Tesco plc Annual Report and Financial Statements 2012

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Notes to the Group financial statements Note 28 Related party transactions continued Transactions of key management personnel with Tesco Bank during the financial year were as follows: Credit card and personal loan balances Saving deposit accounts Number of key Number of key management management personnel £m personnel £m At 25 February 2012 12 – 13 2 At 26 February 2011 7 – 10 1 Note 29 Reconciliation of profit before tax to cash generated from operations Profit before tax 3,835 3,641 Net finance costs (Note 5) 241 333 Share of post-tax profits of joint ventures and associates (Note 13) (91) (57) Operating profit 3,985 3,917 Operating loss of discontinued operations (127) (106) Depreciation and amortisation 1,498 1,420 Profits/losses arising on property-related items from continuing operations (376) (432) Profits/losses arising on property-related items from discontinued operations 1 5 Loss arising on sale of non property-related items 4 3 Profit arising on sale of other investments (5) – Impairment of goodwill (Note 10) – 55 Net charge/(reversal) of impairment of property, plant and equipment (Note 11) and intangible assets (Note 10) 75 (13) Adjustment for non-cash element of pensions charge 35 95 Share-based payments (Note 25) 125 220 Tesco Bank non-cash items included in profit before tax 166 (83) Increase in inventories (461) (467) Increase in trade and other receivables (139) (152) Increase in trade and other payables and provisions 679 976 Tesco Bank decrease/(increase) in loans and advances to customers (Note 17) 150 (519) Tesco Bank increase in trade and other receivables (278) (86) Tesco Bank increase in customer and bank deposits and trade and other payables 356 780 Decrease in working capital 307 532 Cash generated from operations 5,688 5,613 * See Note 1 Accounting policies for details of reclassifications. The increase in working capital includes the impact of translating foreign currency working capital movements at average exchange rates rather than year end exchange rates. Note 30 Analysis of changes in net debt At 26 February 2011** £m Tesco Bank at 26 February 2011* £m Cash flow £m Business combinations £m Other non-cash movements £m Net debt of disposal group £m 2012 £m Elimination of Tesco Bank £m 2011* £m At 25 February 2012** £m Cash and cash equivalents 1,722 706 (148) 7 24 (6) (580) 1,725 Short-term investments 1,022 – 221 – – – – 1,243 Joint venture loan and other receivables 493 34 (142) – 8 – (34) 359 Bank and other borrowings (10,282) (595) 353 (98) (962) 1 576 (11,007) Finance lease payables (198) – 45 – (13) – – (166) Net derivative financial instruments 453 (21) (94) – 613 – 52 1,003 Net debt of the disposal group – – – – – 5 – 5 (6,790) 124 235 (91) (330) – 14 (6,838) * See Note 1 Accounting policies for details of reclassifications. ** These amounts relate to the net debt excluding Tesco Bank but including the disposal group. 138 Tesco PLC Annual Report and Financial Statements 2012
OVERVIEW STRATEGIC REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS Note 31 Business combinations and other acquisitions Business combinations During the financial year, the Group completed five business combination transactions as follows: i) 18 March 2011 – Acquired 100% of the ordinary share capital relating to the 77 stores of Mills Group in the UK for a cash consideration of £10m; ii) 1 April 2011 – Acquired 100% of the ordinary share capital relating to the 87 franchised kiosks and 47 stores branded as Zabka and Koruna in the Czech Republic for a cash consideration of £36m; iii) 18 April 2011 – Acquired 80.25% of the ordinary share capital of Blinkbox Entertainment Limited in the UK for a cash consideration of £3m; iv) 8 June 2011 – Acquired 100% of the ordinary share capital of BzzAgent Inc and BzzAgent Limited for a cash consideration of £9m and deferred contingent consideration of £15m; and v) 18 August 2011 – Acquired the remaining 50% of the ordinary share capital of its joint venture Multi Veste Czech Republic 9, s.r.o not already owned by the Group for a total consideration of £24m, split equally between cash and equity. The table below sets out the provisional fair values to the Group in respect of these acquisitions. Non-current assets Provisional fair values on acquisition £m 107 Current assets 25 Cash 5 Current liabilities (41) Non-current liabilities (98) Net liabilities acquired (2) Non-controlling interests (1) Goodwill arising on acquisition Consideration: 100 97 Cash 70 Non-cash 27 Total consideration 97 The goodwill represents synergies within the operating models and the economies of scale expected from incorporating the operations of acquired entities within the Group. Purchase of non-controlling interest On 1 July 2011, the Group completed the acquisition of the remaining 6% of the ordinary share capital of Homeplus Co., Limited for a cash consideration of £73m. Note 32 Commitments and contingencies Capital commitments At 25 February 2012, there were commitments for capital expenditure contracted for, but not provided for of £1,599m (2011: £1,719m), principally relating to the store development programme. Contingent liabilities For details of assets held under finance leases, which are pledged as security for the finance lease liabilities, see Note 11. There are a number of contingent liabilities that arise in the normal course of business which if realised are not expected to result in a material liability to the Group. The Group recognises provisions for liabilities when it is more likely than not that a settlement will be required and the value of such a payment can be reliably estimated. Tesco Bank At 25 February 2012, Tesco Bank had commitments of formal standby facilities, credit lines and other commitments to lend, totalling £7.4bn (2011: £7.1bn). The amount is intended to provide an indication of the potential volume of business and not of the underlying credit or other risks. The Financial Services Compensation Scheme (‘FSCS’) is the UK statutory fund of last resort for customers of authorised financial services institutions and pays compensation if an institution is unable to pay claims against it. The FSCS has borrowed from HM Treasury to fund these compensation costs associated with institutions that failed in 2008 and will receive receipts from asset sales, surplus cash flow and other recoveries from these institutions in the future. The initial borrowings from HM Treasury are on an interest-only basis and, from 1 April 2012, this has increased from 12 month LIBOR + 30 basis points to 12 month LIBOR + 100 basis points. The FSCS meets its obligations by raising management expense levies which will be kept based on limits advised by the FSA. These include amounts to cover the interest on its borrowings and compensation levies on the industry. Each deposit-taking institution contributes in proportion to its share of total protected deposits. As at 25 February 2012, Tesco Bank accrued £5m (2011: £3m) in respect of its current obligation to meet expenses levies, based on indicative costs published by the FSCS. If the FSCS does not receive sufficient funds from the failed institutions to repay HM Treasury in full it will raise compensation levies. At this time it is not possible to estimate the amount or timing of any shortfall resulting from the cash flows received from the failed institutions and, accordingly, no provision for compensation levies, which could be significant, has been made in these financial statements. Tesco PLC Annual Report and Financial Statements 2012 139
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Trading profit £529m 14% of Group
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OVERVIEW Chairman’s statement Cha
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OVERVIEW Chief Executive’s review
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OVERVIEW STRATEGIC REVIEW PERFORMAN
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OVERVIEW Strategy in action IN THIS
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OVERVIEW Clothing The UK clothing m
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OVERVIEW Click & Collect Click & Co
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OVERVIEW Financial review Laurie Mc
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OVERVIEW US trading loss £(142)m
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Page 111 and 112: OVERVIEW Note 6 Taxation continued
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Page 123 and 124: OVERVIEW Note 17 Loans and advances
Page 125 and 126: OVERVIEW Note 20 Borrowings Current
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Page 157 and 158: Financial calendar Financial year e
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