NOTE 5

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 development costs 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 2014
	Opening carrying amount	217 635	1 975	1 482	723	25 550	21 669	1 611	4 789	430 584		706 018
	Additions	—	—	159	89 359	10 306	2 954	—	—	(15 501)	**	87 277
	Acquisition of subsidiary	205 749	—	—	101 174	24	2 979	—	—	—		309 926
	Disposals	—	—	—	—	—	(1 210)	—	—	—		(1 210)
	Amortisation charge	—	(677)	(610)	(10 999)	(3 452)	(9 095)	(260)	(90)	(69 821)	*	(95 004)
	Impairment charges	—	—	—	—	(77)	(797)	—	(199)	—		(1 073)
	Closing carrying amount	423 384	1 298	1 031	180 257	32 351	16 500	1 351	4 500	345 262		1 005 934
	At 31 May 2014
	Cost	454 250	6 835	33 306	202 339	82 078	44 881	3 118	131 023	510 668		1 468 498
	Accumulated amortisation	(4 746)	(5 537)	(32 275)	(20 204)	(49 240)	(13 814)	(1 767)	(125 709)	(165 406)		(418 698)
	Accumulated impairments	(26 120)	—	—	(1 878)	(487)	(14 567)	—	(814)	—		(43 866)
	Carrying amount	423 384	1 298	1 031	180 257	32 351	16 500	1 351	4 500	345 262		1 005 934
	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	—	8	330	—	6 262	1 219	—	325	263 997		272 141
	Acquisition of subsidiary	14 729	—	—	—	4	6 127	—	4 500	—		25 360
	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)
	Impairment charges	—	—	—	—–	—	—	—	—	—		—
	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

	*	Included in the amortisation charge is an amount of R70 million (2013: R51 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.
	**	The post-paid base acquired included a warranty clause pertaining to the initial performance of the base. During the year, the Group was entitled to a warranty refund on the initial cost of the base, which is disclosed as a reduction in the cost of the asset.
	*******	This represents independently distributed starter pack bases and post-paid bases purchased during the prior year. The remaining amortisation periods range between 31 months and 103 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:

	2014 R’000	2013 R’000
Blue Label Distribution Proprietary Limited	36 364	36 364
Blue Label Engage Proprietary Limited	2 742	2 742
Cellfind Proprietary Limited	21 406	21 406
Retail Mobile Credit Specialists Proprietary Limited¹	205 749	—
Crown Cellular²	62 113	62 113
Panacea Mobile Proprietary Limited	6 883	6 883
TicketPros Proprietary Limited	5 104	5 104
Datacel Group	83 023	83 023
	423 384	217 635

	¹	Retail Mobile Credit Specialists Proprietary Limited was acquired in the current year (refer to note 26.1).
	²	Crown Cellular Proprietary Limited was deregistered and the business divisionalised into The Prepaid Company Proprietary Limited.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

The recoverable amount, which is the higher of fair value less cost to sell and the 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:


	2014		2013
	Growth rate %	Discount rate %	Growth rate %	Discount rate %
Blue Label Distribution Proprietary Limited	4.20	15.28	4.20	14.79
Blue Label Engage Proprietary Limited	4.00	18.92	4.00	17.99
Cellfind Proprietary Limited	4.00	18.42	4.00	17.49
Retail Mobile Credit Specialists Proprietary Limited	4.20	15.28	—	—
Crown Cellular	4.50	16.78	4.50	16.29
Panacea Mobile Proprietary Limited	4.00	18.42	4.00	17.49
TicketPros Proprietary Limited	4.20	15.28	4.20	14.79
Datacel Group	2.50	21.42	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.

For Blue Label Distribution Proprietary Limited and Blue Label Engage Proprietary Limited if one or more of the inputs were changed to a reasonable possible alternative assumption, there would be no impairments that would have to be recognised.

For the remaining balances of goodwill, the discount rate used when calculating the value-in-use calculations would need to be increased by the following amounts before any impairments would need to be recognised:

			Increase in discount rate %
	Cellfind Proprietary Limited		0.90
	Retail Mobile Credit Specialists Proprietary Limited		7.10
	Crown Cellular		21.40
	Panacea Mobile Proprietary Limited		7.60
	TicketPros Proprietary Limited		26.20
	Datacel Group		4.50

The valuation of the goodwill balances did not result in goodwill impairment charges for the year (2013: nil).

NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS l NOTE 5