Notes to the consolidated financial statements For the year ended 30 June 2024
13. Intangible assets continued
Cornelian The Cornelian CGU recoverable amount was calculated as £37,223,000 at 30 June 2024 (FY23: £46,836,000), giving a surplus over the Cornelian CGU carrying amount of £8,416,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. The revenue growth forecasts range between 8% and 9% annually over the five- year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on FUM, multiplied by estimated fee yields for both the discretionary and fund management business. Expenditure growth forecasts range between 4% and 9% annually over the five-year period. Both the revenue growth and expenditure growth reflect historic actual growth and planned management actions and are considered to be reasonable in the current market and industry conditions. A pre-tax discount rate of 13% has been used (FY23: 15%), based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Cornelian. The recoverable amount was based on the estimated cash inflows over the next five financial years, the period covered by the most recent forecasts, which reflect planned management actions and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds and investment management industries in which the CGU operates. The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised. • An increase of the pre-tax discount rate of 3% (FY23: 6%), from 13% to 16%, would result in an impairment. • The perpetuity growth rate would need to reduce by 5% (FY23: 10%), from 2% to (3%), to result in an impairment. • The forecast pre-tax cash inflows would need to reduce by 21% (FY23: 28%) each year to result in an impairment. Funds Based on a value-in-use calculation, the recoverable amount of the Braemar CGU at 30 June 2024 was £13,602,000 (FY23: £14,463,000), giving a surplus over the Braemar CGU carrying amount of £9,384,000 indicating that there is no impairment. A pre-tax discount rate of 15% (FY23: 16%) has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Braemar. The key underlying assumptions of the calculation are the discount rate, the growth in FUM of the funds business and the long-term growth rate. Forecasted FUM is multiplied by estimated fee yields for each of the funds resulting in forecasted revenue remaining flat over the five-year period. FUM growth is forecast
using estimated new business targets, expected outflows and estimated impact of market performance. Expenditure growth is forecast to decrease by between 1% and 3% annually over the five-year period. The inputs to the forecast cash inflows over the next five financial years reflect historic actual growth and planned management activities and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds industry in which the CGU operates. The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised. • An increase of the pre-tax discount rate of 30% (FY23: 28%), from 15% to 45%, would result in an impairment. • The 2% perpetuity growth rate could reduce by >100% (FY23: 100%) to trigger an impairment. • The forecast pre-tax cash inflows would need to reduce by 54% (FY23: 52%) each year to result in an impairment. Integrity Based on a value-in-use calculation, the recoverable amount of the Integrity CGU at 30 June 2024 was £9,335,000 (FY23: £7,725,000), giving a surplus over the Integrity CGU carrying amount of £4,010,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 14% (FY23: 15%) has been used, based on the Group’s assessment of the risk-free rate of interest and specific risks relating to Integrity. The key input in forecasting revenue is based on new business, which is forecast to grow based on new business targets, attrition and estimated impact of market performance. The revenue growth forecasts range between 8% and 13% annually over the five-year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on AUM. Expenditure growth is forecast to increase by between 4% and 6% annually over the five-year period, which includes consideration for reasonable allocated costs. The underlying methodology for allocating costs is reviewed by management each year when preparing the value-in-use calculations to ensure the methodology remains appropriate. In the current year, this resulted in a change to the allocation metrics used within the five-year forecast. The period covered is five years and the forecasts are based on management’s growth projections for the business based on its strategic objectives, taking into account historic performance and prevailing market and economic conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds, investment management and financial planning industries in which the CGU operates.
136 Brooks Macdonald Group plc Annual Report and Accounts 2024
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