11 Goodwill

Goodwill is not amortized and is therefore recognized at cost less any impairment losses. The allocation of existing goodwill to cash-generating units or groups of cash-generating units (CGUs) is carried out in accordance with IAS 36.80. Accordingly, the relevant goodwill is allocated within the Group independently of other individual assets and liabilities; rather, it is allocated to the smallest group of cash-generating units which is expected to benefit from the synergy effects of the business combination.

An annual impairment test is required for goodwill. Goodwill is monitored at Carl Zeiss Meditec for internal management purposes at the level of the SBUs. The impairment test is therefore performed at SBU level and thus in accordance with IAS 36.80 for a group of CGUs.

An impairment exists when the carrying amount of the group of cash-generating units exceeds the recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use – determined for the group of cash-generating units in each case. An impairment loss would be recognized in the income statement immediately.

The carrying amount of a group of cash-generating units includes all assets that stimulate the flow of cash, i.e., that contribute to the creation of a salable service. This means that all non-operating items and interest-bearing borrowings are excluded from the calculation.

In assessing value in use, the estimated future cash flows are discounted to their present value using an after-tax risk-adjusted discount rate based on the discounted cash flow method. The discount rates are calculated using the parameters risk-free base interest rate, risk premium (market risk premium, country risk and beta factor), borrowing costs and tax effect, and reflect the capital structure of the peer group of the cash-generating unit. The pre-tax discount rate applied for cash flow forecasts is around 14% (prior year: around 13%).

The detailed planning period on which the impairment tests are based was extended from three to five years in the current fiscal year and thus brought in line with the characteristics of the medical technology business. The extension supports the derivation of sustainable cash flows, as it enables more accurate depictions of acquisitions or business models with an extended observation horizon. The planning is based on the financial plans approved by the Company management and the management’s forecasts for revenue, costs and earnings. These are determined based on historical values, budgets for the following year and the future strategic orientation of the strategic business unit (medium-term planning). In addition, external information sources, such as market studies and the results of market surveys and publications are used in order to take macroeconomic trends into account to a reasonable extent. The cash flow projections resulting from the management’s financial forecasts, to determine the value in use, do not contain any cash flows from future restructuring measures or enhancements or improvements to increase earnings power. In order to determine the future development of working capital, specific ranges are currently applied for each SBU. At the same time, the earnings for the respective planning year are adjusted for the expected depreciation and amortization, and corrected for any asset additions, for the purpose of calculating free cash flows – insofar as the investments for this had already begun at the time of the impairment test.

For the following fiscal years (perpetuity), the cash flows of the fifth detailed planning year are rolled forward taking into account appropriate growth. A cash flow growth rate of 1.5% is applied for the “Ophthalmology” (OPT) SBU and 1.0% for the “Microsurgery” (MCS) SBU (prior year: 1.0% for the OPT SBU and 1.0% for the MCS SBU).

At the time of publication of the Annual Report, the management of the Carl Zeiss Meditec Group continues to expect a difficult global macroeconomic environment in the coming fiscal year and does not anticipate a rapid recovery in the investment climate for devices or significant pressure on consumer spending for elective procedures – although the underlying long-term development trends for the market remain fundamentally positive. However, in the Company’s assessment, the most pronounced uncertainty factors at present are the trade conflicts between the US, China and the European Union, other geopolitical conflicts, increasing regulatory uncertainty and the associated currency fluctuations. More details can be found in the risk report within the management report.

A crucial advantage for even greater stability of our overall business is a higher proportion of revenue with case-number-dependent products and services, since there is generally less fluctuation in these areas than in the capital goods business, for example. A share of around 50% was achieved in fiscal year 2024/25. The significant increase in the 2024/25 fiscal year was due in part to the first full year consolidation of DORC, whose revenue mainly stems from consumables. Further growth was also achieved, particularly in multifocal intraocular lenses. In the medium term, a further increase in the proportion of recurring revenue is expected.

The above-mentioned uncertainty factors will require additional organizational measures as the result of our global presence and value chain. These measures could have negative, non-recurring effects. These could relate to the Company’s organizational structure and production sites. In addition, negative, non-recurring effects cannot be ruled out as a result of the ongoing reprioritization of development projects. From today’s perspective, the Company considers non-recurring effects in the low to mid double-digit million euro range in fiscal year 2025/26 to be conceivable. These effects are not yet included in the forecast for EBIT and EBITA.

Excluding the possible non-recurring effects mentioned above, and based on the exchange rates at the beginning of the 2025/26 fiscal year, the Carl Zeiss Meditec Group expects revenue to grow to around €2.3b in fiscal year 2025/26. EBIT and EBITA are likely to see further increases. The EBIT and EBITA margin in fiscal year 2025/26 should benefit overall from an improvement in the product mix due to increasing recurring revenue, particularly from the refractive laser business and the DORC portfolio within ophthalmology, as well as growth in microsurgery. The EBIT margin is expected to reach around 11.0 – 11.5% and the EBITA margin around 12.5% (fiscal year 2024/25: EBIT €223.3m, EBIT margin 10.0% and EBITA €257.7m, EBITA margin 11.6%).

The aim is to gradually increase the EBITA margin in subsequent years. In the long term, the Company expects to return to an EBITA margin of around 16 – 20% (2024/25: 11.6%). This will be supported in part by the increasing share of recurring revenue, as well as by cost discipline as growth momentum picks up again.

Moderate growth is expected in the “Ophthalmology” strategic business unit (SBU) in the 2025/26 fiscal year. However, the ongoing restrictive investment climate in the equipment business and in elective procedures, which is dependent on the general consumer climate, is likely to have a slowing effect. EBIT and EBITA are expected to remain at least stable in the 2025/26 fiscal year. The EBIT and EBITA margins are expected to decrease slightly or remain stable.

In the “Microsurgery” strategic business unit, the Company expects further growth in revenue and an improved product mix for the 2025/26 fiscal year, particularly from the product cycle of the new KINEVO^® 900 S neurosurgical visualization system. EBIT and EBITA should increase considerably in fiscal year 2025/26 compared to the prior year. The EBIT and EBITA margins will increase in equal measure.

The Carl Zeiss Meditec Group completed its annual scheduled impairment testing of goodwill on 30 June 2025. This testing did not indicate any need for impairment based on the values in use. Nor did any significant events arise up until the end of the reporting period that could lead to a change in this assessment as of the end of June.

The sensitivity analyses for the individual impairment tests carried out by the Company for the two SBUs Microsurgery and Ophthalmology relate to the changes in the valuation parameters capitalization interest rate, long-term growth rate and future cash flows (EBIT expectation) deemed possible by the management. An increase in the capitalization interest rate after taxes by 1 percentage point and a reduction in the long-term growth rate for the perpetuity period by 0.5 percentage points, as well as a decrease of 10% in the EBIT or EBIT margin in the last detailed planning year were assumed for these analyses. None of these sensitivity analyses lead to an individual impairment requirement.

The goodwill of the two SBUs developed as follows:

The change in goodwill in 2024/25 relates exclusively to translation differences, which are mainly attributable to exchange rate effects on goodwill in USD. They also include the effects of the inflation adjustment of the carrying amounts of goodwill in TRY.