Registered number 01668247 30 September
NOTES TO THE FINANCIAL STATEMENTS
8. PROPERTY, PLANT AND EQUIPMENT
Group Land and buildings
Furniture, fittings and equipment Assets in course of construction Total £m £m £m £m Cost At 30 September 2009 ... 136.4 36.7 1.0 174.1 Additions ... 1.8 3.5 6.9 12.2 Transfers ... 1.7 3.5 (5.2) — Transfers to current assets ... (5.4) (1.6) 0.2 (6.8) Disposals ... — (1.1) — (1.1) At 30 September 2010 ... 134.5 41.0 2.9 178.4 Acquired ... 1.9 0.4 — 2.3 Additions ... 3.1 6.1 13.1 22.3 Transfers ... 3.5 4.1 (7.6) —
Transfers to current assets ... (2.8) 8.5 1.8 7.5
Disposals ... (3.6) (1.3) — (4.9) At 30 September 2011 ...136.6 58.8 10.2 205.6 Depreciation
At 30 September 2009 ... 12.6 20.2 — 32.8 Charge for year ... 8.3 6.0 — 14.3 Transfers to current assets ... (0.5) (1.6) — (2.1) Disposals ... — (1.2) — (1.2) At 30 September 2010 ... 20.4 23.4 — 43.8 Charge for year ... 7.0 9.3 — 16.3
Transfers to current assets ... 2.0 5.5 — 7.5
Disposals ... (0.9) (1.1) — (2.0) At 30 September 2011 ... 28.5 37.1 — 65.6 Net book value
At 30 September 2011 ...108.1 21.7 10.2 140.0 At 30 September 2010 ... 114.1 17.6 2.9 134.6 At 30 September 2009 ... 123.8 16.5 1.0 141.3 Land and buildings include depreciable assets with an original cost of £101.1m (2010: £102.1m) and capitalised interest of £3.5m (2010: £3.5m). Included within the net book value of land and buildings are long leasehold buildings which have a net book value of £49.1m (2010: £32.1m) and short leasehold buildings which have a net book value of £51.8m (2010: £41.1m).
F-77
The net book value of furniture, fixtures and fittings includes assets with a cost of £0.2m (2010: £0.7m) and accumulated depreciation of £0.1m (2010: £0.6m) held under finance leases. The depreciation charge on fixed assets held under finance leases was £nil (2010: £nil).
Refer to note 26 for contractual commitments for the acquisition of property, plant and equipment.
Company Furniture, fittings and equipment Assets in course of construction Total £m £m £m Cost At 30 September 2009 ... 3.9 0.5 4.4 Additions ... 0.2 2.5 2.7 Transfers ... 1.0 (1.0) — At 30 September 2010 ... 5.1 2.0 7.1 Additions ... 1.2 1.6 2.8 Transfers ... 2.8 (2.8) — Disposals ... (1.0) — (1.0) At 30 September 2011 ... 8.1 0.8 8.9 Depreciation At 30 September 2009 ... 2.5 — 2.5 Charge for year ... 0.8 — 0.8 At 30 September 2010 ... 3.3 — 3.3 Charge for year ... 1.7 — 1.7 Disposals ... (1.0) — (1.0) At 30 September 2011 ... 4.0 — 4.0 Net book value
At 30 September 2011 ... 4.1 0.8 4.9 At 30 September 2010 ... 1.8 2.0 3.8 At 30 September 2009 ... 1.4 0.5 1.9
Furniture, fittings and equipment include capitalised interest of £0.2m (2010: £0.1m).
F-78 9. INTANGIBLE ASSETS
(a) Acquired intangible assets
Group Goodwill Intangible assets Total
£m £m £m
Cost
At 30 September 2009 and 30 September 2010 ... 82.1 52.6 134.7
Additions ... 10.1 — 10.1 Disposals ... (11.9) — (11.9) At 30 September 2011 ... 80.3 52.6 132.9 Amortisation and impairment losses
At 30 September 2009 ... 16.4 19.7 36.1 Amortisation charge for year ... — 8.7 8.7 Impairment losses ... 10.0 — 10.0 At 30 September 2010 ... 26.4 28.4 54.8 Amortisation charge for year ... — 8.4 8.4 Disposals ... (10.0) — (10.0) At 30 September 2011 ... 16.4 36.8 53.2 Net book value
At 30 September 2011 ... 63.9 15.8 79.7 At 30 September 2010 ... 55.7 24.2 79.9 At 30 September 2009 ... 65.7 32.9 98.6 The amortisation of intangible assets of £8.4m (2010: £8.7m) and impairment charge of £nil (2010: £10.0m) are both recognised within administrative expenses in the statement of comprehensive performance.
Intangible assets comprise the value attributed to ongoing customer relationships within acquired businesses and are amortised over their estimated useful economic lives, which do not exceed ten years. The useful economic life is determined by reference to the life of the associated contract.
Management believes that goodwill represents value to the group for which the recognition of a discrete intangible asset is not permitted.
(b) Impairment charge
During the year ended 30 September 2011, the group reviewed all cash-generating units that contain goodwill for impairment in accordance with IFRS 3. The recoverable amount was determined by value-in-use. The discount rates used in each value-in-use calculation were based upon a risk adjusted pre-tax group weighted average cost of capital (2011: 8.34%; 2010: 9.27%) specific to the respective cash-generating unit.
No goodwill impairment was recognised in 2011. In 2010 a goodwill impairment charge of £10.0m was recognised following an impairment review of the group’s Children’s Services operations (£9.2m) and the loss of a contract in Health Care (£0.8m).
F-79
(c) Impairment tests for cash-generating units containing goodwill
The following divisions have significant cash-generating units that have the following goodwill carrying values: 2011 2010 £m £m Community Services ... 19.1 19.1 Health Care ... 23.3 20.7 Other ... 21.4 15.9 63.8 55.7 All of the recoverable amounts are measured based on value-in-use. Those calculations use cash flow projections based on actual operating results and the budget and forecast business plan for the five years ending 30 September 2015. A terminal value is placed on the value of the annual cash flows in year five. No adjustment is made for the projected terminal value of the net assets of the individual cash- generating unit.
The discount rates used in each value-in-use calculation were based upon division specific risk adjusted pre-tax cost of capital. The group pre-tax weighted average cost of capital used as the starting point for these tests was 8.34% (2010: 9.27%).
Community Care
The key assumptions in the value-in-use calculations are that forecast numbers of chargeable hours are met and hence that revenue and EBITDA projections are achieved. Cash flows for years one to five are derived from the current forecast budget and business plan. Cash flows associated with post acquisition investment are included within the calculation. No growth has been assumed after the first five years. A premium of 1.0% has been applied to the group pre-tax weighted average cost of capital. Health Care
The key assumptions in the value-in-use calculations are that forecast volumes of activity/patients treated are achieved and hence that forecast revenue and EBITDA projections are realised. Cash flows for years one to five are derived from the current forecast budget and business plan. Cash flows associated with post acquisition investment are included within the calculation. No growth has been assumed after the first five years. A premium of 0.5% has been applied to the group pre-tax weighted average cost of capital.
Other
This goodwill is primarily associated with the group’s Mental Health operations. The key assumptions in the value-in-use calculations are that forecast numbers of chargeable hours and levels of occupancy are met and hence that revenue and EBITDA projections are achieved. Cash flows for years one to five are derived from the current forecast budget and business plan. Cash flows associated with post acquisition investment are included within the calculation. No growth has been assumed after the first five years. A discount of 1.0% has been applied to the group pre-tax weighted average cost of capital.
Assumptions
Whilst management is confident that its assumptions are appropriate in light of circumstances at the time of the review, it is possible that circumstances may change. The recoverable amounts calculated on the above basis significantly exceed the carrying values of the cash-generating units that include
F-80
goodwill to the extent that the assumptions made would need to change by a significant amount to eliminate the surplus.
(d) Acquisitions
i) Year ended 30 September 2011
During the year ended 30 September 2011 the group acquired 100% of the issued share capital of Nexvale Limited and 80% of the issued share capital of Specialist Medical Imaging Limited.
Company name acquisition Date of Nature of business
Nexvale Limited 2 February 2011 The provision of acute eating disorders services to younger people.
Specialist Medical
Imaging Limited 4 January 2011 The provision of ultrasound and other diagnostic services. These purchases have been treated as acquisitions.
Nexvale Ltd
Specialist Medical Imaging
Ltd 2011 Book value adjustments Fair value Fair value
Book value and Fair
value Total
£m £m £m £m £m
Property, plant and equipment ... 1.4 0.5 1.9 0.4 2.3
Current assets:
— trade and other receivables ... 0.1 — 0.1 0.4 0.5
— cash and cash equivalents ... 0.4 (0.2) 0.2 — 0.2
Total assets ... 1.9 0.3 2.2 0.8 3.0
Liabilities:
— trade and other payables ... — — — (0.5) (0.5)
— other non-current liabilities ... — (0.1) (0.1) — (0.1)
— loan facilities ... (0.1) 0.1 — — — Total liabilities ... (0.1) — (0.1) (0.5) (0.6) Net assets ... 1.8 0.3 2.1 0.3 2.4 Goodwill on acquisition ... 5.3 4.8 10.1 Total consideration... 7.4 5.1 12.5 Satisfied by:
Cash paid on acquisition ... 2.2 3.0 5.2
Contingent consideration ... 5.2 2.1 7.3
7.4 5.1 12.5
A comprehensive review of acquired entities’ trade and assets was undertaken upon completion. No other intangible assets were identified that could be recognised.
ii) Year ended 30 September 2010
F-81 iii) Other disclosures
The net loss (after attributable financial expenses and taxation) since their respective dates of acquisition, for the entities acquired during the financial year was:
2011 2010
£m £m
Net loss since acquisition ... (0.3) — If the above acquisitions had all occurred at the start of the financial year in which they were acquired, the group revenue and net profit would have been:
2011 2010
£m £m
Revenue ... 7.6 — Loss* ... (0.1) — * Net loss is stated after attributable financial expenses and taxation and is an indicative figure only since the acquired entities’ pre-acquisition accounting policies and operating costs have not been adjusted to reflect the post-acquisition position.
During the year a total of £0.5m (2010: £nil) contingent consideration was paid in respect of a business acquired in 2008.
10. OTHER FINANCIAL ASSETS
Group Company
2011 2010 2011 2010
£m £m £m £m
IFRIC-12 financial asset: brought forward ... 66.0 89.4 — — Released in the period ...(22.2) (23.4) — — IFRIC-12 financial asset: carried forward ... 43.8 66.0 — — These financial assets are recognised upon adoption of IFRIC 12 “Service Concession Arrangements” (this interpretation addresses the accounting by private sector operators involved in the provision of public sector infrastructure assets and services). For all arrangements falling within the scope of the interpretation, the infrastructure assets are not recognised as property, plant and equipment of the operator, Care UK. Rather, depending on the terms of the arrangement, the operator recognises a financial asset where the operator has an unconditional right to receive a specified amount of cash or other financial assets over the life of the arrangement.
(a) Current assets
Group Company
2011 2010 2011 2010
£m £m £m £m
F-82 (b) Non-current assets
Group Company
2011 2010 2011 2010
£m £m £m £m
IFRIC-12 financial asset ... 24.2 43.8 — — 11. INVESTMENTS Company Shares in subsidiary undertakings £m Cost At 30 September 2009 ... 84.2 Additions ... 9.9 At 30 September 2010 ... 94.1 Additions ... 3.6 Disposals ... (9.1) At 30 September 2011 ... 88.6 Provision for impairment
At 30 September 2009 ... 13.8 Impairment charges ... 9.2 At 30 September 2010 ... 23.0 Disposals ... (9.2) At 30 September 2011 ... 13.8 Net book value ...
At 30 September 2011 ... 74.8 At 30 September 2010 ... 71.1 At 30 September 2009 ... 70.4 12. INVENTORIES Group Company 2011 2010 2011 2010 £m £m £m £m
F-83 13. TRADE AND OTHER RECEIVABLES
(a) Current assets
Group Company
2011 2010 2011 2010
£m £m £m £m
Trade receivables ... 43.5 43.8 — — Less: provision for impairment of receivables ...(0.7) (1.7) — — Trade receivables — net ...42.8 42.1 — — Amounts owed by subsidiary undertakings ... — — — 9.2 Other receivables ... 5.6 9.8 4.0 0.2 Prepayments and accrued income ...5.0 3.7 0.7 0.8
53.4 55.6 4.7 10.2
The group’s exposure to credit risk from its trading operations is minimal given Local Authorities, PCTs and other NHS Trusts form the majority of its customer base.
The group has £10.9m trade and other receivables (2010: £10.1m) that are past due but not impaired. These relate primarily to Local Authorities, PCTs and other NHS Trusts for whom there is no history of default. These have not been provided for as there has not been a significant change in the credit quality of the customers concerned and the amounts are still considered recoverable. The group does not hold any collateral over these balances. The ageing analysis of these receivables is as follows:
2011 2010 £m £m 0–30 days ...6.0 5.9 30–60 days ...1.7 1.5 60–90 days ...0.9 1.0 Over 90 days ...2.3 1.7 10.9 10.1 The group has trade and other receivables of £0.7m (2010: £1.7m) which are impaired and provided for. The ageing of these receivables is as follows:
2011 2010 £m £m 0–30 days ...— 0.3 30–60 days ...— 0.1 60–90 days ...— — Over 90 days ...0.7 1.3 0.7 1.7
The group’s impairment provision has been calculated based upon the ageing profile of the receivables and any history of default with particular customers.
Concentrations of credit risk with respect to trade and current other receivables are limited due to the nature of the group’s customer base.
F-84 (b) Non-current assets
Group Company
2011 2010 2011 2010
£m £m £m £m
Amounts owed by subsidiary undertakings ... — — 147.1 171.5
14. CASH AND CASH EQUIVALENTS
Group Company
2011 2010 2011 2010
£m £m £m £m
Cash at bank and in hand ...13.0 15.6 3.8 0.2 Short-term bank deposits ...27.2 10.6 27.2 10.6 Cash and cash equivalents...40.2 26.2 31.0 10.8 Bank overdrafts ... — — — (35.8) Cash and cash equivalents as shown in the statement
of cash flows ... 40.2 26.2 31.0 (25.0)
15. ASSETS HELD FOR SALE
As at 30 September 2011 the group has eight (2010: eleven) properties that have been classified as being held for sale.
16. FINANCIAL LIABILITIES