On 17 June 2010 the Group acquired 100% of the shares of Melorio plc, a vocational training provider. On 19 August 2010 the Group acquired 100% of the shares of Wall Street Institute Education S.a.r.l (WSI), a group providing spoken English training for adults. On 1 September 2010 the Group acquired 69% of the voting equity of Sistema Educacional Brasiliero’s (SEB) school learning systems division. On 7 September 2010 the Group acquired 100% of the shares of America’s Choice Inc, a provider of school improvement services.
Provisional values for the assets and liabilities arising from these and other acquisitions completed in the year together with adjustments to prior year acquisitions are as follows:
| All figures in £ millions | Notes | 2010 | 2009 | |||||
|---|---|---|---|---|---|---|---|---|
| Melorio fair value | SEB fair value | WSI fair value | America’s Choice fair value | Other fair value | Total fair value | Total fair value | ||
| Property, plant and equipment | 10 | 4 | 7 | 3 | – | 3 | 17 | 9 |
| Intangible assets | 11 | 89 | 103 | 32 | 24 | 37 | 285 | 142 |
| Intangible assets – Pre-publication | 20 | – | 3 | – | – | 6 | 9 | 2 |
| Inventories | – | 5 | 1 | 1 | (5) | 2 | 14 | |
| Trade and other receivables | 8 | 13 | 8 | 7 | 5 | 41 | 23 | |
| Cash and cash equivalents | 3 | 5 | 2 | 12 | 4 | 26 | 29 | |
| Financial liabilities – Borrowings | (13) | – | – | – | – | (13) | – | |
| Net deferred income tax liabilities | 13 | (24) | – | (3) | (4) | (6) | (37) | (45) |
| Retirement benefit obligations | – | – | – | – | (1) | (1) | (1) | |
| Provisions for other liabilities and charges | 23 | (10) | – | – | – | – | (10) | – |
| Trade and other liabilities | (9) | (10) | (14) | (5) | 1 | (37) | (91) | |
| Current income tax liabilities | – | – | (3) | – | – | (3) | (4) | |
| Non-controlling interest | – | (39) | – | – | – | (39) | (16) | |
| Net assets acquired at fair value | 48 | 87 | 26 | 35 | 44 | 240 | 62 | |
| Goodwill | 11 | 50 | 141 | 39 | 30 | 28 | 288 | 205 |
| Increase in fair values of proportionate holding arising on stepped acquisition | – | – | – | – | – | – | (23) | |
| Total | 98 | 228 | 65 | 65 | 72 | 528 | 244 | |
| Satisfied by: | ||||||||
| Cash | (98) | (228) | (65) | (65) | (74) | (530) | (201) | |
| Other consideration | – | – | – | – | – | – | (5) | |
| Deferred consideration | – | – | – | – | (8) | (8) | (27) | |
| Net prior year adjustments | – | – | – | – | 10 | 10 | (11) | |
| Total consideration | (98) | (228) | (65) | (65) | (72) | (528) | (244) |
The goodwill arising on these acquisitions results from substantial cost and revenue synergies and from benefits that cannot be separately recognised, such as the assembled workforce.
The fair value of trade and other receivables is £41m and includes trade receivables with a fair value of £34m. The gross contractual amount for trade receivables due is £37m of which £3m is expected to be uncollectable.
A provisional value of £12m of goodwill arising on 2010 acquisitions is expected to be deductible for tax purposes.
The non-controlling interest in SEB was measured using the non-controlling interest’s proportionate share of the acquiree’s net assets.
| All figures in £ millions | 2010 | 2009 |
|---|---|---|
| Cash flow on acquisitions | ||
| Cash – Current year acquisitions | (530) | (201) |
| Cash – Acquisitions yet to complete | – | (4) |
| Deferred payments for prior year acquisitions and other items | (20) | (32) |
| Cash and cash equivalents acquired | 26 | 29 |
| Acquisition costs paid | (11) | – |
| Net cash outflow | (535) | (208) |
In 2010, acquisitions contributed £84m to sales and £6m to operating profit before acquisition costs and amortisation of acquired intangibles from the date of acquisition to the balance sheet date. Of these amounts, Melorio contributed £38m of sales and £5m of profit, SEB contributed £11m of sales and a loss of £2m, WSI contributed £13m of sales and £1m of profit and America’s Choice contributed £9m of sales and £nil of profit.
If the acquisitions had completed on 1 January 2010, the Group estimates that sales for the period would have been £5,799m and profit before tax would have been £676m.