Pilihan insentif-422

Pilihan insentif-422

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Perpajakan Opsi Saham Karyawan 2017-01-26 Pegawai utama perusahaan sering menerima opsi saham sebagai bagian dari paket kompensasi mereka. Opsi saham karyawan memberi hak kepada karyawan, namun bukan kewajiban, untuk membeli saham di perusahaan dengan harga tetap pada tanggal tertentu atau selama interval waktu tertentu. Bila pilihannya diberikan, biasanya ada batasan kapan mereka dapat dieksekusi atau kapan saham yang diperoleh dapat dijual atau mungkin ada risiko penyitaan saham yang diperoleh sampai karyawan memenuhi persyaratan tertentu, seperti bekerja untuk perusahaan tersebut. Beberapa tahun. Bila semua pembatasan atau risiko penyitaan dikeluarkan, maka opsi atau saham yang dibeli dikatakan tidak berlaku lagi. Artinya karyawan tersebut memiliki hak yang tidak dapat dibatalkan untuk properti tersebut. Bagaimana pilihannya dikenakan pajak tergantung pada jenis pilihan mereka, apakah ada diskon saat opsi diberikan, dan interval waktu antara tanggal pemberian opsi, tanggal pelaksanaan, dan tanggal penjualan saham. Kerugian dari mengkompensasi karyawan dengan opsi saham daripada dengan saham terbatas, bagaimanapun, adalah bahwa opsi dapat kehilangan nilai signifikan sebelum menjadi hak karyawan. Stok terbatas. Di sisi lain, akan selalu ada nilai kecuali bisnis menjadi bangkrut secara finansial. Ada 3 peristiwa penting dalam mengkompensasikan karyawan dengan opsi saham: Opsi saham diberikan, pada saat mana karyawan membayar harga opsi untuk menerima hibah atau menerimanya sebagai imbalan kerja, karyawan harus memegang opsi untuk periode tertentu. Sampai dapat dieksekusi, pada saat itu, karyawan tersebut menerima sahamnya kemudian karyawan tersebut menjual saham tersebut, dan selisih antara hasil penjualan dan biaya perolehan opsi saham adalah keuntungan karyawan. Hukum pajak membedakan antara pilihan undang-undang. Yang harus sesuai dengan IRC 421-424. Dan termasuk opsi saham insentif (ISO) dan opsi yang dibeli berdasarkan Rencana Pembelian Saham Karyawan (Employee Stock Purchase Plan - ESPP), dan opsi nonstatutory. Yang tidak memenuhi syarat berdasarkan peraturan ini, namun tunduk pada perlakuan pajak yang kurang menguntungkan terhadap IRC 83. Pilihan Wajib Pilihan wajib menerima perlakuan pajak preferensial. Jika peraturan penangguhan tertentu diikuti, karyawan tidak dikenakan kewajiban pajak penghasilan tetap apabila opsi tersebut diberikan atau bila dilakukan, dan keuntungan apa pun diperlakukan sebagai keuntungan modal daripada sebagai pendapatan biasa. Namun, jika opsi vested dilakukan, maka opsi tersebut akan menyebar. Yang sama dengan harga saham yang dieksekusi dikurangi harga opsi, harus dilaporkan sebagai penyesuaian positif terhadap pajak minimum alternatif (AMT) apabila diadakan di luar akhir tahun pajak. Tanggung jawab AMT tidak harus dilaporkan jika stoknya dijual sebelum akhir tahun pajak, karena kemudian harus dilaporkan sebagai penghasilan kena pajak di bawah sistem pajak biasa. Opsi Spread Nilai Pasar Wajar Saham Saat Berprestasi Pilihan Harga Contoh Penyesuaian AMT Majikan Anda memberi Anda opsi saham insentif untuk membeli 100 saham perusahaan dengan nilai pasar wajar (FMV) sebesar 9 saham: 1 tahun kemudian, Anda menggunakan opsi ini Saat saham FMV 14 saham 2 tahun kemudian, saat saham FMV itu 16 share. Hak Anda atas persediaan menjadi hak. Akibatnya, penyesuaian AMT Anda, yang dilaporkan pada Formulir 6251. meningkat sebesar 1.600 900 700. ISO umumnya dikenakan pajak saat barang yang dibeli dijual ISO tidak dikenakan pajak saat diberikan atau kapan penggunaannya. Agar ISO dapat memenuhi syarat berdasarkan peraturan pajak sebagai opsi saham wajib, mereka harus dapat dieksekusi dalam waktu 10 tahun sejak tanggal pemberian opsi dan harga opsi setidaknya harus sama dengan nilai pasar wajar dari saham saat diberikan. Jika nilai pasar wajar agregat saham yang dapat diperoleh dengan menggunakan ISO ketika pembatasan latihan telah dihapus untuk pertama kalinya selama tahun pajak melebihi 100.000, maka kelebihan tersebut diperlakukan sebagai opsi saham nonstatutory. Jika karyawan tersebut meninggalkan perusahaan, maka ISO harus dilakukan dalam waktu 3 bulan setelah penghentian pekerjaan jika tidak, pendapatan dikenai pajak sebagai opsi saham nonstatutory. Untuk diperlakukan sebagai ISO, persyaratan berikut harus dipenuhi: ISO harus diberikan berdasarkan rencana yang diadopsi oleh perusahaan dan disetujui oleh pemegang saham jumlah saham dan karyawan yang mungkin menerima opsi tersebut harus ditentukan bahwa rencana tersebut harus disetujui oleh Pemegang saham dalam waktu 12 bulan sebelum atau setelah tanggal rencana tersebut diadopsi opsi harus diberikan dalam waktu 10 tahun sebelum tanggal adopsi atau persetujuan rencana opsi harus dapat dieksekusi dalam waktu 10 tahun sejak tanggal pemberian opsi harga tidak boleh kurang. Daripada nilai pasar wajar dari saham bila diberi opsi mungkin tidak dapat dipindahtangankan kecuali karena kematian penerima hibah, pilihannya hanya dapat dilakukan oleh karyawan karyawan pada saat hibah, mungkin tidak memiliki lebih dari 10 gabungan total Hak suara dari semua kelas saham perusahaan pemberi kerja, atau orang tua atau anak perusahaannya. Pemegang opsi harus menerima Copy B of Form 3921, Exercise of Incentive Stock Option berdasarkan Bagian 422 (b) dari perusahaan ketika ISO dilaksanakan, menunjukkan informasi berikut: tanggal tanggal pemberian kompensasi harga exercise exercise per share nilai pasar wajar Per saham pada tanggal pelaksanaan jumlah saham yang diakuisisi saat opsi dilakukan Copy A of Form 3921 masuk ke IRS. Informasi yang terkandung dalam formulir ini harus digunakan untuk menghitung keuntungan saat saham dijual atau untuk menghitung penyesuaian AMT, jika berlaku. Aturan Periode Holding Keuntungan atau kerugian modal jangka panjang dapat diklaim pada saham hanya jika saham ditahan paling sedikit 2 tahun setelah ISO diberikan dan setidaknya 1 tahun setelah pelaksanaan opsi tersebut. Aturan periode memegang ini dianggap memuaskan jika penjualan terdahulu dimotivasi untuk memenuhi persyaratan benturan kepentingan. Jika uji holding period tidak terpenuhi, maka keuntungan pada penjualan saham diperlakukan sebagai pendapatan upah biasa yang sama dengan spread opsi: Opsi Penghasilan Upah Biasa Opsi Harga Latihan Harga Hibah Dasar pajak untuk saham meningkat dengan jumlah apapun. Yang diperlakukan sebagai upah. Contoh Aturan Periode Holding 12 Maret Tahun 1: Majikan Anda memberi Anda ISO untuk membeli 100 saham pada FMV-nya 10 per saham. 6 Januari Tahun 2: Anda menjalankan pilihan saat saham FMV adalah 12 per saham. 26 Januari Tahun 3: Anda menjual saham dengan harga 15 per saham. Meskipun Anda memegang saham lebih dari 1 tahun, Anda tidak memegangnya setidaknya selama 2 tahun dari tanggal pemberian opsi. Pada tahun penjualan, Anda harus melaporkan selisih antara harga opsi 10 per saham dan harga pelaksanaan 12 per saham sebagai upah sisanya adalah capital gain: Harga jual (15 100 saham): Pembelian Saham Karyawan Saham Karyawan Rencana Pembelian (ESPPs) adalah rencana pemegang saham yang disetujui tertulis dimana karyawan diberi opsi untuk membeli saham dari perusahaan induk atau induk perusahaan atau anak perusahaannya. Harus diperlakukan berdasarkan peraturan perundang-undangan wajib: Tidak ada pilihan yang dapat diberikan kepada karyawan yang memiliki lebih dari 5 hak suara dari saham pemberi kerja atau orang tua atau anak perusahaan dari pemberi kerja. Semua karyawan tetap harus disertakan kecuali mereka yang memiliki karyawan kurang dari 2 tahun, paruh waktu atau musiman. Rencananya harus tidak diskriminatif tapi jumlah persediaan yang dapat dibeli oleh setiap karyawan mungkin didasarkan pada kompensasi karyawan. Tidak ada karyawan yang berhak membeli lebih dari 25.000 saham per tahun berdasarkan harga saham saat opsi diberikan. Opsi harga mungkin tidak kurang dari 85 dari yang lebih rendah dari: nilai pasar wajar dari saham pada saat opsi tersebut diberikan, atau nilai pasar wajar dari saham pada saat opsi tersebut dieksekusi. Opsi tersebut harus dilakukan dalam waktu 27 bulan sejak tanggal pemberian kompensasi, atau 5 tahun jika harga opsi didasarkan pada nilai wajar pasar saat opsi diberikan. Karyawan harus dipekerjakan terus menerus sejak tanggal pemberian opsi sampai 3 bulan sebelum pelaksanaannya. Jika karyawan tersebut membeli opsi tersebut pada harga yang lebih rendah daripada nilai pasar wajar dari saham pada hari hibah, maka jumlah diskon tersebut, yang jumlahnya tidak lebih besar dari 15, diperlakukan sebagai pendapatan upah biasa. Pembelian saham berdasarkan ESPP tunduk pada peraturan periode holding yang sama seperti ISO. Pajak tidak harus dibayar sampai persediaan terjual dan keuntungannya, dikurangi jumlah yang diperlakukan sebagai upah, diperlakukan sebagai capital gain. Jika sahamnya dijual dengan kerugian, maka itu adalah kerugian modal. Jika holding period tidak terpenuhi, maka karyawan tersebut mengakui pendapatan biasa sebagai hasil penjualan yang lebih rendah atau nilai pasar wajar pada saat kematian karyawan dikurangi harga opsi, atau nilai wajar dari saham ketika opsi diberikan dikurangi opsi harga. Jika karyawan melaksanakan opsi yang diberikan berdasarkan ESPP, maka dia harus menerima Formulir 3922, Transfer Saham yang Diperoleh melalui Rencana Pembelian Saham Karyawan berdasarkan Bagian 423 (c) setelah akhir tahun pajak. Contoh ESPP Anda membayar 10 per saham untuk opsi membeli 1000 saham perusahaan saat nilai wajar pasar saham adalah 11. Satu tahun kemudian, Anda menjalankan pilihan ketika nilai pasar wajar saham itu 15.000. 2 tahun kemudian, Anda menjual sahamnya seharga 20.000. Karena Anda membeli opsi tersebut dengan harga diskon 11 10 1 per saham, 1000 keuntungan Anda diperlakukan sebagai upah pada tahun opsi pembelian sisanya diperlakukan sebagai keuntungan modal jangka panjang sebesar 20.000 11.000 9000 pada tahun Penjualan saham Namun, jika Anda belum memenuhi peraturan holding period, maka 15.000 10.000 1000 4000 harus diperlakukan sebagai upah dan keuntungan modal jangka panjang Anda hanya sebesar 20.000 15.000 5000. Pilihan Saham Nonstatutory Opsi saham nonstatutory (opsi saham yang tidak memenuhi syarat) Tunduk pada perlakuan pajak yang kurang menguntungkan di bawah IRC 83. dan, dalam keadaan tertentu, dapat dianggap sebagai kompensasi tangguhan tanpa syarat yang tunduk pada Bagian 409A jika harga pelaksanaan kurang dari nilai pokok obligasi bila opsi tersebut diberikan. Jika opsi saham memiliki nilai pasar wajar yang dapat dipastikan, maka: Penghasilan Upah Biasa (Nilai Pasar Wajar Opsi Opsi Harga yang Dibayar) Jumlah Saham Opsi nonstatutial memiliki nilai pasar wajar yang dapat dipastikan jika: opsi dapat dipindahtangankan opsinya dapat dilakukan. Dilakukan bila diberikan tidak ada syarat atau batasan yang akan mempengaruhi nilai pasar wajar ini dan nilai hak istimewa opsi dapat segera diketahui. Dalam kebanyakan kasus, opsi tidak akan memiliki nilai pasar wajar yang dapat dipastikan jika tidak diperdagangkan di bursa umum, dan karena opsi karyawan tidak pernah diperdagangkan di bursa umum, mereka hampir tidak akan pernah memiliki nilai pasar wajar yang dapat dipastikan. Pilihan yang ditentukan tanpa FMV yang pasti dapat dikenai pajak sebagai pendapatan biasa pada tahun dimana opsi tersebut dilakukan: Penghasilan Upah Biasa (Opsi Harga Latihan yang Dibayar) Jumlah Saham Jika saham tersebut tidak menjadi hak, maka pendapatan ditangguhkan sampai dengan tahun Rompi saham Pada tahun vesting, kenaikan dikenai pajak sebagai pendapatan upah biasa yang sama dengan nilai saham pada tanggal vesting dikurangi jumlah yang dibayarkan, bahkan jika Wajib Pajak memegang saham. Pendapatan Upah Biasa (Stock FMV on Vesting Date Option Price Paid) Jumlah Saham Pendapatan upah biasa tunduk pada pajak penghasilan dan pekerjaan. Keuntungan yang dilaporkan sebagai pendapatan upah ditambahkan ke basis pajak saham: Dasar Pajak Opsi Saham Harga Dibayar Dibayar Dilaporkan sebagai Penghasilan Setelah itu, pada saat saham terjual, keuntungan atau kerugian diperlakukan sebagai keuntungan atau kerugian modal: Capital Gain atau Loss Stock Sale Hasil Pajak Dasar Stok Opsi saham nonstatutory dapat diberikan di samping opsi saham insentif. Tidak seperti ISO, tidak ada pembatasan jumlah opsi saham nonstatutory yang dapat diberikan karena mereka tidak menerima perlakuan pajak yang menguntungkan. Kebijakan Privasi Cookie ini digunakan untuk mempersonalisasi konten dan iklan, memberikan fitur media sosial dan menganalisis lalu lintas. Informasi juga dibagikan tentang penggunaan situs ini dengan mitra media sosial, periklanan, dan analisis kami. Rincian, termasuk pilihan opt-out, disediakan dalam Kebijakan Privasi. Kirimkan email ke thismatter untuk saran dan komentar Pastikan menyertakan kata-kata tanpa spam pada subjek. Jika Anda tidak memasukkan kata-kata, email akan dihapus secara otomatis. Informasi diberikan sebagaimana adanya dan semata-mata untuk pendidikan, bukan untuk tujuan perdagangan atau saran profesional. Hak Cipta salinan 1982 - 2017 oleh William C. Spaulding GoogleFirm Wawasan Menjaga Karyawan Minat Menguntungkan Minat, Manfaat Bisnis dan Peringatan Potensi Bisnis 24 Februari 2017 Salah satu keputusan perpajakan pertama dan terpenting yang harus dibuat oleh seorang pendiri adalah jenis entitas di mana Untuk membangun usaha mereka. Meskipun banyak tinta telah tumpah selama pro dan kontra untuk memilih perusahaan versus perusahaan pertanggungjawaban terbatas, atau LLC, satu hal yang pasti: kebanyakan orang lebih memahami perusahaan lebih baik daripada LLC. Dan siapa yang bisa menyalahkan mereka LLC bisa jadi entitas yang rumit ndash begitu fleksibel sehingga sering terlihat sangat aneh. Akibatnya, bahkan ketika seorang pendiri memutuskan bahwa LLC adalah hak yang tepat, seringkali terstruktur untuk terlihat sama seperti korporasi mungkin. Kami menunjukkan minat anggota sebagai unit mirip saham, kami memandang dewan manajer hanya sebagai direksi dengan nama lain, dan ya, terkadang kami bahkan mengeluarkan opsi kepada karyawan. 2016 MA Deals Pengambilan contoh dari tahun-tahun transaksi MA 14 Februari 2017 Undang-undang Hak Cipta pada 2016 Perkembangan Legislatif dan Peraturan 26 Januari 2017 Hak Cipta: Sistem Administrasi Kantor Hak Cipta Baru untuk mendaftarkan Agen yang Ditunjuk Di bawah DMCA 2 Februari 2017 Seri A Pembiayaan Modal Ventura : Tinjauan 2016 dan A Look Forward to 2017 22 September 2016 Model Pendanaan di Seri Bioteknologi - Panel 3 Penilaian Saham Biasa dan Opsi Harga oleh Perusahaan Swasta 10 Tahun Penilaian di Bawah 409A Ini adalah praktik lama perusahaan swasta. Dan penasehat hukum dan akuntansinya untuk menentukan nilai pasar wajar dari saham biasa mereka untuk tujuan menetapkan harga opsi pelaksanaan dengan memperkirakan secara longgar diskon yang sesuai dari harga saham preferen yang baru dikeluarkan berdasarkan tahap pengembangan perusahaan. Praktik ini, yang sebelumnya diterima oleh Internal Revenue Service (ldquoIRSrdquo atau ldquoServicerdquo) dan Securities and Exchange Commission (SEC), secara tiba-tiba diakhiri dengan Pedoman Internal Revenue Code Section 409A 1 awal yang dikeluarkan oleh IRS pada tahun 2005. Sebaliknya Untuk praktik masa lalu, peraturan Bagian 409A (versi final yang dikeluarkan oleh IRS di tahun 2007) berisi pedoman terperinci untuk menentukan nilai pasar wajar dari saham biasa perusahaan swasta dengan mewajibkan penerapan metode penilaian yang masuk akal. , Termasuk beberapa metode penilaian yang proporsional yang masuk akal atau Safe Harbors. Aturan-aturan ini telah membentuk ulang valuasi saham biasa perusahaan swasta dan praktik penetapan harga opsi. Artikel ini pertama secara singkat menjelaskan pra-Bagian 409A penilaian saham biasa mdash metode diskon tepat waktu dihormati. Selanjutnya, ini menggambarkan aturan penilaian yang ditetapkan oleh pedoman Bagian 409A yang dikeluarkan oleh IRS, termasuk Safe Harbors. Ini kemudian menggambarkan reaksi perusahaan swasta dengan berbagai ukuran dan tahap kedewasaan yang telah kami amati oleh manajemen apa, dewan mereka dan penasehat mereka benar-benar melakukan di lapangan. Akhirnya, ini menggambarkan praktik terbaik yang telah kita lihat berkembang sejauh ini. Perhatikan bahwa artikel ini tidak dimaksudkan untuk mencakup semua masalah berdasarkan Bagian 409A. Satu-satunya fokus dari artikel ini adalah efek dari Bagian 409A mengenai penilaian saham biasa dari perusahaan swasta untuk tujuan menetapkan harga opsi saham yang tidak memenuhi syarat (ldquoNQOququo), sehingga opsi tersebut dikecualikan dari penerapan Bagian 409A, dan Mdash untuk alasan yang kami jelaskan di bawah ndash juga untuk tujuan menetapkan harga pelaksanaan opsi saham insentif (ISO) meskipun ISO tidak tunduk pada Bagian 409A. Ada sejumlah masalah signifikan yang berkaitan dengan efek Bagian 409A mengenai persyaratan opsi dan kompensasi tangguhan yang tidak memenuhi syarat secara lebih umum yang berada di luar cakupan pasal ini. 2 Pendahuluan Sudah hampir 10 tahun sejak Bagian 409A dari Internal Revenue Code (ldquoCoderdquo) diundangkan. Ini adalah update dari sebuah artikel yang kami tulis di tahun 2008, setahun setelah peraturan akhir 409A diterbitkan oleh IRS. Pada artikel ini, kami menangani, seperti yang telah kami lakukan sebelumnya, penerapan Bagian 409A untuk penilaian saham biasa perusahaan swasta untuk tujuan menetapkan harga pelaksanaan hibah kompensasi ISO dan NQO kepada karyawan 3 dan kami memperbarui yang terbaik. Praktik yang telah kita amati, sekarang selama dekade terakhir, dalam valuasi saham dan penetapan harga opsi. Untuk menghargai pentingnya Bagian 409A, penting untuk memahami perlakuan pajak atas opsi saham yang tidak memenuhi syarat baik sebelum maupun setelah penerapan Bagian 409A. Sebelum diundangkannya Bagian 409A, seorang pilihan yang diberi NQO untuk layanan tidak dikenai pajak pada saat pemberian. 4 Sebaliknya, optionee dikenakan pajak pada spread antara harga pelaksanaan dan nilai wajar pasar saham yang mendasar pada saat opsi exercise. Bagian 409A mengubah perlakuan pajak penghasilan atas opsi saham yang tidak memenuhi syarat. Berdasarkan Bagian 409A, opsi yang diberikan NQO sebagai imbalan atas layanan dapat dikenakan pajak penghasilan langsung pada ldquospreadrdquo antara harga pelaksanaan dan nilai pasar wajar pada akhir tahun dimana opsi saham nonqualified (r) Tahun-tahun berikutnya sebelum berolahraga sejauh nilai saham yang mendasarinya meningkat) dan 20 penalti pajak ditambah bunga. Perusahaan yang memberikan NQO mungkin juga memiliki konsekuensi pajak yang merugikan jika perusahaan tersebut gagal menahan pajak pendapatan dan membayar bagiannya atas pajak kerja. Untungnya, NQO diberikan dengan harga pelaksanaan yang tidak kurang dari nilai pasar wajar dari underlying stock pada tanggal pemberian dibebaskan dari Bagian 409A dan konsekuensi pajaknya yang berpotensi merugikan. 5 Sementara ISO tidak tunduk pada Bagian 409A, jika opsi yang dimaksudkan untuk menjadi ISO kemudian ditentukan agar tidak memenuhi syarat sebagai ISO (untuk sejumlah alasan yang berada di luar cakupan artikel ini, namun yang penting termasuk menjadi Diberikan dengan harga pelaksanaan yang kurang dari nilai pasar wajar dari saham biasa), maka akan diperlakukan sebagai NQO sejak tanggal pemberian. Berdasarkan peraturan yang berlaku untuk ISO, jika suatu opsi akan gagal menjadi ISO semata-mata karena harga pelaksanaannya kurang dari nilai pasar wajar dari saham yang mendasari pada tanggal hibah, umumnya opsi tersebut diperlakukan sebagai ISO jika perusahaan Berusaha dengan itikad baik untuk menetapkan harga pelaksanaan pada nilai pasar wajar. 6 Ada risiko bahwa perusahaan yang gagal mengikuti prinsip penilaian yang ditetapkan oleh Bagian 409A dapat dianggap tidak berusaha dengan itikad baik untuk memastikan nilai pasar yang adil, sehingga opsi tersebut tidak akan diperlakukan sebagai ISO dan akan menjadi Tunduk pada semua konsekuensi dari Bagian 409A untuk NQO dengan harga pelaksanaan kurang dari nilai pasar wajar. Dengan demikian, menetapkan harga pelaksanaan ISO pada nilai pasar wajar menggunakan prinsip penilaian Bagian 409A juga menjadi praktik yang baik. Sebagai wersquove telah menasihati klien selama 10 tahun terakhir, membangun nilai pasar wajar yang dapat diandalkan sangat penting dalam lingkungan Bagian 409A. Bagaimana Harga Latihan untuk Opsi Saham Biasa Dimulai Sebelum Bagian 409A Sampai penerbitan panduan IRS berkenaan dengan Bagian 409A, praktik perusahaan swasta yang dihormati dalam menetapkan harga opsi opsi saham insentif (ISO) untuk saham biasa 7 Sederhana, mudah dan sangat bebas dari kekhawatiran bahwa IRS akan banyak bicara tentang hal itu. 8 Untuk start-up, harga pelaksanaan ISO dapat diatur dengan nyaman dengan harga yang telah dibayarkan pendiri untuk saham biasa mereka, dan seringkali tujuannya adalah untuk mendapatkan kesempatan kenaikan ekuitas ke tangan karyawan awal yang penting semurah mungkin. Setelah investasi berikutnya, harga pelaksanaan dipatok pada harga saham biasa yang dijual kepada investor atau dengan potongan harga dari putaran terakhir saham preferen yang dijual kepada investor. Demi ilustrasi, sebuah perusahaan dengan tim manajemen yang cakap dan cakap, mengeluarkan produk, pendapatan, dan satu putaran C tertutup mungkin telah menggunakan diskon sebesar 50 persen. Itu semua sangat tidak ilmiah. Jarang sekali perusahaan membeli penilaian independen untuk penetapan harga opsi, dan, sementara auditor perusahaan berkonsultasi dengan mdash dan pendapat mereka memuat bobot, walaupun tidak harus tanpa pertengkaran mdash percakapan antara mereka, manajemen dan dewan biasanya cukup singkat. Aturan Penilaian Berdasarkan Bagian 409A 9 Panduan IRS mengenai Bagian 409A membangun lingkungan yang sangat berbeda di mana perusahaan swasta dan dewan mereka harus beroperasi dalam menentukan penilaian saham biasa mereka dan menetapkan harga pelaksanaan opsi mereka. Aturan Umum. Bagian 409Sebuah panduan menetapkan peraturan (yang akan kita sebut dengan Peraturan Umum) bahwa nilai pasar wajar dari saham pada tanggal penilaian adalah nilai yang ditentukan oleh penerapan metode penilaian wajar yang wajar berdasarkan semua fakta dan keadaan. Metode penilaian cukup diterapkan jika memperhitungkan semua materi informasi yang tersedia sesuai nilai korporasi dan diterapkan secara konsisten. Metode penilaian adalah metode penilaian yang masuk akal jika mempertimbangkan faktor-faktor termasuk, jika berlaku: nilai aset berwujud dan tidak berwujud perusahaan, nilai sekarang dari arus kas masa depan yang diantisipasi perusahaan, nilai pasar saham atau kepentingan ekuitas di Perusahaan sejenis yang bergerak dalam bisnis serupa, transaksi panjang tangan terakhir yang melibatkan penjualan atau pengalihan saham atau kepentingan ekuitas tersebut, premi pengendalian atau diskon karena kurangnya pemasaran, apakah metode penilaian digunakan untuk tujuan lain yang memiliki dampak ekonomi material terhadap Perusahaan, pemegang saham, atau krediturnya. Aturan Umum mengatur bahwa penggunaan suatu penilaian tidak masuk akal jika (i) ia gagal untuk mencerminkan informasi yang tersedia setelah tanggal perhitungan yang secara material dapat mempengaruhi nilai (misalnya, menyelesaikan pembiayaan pada penilaian yang lebih tinggi, pencapaian tonggak sejarah yang signifikan seperti Sebagai penyelesaian pengembangan produk utama atau penerbitan paten utama, atau menutup kontrak yang signifikan) atau (ii) nilai dihitung berkenaan dengan tanggal lebih dari 12 bulan lebih awal dari tanggal penggunaannya. Penggunaan metode valuasi secara konsisten oleh perusahaan guna menentukan nilai saham atau asetnya untuk keperluan lain mendukung kewajaran metode penilaian untuk tujuan Bagian 409A. Jika sebuah perusahaan menggunakan Aturan Umum untuk menghargai sahamnya, IRS dapat berhasil mengatasi nilai pasar wajar dengan hanya menunjukkan bahwa metode penilaian atau aplikasinya tidak masuk akal. Beban membuktikan bahwa metode tersebut masuk akal dan cukup diterapkan terletak pada perusahaan. Metode Penilaian Pelabuhan Aman. Metode penilaian akan dipertimbangkan secara anggapan masuk akal jika berada dalam salah satu dari tiga metode penilaian Safe Harbor yang dijelaskan secara spesifik dalam panduan Bagian 409A. Berbeda dengan nilai yang ditetapkan berdasarkan Peraturan Umum, IRS hanya dapat berhasil mengatasi nilai pasar wajar yang ditetapkan dengan menggunakan Pelabuhan Aman dengan membuktikan bahwa metode penilaian atau penerapannya sangat tidak masuk akal. Safe Harbors meliputi: Penilaian oleh Penilaian Independen. Penilaian yang dilakukan oleh penilai independen yang memenuhi syarat (yang akan kami sebut sebagai Metode Penilaian Independen) akan dianggap wajar jika tanggal penilaiannya tidak lebih dari 12 bulan sebelum tanggal pemberian opsi. Reasonable Good Faith Tertulis Penilaian dari Start-Up. Penilaian saham perusahaan swasta yang tidak memiliki perdagangan atau bisnis material yang telah dilakukan selama 10 tahun atau lebih, jika dilakukan secara wajar dan dengan itikad baik dan dibuktikan dengan laporan tertulis (yang akan kita sebut dengan Metode Start-Up) , Akan dianggap wajar jika persyaratan berikut terpenuhi: Penilaian memperhitungkan faktor penilaian yang ditentukan berdasarkan Aturan Umum dan peristiwa setelah penilaian yang mungkin memberikan penilaian sebelumnya tidak dapat diterapkan diperhitungkan. Penilaian dilakukan oleh orang dengan pengetahuan, pengalaman, pendidikan atau pelatihan yang signifikan dalam melakukan penilaian serupa. Pengalaman yang signifikan umumnya berarti setidaknya lima tahun pengalaman yang relevan dalam penilaian atau penilaian bisnis, akuntansi keuangan, perbankan investasi, ekuitas swasta, pinjaman yang dijamin, atau pengalaman sebanding lainnya dalam lini bisnis atau industri tempat perusahaan beroperasi. Stok yang dinilai tidak tunduk pada put atau hak panggil, selain hak perusahaan menolak atau menolak pembelian kembali seorang pegawai (atau penyedia layanan lainnya) pada saat mempekerjakan karyawan yang menerima tawaran untuk dibeli oleh pihak ketiga yang tidak terkait. Atau penghentian pelayanan. Perusahaan tidak mengantisipasi secara wajar, pada saat penilaian diterapkan, perusahaan akan mengalami perubahan dalam acara kontrol dalam waktu 90 hari setelah hibah atau melakukan penawaran umum sekuritas dalam 180 hari setelah hibah tersebut. Penilaian Berbasis Formula. Pelabuhan Aman Lainnya (yang akan kami sebut Metode Formula) tersedia untuk perusahaan yang menggunakan formula berdasarkan nilai buku, sejumlah pendapatan yang wajar, atau kombinasi keduanya yang wajar untuk menetapkan harga opsi pelaksanaan. Metode Formula tidak akan tersedia kecuali jika (a) saham yang diperoleh tunduk pada pembatasan permanen atas transfer yang mengharuskan pemegangnya menjual atau mengalihkan kembali saham tersebut ke perusahaan dan (b) formula tersebut digunakan secara konsisten oleh perusahaan untuk (Atau sejenisnya) untuk semua transfer (baik kompensasi maupun nonkompensasi) kepada perusahaan atau orang yang memiliki lebih dari 10 persen dari total gabungan hak suara semua kelas saham perusahaan, selain sebuah Penjualan lengan panjang secara substansial seluruh saham perusahaan yang beredar. Pilihan untuk Praktik Penilaian Perusahaan Di lingkungan penilaian Bagian 409A, perusahaan dapat memutuskan untuk mengambil satu dari tiga tindakan: Ikuti Praktik Pra-409A. Perusahaan dapat memilih untuk mengikuti praktik penilaian pra-409A. Namun, jika harga opsi pelaksanaan kemudian ditantang oleh IRS, maka perusahaan harus memenuhi beban pembuktian bahwa metode penilaian sahamnya masuk akal dan cukup diterapkan, seperti yang dipersyaratkan dalam Peraturan Umum. Tolok ukur untuk bukti tersebut adalah peraturan, faktor dan prosedur dari panduan Bagian 409A, dan jika praktik penetapan harga opsi perusahaan tidak jelas dan mengikuti peraturan, faktor dan prosedur tersebut, hampir pasti akan gagal membebani dan merugikan Konsekuensi pajak dari Bagian 409A akan dihasilkan. Latihan Valuasi Internal Mengikuti Aturan Umum 409A Bagian. Perusahaan dapat memilih untuk melakukan penilaian saham internal sesuai dengan Peraturan Umum. Jika harga opsi opsi yang dihasilkan kemudian ditantang oleh IRS, maka perusahaan tersebut lagi harus memenuhi beban pembuktian bahwa metode penilaian sahamnya masuk akal dan cukup diterapkan. Namun, sekarang, karena perusahaan dapat menunjukkan bahwa penilaiannya mengikuti panduan Bagian 409A, masuk akal untuk berpikir bahwa peluangnya untuk memuaskan beban ini secara signifikan lebih baik, walaupun tidak ada jaminan bahwa hal itu akan terjadi. Ikuti salah satu metode Safe Harbor. Sebuah perusahaan yang ingin meminimalkan risikonya dapat menggunakan salah satu dari tiga Safe Harbors yang diperkirakan akan menghasilkan valuasi yang masuk akal. Untuk menantang nilai yang ditentukan di bawah Safe Harbor, IRS harus menunjukkan bahwa metode penilaian atau aplikasinya sangat tidak masuk akal. Solusi Praktis dan Praktik Terbaik Ketika kami menulis draf pertama artikel ini di tahun 2008, kami menyarankan agar pola valuasi di antara perusahaan swasta jatuh di sepanjang rangkaian tanpa demarkasi tajam dari tahap awal, hingga pasca-awal hingga pra-ekspektasi. Kejadian likuiditas, hingga pasca ekspektasi kejadian likuiditas. Sejak itu sudah jelas dalam praktik kami bahwa demarkasi antara mereka yang memiliki modal cukup untuk mendapatkan Penilaian Independen dan yang tidak. Perusahaan Tahap Awal. Pada tahap awal dari sebuah perusahaan yang didirikan pada saat mulai memiliki aset dan operasi yang signifikan, banyak faktor penilaian terkenal yang tercantum dalam panduan IRS mungkin sulit atau tidak mungkin untuk diterapkan. Sebuah perusahaan biasanya mengeluarkan saham kepada pemegang saham pendiri, bukan opsi. Sampai perusahaan mulai memberikan pilihan kepada beberapa karyawan, Bagian 409A akan kurang memprihatinkan. 10 Bahkan setelah hibah opsi yang signifikan dimulai, kita melihat perusahaan menyeimbangkan dolar yang berpotensi signifikan dan biaya lainnya untuk mencapai perlindungan definitif dari ketidakpatuhan dengan Bagian 409A terhadap keadaan keuangan perusahaan tahap pertama yang seringkali ketat. Pada hari-hari awal dari Bagian 409A, biaya penilaian oleh perusahaan penilai profesional berkisar antara sekitar 10.000 sampai 50.000 atau lebih, tergantung pada usia, pendapatan, kompleksitas, jumlah lokasi, kekayaan intelektual dan faktor lain yang mengendalikan tingkat penyelidikan Diperlukan untuk menentukan nilai perusahaan. Sekarang sejumlah perusahaan penilai baru dan baru bersaing secara khusus untuk bisnis penilaian Bagian 409A berdasarkan harga, banyak di antaranya menawarkan biaya awal serendah 5.000 dan beberapa bahkan serendah 3.000. Beberapa perusahaan valuasi bahkan menawarkan kesepakatan paket di mana valuasi kuartalan berikutnya dihargai dengan harga diskon saat dilakukan sebagai pembaharuan penilaian tahunan. Meskipun biaya Metode Penilaian Independen sekarang sangat rendah, banyak perusahaan tahap start-up enggan untuk melakukan Metode Penilaian Independen karena kebutuhan untuk melestarikan modal untuk operasi. Penggunaan Metode Formula juga tidak menarik karena kondisi pembatasan penggunaannya dan, untuk tahap awal, Metode Formula mungkin tidak tersedia karena tidak memiliki nilai buku maupun pendapatan. Penggunaan Metode Start-Up juga sering tidak tersedia karena kurangnya personil in-house dengan expertiserdquo ldquosignificant untuk melakukan valuasi. Rekomendasi umum tidak berbeda dengan perusahaan pemula daripada perusahaan pada tahap pembangunan: memilih kepastian maksimum yang dapat mereka bayar, dan jika perlu, bersedia mengambil risiko jika mereka kekurangan uang. Karena layanan penilaian harga terjangkau yang disesuaikan secara khusus untuk kebutuhan yang diciptakan oleh Bagian 409A sekarang ditawarkan di pasar, bahkan beberapa perusahaan tahap awal mungkin menganggap bahwa biaya Penilaian Independen dapat dibenarkan dengan imbalan yang diberikan. If the start-up cannot afford the Independent Appraisal Method and the Formula Method is too restrictive or inappropriate, the remaining options include the Start-Up Method and the General Method. In both cases, companies that intend to rely on these methods will need to focus on their valuation procedures and processes to ensure compliance. Developing best practices include the following: The company should identify a person (e.g. a director or a member of management) who has significant knowledge, experience, education or training in performing similar valuations, if such a person exists within the company in order to take advantage of the Start-Up Method. If such a person is not available, the company should identify a person who has the most relevant skills to undertake the appraisal and consider whether it may be feasible to augment that personrsquos qualifications with additional education or training. The companys board of directors, with the input of the person identified to perform the appraisal (the ldquoInternal Appraiserrdquo), should determine the factors relevant to its valuation, given the companys business and stage of development, including at least the valuation factors specified under the General Rule. The companys Internal Appraiser should prepare, or direct and control the preparation of, a written report determining the valuation of the companys common stock. The report should set forth the qualifications of the appraiser, it should discuss all valuation factors (even if simply to note a factor is irrelevant and why), and it should come to a definitive conclusion (a range of value is unhelpful) as to fair market value and provide a discussion as to how the valuation factors were weighted and why. The companys valuation procedure described above should be performed in cooperation and consultation with its accounting firm in order to ensure that the company does not determine a valuation that the accountants will refuse to support in its financial statements. The companys board of directors should carefully review and expressly adopt the final written report and the valuation established in it, and should expressly refer to the valuation established by the report in connection with grants of stock options. If additional options are granted later, the board should expressly determine that the valuation factors and facts relied upon in preparing the written report have not materially changed. If there have been material changes, or if more than 12 months have passed since the date of the report, the report should be updated and adopted anew. Intermediate-Stage Private Companies. Once a company is beyond the start-up stage but does not yet reasonably anticipate a liquidity event, its board of directors will have to apply its judgment in consultation with the companys legal counsel and accountants to determine whether it should obtain an independent appraisal. There is no bright line test for when a company should do so, but in many cases the company will have reached this stage when it takes its first significant investment from outside investors. An angel round could be significant enough to trigger this concern. Boards that gain truly independent outside directors as a result of the investment transaction will be more likely to conclude that an independent appraisal is advisable. Indeed, venture capital investors typically require the companies they invest in to obtain an outside appraisal. The general recommendation for companies in this intermediate stage of growth is again the same: opt for the maximum certainty that they can reasonably afford, and, if necessary, be willing to take some risk if they are cash-constrained. Companies that have either begun to generate significant revenues or that have completed a significant financing will both be more capable of bearing the cost of the Independent Appraisal Method and be more concerned about possible liability for the company and for optionees if their valuation is subsequently determined to have been too low. Because reasonably priced valuation services tailored specifically for the needs created by Section 409A are being offered in the market, intermediate-stage companies are likely to determine that the cost is justified by the benefits afforded. Companies that foresee a liquidity event in their future are more likely to use, if not a Big 4 accounting firm, then one of the larger and relatively sophisticated regional firms in order to assure that their accounting and financial affairs are in order for an IPO or acquisition. Many such firms require that their clients obtain independent valuations of their stock for purposes of option grants, and wersquove heard reports of accounting firms that are refusing to take on new audit accounts unless the company agrees to do so, especially in light of the option expensing rules under FAS 123R. A common practice that has developed in implementing the Independent Appraisal Method is to have an initial appraisal performed (or annual appraisals), and then to have that appraisal updated quarterly (or perhaps semi-annually, depending on the companys circumstances), and to plan option grants to occur soon after an update. The only caveat is that if, as is the case with many technology companies, a company has experienced a value-changing event since the most recent appraisal, the company must be sure to advise its appraiser of such events in order to be sure that the appraisal incorporates all relevant information. If a company at this stage, after careful consideration, determines that the Independent Appraisal Method is not feasible, the next best option is to apply the Start-Up Method if all the requirements for relying on this method are met or, if the Start-Up Method is not available, apply the General Rule. In both cases, the company should consult with its accounting and law firms to determine a reasonable methodology of valuation for the company based on its facts and circumstances and, at a minimum, undertake the appraisal as we described above for Start-Up Stage Companies. Later Stage Private Companies. Companies that anticipate mdash or reasonably should anticipate mdash going public within 180 days or being acquired within 90 days, or that have a line of business that has continued for at least 10 years, cannot rely on the Start-Up Method and, while such companies may rely upon the General Rule, many will, and should, rely predominantly on the Independent Appraisal Method. Companies contemplating an IPO will be required - initially by their auditors and later by the SECs rules - to establish the value of their stock for financial accounting purposes using the Independent Appraisal Method. Companies planning to be acquired will be advised that prospective buyers will be concerned about compliance with Section 409A and will require evidence of defensible option pricing, typically the Independent Appraisal Method, as part of their due diligence. Other Observations Finally, for NQO grants, companies that cannot take advantage of a Safe Harbor and that determine reliance on the General Rule leaves more risk than the company and the optionees are willing to take on may also consider limiting Section 409A exposure by making the options compliant with (rather than exempt from) Section 409A. A NQO may be ldquo409A-compliantrdquo if its exercise is limited to events permitted under Section 409A guidance (for example, upon (or upon the first to occur of) a change of control, separation from service, death, disability, andor a certain time or schedule, as defined in Section 409A guidance). However, while many optionees whose options are not restricted in this manner in fact do not exercise their options until such events occur, applying these restrictions may in subtle ways change the economic deal, or the optioneersquos perception of it, and thus may have an effect on incentivizing service providers. Considering the application of such restrictions from both the tax and business perspectives is imperative. Please feel free to contact any member of our Tax or Corporate practice groups for assistance and advice in considering your companys choices of valuation practices under Section 409A. While we are not competent to perform business valuations, we have counseled many clients in these matters. Footnotes. 1. The tax law regulating nonqualified deferred compensation plans, including nonqualified stock options, which was enacted on October 22, 2004 and became effective on January 1, 2005. 2. These issues are addressed in more detail in other MBBP Tax Alerts. 3. Unless an exemption applies, Section 409A covers all ldquoservice providers,rdquo not just ldquoemployeesrdquo. For purposes of this article, we use the term ldquoemployeerdquo to indicate a ldquoservice providerrdquo as that term is defined in Section 409A. 4. This treatment applied so long as the option did not have a ldquoreadily ascertainable fair market valuerdquo as defined under Section 83 of the Code and related Treasury regulations. 5. To be exempt from Section 409A, a nonqualified stock option must also not contain an additional right, other than the right to receive cash or stock on the date of exercise, which would allow compensation to be deferred beyond the date of exercise and the option must be issued with respect to ldquoservice recipient stockrdquo as defined in the final regulations. 6. See section 422(c)(1). 7. ISOs only. Until Section 409A there was no requirement that NQOs be priced at fair market value. 8. The SEC was not a concern unless the company was likely to file for its IPO in less than a year or so, giving rise to cheap stock accounting concerns that could require a restatement of the companys financial statements. This has not changed as a result of Section 409A, although there have been changes recently in the valuation methodologies that the SEC sanctions, which seems to point to a substantial convergence in valuation methodologies for all purposes. 9. The IRS issued guidance which adopted differing valuation standards depending upon whether options were granted before January 1, 2005, on or after January 1, 2005 but before April 17, 2007, or on or after April 17, 2007. Options granted before January 1, 2005 are treated as granted at an exercise price not less than fair market value if the company made an attempt in good faith to set the exercise price at not less than the stocks fair market value on the date of grant. For options granted in 2005, 2006 and up to April 17, 2007 (the effective date of the final Section 409A regulations), the IRS guidance expressly provides that where a company can demonstrate that the exercise price is intended to be not less than fair market value of the stock at the date of grant and that the value of the stock was determined using reasonable valuation methods, then that valuation will meet the requirements of Section 409A. The company may also rely on the General Rule or the Safe Harbors. Options granted beginning on and after April 17, 2007 must comply with the General Rule or the Safe Harbors. 10. Although Section 409A does not technically apply to outright stock grants, care must be taken when establishing the value of stock grants issued proximate to the grant of options. For example, a grant of stock with a reported value for tax purposes of 0.10share may be questioned when a subsequent grant of NQOs at a fair market value strike price of 0.15share established using a Section 409A valuation method is made close in time. Share this pageHALF YEAR RESULTS HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 30 OCTOBER 2016 A ROBUST BUSINESS MODEL DELIVERING RESULTS Conviviality Plc (Conviviality, the Company, or the Group), the UKs leading independent wholesaler and distributor of alcohol and impulse serving consumers through its franchised retail outlets and through hospitality and food service, announces its results for the 26 weeks to 30 October 2016 (H1 FY16: 27 weeks to 1 November 2015). Group Financial Highlights 183160160160160160 Revenue up 211 to 163782.5m (H1 FY16: 163252.0m) 183160160160160160 Gross margin up 2.5 points to 12.5 (H1 FY16: 10.0) 183160160160160160 Profit before tax up 285 to 1637.4m (H1 FY16: loss 1634.0m) 183160160160160160 Adjusted EBITDA 1 up 252 to 16322.9m (H1 FY16: 1636.5m) 183160160160160160 Adjusted profit before tax 2 up 295 to 16315.4m (H1 FY16: 1633.9m) 183160160160160160 Adjusted fully diluted EPS 3 up 142 to 9.2 pence (H1 FY16: 3.8 pence) 183160160160160160 Free cash flow 4 improved 18 to an outflow of 1639.2m (H1 FY16: out flow of 16311.2m) 183160160160160160 Net debt at 163138.4m is 1.2 below pro forma net debt 5 at 1 November 2015 of 163140.1m 183160160160160160 Leverage is comfortably below the Adjusted EBITDA bank covenant of 2.50x at 2.19x 183160160160160160 Interim dividend up 100 to 4.2 pence (H1 FY16: interim dividend 2.1 pence), which is currently expected to represent approximately one third of the anticipated full year divi dend 183160160160160160 Sales 4.4 above the corresponding prior period 6 with each business unit trading well 183160160160160160 Completed complementary acquisition of Bibendum PLB Group 183160160160160160 Successful integration of strategic acquisitions ahead of plan and on track to deliver stated synergies of 1636m in FY17 183160160160160160 Strengthened Plc Board with appointments of Jennifer Laing, Mark Aylwin and David Robinson 183160160160160160 Number of outlets served in the period increased 1.5 and sales per outlet grew 3.8 183160160160160160 Number of Bibendum customers who buy all product categories has increased 100 (H1 FY17 10 H1 FY16 5) 183160160160160160 Entered into a two year supply agreement with Palmer and Harvey to provide lower volume beers, wines and spirits, who in turn will supply the Group with tobacco Conviviality Direct Highlights 183160160160160160 5.2 increase in sales compared to the corresponding prior period 6 160 183160160160160160 1.5 increase in outle ts supplied 183160160160160160 3.8 increase in revenue per outlet Conviviality Retail Highlights 183160160160160160 2.5 increase in sales compared to the corresponding prior period 6 160 183160160160160160 Franchisee like for like 7 retail sales down 1.7 (H1 FY16: down 1.7) 183160160160160160 Franchisee margin up 1.8 Conviviality Trading Highlights 183160160160160160 5.1 increase in sales compared to the corresponding prior period 6 160 183160160160160160 47 increase in Events sales 183160160160160160 Appointed agents for a number of key brands including Santa Rita and Luis Felipe Edwards 183160160160160160 6.1 increase in Group sales in November and December 183160160160160160 2.1 increase in retail like for like 7 sales for the 6 weeks ended 1 January 2017 Diana Hunter, Chief Executive Officer of Conviviality, said: These strong results demonstrate our competitive advantage, the broad customer base we have developed and the robust nature of Conviviality as the UKs leading drinks whol esaler, distributor and solution provider to our Customers. We have successfully restructured to create three business units Conviviality Direct, Conviviality Retail and Conviviality Trading, each providing our customers and Franchisees with unrivalled range, expert service and advice to meet their customer needs whilst providing our suppliers with unmatched access to routes to market across both the on and off trade. The recent acquisitions have resulted in Conviviality being well positioned in its market with a resilient business model that provides unique positioning for its suppliers and customers. We are also pleased to report that the Group continues to trade in line with expectations for the full year There will be a presentation for analysts at the offices of FTI Consulting (200 Aldersgate, EC1A 4HD) at 9.30am today, 30 January 2017. 1 Adjusted EBITDA is calculated as profit before tax of 1637,434,000 (H1 FY16: loss of 1634,023,000), adding back net interest of 1632,643,000 (H1 FY16: 163346,000), depreciation of 1632,299,000 (H1 FY16: 1631,311,000), amortisation of 1636,255,000 (H1 FY16: 163650,000), exceptional items of 1633,669,000 (H1 FY16: 1637,344,000) and share based payment charges160of 1631,259,000 (H1 FY16: 163766,000) and adjusting for fair value movements on foreign exchange derivatives 163673,000 (H1 FY16: ( 163122,000)). The last 12 months adjusted EBITDA used in the leverage calculation for the bank covenants is a rolling last 12 months EBITDA including the results of all current entities assuming they were part of the group for the full 12 month period. 2 Adjusted profit before tax is calculated as profit before tax of 1637,434,000 (H1 FY16: loss of 1634,023,000), adding back amortisation of intangible assets created on the acquisitions of Matthew Clark, Peppermint and Bibendum PLB of 1635,014,000 (H1 FY16: 163412,000), exceptional items of 1633,669,000 (H1 FY16: 1637,344,000) and adjusting for fair value movements on foreign exchange derivatives of 163673,000 (H1 FY16: (163122,000)). 3 Adjusted fully diluted earnings per share takes into account the dilutive effect of share options. The difference between the basic and diluted average number of shares represents the dilutive effect of share options. Note 15 reconciles the weighted average number of shares to the diluted weighted average number of shares. 4 Free cash out flow of 1639,282,000 (H1 FY16: 16311,155,000) is calculated as EBITDA 16322,885,000 (H1 FY16: 1636,515,000) less working capital movements (16315,631,000) (H1 FY16: (16313,873,000)), tax payments 1635,083,000 (H1 FY16: 163958,000), net capital expenditure 1638,799,000 (H1 FY16: 1632,671,000) and interest payments 1632,654,000 (H1 FY16: 163168,000). 5 Proforma performance measures restate the prior period to include the impact of acquisitions including Matthew Clark, Bibendum PLB Group and Peppermint Events and apply to various measures including net debt, sales, working capital. 6 References to corresponding prior period and year on year in the front section of this report are on a pro forma basis. 7 Like for like performance measures adjust the prior period of 27 weeks to 26 weeks to compare with the current period of 26 weeks. Like for like performance measures also adjust for the impact of non-recurring trading disruptions in both periods. 8 Adjusted profit after tax is calculated as adjusted profit before tax less a tax charge calculated at the marginal tax rate. I am pleased with the trading performance of the Group during the first half of the year whilst also completing the acquisition of Bibendum PLB Group, which provides the business with a complementary proposition and further strengthens our leading position both in the On-Trade and as a center of excellence for Wine. The Group is now structured into three Business Units: Conviviality Direct, serving the On-Trade through its Matthew Clark and Bibendum propositions Conviviality Retail, serving the Off-Trade focusing on its Franchisee model and strategic partnerships and Conviviality Trading, providing brand agency expertise and sourcing to suppliers and to multiple and independent retailers. The recent acquisitions and new structure result in Conviviality being well positioned in its market with a robust business model that provides a unique positioning with both its suppliers and its customers. We have strengthened the management team with the following key appointments: 183160160160160160 Mark Aylwin joined the business in January 2016 and was subsequently appointed as Managing Director Conviviality Direct 183160160160160160 James Lousada joined the business in June 2016 as Managing Director Conviviality Trading 183160160160160160 David Robinson joined the business in July 2016 as Managing Director Conviviality Retail and 183160160160160160 Nigel Basey joined the business in March 2016 as Group Logistics Director ensuring that all of Convivialitys customers benefit from our extensive logistics capability. Furthermore, we have added experience to the Plc Board with the appointments of Mark Aylwin and David Robinson as Executive Directors and the addition of Jennifer Laing as our fourth Independent Non-Executive Director. The integration of Matthew Clark and Bibendum PLB Group continues to progress well and we remain ahead of schedule. Importantly, we are on track to deliver our stated synergies and the teams are working well together across the entire business. On behalf of the Board, I would like to thank everyone working in our business for their passion, commitment and customer focus that has made it possible to deliver our acquisitions to plan while also delivering underlying growth across the business. Reflecting the progress of the Group I am pleased to announce a 100 increase in the interim dividend to 4.2 pence per share, which is currently expected to represent approximately one third of the anticipated total dividend. 30 January 2017 CHIEF EXECUTIVE OFFICERS STATEMENT Conviviality Group Overview As a result of the acquisitions of Matthew Clark and Bibendum PLB we are now in a truly unrivalled position. Across the UK we have access to over 25,000 restaurants, hotels, bars over 700 Franchise retail outlets approximately 400 independent specialists and events and we serve major multiple supermarkets drawing from over 10,000 alcohol SKUs sourced globally from specialist producers and brand owners. Total Group unaudited pro forma revenues for the current financial year are now over 1631.5bn underlining our significant scale and reach across the drinks industry. We are the only company in our sector which has the skillset spanning, marketing, branding, merchandising, logistics, supplier management, buying and technical with unrivalled scale and reach across the On-Trade and Off-Trades. As we connect across all these areas of our business and utilise our skills and talent more effectively, we move from being not only a wholesaler and distributor but also a solution provider by providing access to all of these resources to our customers as they face the complexity and operational challenges of their market place. Our strategic goal is to be the drinks and impulse sectors leading independent wholesaler, distributor and solution provider to hotels, restaurants, bars, events and retail outlets by being the most knowledgeable and inspiring partner for our customers. In 2016, we put in place a new organisational structure and leadership team with the formation of our three business units Conviviality Retail led by David Robinson, Conviviality Direct led by Mark Aylwin and Conviviality Trading led by James Lousada. This uniquely connected business model has been purposefully designed to make us stronger and more resilient and to provide the infrastructure to deliver unparalleled customer service today with the opportunity to scale easily as we drive future growth. Each business unit faces the customer with the full back up of our Group support function which helps service the needs of each business unit in the core areas of Finance, Human Resource and critically in Supply Chain and Logistics, a key backbone and increasingly differentiating element of competitive advantage for our business. We have very purposefully lowered our center of gravity to empower our people closest to the customer and provide the support required by the Group to remain agile and efficient. We believe that our determination to ensure our customers and suppliers succeed will continue to further strengthen our market leading position. The market continues to be full of challenges and opportunities and we now have the best platform from which to benefit. We span the entire market across the UK and we are best placed to see trends starting in festivals and cocktail bars, across the retail space and we, more than any business, can provide access to the market to help our suppliers place their products appropriately and to help our customers know what is going to appeal to their consumers. We are rapidly becoming the one stop shop for any customer who sells alcohol or any supplier who wants to reach the right consumers. Due to the acquisitions of Matthew Clark on 7 October 2015, Peppermint on 31 December 2015 and Bibendum PLB Group on 20 May 2016, coupled with strong organic growth, sales grew 211 to 163782.5m (H1 FY16: 163252.0m and adjusted EBITDA 1 increased 252 to 16322.9m (H1 FY16: 1636.5m). Adjusted profit before tax 2 increased by 295 to 16315.4m (H1 FY16: 1633.9m) and fully diluted adjusted earnings per share 3 increased 142 to 9.2 pence (H1 FY16: 3.8 pence). Net debt at 30 October 2016 was 163138.4m (1 May 2016: 16386.1m) reflecting new debt of 16330.0m to fund the acquisition of Bibendum PLB Group coupled with a seasonal increase in net working capital. Net debt was 1631.7m below pro forma net debt 5 at 1 November 2015 and leverage at 30 October 2016 was comfortably below the bank covenant of 2.50x Adjusted EBITDA 1 at 2.19x. Business Unit Highlights: We have made excellent progress with the integration of Matthew Clark and Bibendum PLB Group and are ahead of schedule. We have seen good sale s growth from both propositions, with first half sales up 5.2 over the corresponding prior period 6 to 163515.2m. The number of outlets served in the period increased by 1.5 and sales per outlet grew 3.8, demonstrating the strength of our proposition to both existing and new customers.160 The number of Bibendum customers who buy all product categories has increased 100 (H1 FY17 10 H1 FY16 5). Conviviality Direct will continue to serve its customers through the differentiated propositions of Matthew Clark and Bibendum, however, with the integration of Bibendum there is a significant opportunity for our customers to choose from over 10,000 SKUs of alcohol from the Groups assortment, enabling them to reduce complexity of supply and enabling Conviviality Direct to be a one stop shop for its customers. Detailed analysis has been undertaken to assess the purchases of the 25,000 outlets served by Conviviality Direct, and only 3 of these outlets have duplicated assortments, thereby indicating a significant growth opportunity for both Mathew Clark and Bibendum to support our customers further. 1,769 customers are now trading through the digital platform, a 34 increase year on year 6. We have created a Group Wine Buying team to ensure our supplier partners benefit from access to the enlarged group and so that our customers benefit from the expertise of our buying team and the enhanced choice of wine both in quality and value. For the half year, total sales were up 2.5 reflecting the number of new stores brought into the group and that some of the stores brought into the group in March will be converted and refurbished in the second half of the year leading to further expected growth. 10 existing Franchisees opened 11 more stores in the first half and in total there are 12 Franchisees actively seeking to grow with the business. Attracting new quality Franchisees remains key to our plan with 8 new Franchisees joining us in the period. Franchisee margin for the period improved 1.8 and we were delighted to award 224 Franchisees 920,180 shares under our Franchisee Inventive Plan. The store pipeline continues to build, albeit the focus will always be on quality outlets as opposed to quantity hence the slightly lower number of store openings compared to the prior half. During the period 19 stores were opened including a new Wine Rack in Tattenham Corner, Epsom. On 5 December 2016, 15 high quality convenience stores were purchased from the convenience operator KMD and these stores will be gradually converted to Bargain Booze Select Convenience during the second half and will be subsequently Franchised. The refurbishment programme continues to show strong results with on average 5.8 growth post refurbishment. The supply agreement with Palmer and Harvey signed in October 2016 provides a strong indication of expertise in the drinks sector through our ability to serve a wider group of customers and partners. The relationship with Palmer and Harvey is working well and we consider that there is further potential going forward. Conviviality Retail continues to develop marketing strategies to win in the local community, leveraging its significant strength in social media. Facebook followers now exceed 100,000 enabling the business to communicate with its customers efficiently and with a wide range of mechanics. The Conviviality Retail pricing policy is to be everyday low promotionally priced. On average across our off licence range we have maintained competitiveness in spite of the heavy discounting in the market. Value and consistent pricing is important to our customers and they appreciate the transparency of our pricing strategy, which in turn increases customer loyalty.160 Differentiating the proposition from our competitors has been a successful part of our Retail strategy and will continue to be so.160 By way of example, we recently launched the vaping category into 150 stores with sales per week of vaping products up 61 in participating stores, an average of 163140 per week per store. 160Vaping is an increasing trend as customers switch from tobacco into alternative solutions.160 Franchisees have embraced the proposition, it is a category that is complementary to an off-licence proposition and Franchisees are benefiting from the enhanced margin that these products bring. Conviviality Trading, which aims to be the UKs leading drinks agency, brings together PLB, Instil and Catalyst Brands, three specialist brand agency businesses, each with significant expertise in their respective categories. This area of the business not only represents large suppliers and brands as an agency but is also a consolidator of wine suppliers managing the supply of wine to the Off-Trade and selling more than 9 million 9 litre cases of wine per annum to the UK retail trade including high street retailers, specialists and supermarkets.160 Conviviality Trading has significant capabilities in consumer insight, sourcing, ranging and supply that can add significant value to its customers by reducing the complexity of the wine category in large multiple national chains. Following the creation of this business unit, we have already seen new strategic relationships established. In January 2017 two of the largest Chilean wine producers transferred their Off-Trade business to Conviviality: Santa Rita, with brands including Santa Rita, Vina Carmen and Sur Andino, is the leading Chilean wine producer in the domestic market with a 31 market share and is the third largest wine group in the export market and second largest in the premium wine category and Luis Felipe Edwards, a privately owned wine group founded in 1976 by Luis Felipe Edwards Senior, with brands including Luis Felipe Edwards, Dona Bernada, Marea and Cien. The business is focused heavily on exports and less so on the domestic market. In addition to the agency business, Conviviality Trading is also responsible for the development and growth of an events business including Peppermint and Wondering Wine Co, which are both specialists in outdoor events and festivals.160 Sales increased by 47 over the corresponding prior period 6. The aim for the outdoor business (known as third space) is to create one stop shop solutions for event owners to include full bar and food service management as well as ATM operation and Click and Collect. Click and Collect in association with Bargain Booze was trialled for the first time in 2016 at the Isle of Wight Festival and then at Bestival. Furthermore, Elastic, our brand activation agency, which provides activation and brand building expertise to many of Convivialitys branded supply base saw sales grow strongly. Elastic has signed with 8 new branded suppliers in addition to the retained business of Diageo, LVMH, ABInBev, cementing our positioning as one of the UKs leading agencies. With the greater scale of the Group there is the potential to realise lower costs through buying and distribution and improved organisational efficiency. A clear integration plan has been established to ensure the benefits of both the Matthew Clark and Bibendum PLB acquisitions are achieved.160 By acquiring the two businesses in relatively close succession we have been able to simplify the integration process particularly in the areas of logistics and IT.160 The key benefit areas are detailed as follow: Two key programmes of work have been undertaken, firstly the alignment of Buying terms from the Matthew Clark acquisition by Conviviality Retail, and the subsequent acquisition of Bibendum PLB.160 Secondly through the establishment of the Group Wine Buying team in June 2016, the team are now undertaking detailed analysis of the supply base and assortment to ensure that not only do we carry the choice that our customers and their consumers demand but also to maximise buying scale. Logistics and Distribution The enlarged Group spans 18 depots and third party distribution through DHL Trade Team.160 During May 2016 we changed the reporting structure of all the Depots to report into Nigel Basey, Group Logistics Director.160 We believe there is clear opportunity to align best practice and process to drive more efficient ways of working and deliver between 1631-1.5million of cost savings into FY18.160 Furthermore, the logistics function is reviewing the network to ensure that it has the capacity to allow for future growth.160 As a result, trials will be undertaken in the remainder of the financial year to understand the potential to consolidate slow moving lines as well as to fulfil six day deliveries in target city locations.160 Further updates on the network will be provided in our full year results. With the acquisition of Bibendum PLB Group we have decided to move our systems on to one platform across the entire group.160 The migration of Bibendum Wines to the JD Edwards system that is used in Matthew Clark is expected to be completed during 2017 and will facilitate consolidation of several back office teams. Conviviality Retail is also implementing JD Edwards which will result in more streamlined processes.160 Once these IT projects are complete we plan to migrate Conviviality Trading to JD Edwards. Conviviality performed well during the Christmas trading period across all of its businesses. Group sales in November and December were 6.1 above the corresponding prior period 6 with each business unit performing well. Retail like for like sales in the 6 weeks ending 1 January 2017 grew 2.1 and Conviviality Retail sales increased 6.9. Conviviality Direct sales increased 6.2 and Conviviality Trading grew 3.1. Our trading is in line with expectations for the full year. We have a proven capability in delivering results whilst managing the integration of acquisitions and delivery of synergies.160 Our teams believe in the potential there is for the business and are working well together to deliver our aims.160 We will continue to invest in our business, supporting our customers and Franchisees and our supplier partners as we build upon our strong foundations. Chief Executive Officer 30 January 2017 Following the acquisitions of Matthew Clark on 7 October 2015, Peppermint on 31 December 2015 and Bibendum PLB Group on 20 May 2016, sales grew 211 to 163782.5m (H1 FY16: 163252.0m) and adjusted EBITDA 1 increased 252 to 16322.9m (H1 FY16: 1636.5m). Profit before tax, amortisation of intangible assets created on the acquisitions of Matthew Clark, Peppermint and Bibendum PLB Group, exceptional items and mark to market adjustments (Adjusted profit before tax) 2 increased by 295 to 16315.4m (H1 FY16: 1633.9m). On the same basis, fully diluted adjusted earnings per share 3 increased 142 to 9.2 pence (H1 FY16: 3.8 pence). The acquisition of Bibendum PLB Group was funded in part by new debt of 16330m which, coupled with a seasonal increase in net working capital increased net debt at 30 October 2016 to 163138.4m (1 May 2016: 16386.1m).160 Net debt was 1631.7m below pro forma 5 net debt at 1 November 2015 and leverage at 30 October 2016 was comfortably below the bank covenant of 2.50x Adjusted EBITDA 1 at 2.19x. Group revenues for the period were 211 ahead of last year at 163782.5m (H1 FY16: 163252.0m) and include revenues from the acquisitions of Matthew Clark, Peppermint and Bibendum PLB Group.160 On a pro forma 5 basis Group revenues are 4.4 above the corresponding prior period 6 160 with each of Convivialitys three business units (Conviviality Direct Conviviality Retail and Conviviality Trading) delivering strong growth. Conviviality Direct generated sales of 163515.2m in the 26 weeks to 30 October 2016 and were 5.2 above the corresponding prior period 7 as both Matthew Clarks and Bibendum Wines sales teams remained focused and worked well together during the acquisition and subsequent integration process.160 The strong sales growth is due to a 1.5 increase in the number of outlets coupled with a 3.8 increase in sales per outlet. Conviviality Retails sales were 2.5 above the corresponding prior period 6 as the benefit of a 14 increase in the average number of stores was offset by lower wholesale sales per store as the strong store growth enjoyed in FY16 resulted in a far less mature store estate.160 In addition, a significant number of the stores joined the franchisee estate in March 2016 and have not yet been rebranded, further restricting wholesale sales. During the period, Conviviality Retails store estate fell by 2.0 to 702 (1 May 2016: 716) and the number of stores owned by multi-site franchisees decreased by 2.2 to 356 (1 May 2016: 364). Franchisee like for like 7 sales were down 1.7 reflecting strong summer 2015 marketing campaigns with higher discounts.160 Franchisee gross margin increased 1.8 such that average Franchisee margin was in line with last year. Conviviality Trading generated sales of 16379.0m in the 26 weeks to 30 October 2016 and were 5.1 above the corresponding prior period 6 due to strong growth in Peppermint, Conviviality Tradings festivals and events business that was acquired on 31 December 2015. Adjusted EBITDA 1 Adjusted EBITDA 1 increased 252 to 16322.9m (H1 FY16: 1636.5m) as the strong sales growth was augmented by a 2.5 point improvement in gross margin.160 This increased gross margin by 16372.4m which was partly offset by a 16356.0m increase in operating costs (excluding exceptional items, depreciation, amortisation, share based payment charges and mark to market adjustments on foreign currency contracts). Gross margin improved to 12.5 (H1 FY16: 10.0) due to a significantly improved sales mix with the mix of higher margin wines increasing from 19 to 34 and low margin tobacco falling from 23 of sales to 8 of sales. Bibendum PLB Group was acquired on 20 May 2016 generating sales of 163135.3m and profit before tax of 1632.7m. Adjusted Profit before Tax 2 Adjusted profit before tax 2 increased 16311.6m as the 16316.4m increase in adjusted EBITDA 1 was offset by higher finance costs, depreciation and amortisation (excluding amortisation of Matthew Clark and Bibendum PLB Group acquisition intangibles).160 Finance costs increased to 1632.7m primarily due to interest on debt acquired to fund the acquisitions of Matthew Clark and Bibendum PLB Group, and the amortisation of banking arrangement fees. Depreciation and amortisation (excluding amortisation of Matthew Clark and Bibendum PLB Group acquisition intangibles) increased 1632.0m due to the acquisitions of Matthew Clark and Bibendum PLB Group coupled with an increase in Conviviality Retail depreciation following investments in the store estate and IT systems since IPO on 2 October 2015. Profit before Tax Profit before tax increased by 16311.4m from a loss of 1634.0m to a profit of 1637.4m. Exceptional items includes the costs of acquiring Bibendum PLB Group and business integration costs.160 Exceptional items have fallen 1633.7m due to the prior period including the costs of acquiring Matthew Clark. The intangible assets created on the acquisitions of Matthew Clark and Bibendum PLB Group total 16373.5m, comprising brands and customer bases and generated an amortisation charge of 1635.0m in the 26 weeks ended 30 October 2016 (H1 FY16 1630.4m). The tax charge of 1631.7m represents tax on Group profit before tax and exceptional items of 1632.1m offset by a tax credit on exceptional items of 1630.4m.160 The effective tax rate on Group profit before tax and exceptional items was 19.0 as disallowable expenses in Matthew Clark were offset by deferred tax movements.160 The tax credit on exceptional items was 160 12 due to disallowable transaction costs on the acquisition of Bibendum PLB Group. Earnings per Share Adjusted profit after tax 8 increased 303 to 16312.5m (H1 FY16: 1633.1m) and the basic weighted average number of shares increased 13 to 129.5m (1 May 2016: 115.3m) following the issue of approximately 15.6m new shares, for cash, to help fund the acquisition of Bibendum PLB Group.160 This resulted in basic adjusted EPS increasing 143 to 9.7 pence (H1 FY16: 4.0 pence). Fully diluted weighted average shares increased 14 to 136m (1 May 2016: 119m) resulting in fully diluted adjusted EPS 3 increasing 142 to 9.2 pence (H1 FY16: 3.8 pence). Cash flow and Funding Free cash flow 4 (adjusted EBITDA plus changes in working capital less capital expenditure, interest and tax) improved 17.9 to an outflow of 1639.2m (H1 FY16: outflow of 16311.2m) as adjusted EBITDA 1 of 16322.9m (H1 FY16: 1636.5m) was offset by an increase in working capital of 16315.8m (H1 FY16: increase of 16313.8m), net capital expenditure of 1638.5m (H1 FY16: 1632.7m), interest payments of 1632.7m (H1 FY16: 1630.2m) and tax payments of 1635.1m (H1 FY16: 1631.0m). Net working capital of 16375m was 160 17 below the pro forma prior year net working capital of 16390m. Capital expenditure includes investments in our Franchisees stores of 1631.8m, our IT systems of 1634.2m, as we implement our systems convergence strategy, and the building of a replacement depot in Shefford with a total investment of 1635.4m of which 1631.9m was incurred in the 26 weeks ended 30 October 2016. The Shefford depot was sold and leased back in December 2016 realising cash proceeds of 1635.7m. Net debt increased from 16386.1m at 1 May 2016 to 163138.4m due to the free cash outflow 4 of 1639.2m, a net cash outflow on the acquisition of Bibendum PLB Group of 16326.4m, exceptional items of 1633.7m and dividend payments of 16312.8m. The consideration for Bibendum PLB Group was 16339.7m which, together with 16318.7m of debt acquired resulted in a total investment of 16358.4m.160 This investment was funded by proceeds from the issue of new ordinary shares of 16332.0m and new term loans of 16310.0m. At 30 October 2016 the Groups net debt comprised 16380.2m of term loans and amounts drawn down under the Groups working capital facilities, less unamortised banking arrangement fees.160 The bank facilities include a leverage and an interest cover covenant.160 The leverage covenant requires debt (excluding any amounts drawn down under Matthew Clarks invoice discounting facility plus any amounts above 16320.0m drawn down under Bibendum PLBs invoice discounting facility) to be less than 2.5 times the last 12 months adjusted EBITDA 1. The interest cover covenant requires adjusted EBITDA 1 to be at least four times net finance charges.160 At the measurement date of 31 October 2016 leverage was 2.19 and interest cover was 11. On 16 January 2017 the Groups banking facilities were restructured to reduce costs and increase flexibility. The new facilities comprise term loans of 163101m and a group wide invoice discounting facility with a maximum draw down of 163130m. The leverage covenant requires the term loans to be less than 2.5 times the last 12 months adjusted EBITDA 1. The interest cover covenant has not changed. Conviviality has a progressive dividend policy and aims to increase dividend cover (based on fully diluted adjusted EPS 3 ) 160 to two times by the year ending April 2020.160 In line with this policy an increase in the interim dividend of 100 to 4.2 pence per share (H1 FY16: 2.1 pence) is declared today for shareholders on the register at close of business on 10 February and will be paid on 10 March 2017. This is currently expected to represent approximately one third of the anticipated total dividend Chief Financial Officer 30 January 2017 INDEPENDENT REVIEW REPORT TO CONVIVIALITY PLC160 Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the 26 weeks ended 30 October 2016 which comprises the consolidated income statement, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and the related explanatory notes.160 We have read the othe r information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.160 This report is made solely to the company in accordance with the terms of our engagement.160 Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.160 To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.160 Directors responsibilities The half-yearly report is the responsibility of, and has been approved by, the directors.160 The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.160 The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.160 The condens ed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.160 Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.160 Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.160 A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.160 A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we wou ld become aware of all significant matters that might be identified in an audit.160 Accordingly, we do not express an audit opinion.160 Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the 26 weeks ended 30 October 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules.160 for and on behalf of KPMG LLP160 Chartered Accountants 160 1 St Peters Square 30 January 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.160160160160 General Information The principal activity of Conviviality Plc (the Company) and its subsidiaries (together, the Group or Conviviality) is that of wholesale supply of beers, wines, spirits, tobacco, soft drinks, grocery and confectionery to the UK on trade and off trade markets. The Company is incorporated and domiciled in the United Kingdom. The address of its registered office is: Weston Road, Crewe, Cheshire CW1 6BP. The registered number of the Company is 5592636. The condensed interim financial information presented is for the periods ended 30 October 2016 and 1 November 2015 and the year ended 1 May 2016. The consolidated financial information is presented in sterling, which is also the functional currency of the parent company, and has been rounded to the nearest thousand (163000). The condensed interim financial information shown has been approved for issue on 30 January 2017. The condensed interim financial information shown does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The Groups statutory financial statements for the year ended 1 May 2016 have been reported on by the Companys auditor and delivered to the Registrar of Companies. The auditors report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The condensed interim financial information has not been audited. 2.160160160160 Basis of preparation The condensed interim financial statements for the 26 weeks ended 30 October 2016, which are unaudited, have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Directors have prepared cash flow forecasts for the period until April 2019. Based on these forecasts the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its business risk successfully. In addition to this the group has restructured its bank facilities to reduce costs and increase flexibility. For this reason they continue to adopt the going concern basis in preparing the financial information. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements they should be read in conjunction with the Groups financial statements as at 1 May 2016. The Board has considered the principal risk and uncertainties for the remaining half of the financial year and determined that the risks and uncertainties presented in the 2016 Annual Report still remain. The Groups business is seasonal in nature. Historically, the Groups most important trading period in terms of sales, profitability and cash flow has been the Christmas season. 3.160160160160 Accounting policies In preparing these condensed interim financial statements, the Groups accounting policies and judgements and estimates were the same as those applied to the consolidated financial statements as at 1 May 2016, with the exception of a new policy for assets held for sale, and as such should be read in conjunction with those consolidated financial statements. Assets held for sale The Group classifies non-current assets and disposal groups as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. To be classified as held for sale, an asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets, and the sale must be highly probable. Sale is considered to be highly probable when management is committed to a plan to sell an asset and an active programme to locate a buyer and complete the plan has been initiated at a price that is reasonable in relation to its current fair value, and there is an expectation that the sale will be completed within one year from the date of classification. Non-current assets classified as held for sale are carried on the Groups statement of financial position at the lower of their carrying amount and fair value less costs to sell. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised. 4.160160160160 Segmental Information The Groups activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom to both the On-Trade and Off-Trade market. The Chief Executive officer is considered to be the chief operating decision maker (CODM). Each trading division within Conviviality plc wholesales to businesses that retail alcohol via stores, pubs, bars, restaurants and events. The performance of each division is therefore driven by the UK market for alcohol consumption, which is a single market with a single set of economic characteristics and risks. In addition 90 of the Groups sales are of the same products and the sales process is similar in each division and is serviced by a single supply chain. Consequently, all activities are reported as one segment. To assist with the understanding of performance, however, an analysis of sales are disclosed for each of the trading divisions. This is a new divisional structure which became operational this year. The Remuneration Committee awarded a one off cash bonus of 163288,000160 to Diana Hunter on 13 September 2016 which represents an amount equal to the gross dividends received by Bargain Booze EBT trustees Limited (EBT) (as trustee of the Bargain Booze Share Option Plan 2013) following the IPO of the Company during July 2013.160 The dividends are in respect of the shares held by the EBT that subsequently vested on the date of the IPO. The commercial intent, when the option was granted, was that Diana Hunter would be entitled to receive dividends on such shares from the date of the IPO.160 The dividends were not paid to Diana Hunter as planned and therefore this bonus payment realised the intended objective.160 The Company and the EBT have also entered into a joint share ownership plan with Diana Hunter and Andrew Humphreys which ensures they are both entitled to receive the future dividends payable on the vested share options owned by the EBT pursuant to the Bargain Booze Share Option Plan 2013. Taxation for the period has been calculated by applying the forecast effective tax rate for the financial year ending 30 April 2017. Deferred tax assets relating to share-based payments have been calculated to reflect the number of options outstanding and movement in the share price. Deferred tax liabilities have been recognised relating to the valuation of the Bibendum PLB Group brand and customer base included in intangible assets. In addition deferred tax assets have been recognised on certain acquisition fair value adjustments. A final dividend of 4.2p per ordinary share was declared by the Board of directors at the date of publication of these financial statements. It will be paid on 10 March 2017 to shareholders whose name appears on the register at close of business on 10 February 2017. The interim dividend, amounting to 1637.2 million, has not been recognised as a liability in this interim financial information. It will be recognised in the shareholders equity in the year to 30 April 2017. 9.160160160160 Financial instruments Fair values of financial assets and financial liabilities The carrying values of all the Groups financial assets and financial liabilities approximate to their fair values because of the short-term maturity of these instruments. The fair value of trade receivables and payables is considered to be equal to the carrying values of these items due to their short-term nature. All other financial assets and liabilities are carried at amortised cost. Cash is held with counterparties with a credit rating of A1, A2 and BBB. 10.160 Business combinations Current period business combinations Bibendum PLB Group On 20 May 2016, the Group entered into an agreement to acquire the entire issued share capital of Bibendum PLB Group for a total consideration of 16339.7 million in cash. Bibendum PLB Group is a leading independent wholesaler in the drinks industry specialising in wines and spirits.160 This acquisition is consistent with the Groups ongoing strategy of expanding the Groups wholesaling expertise and entering new markets and channels. The acquisition, together with the current businesses in the Group, creates a unique offering that addresses both the On-Trade and Off-Trade retailers. Significant synergies across buying, distribution, organisational efficiencies and additional revenue generation are expected to be achieved by bringing the businesses together. The following table summarises the consideration paid for Bibendum PLB Group, and the amount of assets acquired and liabilities assumed recognised at the acquisition date. The goodwill arising on acquisition represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised on the acquisition of Bibendum PLB Group these largely relate to synergy and integration benefits. On the acquisition of Bibendum PLB Group, the fair value of assets and liabilities has been assessed and adjustments made as shown in the table above. Within property, plant and equipment and intangible assets a fair value adjustment of 1631.6 million was made to write down assets to their fair value. Within inventories, a fair value adjustment of 1634.2 million was made which represents the adjustment required to bring inventories to their net realisable value. Fair value adjustments of 1630.5 million were made to receivables in relation to non-recoverable debtors of 1631.0 million offset by a 1630.5 million fair value adjustment in relation to forward contracts. Adjustments of 1630.2 million were made to bank balances to convert foreign denominated balances to spot rate. Adjustments of 1630.2 million were made to trade and other payables in respect of conversion to spot rate for foreign denominated balances (1630.3 million) offset by a 1630.1 million holiday pay accrual. A deferred tax liability of 1632.0 million has been recognised on the brand and customer base intangible assets, offset by a deferred tax asset of 1631.3 million on fair value adjustments. From the date of acquisition Bibendum PLB Group has contributed revenue of 163135.3 million and 1632.7 million to profit before tax to the Groups results. Acquisition costs of 1631.5 million have been charged to exceptional costs in the consolidated income statement for the period. Prior period business combinations Matthew Clark (Holdings) Limited On 7 October 2015, the Group entered into an agreement to acquire the entire issued share capital of Matthew Clark (Holdings) Limited for a total consideration of 163199.0 million in cash. Matthew Clark (Holdings) Limited is a leading independent wholesaler in the drinks industry.160 This acquisition is consistent with the Groups ongoing strategy of expanding the Groups wholesaling expertise and entering new markets and channels. The acquisition, together with the current businesses in the Group, creates a unique offering that addresses both the On-Trade and Off-Trade retailers. Significant synergies across buying, distribution, organisational efficiencies and additional revenue generation are expected to be achieved by bringing the businesses together. The following table summarises the consideration paid for Matthew Clark (Holdings) Limited, and the amount of assets acquired and liabilities assumed recognised at the acquisition date. Adjustments made to the fair value of assets acquired include the recognition of the deferred tax liability relating to the intangible asset (16310.1 million), additional provisions and accruals to recognise three onerous contacts that were in place at acquisition (16311.0 million which has been recalculated in this half year review and uplifted by 1635.8 million), additional provisions to recognise that renovation works needed to be carried out at specific depots (1631.0 million) and impairments for property plant and equipment that is impaired at the point of acquisition (1630.9 million). A deferred tax asset of 1631.8 million has been recognised in these interim financial statements relating to the fair value adjustment of onerous contracts. Goodwill has increased by net 1634.0 million as a result of the measurement period adjustments. The comparative balance sheets have been restated to reflect these measurement period adjustments. The goodwill arising on acquisition represents the premium paid to acquire Matthew Clark (Holdings) Limited and the future economic benefits arising from other assets acquired in the business combination that are not individually identified and separately recognised on the acquisition of Matthew Clark (Holdings) Limited these largely relate to synergy and integration benefits. Goodwill has been allocated to the Matthew Clark (Holdings) cash-generating unit (CGU). 160160160160160160 Cost and net book value 160 As at 26 April 2015 160 Acquisitions through business combinations - restated 160 Other acquisitions 160 Other disposals 160 As at 1 May 2016 - restated 160 Acquisitions through business combinations 160 Other acquisitions As at 30 October 2016 12.160 Intangible assets 160Brands and customer base 160 160160160 Cost 160160 160As at 26 April 2015 160160 160Acquired through business combinations 160160 160As at 1 May 2016 160 160160Acquisitions through business combinations 160 160160Transfers from property, plant and equipment 160 160160 As at 30 October 2016 160 160160As at 26 April 2015 160 160160Charge for the period 160 160160As at 1 May 2016 160 160160Charge for the period 160 160160As at 30 October 2016 160 160160Net book value 160160 160As at 30 October 2016 160 160160As at 1 May 2016 13.160 Assets held for sale Matthew Clark have disposed of a warehouse depot under a sale and leaseback arrangement which completed in December 2016. Th e net book value as at 30 October 2016 was 1635.4 million and has been disclosed under assets held for sale. 14.160 Share Capital On 20 May 2016, a further 15,609,757 shares were issued at a value of 1632.05 each in relation to the acquisition of Bibendum PLB Group Limited. The Company entered into additional block listing arrangements with AIM in respect of the notification to AIM of allotments of 250,000 new ordinary shares of 1630.0002 each in the capital of the Company to satisfy the requirement to allot matching shares at the time of purchase of partnership shares for the Bargain Booze Share Incentive Plan. In this regard 47,679 shares were issued during the period. In addition 36,667 shares were issued to a director during the period and a further 2,331,250 free shares were issued under the Franchisee Incentive Plan in the period. 15.160 Earnings per ordinary share Profit(loss) attributable to ordinary shareholders (163000) Basic earnings(loss) per share (pence) Diluted earnings(loss) per share (pence) Basic and diluted earnings per share are calculated by dividing the profit (loss) for the period attributable to equity holders by the weighted average number of shares. Adjusted basic and diluted earnings per share are calculated by dividing the profit after tax but before exceptional items, fair value adjustments on derivative financial instruments and amortisation of intangibles acquired with Matthew Clark and Bibendum PLB Group, by the weighted average number of shares, which is the same as disclosed in the table above. 16.160 Events Occurring After the Reporting Date On 16 January 2017 the Groups receivable financing facilities were restructured to reduce costs and increase flexibility. Under the new agreement the Group can sell any debts owed to Matthew Clark Wholesale Limited, Bibendum PLB Group Limited and Conviviality Retail Limited by its customers who have purchased goods or services. The maximum facility available is 85 of the allowable trade receivables up to 163130m.160 The discount margin for the funding of debts is 1.25.160 There is a non utilisation fee of 0.5 of the available facility payable during the minimum period of the facility being 24 months from the date of the agreement. The agreement terminates in October 2020. An arrangement fee of 163150,000 was incurred and is being amortised over 5 years. The Groups existing senior term and revolving facilities agreement have been revised.160 Term loan A has increased from 16340m to 16351m and Term loan B has increased to 16350m. This information is provided by RNS The company news service from the London Stock Exchange
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