Mitie Group plc 102 Annual Report and Accounts 2014
Notes to the consolidated financial statements For the year ended 31 March 2014
13
Goodwill
Cost
£m
At 1 April 2012
347.7
Acquisition of subsidiaries
100.3
Impact of foreign exchange
0.1
Change in deferred contingent consideration for subsidiaries acquired prior to 31 March 2010
(0.9)
At 1 April 2013
447.2
Acquisition of subsidiaries
12.7
Impact of foreign exchange
(0.3) 459.6
At 31 March 2014 Accumulated impairment losses At 1 April 2012
–
At 1 April 2013
–
At 31 March 2014
–
Carrying amount 459.6
At 31 March 2014 At 31 March 2013
447.2
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. Additions during the year relate to goodwill recognised on two acquisitions and finalisation of the acquisition accounting for acquisitions made in the prior year. More details are presented in the Acquisitions note (Note 31). Goodwill has been allocated to CGUs, which align with the business segments, as this is how goodwill is monitored by the group internally. Goodwill has arisen principally on the acquisitions of Initial Security in 2006, Dalkia Technical Facilities Management in 2009 and Enara in 2012. Discount rate 2014 %
Discount rate 2013 %
Goodwill 2014 £m
Goodwill 2013 £m
Facilities Management
9.8
8.2
251.9
250.9
Property Management
11.0
9.5
85.2
85.2
Healthcare
11.0
9.5
105.0
93.6
Energy Solutions
12.0
10.7
17.5
17.5
459.6
447.2
The group tests goodwill at least annually for impairment or more frequently if there are indicators that goodwill may be impaired.
Key assumptions The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
Growth rates and terminal values The group prepares cash flow forecasts derived from the most recent one year financial budgets approved by the Board, extrapolated for four future years by a growth rate applicable to each unit with a terminal value using a 2% inflationary growth rate assumption.