Final Results

1 March 2013

BERENDSEN plc

Full Year results announcementfor the year ended 31 December 2012

*before £nil (2011:£8.5 million) exceptional items and £25.1 million (£24.0 million) amortisation of customer contracts

**Underlying (at constant exchange rates and excluding acquisitions)

Full Year Highlights

·; Good underlying growth in both revenue and profit

·; Business line structure delivering benefits ahead of schedule in its first full year

·; Increased rate of revenue growth in Core Growth businesses in second half

·; Further operating margin improvements, up 70bps in the year

·; Excellent free cash conversion at 142% of adjusted profit after tax: investments targeted to Core Growth opportunities

·; Return on invested capital further improved to 8.5% (7.9%)

·; Dividend up 9% in line with our progressive dividend policy

Iain Ferguson, Chairman of Berendsen, commented

"We are pleased to report this strong set of results, with our business line structure delivering benefits ahead of schedule in its first full year. The board expects trading trends in 2013 to be similar to last year and for Berendsen to achieve another year of good progress."

For further information contact

Analyst Meeting

The company will be presenting to a meeting of analysts at 9.00am today. A live audiocast of the presentation and questions, and the recording, will be available at the company's website on www.berendsen.com. Questions will only be taken at the meeting.

Overview of the 12 months ended 31 December 2012

We are pleased to report a strong set of results for the Group with underlying revenue up 2% and underlying adjusted operating profit up 8% to £145.6 million (2011: £139.8 million). Our adjusted operating margin increased 70bps to 14.8%. Adjusted earnings per share were 52.2p compared with 48.4p last year, an increase of 8%. The Board is recommending a final dividend of 17.5 pence (16.0 pence) bringing the total dividend to 25.5 pence (23.4 pence), an increase of 9%.

Our free cash flow was 34% higher than last year at £125.1 million (£93.1 million) a conversion of 142% of our adjusted profit after tax. Our net debt reduced to £463.7 million compared to £513.6 million as at 31 December 2011.

We also improved our return on invested capital by 60bps from 7.9% in 2011 to 8.5%. Moving towards double digit returns remains a key strategic objective.

We are pleased with the progress we have made in implementing the various initiatives we identified in our Strategic Review. Our business line structure was fully in place from 1 January 2012 and we are now managing our operations along these business lines. We saw the benefits of this more focused structure during the year through a consistent approach to market opportunities in each business segment and the faster execution of best practice transfer to exploit the opportunities we see. At the same time we have a number of Group-wide programmes where we are targeting to capture the opportunities of scale, leveraging our resources in procurement, pricing and commercial terms management and working capital management. In 2013, we will build on this momentum adding service management to this programme. These front line initiatives are supported by a strengthening of our central capabilities in HR, procurement and business development.

We grew underlying revenue by 3.5% in our Core Growth businesses, which ended the year with a stronger second half: we also improved operating margins by 90bps with the benefit of the additional volume and the restructuring undertaken last year of our sales force to improve efficiency. Furthermore, whilst the aggregate revenue of our Manage for Value businesses declined, the operating margin increased by 40bps, assisted by restructuring last year. We remain committed to increasing value from both segments.

Results

Group revenue was £985.1 million in the year, down 1% on the prior year (2011: £992.0 million). Adjusted operating profit (before exceptional items and amortisation of customer contracts) was £145.6 million, compared with £139.8 million, an increase of 4%. Comparisons of revenue and adjusted operating profit performance to the equivalent period last year reflect the bolt-on acquisitions we made in the year and the impact of currency. Adjusting for these, underlying revenue grew 2% and adjusted operating profit grew 8%. Foreign exchange translation reduced revenue and adjusted operating profit by £33.9 million and £6.1 million respectively compared to the prior year.

Our net finance costs were £25.6 million compared with £28.0 million last year, notwithstanding the full year effect of the modest uplift in the pricing of the 5 year €535 million Revolving Credit Facility, which we signed in July 2011. The reduced cost reflects our strong cash flow. Adjusted profit before tax was £120.0 million (£111.8 million) and adjusted earnings per share were 52.2 pence (48.4 pence), up 8%.

Our effective tax rate on adjusted profit before tax was 26.1%, similar to last year (26.4%). We will benefit in 2013 from the planned reduction in country tax rates in the UK and Sweden, which will mean that our effective tax rate should be closer to 25.5% in 2013.

There were no exceptional items in the year. In 2011 net exceptional charges of £8.5 million were incurred. These costs related to the restructuring of our German Healthcare, Irish and Scandinavian flat linen businesses, which we are managing for value, and in rationalising the sales force in our Core Growth business; costs incurred in managing the change programmes identified in our Strategic Review and costs incurred in relation to acquisitions: credits were recognised for changes to long term employee benefits.

Amortisation of acquired customer contracts was £25.1 million (£24.0 million). After amortisation and net exceptional items, operating profit was £120.5 million (£107.3 million), profit before taxation was £94.9 million (£79.3 million) and basic earnings per share were up 27% to 42.8 pence compared with 33.8 pence in 2011.

As previously indicated, we are a well invested business. Our net capital expenditure was £154.7 million, compared to the previous year of £159.2 million. This was 94% (96%) of the depreciation charged. The investment in textiles and other rental assets was slightly lower than 2011 at £127.8 million (£131.3 million) but, at 107% of depreciation, this is supporting the higher underlying volumes and the new contract wins. Expenditure on plant and equipment was £27.3 million compared to £29.6 million last year and targeted at the higher growth areas of our business, such as the conversion of our plant in UK Workwear to the model we operate in Continental Europe and investment in our Cleanroom plant in Holland. For 2013, we expect net capital expenditure to be slightly below depreciation. Free cash flow was significantly higher at £125.1 million (£93.1 million). Our initiatives in capital efficiency improved cash flow with a positive inflow of £11.4 million (inflow of £6.3 million) in working capital and our cash tax rate is lower than the accounting rate because of the tax relief on the asset purchases we have made.

We contributed £5 million to the UK pension fund in the year and a further £5 million is planned this year, in line with the funding plan agreed following the 2010 triennial valuation. In 2013, we will therefore undertake our next triennial valuation. We expect the results of this to be agreed later in the year and for the funding plan for the next three years to commence from the start of 2014. We ended the year with net retirement benefit obligation liabilities for the Group of £20.5 million (£28.2 million) reflecting the decrease we have seen in discount rates following the lowering of bond yields offset by improved asset performance. The main UK pension fund shows an asset of £18.8 million (£10.3 million) on an IFRS accounting basis but a deficit at the triennial valuation for funding purposes, with our overseas pension funds showing a liability of £40.0 million (£38.5 million). These overseas plans are unfunded in line with local practice. As indicated in note 16, the company will adopt IAS19 - "Employee Benefits", with effect from 1 January 2013 in line with required practice. As this is a change of accounting policy, the 2012 accounts presented here will be restated with effect from 1 January 2012. Had the new accounting standard been adopted in 2012, then we estimate that pension costs would have been £3.3 million higher than reported this year under the existing accounting standard and adjusted earnings per share 1.5 pence lower, with no impact on the cash flow of the business.

Acquisition spend amounted to £37.1 million (£13.7 million). This relates primarily to the acquisition we made in February 2012 to extend our Cleanroom footprint to Germany and the acquisition of Groene Team, a mat and washroom company in the Netherlands, which we announced in December 2012, substantially increasing our market position there. A number of small bolt-on acquisitions were made, primarily in Facility and Workwear in Scandinavia. These acquisitions are already contributing to Group profits. After a reduction of £14.5 million from exchange translation and dividends paid of £40.6 million (£37.3 million), net debt at 31st December 2012 was £463.7 million (£513.6 million).

Overall the Group retains a strong balance sheet with a ratio of net debt to earnings before exceptional items, interest, tax, depreciation and amortisation (EBITDA) of 1.48 times (2011: 1.66 times), compared with a covenant level of not more than three times. We have total private placement notes of £342 million with maturities between 2014, when £31 million equivalent is due to be repaid and 2021. In addition the Group's bank facilities extend to July 2016 and amount to £437 million, of which £250 million was undrawn at the year end.

We seek to create value by increasing our return on invested capital in line with our strategic objectives: we aim to increase our returns by growing revenues and margins and manage our invested capital by converting our growth to cash. This year we increased our return on invested capital by 60bps from 7.9% last year to 8.5%. Further improving these returns remains a key strategic objective, with a target towards double digit.

The Board is recommending a final dividend of 17.5 pence, which, together with the interim dividend of 8.0 pence paid in October 2012, gives a total of 25.5 pence, an increase of 9% on last year's level. The final dividend will be paid on 3 May 2013 to shareholders on the register at the close of business on 12 April 2013.

Business Line Performance

* before exceptional items and amortisation of customer contracts

** Flat linen outside UK 2011 operating profit has been reduced by £1.0 million and Workwear and Facility increased by £0.5 million each from the amounts previously disclosed to present a more consistent allocation of management charges in line with 2012

Core Growth

Workwear

Revenue grew 1% in the year to £288.0 million (£286.5 million), which excluding exchange represented 4% underlying growth. The underlying growth rate was stronger in the second half of the year than in the first half. Margins increased 50 bps to 17.8% and adjusted operating profits were up 3% to £51.2 million (£49.7 million). The adjusted operating profit growth was 8% on an underlying basis.

We are pleased with the development of our sales operations with important changes being made market by market. A number of our lead indicators are also improving: we were almost 20% ahead of our targets on new contract sales in 2012, which included seven new contract wins with annual values of over £1m each, three of which were either new to outsourcing or added a significant portion of new business: our pipeline increased by 50% over the year. While this is encouraging, we believe there are further opportunities for improvement.

In Sweden, customer demand was strong, particularly in the first half, and in Holland we are improving market share with new contract wins. This resulted in higher year-on-year volumes in both countries. Denmark had a more difficult year because of the slower economy but we ended the year with good momentum, having secured some good contract wins in the second half. These are the countries with good market positions where our business model is well developed. The average operating margin for these is almost 10% higher than in the UK and Germany, where we are focusing our transfer of best practice.

In the UK we have started the process of improving our market offerings and the new garment ranges we introduced in the first half continued to sell well, representing almost a quarter of new sales and at higher prices, reflecting the improved quality of our offering. We also completed in August the conversion of our plant in Rainhill, near Liverpool, to the proprietary production model we use in Continental Europe. This is based on the principles of self-managed teams and lean production techniques and we are already seeing benefits in productivity with greater employee engagement, opportunities to improve service further and a growing level of customer interest in the initiatives we have introduced. The UK market is not easy in this economic climate but we did see revenue growth in 2012, which we aim to build on in 2013.

We made strong progress in Germany. Our revenue was up 6% year-on-year and 10% second half on second half as we started up the new contract wins we referred to in August 2012 in our first half statement. In addition, we saw an improvement in field sales to smaller and medium sized companies. Our retention rate, which has been below the average for the Business Line in recent years, improved significantly, ending the year among our top performers in this area. The increased revenue has yet to convert fully into an increase in operating profit, primarily because of the textile investment we have made for new contracts, but we expect margin improvement in 2013.

Our outlook for Workwear in 2013 will see us build on the achievements of the second half 2012 and capture the benefits of the improvements and innovations the Business Line management team has introduced.

Facility

Revenue of Facility was £212.8 million, up 3% on last year (£207.3 million). Excluding the impact of the acquisitions and currency, organic revenue growth was 4%. Adjusted operating profit grew 12% from £48.3 million to £54.1 million, which on an underlying basis was an increase of 17%. Our adjusted operating margin improved from 23.3% to 25.4%, which is an excellent performance.

Our Mat and Washroom businesses delivered higher new contract sales with fewer sales people following the reorganisation last year. This delivered the sales efficiency we targeted with higher quality salespeople supported by a better ratio of sales coaches and managers and an increase in their potential for higher commissions. The Business Line organisation is driving the improvements in sales and marketing capability with a number of key changes. We are also focusing on our service and distribution model and the changes we identified in Norway last year to improve our distribution processes are now largely complete. We believe we have further opportunity to improve and increase our retention rates through service improvements.

In Scandinavia we saw some reduction in volume per contract in the second half, primarily in Denmark where the economy is still weak, but we made good progress overall. We also improved our market position in Holland with the acquisition of Groene Team in December 2012, which will add annual revenues of approximately £14 million. This further strengthens our capability in washroom services. Although washroom services is much smaller than mat services in the markets we serve, in many of the more developed facility markets of Europe, washroom is a larger business. This remains a significant opportunity for us, especially in Scandinavia.

In Poland, we returned to double digit revenue growth, primarily from new contract wins of virgin customers and as a result our margin increased to close to 20%. In our smaller markets, the Baltic and Czech Republic, we delivered double digit revenue growth.

Our Cleanroom business is clearly benefiting from the added focus and exposure that the new business line structure brings. Denmark, Holland and Sweden performed very well in the year and we are pleased with the acquisition we made in Germany to extend our footprint. This delivered to expectation in its first year and offers very good opportunities for the future. We delivered underlying double digit revenue and profit growth through a combination of service extensions and new customers in Cleanroom this year, which is an excellent performance.

Looking ahead, Facility has good growth opportunities. The business is now our most profitable, growing well and remains a very attractive segment for us.

UK Flat Linen

Revenue and adjusted operating profit were similar to last year with £196.7 million (£195.2 million) and £26.2 million (£26.1 million) respectively. Revenue growth was impacted by the extra billing week in 2011, which we referred to in our first half statement and adjusting for this, underlying revenue and adjusted operating profit were up 2%.

We saw higher levels of growth in the Healthcare business as like-for-like volumes increased 2% in the year and we have won a number of our target contracts for new outsourcing. Our success against the competition has been encouraging as a result of the investments we made in customer service and quality control. We remain well placed to capture any further outsourcing in the Healthcare market, where about a quarter of hospitals in England still operate their own on-premise laundries: in Wales and Scotland most hospitals still operate in this way. Our operational management is performing particularly well, improving efficiency in our plants but importantly developing our service with innovation in textiles and in management information for our customers.

Like for like volumes in our group hotel business were broadly in line with last year. New contract wins were higher than last year, however, and we have yet to see the full benefit of these in the results. We are building our capabilities in customer relationship management and we are encouraged at the level of add-on services, which are delivering value to our existing customers. We are also seeing a broader spread than in recent years of new sales in different parts of the country and to hotels of different sizes.

Our outlook for the UK Flat Linen business is for further progress in Healthcare, where we expect to benefit from the full year effect of wins in 2012 and new outsourcing opportunities to come through. Our hotel business is dependent upon a stable economy but we remain strategically well-placed in this market.

Manage for Value

Flat Linen outside the UK

This comprises our hotel and healthcare businesses in Denmark and Sweden, our healthcare businesses in Germany and Austria and our business in Ireland. Our flat linen business outside the UK saw revenues down at £218.0 million (£234.0 million) but adjusted operating profit was £21.0 million compared with £20.7 million last year. Adjusting for exchange, revenue was down 2% but adjusted operating profit was up 6%. The margin increased from 8.8% to 9.6%.

Our focus in these businesses is on operating margin improvement and cash generation, delivering from the existing asset base and maintaining our existing strong market positions. We will invest capital to maintain the quality of these businesses and to provide excellent service to our customers but we would not expect to expand our plant footprint or to consolidate our markets through acquisitions as the returns are less attractive than in our Core Growth businesses.

Our operating margins benefited from the restructuring we undertook last year, with all of our businesses contributing.

We have seen some price pressure coming through in the second half in Sweden with a number of unusually large contract renewals in our Healthcare business and we have a number of tenders outstanding in Germany. Our management teams are focused on capturing the opportunities to build stronger businesses, as demonstrated this year and they have much to contribute to the success of the Group.

Clinical Solutions and Decontamination

Revenue was up 1% on last year at £69.6 million (£69.0 million) with adjusted operating profit of £2.9 million compared to £3.3 million last year.

The operational issues we experienced in the first half in our sterile consumables business have been positively addressed by new management, improving the level of sales to existing contract relationships, addressing pricing and commercial terms in contracts with low profitability and delivering operational efficiencies. Our reusable sterile textile business continues to perform well. As a result, we increased our profits by £0.9 million in the second half of 2012 compared to the first six months of the year.

Losses on our decontamination contracts, for which we made provision at the end of 2010, were reduced from £4.4 million last year to £2.2 million. Our customers recognise the quality of our service and have worked with us to make the number of changes identified in our turnaround plan. We are planning the transition to our service of both new volume from our existing contracts and volume from a significant new contract. We remain on track with our turnaround plan and our focus is now on developing the opportunities that are being discussed with potential customers using our existing footprint.

Outlook

We are pleased to report this strong set of results, with our business line structure delivering benefits ahead of schedule in its first full year. The board expects trading trends in 2013 to be similar to last year and for Berendsen to achieve another year of good progress.

Consolidated income statement

Consolidated statement of comprehensive income

Items in the statement above are disclosed net of tax.

Consolidated balance sheet

Consolidated cash flow statement

Consolidated statement of changes in equity

The group has an Employee Benefit Trust to administer share plans and to acquire company shares, using funds contributed by the group, to meet commitments to group employees. At 31 December 2012, the Trust held 2,882,275 (2011: 2,915,296) shares.

Notes to the consolidated financial statements

Accounting policies to the consolidated financial statements

1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The Berendsen plc's Report and Accounts 2012 (the "Annual Report") will be posted to shareholders on 21 March 2013. The Annual Report will also be made available on the company's website, www.berendsen.com, from 21 March 2013. The financial information set out herein does not constitute the company's statutory accounts for the year ended 31 December 2012 but is derived from those financial statements and the accompanying directors' report. The statutory accounts for 2012 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 25 April 2013. The auditors have reported on the company's statutory accounts; the report was unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

The comparative figures for the year ended 31 December 2011 are not the financial statements for the financial year but are derived from those accounts which have been reported on by the group's auditors and delivered to the Registrar of Companies. The report was unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.

2 Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Berendsen plc executive board.

Following the strategic review of the business presented in November 2010, from 1 January 2012 the Berendsen plc executive board manages the business under the business lines of Workwear, Facility, UK Flat Linen, Flat Linen outside the UK, and Clinical Solutions and Decontamination. From the same date the group's internal reporting structure was aligned on the same basis. 2011 segment information is presented on a basis consistent with the new reporting structure.

The results for the year ended 31 December 2012 under the business line structure are as follows:

Unallocated costs includes group marketing and communication functions.

Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.

Sales between operating segments are carried out at arm's length. The company is domiciled in the UK.

The results for the year ended 31 December 2011 under the business line structure are as follows:

The 2011 operating profit before exceptional items and amortisation of customer contacts for the Workwear, Facility and Flat Linen outside UK business lines, have been restated to present a more consistent allocation of management charges in line with 2012.

The segment assets and liabilities at 31 December 2012 under the business line structure are as follows:

The business line split of operating assets and liabilities as at 31 December 2011 is as follows.

Business line operating assets consist primarily of property, plant and equipment and other intangible assets, inventories and receivables.

Business line operation liabilities consist primarily of trade and other payables.

Unallocated assets include operating assets relating to corporate segments.

Unallocated liabilities include operating liabilities for corporate segments.

2011 has been restated to more accurately reflect the allocation of centrally held goodwill.

3 Net finance costs

(i) This relates to loan issue costs arising on the 2011 €535 million Revolving Credit Facility and on the 2006 $250 million, 2009 $259 million and £25 million US Private Placements. The costs have been capitalised and are being amortised over the shortest period of the loans being four years, eight years and seven years respectively.

4 Exceptional items

Included within operating profit are the following items which the group considers to be exceptional:

There were no exceptional items in 2012.

In 2011 the restructuring costs related primarily to the closure of a German Healthcare plant. This concluded the restructuring undertaken following the loss of a significant contract in 2010. The tax credit on this was £0.9 million.

In 2011 the group incurred costs of £7.9 million associated with the implementation of its strategic review announced in November 2010. This included £5.4 million of restructuring costs incurred in the Irish and Scandinavian flat linen businesses, which we are Managing for Value and in rationalising the salesforce in our Core Growth business. This also included £2.5 million of costs in managing the change programmes identified in our Strategic review such as the capital efficiency and procurement review programmes. The tax credit on these costs was £1.7 million.

We incurred net transaction costs of £1.2 million on acquisitions and similar initiatives in 2011. There was a tax related charge of £0.4 million.

In 2011, the group recognised a £3.1 million credit for changes in the management and funding arrangements for long‑term employee benefits. This covered a number of countries and included the impact of closing to future accrual the UK defined benefit pension scheme. The scheme was closed to new entrants in 2003 and by closing to future accrual the scheme is in line with standard UK practice. There was a tax charge of £0.9 million.

During 2011 a net profit was realised on property disposals primarily in the UK. The tax charge on this was nil.

5 Taxation

The amount of overseas tax included in the total tax charge is £18.2 million (2011: £18.9 million). 

6 Dividends

The directors recommend a final dividend for the financial year ended 31 December 2012 of 17.5 pence per ordinary share to be paid on 3 May 2013 to shareholders who are on the register at 12 April 2013. This dividend is not reflected in these financial statements as it does not represent a liability at 31 December 2012.

7 Earnings per share

Basic earnings per ordinary share are based on the group profit for the year and a weighted average of 169,124,166 (2011: 168,875,066) ordinary shares in issue during the year.

Diluted earnings per share are based on the group profit for the year and a weighted average of ordinary shares in issue during the year calculated as follows:

An adjusted earnings per ordinary share figure has been presented to eliminate the effects of exceptional items, amortisation of customer contracts and non-recurring tax items. This presentation shows the trend in earnings per ordinary share that is attributable to the underlying trading activities of the total group.

The reconciliation between the basic and adjusted figures for the group is as follows:

8 Goodwill

Changes in composition of CGUs under the new business line structure

With effect from 1 January 2012, we reorganised the group's structure into Business Lines, resulting in a change in operating segments and the composition of the cash generating units (CGUs). These Business Lines are managed and controlled at the operating segment level and each of the operating segments has their own dedicated management team. The internal group reporting structure was changed in January 2012 to align with the new Business Line structure. Going forward, management will monitor goodwill at operating segment level and goodwill has been reallocated on this basis. Goodwill that is specific to a particular operating segment has been included in the operating segment directly. All other goodwill has been reallocated to the appropriate operating segments prospectively using the three-year average forecast operating cash flow for 2012 to 2014 as the basis for the relative value approach.

Under the new business line structure, we have 23 CGUs which represents the smallest identifiable group of assets that generates independent cash flow from other groups of assets. In 2011, we had 17 CGUs under the previous geographical structure. For the purpose of goodwill impairment review, acquired goodwill has been allocated to nine groups of CGUs being the operating segments. The operating segments are Workwear, Facilities, UK Flat Linen, Scandinavian Flat Linen, Germany and Austria Healthcare, Ireland, Direct Sales, Clinical Solutions and Decontamination.

For reporting purposes, the goodwill has been allocated to the operating segments as outlined below. 2011 has been re-presented based upon the new segmental reporting adopted for 2012.

Impairment testing of goodwill

The group reviews at each reporting date whether there is an indication that any of the CGU that contains the operating assets may be impaired in accordance with IAS 36 'Impairment of assets'. An annual goodwill impairment test is then carried out by comparing the carrying amount of the group of CGUs to which the goodwill relates to its recoverable amount. The recoverable amount of each operating segment is based on value-in-use calculations which management develop from forecast cash flows based on past performance, market data and its expectation of future market development. These calculations require the use of estimates and the pre-tax cash flow projections are based on the group's current three-year strategic plan. Cash flows beyond the three-year period have been extrapolated using an estimated growth rate of 2% and are appropriate because these are long-term businesses. The growth rate of 2% does not exceed long-term GDP estimates for countries that the group operates within. The main assumptions on which forecast cash flows have been based are revenue, operating margin and cash growth. Projected cash flows have been discounted using pre-tax discount rates of 11%. The discount rates reflect market assumptions for the Risk Free-rates and Equity Risk Premiums and also take into account the net cost of debt.

The annual impairment testing carried out in the current year showed that the recoverable amount for all groups of CGUs to which goodwill is allocated exceeded the carrying amount of the groups of CGUs. At the time of the reallocation of goodwill an impairment test was also carried out which showed that no impairment was required.

This year there are no reasonably possible changes in assumptions that would cause an impairment of goodwill. Last year, we provided additional disclosures on the annual impairment testing results for Germany Healthcare and Clinical Solutions. In 2012, Clinical Solutions has performed well ahead of last year's plan and the latest forecast operating cash flow results reflect the current year's positive results, resulting in an increase in headroom. In 2012, Germany Healthcare's operating cash flow results were also better than plan and the goodwill impairment review carried out at the time of reallocation indicated no impairment was necessary.

9 Other intangible assets

All amortisation charges have been charged through other operating expenses. The following useful lives have been determined for the intangible assets acquired during the year:

·; Computer software three to five years.

·; Intellectual property rights three to five years.

·; Customer contracts two to five years.

10 Property, plant and equipment