Note 4 - Main changes in the scope of consolidation
4.1 2020
The main changes in the scope of consolidation in 2020 were as follows:
Lagardère Publishing
- Acquisition by Hachette Livre SA of Blackrock Games, France’s third-largest distributor of board games. Blackrock Games was consolidated in the Group’s financial statements with effect from January 2020.
- Acquisition by Lagardère Publishing in January 2020 of Le Livre Scolaire, a collaborative textbook publisher (paper and digital) and consolidated with effect from February 2020.
- Acquisition in September 2020 of Laurence King Publishing, a leading specialist in creative arts publishing and stationery in the United Kingdom.
Lagardère Sports
- Disposal of Lagardère Sports to H.I.G. Capital in April 2020 (see note 4.3).
Disposal of Lagardère Active assets
- Disposal of Lagardère Studios to Mediawan in October 2020 for a sale price of €85 million, plus an earn-out of up to €15 million to be collected in 2023 if the Group meets a specific earnings target (see note 9).
4.2 BUSINESS COMBINATIONS
The impacts of the business combinations carried out in 2020 on the consolidated financial statements were as follows:
| Provisional purchase price allocation for 2020 business combinations | Final purchase price allocation for 2019 business combinations | Total | |
| Purchase price (A) | 41 | (5) | 36 |
| Allocation to identifiable assets and liabilities | |||
| Non-current assets | 11 | - | 11 |
| Inventories, trade receivables and other assets | 21 | - | 21 |
| Cash and cash equivalents | 13 | - | 13 |
| Trade payables and other liabilities | (18) | - | (18) |
| Net debt | (4) | - | (4) |
| Leases: right-of-use assets | 1 | - | 1 |
| Leases: lease liabilities | (1) | - | (1) |
| Deferred taxes, net | (2) | - | (2) |
| Minority interests as a proportion of the net assets acquired | (4) | - | (4) |
| Total identifiable assets and liabilities (B) | 17 | - | 17 |
| Goodwill (euro equivalent at the acquisition date) (A-B) | 24 | (5) | 19 |
| Translation adjustments | - | - | - |
| Provisional goodwill (euro equivalent at year-end) | 24 | (5) | 19 |
The impacts shown above result mainly from acquisitions by Lagardère Publishing that were not material taken individually, and from a price adjustment relating to the International Duty Free (IDF) group acquired in 2019. The impact of the acquisition of the International Duty Free (IDF) group is described in a dedicated paragraph below.
The table below shows a reconciliation between the price paid for business combinations and the amount recorded under “Purchases of investments” in the consolidated statement of cash flows:
| 2020 | |||
| Price paid for business combinations in 2020 |
(41) | ||
| Increase in capital at associates and joint ventures | (5) | ||
| Price adjustments for prior-period acquisitions | 6 | ||
| Purchases of investments recorded under investing activities in the statement of cash flows | (40) | ||
International Duty Free (IDF)
| Provisional opening balance sheet at 31 Dec. 2019 | Opening balance sheet adjustments | Final opening balance sheet at 31 Dec. 2020 | |
| Purchase price (A) | 228 | (6) | 222 |
| Allocation to identifiable assets and liabilities | |||
| Non-current assets(*) | 199 | - | 199 |
| Inventories, trade receivables and other assets | 36 | - | 36 |
| Cash and cash equivalents | - | - | - |
| Trade payables and other liabilities | (33) | - | (33) |
| Net debt | (19) | - | (19) |
| Leases: right-of-use assets | 340 | - | 340 |
| Leases: lease liabilities | (340) | - | (340) |
| Deferred taxes, net | (40) | - | (40) |
| Total identifiable assets and liabilities (B) | 143 | - | 143 |
| Goodwill (A-B) | 85 | (6) | 79 |
(*) Including €178 million in intangible assets, of which €177 million in respect of concession agreements.
As detailed in note 4.2 to the 2019 consolidated financial statements, on 19 September 2019 Lagardère Travel Retail SAS closed the acquisition of the entire share capital of International Duty Free SA, the holding company for the International Duty Free group (“IDF”) for a total cash consideration of around €228 million (including an enterprise value of €250 million). Further to this acquisition, the Group holds seven fully consolidated entities and two equity-accounted entities. IDF is Belgium’s leading travel retail operator, and is also present in Luxembourg and Kenya.
The intangible assets recognised during the purchase price accounting represented €177 million and related to concession agreements. Concession agreements are amortised on a straight-line basis over the term of the agreements. The amortisation expense in 2020 was €15 million.
After accounting for a negative €6 million price adjustment in 2020, the final goodwill amount is €79 million, chiefly reflecting IDF’s operational and sales expertise, and the capacity of the new group to develop in the future. This goodwill was allocated to the Belgium CGU, which was created in the wake of the acquisition.
At 31 December 2020, the carrying amount of this goodwill was €48 million following the recognition of a €31 million impairment loss as a result of impairment tests carried out (see note 10).
4.3 ASSETS HELD FOR SALE, ASSOCIATED LIABILITIES AND DISCONTINUED OPERATIONS
At 31 December 2020, none of the Group’s assets (or associated liabilities) met the criteria to be classified as held for sale. Assets previously classified as held for sale were sold during the year.
Disposal of Lagardère Active assets
In October 2020, Lagardère Studios was sold to Mediawan for a sale price of €85 million, plus an earn-out of up to €15 million to be collected in 2023, depending on the achievement of a specific earnings target (see note 9).
At 30 June 2020, goodwill relating to Lagardère Studios, whose estimated sale price less costs to sell was lower than its carrying amount, was written down by €19 million.
Lagardère Sports
Lagardère Sports previously represented an operating segment for the Group and was classified as a discontinued operation in accordance with IFRS 5.
The effective sale of Lagardère Sports was completed on 22 April 2020 (see note 4.3.1).
4.3.1 DISCONTINUED OPERATIONS
Net-of-tax earnings for Lagardère Sports in 2020 and 2019 are shown on a separate line of the consolidated income statement, and all related cash flows (relating to operating, investing and financing activities) were classified within “Net cash from (used in) discontinued operations” in the consolidated statement of cash flows.
The €14 million loss on the disposal of Lagardère Sports and the €6 million in negative earnings between 1 January and 22 April 2020 make up the €20 million loss from discontinued operations in 2020.
A breakdown by income statement line of the reclassification of Lagardère Sports as a discontinued operation in accordance with IFRS 5
is as follows:
| 2020 | 2019 | |
| Revenue | 84 | 470 |
| Other income from ordinary activities | 2 | - |
| Total income from ordinary activities | 86 | 470 |
| Purchases and changes in inventories | - | - |
| External charges | (41) | (191) |
| Payroll costs | (40) | (145) |
| Depreciation and amortisation other than on acquisition-related intangible assets | (5) | (60) |
| Depreciation of right-of-use assets | (3) | (11) |
| Amortisation of acquisition-related intangible assets and other acquisition-related expenses | - | (7) |
| Restructuring costs | (3) | (20) |
| Gains (losses) on: | ||
| - Disposals of assets | (14) | - |
| Impairment losses on goodwill, property, plant and equipment and intangible assets | - | (234) |
| Other operating expenses | 1 | (1) |
| Other operating income | - | - |
| Profit (loss) before finance costs and tax | (19) | (199) |
| Financial income | 4 | 4 |
| Financial expenses | (6) | (5) |
| Interest expense on lease liabilities | - | (1) |
| Profit (loss) before tax | (21) | (201) |
| Income tax benefit (expense) | 1 | (6) |
| Profit (loss) from discontinued operations | (20) | (207) |
| Profit (loss) from discontinued operations – Attributable to owners of the Parent (in millions of euros) | (22) | (206) |
| Basic earnings (loss) per share (in €) | (0.17) | (1.59) |
| Diluted earnings (loss) per share (in €) | (0.17) | (1.57) |
A breakdown by cash flow statement line of the reclassification of Lagardère Sports as a discontinued operation in accordance with IFRS 5 is as follows:
| 2020 | 2019 | |
| Net cash from (used in) operating activities | (7) | 49 |
| Net cash used in investing activities | (84) | (40) |
| Net cash used in financing activities | (3) | (12) |
| Total other movements | (1) | (1) |
| Net cash inflows (outflows) | (95) | (4) |
| Cash and cash equivalents and intra-group cash flows at beginning of period | - | (99) |
| Reclassification of cash flows within assets held for sale and associated liabilities | 95 | 4 |
| Net cash from (used in) discontinued operations | - | (99) |
4.4 2019
The main changes in the scope of consolidation in 2019 were as follows:
Lagardère Publishing
- Acquisition by Hachette Livre in February 2019 of Gigamic, a French board game publisher.
- Acquisition by Octopus Publishing in May 2019 of Short Books, a reputed health and nutrition book publisher.
Lagardère Travel Retail
- Acquisition by Lagardère Travel Retail SAS on 19 September 2019 of the International Duty Free (IDF) group, Belgium’s leading Travel Retail operator also present in Luxembourg and Kenya. IDF was consolidated in the Group’s financial statements as from October 2019.
- Acquisition in June 2019 of Autogrill Czech in the Czech Republic. Autogrill Czech specialises in Foodservice operations in stations and shopping centres.
Lagardère Sports
- Disposal in March 2019 of the 60% interest in SIIS Développement, a network of sports facilities.
- On 14 December 2019, the Lagardère group received an offer from H.I.G. Capital for a 75% stake in Lagardère Sports. The planned disposal valued Lagardère Sports at approximately €110 million. In accordance with IFRS 5, the corresponding disposal group was classified as held for sale in the balance sheet at 31 December 2019 and as a discontinued operation in the 2019 income statement (see note 4.3).
Assets sold and pending disposal at Lagardère Active
- Disposal on 31 January 2019 of the Boursier.com website and its financial markets information and publishing activities, previously held by Lagardère Active subsidiary Newsweb, to the Les Échos-Le Parisien group.
- Disposal on 7 February 2019 of the 20% interest held by LARI in Jacaranda FM Proprietary Limited, owner of Jacaranda FM, South Africa’s number 1 private radio station, to the Kagiso Media group.
Mediamark, the Group’s associated advertising sales brokerage partner, was sold on 28 February 2019. - Disposal on 14 February 2019 of the following magazine publishing assets in France to Czech Media Invest: Elle and its various extensions, Version Femina, Art & Décoration, Télé 7 Jours and its various extensions, France Dimanche, Ici Paris and Public.
- Disposal on 28 February 2019 of BilletReduc.com to the Fnac- Darty group.
- Disposal on 28 February 2019 of Plurimedia to Media Press Group.
- Disposal on 17 July 2019 of Mezzo to the Les Echos-Le Parisien and Canal+ groups.
- Disposal on 2 September 2019 of the television business (excluding Mezzo) to the M6 group. The business includes Gulli and its international extensions, Canal J, TiJi, Elle Girl TV, MCM, MCM Top, RFM TV, and the related advertising sales brokerages.
- Disposal on 1 October 2019 of Disney Hachette Presse.
- Disposal on 31 December 2019 of Carson Prod to Franck Saurat Productions.