition 29.4 2.4 31.8
       
Total consideration 268.6 0.8 269.4

In addition to the further acquisition costs of €0.8m paid during the current financial year, the Group settled the deferred consideration of €30.8m to AB InBev which was payable on the first anniversary of completion of the acquisition of the Irish, Northern Irish and Scottish businesses of AB InBev (28 September 2010). This payable balance was included within accruals in the prior year (note 18).

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13. PROPERTY, PLANT & EQUIPMENT

  Freehold
land &
buildings
€m
Plant &
machinery
€m
Motor
vehicles
& other
equipment
€m
Total
€m
         
Group        
Cost or valuation        
At 1 March 2009 23.9 119.0 46.0 188.9
Translation adjustment 0.6 0.4 0.4 1.4
Acquisition of businesses (note 12) 47.8 37.1 16.4 101.3
Additions - 1.2 4.5 5.7
Disposals - - (1.5) (1.5)
         
At 28 February 2010 72.3 157.7 65.8 295.8
         
Translation adjustment 2.8 2.1 1.0 5.9
Additions - 4.0 15.2 19.2
Disposals - - (1.5) (1.5)
Disposal of Spirits and Liqueurs - (7.7) (0.7) (8.4)
         
At 28 February 2011 75.1 156.1 79.8 311.0
         
Depreciation        
At 1 March 2009 4.7 56.5 32.0 93.2
Charge for the year 0.5 10.7 5.6 16.8
Disposals - - (1.4) (1.4)
         
At 28 February 2010 5.2 67.2 36.2 108.6
         
Translation adjustment 0.1 - 0.1 0.2
Charge for the year 1.1 11.4 8.7 21.2
Disposals - - (0.3) (0.3)
Disposal of Spirits and Liqueurs - (5.2) (0.7) (5.9)
         
At 28 February 2011 6.4 73.4 44.0 123.8
         
Net book value        
At 28 February 2011 68.7 82.7 35.8 187.2
         
At 28 February 2010 67.1 90.5 29.6 187.2

No depreciation is charged on freehold land, which had a book value of €12.7m at 28 February 2011 (28 February 2010: €12.7m).

Depreciated replacement cost – 28 February 2010
An internal valuation was undertaken of all plant & machinery assets at 28 February 2010 that were valued under the depreciated replacement method in the prior year. As part of this valuation the Directors considered projected asset utilisations, changes in useful lives and obsolescence. The valuations resulted in no revaluation of this property, plant & machinery.

The freehold property acquired by the Group during the year ended 28 February 2010 was valued by external valuer, Timothy Smith, BSc MRICS - Gerard Eve LLP on an existing use basis and the acquired plant & machinery assets were valued by external valuer, D.R. Elston, FRICS - Elston Sutton & Co using the depreciated replacement cost method of valuation. These valuations were undertaken in accordance with the requirements of RICS Valuation Standards, sixth edition and the International Valuation Standards. Fixtures & fittings were not valued by external valuers.

Depreciated replacement cost – 28 February 2011
An internal valuation was undertaken of all property, plant & machinery assets at 28 February 2011 that were valued under the existing use basis and the depreciated replacement method in the preceding financial years. As part of this valuation the Directors considered land values, projected asset utilisations, changes in useful lives and obsolescence. The valuations resulted in no revaluation of this property, plant & machinery.

The Company has no property, plant & equipment.

Assets held under finance leases
Neither the Company nor the Group have any assets held under finance leases at 28 February 2011 (28 February 2010: nil).

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14. GOODWILL & INTANGIBLE ASSETS

  Goodwill
€m
Brands
€m
Other
intangible
assets
€m
Total
€m
Cost        
At 1 March 2009 394.7 - - 394.7
Arising on acquisition 29.4 80.2 1.5 111.1
Translation adjustment (0.1) 1.9 0.1 1.9
         
At 28 February 2010 424.0 82.1 1.6 507.7
         
Fair value adjustment 2.4 - - 2.4
Disposal (49.6) - - (49.6)
Translation adjustment 1.3 4.5 0.1 5.9
         
At 28 February 2011 378.1 86.6 1.7 466.4
         
Amortisation - - (0.1) (0.1)
         
Net book value at 28 February 2011 378.1 86.6 1.6 466.3

Goodwill
Goodwill has been attributed to operating segments (as identified under IFRS 8 Operating Segments) as follows:-

  Cider
- ROI
€m
Cider
- GB
€m
Cider
-NI
€m
Cider
-Export
€m
Spirits &
Liqueurs
€m
Tennent’s
- GB
€m
Tennent’s
- Ireland
€m
Total
€m
                 
Cost                
At 1 March 2009 116.5 187.1 19.6 21.9 49.6 - - 394.7
Arising on acquisition - 3.7 - - - 22.9 2.8 29.4
Translation adjustment - - - - - (0.1) - (0.1)
At 28 February 2010 * 116.5 190.8 19.6 21.9 49.6 22.8 2.8 424.0
                 
Disposal - -     (49.6) -   (49.6)
Fair value adjustment - 6.7 - - - (4.3) - 2.4
Translation adjustment - 0.5 - - - 0.8 - 1.3
                 
At 28 February 2011 116.5 198.0 19.6 21.9 - 19.3 2.8 378.1

* Goodwill at 1 March 2009 and 28 February 2010 has been attributed to the current operating segments as outlined in note 2.

Goodwill at 1 March 2009 consisted entirely of goodwill capitalised under Irish GAAP which at the transition date to IFRS was treated as deemed cost.

Goodwill that arose on the acquisition of the Tennent’s and Gaymer Cider businesses during the previous financial year was capitalised at cost and represents the synergies arising from cost savings and the opportunity to utilise the extended distribution network of the Group to leverage the marketing of the Group’s acquired products. This goodwill was attributed to the operating segments; Cider - GB and Tennent’s Beer (comprising Tennent’s GB and Tennent’s Ireland). No goodwill was attributed to the Third party brands operating segment as the Group considered that the goodwill generated on acquisition of the Tennent’s business from AB InBev is considered to be derived from purchased brands.

The requirement of IAS 36 Impairment of Assets that the operating segments to which goodwill is allocated should not be larger than an operating segment determined in accordance IFRS 8 Operating Segments and the inclusion of Cider NI and Tennent’s Ireland as separate operating segments in the current financial year has resulted in the reporting of an element of goodwill previously classified within Cider Export (previously Cider ROW) and Tennent’s Beer as Cider – NI (€19.6m) and Tennent’s Ireland (€2.8m) respectively.

As permitted under IFRS 3 (2004) Business Combinations, the provisional valuations assigned to the assets and liabilities acquired were amended resulting in an increase to the value of goodwill of a net €2.4m. The amendments to the originally assigned fair values giving rise to this adjustment are set out in note 12 and relate to the costs of acquisition and the fair value of trade receivables, accruals and provisions.

All goodwill is regarded as having an indefinite life and is not subject to amortisation under IFRS but is subject to an annual impairment assessment.

Brands
Brands have been attributed to operating segments (as identified under IFRS 8 Operating Segments) as follows:-

  Cider
- GB
€m
Tennent’s
- GB
€m
Tennent’s
- Ireland
€m
Total
€m
         
At 1 March 2009 - - - -
Arising on acquisition 10.9 61.0 8.3 80.2
Translation adjustment (0.1) 1.8 0.2 1.9
At 28 February 2010 10.8 62.8 8.5 82.1
         
Translation adjustment 0.6 3.4 0.5 4.5
         
At 28 February 2011 11.4 66.2 9.0 86.6

During the year ended 28 February 2010, the Group acquired the Tennent’s beer brands and a number of cider brands, including Gaymers, Blackthorn and Olde English, further details of which are outlined in note 12. The acquired brands were valued at fair value on the date of acquisition in accordance with the requirements of IFRS 3 Business Combinations by independent professional valuers.

In line with IAS 36 Impairment of Assets, and as discussed above, €8.3m of the fair value of the Tennent’s beer brand attributed to Tennent’s Ireland is now reported within that operating segment.

Capitalised brands are regarded as having indefinite useful economic lives and therefore have not been amortised. The brands are protected by trademarks, which are renewable indefinitely in all major markets where they are sold and it is the Group’s policy to support them with the appropriate level of brand advertising. In addition, there are not believed to be any legal, regulatory or contractual provisions that limit the useful lives of these brands. Accordingly, the Directors believe that it is appropriate that the brands be treated as having indefinite lives for accounting purposes.

Other intangible assets
Other intangible assets, acquired by the Group during the previous financial year, comprise 20 year distribution rights for third party beer products. These were valued at fair value on the date of acquisition in accordance with the requirements of IFRS 3 Business Combinations by independent professional valuers. Other intangible assets have finite lives and are subject to amortisation on a straight line basis over the length of the distribution arrangements. The amortisation charge for the year ended 28 February 2011 is €0.1m (2010: less than €0.1m).

Impairment testing
To ensure that goodwill and brands considered to have an indefinite useful economic life are not carried at above their recoverable amount, impairment reviews are performed comparing the carrying value of the assets with their recoverable amount using value-in-use computations. Impairment testing is performed annually or more frequently if there is an indication that the carrying amount may not be recoverable.

For goodwill, the recoverable amount is calculated in respect of each business segment (which may comprise of more than one cash generating unit). The business segments represents the lowest levels within the Group at which the associated goodwill and indefinite life brands are monitored for management purposes and are not larger than the reported segments determined in accordance with IFRS 8 Operating Segments.

Value-in-use is the recoverable amount calculated on the basis of estimated future cash flows discounted to present value and terminal values calculated on the assumption that cash flows continue in perpetuity. The key assumptions used in the value-in-use computations are the revenue and operating profit growth rates, the perpetuity growth rate and the discount rate applied to the estimated future cash flows.

The forecasted cash flows for each business segment are based on detailed financial budgets, formally approved by the Board, for year one, management’s projected cash flows for the following four years and a terminal value on the assumption that cash flows for the first five years will increase at a nominal growth rate in perpetuity. Management forecasts are based on an assessment of anticipated market conditions for each segment equating to an average EBIT growth rate of 1% (2010: 1%) per annum for all segments. A nominal growth rate of 2.5% (2010: 2.5%) in perpetuity was assumed based on an assessment of the likely long term growth prospects for the sectors in which the Group operates. The resulting cash flows were discounted to present value using a range of discount rates between 8%-12% (2010: 12%).

No impairment losses were recognised by the Group in the current or previous financial year.

Sensitivity analysis
The impairment testing carried out at 28 February 2011 identified significant headroom in the recoverable amount of the brands and goodwill compared to their carrying values in all business segments. The key sensitivities for the impairment testing are revenue and operating profit growth assumptions, discount rates applied to the resulting cashflows and the expected long term growth rates. No reasonable adjustments to the assumptions underlying the impairment testing models applied would result in any foreseeable risk of an impairment arising.

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15. FINANCIAL ASSETS

Company 2011
€m
2010
€m
(restated)
     
Equity investment in subsidiary undertakings at cost    
At beginning of year 962.2 788.7
Investment in subsidiary undertakings - 171.0
Capital contribution in respect of share options granted to employees of subsidiary undertakings 4.0 2.5
     
At end of year 966.2 962.2

The total expense of €4.0m (2010: €2.5m) attributable to share options granted to employees of subsidiary undertakings has been included as a capital contribution in financial assets.

The prior year now incorporates a reclassification of €171.0m from Amounts due from Group Undertakings which had been included within Trade & other receivables, to Financial Assets to more accurately reflect the substance of the transaction.

In the opinion of the Directors, the shares in the subsidiary undertakings are worth at least the amounts at which they are stated in the balance sheet. Details of subsidiary undertakings are set out in note 31.

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