That shows intangible assets
decreasing by £65m (or about 2%) between 30/04/2019 and 30/04/2020, so don't expect anything major about them in this year's results or annual report. The big increases were in the previous two years, from 30/04/2017 to 30/04/2018 and from 30/04/2018 to 30/04/2019. I've taken a quick look at the relevant annual reports and found the following:
30/04/2017 to 30/04/2018: The increase in intangible assets is mainly due to acquisitions of £638m of goodwill and £297m "customer related" intangible assets (note 10 of the 2018 annual report). The goodwill is £581m related to the following acquisition:
"
On 29 June 2017, the Group entered into a conditional agreement to acquire an 80% interest in Indevco Management Resources Inc. (IMRI), the owner of Interstate Resources Inc. (Interstate Resources), from Merpas Co. Sàrl. (‘Merpas’), which completed on 25 August 2017.
Interstate Resources is an integrated packaging and paper producer based on the East Coast of the USA. It operates from 19 production sites and has approximately 1,500 employees. ..."
and £53m related to the following acquisition:
"
On 18 October 2017, the Group announced it had entered into an agreement to acquire EcoPack and EcoPaper, (collectively “the Business”) for
an enterprise value of c. €208 million, which completed on 6 March 2018.
The Business is a leading integrated packaging and paper group in Romania; family owned for many years. ..."
plus some other small ones that aren't reported in detail and presumably produced £4m goodwill in total (note 30). Not much is said directly about the "customer related" intangible assets, just a description of them in note 1 as "
Customer relationships, acquired as part of a business combination, are capitalised separately from goodwill and are carried at cost less accumulated amortisation and impairment.". Indirectly, though, they seem to be the £258m and £39m of "Intangible assets" listed in note 30 for the above two acquisitions. I think I would treat them as pretty much equivalent to goodwill, and so to regard the increased intangible assets at 30/04/2018 as mainly due to £839m and £92m of 'goodwill & similar' from the acquisitions of the Interstate Resources stake and EcoPack/EcoPaper respectively.
30/04/2018 to 30/04/2019: The increase in intangible assets is mainly due to acquisitions of £809m of goodwill and £494m "customer related" intangible assets (note 10 of the 2019 annual report). This time, there is one acquisition reported in detail, of (again in note 30):
"
On 22 January 2019, the Group completed its acquisition of a 100% interest in Papeles y Cartones de Europa, S.A. (Europac), a leading integrated packaging business in Iberia and France. ...and it accounts for £787m of goodwill and £488m of intangible assets (again presumably the 'customer related' ones), again with some other small ones making up the balances.
Goodwill is basically how much more was paid for acquisitions above the sum of the identifiable parts that can be valued, and the 'customer related' intangible assets seem to be some sort of attempt to place a value on customer relationships and so take them out of goodwill - which is something that I feel rather sceptical about and is the reason why I'm treating the 'customer related' intangible assets as more-or-less equivalent to goodwill. So the big rises in intangible assets were very largely due to DS Smith paying a lot more than the sum-of-the-identifiable-parts-that-can-be-valued valuations for Interstate Resources, EcoPack/EcoPaper and Europac. Paying more than such valuations for acquisitions is normal and does not necessarily indicate anything wrong, so don't treat those big rises as worrying in themselves. But it is possible to overpay for acquisitions, so do treat them as an indication that you might want to take a look at how good those businesses' contributions to DS Smith's overall position are, relative to what was paid for them. Or much more briefly, are Interstate Resources, EcoPack/EcoPaper and Europac pulling their weights, those weights being measured by what was paid for them?
Gengulphus