Franchise Brands plc Annual Report and Accounts 2018 65 Financial Statements Governance Strategic Report Pence Pence Basic earnings per share 3.00 (0.18) Diluted earnings per share 2.96 (0.18) Adjusted earnings per share 3.00 2.47 Adjusted diluted earnings per share 2.96 2.45 11 Intangible assets Goodwill £’000 Brands, trade marks & other intangibles £’000 Customer relationships £’000 Software £’000 Total £’000 Cost At 1 January 2017 1,314 2,619 – – 3,933 Additions 18,174 4,685 2,159 21 25,039 At 31 December 2017 19,488 7,304 2,159 21 28,972 Additions – – – 460 460 At 31 December 2018 19,488 7,304 2,159 481 29,432 Amortisation At 1 January 2017 – (1,791) – – (1,791) Charge for year – – (156) – (156) At 31 December 2017 – (1,791) (156) – (1,947) Charge for year – – (216) (37) (253) At 31 December 2018 – (1,791) (372) (37) (2,200) Net book value At 31 December 2018 19,488 5,513 1,787 444 27,232 At 31 December 2017 19,488 5,513 2,003 21 27,025 At 1 January 2017 1,314 828 – – 2,142 Carrying amount of assets with indefinite useful lives Goodwill £’000 Indefinite life intangibles £’000 2018 £’000 Goodwill £’000 Indefinite life intangibles £’000 2017 £’000 Metro Rod 18,174 4,750 22,924 18,174 4,750 22,924 ChipsAway 1,171 – 1,171 1,171 – 1,171 MyHome 14 – 14 14 – 14 Barking Mad 129 763 892 129 763 892 19,488 5,513 25,001 19,488 5,513 25,001 The key assumptions for the value in use calculations are those regarding the discount rates and expected changes to operating results and cash flows during the period of five years from the statement of position dates. Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks in relation to the cash generating unit (“CGU”). In the current year a rate of 9.9% (2017: 9.3%) was used. The Directors believe that the risk profiles of the divisions are broadly similar given their similar operational and geographic natures. Changes in operating results and cash flows including the sales of franchises and the level of sales of the franchisees, are based on past results and expectations of future performance. The Group prepares cash flow forecasts for the next two to five years derived from the most recent budgets and long-term business plans which have been approved by the Board of Directors. The key assumptions used for estimating cash flow projections are those relating to revenue growth and operating margin. A 2% perpetual growth rate has been assumed when extrapolating cash flow projections beyond the five-year period used in the long-term business plans. Based on the calculations prepared the recoverable amount for all CGUs exceed their carrying amount. The recoverable amounts are not considered to be sensitive to reasonably possible changes in the discount rate. The recoverable amounts for ChipsAway and Barking Mad are not considered to be sensitive to reasonably possible changes in the growth rates. The recoverable amount for Metro Rod is more sensitive to movements in the growth assumptions within the forecasts, but the Directors do not believe that there is currently a reasonably possible change of key assumptions that would cause the units carrying amount to exceed its recoverable amount.