Adcock Ingram Integrated Report 2018

75 ADCOCK INGRAM  Integrated Report 2018 1 ACQUISITION OF BUSINESSES (continued) 1.2 VIRTUAL LOGISTICS PROPRIETARY LIMITED (VIRTUAL) On 1 April 2017, Adcock Ingram Healthcare Proprietary Limited acquired 100% of the shareholding of Virtual, a national fine distribution company. The Group acquiredVirtual as it complements the Company's reach and capacity, allowing for improved service levels to customers. 2017 R’000 The fair value of the identifiable assets as at the date of acquisition was: Assets Trade and other receivables 16 485 Property, plant and equipment 5 288 Intangible assets 2 880 Taxation receivable 462 Deferred tax 204 Inventories 94 25 413 Liabilities Trade and other payables 11 015 Bank overdraft 2 275 Short-term borrowings 1 198 Long-term borrowings 920 15 408 Total identifiable net assets at fair value 10 005 Goodwill arising on acquisition 5 595 Purchase consideration 15 600 Deferred consideration (8 000) Net bank overdraft acquired with the business 2 275 Net cash consideration 9 875 The fair value of the trade receivables equalled the gross amount of trade receivables and amounted to R16.1 million. None of the trade receivables were impaired and it was expected that the full contractual amounts could be collected. Goodwill represented the difference between the purchase consideration and the fair value of the net assets acquired as there were no further separately identifiable intangible assets. The significant factors that contributed to the recognition of goodwill include, but were not limited to, the establishment of a fine distribution network, expanding the Group’s national footprint. During the previous financial year, Virtual contributed R21.7 million towards revenue and reported a profit before income tax of R0.9 million. If the Virtual acquisition took place at the start of the previous financial year, the revenue would have been R84.9 million and profit before income tax would have been R3.1 million. Analysis of cash flows on acquisition Transaction costs of the acquisition (included in cash flows from operating activities) (1 467) Net bank overdraft acquired with the business (included in cash flows from investing activities) (2 275) Transaction costs of R1.5 million were expensed and were included in non-trading expenses. A payment of R8.0 million of the purchase price, which was fully provided for in the previous financial year, was deferred and subject to the achievement of profit targets. During the 2018 financial year the deferred amount was paid. Notes to the Group annual financial statements continued