2 Acquisitions (continued)
Investment in Associate On 26 May 2015 the Group acquired 25% of the ordinary share capital of Dr Zak’s Ltd for a consideration of £225,000 of which £50,000 has been deferred and is payable within one year of the acquisition date.
2015 £000
Carrying amount of immaterial associates 225
The Group has not recognised the results relating to the Investment in Dr Zak’s as post acquisition results are less than £1,000 and deemed not material to the Group.
The total costs associated with the acquisitions amounted to £3,181,000 and are shown as a non-recurring signitificant item under administration costs. Share placing costs of £1,484,000 relating to an equity raise to part fund the acquisition of Fletchers have been written off against the share premium account.
3 Revenue and Segment Information
Operating segments are identified on the basis of internal reporting and decision making. The Group’s Chief Operating Decision Maker is considered to be the Board as it is primarily responsible for the allocation of resources to segments and the assessment of performance by segment.
The Board uses adjusted operating profit, reviewed on a regular basis, as the key measure of the segments’ performance. Operating profit in this instance is defined as profit before the following:
• Net financing expense • Share option charges • Significant non-recurring items • Fair value adjustments relating to acquisitions • Pension charges or credits in relation to the net pension position • Revaluation of interest rate swaps and forward foreign currency contracts
The UK Bakery segment manufactures and sells bakery products to the UK’s multiple grocers and foodservice sectors. This segment primarily comprises the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Johnstone’s Food Service Ltd, Fletchers Bakeries Ltd and Nicholas & Harris Ltd. These subsidiaries are aggregated into a single segment after considering the following criteria:
• The nature of the products – products are similar in nature and are classed as manufactured bakery products • The production process – the production processes have the same or similar characteristics • The economic characteristics – the average gross margins are expected to be similar
The core operation of the Overseas segment is the distribution of the Group’s UK manufactured product along with the sale of third party products primarily to Europe.
Costs of Group operations plus a 10% premium have been allocated across the segments on the basis of their operating profit. The premium has been charged to reflect the synergies achieved from obtaining resources centrally giving benefits across the operating segments. Operating profit levels have been chosen as the basis, as this reflects the underlying performance of the segment and is also the return the Group expects from those segments.
A purchasing premium of 2% is charged from Group operations, and is calculated on materials and packaging spends at segmental level. This charge is based on the rationale that Group operations, through its Group buyers, optimises the Group’s procurement spend through leveraging its purchasing power.
This has resulted in a profit from continuing operations of £0.3m (2014: £0.5m) being presented within the Group Operations segment. The Group’s finance income and expenses cannot be meaningfully allocated to the individual operating segments.
2014 £000
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