38 AVESCOGROUPPLC ANNUAL REPORT 2009
www.avesco.com
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
As at 30 September the Group had the following undrawn borrowing facilities:
2009 2008
Group £000s £000s
Loan and overdraft facilities 3,601 3,664
Finance lease facilities 1,460 3,672
5,061 7,336
Further details of cash and cash equivalents can be found in note 23.
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders
and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group is subject to various covenants on its credit facilities and compliance with these covenants is reviewed by management. No breaches of the
covenants occurred during the current or prior periods and current forecasts suggest no breaches are expected to occur.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt. The Group monitors capital on the basis of net debt. This is calculated as total borrowings (including ‘current and non-
current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents and bank overdrafts..
During the year net debt has increased, primarily as a result of foreign exchange movements.
2009 2008
£000s £000s
Total borrowings 25,593 24,691
Less: cash and cash equivalents (4,531) (4,845)
Net debt 21,062 19,846
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
a) Estimated impairment of goodwill
In accordance with the accounting policy stated in note 2.7, the Group tests annually whether goodwill has suffered any impairment. The recoverable
amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (note 18).
After performing testing, it was concluded that the goodwill held on the balance sheet relating to Fountain Television and CT Germany was impaired during
the period. As a result the full balance has been written off to the income statement (note 18).
b) Estimated impairment of acquired intangible assets.
In accordance with IAS 36 the Group has considered the impact of the current economic climate and its effect on Group forecasts to be an indicator of
potential impairment. As such the Group has performed tests to determine whether acquired intangibles have suffered any impairment. The recoverable
amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (note 18).
After performing testing, it was concluded that no acquired intangible assets were impaired during the period.
c) Residual values of hire stock
The residual value of hire stock is estimated at the date the asset is recognised. Management take into account asset type and current market conditions in
arriving at these estimations. Residual values are reviewed on an annual basis.
d) Taxation
The Group is subject to taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for tax. The Group
recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current tax provision, deferred tax provisions and income statement
in the period in which such determination is made.
5. Segmental information
a) Primary reporting format – business segments
As at 30 September 2009, the Group’s continuing business is classified by management into four main segments. These correspond to three operating
segments (Creative Technology, Full Service and Broadcast Services) which together provide the Group's principal activity of services to the corporate
presentation, entertainment and broadcast markets. In addition, the Group recognises a further segment, Head Office, which provides administrative support
to the rest of the Group.
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