Consolidated financial statements
Notes to the financial statements
9. Goodwill and other intangible assets
| |
Other intangible assets |
|
|
Secured
customer
contracts
£m |
Other
contracts
and related
relationships
£m |
Software
£m |
Non-compete
agreement
£m |
|
Total other
intangible
assets
£m |
Goodwill
£m |
Cost or valuation |
|
|
|
|
|
|
|
| Balance at 1 January 2008 |
4.2 |
26.9 |
0.9 |
5.0 |
|
37.0 |
192.3 |
| Balance at 31 December 2008 |
4.2 |
26.9 |
0.9 |
5.0 |
|
37.0 |
192.3 |
| Balance at 1 January 2009 |
4.2 |
26.9 |
0.9 |
5.0 |
|
37.0 |
192.3 |
| Additions in the year (note 25) |
– |
– |
– |
– |
|
– |
1.1 |
Balance at 31 December 2009 |
4.2 |
26.9 |
0.9 |
5.0 |
|
37.0 |
193.4 |
Accumulated amortisation |
|
|
|
|
|
|
|
| Balance at 1 January 2008 |
(0.8) |
(2.8) |
(0.2) |
(0.7) |
|
(4.5) |
(9.0) |
| Amortisation charge for the year |
(2.1) |
(4.8) |
(0.5) |
(1.7) |
|
(9.1) |
– |
| Balance at 31 December 2008 |
(2.9) |
(7.6) |
(0.7) |
(2.4) |
|
(13.6) |
(9.0) |
| Balance at 1 January 2009 |
(2.9) |
(7.6) |
(0.7) |
(2.4) |
|
(13.6) |
(9.0) |
| Amortisation charge for the year |
(1.0) |
(3.9) |
(0.2) |
(1.7) |
|
(6.8) |
– |
Balance at 31 December 2009 |
(3.9) |
(11.5) |
(0.9) |
(4.1) |
|
(20.4) |
(9.0) |
Carrying amount |
|
|
|
|
|
|
|
Carrying amount at 31 December 2009 |
0.3 |
15.4 |
– |
0.9 |
|
16.6 |
184.4 |
| Carrying amount at 31 December 2008 |
1.3 |
19.3 |
0.2 |
2.6 |
|
23.4 |
183.3 |
Secured customer contracts and other contracts and related relationships arise from valuing the relationship with a number of clients where there is a secured pipeline of work or historic experience of a relationship and the real prospective opportunity of repeat work. Secured customer contracts will be fully amortised by December 2010 and other contracts and related relationships by 2023.
Software was fully amortised by 31 December 2009.
The non-compete agreement is of a three year duration and will expire in July 2010.
Goodwill represents the value of people, track record and expertise acquired within acquisitions that are not capable of being individually identified and separately recognised.
Segmentation of goodwill and other intangible assets is disclosed in note 1.
Note 25 provides further details in respect of the fair value of intangible assets identified on acquisition and for the determination of goodwill arising on acquisition. Amortisation charges in respect of intangible assets with a finite life are recorded within administration expenses in the income statement. The amortisation rates are given in the significant accounting policies.
In testing goodwill and other intangible assets for impairment the carrying value of goodwill and other intangible assets in each cash-generating unit has been compared against value in use. Value in use has been determined by using forecast pre-tax cash flows from Board approved budgets for the next three years and extrapolating future growth and applying risk-adjusted discount rates that are specific to the cash-generating unit in question.
Cash flows beyond three years have been extrapolated using an estimated growth rate of 2.25% (2008: 2.25%), which is equal to the estimated nominal longterm growth in construction sector GDP. The risk-adjusted nominal discount rates used are 12% (2008: 12%) for Construction and Infrastructure Services, 13% (2008: 13%) for Affordable Housing and 15% (2008: 15%) for Urban Regeneration. The directors have reviewed the rates used and believe they are still appropriate.
The key assumptions in forecasting pre-tax cash flows relate to future budgeted revenue, margin likely to be achieved, and likely rates of long-term growth by market sector. Budgeted revenue and margin are based on views on past performance, secured workload and workload likely to be achievable in the short to medium-term given trends in the relevant market sector as well as macroeconomic factors. In carrying out this exercise, no impairment of goodwill or other intangible assets has been identified.
