Balance sheet /
| £m | 2011 | 2010 |
|---|---|---|
| Goodwill | 1,069.7 | 1,331.1 |
| Intangible assets | 139.4 | 112.5 |
| Property, plant and equipment | 52.7 | 61.9 |
| Investments in associates and joint ventures | 52.3 | 48.5 |
| Other non-current assets | 81.9 | 74.1 |
| Total non-current assets | 1,396.0 | 1,628.1 |
| Net payables | (513.4) | (441.0) |
| Net debt | (128.4) | (331.3) |
| Earn-out liabilities | (182.3) | (63.7) |
| Liabilities in respect of put options | (14.4) | (34.5) |
| Other | (94.8) | (89.2) |
| Net assets | 462.7 | 668.4 |
Balance sheet movements year-on-year were affected by exchange movements at the closing date, but not to the extent of previous years. The 2010 balance sheet included the assets and liabilities of Synovate and, in many cases, the main movement in balance sheet line items is the disposal of these assets and liabilities.
Goodwill and intangible assets /
The decrease of £261.4m in goodwill predominantly arises due to the disposal of Synovate in October 2011, offset by acquisitions made in 2011 and upward revisions of estimated future earn-out liabilities on older acquisitions. Goodwill arising on new acquisitions in the year totalled £146.7m.
Intangible assets increased to £139.4m (2010: £112.5m) as a result of an increase in purchased intangibles largely through the acquisitions made in 2011, offset by the amortisation charge for the year for the Total Group of £47.3m (Retained Group: £40.8m), those assets included within Synovate on disposal, together with exchange movements.
Property, plant and equipment /
The net decrease in property, plant and equipment of £9.2m was mainly due to the Synovate disposal. Net capital expenditure for the year increased to £45.7m (2010: £28.1m), as a result of various office re-locations across the Group.
Investments in associates and joint ventures /
The increase of £3.8m in associates and joint ventures was mainly due to the contribution from a number of investments made in 2011, including TigerSpike and Qualité Search Marketing, along with our share of associates’ profits for the year.
Net Payables /
Trade payables principally represent amounts payable to media owners in respect of media space booked for clients; trade receivables principally represent amounts due from clients in respect of this space.
There were the typical working capital movements during the year, with an outflow during the first half, followed by an inflow in the second half. During the year, there was a working capital outflow of £24.6m on an underlying basis.
Net debt /
The profile of net debt at the end of 2011 was as follows:
| £m | 2011 | 2010 | Change % |
|---|---|---|---|
| Cash and short-term deposits | 626.1 | 394.4 | 231.7 |
| Current borrowings and overdrafts | (136.2) | (85.6) | (50.6) |
| Non-current borrowings | (618.3) | (640.1) | 21.8 |
| Net Debt | (128.4) | (331.3) | 202.9 |
Net debt improved from £331.3m at the end of 2010 to £128.4m at the end of 2011, a year-on-year improvement of £202.9m. This increase was mainly due to the receipt of cash proceeds from the Synovate sale and strong operating cash flows in the second half of 2011, offset by acquisition spend and a special dividend of £200m being paid to shareholders.
Earn-outs and put options /
Our estimated future earn-out liabilities increased by £118.6m to £182.3m at the end of the year. Decreases in liabilities due to payments made in the year were more than offset by additional earn-outs through acquisitions made in 2011, revaluations of future liabilities and currency effects. The vast majority of our earn-out commitments depend on the post acquisition financial performance of businesses acquired.
Liabilities in respect of put options decreased by £20.1m to £14.4m (2010: £34.5m), primarily due to payments made on the purchase of additional stakes in existing subsidiaries.
Cash flow /
Cash inflows from underlying operations were £218.1m (2010: £250.2m), down 12.8%, mainly due to the loss of cash inflows from Synovate generated in the fourth quarter of the prior year. Statutory cash inflows from operations were £208.1m, down 10.5% from £232.5m in 2010. Net cash inflow on acquisitions and disposals was £402.6m.
Financing /
The Group has a good maturity and diversified debt profile and, as a result, the headroom on the Group’s facilities is satisfactory. A bilateral facility of £45m, which had a maturity of July 2011, was increased to £60m and extended to October 2014.
We ended the year with a comfortable covenant position. Our leverage covenant (net debt/EBITDA) was 0.5 times (compared to a covenant requirement of <3 times) and our interest cover covenant (EBITDA/net interest) was 7.7 times (compared to a covenant requirement of >4 times).
| Covenant | Requirement | 2011 | 2010 |
|---|---|---|---|
| Leverage | Less than 3 times | 0.5 | 1.5 |
| Interest cover | Greater than 4 times | 7.7 | 8.2 |
Under our committed central facilities, we had undrawn available facilities at the year-end of £450.0m, as we did at the end of 2010. Cash flow forecasts produced on a prudent basis for the next three years show that the Group has sufficient headroom and available facilities to meet its liabilities as they fall due.
Nick Priday
Chief Financial Officer, Aegis Group plc