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Financial Statements
13. Intangible Assets
Goodwill
Brand
Total
names
£’000
£’000
£’000
Cost
At 1 March 2009
163,258
60,000 223,258
Acquisition of
Stobart Air Limited
8,028
-
8,028
At 28 February 2010
171,286
60,000 231,286
At 28 February 2011
171,286
60,000 231,286
Impairment
At 1 March 2010
and 28 February 2011
-
-
-
Net book value
At 1 March 2009
163,258
60,000 223,258
At 28 February 2010
171,286
60,000 231,286
At 28 February 2011
171,286
60,000 231,286
There are no internally generated intangible assets.
Brand names consist of the Eddie Stobart brand and other Stobart-associated
brands. This brand name is considered to have an indefinite useful life as there
is no foreseeable limit to the period over which it is expected to generate cash
flows for the Group. The Group invests significant amounts to support the
brand profile and development.
Further details of the accounting for the acquisition in the prior year are set
out in Note 11.
Impairment testing of goodwill and intangible assets with indefinite
lives
The goodwill and brands with indefinite lives frombusiness combinations have
been allocated to three cash generating units. Carrying amounts of goodwill
and brands with indefinite lives allocated to each cash generating unit are set
out below:
Eddie
Stobart
Stobart
Total
Stobart
Rail
Ports
2011 2010 2011 2010 2011 2010 2011 2010
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Carrying amount
of goodwill
141,642 141,642 4,375 4,375 25,269 25,269 171,286 171,286
Carrying amount of brands
with indefinite useful lives
60,000 60,000
-
-
-
- 60,000 60,000
Eddie Stobart Cash-Generating Unit
The recoverable amount of the goodwill in the Eddie Stobart cash-
generating unit has been based on value in use calculations using
projections from financial forecasts approved by senior management
covering a 5-year (2010: 5 year) period. The main assumptions on which
the forecasts were based include sales volumes and profit margins. The
pre-tax discount rate applied to the cash flow projections is 8.1% (2010:
7.3%) based on the weighted average cost of capital of the division,
taking in to account the cost of equity and debt for the CGU, and cash
flows beyond the 5-year period are deemed to be in perpetuity but no
growth (2010: nil) is assumed in the calculations after 5 years.
No impairment losses have been recognised in the period or the prior
period. The calculation of the value in use is most sensitive to the
discount rate and sales volumes. With regard to the assessment of value
in the Eddie Stobart unit, management believes that no reasonably
possible change in the discount rate or sales volumes would cause the
carrying value of the unit to exceed its recoverable amount.
Stobart Rail Cash-Generating Unit
The recoverable amount of the goodwill in the Stobart Rail cash-generating
unit has been based on value in use calculations using projections from financial
forecasts approved by senior management covering a 5 year (2010: 5 year)
period. The main assumptions on which the forecasts were based include
Network Rail work volumes. The pre-tax discount rate applied to the cash flow
projections is 10% (8.4%) based on the weighted average cost of capital for
the division, taking in to account the cost of equity and debt for the CGU, and
cash flows beyond the 5-year period are deemed to be in perpetuity but no
growth (2010: nil) is assumed in the calculations after 5 years.
No impairment losses have been recognised in the period or the prior period.
The calculation of the value in use is most sensitive to the discount rate. With
regard to the assessment of value in the Stobart Rail unit, management
believes that no reasonably possible change in the discount rate would cause
the carrying value of the unit to exceed its recoverable amount.
Stobart Ports Cash-Generating Unit
The recoverable amount of the goodwill in the Stobart Ports cash-generating
unit has been based on fair value less costs to sell calculations using estimated
discounted cash flows after tax and direct selling costs. The calculations are
based on projections from financial forecasts approved by senior
management covering a 5-year (2010: 5 year) period. The main assumptions
on which the forecasts were based include container volumes and profit
margins. The discount rate applied to the cash flow projections is 8.2% (2010:
6.2%) based on the weighted average cost of capital of the division, and
cash flows beyond the 5-year period are deemed to be in perpetuity with a
growth rate of 4.0% following the expected development of the port.
No impairment losses have been recognised in the period or the prior
period. The calculation of the fair value less costs to sell is most sensitive
to the discount rate, container volumes and development progress. The
recoverable amount exceeds the carrying amount by a significant
amount. In order for the recoverable amount to be equal to the carrying
amount, the value of the discount rate would need to be increased by
35% and it would also be assumed that there was no growth.
14. Investment Property
Investment property in 2009 year were carried at fair value and included in
Assets Held for Sale, determined based on valuations performed by Knight
Frank, an accredited independent valuer, as at 28 February 2009 on the basis
of openmarket value, supported by market evidence. The fair value represents
the amount at which the assets could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arms
length transaction at the date of the valuation. The valuation was performed
in accordance with the RICS Valuation Standards issued by the Royal Institution
of Chartered Surveyors and is based on available market evidence. The
Directors consider that there has been no material change to the valuation in
the year based on an in-house review of the valuation.
2011
2010
£’000
£’000
Opening Balance
2,000
-
Reclassification from assets of disposal
groups held for sale to investment
property in the current year
-
2,000
Closing balance
2,000
2,000
At 28 February 2011, therewere no restrictions on the realisability of investment
property or remittance of income and proceeds of disposal (2010: none).
At 28 February 2011, contractual obligations to purchase investment property
amounted to £nil (2010: £nil).