REG - Ten Alps PLC - Audited Preliminary Results <Origin Href="QuoteRef">TAL.L</Origin> - Part 2

Zinc MediaAnnouncement

04/12/2014 07:11

- Part 2: For the preceding part double click  ID:nRSD7926Ya 

       (570)          (251)     (27)       (248)     (1,096)   
 Impairment charge                        (3,175)   -              -         -          -         (3,175)   
 Disposals & retirements                  27        -              494       -          -         521       
 Exchange movements                       -         -              (12)      -          -         (12)      
 At 31 March 2013                         (18,765)  (3,728)        (1,104)   (171)      (1,006)   (24,774)  
 Charge for the year                      -         (90)           (14)      -          (248)     (352)     
 Impairment charge                        -         -              -         -          -         -         
 Disposals & retirements                  -         -              -         -          -         -         
 Exchange movements                       -         -              -         -          -         -         
 At 30 June 2014                          (18,765)  (3,818)        (1,118)   (171)      (1,254)   (25,126)  
 Net Book Value                                                                                             
 At 30 June 2014                          6,897     -              -         -          56        6,953     
 At 31 March 2013                         6,897     90             14        -          304       7,305     
 
 
Goodwill 
 
Goodwill arising on acquisitions after the date of transition to IFRS is
attributable to operational synergies and earnings potential expected to be
realised over the longer term. 
 
Customer Relationships 
 
Customer relationships relating to contract publishing relationships are
amortised over an 8 year period which is representative of the average length
of the contract publishing relationships acquired. 
 
Magazine Titles 
 
Magazine titles are magazines for which the intellectual property is wholly
owned by the company. 
 
Websites 
 
Development costs of revenue generating websites are capitalised as intangible
assets. 
 
Impairment Tests for Goodwill 
 
The carrying amount of goodwill by operating segment is: 
 
             2014   2013   
             £'000  £'000  
 Publishing  4,399  4,399  
 TV          1,611  1,611  
 Agency      887    887    
 Total       6,897  6,897  
 
 
Goodwill is not amortised but tested annually for impairment with the
recoverable amount being determined from value in use calculations. The key
assumptions for the value in use calculations are those regarding the discount
rate, growth rates and forecasts in income and costs. 
 
The Group assessed whether the carrying value of goodwill was supported by the
discounted cash flow forecasts of operating segment based on financial
forecasts approved by management covering a seven-year period, taking in to
account both past performance and expectations for future market developments.
Management has used a seven year model predominately because the earnout
models used on acquisitions have been based on seven year scenarios.
Management estimates the discount rate using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to media businesses. 
 
In assessing the divisions the Group reviewed the management forecasts for a
projection of 2 years at 2% for 2015 and 2.5% for 2016 in line with long term
growth rate. Management believe this rate does not exceed the growth rate of
the industry and the UK economy in the long term. After the 2 year period,
management reflected the significant cost benefits and restructure incurred by
the Group over the last three years into the forecasts and concluded that no
further benefit or growth rate would be applied thereafter. The management
forecasts include restructurings which have been completed prior to 30 June
2014. 
 
In evaluating the recoverable amount, we employ the discounted cash flow
methodology, which is based on making assumptions and judgements on forecasts,
margins, discount rates and working capital needs. These estimates will differ
from actuals in the future and could therefore lead to material changes to the
recoverable amounts. 
 
The discount rate applied across all the segments for 2014 was 7.5% (2013:
9.3%). The reduction reflects the weighting of the debt and equity valuation
of the Group, the overall calculation and methodology remains unchanged from
prior periods. As the overall debt has increased and the equity value
decreased in the period, the discount rate has fallen to reflect the lower
debt borrowing costs. A sensitivity analysis of an increase in the discount
rate by 2% is shown below. 
 
Broadcast 
 
A pre-tax discount rate of 7.5% (2013: 9.3%) has been used. The main
assumptions on which the forecast cash flows were based include revenue growth
and margin growth. All key assumptions used by management within the cash flow
forecasts are based on past experience, sector experience. 
 
Publishing 
 
A pre-tax discount rate of 7.5% (2013: 9.3%) has been used. The main
assumptions on which the forecast cash flows were based include revenue growth
and margin growth. All key assumptions used by management within the cash flow
forecasts are based on past experience, sector experience. 
 
Agency 
 
A pre-tax discount rate of 7.5% (2013: 9.3%) has been used. The main
assumptions on which the forecast cash flows were based include revenue growth
and margin growth. All key assumptions used by management within the cash flow
forecasts are based on past experience, sector experience. 
 
Changes in these assumptions can have a significant effect on the recoverable
amount and therefore the value of the impairment recognised. 
 
 Assumption                       Judgement                                                                                                                                                                     Sensitivity                                                                                                                                                                                                                    
 Discount Rate                    As indicated above the rate used is 7.5%                                                                                                                                      An increase in the discount rate by 2% will result in a decrease in the overall goodwill carried at the period end by £0.29m. A decrease in the discount rate by 1% will not result in an impairment charge.                   
 Growth Rate and Strategic plans  A rate of 2% and 2.5% has been used for the first 2 years respectively.                                                                                                       If 0% growth rate was applied and all benefits from the restructuring and reorganisation were eliminated then the Publishing unit would be impaired by £3.21m and Agency by £0.36m. Broadcast division would not be impaired.  
 Cashflows                        Cash collection is consistent with previous years with no significant bad debts being incurred due to write offs taken in the previous years and provisions for this period.  A 15% fall in cashflow estimates would result in an overall impairment of £0.79m in the period.                                                                                                                                
 
 
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