Re: End of Year Tax loss?
sounds like an accounting maneuver for tax reasons.
Unlikely. Tax accounts and published GAAP accounts are completely different, and since 2015, goodwill amortisation hasn't been claimable against corporation tax, so I'm confident that writing it down in one fell swoop would equally not be allowable. My money's on the exec bonus scheme driving this.
What's going on here formally is that they're admitting that the CPW merger was on unduly favourable terms to CPW, and by writing off the goodwill from the balance sheet they reduce the total value of the balance sheet, which helps with some performance ratios such as "return on capital employed". But I suspect the main thing is that by taking the pain this year, profits in future years will be higher by the amount they would otherwise have amortised, and the executive incentive scheme should pay out more generously next year. As there's a minimum profit threshold before bonuses are paid, chances are they thought "we're getting stuff all bonus this year, so what else can we incur as a cost now?"
Also, investor memories are short, and when in the next financial year the share price rises on a big jump in net profit, few will remember that c£33m of the increase is down to this goodwill writeoff. As beneficiaries of share incentives the board will be pleased if the share price improves.
Overall though, it isn't a proper "big bath" provision because in the longer term I can't see the Dixons Carphone mobile shops surviving, so there will be further closures, writedown of leases and business termination costs. Whilst the board continue to cling to the idea that there's value in selling a modest range of handsets at inflated prices on the high street, they aren't going to sort out the CPW rump.