XML 33 R20.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Acquisition of Subsidiaries | 12 Months Ended
--- | ---
Jun. 30, 2018
Business Combinations1 [Abstract] |
Acquisition of Subsidiaries | Acquisition Of Subsidiaries Acquisition of Velocity Partners On 29 December 2017 (the “Acquisition Date”), the Group entered into an Equity Purchase Agreement (“the Purchase Agreement”) pursuant to which the Group acquired all of the issued and outstanding equity of Velocity Partners, LLC (“Velocity Partners”). Velocity Partners is based in Seattle, Washington and provides software development services to clients based in North America. Following the acquisition, 527 employees of Velocity Partners became part of the Group. The acquisition accounting for the Velocity Partners acquisition was considered final as at 30 June 2018. Total consideration includes elements of cash, contingent consideration and deferred compensation. Under the Purchase Agreement, there are other amounts that are payable in future periods based on the continued service of certain employees of Velocity Partners. Any amounts based on continued service provided to the post-combination entity have been excluded from consideration and will instead be accounted for as ongoing remuneration. The following table summarises the acquisition date fair values of each major class of consideration transferred:
| £’000
Initial cash consideration | 28,586 |
Fair value of deferred consideration | 4,198 |
Fair value of contingent consideration | 10,933 |
Fair value of tax refund consideration | 1,170 |
Total consideration transferred | 44,887 |
Under the Purchase Agreement, the Group paid to the former equity holders of Velocity Partners a cash purchase price of £28.6 million. In addition, the Group recognised a fair value of £4.2 million of deferred consideration attributed to a holdback amount, of which £3.0 million is payable one year after the Acquisition Date and £1.5 million is payable within 18-months of the Acquisition Date. The contingent consideration ultimately may be settled with cash, equity or a combination of both cash and equity, based upon a number of conditions specified in the Purchase Agreement. The factors that will determine the portion of the contingent consideration that ultimately must be settled in cash include (1) whether the Group completes an IPO prior to the third anniversary of the Acquisition Date, (2) the timing of any future IPO event that may occur and (3) the weighted average trading price of the Group’s Class A ordinary shares (including in the form of American Depositary Shares) during the initial 30-day period immediately following any IPO event. During the 3-year period immediately following the Acquisition Date, the Group will pay cash in an amount equal to approximately one third of the contingent consideration, plus a supplemental cash amount, on each anniversary date that passes prior to the consummation of an IPO. Upon consummation of an IPO, equity becomes the initial means of settlement of any portion of the contingent consideration not previously settled in cash upon the passage of an anniversary of the Acquisition Date. The maximum number of shares issuable upon the occurrence of an IPO is 1,125,035 shares, dependent on the timing of the occurrence of an IPO. However, the Group may be required to supplement the equity issuance with additional cash consideration, based on the average trading price of the Group’s Class A ordinary shares (including in the form of American Depositary Shares) during the 30-day period immediately following the IPO. The total cash to be paid will not exceed £12.1 million under any circumstances. In accordance with IFRS 13 “Fair Value Measurement,” the Group measures its contingent consideration liability recognised in connection with the acquisition of Velocity Partners at fair value (the “contingent equity consideration”). Since the IPO happened on 27 July 2018, the fair value of the contingent consideration has increased because the closing price achieved on IPO was higher than the price valuation used at 30 June 2018. This was accounted for as a non-adjusting post balance sheet event. The tax refund consideration of £1.2 million represents the amounts due to the former equity holders of Velocity Partners if we receive certain future tax refunds. As part of Velocity Partner’s closing balance sheet as of the acquisition date, Velocity Partners has recorded a $0.5 million tax receivable for a Washington State tax refund for the periods from 2010-2013 and $1.1 million value-added tax receivable in Argentina, recorded in other receivables. In the instance Velocity Partners receives proceeds under either of these tax refunds, they are owed to the seller as part of the terms of the Equity Purchase Agreement. The Company's allocation of the total purchase consideration amongst the net assets acquired is as follows:
| Fair Value £’000
Intangible asset - Client relationships | 15,214 |
Property, plant and equipment | 932 |
Trade and other receivables | 6,045 |
Cash and cash equivalents | 2,342 |
Trade and other payables | (3,792 | )
Corporation tax payable | (39 | )
Deferred tax liability | (27 | )
Total net assets acquired | 20,675 |
Other than intangible assets, there were no differences between the fair values and the book values of net assets acquired at acquisition. Intangible assets subject to valuation include customer relationships. Other immaterial intangibles assets that exist include the Velocity Partners trade name and a non-compete agreement. The multi period excess earnings method (“MPEEM”) was applied to determine the fair value of the customer relationship intangible asset. The fair value determined under this approach is a function of the following: (1) future revenues expected to be generated by these assets and the profitability of these assets; (2) identification of the contribution of other tangible and intangible assets to the cash flows of these assets to apply an appropriate capital charge against the cash flows; and (3) determination of the appropriate risk-adjusted discount rate to calculate the present value of the stream of anticipated cash flows. An estimate was made by the Group regarding the amount of future revenues that could be attributed to Velocity Partners’ customers that existed as of the acquisition date. This revenue projection was based on recurring revenue from existing customers prior to any customer attrition. As the estimate of fair value for the customer related asset is based on MPEEM, consideration was given to contributions to earnings from “contributory assets” other than customer relationships, in order to isolate the cash flows attributable to the customer related asset inclusive of other assets. The after-tax residual cash flows attributable to existing customers were adjusted for attrition and discounted to a present value. The fair value of the assembled workforce acquired is included in the amount initially recorded as goodwill. Deferred Tax The deferred tax liability at acquisition on the customer relationship was zero as the tax base at the date of acquisition was equal to the carrying value. Over time, a temporary difference will arise and applicable U.S. tax rates will be applied to arrive at the deferred tax balance. Goodwill Goodwill arising from the acquisition has been recognised as follows:
| £’000
Consideration transferred | 44,887 |
Fair value of identifiable net assets | (20,675 | )
Goodwill | 24,212 |
Goodwill relates to the benefit of expected synergies, future market development (including future growth potential from new clients) and the possibility of innovation and expansion by utilising a larger workforce. These benefits are not recognised separately from goodwill as they do not meet the recognition criteria for identifiable intangible assets. Revenue and Profit of Velocity Partners From Acquisition Date to 30 June 2018
| £’000
Revenue | 15,281 |
Profit | 2,635 |
Revenue and Profit of Velocity Partners for Current Reporting Period (had the acquisition occurred at the beginning of the reporting period)
| £’000
Revenue | 30,383 |
Profit | 4,327 |
Acquisition Related Costs
| £’000
Legal and professional fees | 1,233 |
Acquisition of ISDC On 2 September 2016, the Group acquired 100% of ISDC voting rights and obtained control of ISDC. ISDC conducts its operations in the Netherlands, Romania and Bulgaria. Following the acquisition, 286 employees of ISDC became part of the Group. Consideration Transferred The following table summarises the acquisition date fair values of each major class of consideration transferred:
| £’000
Cash | 8,862 |
Total consideration transferred | 8,862 |
Identifiable Assets Acquired and Liabilities Assumed The fair value of assets acquired and liabilities assumed on the date of the acquisition were as follows:
| Fair Value £’000
Client relationships | 4,301 |
Property, plant and equipment | 323 |
Trade and other receivables | 1,739 |
Cash and cash equivalents | 768 |
Trade and other payables | (648 | )
Other taxation and social security | (430 | )
Corporation tax payable | (17 | )
Borrowings | (196 | )
Other liabilities | (103 | )
Deferred tax liability | (1,075 | )
Total net assets acquired | 4,662 |
Measurement of fair values Intangible assets The multi-period excess earnings method (“MEEM”) was applied to determine the fair value of intangibles. Excess earnings are determined from the projected financial statements through the difference between the after tax operating profit to the existing clients and the required cost of invested capital (“CAC”) on all the other supporting assets (tangible and intangible). The value of the subject intangible asset corresponds to the present value of these excess earnings over the expected remaining useful life of the asset. The CAC consists of a charge intended to ensure that the residual income stream only relates to the subject intangible asset to be valued, profits generated from sales to a client cannot be ascribed solely to the client itself. To generate sales, other assets (such as fixed assets, working capital and other intangible assets) all contribute to the performance of the acquired business. Contributory assets charges are valued prior to the client relationships valuation so that the expected CAC on these assets can be computed and deducted from the flows considered. Intangible assets subject to valuation include client relationships. Client relationships were not accounted for by the acquired business, as it developed them internally and charged the related costs to expense. Goodwill Goodwill arising from the acquisition has been recognised as follows:
| £’000
Consideration transferred | 8,862 |
Fair value of identifiable net assets | (4,662 | )
Goodwill | 4,200 |
Goodwill relates to the benefit of expected synergies, future market development and the assembled workforce. These benefits are not recognised separately from goodwill as they do not meet the recognition criteria for identifiable intangible assets. Revenue and Profit of ISDC From Acquisition Date to 30 June 2017
| £’000
Revenue | 10,338 |
Profit | 1,398 |
Revenue and Profit of ISDC for 2017 Reporting Period (had the acquisition occurred at the beginning of the reporting period)
| £’000
Revenue | 12,262 |
Profit | 1,589 |
Acquisition Related Costs
| £’000
Legal and professional fees | 550 |

X
- Definition Business Combinations1 [Abstract] + References No definition available. + Details
Name: | dava_BusinessCombinations1Abstract
Namespace Prefix: | dava_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for business combinations. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name IFRS -Number 3 -IssueDate 2017-01-01 -Section Disclosures -URI http://eifrs.ifrs.org/eifrs/XBRL?type=IFRS&num=3&date=2017-03-01&anchor=sect_Disclosures&doctype=Standard -URIDate 2017-03-09 + Details
Name: | ifrs-full_DisclosureOfBusinessCombinationsExplanatory
Namespace Prefix: | ifrs-full_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration