2006 acquisitions

The Group made a number of acquisitions in 2006, which are shown in aggregate below:

During the year deferred consideration of £3.5m was paid in respect of acquisitions made in prior years, of which £3.5m had been provided; there was no impact on goodwill.

Deferred consideration which is expected to be paid has been accrued in respect of acquisitions made in the current and prior years amounting to £9.1m. The impact of this is to increase goodwill by the same amount.

As required by IAS 12 deferred taxation is calculated on intangible assets recognised as a result of an acquisition, the impact of this was to increase goodwill in 2006 by £2.6m and to create a deferred tax liability of the same amount.

As a result of the above, total goodwill of £39.3m was recognised in the year.

Acquisitions in the year included Sinclair Henderson group of companies, Ruddle Wilkinson Limited, Synaptics Services Limited, Webline Limited, Stirling Trustees Limited and Two Ten Communications Limited.

The performance of these acquisitions post their inclusion in the Group cannot be ascertained as they have been fully integrated within existing offerings.

Within goodwill are certain intangibles that were not separable from the acquirees and could not be measured reliably. These items include customer loyalty and the assembled workforce.

In February 2007 the Group acquired the entire share capital of Harry Weeks Travel & Leisure Group Limited for a consideration of £21m, with a further £12m payable over the next four years subject to the business achieving certain performance targets.

2005 acquisitions

The Group made a number of acquisitions in 2005 of which only one, the acquisition of the BDML group of companies (BDML), is considered material and is thus disclosed separately, the remainder are shown in aggregate. The book and fair values of the assets acquired are disclosed in the tables below:

BDML, includes BDML Connect Limited, an insurance intermediary and agent, that offers instalment debt facilities to its insurance customers and a specialist in pet insurance and policy administration.

The Group acquired 100% of the ordinary share capital of BDML on 25 July 2005. From the date of acquisition to the comparative year end BDML contributed £1.1m to the net profit after tax of the Group. Had the combination taken place at the beginning of 2005, the profit after tax of the Group would have been £107.9m and the revenue from continuing operations would have been £1,443.7m in the comparative year.

Included within goodwill on acquisition were certain intangibles that were not separable from the acquiree and could not be measured. These included customer loyalty and the assembled workforce.

The acquisition of BDML included 'insurance debtors subject to a securitisation agreement'. The purpose of this arrangement is to securitise customer receivables, derived through the provision of instalment credit facilities to insurance customers of the company. The company sells said receivables, with no immediate effect on the income statement, for cash to a third party (Gresham in this case). Gresham takes on the rights and responsibilities of these receivables such that the terms of this agreement dictate that Gresham has no recourse to BDML beyond 14% of the total receivable securitised.

As required by IAS 12 deferred taxation is calculated on intangible assets recognised as a result of an acquisition, the impact of this was to increase goodwill in 2005 by £9.2m and to create a deferred tax liability of the same amount.

The other acquisitions in 2005 included Buchanan Consulting Engineers Limited, BMI Health Services Limited, Channel House Financial Services Group Limited, FPS Group of Companies Limited, Lonsdale Travel Limited, Quay Software Solutions Limited, Randall Lyons Limited, Micromedia Limited, MHA Pensions Limited and Norman + Dawbarn. The companies acquired provide a range of property, health, trust, pension, corporate travel and software services.

On 8 November 2005, 0.1 million ordinary 2p shares with an aggregate nominal value of £1,300 were issued at £3.89 each pursuant to the acquisition of a subsidiary undertaking, Lonsdale Travel Limited.

The performance of these acquisitions post their inclusion in the Group cannot be ascertained as they have been fully integrated within existing offerings.

Within goodwill are certain intangibles that were not separable from the acquirees and could not be measured reliably. These items include customer loyalty and the assembled workforce.

Included in the above table is further consideration paid in cash in 2005 with regard to the acquisition of the Lincoln Life and Pensions business in a previous year of £13.8m against which the Group had provided for accrued deferred consideration payable of £6.6m. There were also further payments on previous acquisitions. The impact of these further payments was to increase goodwill in 2005 by £9.4m.