Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
Goodwill with an indefinite life is not subject to amortisation and is tested annually for impairment or more frequently if events and changes in circumstances indicate that they might be impaired. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gains and losses on disposal.
Goodwill is allocated to cash generating units for the purpose of impairment testing. Any impairment is presented separately on the face of the statement of profit or loss and other comprehensive income.
Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring to use the specific software and are amortised using the straight-line method over their estimated useful lives (1 - 8 years).
The breakdown of the goodwill is:
| 2022 | 2021 | |||||
| MUR ’000 | MUR ’000 | |||||
| Healthcare segment | 798,148 | 798,148 | ||||
| Hotels and resorts segment | 225,024 | 225,024 | ||||
| Financial services segment | 233,893 | 252,955 | ||||
| 1,257,065 | 1,276,127 |
The key assumptions used for the impairment calculation are:
Operating profit margin: Operating profit margin is based on average values achieved in the year preceding the start of the budget period.
Discount rate: Discount rate represents the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and specific risk of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on specific circumstances of the Company and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into consideration both debt and equity. The cost of equity is derived by using comparable industries data and adjust for the country risk and size for the company. The cost of debt is based on the interest-bearing borrowings.
Growth rate estimates: Rates are based on management's best estimates of the Group's and industry's growth rate.
Goodwill has been allocated for impairment testing purposes to the following cash generating units:
(i) IMG Group
The recoverable amount of this cash-generating unit is determined based on the fair value less costs to sell calculations. These calculations use cash flow projections based on financial budgets and forecasts approved by management. Fair value was determined by using an appropriate discount rate to discount future cash flows generated from IMG Group. The discount rate calculation is based on specific circumstances of the cash generating units and a rate of 22.40% (2021: 20.69%) has been estimated. The terminal value has been computed by capitalising the net income prevailing at the end of the cash flow projections, using a growth rate of 6% (2021: 6%) and discounting at an appropriate rate.
| 2022 | 2021 | |||||
| MUR ’000 | MUR ’000 | |||||
| Sensitivity to changes in assumptions - IMG Group | ||||||
| Discount factor +0.5% point | (20,000) | (27,000) | ||||
| Discount factor -0.5% point | 21,000 | 30,000 | ||||
| Terminal Growth rate +0.5% point | 6,000 | 10,400 | ||||
| Terminal Growth rate -0.5% point | (6,000) | (9,700) | ||||
(ii) C-Care (Mauritius) Limited
C-Care is listed on the Development Enterprise Market (DEM) on the Stock Exchange of Mauritius. As at 30 June 2022, the investment in C-Care has been valued using the Volume Weighted Average Price (“VWAP”) model as management considers it is a more appropriate valuation of the Company. The share price as at 30 June 2022 was MUR 17.20 (2021: MUR 19.70) and the VWAP used for valuing the investment was MUR 18.82 (2021: MUR 10.35).
(iii) Wellkin Hospital
The recoverable amount of this cash generating unit is Rs. 5.4bn. This has been based on the overall contribution of Wellkin to C-Care- the valuation of C-Care being explained above.
(iv) Department of Cardiac
The recoverable amount of Department of Cardiac Cash Generating Unit of MUR7.5M has been determined based on its fair value less cost to sell. These calculations use cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to the cash flow projections is 9.3% (2021: 9.25%). Management has used its past experience in determining the value of each assumption. As a result of the analysis, management did not identify any impairment.
| 2022 | 2021 | |||||
| MUR ’000 | MUR ’000 | |||||
|
Sensitivity to changes in assumptions -
Department of Cardiac
|
||||||
| Discount factor +0.5% point | (6,000) | (6,000) | ||||
| Discount factor -0.5% point | 24,000 | 24,000 | ||||
| Terminal Growth rate +0.5% point | 7,000 | 7,000 | ||||
| Terminal Growth rate -0.5% point | (7,000) | (7,000) |
Goodwill has been allocated for impairment testing purposes to the following cash generating units.
| 2022 MUR’000 |
2021 MUR’000 |
|
|---|---|---|
| Indian Ocean Financial Holdings Limited (Group) | 163,378 | 163,378 |
| Investment Professionals Ltd | - | 19,062 |
| Mitco Group Ltd | 70,515 | 70,515 |
| 233,893 | 252,955 |
Management has determined the values assigned to each of the above key assumptions as follows:
| Assumption | Approach used to determine values |
|---|---|
| Risk-free rate (%) | Reflects the risk-free rate applicable to the country, for instance, the 20-year (2021: 20-year) bond rate or 3 year in the case of Madagascar |
| Equity beta | Volatility of a stock compared to the market. Applicable rate in country used. |
| Specific risk premium (%) | Return in excess of the risk-free rate that an asset is supposed to yield based on country in which the investment operates as well as its segment. |
| Cost of equity/ Weighted Average Cost of Capital (%) | Firm’s cost of capital and is not determined by management but rather by external factors. However, this is validated against the general risk appetite framework put in place by the controlling shareholder |
| Growth (%) | Based on forecasts and business plans of the investee company |
| BNI Madagascar SA |
Investment Professionals Ltd |
Mitco Group Ltd |
|
|---|---|---|---|
| 2022 | |||
| Cost of equity / Weighted Average Cost of Capital (%) | + 5% | + 5% | + 5% |
| Impact on Goodwill | (MUR 13M) | Nil | Nil |
| 2021 | |||
| Cost of equity / Weighted Average Cost of Capital (%) | + 5% | + 5% | + 5% |
| Impact on Goodwill | Nil | (MUR 5M) | Nil |
*Sun managed resorts refer to Wolmar Sun Hotels Limited, Long Beach Resort Ltd, City and Beach Hotels (Mauritius) Limited and Loisirs des Iles Ltée. Wolmar Sun Hotels Limited, Long Beach Resort Ltd and City and Beach Hotels (Mauritius) Limited were valued based on projected cash flows and Loisirs des Iles Ltée was valued based on sales comparison approach.
**Resorts managed by external operators refer to Anahita Hotel Limited and SRL Touessrok Hotel Ltd, of which Sun Limited owns 100% and 74% respectively. These resorts were valued based on present value of projected cash flows.
The recoverable amounts of the CGUs would equal their carrying amounts if the key assumption, i.e. discount rate, was to change as follows:
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| From | To | From | To | |||||
| Change in discount rate | ||||||||
| Anahita Hotel Limited | 11.50% | 16.16% | 10.80% | 14.13% | ||||
| City and Beach Hotels (Mauritius) Limited | 12.00% | 26.57% | 10.80% | 22.53% | ||||
| Long Beach Resort Ltd | 12.00% | 22.91% | 10.80% | 11.80% | ||||
| Wolmar Sun Hotels Limited | 12.00% | 24.23% | 10.80% | 26.23% | ||||
| SRL Touessrok Hotel Ltd | 11.50% | 15.60% | 11.25% | 11.98% | ||||
| Sensitivity Analysis | Decrease of 0.5% in discount rate MUR'000 | Increase of 0.5% in terminal value MUR'000 | Increase of 1% in occupancy rate MUR'000 |
|---|---|---|---|
| 2022 | 1,010,004 | 619,724 | 423,724 |
| 2021 | 1,760,984 | 851,079 | 890,683 |
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