Annual Report & Accounts 2013 - Pinewood Studios

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76 Pinewood Shepperton plcAnnual Report & Accounts 2013Notes to the consolidated financial statements continued16. Intangible assetsGoodwill£000At 31 March 2013 and 31 March 2012 5,604Goodwill has been acquired through business combinations and has been allocated to the Group’s Media Servicescash-generating unit.The recoverable amount of the cash-generating unit is based on a value in use calculation and is tested at least annuallyfor impairment. Other than goodwill there are no intangible assets with indefinite lives.Outcome of impairment reviewThe recoverable amount of the Group’s Media Services cash-generating unit exceeds its carrying value and no impairmentcharge has been recognised (15 month period ended 31 March 2012: no impairment charge recognised).Key assumptionsThe value in use calculations use five-year cash flow projections derived from the Board approved budget for the nextyear and the Board approved long range plan and do not include non-cash generating assets, any activities that theGroup is not yet committed to or significant future investments that will enhance the asset’s performance of the cashgeneratingunit. The key assumptions used in the value in use calculations are:Discount rateThe discount rate reflects the current market assessment of the risks specific to the cash-generating unit. The discountrate was calculated using the Group’s cost of debt together with an estimate based on the average cost of equity forthe industry, adjusted to reflect the market assessment of any risk specific to the cash-generating unit for which futureestimates of cash flows have not been adjusted. The pre-tax discount rate used for the year ended 31 March 2013is 6.7% (15 month period ended 31 March 2012: 6.6%).Perpetuity growth rateThe cash flows subsequent to the Board approved period are based on the long-term growth rate prospectsof the industry in which the Group operates. The perpetuity growth rate used is 2.5% (15 month period ended31 March 2012: 2.5%).Cash flow from operationsCash flow projections have been estimated using a combination of assumptions including, but not limited to, facilityutilisation, income growth and Media Hub void ratios and rent increases. Considering previously achieved trading levelsand the anticipated future operating environment for the business and taking into account any cost efficiencies whichmay be achieved, the Company has retained the assumptions used in its Board approved budget and its long range plan.SensitivitiesThe Group’s impairment review is sensitive to a change in the key assumptions used, notably the discount rate.The discount rate would need to move to 11.6% to result in a breakeven position and, should the discount rate remainat 6.7%, the perpetuity growth rate would need to be a negative 4.0% to reach a break even point. Based on the Group’ssensitivity analysis, a reasonably possible change in a single factor would not cause an impairment charge.
Pinewood Shepperton plc 77Annual Report & Accounts 2013Notes to the consolidated financial statements continued17. Long-term assetsCost:Torontolong-termagreement£000Malaysialong-termagreement£000DominicanRepubliclong-termagreement£000Atlanta jointventureagreement£000China jointventureagreement£000At 1 January 2011 94 188 65 – – 347Additions – – – – – –At 31 March 2012 94 188 65 – – 347Additions – 10 – 24 39 73At 31 March 2013 94 198 65 24 39 420Amortisation:At 1 January 2011 – – – – – –Provided during the 15 month period 27 – – – – 27At 31 March 2012 27 – – – – 27Provided during the year 24 – – – – 24At 31 March 2013 51 – – – 51Carrying value:At 31 March 2013 43 198 65 24 39 369At 31 March 2012 67 188 65 – – 320The Group signed a ten-year sales and marketing agreement with Pinewood Toronto Studios on 26 May 2009. Transactioncosts in relation to this agreement have been recognised as a long-term asset and are being amortised over the termof the agreement.Pinewood Malaysia Limited signed a long-term agreement on 16 December 2009 until the ten-year anniversary of theopening of Pinewood Iskandar Malaysia Studios to provide marketing, operations and management support. Transactioncosts of £198,000 in relation to this agreement have been recognised as a long-term asset. The costs will be amortisedover the period of the agreement commencing when the Studio opens for business.Pinewood Dominican Republic Limited signed an agreement on 20 May 2010 with a term of 15 years to provide sales,marketing and operations support to Pinewood Dominican Republic Studios. Transaction costs of £65,000 in relation tothis agreement have been recognised as a long-term asset. The costs will be amortised over the period of the agreementcommencing when the Studio opens for business.On 29 April 2013, the Group announced it had entered into a joint venture (Pinewood Atlanta LLC), with River’s Rock LLC.The joint venture will work to initially develop 288 acres of land south of Atlanta, Georgia, USA, into world-class studiofacilities for the production of film, television, music and video games. The business will operate under the Pinewoodtrademark and Pinewood has received 40% of the shareholding in the joint venture. Pinewood will provide the jointventure with sales and marketing services. Transaction costs of £24,000 in relation to this joint venture have beenrecognised as a long-term asset. The costs will be amortised over the first three years of the Studio’s operations,commencing when the Studio opens for business.On 17 April 2013, the Group signed a 50:50 joint venture agreement (Song Lin) with Seven Stars Media Limited, partof China’s leading private media group which provides content creation and distribution, media services and events.Transaction costs of £39,000 in relation to this joint venture have been recognised as a long-term asset. The costswill be amortised upon commencement of the agreement over the first two years of the joint ventures operations.Total£000
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