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Annual Report & Accounts 2012 - NOTES
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H ANNUAL REPORT 2012 o l d i n g G~VC s 10. INTANGIBLE ASSETS (continued) 10.1 Amortisation The amortisation for the year is recognised in the following line items in the income statement. 2012 2011 €000's €000's Net operating expenses 2,299 1,827 Discontinued activities 112 142 2,411 1,969 10.2 Impairment Tests for Cash-Generating Units Containing Goodwill and Trademarks An Impairment Review of the Group's goodwill and trademarks was carried out for the year ended 31 December 2012. The goodwill relates to B2C and B2B businesses and trademarks all relate to the B2C business. The carrying values of the assets were compared with the recoverable amounts, the recoverable amount was estimated based upon a value in use calculation, based upon management forecasts for the years ending 31 December 2013 and up to 31 December 2017. The assumptions detailed below have been determined based on past experience in this market which the Group's management believes is the best available input for forecasting this market. Betboo Significant growth is expected in the short-term and a step-down approach to 20% by 2017 is applied, a longterm growth rate of 2% was used from 2018 to reflect the likely competitive pressures. A discount rate of 35% was used, based on the internal rate of return of the Betboo acquisition. It was concluded that the carrying value of the goodwill and trademarks was not impaired. CasinoClub A long-term growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies. A discount rate of 17.2% was used, based on company specific pre-tax weighted average cost of capital. Having performed appropriate sensitivity analysis on the key assumptions (including reducing the growth rate to nil and increasing the discount rate to 22%), it was concluded that the carrying value of the goodwill and trademarks was not impaired. The following units have significant carrying amounts of goodwill: 2012 2011 €000's €000's Betboo* 8,333 8,333 CasinoClub 40,339 40,339 Total Goodwill 48,672 48,672 *€3,278,000 relates to B2C business (2011: €3,278,000) and €5,055,000 to B2B business (2011: €5,055,000) 11. ACQUISITION OF BETBOO On 2 July 2009, the Group acquired the trade and assets of betboo.com, a leading South American internet gaming operator, offering, bingo, casino, poker and a sports betting product. The terms of the acquisition were an initial payment of US$4 million (€2,840k) with the sellers able to earn up to a further US$26 million depending on performance. On 23 February 2011, the Group announced a change in the terms of the earn out. Under the new arrangements: • From 1 July 2011 there will be 36 monthly payments of $156,944. • From 31 January 2012, there will be four annual payments equal to 25% of the Betboo NGR earned in the previous fiscal year. • The total earn out cap remains at $30 million. • The exchange rate between the US Dollar and Euro has been fixed at 1 Euro = US$ 1.4031. 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 31 December 2012