| |
Goodwill
R’000 |
Brands and
intellectual
property
R’000 |
Computer
software
R’000 |
Internally
developed
computer
software
R’000 |
Custo-
mer
relation-
ships
R’000 |
Total
R’000 |
|
| Opening carrying amount at 1 July 2017 |
855 437 |
12 913 |
195 208 |
309 443 |
90 745 |
1 463 746 |
|
| Take on balance |
– |
– |
6 |
– |
– |
6 |
|
| Additions |
– |
– |
119 594 |
191 251 |
– |
310 845 |
|
| Amortisation charge for the year |
– |
(2 743) |
(48 561) |
(24 359) |
(13 940) |
(89 603) |
|
| Business Acquisitions* |
28 051 |
– |
– |
– |
28 180 |
56 231 |
|
| Reclassification |
– |
– |
(2 139) |
– |
– |
(2 139) |
|
| Carrying value at 30 June 2018 |
883 488 |
10 170 |
264 108 |
476 335 |
104 985 |
1 739 086 |
|
| At 30 June 2018 |
|
|
|
|
|
|
|
| Cost |
926 900 |
47 873 |
431 425 |
607 499 |
269 558 |
2 283 255 |
|
| Accumulated amortisation, impairment and adjustments |
(43 412) |
(37 703) |
(167 317) |
(131 164) |
(164 573) |
(544 169) |
|
| Closing carrying amount |
883 488 |
10 170 |
264 108 |
476 335 |
104 985 |
1 739 086 |
|
| Opening carrying amount at 1 July 2016 |
872 077 |
15 656 |
185 202 |
215 021 |
100 859 |
1 388 815 |
|
| Additions |
– |
– |
49 630 |
128 418 |
– |
178 048 |
|
| Disposals |
– |
– |
(27) |
– |
– |
(27) |
|
| Amortisation charge for the year |
– |
(2 743) |
(39 597) |
(33 996) |
(10 114) |
(86 450) |
|
| Impairment |
(16 640) |
– |
– |
– |
– |
(16 640) |
|
| Carrying value at 30 June 2017 |
855 437 |
12 913 |
195 208 |
309 443 |
90 745 |
1 463 746 |
|
| At 30 June 2017 |
|
|
|
|
|
|
|
| Cost |
898 849 |
47 873 |
313 964 |
416 248 |
241 378 |
1 918 312 |
|
| Accumulated amortisation, impairment and adjustments |
(43 412) |
(34 960) |
(118 756) |
(106 805) |
(150 633) |
(454 566) |
|
| Closing carrying amount |
855 437 |
12 913 |
195 208 |
309 443 |
90 745 |
1 463 746 |
|
* The recognition of goodwill (R28.1 million) and customer relationships (R28.2 million) is as a result of the business combinations in the current financial year (refer to note 4 for further details).
A summary per cash generating unit (CGU) of the goodwill allocation is presented below:
| |
| |
June 2017
R’000 |
|
June 2017
R’000 |
|
| Healthcare Administration SA CGU |
|
|
|
|
|
|
|
|
| Medscheme – healthcare administration |
248 622 |
|
248 622 |
|
– |
|
– |
|
| Medscheme – health risk management |
89 298 |
|
89 298 |
|
– |
|
– |
|
| Aid for Aids Management Proprietary Limited – healthcare administration |
23 490 |
|
23 490 |
|
– |
|
– |
|
| Allegra Proprietary Limited – healthcare IT support |
1 268 |
|
1 268 |
|
– |
|
– |
|
| AfroCentric Distribution Services Proprietary Limited – healthcare marketing support |
835 |
|
835 |
|
– |
|
– |
|
| Klinikka Proprietary Limited – medical equipment supplier |
2 435 |
|
2 435 |
|
– |
|
– |
|
| Wellness Odyssey – healthcare wellness days |
14 857 |
|
– |
|
– |
|
– |
|
| Tendahealth – healthcare insurance broker |
1 162 |
|
– |
|
– |
|
– |
|
| Scriptpharm – Chronic scripts claim |
2 699 |
|
– |
|
– |
|
– |
|
| Essential Group – healthcare insurance |
9 333 |
|
– |
|
– |
|
– |
|
| Healthcare Africa CGU |
|
|
|
|
|
|
|
|
| Medscheme Mauritius Limited – local administration |
4 969 |
|
4 969 |
|
– |
|
– |
|
| Medscheme Mauritius Limited – International administration |
10 566 |
|
10 566 |
|
– |
|
– |
|
| Healthcare Retail SA CGU |
|
|
|
|
|
|
|
|
| Pharmacy Direct, Curasana and Glen Eden |
473 954 |
|
473 954 |
|
– |
|
– |
|
| |
883 488 |
|
855 437 |
|
– |
|
– |
|
Management determines the recoverable amount of cash generating units as being the higher of fair value less costs to
sell or value in use. In the absence of an active market, value in use is used to determine the recoverable amount. As
there are no active market value in use is used. A traditional method of discounting management’s best estimate of future
cash flows attributable to the cash generating unit has been applied to determine the value in use. A growth rate has
been applied to cash flow streams to take into account the effect of inflation as well as business specific expectations.
Assumptions used in the determination of the discount rate are as follows:
- The rate on government bonds (risk free rate) 8.12% as at 30 June 2018
- A market risk premium of 6.5% is justified as the overall risk is to the downside.
(Please note that the inputs above were adjusted for geographical and entity specific risk.)
The table below indicates the variables used in the determination of the discounted cash flows for the separate business units.
| |
Recover-
able
amount
R’000 |
Risk
adjustment
factor |
WACC |
Forecast
period1 |
Average
growth
rate2 |
|
| Medscheme – healthcare administration and health risk management |
5 973 902 |
1.0 |
13.97 |
4 years |
6.00% |
|
| Aid for Aids Management Proprietary Limited – healthcare administration |
139 559 |
1.0 |
13.97 |
4 years |
7.00% |
|
| Allegra Proprietary Limited – healthcare IT support |
158 879 |
1.15 |
16.07 |
4 years |
6.00% |
|
| AfroCentric Distribution Services Proprietary Limited |
78 529 |
1.10 |
15.37 |
4 years |
6.00% |
|
| Klinikka Proprietary Limited – medical equipment supplier |
21 286 |
1.20 |
16.76 |
4 years |
6.00% |
|
| Medscheme Mauritius Limited – local and international administration |
87 291 |
1.15 |
16.07 |
4 years |
7.00% |
|
| Pharmacy Direct, Curasana and Glen Eden |
1 280 086 |
1.0 |
13.97 |
4 years |
7.00% |
|
| Scriptpharm – Chronic scripts claim |
22 687 |
1.2 |
16.76 |
4 years |
6.00% |
|
| Wellness Odyssey – healthcare wellness days |
113 861 |
1.2 |
16.76 |
4 years |
6.00% |
|
| Essential Group – healthcare insurance |
93 620 |
1.2 |
16.76 |
4 years |
8.00% |
|
Note 1: Based on the average tenure of current contracts with our clients, a forecast period of 4 years is considered reasonable.
Note 2: Growth rates are based on current consumer price indicators and membership growth.
The net present value of forecasts support the carrying value of the goodwill indicated above.
The Medscheme – healthcare administration was impaired in the 2017 financial year by R16.6 million relating to
IE Business and there has been no changes in any of the other CGUs.
|