Page 100 - EVRY Annual Report 2012

Annual Accounts Group 100
Investment spending (CAPEX)
Calculations of value in use assume a normalised relationship between investment and operating revenue. It is
assumed that the operational investments and investments in software developed in-house that are necessary to
achieve the expected growth in revenue will be carried out. The cash generating units IT Operations, Solutions and
Financial Services are more capital intensive than the group’s consulting business, and accordingly CAPEX for these
segments is forecast at a higher percentage of revenue than for Consulting.
Discount rate
Future cash flows are discounted to present value using a discount rate based on a calculation of a weighted average
cost of capital (WACC). For 2012, pre-tax WACC was assumed to be 6.88%. This is based on a risk-free interest rate of
2.4 %, gearing ratio of 20 %, equity market premium of 5.0 % and equity beta of 1, as well as a corporate tax rate of 28
%. WACC is updated annually in accordance with market expectations for EVRY, and was unchanged from 2011. WACC
of 6.88 %was used for all cash generating units since differences in future uncertainty are reflected in the expected
cash flows that form the basis for the calculation of future value in use. The observed level of risk expressed in terms
of equity beta is also considered to be close to 1 for all segments in which the group operates, indicating that the same
WACC should apply to all cash generating units.
Sensitivity analysis
The calculations are based on assumptions about future developments in both macroeconomic and company-spe­
cific factors. Stress tests have been carried out to evaluate the sensitivity of each cash generating unit to changes in
these factors.
The table below shows the required write-down analysed by cash generating unit that would result from changes
in EBITA and WACC. The table shows that an increase in WACC of 2 percentage points, keeping other assump-
tions unchanged, would not result in impairment for any of the cash generating units. If the level of EBITA in 2012
is extrapolated forward and revenue increases by 2.5 %, this would not result in impairment for any of the cash
generating units other than IT Operations, where the impairment would be NOK 91 million. If revenue growth is
reduced to 0 % (with EBITA continuing at the 2012 level) this would not result in impairment for the cash generat-
ing units Financial Services, Solutions, BEKK Consulting and Global Sourcing, but it would cause impairment for IT
Operations, Consulting and Sweden. This indicates that in order to avoid impairment for these units, a higher level
of level of EBITA than in 2012 and/or higher revenue is needed.
NOK million
Cash generating unit
Excess value (+) /
Write-down (-) requirement at 2012
EBITA level and
revenue growth of 0 %.
Excess value (+) /
Write-down (-) requirement at 2012
EBITA level and
revenue growth of 2.5 %.
Excess value (+) / Write-down (-)
requirement by an
increase in WACC with 2 %
IT Operations -1 385 -91 391
Financial
Services 914 2 059 1 659
Solutions 510 1 143 1 152
Consulting -311 211 1 087
Sweden -312 610 1 255
BEKK Consulting 474 985 460
Global Sourcing 331 670 415