NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS l NOTE 5


        Goodwill
R’000		 Trademarks
R’000		 Customer
listing
R’000		 Distribution
agreement
R’000		 Computer
software
R’000		 Internally
generated
software
R’000		 Franchise
fees
R’000		 Customer
relationships
R’000		 Purchased
starter pack
bases and
post paid
bases**
R’000		 Total
R’000		  
5. Intangible assets                          
  Year ended 31 May 2013                          
  Opening carrying amount     213 498 2 730 1 967 4 310 30 764 21 837 6 897 5 810 217 885 505 698  
  Additions     14 729 8 330 — 6 266 7 346 — 4 825 263 997 297 501  
  Disposals     (10 592) (76) — (2 841) (172) (70) (4 500) — — (18 251)  
  Amortisation charge     — (687) (815) (746) (11 308) (7 444) (786) (5 846) (51 298)* (78 930)  
  Closing carrying amount     217 635 1 975 1 482 723 25 550 21 669 1 611 4 789 430 584 706 018  
  At 31 May 2013                          
  Cost     248 501 6 835 33 147 11 806 72 010 57 636 3 118 131 348 526 169 1 090 570  
  Accumulated amortisation     (4 746) (4 860) (31 665) (9 205) (46 050) (21 400) (1 507) (125 944) (95 585) (340 962)  
  Accumulated impairments     (26 120) — — (1 878) (410) (14 567) — (615) — (43 590)  
  Carrying amount     217 635 1 975 1 482 723 25 550 21 669 1 611 4 789 430 584 706 018  
  Year ended 31 May 2012                          
  Opening carrying amount     214 834 3 385 2 800 5 670 30 165 25 030 2 132 19 813 129 684 433 513  
  Additions     5 847 83 — — 11 754 2 606 5 400 — 120 593 146 283  
  Disposals     (2 499) (25) — — — — — — — (2 524)  
  Amortisation charge     — (713) (833) (1 360) (11 155) (5 595) (635) (14 003) (32 392)* (66 686)  
  Impairment charges*     (4 684) — — — — (204) — — — (4 888)  
  Closing carrying amount     213 498 2 730 1 967 4 310 30 764 21 837 6 897 5 810 217 885 505 698  
  At 31 May 2012                          
  Cost     239 618 6 918 32 817 16 716 75 107 52 874 8 518 126 673 262 172 821 413  
  Accumulated amortisation     — (4 188) (30 850) (10 528) (43 933) (16 470) (1 621) (120 248) (44 287) (272 125)  
  Accumulated impairments     (26 120) — — (1 878) (1 878) (14 567) — (615) — (43 590)  
  Carrying amount     213 498 2 730 1 967 4 310 30 764 21 837 6 897 5 810 217 885 505 698  

  * Included in the amortisation charge is an amount of R51 million (2012: R32 million) in respect of the purchased starter pack bases and post paid bases, which is charged to the changes in inventories of finished goods line in the statement of comprehensive income.
  ** This represents independently distributed starter pack bases and post paid bases purchased during the current and prior year. The remaining amortisation periods range between 43 months and 115 months.
 

The carrying amount of goodwill and intangible assets have been reduced to their recoverable amounts through recognition of an impairment loss when required.

The cash-generating units to which goodwill is allocated are presented below:
 
      2013
R’000		   2012
R’000		  
Blue Label Distribution Proprietary Limited     36 364   36 364  
Blue Label Engage Proprietary Limited3     2 742   —  
Cellfind Proprietary Limited     21 406   21 406  
Content Connect Africa Proprietary Limited1     —   4 745  
Crown Cellular     62 113   62 113  
Multiserv Proprietary Limited2     —   5 847  
Panacea Mobile Proprietary Limited3     6 883   —  
TicketPros Proprietary Limited3     5 104   —  
Datacel Group     83 023   83 023  
      217 635   213 498  
1 In the prior year, a portion of the goodwill arising on the acquisition of Content Connect Africa Proprietary Limited was impaired due to the fair value less cost to sell being less than the carrying value. Content Connect Africa Proprietary Limited was disposed of in the current year (refer to note 27).
2 Multiserv Proprietary Limited was acquired in the prior year (refer to note 28.1) and disposed of in the current year (refer to note 27).
3 Blue Label Engage Proprietary Limited, Panacea Mobile Proprietary Limited and TicketPros Proprietary Limited were acquired in the current year (refer to note 28.1).

Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The recoverable amount, which is the higher of fair value less cost to sell and value in use of CGUs, has been determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the board of directors for the forthcoming year and forecasts for up to five years which are based on assumptions of the business, industry and economic growth. Cash flows beyond this period are extrapolated using terminal growth rates, which do not exceed the expected long-term economic growth rate.

The key assumptions used for the value-in-use calculations are as follows:

      2013   2012  
      Growth
rate
%		   Discount
rate
%		   Growth
rate
%		   Discount
rate
%		  
Blue Label Distribution Proprietary Limited     4.20   14.79   4.20   15.97  
Blue Label Engage Proprietary Limited     4.00   17.99   —   —  
Cellfind Proprietary Limited     4.00   17.49   4.00   18.46  
Crown Cellular     4.50   16.29   4.50   18.46  
Multiserv Proprietary Limited     —   —   4.50   20.45  
Panacea Mobile Proprietary Limited     4.00   17.49   —   —  
TicketPros Proprietary Limited     4.20   14.79   —   —  
Datacel Group     2.50   21.73   2.50   21.73  

The discount rates used are pre-tax and reflect specific risks relating to the relevant companies. The growth rate is used to extrapolate cash flows beyond the budget period.

If one or more of the inputs were changed to a reasonable possible alternative assumption, there would be no further significant impairments that would have to be recognised.

The recoverable amount of Content Connect Africa Proprietary Limited was based on fair value less cost to sell. The fair value is based on indicative sales values for the respective businesses. Content Connect Africa Proprietary Limited was disposed of in the current year and SharedPhone International Proprietary Limited was disposed of in the prior year

The valuation of the goodwill balances did not result in goodwill impairment charges for the year (2012: R4.7 million).

Refer to note 32 for details of impairments per segment.

NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS l NOTE 5