Vesuvius plc Prospectus

FY 2009 FY 2010 FY 2011
(£m)
Steel ..................................................... 374.4 388.7 383.1
Foundry ................................................... 211.1 219.2 216.0
Total goodwill ............................................. 585.5 607.9 599.1
17.4 Analysis of other intangible assets
Other intangible assets arose in FY 2008 on the acquisition of Foseco plc and are being amortised on
a straight-line basis over their estimated useful lives. The assets acquired and their remaining useful
lives are shown below.
Remaining
useful life
Net book value
as at
31 December 2011
(Years) (£m)
Foseco:
– Customer relationships (useful life: 20 years) ................... 16.3 97.8
– Trade name (useful life: 20 years) ............................ 16.3 58.8
– Intellectual property rights (useful life: 10 years) ................ 6.3 50.2
Total .................................................... 206.8
18 Impairment of tangible and intangible assets
18.1 Accounting policy
At each balance sheet date, the Directors review the carrying value of Vesuvius’ tangible and other
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent, if any, of the impairment loss. Where it is not feasible to estimate the
recoverable amount of an individual asset, the Directors estimate the recoverable amount of the CGU
to which the asset belongs.
Goodwill acquired in a business combination is allocated to each of Vesuvius’ CGUs expected to
benefit from the synergies of the combination and the Directors carry out annual impairment testing
of the carrying value of its CGUs to assess the need for any impairment of the carrying value of
goodwill and other intangible and tangible assets associated with these CGUs.
For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of
(i) its fair value less costs to sell and (ii) its value in use. If the recoverable amount of a CGU is less
than the carrying amount of that CGU, the resulting impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU pro
rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for
goodwill is not reversed in a subsequent period. An impairment loss recognised in a prior year for an
asset other than goodwill may be reversed where there has been a change in the estimates used to
measure the asset’s recoverable amount since the impairment loss was recognised. The value in use
calculations of Vesuvius’ CGUs are based on detailed business plans covering a three year period
from the balance sheet date, higher level assumptions covering a further two year period and
perpetuity calculations beyond this five-year projection period. The cash flows in the calculations are
discounted to their current value using pre-tax discount rates.
18.2 Key assumptions
The key assumptions used in determining value in use are return on sales, return on net sales value,
growth rates and discount rates. Return on sales and return on net sales value assumptions are based
on historical financial information, adjusted to factor in the anticipated impact of restructuring and
rationalisation plans already announced at the balance sheet date.
Growth rates are determined with reference to: current market conditions; external forecasts and
historical trends for Vesuvius’ key end-markets of steel production and foundry castings; and
expected growth in output within the industries in which each major Vesuvius business unit operates.
A perpetuity growth rate of 2.5 per cent. (FY 2010 and FY 2009: 3 per cent.) has been applied based
on the long-term growth rates experienced in Vesuvius’ end-markets and external forecasts.
Vesuvius’ projections are based on historical trends and external forecasts.
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