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RNS

Full Year Results

Released 07:00 30-Nov-2017

RNS Number : 9200X
Daily Mail & General Trust PLC
30 November 2017
 



 

30 November 2017


Daily Mail and General Trust plc ('DMGT')

Group results for the year ended 30 September 2017

 

DMGT executes on its strategy and delivers resilient underlying performance

 

·     Group adjusted revenue up underlying# 1% to £1,660 million and adjusted operating profit down underlying 2% to £198 million

·     Adjusted earnings per share down 1%, dividend per share up 3% to 22.7 pence

·     Good progress made against DMGT's three strategic priorities in 2017

·     New Group strategy and vision with Performance Improvement Programme established

 


Adjusted Results*

(from continuing and discontinued operations)

Statutory Results^


2017

2016

 

Reported

Change~

Underlying#

Change~

2017

2016

 

Revenue

£1,660m

£1,917m

-13%

+1%

£1,564m

£1,514m

Operating profit/(loss)

£198m

£277m

-28%

-2%

£(129)m

£91m

Profit/(loss) before tax

£226m

£260m

-13%


£(112)m

£202m

Earnings per share

55.6p

56.0p

-1%


97.8p

57.8p

Dividend per share


22.7p

22.0p

# Underlying revenue and operating profit growth rates are on a like-for-like basis, at constant exchange rates, after adjusting for the timing of events, for acquisitions and for disposals, notably Euromoney which is excluded from the growth rates, as set out on pages 32 and 33.

 

As in previous years, the IFRS figures ("Statutory results") have been adjusted* for exceptional items and the inclusion of discontinued operations ("Adjusted results").  Statutory profits were reduced by impairment charges and statutory earnings per share also benefited from the inclusion of the gain on the Euromoney transaction.

 

In December 2016, DMGT reduced its stake in Euromoney from c.67% to c.49%. To enable a like-for-like comparison, 2016 pro forma results ("Pro Forma results") have been presented as though DMGT owned a c.67% stake in Euromoney during the first quarter of the year and a c.49% stake during the remaining nine months, consistent with the actual holding during Full Year 2017.  Except where stated otherwise, commentary throughout this report compares Full Year 2017 adjusted results with the Full Year 2016 pro forma results.

 


Adjusted Results*

(from continuing and discontinued operations)


2017

2016

(Pro Forma)

Change~

Underlying#

Change~

Revenue

£1,660m

£1,604m

+3%

+1%

Operating profit

£198m

£195m

+2%

-2%

Profit before tax

£226m

£217m

+4%


Earnings per share

55.6p

52.1p

+7%


 

Full Year Financial Highlights:

 

·     DMGT statutory and pro forma revenue up 3%, underlying# revenue up 1%; adjusted operating profit down underlying 2%

 

Consumer: encouraging performance from dmg media; revenue up underlying 1%, adjusted profit up underlying 10%, with MailOnline moving into operating profit during the final quarter

 

B2B: revenue up underlying 2% and adjusted profit down underlying 15%, reflecting RMS(one) amortisation, planned investment at Xceligent and challenging trading at Genscape

 

·     Adjusted profit before tax* (PBT) of £226 million, up 4% on a pro forma basis

 

·     Adjusted earnings per share* (EPS) of 55.6p, up 7% on a pro forma basis; full year dividend increased by 3% to 22.7p.

 

·     Impairment charges of £206 million taken against Genscape, Xceligent and SiteCompli

 

·     Statutory loss before tax of £(112) million, including impairment charges; statutory EPS of 97.8p, up 69%, including £509 million profit on Euromoney transaction

 

Progress against strategic priorities:

 

·     Improving operational execution: simplification of management structure has already led to faster decision making

 

·     Increased portfolio focus: reduction of stake in Euromoney from c.67% to c.49%; disposal of Hobsons' Admissions and Solutions businesses and Elite Daily; disposal of EDR in progress

 

·     Enhancing financial flexibility: net debt reduced by £214 million to £464 million; net debt:EBITDA ratio of 1.4; comfortably within preferred range

 

Paul Zwillenberg, Chief Executive, commented:

"We are encouraged that DMGT has delivered a resilient underlying performance during the year and made good progress against our strategic priorities.

 

dmg media produced another year of outperformance.  The underlying profit growth was particularly encouraging as MailOnline continued to grow its revenue strongly, moving into operating profit during the final quarter, and launched new initiatives, including DailyMailTV in the US.

 

Our B2B companies delivered robust revenues despite challenging markets.  RMS(one) Risk Modeler has been released, innovative data-driven products continue to be launched and Hobsons is now entirely focused on its student-success business.  As a long-term investor, we continued to invest through the cycle, and this contributed to a decline in B2B profitability, notably within dmg information and RMS.

 

We have made good progress against our three key priorities of improving operational execution, increasing portfolio focus and enhancing financial flexibility.  We have delayered management, reduced overheads, enhanced our talent and refocused each business's priorities.  We have sharpened our focus on our strongest products as a result of the Euromoney transaction, restructuring of Hobsons, the sale of Elite Daily and the planned disposal of EDR.  Our financial flexibility has improved with net debt to EBITDA now at 1.4 times, the lowest level in over 20 years.

 

We have now completed the strategic review of the Group.  We have defined a new strategic vision, 'Intelligent Insights. Consumer Connections', which will harness DMGT's competitive advantages across B2B and Consumer Media to create value enhancing opportunities.  We are also rolling out a company-wide Performance Improvement Programme and these two initiatives will underpin our progress and better position us for the future. 

                                                                                         

As we move into FY 2018, we proceed with confidence towards my vision for DMGT's future.  The Board is confident that the new strategy and strong balance sheet will, over the medium term, generate consistent earnings growth that will underpin DMGT's long-standing commitment to deliver sustainable annual real dividend growth."

 

 

For further information

 

For analyst and institutional enquiries:

 

 

Tim Collier, Chief Financial Officer

+44 20 3615 2902

 

Adam Webster, Head of Management Information and Investor Relations

+44 20 3615 2903

For media enquiries:

Paul Durman / Doug Campbell, Teneo Blue Rubicon

 

+44 20 7260 2700

 

Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 30 November 2017, at The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.  There will also be a live webcast available at http://www.dmgt.com/webcastfy17.

 

Financial reporting calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 25 January 2018.  There will be an Investor Briefing held on 1 February 2018.  Please note that, unlike in previous years, DMGT does not intend to provide a trading update between the third quarter trading update, scheduled for 26 July 2018, and the announcement of Full Year results on 29 November 2018.

 

About DMGT

DMGT manages a diverse, multinational portfolio of companies, with total revenues of around £1.5 bn, that provide businesses and consumers with compelling information, analysis, insight, events, news and entertainment.  DMGT is also a founding investor and the largest shareholder of Euromoney Institutional Investor PLC and ZPG Plc.

 

 

 

Notes

* Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results.  Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges and fair value adjustments.  For reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 27 to 30.  Adjusted results include results from discontinued operations, specifically the Euromoney subsidiary.  Euromoney ceased to be a subsidiary on 29 December 2016 and has subsequently been included in continuing operations, as a c.49% owned associate, within statutory and adjusted results. 

 

~ Percentages are calculated on actual numbers to one decimal place.

 

# Underlying revenue or profit* is revenue or profit on a like-for-like basis, see pages 32 and 33.  Underlying results are adjusted for constant exchange rates, the exclusion of disposals and closures and for the inclusion of the year-on-year organic growth from acquisitions.  For events, the comparisons are between events held in the year and the same events held the previous time.  For dmg media, underlying growth rates exclude the benefit to Full Year 2016 results of an additional 53rd week and underlying revenues exclude low margin newsprint resale activities.

 

† Pro Forma Full Year 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first quarter and as a c.49% owned associate during the remaining nine months, consistent with the ownership profile during Full Year 2017.  See page 26.

 

^ These statutory highlights are for continuing operations only (excluding the discontinued operations, Euromoney), other than basic earnings per share which is the total statutory figure including discontinued operations.  The Full Year 2016 statutory results have been revised to exclude discontinued operations.

 

 

Daily Mail and General Trust plc

Northcliffe House, 2 Derry Street,

London W8 5TT

 

www.dmgt.co.uk

Registered in England and Wales No. 184594



 

Contents

Page



Management Report

5 - 46



Consolidated Income Statement

47



Consolidated Statement of Comprehensive Income

48



Consolidated Statement of Changes in Equity

49



Consolidated Statement of Financial Position

50 - 51



Consolidated Cash Flow Statement

52



Notes to the Condensed Consolidated Financial Statements

53 - 78

 

 



Management Report

This management report, on the audited results for the year ended 30 September 2017, focuses principally on the adjusted results to give a more comparable indication of the Group's business performance.  All year-on-year comparisons are on a like-for-like basis. 

 

In addition, a pro forma version of the Full Year 2016 adjusted results has been prepared to treat Euromoney as a c.67% owned subsidiary during the first quarter of Full Year 2016 and as a c.49% owned associate during the remaining nine months, consistent with the ownership profile during Full Year 2017.  A reconciliation between the reported and the pro forma figures is set out on page 26.

 

An explanation of restructuring and impairment charges and other items included in the statutory results is set out after the divisional performance review and in the segmental note (Note 4).  Reconciliations between the statutory and adjusted results for both FY 2017 and FY 2016, as well as supporting explanations, are set out on pages 27 to 30.  The adjusted results are summarised below, with the pro forma Full Year 2016 comparatives:

 

Adjusted results*

(from continuing and discontinued operations)

2017

£m

2016

£m

(Pro Forma)

Change~

Revenue

1,660

1,604

+3%





Operating profit

198

195

+2%

Income from joint ventures and associates

69

61

+14%

Net finance costs

(42)

(40)

+5%

Profit before tax

226

217

+4%





Tax charge

(29)

(30)

-4%

Minority interest

(1)

(2)

-67%

Group profit

196

184

+7%





Adjusted earnings per share

55.6p

52.1p

+7%





Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

 

Notes

* Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results.  Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges and fair value adjustments.  For reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 27 to 30.  Adjusted results include results from discontinued operations, specifically the Euromoney subsidiary.  Euromoney ceased to be a subsidiary on 29 December 2016 and has subsequently been included in continuing operations, as a c.49% owned associate, within statutory and adjusted results. 

 

# Underlying revenue or profit* is revenue or profit on a like-for-like basis, see pages 32 and 33.  Underlying results are adjusted for constant exchange rates, the exclusion of disposals and closures and for the inclusion of the year-on-year organic growth from acquisitions.  For events, the comparisons are between events held in the year and the same events held the previous time.  For dmg media, underlying growth rates exclude the benefit to FY 2016 results of an additional 53rd week and underlying revenues exclude low margin newsprint resale activities.

 

† Pro Forma Full Year 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first quarter and as a c.49% owned associate during the remaining nine months, consistent with the ownership profile during Full Year 2017.  See page 26.

 

~ Percentages are calculated on actual numbers to one decimal place.

 

The average £: US$ exchange rate for the year was £1:$1.27 (2016 £1:$1.42).  The rate at the year end was $1.34 (2016: $1.30).

 

All references to profit or margin in this management report are to adjusted profit or margin, except where reference is made to statutory profit.

 



Summary

Group performance: DMGT has delivered a resilient performance in challenging market conditions.  Group adjusted* revenue for the year was £1,660 million, growth of 3% on a pro forma basis.  Statutory revenue, excluding Euromoney, also grew 3%, reflecting the benefit of the stronger US dollar relative to sterling.  On an underlying basis, adjusted revenue grew 1% for the Full Year, consistent with the growth during the first half.  Good underlying growth was delivered in digital advertising and subscriptions and there was continued growth from events, whilst circulation revenues remained stable.  The growth was partly offset by a decline in transaction volume related revenues and reduced print advertising.

 

The revenue performance for our B2B businesses and our consumer business, dmg media, on a reported and underlying basis is summarised below.

 

Adjusted* revenue

Year-on-year change

Reported

Underlying#

Pro Forma

H1

H2

Year

H1¹

H2

Year

H1

H2

Year

Group revenue

-6%

-20%

-13%

+1%

+2%

+1%

+5%

+2%

+3%

B2B

-9%

-30%

-19%

+2%

+2%

+2%

+11%

+6%

+9%

RMS

+21%

+7%

+14%

+1%

+2%

+2%




dmg information

+13%

+1%

+7%

+1%

+2%

+2%




dmg events

-5%

+45%

+11%

+3%

+2%

+3%




Euromoney

-51%

-100%

-76%

n/a

n/a

n/a

+6%

n/a

+6%

dmg media

-2%

-4%

-3%

+0%

+1%

+1%




¹ Underlying growth rates for H1 have been restated to exclude the disposed of Hobsons Admissions and Elite Daily businesses, consistent with the H2 and Full Year growth rates.

 

Adjusted operating profit* of £198 million grew 2% on a pro forma basis.  The benefit from the stronger US dollar and reduced Corporate costs more than offset the impact of an additional £26 million of expensed costs as a result of ceasing to capitalise and starting to amortise RMS(one).  Underlying operating profit was down 2%, with the reduction being primarily due to the increase in RMS(one) related costs, increased investment in dmg information's Xceligent Property Information business, particularly during the first half of the year, and reduced profits from Genscape, where the solar energy business had a particularly challenging year.  The adjusted operating margin was 12%, consistent with the pro forma margin in the prior year. 

 

Excluding Corporate costs, the B2B businesses generated 66% of the adjusted operating profit in the year, with dmg media contributing the remainder.  More than half of the Group's adjusted operating profit was generated from outside the UK, with over a third coming from North America.

 

Adjusted profit before tax* was £226 million, 4% growth on a pro forma basis.  The share of adjusted operating profits from joint ventures and associates was £69 million, an increase of 14% on a pro forma basis, with good growth from both ZPG Plc and Euromoney. Finance charges, including DMGT's share of associates' interest costs, were £42 million, up 5% on the prior year on a pro forma basis, due to increased finance charges for associates and the adverse effect of the stronger US dollar.  The adjusted tax charge benefited from a reduced effective tax rate and was £29 million, down 4% on the prior year on a pro forma basis.  Adjusted Group profit after tax and minority interests* was £196 million, up 7% on a pro forma basis.  Adjusted earnings per share* of 55.6p declined 1%, although grew 7% on a pro forma basis. 

 

The full year dividend increased by 3% to 22.7p, in line with our dividend policy of delivering real dividend growth.  The Board's decision to recommend increasing the dividend reflects its confidence in DMGT's ability to deliver future long-term earnings growth.

 

The statutory loss before tax for the year was £112 million after £282 million of amortisation and impairment charges in respect of goodwill and intangible assets, £42 million of impairment charges in respect of plant and £50 million of exceptional costs, including £30 million of reorganisation related costs and a £7m share of joint ventures' and associates' exceptional charges.  The statutory loss before tax compared to a £202 million profit before tax in the prior year, which benefited from gains on disposals, notably Local World and Wowcher.  Statutory basic earnings per share were 97.8p, including the benefit of a £509 million gain on the Euromoney transaction, up 40.0p or 69% on the prior year.

 

The table below sets out the reconciliation from statutory profit before tax to adjusted profit before tax.  More detail and explanations are provided on pages 27 to 30.

 


2017

£m

2016

£m

Explanation

(as per pages 27 and 28)

Statutory (loss)/profit before tax

(112)

202


Discontinued operations

523

45

1

Exceptional operating costs

50

58

2

Impairment of plant

42

-

3

Intangible impairment and amortisation

282

107

4

Profit on sale of assets

(530)

(138)

5

Pension finance charge

5

5

6

Other adjustments

(33)

(19)

7

Adjusted profit before tax

226

260


Euromoney revision

-

(43)


Adjusted profit before tax (Pro Forma)

226

217


 

Net debt: decreased by £214 million during the year to £464 million, benefiting from disposal proceeds, notably the reduced stake in Euromoney.  At the year end, the Group's net debt comprised £424 million of bonds, £46 million of bank borrowings, £2 million of loan notes and derivatives and a cash balance of £7 million.  The Group's ratio of net debt to EBITDA was 1.4 at the year end, significantly below the Group's preferred upper limit of around 2.0 and the requirements of the Group's bank covenants.

 

Strategy

Strategy on track with good progress against three strategic priorities: as presented at the preliminary results on 1 December 2016, DMGT's three key strategic priorities in 2017 have been to improve operational execution, increase portfolio focus and enhance our financial flexibility. 

 

·     Improving operational execution: the management structure has been simplified, increasing our agility and enabling faster decision making.  The relationship between DMGT and individual businesses has changed from a light-touch approach to one with greater emphasis on performance management.  A culture of accountability is being established and the pace of operational change is being accelerated. 

 

·     Increasing portfolio focus: significant steps were taken during the year to increase the focus of DMGT's portfolio.  In December 2016, DMGT reduced its stake in Euromoney from c.67% to c.49%.

 

Following the restructure of Hobsons earlier in the year, its Admissions and Solutions businesses were disposed of in September 2017 and October 2017 respectively.  Hobsons will now focus on its core business lines that have the most attractive growth opportunities.

 

A process is currently under way to dispose of EDR, the US commercial real estate environmental information business.  The planned disposal will further increase the focus within the portfolio and strengthen DMGT's balance sheet, enhancing financial flexibility.

 

dmg media, DMGT's Consumer Media business, closed 7 Days, the Dubai based newspaper business, in December 2016 and disposed of Elite Daily, the online publishing business, in April 2017.  The sale has enabled dmg media to concentrate its digital resources on MailOnline, particularly in the US.  Following these changes dmg media is now comprised of the Mail and Metro businesses, further increasing the focus of the DMGT portfolio. 

 

·     Enhancing financial flexibility: DMGT's financial flexibility has improved significantly over the year, with net debt decreasing by £214 million during the year to £464 million including the benefit of disposal proceeds, notably from the reduced stake in Euromoney.  The net debt to EBITDA ratio is now 1.4 compared to 1.8 at year end 2016.

 

Strategic review complete: the completion of our comprehensive strategic review has identified clear roles for each of our businesses in the DMGT portfolio.  We have allocated out businesses into three specific areas which reflect their financial characteristics.  This segmentation will help frame our capital allocation decisions. 

·     Operating at scale: strong cash contributors which are operating at scale, an example being the Consumer Media print business. 

·     Focused growth: businesses which have the ability to deliver focused growth through targeted investment and are expected to develop into strong cash generators; examples include the Energy Information and digital Consumer Media businesses. 

·     Invest to grow: businesses and minority stake holdings in early-stage companies which will require incremental investment to grow into businesses of the future. 

 

Strategic vision: we have defined a new strategic vision for DMGT entitled 'Intelligent Insights. Consumer Connections'.  Due to the Group's capabilities and expertise across B2B and Consumer Media, DMGT is especially well placed to take advantage of two important emerging trends spanning these sectors.  Firstly, in B2B sectors, customers increasingly expect to experience the same quality of user interface, the speed of delivery and multi-device accessibility as they do with consumer products.  Secondly, the most successful consumer products are built on robust use of data and analytics to gain insight.  The agility, speed to market, user engagement and audience understanding demonstrated by MailOnline can be applied to open up new opportunities across our B2B businesses.  The advanced analytics and resilient and secure technology required in our B2B sectors can be applied to Consumer Media digital businesses.  DMGT's strategy will be focused on seeking opportunities, either through organic initiatives or acquisition, which can exploit the emerging trends across the B2B and Consumer Media sectors. 

 

Performance Improvement Programme: we have introduced the new Performance Improvement Programme, which will build on the progress made against DMGT's three key strategic priorities.  The programme will lead to further improvements to the Group's performance and execution, through initiatives in respect of product, technology and people.  The increasing focus of the portfolio will be driven by the Group's strengths, notably where the convergence of B2B and Consumer Media gives DMGT a competitive advantage.  Similarly, where DMGT is not the best owner, further divestments will be made.  DMGT will continue to ensure it has the financial flexibility to pursue opportunities as they arise, notably to build scale in those sectors that can deliver focused growth.

 

2018 - a year of transition: the coming year is expected to be one of transition as we execute against the Performance Improvement Programme.  The Group's short-term earnings will be adversely affected by recent disposals and challenging conditions in some of our sectors.  However, the Board is confident that in the medium term the strategy will result in DMGT being well-positioned to generate sustainable earnings growth with a strong balance sheet which will underpin DMGT's long-standing commitment to deliver real dividend growth.

 

Outlook - 2018

B2B: the financial performance will be adversely affected by the disposals that have taken place in the past year and the planned disposal of EDR.Excluding Euromoney, Hobsons' Admissions and Solutions businesses and EDR, the FY 2017 B2B revenues were £781 million and the adjusted operating margin was 13%.  In FY 2018, the B2B businesses are collectively expected to deliver underlying revenue growth in the low-single digits and the adjusted operating margin is expected to be in the mid-teens, as the flow-through of operational efficiencies is partly offset by continued investment to support our long-term growth.  At a business level, we are anticipating the following dynamics:

·     Insurance Risk: RMS will continue to expand the client base for the RMS(one) software platform and associated applications, laying the groundwork for revenue acceleration in FY 2019 and beyond.

·     Property Information: the European businesses are expected to continue to experience relatively subdued market conditions and the remaining US businesses to continue to deliver growth.

·     Education Technology (EdTech): following the disposal of Hobsons' Admissions and Solutions businesses, the remaining EdTech business is expected to benefit from increased focus and to continue to deliver growth.

·     Energy Information: Genscape is expected to continue to deliver growth across most of its sub-sectors, albeit the challenging market conditions are expected to persist.

·     Events and Exhibitions: despite challenges in some end markets, notably the energy sector and some Gulf Cooperation Council countries, and the expected reduction in revenues from Gastech, reflecting the change in location in 2018, dmg events is well positioned to continue to target underlying revenue growth.

 

Consumer Media: digital advertising revenues are expected to grow further, helping to offset anticipated circulation volume and print advertising declines, with advertising market conditions likely to remain volatile.  As a result, in FY 2018, the underlying rate of decline of dmg media's revenues is expected to be in the mid-single digits.  The operating margin is expected to be approximately 10% in FY 2018, compared to the 11% delivered in FY 2017, with the flow-through of lower revenues being partly offset by continued cost efficiencies within the newspapers and by MailOnline being profitable for the Full Year.

 

Corporate costs: are expected to be around £45 million in FY 2018, increasing as a result of strengthening central functions, particularly strategy, technology and talent, to better support, monitor and review businesses and to assess potential capital allocation decisions.

 

JVs and Associates: are expected to benefit from the inclusion of twelve months of Euromoney's results as an associate.  The share of adjusted operating profits from joint ventures and associates in FY 2018 is expected to be at least £75 million.

 

Net debt: the year end net debt:EBITDA ratio of 1.4 is significantly below our preferred upper limit of 2.0 and the Board remains confident in the overall outlook for the Group and its operating cash flows.  Net finance costs are expected to be around £40 million in FY 2018, broadly in line with FY 2017. 

 

Taxation: is expected to be affected by changes to UK legislation that will contribute towards increasing the effective tax rate to over 20% within the next three years, with FY 2018 expected to increase to nearer 18%.

 



Business Review

 

Business to Business (B2B)

 

Adjusted results*

(from continuing and discontinued operations)

2017

£m

2016

£m

(Pro Forma)

Change~

 

Underlying#

Change~

Revenue

976

899

+9%

+2%

Operating profit

152

160

-5%

-15%

Operating margin

16%

18%



These results are stated before the allocation of Group corporate costs.

† Pro Forma Full Year 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first quarter and as a c.49% owned associate during the remaining nine months, consistent with the ownership profile during Full Year 2017. 

 

B2B revenues totalled £976 million, up 9% on a pro forma basis, including the benefit of the stronger US dollar.  On an underlying basis, revenue grew 2%, with growth from each of RMS, dmg information and dmg events.  Adjusted operating profits, excluding any allocation of Group corporate costs, were £152 million, a reduction of 5% on a pro forma basis and an underlying decline of 15%, largely driven by RMS and, within dmg information, by Xceligent and Genscape.  The overall B2B operating margin declined to 16%, reflecting lower margins across each of the three B2B divisions.

 

Outlook: the B2B financial performance will be adversely affected by the disposals that have taken place in the past year and the planned disposal of EDR.Excluding Euromoney, Hobsons' Admissions and Solutions businesses and EDR, the FY 2017 B2B revenues were £781 million and the adjusted operating margin was 13%.  In FY 2018, the B2B businesses are collectively expected to deliver underlying revenue growth in the low-single digits and the adjusted operating margin is expected to be in the mid-teens, as the flow-through of operational efficiencies is partly offset by continued investment to support our long-term growth. 

 

 

Risk Management Solutions (RMS)

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

Revenue

233

205

+14%

+2%

Operating profit*

33

36

-9%

-25%

Operating margin*

14%

18%



These results are stated before the allocation of Group corporate costs.

 

RMS's revenues increased by 14% on a reported basis, primarily due to the benefit of the stronger US dollar, and by 2% on an underlying basis, despite continuing consolidation in the re-insurance industry.  As previously indicated, in August 2016, the capitalisation of RMS(one) development activities ceased and the amortisation of the RMS(one) asset started.  Consequently, adjusted operating profit decreased by 9%, including the benefit of the stronger US dollar, and by 25% on an underlying basis.  The operating margin was 14%, broadly in line with the low-teens guidance provided in December 2016.  Excluding the benefit of £13 million of RMS(one) capitalisation in the prior period, as well as depreciation and amortisation, the EBITDA margin was 24%, an improvement on the 17% in FY 2016.  The increase reflects the improving cash generation of the business.

 

RMS continues to be a market leader, innovating in the risk modelling market.  The business delivered an unprecedented level of modelling solutions during the year, with updates to the North American Earthquake and North American Hurricane models, and new models for South East Asia Earthquake, Taiwan Typhoon and South Korea Typhoon.  RMS continued to expand into new lines of risk, with the second release of its cyber models. 

 

A major milestone was achieved in April 2017, with the release of Risk Modeler, the second application to run on the RMS(one) risk management platform, and over a dozen clients are now using applications on the platform.  The increasing pace of digitalisation across the risk and insurance market, combined with the requirement for real-time risk assessment on one risk modelling evaluation platform that has integrated data analytics, is expected to create progressive demand for the RMS(one) platform.

 

Priorities in the year ahead: during FY 2018, RMS will be focusing on the continued successful development and delivery of its core and new models to clients and on managing the gradual migration of clients to the RMS(one) platform.  The model pipeline for 2018 covers a wide range of perils, including North America Flood, Central and European Storm, Indian Flood, Japanese Earthquake and Typhoon and North American Wild Fire.  Given the extensive acceptance testing required during the clients' adoption processes, the revenues from RMS(one) are expected to have a more significant impact on RMS's overall revenue growth rate and margin improvement in FY 2019 and beyond.

 

 

dmg information

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

Revenue

531

498

+7%

+2%

Operating profit*

69

77

-10%

-13%

Operating margin*

13%

15%



These results are stated before the allocation of Group corporate costs.

 

dmg information continued to grow during the year, with overall revenues up an underlying 2%.  The EdTech company, Hobsons, delivered further underlying growth due to the strength of its Naviance, Intersect and Starfish businesses.  The Energy Information business, Genscape, faced difficult market conditions, particularly in the solar sector, resulting in muted underlying revenue growth.  The Property Information businesses faced some challenging market headwinds, notably in the UK, although overall they delivered a stable underlying revenue performance.  Reported revenues benefited from the stronger US dollar and grew 7%.  Adjusted operating profit declined by 13% on an underlying basis, with all of the reduction being attributable to increased investment in Xceligent, the US Property Information business, and challenging conditions for Genscape.  The performance of these two businesses resulted in the operating margin declining to 13%, from 15% in the prior year.

 

During the year, DMGT undertook a management delayering and streamlining project.  The aim was to reduce complexity and move dmg information's operating companies closer to decision making made by the Group's central management team.  Consequently, dmg information no longer exists as a division and in FY 2018 the Property Information, EdTech and Energy Information businesses will be presented as part of the overall B2B portfolio.

 

Property Information

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

 

Revenue:





Property Information - European

183

183

+0%

-3%

Property Information - US

145

123

+18%

+5%

Total Revenue

328

307

+7%

+0%






Operating profit*

53

55

-4%

-9%

Operating margin*

16%

18%



These results are stated before the allocation of Group corporate costs.  Central dmg information costs are allocated to the businesses on a revenue basis.  Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

The Property Information portfolio delivered stable underlying revenues.  While there was continued good growth from most of the US businesses, the European businesses, Landmark and SearchFlow, were adversely affected by continued uncertainty in the UK residential market, where mortgage approvals were lower than the previous year.  In the UK legal property market, SearchFlow delivered a major upgrade of its ordering platform, while Landmark continued to deliver enhancements to its range of conveyancing searches.  Landmark has also made significant steps into the UK household insurance market with long-term agreements to provide its risk models to leading players in the industry.  Total revenues for the European Property Information businesses declined by an underlying 3%, although were in line with last year on a reported basis, including the benefit of acquisitions and the stronger Euro.  Landmark has continued to focus on operational efficiencies, delivering operating margin improvement despite lower revenues, and reducing its cost base as the business develops.

 

The five US-based Property Information businesses collectively delivered underlying revenue growth of 5%.  Xceligent and BuildFax, two early stage businesses, delivered double-digit growth, while Trepp and SiteCompli also continued to deliver underlying growth.  The revenues of EDR, the US commercial real estate environmental information business, are more closely related to transaction volumes and the company experienced a more challenging year, with an underlying decline in revenues.  EDR is pursuing growth opportunities in managed services, an area the market is expected to transition towards.  Service industries are not a preferred area of growth for DMGT and consequently a process is underway to dispose of EDR to a more appropriate owner.

 

Xceligent, which is a provider of fully researched US commercial property and listing information, increased its investment during the year, completing the build-out of the database for New York and starting the build-out for Chicago.  This resulted in adjusted operating profit, for the Property Information businesses as a whole, declining by an underlying 9% to £53 million.

 

Xceligent's revenue growth in New York has been slower than previously expected and, given the significant further investment and time required to achieve full national coverage, a decision has been taken to reduce the carrying value of the business to zero, resulting in an impairment charge of £42 million.  Similarly, SiteCompli's planned expansion into the national retail market has proved more challenging than previously expected and an impairment charge of £24 million has been taken in respect of its carrying value.  The impairment charges have been excluded from the adjusted results.  Xceligent now has a new management team in place and a strategic review of the business is in progress, whilst the SiteCompli management team are focusing on growth opportunities.

 

Priorities in the year ahead: the existing market dynamics are expected to continue, with relatively subdued conditions.  In the US, there will be continued product development at Trepp, to enhance its market leading position, and continued strong growth is expected from the early-stage businesses.  The European Property Information businesses' product development and launch programme will continue and will help to generate future growth.

 

EdTech and Energy Information

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

 

Revenue:





EdTech - Hobsons

114

115

+0%

+9%

Energy Information - Genscape

88

76

+16%

+1%

Total Revenue

203

192

+6%

+4%






Operating profit*

16

21

-24%

-41%

Operating margin*

8%

11%



These results are stated before the allocation of Group corporate costs.  Central dmg information costs are allocated to the businesses on a revenue basis.  Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers. 

 

In the EdTech sector, underlying revenue growth, which excludes Admissions, was 9%.  Growth was driven by the K-12 career and college planning platform, Naviance; the college matching business, Intersect; and the higher education student retention product, Starfish.  On a reported basis, Hobsons' revenue of £114 million was in line with last year, reflecting the benefit of the stronger US dollar and the adverse impact of the September 2016 disposal of its US-based enrolment management services (EMS) business.  Reported revenues were also adversely affected by weaker trading at the Admissions business, which supplies software to higher education institutions and was disposed of in September 2017.  Hobsons delivered underlying profit growth in the year, reflecting strong management of the cost base, partly offset by continued investment in product development.

Following a strategic review of Hobsons, the business underwent a restructuring programme.  The sale of the Admissions business was followed by the disposal in October 2017 of the Solutions business, which provided international enrolment management services to higher education institutions, primarily in Australia and the UK. 

The remaining EdTech business is now comprised of the faster-growing Naviance, Intersect and Starfish businesses that delivered £69 million of revenue in the year.  Operationally, Hobsons made good progress strengthening these core products and services.  The first phase of Naviance platform modernisation was launched, with the product successfully transitioned to the cloud during the year.  A new, centralised platform for Intersect was built and the integration of Starfish and PAR Framework (acquired in FY 2016) continued, bringing together Starfish's technology with PAR's predictive analytics.

In the Energy Information sector, Genscape faced some challenging market conditions due to the sustained low oil price and low price volatility environment and, most notably, a change in distribution channels for the US residential solar market.  Notwithstanding this, the core businesses, operating in the Power, Oil and Gas sectors, continued to grow, reflecting good ongoing product development and client expansion. This was, however, largely offset by the revenue decline from the solar business, Locus Energy.  Underlying revenue growth for Genscape as a whole was 1%.  Genscape is committed to bringing transparency to global energy markets and is executing on that strategy by building global product offerings.  Profitability was adversely affected by increased amortisation costs, associated with previous product development, and by the continued investment in enhancing existing services, as well as by the weaker performance at Locus Energy. 

 

Adjusted operating profit across EdTech and Energy Information was £16 million, 24% lower than the prior year, including the benefit of the stronger US dollar, and an underlying decline of 41%.All of the reduction was attributable to the Energy Information business.  Similarly, the operating margin across both businesses was 8% compared to 11% in the prior year, with the EdTech business maintaining its margin but declining profitability in Energy Information.

 

Given the continued challenges facing the Energy Information sector, notably solar, and the likely time required before the business becomes a major cash generator, the carrying value of the Genscape business has been reduced to £141 million, resulting in an impairment charge of £140 million.  The impairment charge has been excluded from the adjusted results.  A new management team is in place and is focusing on prioritising growth opportunities.

 

Priorities in the year ahead: following the disposal of Hobsons' Admissions and Solutions businesses, FY 2018 will be another year of transition for the EdTech business as it continues to refocus and strengthen its high value, high growth core products and services.  Operational improvements are expected to flow through as the cost base is streamlined and an agile methodology is adopted across core internal processes.  In the Energy Information sector, Genscape is also expected to continue to deliver growth across most of its sub-sectors, albeit the challenging market conditions are expected to continue and there will be a keen focus on repositioning Locus Energy's product in the distribution channel.  Genscape will continue to drive operational improvements, particularly around pricing and an enhanced go-to-market strategy. 

 

 

dmg events

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

Revenue

117

105

+11%

+3%

Operating profit*

31

29

+6%

-7%

Operating margin*

26%

28%



These results are stated before the allocation of Group corporate costs.

 

In the Events and Exhibitions sector, dmg events produced a resilient performance despite the continued weakness in the oil price, which was particularly challenging for Canadian energy events.  Revenues increased by 3% on an underlying basis and by 11% on a reported basis.  Gastech, one of the business's three large events, occurred in Tokyo in April 2017 and delivered double-digit revenue growth, benefiting from Japan being the world's largest LNG market, whereas the prior year event was held in Singapore.  The two other large events, Big 5 Dubai and ADIPEC, were held in November 2016 and collectively delivered low-single digit underlying revenue growth.  Exhibitor and visitor levels also grew across all three of the large events. 

 

The business continued to geo-clone shows by launching into new locations, including two South African events, The Hotel Show Africa and Oil & Gas Africa, as well as East Africa Big 5 and Saudi Stone.  There were also a number of new spin-off events launched into adjacencies from the existing construction, energy and hospitality sectors.

 

The operating profit margin reduced slightly to 26%, reflecting investment in launching new events and in marketing to grow attendance levels to fuel future revenue growth.  Profitability was also adversely affected by the weaker performance of Canadian energy events, although action was taken to address the cost base in the region.  As a result, operating profits increased 6%, although declined by 7% on an underlying basis.

 

Priorities in the year ahead

Despite challenges in some Events and Exhibitions end markets, notably the energy sector and some Gulf Cooperation Council countries, and the expected reduction in revenues from Gastech moving from Japan to Barcelona in 2018, dmg events is well positioned to continue to target underlying revenue growth. The five launches planned for 2018 in North Africa, the Middle East and South East Asia illustrate the continued strong commitment to organic growth.  Big 5 Dubai and ADIPEC, two of the three large events of the year, occurred in November 2017 and are expected to deliver modest growth.

 

 

Euromoney Institutional Investor

 

Adjusted results*

(from continuing and discontinued operations)

2017

£m

2016

£m

(Pro Forma)

Change~

Underlying#

Change~


Revenue

95

90

+6%

N/A

Operating profit

19

18

+6%

N/A

Operating margin

20%

20%



These results are stated before the allocation of Group corporate costs. The 2017 figures included in the table above are only for the three months that Euromoney was a subsidiary of DMGT.

† Pro Forma 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first quarter of 2016 and as a c.49% owned associate during the remaining nine months of the year, consistent with the ownership profile during Full Year 2017.

 

In December 2016, DMGT reduced its stake in Euromoney from c.67% to c.49%.  Consequently, since 29 December 2016, Euromoney has ceased to be a subsidiary of DMGT and is now being accounted for as an associate.  Since January 2017, DMGT's consolidated revenues and operating profits have not included Euromoney's results and DMGT has recognised its share of operating profits within joint ventures and associates.  DMGT's adjusted revenue and operating profit in the period therefore includes 100% of Euromoney's results for the three months to December 2016, as shown in the table above.  Revenues in the first quarter were £95 million, up 6% on the first quarter of the prior year, including the benefit of the stronger US dollar, and operating profit also grew 6%.  DMGT's share of Euromoney's results for the nine months to 30 September 2017 is included in joint ventures and associates. 

 

Euromoney reported its results for the Full Year 2017 on 22 November 2017.  Euromoney's performance is excluded from DMGT's underlying revenue and operating profit growth calculations.

 

 

Consumer Media

 

dmg media

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

Revenue:






Daily Mail / The Mail on Sunday

455

484

-6%

-4%


MailOnline

119

93

+28%

+20%


Mail Businesses

574

577

-0%

+0%


Metro

68

65

+4%

+7%


Newsprint and other continuing

36

43

-15%



Sub-total

678

685

-1%

+1%


Wowcher, Elite Daily and 7 Days

5

21

-75%



Total Revenue

683

706

-3%

+1%








Operating profit*:






Mail Businesses

Metro

71

11

69

15

+3%

-27%

+17%

-22%


Sub-total

82

84

-3%

+10%


Wowcher, Elite Daily and 7 Days

(5)

(7)




Total Operating profit

77

77

+0%

+10%








Operating margin*

11%

11%




These results are stated before the allocation of Group corporate costs.  Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

Summary

In the Consumer Media sector, dmg media's revenues grew by an underlying 1% to £683 million, with strong underlying digital advertising growth (+18%), a decline in print advertising and circulation revenues remaining stable on an underlying basis.  Reported revenues declined by 3%, including the impact of disposals and the absence of a 53rd week of newspaper revenues, which benefited the prior year.

The tough newspaper advertising market conditions eased a little in the year, helping to support the improvement to a 5% underlying decline in print advertising, compared to 12% in the prior year.  Strong digital advertising growth of 18% more than offset the reduction in print advertising, resulting in total combined advertising revenues across the dmg media portfolio growing by an underlying 2% to £319 million.  Circulation revenues were stable on an underlying basis, with the benefit of cover price increases offsetting the adverse impact from a continued decline in circulation volumes of the Daily Mail and The Mail on Sunday. 

Despite the absence of the 53rd week, dmg media's operating profit of £77 million was in line with the prior year, an underlying increase of 10%.  As expected, the underlying profit growth was driven by MailOnline, which moved into profit during the final quarter, and cost savings in the newspaper businesses, notably the closure of the Didcot printing plant.  These enabled dmg media to deliver an operating margin of 11%, in line with the prior year.



Progress was made during the year to increase the focus within the dmg media portfolio.  In April 2017, dmg media disposed of its Elite Daily website, following the closure in December 2016 of the Dubai based 7 Days newspaper.  Consequently, dmg media now comprises the Mail businesses and Metro, brands that reach 71% of the UK adult population each month.

 

Mail businesses

Revenues for the Daily Mail, The Mail on Sunday and MailOnline combined were £574 million, including £119 million from MailOnline.  Revenues were in line with last year on both an underlying and reported basis, as the benefit of the stronger US dollar helped to offset the absence of the 53rd week.  Despite the decline in volumes, both the Daily Mail and The Mail on Sunday grew their already substantial market shares, to an average for the year of 23.4% and 22.1% respectively∞.  Revenues benefited from the cover price increases of the Monday to Friday editions of the Daily Mail from 60p to 65p, in February 2016, the Saturday edition from 90p to £1.00 in October 2016 and The Mail on Sunday, from £1.60 to £1.70 in July 2016.  The cover price of The Mail on Sunday was increased from £1.70 to £1.80 in October 2017.

 

Total advertising revenues across the Mail businesses increased by £7 million to £248 million, with a £26 million increase in MailOnline's revenues exceeding a £19 million decline in print advertising.  On an underlying basis, total advertising revenues from the Mail titles grew 2% as the increase of £19 million, 19% in MailOnline's advertising revenues outstripped the £15 million, 10% decline in print advertising revenues.  MailOnline made particularly good progress growing its revenues from programmatic advertising and through partnerships with other channels.  In the US, MailOnline's revenues grew by an underlying 36% to £36 million, reflecting the strength of the DailyMail.com brand, which has been further enhanced by the launch of DailyMailTV in September 2017, which attracted an average of 1.3 million viewers a night by its 8th week.

 

MailOnline successfully broadened its reach through other channels during the year, notably Facebook and Snapchat.  The audience on the core site also continues to grow, with 14.9 million  average daily global unique browsers during the year, up 4%, of which 4.3 million were in the US, up 8%.  The site attracted an average 227 million monthly global unique browsers during the year. 

 

Operating profit from the Mail businesses grew by an underlying 17% to £71 million.  The strong performance reflects the encouraging progress made by MailOnline, which moved into operating profit during the final quarter, including an editorial content recharge from the Mail Newspapers, and another resilient performance from the Daily Mail and The Mail on Sunday, with further cost efficiencies achieved. 

 

Other dmg media businesses

Metro delivered a robust revenue performance in the context of a declining print advertising market, growing revenues by an underlying 7% to £68 million, including the benefit of increasing circulation in London and taking on four franchises from Trinity Mirror in January 2017.  Metro has the largest circulation of any weekday newspaper in the UK, is read by an average of 3.1 million people each day and has the largest Monday to Friday advertising market share by volume.  Printing and distribution costs increased, resulting in a 22% underlying decline in Metro's operating profit to £11 million.

 

The Dubai based newspaper business, 7 Days, was closed in December 2016 and Elite Daily, the online publishing business, was disposed of in April 2017.  The sale enables dmg media to concentrate its digital resources on MailOnline, particularly in the US.  dmg media is now a more focused Consumer Media portfolio, comprising of the Mail brands and Metro.

 

Low margin sales of newsprint to other publishers account for the majority of other revenues and these are excluded from underlying revenue growth calculations. 

 

Outlook and Priorities in the year ahead

dmg media is expected to continue to benefit from digital advertising growth and to experience circulation volume and print advertising declines, with advertising revenues likely to remain volatile.  In FY 2018, the underlying rate of decline of dmg media's revenues is expected to be in the mid-single digits.  The operating margin is expected to be around 10% in FY 2018, compared to the 11% delivered in FY 2017, with the revenue reduction being partly offset by the benefit of continued cost efficiencies within the newspapers and by MailOnline being profitable for the Full Year.

 

 

Corporate costs

 


2017

£m

2016

£m

Change~

 

Underlying#

Change~

Corporate costs*

31

42

-26%

-26%

 

Corporate costs reduced by 26% from £42 million in the prior year to £31 million, largely due to payroll costs, notably incentive plan costs and one-off items.

 

Outlook: Corporate costs are expected to be around £45 million in FY 2018, increasing as a result of strengthening central functions, particularly strategy, technology and talent, to better support, monitor and review businesses and to assess potential capital allocation decisions.

 

 

Joint ventures and associates

 

Share of pre-tax operating profits*

2017

£m

2016

£m

(Pro Forma)

Change~

 

Euromoney Institutional Investor PLC

47

42

+11%

ZPG Plc

25

21

+15%

Other joint ventures and associates

(2)

(3)


Total joint ventures and associates

69

61

+14%

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

The Group's share of the operating profits* of its joint ventures and associates was £69 million, including £47 million in respect of Euromoney for the nine months to September 2017, following the reduction in the Group's stake in Euromoney to c.49%.  Euromoney's balance sheet is now independent of DMGT's, increasing Euromoney's financial flexibility to be acquisitive and to accelerate the implementatoin of its strategy.  Euromoney acquired RISI, the price reporting agency for the forest products market, for $125 million in April 2017.  Euromoney released its Full Year 2017 results on 22 November 2017 and reported an underlying decline in revenues of 1%, with subscription revenues, which account for 60% of total revenues, up an underlying 1%.  Euromoney's adjusted profit before tax increased by 4%, including the benefit of the stronger US dollar.

 

The share of operating profits from ZPG Plc, formerly Zoopla Property Group, increased 15% to £25 million.  There was a particularly strong growth from the Property Services division, which benefited from acquisitions.  In February 2017, ZPG placed new shares to part fund its acquisition of Hometrack, the UK provider of residential market insights, diluting DMGT's stake in ZPG to c.30%.  During the year, ZPG also acquired Expert Agent, the provider of workflow tools and websites to property professionals, and Ravensworth, a provider of on-demand print and creative marketing services to UK estate agents.  In October 2017, ZPG acquired Money.co.uk, one of the UK's leading financial services comparison websites.  ZPG released its Full Year results on 29 November 2017 and reported revenue growth of 24% and adjusted basic earnings per share growth of 20%.

 

The net share of operating losses from other joint ventures and associates was £2 million, a slight reduction on the prior year.  These include investments in early-stage businesses in the Insurance Risk, Property Information, EdTech, Energy Information and Consumer Media sectors.  Notable joint ventures and associates include Real Capital Analytics, the US Property Information business, and DailyMailTV.

 

Outlook for joint ventures and associates

The share of operating profits from joint ventures and associates is expected to benefit from ZPG's continued growth.  The share of operating profits from Euromoney in FY 2018 is also expected to increase, due to the inclusion of a full twelve months' trading, although completed and potential disposals by Euromoney will reduce the impact.  In the absence of any significant acquisitions and disposals, the share of operating profits from joint ventures and associates in FY 2018 is expected to be at least £75 million.

 

 

Net finance costs

 


2017

£m

2016

£m

(Pro Forma)

Change~

 

Net interest payable and similar charges*

42

40

+5%

 

Net interest payable and similar charges, including DMGT's share of associates' interest costs, was £42 million, a 5% pro forma increase on the prior year.  DMGT benefited from lower average debt levels during the year but the interest payable was adversely affected by the stronger US dollar and an increase in the share of associates' interest payable to £5 million, from £3 million in the prior period.

 

The pension finance charge, which is excluded from adjusted results, was £5 million, consistent with the prior year. 

 

Outlook for net finance costs

Net finance costs in FY 2018 are expected to be around £40 million, broadly in line with FY 2017.

 

 



Other income statement items

 

·      Exceptional items and amortisation

Exceptional operating costs, excluding those of joint ventures and associates, were £43 million compared to £55 million in the prior year.  There were £17 million of severance costs, including £11 million in respect of dmg information, and £8 million of restructuring costs, including £4m in relation to the closure of the Didcot printing plant.  Other exceptional costs comprised £14 million of legal fees, principally in respect of the defence by Xceligent, the US property information business, of a complaint filed by a competitor, and £5 million of reorganisation related consultancy charges.  The share of joint ventures' and associates' exceptional operating costs was £7 million, compared to £4 million in the prior year.

 

The charge for amortisation of intangible assets arising on business combinations, including the share from joint ventures and associates, reduced by £2 million to £50 million. The Group also made an impairment charge against goodwill and intangible assets of £231 million, including £140 million in respect of the Energy Information business, Genscape, £42 million in respect of Xceligent and £24 million in respect of SiteCompli, the US Property Information businesses.  The Group also incurred a £41 million impairment charge in respect of the Didcot printing plant.

 

The Group recorded other net gains on disposal of businesses and investments of £530 million, compared to a net gain of £138 million in the prior year.  DMGT recognised £509 million of gains in respect of the reduced holding in Euromoney, including the gain on the revaluation of the retained c.49% stake.  In February 2017, ZPG issued share capital and DMGT did not participate in the placing, resulting in a dilution of DMGT's stake to c.30% and a deemed disposal for accounting purposes on which DMGT recognised a non-cash gain of £18 million. 

 

·      Taxation

The adjusted tax charge for the year, after adjusting for the effect of exceptional items, was £29 million, compared to £30 million in the prior year on a pro forma basis.  The adjusted tax rate for the year of 12.8% reduced slightly from the pro forma basis 13.9% in FY 2016, reflecting the increased use of historic UK tax losses, and was lower than previously anticipated due to the slower than expected enactment of new UK legislation restricting the use of losses.

 

The statutory tax charge for the year was £65 million.  This excludes the charge of £4 million in respect of discontinued operations and £5 million in respect of joint ventures and associates.  There were tax credits of £30 million in respect of the amortisation and impairment of intangible fixed assets, tax charges of £109 million in respect of tax losses that can no longer be recognised as deferred tax assets and tax credits of £35 million on other adjusting items.

 

Due to new legislation in respect of the use of historic UK losses enacted since the year end, and to the geographical mix of profits, the effective tax rate is expected to increase to nearer 18% in FY 2018 and to increase further over the next few years, to over 20%.

 

 

Pensions

The financial position of the Group's defined benefit pension schemes, on an accounting basis, improved from a net deficit of £246 million at the start of the year to a net surplus of £62 million at 30 September 2017 (calculated in accordance with IAS 19 (Revised)).  During the year, the value of the assets increased and there was a reduction in the value of the defined benefit obligation.  Action was also taken to further reduce the exposure to future investment, interest rate and inflation risk. 

 

Funding payments into the main schemes were £13 million in the year and are expected to continue at least until the next triennial actuarial valuation, in accordance with the existing 2016 funding plan, since the schemes remain in deficit on an actuarial basis.  The funding plan includes payments of approximately £13 million per annum to FY 2019 and £16 million per annum from FY 2020 to FY 2027.  In addition a contribution equal to 20% of any share buy-backs is contributed to the schemes. Contributions will be discontinued should the schemes' actuary agree the schemes are no longer in deficit.  The next formal actuarial valuation is scheduled for 31 March 2019.  The defined benefit schemes are closed to new entrants.

 

 

Net debt and cash flow 

Net debt at the end of the year was £464 million, a decrease of £214 million during the year and a decrease of £87 million since the half year.  The Group's operating cash flow was £175 million and was adversely affected by the inclusion of £46 million of exceptional operating items and by only including Euromoney's cash flows for the three months that it was a subsidiary.  Operating cash flows included capital expenditure of £79 million.  The conversion rate of operating profits* to operating cash flow was 88%, an improvement on 72% in the prior year. 

 

The Group's adjusted cash operating income, which is calculated by adding back depreciation and amortisation and by deducting capital expenditure from adjusted operating income, was £199 million.  This metric, a new Group key performance indicator, reflects the cash generation of the Group's subsidiary businesses and improved by 16% on a pro forma basis, from £172 million in the prior year. 

 

Net proceeds from disposals, including expenditure on acquisitions, were £271 million and included £218 million from the reduction of the stake in Euromoney, after adjusting for the de-consolidation of £96 million cash on Euromoney's balance sheet.  Cash out-flows included dividends of £78 million, interest payments of £35 million, taxation of £13 million and pension funding of £13 million.  The Group broadly matches the profile of its net debt by currency to the components of its operating cash flow by currency.  The slight strengthening of sterling over the course of the year, notably against the US dollar, resulted in a favourable debt revaluation of £4 million.

 

At the year end, the Group's Bond debt was £424 million and comprised £216 million of the 5.75% Bonds, due December 2018, £10 million of the 10.0% Bonds, due 2021, and £197 million of the 6.375% Bonds, due 2027.  Bond debt constitutes less than half of the debt available to DMGT.  At the year end, the committed bank facilities were £611 million, of which £565 million was unutilised, there were £2 million of loan notes and derivatives and cash balances were £7 million.

 

The Group's ratio of year end net debt to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was 1.4, significantly below the Group's preferred upper limit of around 2.0 and further below the requirements of the Group's bank covenants.  Throughout the year, the Group's corporate credit rating remained at investment grade BBB-.

 

The Directors have a reasonable expectation that the Group will continue to operate and meet its liabilities as they fall due over the next three years. Accordingly, they continue to adopt the going concern basis in preparing its accounts.

 

Financing

During the year, the Group acquired 3.9 million 'A' Ordinary Shares for £29 million in order to meet obligations to provide shares under its incentive plans.  It utilised 4.1 million shares, valued at £30 million, and a further 1.2 million shares from the Employee Benefit Trust, valued at £9 million, to provide shares under various incentive plans.  As at 30 September 2017, DMGT had 353.6 million shares in issue, including 19.9 million Ordinary Shares, and a further 8.5 million 'A' Ordinary Shares held in Treasury and the DMGT Employee Benefit Trust.

 

Dividend

The Board is recommending the payment on DMGT's issued Ordinary Shares and 'A' Ordinary Non-Voting Shares of a final dividend of 15.8 pence per share for the year ended 30 September 2016 (2016 15.3 pence).  This will make a total for the year of 22.7 pence (2016 22.0 pence per share).  The final dividend will be paid on 9 February 2018 to shareholders on the register at the close of business on 8 December 2017.

 

Appointment of Tim Collier as Chief Financial Officer

Tim Collier was appointed Chief Financial Officer and to the Board of DMGT with effect from 2 May 2017.  He joined from Thomson Reuters, where he was CFO of the Financial and Risk business.

 

 



Pro Forma Full Year 2016 adjusted results

 

Euromoney was a c.67% owned subsidiary throughout Full Year 2016 and during the first three months of Full Year 2017.  It ceased to be a subsidiary and became a c.49% owned associate with effect from 29 December 2016.  As a subsidiary, 100% of Euromoney's revenue and operating profit was included in DMGT's results whereas as an associate, DMGT recognises its share of operating profits.  The tables below make revisions to Full Year 2016 to treat Euromoney as a c.67% owned subsidiary during the first three months of the year and then as a c.49% owned associate for the remaining nine months of the year, consistent with the ownership profile during Full Year 2017.

 

Group summary

Adjusted results*

(from continuing and

Full Year

2016

£m

discontinued operations)

 

Reported

Revision

Pro Forma

Revenue

1,917

(313)

1,604

 





 

Operating profit

277

(82)

195

 

Income from JV's and associates

23

38

61

 

Net finance costs

(40)

1

(40)

 

Profit before tax

260

(43)

217

 





 

Tax charge

(37)

7

(30)

 

Minority interests

(24)

22

(2)

 

Group profit

198

(14)

184

 





 

Earnings per share

56.0p

(3.9)p

52.1p

Operating profit margin

14%


12%

 

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

 

Business to business (B2B)

Adjusted results*

(from continuing and

Full Year

2016

£m

discontinued operations)

Reported

Revision

Pro Forma

Revenue

1,212

(313)

899

 

Operating profit

242

(82)

160

 

Operating margin

20%


18%

 

Operating profit is before the allocation of Corporate costs.

 

 

Euromoney Institutional Investor PLC

Adjusted results*

(from continuing and

Full Year

2016

£m

discontinued operations)

Reported

Revision

Pro Forma

Revenue

403

(313)

90

 

Operating profit

100

(82)

18

 

Operating margin

25%


20%

 

Adjusted results; statutory profit before tax (PBT) reconciliation to adjusted PBT

The Board and management team use adjusted results, rather than statutory results, to give greater insight to the financial performance of the Group and the way it is managed.  Similarly, adjusted results are used in setting management remuneration.  Adjusted results exclude certain items which, if included, could distort the understanding of performance during the year and the comparability between periods. 

 

The tables on pages 29 and 30 show the adjustments between statutory profit before tax and adjusted profit before tax, by business, for both FY 2017 and FY 2016. 

 

The explanation for each type of adjustment is as follows:

1)   Discontinued operations: the adjusted results for FY 2017 include the pre-disposal results of discontinued operations, namely Euromoney, in which DMGT reduced its stake from c.67% to c.49% in December 2016, whereas statutory results only include continuing operations.

 

2)   Exceptional operating costs: businesses occasionally incur exceptional costs, including severance and consultancy fees, in respect of a reorganisation that is incremental to normal operations.  Similarly, for the Group's B2B businesses, there may be legal costs in respect of litigation that are outside the ordinary course of business and sufficiently material to be treated as an exceptional charge.  These are excluded from adjusted results.

 

3)   Impairment of plant: occasionally the carrying value of an asset in the balance sheet is considered too high and it is appropriate to impair it.  The associated charge is excluded from adjusted results since it is unrelated to ongoing cost of doing business in the year.  The ongoing depreciation and amortisation of tangible assets and software, including products, is, however, an everyday cost of doing business and is included in both statutory and adjusted results.  A reorganisation may also result in the write off of the carrying value of tangible fixed assets, as was the case when dmg media closed its Didcot printing plant, and this expense is excluded from adjusted results.

 

4)   Intangible impairment and amortisation: when acquiring businesses, the premium paid relative to the net assets on the balance sheet of the acquired business is classified as either goodwill or as an intangible asset arising on a business combination and is recognised on DMGT's balance sheet.  This differs to organically developed businesses where assets such as employee talent and customer relationships are not recognised on the balance sheet.  Impairment and amortisation of intangible assets and goodwill arising on acquisitions are excluded from adjusted results as they relate to historical M&A activity and future expectations rather than the trading performance of the business during the year.  An example is the impairment in FY 2017 of the goodwill and acquired intangible assets associated with the US Property Information business, Xceligent.

 

5)   Profit on sale of assets: the Group makes gains or losses when disposing of businesses, for example on the disposal of Euromoney shares when DMGT reduced its stake from c.67% to c.49%.  These items are excluded from adjusted results as they reflect the value created since the business was formed or acquired rather than the operating performance of the business during the year.

 

6)   Pension finance charge: the finance charge on defined benefit schemes is a formulaic calculation that does not necessarily reflect the underlying economics associated with the relevant pension assets and liabilities.  It is effectively a notional charge and is excluded from adjusted results.

 

7)   Other adjustments: other items that are excluded from adjusted results include changes in the fair value of certain financial instruments and changes to future acquisition payments.  They are considered to be unrelated to the ongoing cost of doing business.  The share of joint ventures' and associates' tax charges is included in statutory profit before tax but, since it is a tax charge, is excluded from adjusted profit before tax.  The share of joint ventures' and associates' interest charges is reclassified to financing costs in the adjusted results.

 


Reconciliation: Statutory profit to adjusted profit - FY 2017

 

 

£ millions

Note

RMS

dmg info

dmg events

E'money¹

dmg media

Corp. costs²

JV's & Ass.3

DMGT Group


Statutory operating profit


30

(197)

28

-

26

(33)

17

(129)


Discontinued operations

1

-

-

-

13

-

-

(1)

12


Exceptional operating costs

2

3

27

3

1

9

2

7

50

Impairment of plant

3

-

-

-

-

42

-

-

42

Intangible impairment and amortisation

4

-

239

-

5

1

-

36

282

Exclude JV's & Associates








59

(59)


Adjusted operating profit


33

69

31

19

77

(31)


198


 

 

£ millions

Note

RMS

dmg info

dmg events

E'money¹

dmg media

Corp. costs²

JV's & Ass.3

Fin. costs4

DMGT Group


Statutory PBT


30

(202)

28

-

27

(32)

35

2

(112)


Discontinued operations

1

-

-

-

525

-

-

(1)

(1)

523


Profit on sale of assets

5

-

1

-

(512)

(1)

(1)

(18)

-

(530)


Operating profit adjustments (∞ above)

2, 3, 4

3

266

3

6

51

2

43

-

374

Total ∞

Pension finance charge

6

-

-

-

-

-

-

-

5

5


Other adjustments

7

-

4

-

-

-

-

10

(48)

(33)


Adjusted PBT


33

69

31

19

77

(31)

69

(42)

226


 

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

Notes:   The figures in the Note column above correspond with explanations of the adjustments given on pages 27 and 28. 

¹ E'money = Euromoney, ² Corp. costs = Corporate costs, ³ JV's & Ass. = Joint ventures and Associates, 4 Fin. costs = Financing costs

 



Reconciliation: Statutory profit to adjusted profit - FY 2016

 

 

£ millions

Note

RMS

dmg info

dmg events

E'money¹

dmg media

Corp. costs²

JV's & Ass.3

DMGT Group


Statutory operating profit


33

47

27

-

28

(50)

5

91


Discontinued operations

1

-

-

-

41

-

-

(2)

39


Exceptional operating costs

2

3

6

1

13

24

9

4

58

Intangible impairment and amortisation

4

-

24

1

46

25

-

11

107

Exclude JV's & Associates








17

(17)


Adjusted operating profit


36

77

29

100

77

(42)


277


 

 

£ millions

Note

RMS

dmg info

dmg events

E'money¹

dmg media

Corp. costs²

JV's & Ass.3

Fin. costs4

DMGT Group


Statutory PBT


33

59

28

-

143

(47)

5

(20)

202


Discontinued operations

1

-

-

-

47

-

-

(2)

-

45


Profit on sale of assets

5

-

(11)

-

(7)

(115)

(4)

-

-

(138)


Operating profit adjustments (∞ above)

2, 4

3

29

2

59

49

9

14

-

165

Total ∞

Pension finance charge

6

-

-

-

-

-

-

-

5

5


Other adjustments

7

-

-

-

1

-

-

6

(25)

(19)


Adjusted PBT


36

77

29

100

77

(42)

23

(40)

260


 

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

Notes:   The figures in the Note column above correspond with explanations of the adjustments given on pages 27 and 28.

¹ E'money = Euromoney, ² Corp. costs = Corporate costs, ³ JV's & Ass. = Joint ventures and Associates, 4 Fin. costs = Financing costs

 

 

 

Reconciliation: Adjusted results including and excluding discontinued operations

 

 


FY 2017


FY 2016

£ million

Adjusted results including discontinued operations

 

 

 

Discontinued operations

Adjusted results excluding discontinued operations


Adjusted results including discontinued operations

 

 

 

Discontinued operations

Adjusted results excluding discontinued operations









Revenues








Continuing operations

1,564

-

1,564


1,514

-

1,514

Discontinued operations

95

95

-


403

403

-

Total Revenue

1,660

95

1,564


1,917

403

1,514









Operating Profit








Continuing operations

179

-

179


177

-

177

Discontinued operations

19

19

-


100

100

-

Total Operating Profit

198

19

179


277

100

177









Operating margin %

12%

20%

11%


14%

25%

12%

 

 

Notes:

The discontinued operations refer to Euromoney.

 

 

 

 

Underlying analysis - Revenues

















FY 2017


FY 2016

£ millions

%


Underlying

M&A

Other

Reported


Underlying

M&A

Exchange

Other

Reported














B2B













RMS

+2%


233

-

-

233


230

-

25

-

205

dmg information

+2%


498

(33)

-

531


490

(49)

41

-

498

dmg events

+3%


117

-

-

117


114

(1)

11

(1)

105

Euromoney

N/A


-

(95)

-

95


-

(403)

-

-

403


+2%


848

(128)

-

976


833

(453)

76

(1)

1,212

Consumer













dmg media

+1%


645

(5)

(34)

683


640

(18)

4

(52)

706



























DMGT Group

+1%


1,493

(133)

(34)

1,660


1,473

(471)

79

(53)

1,917














 

Notes:   M&A adjustments are for disposals, including Euromoney and Hobsons' Admissions business, and acquisitions.  The underlying results include the post-acquisition organic growth from acquired entities.  'Other' adjustments include the timing of shows at dmg events, the gross-up, equivalent to the cost of sales, on the low margin resale of newsprint activities and the exclusion of the benefit from the 53rd week of dmg media's print businesses' results in FY 2016.

 

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 

 

 

 

Underlying analysis - Adjusted operating profit*

















FY 2017


FY 2016

 

£ millions

 %


Underlying

M&A

Other

Reported


Underlying

M&A

Exchange

Other

Reported

 














 

B2B













 

RMS

-25%


33

-

-

33


44

-

8

-

36

 

dmg information

-13%


57

(12)

-

69


66

(16)

5

-

77

 

dmg events

-7%


30

-

-

31


33

-

3

-

29

 

Euromoney

N/A


-

(19)

-

19


-

(100)

-

-

100

 


-15%


120

(31)

-

152


142

(116)

16

-

242

 

Consumer













 

dmg media

+10%


82

5

-

77


75

6

(2)

(6)

77

 














 

Corporate costs

-26%


(31)

-

-

(31)


(42)

-

-

-

(42)

 

Operating profit

-2%


172

(27)

-

198


175

(109)

14

(6)

277

 














 

Notes:   B2B and Consumer underlying figures are stated pre the allocation of Corporate costs.  'Other' includes adjustments for the timing of shows at dmg events.

 

Amounts are stated rounded to the nearest million pounds, consequently totals may not equal the sum of the component integers.

 



Principal risks and uncertainties

A robust and detailed assessment of the Group's risk register and the Group's risk management processes was carried out by management and overseen by the Audit & Risk Committee.  The Group's risks are categorised as either strategic or operational.  Strategic risks are linked to the Group's strategic priorities and impact the whole Group.  Operational risks are those arising from the execution of the business functions and typically impact on one or more of the principal businesses.

 

Changes to the principal risks during the year

1.    The risk of 'Major change projects' disclosed last year primarily related to the execution of simplification and reorganisation initiatives which are largely now implemented. For this reason the risk is not considered a principal risk for the Group. The operating companies continue to undertake operational change projects and the associated risks are tracked on the Group's risk register.

2.    The principal risk examples below do not include Euromoney's risks as they are no longer consolidated into the Group's overall risk profile.

 



Strategic Risks

Description and impact

Examples

Mitigation

Trend

Market disruption

Market disruption creates opportunities as well as risks. Disruption enables us to move into new markets and geographies to grow the business.

Failure to anticipate and respond to market disruption may affect the demand for our products and services and our ability to drive long-term growth.

 

Market disrupters include changes to customer behaviours and demands, new technologies, the emergence of competitors or structural changes to markets. Examples from the operating companies include:

·    Consumer Media: decline in print advertising revenue and fast changing digital advertising environment.

·    Insurance Risk: convergence of reinsurance with capital markets and consolidation in insurance industry could affect RMS.

·    EdTech: politically-driven change to public school funding and/or the regulation of post-secondary education.

·    Energy Information: rapidly evolving solar industry.

·    The Group's diverse and balanced portfolio of businesses and products reduces the overall Group impact.

·    Organic investment initiatives across the Group to innovate our products and services and to remain competitive in the markets we serve. Organic investment was 9% of total revenues in FY 2017.

·    The Executive Committee, supported by the Performance Management and Strategy function and operating companies' management teams, monitor markets, the competitive landscape and technological developments.

·    Analysis of the performance management dashboard and detailed financial management information for each operating company to highlight and react to early indicators of market disruption.

·    DMGT executive membership of operating business boards.

Success of new product launches and internal investments

A lack of innovation in response to competitive pressures or failure to successfully develop our products and services may compromise their appeal.

Some may fail to achieve customer acceptance and yield expected benefits. This could result in lower than expected revenue and/or impairment losses.

Uncertainty also results from geographic expansion into new and emerging markets.

The Group is continually investing in our products and services, developing new lines and enriching existing products and services. Examples include:

·    Consumer Media: increased monetisation of our online user base and execution of DailyMailTV.

·    Insurance Risk: client adoption of RMS(one) and launch of new models.

·    Property Information: geographical expansion of Xceligent across the US and Trepp entrance into Collateralized Loan Obligations market.

·    Energy Information: Genscape launch of new real time power generation platform and maritime voyages service

·    Events and Exhibitions: geo-cloning of events across new locations.

·    The autonomous culture of the Group encourages an entrepreneurial approach to identifying growth opportunities and new products.

·    The Executive Committee, supported by the Performance Management and Strategy function, provide oversight of progress from the centre. Analysis of the performance management dashboard and detailed financial management information to monitor achievement of key milestones.

·    Performance Management and Strategy function partners with operating company senior management teams to support in achievement of key milestones where necessary.

·    Significant investments are approved by the Investment & Finance Committee and/or the Board.

Portfolio managementl

Increasing portfolio focus is key to the Group's strategy. This could be compromised by portfolio changes not delivering expected benefits, acquisitions and investments not delivering as expected or not divesting from non-core businesses at the right time.

 

l Referred to as 'Acquisitions and disposals' in the 2016 Annual Report

·    Growth opportunities and potential synergies lost through failure to identify or succeed with acquisition and investment targets.

·    Underperforming acquisitions and investments may lead to reduced return on capital and/or impairment losses.

·    Underperforming acquisitions and investments could result in a diversion of management time.

·    Optimal value may not be achieved from divestments.

 

·      The Executive Committee have conducted (and continue to conduct) a rigorous evaluation of the Group's portfolio in order to allocate resources according to individual business growth characteristics and funding requirements.

·     Investments and divestments are approved by the Investment & Finance Committee.

·     Extensive due diligence conducted pre-acquisition and comprehensive integration plan implemented post-acquisition by dedicated function.

·     The Executive and Investment & Finance Committees supported by the Performance Management and Strategy function monitor post-acquisition performance, and to support proactive intervention if performance milestones are not being met.

·     DMGT executive membership of operating business boards and associate boards (Euromoney Institutional Investor PLC and ZPG Plc).

This risk increased over FY 2017 due to the increasing number of transactions, particularly divestments, in the portfolio in the year, including the reduction in Euromoney holding.

Economic and geopolitical uncertainty

The Group performance could be adversely impacted by factors beyond our control such as the economic conditions in key markets and sectors, and political uncertainty.

·    Property Information: volatility in residential and commercial property transactions could impact revenue.

·    Consumer Media: a weakening of the UK economy, particularly if consumer led, could accelerate the decline in print advertising revenue.

·    Energy Information: fluctuations in the global commodities markets could impact Genscape's revenues.

·    Insurance Risk: sustained low interest rates could weaken the sector's overall performance and impact RMS.

·    Events and Exhibitions: fluctuations in the global oil markets could impact revenue from associated trade shows if discretionary revenue from delegates, exhibitors and sponsorships decline. Political uncertainty, particularly in the Middle East, could impact execution of events in the region.

·    The Group's diverse and balanced portfolio of businesses and products reduces the overall impact of any one disruption or change.

·    Analysis of the performance management dashboard and detailed financial management information by the Executive Committee and operating companies' management teams to highlight early trends and impacts from economic and geopolitical uncertainty.

This risk has increased over FY 2017 reflecting the continued uncertainty in the economic and political landscapes in which we operate.

Talentm

Our ability to identify, attract, retain and develop the right people for senior and business-critical roles could impact the Group's performance. 

 

m Referred to as 'Securing and retaining talent' in 2016 Annual Report

·    Entrepreneurship and leadership skills are a priority for the Group and key to the continued success of many of our operating companies.

·    Technology and software development skills remain crucial to many of our businesses, particularly RMS, Genscape and MailOnline where collectively there is significant investment in product development.

·    The strategy to build out our data analytics capabilities places focus on developing and attracting data scientists and specialists in machine learning, artificial intelligence and other emerging technologies. These skills are in high demand which makes attracting and retaining people with these skills more competitive.

·     Enterprise sales and operational execution expertise with market and product knowledge are vital, particularly in our businesses with significant expansion plans.

·    The Group has established a Centre of Expertise for HR specialising on recruitment, succession planning, critical skills planning, identifying and developing internal talent, and reward.

·    Executive management is involved in the recruitment of all operating company leadership roles and their ongoing development.

·    Retention of key management in businesses.

·    Payment of competitive rewards for key senior roles, developed using industry benchmarks and external specialist input.

·    Employee engagement initiatives including Group-wide employee survey with follow-up action plans in place in each operating company.

The risk increased over FY 2017 as a result of the reorganisational changes implemented. As these changes are embedded in the operating companies we expect the risk to stabilise.

 

Operational risks

Description and impact

Examples

Mitigation

Trend

Information security breach or cyberattack

An information security breach, including a failure to prevent or detect a malicious cyberattack, could cause reputational damage and financial loss. The investigation and management of an incident would result in remediation costs and the diversion of management time.

A breach of data protection legislation could result in financial penalties for the business affected and potentially the Group.

The risk is relevant to all businesses in the Group due to the nature of products and services across the portfolio. Examples which could impact the Group include:

·    Loss or unauthorised access to personal information and sensitive client data

·    Unavailability or disruption of online products and services

·    Integrity of online products, services and data compromised

·    Disruption to critical systems which support business operations

·    Theft of intellectual property

 

·    Establishment of an Information Security Steering Committee led by the CEO to provide oversight of information security initiatives in the Group.

·    Appointment of a Group Chief Information Officer and a Group Chief Information Security Officer.

·    Commissioned by the Information Security Steering Committee, a Group-wide independent review of information security posture within the operating companies. This review has resulted in actionable roadmaps for improvement where necessary.

·    Group information security policy and detailed information security standards with regular reviews against these standards reported to the Information Security Steering Committee. Periodic reviews of the standards themselves are performed to ensure they keep pace with best practice.

·    Working group with representatives from across the Group meeting regularly and sharing information security best practice.

·    Information security is reviewed as part of every internal audit of an operating company.

·    Cyber insurance policies in place.

This risk increased over FY 2017 as the inherent threat of an information security breach or cyberattack continues to increase. This is partially offset by continuous improvement in information security controls.

Reliance on key third parties

Certain third parties are critical to the operations of our businesses. A failure of one of our critical third parties may cause disruption to business operations, impact our ability to deliver products and services and result in financial loss. The reputation of our businesses may be damaged by poor performance or a regulatory breach by critical third parties, particularly outsourced service providers.

Key third parties include:

·    Data centre and cloud service providers

·    IT development support

·    Data providers for core products

·    Newsprint, flexographic plate and ink suppliers

·    Newspaper distribution and wholesale

·    Event venues

·    The Group's diverse and balanced portfolio of businesses and products reduces the overall impact of the failure of an individual third party.

·    Operational and financial due diligence is undertaken for key suppliers on an ongoing basis.

·    Close management of key supplier relationships including contracts, service levels and outputs.

·    Robust business continuity arrangements for the disruption to key third parties.

·    Dedicated newsprint-buying team.

·    Event cancellation and business interruption insurance policies.

Compliance with laws and regulations

The Group operates across multiple jurisdictions and sectors. Increasing regulation increases the risk that the Group is not compliant with all applicable laws and regulations across all of the jurisdictions in which it operates, which could result in financial penalties and reputational damage.

Increasing regulation also results in increasing costs of compliance.

Particular areas of focus for DMGT businesses are:

·    Data protection, including the EU General Data Protection Regulation (GDPR) and the proposed ePrivacy Regulation

·    Competition and anti-trust legislation

·    EU Market Abuse Regulation

·    Libel legislation

·    Tax compliance

·    UK Bribery Act

·    Trade sanctions

·    Entering regulated markets or sectors

·    Changes in laws and regulations are monitored and potential impacts discussed with the relevant persons, Board, or Committee, or escalated as appropriate.

·    Developments in the legal and regulatory landscape are reviewed by the Audit & Risk Committee.

·    Implementation and monitoring of Group-wide policies to address new legislation and regulation where applicable.

·    Group-wide working groups in readiness for key emerging compliance areas, such as the GDPR.

Pension scheme deficit

Defined benefit pension schemes, although now closed to new entrants were in operation across the newspaper business, certain other UK businesses and DMGT head office. The schemes remain ultimately funded by DMGT, with Pension Fund Trustees (Trustees) controlling the investment allocation.

There is a risk that the funding of the deficit could be greater than expected.

Future pension costs and funding requirements could be increased by:

·    Adverse changes in investment performance

·    Valuation assumptions and methodology

·    Inflation and interest rate risks

·    The agreed funding plan gives certainty over the financial commitment until FY 2019.

·    Monitoring and management of pension risks is performed by the DMGT Pension Sub‑Committee.

·    Company appointed Trustees.

This risk has decreased over FY 2017 as the Group's defined benefit schemes are in surplus, and exposure to future investment and inflation risk was further reduced.

 

                                  


 

 

Statement of Directors' responsibilities

The Directors are responsible for preparing the full year financial report, in accordance with applicable law and regulations.

 

The Directors confirm that to the best of their knowledge:

 

a) the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

 

b) the management report includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules 4.2.7R and 4.2.8R.

 

By order of the Board of Directors

 

The Viscount Rothermere

Chairman

30 November 2017

 

 

 

 

Notes

 

* Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results.  Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges and fair value adjustments.  For reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 27 to 30.  Adjusted results include results from discontinued operations, specifically the Euromoney subsidiary.  Euromoney ceased to be a subsidiary on 29 December 2016 and has subsequently been included in continuing operations, as a c.49% owned associate, within statutory and adjusted results. 

 

~ Percentages are calculated on actual numbers to one decimal place.

 

# Underlying revenue or profit* is revenue or profit on a like-for-like basis, see pages 32 and 33.  Underlying results are adjusted for constant exchange rates, the exclusion of disposals and closures and for the inclusion of the year-on-year organic growth from acquisitions.  For events, the comparisons are between events held in the year and the same events held the previous time.  For dmg media, underlying growth rates exclude the benefit to FY 2016 results of an additional 53rd week and underlying revenues exclude low margin newsprint resale activities.

 

† Pro Forma Full Year 2016 figures have been restated to treat Euromoney as a c.67% owned subsidiary during the first quarter and as a c.49% owned associate during the remaining nine months, consistent with the ownership profile during Full Year 2017.  See page 26.

 

Π Excluding Euromoney, Hobsons' Admissions & Solutions businesses and EDR, the total B2B revenues in FY 2017 were £781 million, at the average FY 2017 FX rate of $1.27, rather than £976 million.  Similarly, the B2B adjusted operating margin was 13% rather than 16%. 

 

 

Daily Mail's 23.4% average market share during FY 2017 increased from 23.2% during FY 2016 and The Mail on Sunday's 22.1% increased from 22.0% in FY 2016. Circulation market share figures are calculated using ABC's National Newspaper Reports for each month from October 2015 to September 2017 inclusive and exclude digital subscribers.

 

∂ As at the end of 30 September 2017, there were 4,812,419 'A' Ordinary Shares held in Treasury and 3,710,764  'A' Ordinary Shares held by the DMGT Employee Benefit Trust. 

 

The average £: US$ exchange rate for the year was £1:$1.27 (2016 £1:$1.42).  The rate at the year end was $1.34 (2016: $1.30).

 

All references to profit or margin in this management report are to adjusted profit or margin, except where reference is made to statutory profit.

 

 

For further information

 

For analyst and institutional enquiries:

 

 

Tim Collier, Chief Financial Officer

+44 20 3615 2902

Adam Webster, Head of Management Information and Investor Relations

+44 20 3615 2903

For media enquiries:

Paul Durman / Doug Campbell, Teneo Blue Rubicon

 

+44 20 7260 2700

 

 

Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 30 November 2017, at The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.  There will also be a live webcast available at http://www.dmgt.com/webcastfy17.

 

Financial Reporting Calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 25 January 2018.  There will be an Investor Briefing held on 1 February 2018.  Please note that, unlike in previous years, DMGT does not intend to provide a trading update between the third quarter trading update, scheduled for 26 July 2018, and the announcement of Full Year results on 29 November 2018.

 

 

Market Abuse Regulation

As with previous financial announcements, the information communicated in this Full Year Results Report includes inside information.

 

 

 

This Full Year Results Report ('Report') is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents and advisers accept and assume no liability to any person in respect of this Report save as would arise under English law.  Statements contained in this Report are based on the knowledge and information available to the Group's Directors at the date it was prepared and therefore facts stated and views expressed may change after that date.

 

This document and any materials distributed in connection with it may include forward-looking statements, beliefs, opinions or statements concerning risks and uncertainties, including statements with respect to the Group's business, financial condition and results of operations. Those statements and statements which contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect the Group's Directors' beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and which may cause results and developments to differ materially from those expressed or implied by those statements and forecasts. No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved. You are cautioned not to place any reliance on such statements or forecasts. Those forward-looking and other statements speak only as at the date of this Report. The Group undertakes no obligation to release any update of, or revisions to, any forward-looking statements, opinions (which are subject to change without notice) or any other information or statement contained in this Report. Furthermore, past performance of the Group cannot be relied on as a guide to future performance. 

 

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per DMGT share for the current or future financial years would necessarily match or exceed the historical published earnings per DMGT share.

 

Nothing in this document is intended to constitute an invitation or inducement to engage in investment activity. This document does not constitute or form part of any offer for sale or subscription of, or any solicitation of any offer to purchase or subscribe for, any securities nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract, commitment or investment decision in relation thereto. This document does not constitute a recommendation regarding any securities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


DMGT plc





Consolidated Income Statement





for the year ended 30 September 2017




 









Year ended 30 September

2017

Year ended 30 September

2016



Note

£m

£m


CONTINUING OPERATIONS





Revenue

3

1,564.3

1,514.2






Adjusted operating profit

3, (i)

179.0

177.0


Exceptional operating costs, impairment of internally generated and acquired computer software, property, plant and equipment

3

(166.2)

(41.8)


Amortisation and impairment of acquired intangible assets arising on business combinations and impairment of goodwill

3

(158.2)

(49.6)







Operating (loss)/profit before share of results of joint ventures and associates

3

(145.4)

85.6


Share of results of joint ventures and associates

4

16.9

4.9


Total operating (loss)/profit


(128.5)

90.5


Other gains and losses

5

14.0

130.8


(Loss)/profit before investment revenue, net finance costs and tax

(114.5)

221.3


Investment revenue

6

2.5

2.2







Finance expense

7

(43.8)

(49.1)


Finance income

7

43.5

27.3


Net finance costs


(0.3)

(21.8)







(Loss)/profit before tax


(112.3)

201.7


Tax

8

(64.7)

(19.9)


(Loss)/profit after tax from continuing operations


(177.0)

181.8







DISCONTINUED OPERATIONS





Profit from discontinued operations

21

519.3

32.4


PROFIT FOR THE YEAR


342.3

214.2







Attributable to:





Owners of the Company


345.3

204.2


Non-controlling interests*


(3.0)

10.0


Profit for the year


342.3

214.2







(Loss)/earnings per share

12




From continuing operations





Basic


(49.3)p

48.6p


Diluted


(48.5)p

47.4p


From discontinued operations





Basic


147.1p

9.2p


Diluted


144.8p

9.0p


From continuing and discontinued operations





Basic


97.8p

57.8p


Diluted


96.3p

56.4p


Adjusted earnings per share





Basic


55.6p

56.0p


Diluted


54.7p

54.7p






*

Continuing operations


(6.4)

(0.3)


Discontinued operations


3.4

10.3




(3.0)

10.0

 

(i)

Adjusted operating profit is defined as total operating profit from continuing operations before share of results of joint ventures and associates, exceptional operating costs, impairment of goodwill and intangible assets, amortisation of acquired intangible assets arising on business combinations and impairment of property, plant and equipment.

 

DMGT plc



Consolidated Statement of Comprehensive Income


for the year ended 30 September 2017



 





Year ended 30 September

2017

Year ended 30 September

2016


£m

£m

Profit for the year

342.3

214.2




Items that will not be reclassified to Consolidated Income Statement



Actuarial gain/(loss) on defined benefit pension schemes

299.1

(114.7)

Losses on hedges of net investments in foreign operations of non-controlling interests

(5.5)

(14.0)

Foreign exchange differences on translation of foreign operations of non-controlling interests

11.4

31.2

Tax relating to items that will not be reclassified to Consolidated Income Statement

(49.3)

6.4




Total items that will not be reclassified to Consolidated Income Statement

255.7

(91.1)




Items that may be reclassified subsequently to Consolidated Income Statement



Gains/(losses) on hedges of net investments in foreign operations

4.5

(72.9)

Cash flow hedges:



  Losses arising during the year

(2.7)

(9.5)

  Transfer of loss on cash flow hedges from translation reserve

  to Consolidated Income Statement

3.3

2.2

Share of joint ventures' and associates' items of other comprehensive income

(9.7)

  -

Translation reserves recycled to Consolidated Income Statement on disposals

49.4

(0.6)

Foreign exchange differences on translation of foreign operations

8.7

116.0

Tax relating to derivative financial instruments

  -

1.4




Total items that may be reclassified subsequently to Consolidated Income Statement

53.5

36.6




Other comprehensive income/(expense) for the year

309.2

(54.5)




Total comprehensive income for the year

651.5

159.7




Attributable to:



Owners of the Company

645.7

136.9

Non-controlling interests

5.8

22.8


651.5

159.7




Continuing operations

51.7

93.2

Discontinued operations

599.8

66.5


651.5

159.7




Total comprehensive income/(expense) for the year from continuing operations attributable to :


Owners of the Company

54.2

91.1

Non-controlling interests

(2.5)

2.1


51.7

93.2

 

DMGT plc










Consolidated Statement of Changes in Equity










for the year ended 30 September 2017










 


Called-up share capital

Share premium account

Capital redemption reserve

Own shares

Translation reserve

Retained earnings

Equity attributable to owners of the Company

Non-controlling interests

Total equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

At 30 September 2015

  45.4

  17.8

 4.9

(76.3)

(25.9)

  339.0

  304.9

  154.9

  459.8

Profit for the year

  -

  -

  -

  -

  -

  204.2

  204.2

  10.0

  214.2

Other comprehensive (expense)/income for the year

  -

  -

  -

  -

37.8

(105.1)

(67.3)

12.8

(54.5)

Total comprehensive income for the year

  -

  -

  -

  -

37.8

  99.1

  136.9

  22.8

  159.7

Cancellation of A Ordinary Shares

(0.1)

  -

 0.1

 6.5

  -

(6.5)

  -

  -

  -

Issue of share capital

  -

  -

  -

  -

  -

  -

  -

 0.3

 0.3

Dividends

  -

  -

  -

  -

  -

(76.4)

(76.4)

(12.7)

(89.1)

Own shares acquired in the year

  -

  -

  -

(29.8)

  -

  -

(29.8)

  -

(29.8)

Own shares transferred on exercise of share options

  -

  -

  -

  10.9

  -

  -

  10.9

  -

 10.9

Exercise of acquisition put option commitments

  -

  -

  -

  -

  -

(0.3)

(0.3)

  -

(0.3)

Other transactions with non-controlling interests

  -

  -

  -

  -

  -

  -

  -

 0.2

 0.2

Adjustment to equity following increased stake in controlled entity

  -

  -

  -

  -

  -

(4.9)

(4.9)

4.9

  -

Adjustment to equity following decreased stake in controlled entity

  -

  -

  -

  -

  -

(0.2)

(0.2)

0.2

  -

Credit to equity for share-based payments

  -

  -

  -

  -

  -

  15.8

  15.8

0.2

 16.0

Settlement of exercised share options of subsidiaries

  -

  -

  -

  -

  -

(12.1)

(12.1)

  -

(12.1)

Initial recording of put options granted to non-controlling interests in subsidiary undertakings

  -

  -

  -

  -

  -

(0.5)

(0.5)

(0.2)

(0.7)

Non-controlling interest recognised on acquisition

  -

  -

  -

  -

  -

  -

  -

 7.6

 7.6

Corporation tax on share-based payments

  -

  -

  -

  -

  -

 5.4

 5.4

  -

 5.4

Deferred tax on other items recognised in equity

  -

  -

  -

  -

  -

1.4

1.4

  -

1.4

At 30 September 2016

  45.3

  17.8

 5.0

(88.7)

11.9

  359.8

  351.1

  178.2

  529.3











Profit/(loss) for the year

  -

  -

  -

  -

  -

345.3

345.3

(3.0)

342.3

Other comprehensive income for the year

  -

  -

  -

  -

63.0

237.4

300.4

8.8

309.2

Total comprehensive income for the year

  -

  -

  -

  -

63.0

582.7

645.7

5.8

651.5

Issue of share capital

  -

  -

  -

  -

  -

  -

  -

0.5

0.5

Dividends

  -

  -

  -

  -

  -

(78.3)

(78.3)

  -

(78.3)

Own shares acquired in the year

  -

  -

  -

(28.6)

  -

  -

(28.6)

  -

(28.6)

Disposal of Euromoney treasury shares held by Euromoney

  -

  -

  -

14.1

  -

  -

14.1

  -

14.1

Own shares transferred on exercise of share options

  -

  -

  -

38.9

  -

  -

38.9

  -

38.9

Changes in non-controlling interests following disposal of Euromoney

  -

  -

  -

  -

  -

  -

  -

(171.1)

(171.1)

Other transactions with non-controlling interests

  -

  -

  -

  -

  -

  -

  -

(0.2)

(0.2)

Adjustment to equity following increased stake in controlled entity

  -

  -

  -

  -

  -

0.4

0.4

(2.6)

(2.2)

Adjustment to equity following decreased stake in controlled entity

  -

  -

  -

  -

  -

(0.3)

(0.3)

0.3

  -

Credit to equity for share-based payments

  -

  -

  -

  -

  -

4.0

4.0

0.1

4.1

Settlement of exercised share options of subsidiaries

  -

  -

  -

  -

  -

(38.4)

(38.4)

  -

(38.4)

Deferred tax on other items recognised in equity

  -

  -

  -

  -

  -

(0.4)

(0.4)

  -

(0.4)

At 30 September 2017

45.3

17.8

5.0

(64.3)

74.9

829.5

908.2

11.0

919.2

 

DMGT plc





Consolidated Statement of Financial Position





At 30 September 2017





 









At 30 September 2017

At 30 September 2016


Note


£m

£m

ASSETS





Non-current assets





Goodwill

13


363.1

981.6

Other intangible assets

13


213.0

499.2

Property, plant and equipment

14


103.3

176.1

Investments in joint ventures



0.2

4.8

Investments in associates



735.2

145.3

Available-for-sale investments

18


30.6

15.8

Trade and other receivables



20.5

18.7

Other financial assets

18


 15.5

21.0

Derivative financial assets

18


 4.6

28.3

Retirement benefit assets

24


 73.4

  40.1

Deferred tax assets



 75.9

177.4




 1,635.3

2,108.3

Current assets





Inventories



 26.6

30.8

Trade and other receivables



  236.8

346.2

Current tax receivable



9.6

  15.6

Other financial assets

18


 14.5

17.1

Derivative financial assets

18


 3.0

0.4

Cash and cash equivalents

15


 14.6

25.7

Total assets of businesses held-for-sale

22


  107.8

 5.0




  412.9

440.8






Total assets



 2,048.2

2,549.1






LIABILITIES





Current liabilities





Trade and other payables



(502.7)

(756.2)

Current tax payable



(1.7)

(27.0)

Acquisition put option commitments



(0.6)

(18.5)

Borrowings

16


(9.4)

(11.0)

Derivative financial liabilities

18


(0.4)

(11.5)

Provisions



(43.6)

(54.4)

Total liabilities of businesses held-for-sale

22


(29.0)

(5.5)




(587.4)

(884.1)

Non-current liabilities





Trade and other payables



(2.9)

(5.7)

Acquisition put option commitments



(7.4)

(26.3)

Borrowings

16


(470.3)

(693.7)

Derivative financial liabilities

18


(18.8)

(47.3)

Retirement benefit obligations

24


(11.0)

(286.1)

Provisions



(19.1)

(52.8)

Deferred tax liabilities



(12.1)

(23.8)




(541.6)

(1,135.7)






Total liabilities



(1,129.0)

(2,019.8)






Net assets



919.2

529.3

 

DMGT plc





Consolidated Statement of Financial Position (continued)



At 30 September 2017





 









At 30 September 2017

At 30 September 2016


Note


£m

£m

SHAREHOLDERS' EQUITY





Called-up share capital

23


45.3

45.3

Share premium account



17.8

17.8

Share capital



63.1

63.1






Capital redemption reserve



5.0

5.0

Own shares



(64.3)

(88.7)

Translation reserve



74.9

11.9

Retained earnings



829.5

359.8






Equity attributable to owners of the Company



908.2

351.1

Non-controlling interests



 11.0

178.2




919.2

529.3

Approved by the Board on 30 November 2017.





 

DMGT plc




Consolidated Cash Flow Statement




for the year ended 30 September 2017




 







Year ended 30 September

2017

Year ended 30 September

2016


Note

£m

£m

Cash generated by operations

11

232.7

261.0

Taxation paid


(18.1)

(29.7)

Taxation received


4.9

0.8

Net cash generated by operating activities


219.5

 232.1

Investing activities




Interest received


2.4

1.6

Dividends received from joint ventures and associates


 35.9

5.3

Dividends received from available-for-sale investments

6

 0.1

  -

Purchase of property, plant and equipment

14

(21.1)

(27.2)

Expenditure on internally generated intangible fixed assets

13

(57.7)

(58.3)

Expenditure on other intangible assets

13

(0.2)

(3.0)

Purchase of available-for-sale investments


(19.4)

(1.6)

Proceeds on disposal of property, plant and equipment

14

 0.7

1.5

Proceeds on disposal of available-for-sale investments


  -

  0.1

Purchase of subsidiaries

19

(26.7)

(29.5)

Settlements and collateral payments on treasury derivatives


2.8

(40.4)

Purchase of option over equity instrument


  -

(6.5)

Investment in joint ventures and associates


(2.3)

(4.7)

Loans advanced to joint ventures and associates


(2.7)

(0.2)

Loans to joint ventures and associates repaid


 8.6

  1.2

Proceeds on disposal of businesses

20

  215.8

39.5

Proceeds on disposal of joint ventures and associates


 2.4

72.0

Proceeds from redemption of preference share capital


  -

14.4





Net cash generated by/(used in) investing activities


138.6

(35.8)





Financing activities




Purchase of additional interests in controlled entities

19

(2.1)

(0.2)

Equity dividends paid

9

(78.3)

(76.4)

Dividends paid to non-controlling interests


  -

(12.7)

Issue of shares by Group companies to non-controlling interests


 0.5

0.3

Purchase of own shares


(28.6)

(29.8)

Net receipt/(payment) on settlement of subsidiary share options


0.5

(1.2)

Interest paid


(34.7)

(33.9)

Loan notes repaid


(0.6)

(0.5)

Repayments of obligations under finance lease agreements


(0.7)

(0.2)

Inception of finance leases


0.5

  0.6

Decrease in bank borrowings


(224.9)

(60.6)





Net cash used in financing activities


(368.4)

(214.6)





Net decrease in cash and cash equivalents


(10.3)

(18.3)

Cash and cash equivalents at beginning of year


17.5

31.5

Exchange gain on cash and cash equivalents


0.2

4.3

Net cash and cash equivalents at end of year


7.4

17.5

 


NOTES









1

Basis of preparation









 


While the financial information contained in this audited preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.

 


This financial information has been prepared for the year ended 30 September 2017.

 




Other than the Daily Mail, The Mail on Sunday and Metro businesses, the Group prepares accounts for a year ending on 30 September. The Daily Mail, The Mail on Sunday and Metro businesses prepare financial statements for a 52 or 53 week financial period ending on a Sunday near to the end of September and do not prepare additional financial statements corresponding to the Group's financial year for consolidation purposes as it would be impractical to do so. The Group considers whether there have been any significant transactions or events between the end of the financial year of these businesses and the end of the Group's financial year and makes any material adjustments as appropriate.

 


The information for the year ended 30 September 2017 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 30 September 2016 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. These accounts have been audited and finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

 


The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the management report. The Company has long term financing in the form of Eurobonds and meets its day-to-day working capital requirements through bank facilities which expire in March 2019. The Board's forecasts and projections, after taking account of reasonably possible changes in trading performance, show that the company is expected to operate within the terms of its current facilities. After making enquiries, the Directors have a reasonable expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 


This financial information has been prepared in accordance with the accounting policies set out in the 2017 Annual Report and Accounts, as amended, where appropriate, by new or amended International Financial Reporting Standards (IFRS) described below.

 


The Group's financial statements incorporate the financial statements of the Company and all of its subsidiaries together with the Group's share of all of its interests in joint ventures and associates. The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments which are held at fair value through profit or loss.

 


Prior period amounts have been re-presented to conform to the current period's presentation, as prescribed by IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

 


The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the management report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and notes. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least one year from the date of the preliminary announcement. Accordingly, they continue to adopt the going concern basis in preparing the preliminary announcement.

 


The Group presents the results from discontinued operations separately from those of continuing operations. An operation is classed as discontinued if it has been, or is in the process of being disposed and represents either a separate major line of business or a geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or exit a major geographical area of operations.

 


These Group Condensed Financial Statements have been prepared in accordance with the accounting policies set out in the 2016 Annual Report and Accounts, as amended, where appropriate by the application of certain new or amended accounting standards in the period, described below. These policies are followed in the preparation of the full financial statements for the financial year ending 30 September 2017.

 


All amounts presented have been rounded to the nearest £0.1 million.

 





2

Significant accounting policies










The following new and amended IFRSs have been adopted during the year:

 





Amendments to IFRS 10 and IAS 28, Accounting for the sale or contribution of assets between an investor and its associate or joint venture (effective 1 January 2016)

 


Amendments to IFRS 11, Accounting for Acquisitions of Interests in Joint Operations (effective 1 January 2016)

 


Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016)

 


Amendment to IAS 1, disclosure initiative (effective 1 January 2016)

 

 





Annual Improvements 2010-2012 cycle and 2011-2013 cycle have been implemented in the prior year and had no material impact on the Group.

 


Annual improvements 2012-2014 cycle (effective 1 January 2016)






Amendment to IFRS 5, Changes in methods of disposal on non current assets held for sale and discontinued operations

 


Amendments to IFRS 7, Financial Instruments disclosures

 







IAS 19 Employee Benefits, discount rates for post employment benefits

 





IAS 34 Interim Financial Reporting, Disclosure of information 'elsewhere in the interim financial report'

 



The above amendments have not had any significant impact on the Group's financial statements.

 



The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for the Group's accounting periods beginning on or after 1 October 2017. These new pronouncements are listed below:


Amendments to IAS 7, Statement of cash flows (effective 1 January 2017)

 

Amendment to IAS 12, Recognition of deferred tax assets for unrealised losses (effective 1 January 2017)

 

IFRS 15, Revenue from Contracts with Customers (effective 1 January 2018)

 

IFRS 9, Financial Instruments (effective 1 January 2018)

 

IFRS 16, Leases (effective 1 January 2019)

 

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Annual improvements 2014-2016 cycle









Amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards (effective 1 January 2018)

 


Amendments to IFRS 12, Disclosure of Interests in Other Entities (effective 1 January 2017)

 




Amendments to IAS 28, Investments in Associates and Joint Ventures (effective 1 January 2018)

 



A number of new and amended IFRS's have been adopted in the period, none had any significant impact on the Group's financial statements.

 

Other than IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases, the adoption of standards, amendments and interpretations which have been issued but are not yet effective is not expected to have a material impact on the Group's financial statements.

 

IFRS 15, effective for the 2019 fiscal year introduces additional guidance surrounding performance obligations within sales contracts and the timing of revenue recognition. In 2016 the Group commenced a project to evaluate the impact of IFRS 15 but due to the complexity of this new accounting standard and the number of different revenue streams in the Group, the impact is still being evaluated.

 

IFRS 16, effective for the 2020 fiscal year will require lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value eliminating the distinction between operating and finance leases. The new standard will also replace the operating lease expense with a depreciation charge for the leased assets and an interest expense on the corresponding lease liability. Lessors will continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The Group is in the process of assessing the impact of this standard.

 


Business combinations










The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of fair values of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the Consolidated Income Statement as incurred.

 


Where the consideration for an acquisition includes any asset or liability resulting from a contingent arrangement, this is measured at its discounted fair value on the acquisition date. Subsequent changes in such fair values are adjusted through the Consolidated Income Statement in Financing. All other changes in the fair value of contingent consideration classified as an asset or liability are measured at fair value at each reporting date and changes in fair value are recognised in profit or loss. Changes in the fair value of contingent consideration classified as equity are not recognised.


Put options granted to non-controlling interests are recorded at present value as a reduction in equity on initial recognition, as the arrangement represents a transaction with equity holders. Changes in value after initial recognition are recorded in the Consolidated Income Statement in Financing.

 


If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the date of the acquisition that, if known, would have affected the amounts recognised as of that date.

 


The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is a maximum of one year.

 


Business combinations achieved in stages









Where a business combination is achieved in stages, the Group's previously held interests in the acquired entity are remeasured to fair value at the date the Group attains control and the resulting gain or loss is recognised in the Consolidated Income Statement. Amounts arising from interests in the acquiree prior to the acquisition date that were recognised in other comprehensive income are reclassified to the Consolidated Income Statement where such treatment would be appropriate if the interest were disposed of.

 


Purchases and sales of shares in a controlled entity








Where the Group's interest in a controlled entity increases, the non-controlling interests' share of net assets, excluding any allocation of goodwill, is transferred to retained earnings. Any difference between the cost of the additional interest and the existing carrying value of the non-controlling interests' share of net assets is recorded in retained earnings.

 


Where the Group's interest in a controlled entity decreases, but the Group retains control, the share of net assets disposed, excluding any allocation of goodwill, is transferred to the non-controlling interests. Any difference between the proceeds of the disposal and the existing carrying value of the net assets or liabilities transferred to the non-controlling interests is recorded in retained earnings.

 

 


Disposal of controlling interests where non-controlling interest retained






Where the Group disposes of a controlling interest but retains a non-controlling interest in the business, the Group accounts for the disposal of a subsidiary and the subsequent acquisition of a joint venture, associate or available-for-sale investment at fair value on initial recognition. On disposal of a subsidiary all amounts deferred in equity are recycled to the Consolidated Income Statement.

 


Contingent consideration receivable









Where the consideration for a disposal includes consideration resulting from a contingent arrangement, the contingent consideration receivable is discounted to its fair value, with any subsequent movement in fair value being recorded in the Consolidated Income Statement in Financing.

 


Discontinued operations










The Group presents the results from discontinued operations separately from those of continuing operations.  An operation is classed as discontinued if it has been, or is in the process of being disposed and represents either a separate major line of business or a geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or exit a major geographical area of operations.

 


Assets and liabilities of businesses held-for-sale








An asset or disposal group is classified as held-for-sale if its carrying amount is intended to be recovered principally through sale rather than continuing use, is available for immediate sale and is highly probable that the sale will be completed within 12 months of classification as held-for-sale.  Assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment is recognised in the Consolidated Income Statement and is first allocated to the goodwill associated with the disposal group and then to the remaining assets and liabilities on a pro rata basis. No further depreciation or amortisation is charged on non-current assets classified as held-for-sale from the date of classification.









 


DMGT plc









2

NOTES










Significant accounting policies continued








 


Accounting for subsidiaries










A subsidiary is an entity controlled by the Group. Control is achieved where the Group has power over an investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the returns.

 


The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the effective date control is obtained or up to the date control is relinquished, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

 


All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 




Non-controlling interests










Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein, either at fair value or at the non-controlling interest's share of the net assets of the subsidiary, on a case-by-case basis. The total comprehensive income of a subsidiary is apportioned between the Group and the non-controlling interest, even if it results in a deficit balance for the non-controlling interest.

 


Interests in joint ventures and associates









A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

 


An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

 


The post-tax results of joint ventures and associates are incorporated in the Group's results using the equity method of accounting. Under the equity method, investments in joint ventures and associates are carried in the Consolidated Statement of Financial Position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the joint venture and associate, less any impairment in the value of investment. Losses of joint ventures and associates in excess of the of the Group's interest in that joint venture or associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture or associate.

 


Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture or associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment.

 


Foreign currencies










For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than sterling are translated into sterling using exchange rates prevailing on the period end date. Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that operation is recognised in the Consolidated Income Statement as part of the gain or loss on sale.


The Group records foreign exchange differences arising on retranslation of foreign operations within the translation reserve in equity.

 


In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the exchange rate prevailing on the date of the transaction. At each period end date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the period end date.

 


Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rate prevailing on the date when fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 


Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Consolidated Income Statement for the period.

 


Goodwill, intangible assets and fair value adjustments arising on the acquisition of foreign operations after transition to IFRS are treated as part of the assets and liabilities of the foreign operation and are translated at the closing rate. Goodwill which arose pre-transition to IFRS is not translated.

 


In respect of all foreign operations, any cumulative exchange differences that have arisen before 4 October 2004, the date of transition to IFRS, were reset to £nil and will be excluded from the determination of any subsequent profit or loss on disposal.

 


Goodwill and intangible assets










Goodwill and intangible assets acquired arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Negative goodwill arising on an acquisition is recognised directly in the Consolidated Income Statement.

 


Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rates on the period end date.

 


On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the Consolidated Income Statement on disposal.

 


Impairment of goodwill










The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired. The Group has no other intangible assets with indefinite lives.

 


For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units (CGUs). If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit, prorated on the basis of the carrying amount of each asset in the unit, but subject to not reducing any asset below its recoverable amount. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 


When testing for impairment, the recoverable amounts for all of the Group's CGUs are measured at the higher of value in use or fair value less costs to sell. Value in use is calculated by discounting future expected cash flows. These calculations use cash flow projections based on Board-approved budgets and projections which reflect management's current experience and future expectations of the markets in which the CGU operates. Risk adjusted pre-tax discount rates used by the Group in its impairment tests range from 11.45 % to 19.2 % (2016 11.25 % to 25.0 %) the choice of rates depending on the risks specific to that CGU. The Directors' estimate of the Group's weighted average cost of capital is 8.0 % (2016 8.0 %). The cash flow projections consist of Board-approved budgets for the following year, together with forecasts for up to four additional years and nominal long-term growth rates beyond these periods. The nominal long-term growth rates range between 1.5 % and 3.0 % (2016 1.0 % and 5.0 %) and vary with management's view of the CGU's market position, maturity of the relevant market and do not exceed the long-term average growth rate for the market in which the CGU operates.

 


An impairment loss recognised for goodwill is charged immediately in the Consolidated Income Statement and is not subsequently reversed.

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Research and development expenditure









Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from the Group's development activity, including software for internal use, is recognised only if the asset can be separately identified, it is probable the asset will generate future economic benefits, the development cost can be measured reliably, the project is technically feasible and the project will be completed with a view to sell or use the asset. Additionally, guidance in Standing Interpretations Committee (SIC) 32 has been applied in accounting for internally developed website development costs.

 


Internally generated intangible assets are amortised on a straight-line basis over their estimated useful lives, when the asset is available for use, and are reported net of impairment losses. Where no internally generated intangible asset can be recognised, such development expenditure is charged to the Consolidated Income Statement in the period in which it is incurred.

 


Licences










Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives, being three to five years.

 


Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate economic benefits exceeding costs and directly attributable overheads, are capitalised as intangible assets.

 


Computer software which is integral to a related item of hardware equipment is accounted for as property, plant and equipment.

 


Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

 



Other intangible assets










Other intangible assets with finite lives are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the Consolidated Income Statement on straight-line basis over the estimated useful lives of the intangible assets from the date they become available for use. The estimated useful lives are as follows:

 

 


Publishing rights, mastheads and titles



 5 - 30 years






Brands




 3 - 20 years






Market and customer-related databases and customer relationships

 3 - 20 years






Computer software




 2 - 5 years





 


Amortisation of intangibles not arising on business combinations is included within operating profit in the Consolidated Income Statement.

 


Impairment of intangible assets










At each period end date, reviews are carried out of the carrying amounts of tangible and intangible assets and goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount, which is the higher of value in use and fair value less costs to sell, of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, value in use estimates are made based on the cash flows of the CGU to which the asset belongs.

 


If the recoverable amount of an asset or CGU is estimated to be less than its net carrying amount, the net carrying amount of the asset or CGU is reduced to its recoverable amount. Impairment losses are recognised immediately in the Consolidated Income Statement.

 


The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods, for an asset other than goodwill, may no longer exist or may have decreased. If any such indication exists, the Group estimates the recoverable amount of that asset. In assessing whether there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill may no longer exist or may have decreased, the Group considers, as a minimum, the following indications:

 


(i) whether the asset's market value has increased significantly during the period;

 

(ii) whether any significant changes with a favourable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; and

 

(iii) whether market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset's value in use and increase the asset's recoverable amount materially.

 


Property, plant and equipment










Land and buildings held for use are stated in the Consolidated Statement of Financial Position at their cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

 


Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.

 


Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

 


Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

 


The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the Consolidated Income Statement.

 


Depreciation is charged so as to write off the cost of assets, other than property, plant and equipment under construction using the straight-line method, over their estimated useful lives as follows:

 

 


Freehold buildings and long leasehold properties

50 years







Short leasehold premises


the term of the lease






Plant and equipment


3 - 25 years







Depreciation is not provided on freehold land







 


Inventory










Inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. The Group uses the Average Cost method in the dmg media segment for newsprint and the First In First Out method for all other inventories.

 


Exhibitions, training and event costs









Directly attributable costs relating to future exhibitions, training and events are deferred within work in progress and measured at the lower of cost and net realisable value. These costs are charged to the Consolidated Income Statement when the exhibition, training or event takes place.

 


Pre-publication costs










Pre-publication costs represent direct costs incurred in the development of titles prior to their publication. These costs are recognised as work in progress on the Consolidated Statement of Financial Position to the extent that future economic benefit is virtually certain and can be measured reliably. These are recognised in the Consolidated Income Statement on publication.

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Marketing costs










Marketing and promotional costs are charged to the Consolidated Income Statement in the period in which they are incurred.

 


Cash and cash equivalents










Cash and cash equivalents shown in the Consolidated Statement of Financial Position includes cash, short-term deposits and other short-term highly liquid investments with an original maturity of three months or less. For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents are as defined above, net of bank overdrafts.

 


Revenue










Revenue is stated at the fair value of consideration, net of value added tax, trade discounts and commission where applicable and is recognised using methods appropriate for the Group's businesses.

 

Where revenue contracts have multiple elements (such as software licences, data subscriptions and support), all aspects of the transaction are considered to determine whether these elements can be separately identified. Where transaction elements can be separately identified and revenue can be allocated between them on a fair and reliable basis, revenue for each element is accounted for according to the relevant policy below. Where transaction elements cannot be separately identified, revenue is recognised over the contract period.

 

The dmg media segment enters into agreements with advertising agencies and certain clients, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency or client based on the level of agency spend over the contract period.

 


The principal revenue recognition policies, as applied by the Group's major businesses, are as follows:

 

• subscriptions revenue, including revenue from information services, is recognised over the period of the subscription or contract;

 

• publishing and circulation revenue is recognised on issue of the publication or report;

 

• advertising revenue is recognised on issue of the publication or over the period of the online campaign;

 

• contract print revenue is recognised on completion of the print contract;

 

• exhibitions, training and events revenues are recognised over the period of the event;

 

• software revenue is recognised on delivery of the software or the technology or over a period of time where the transaction is a licence (the licence term). If support is unable to be separately identified from hosting and revenue is unable to be allocated on a  fair and reliable basis, support  revenue is recognised over the licence term. Commissions paid to acquire software and services contracts are capitalised in prepayments and recognised over the term of the contract;

 

• support revenue associated with software licences and subscriptions is recognised over the term of the support contract; and

 

• long-term contract revenue is recognised using the percentage of completion method according to the percentage of work completed at the period end date.

 


Adjusted measures










The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits which management believe to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings.

 


Such items would include, but are not limited to, closure costs, costs associated with business combinations, gains and losses on the disposal of businesses, finance costs relating to premia on bond buy backs, fair value movements, exceptional operating costs, impairment of goodwill and amortisation and impairment of intangible assets arising on business combinations.

 


The Board and management team believe these adjusted results, used in conjunction with statutory IFRS results, give a greater insight into the financial performance of the Group and the way it is managed.  Similarly, adjusted results are used in setting management remuneration. 

 


A description of each adjustment is set out in the Financial Review together with a reconciliation of operating profit to adjusted operating profit.

 


See note 10 for a reconciliation of adjusted profit before and after tax.

 






Other gains and losses










Other gains and losses comprise profit or loss on sale of trading investments, profit or loss on sale of property, plant and equipment, impairment of available-for-sale assets, profit or loss on sale of businesses and profit or loss on sale of joint ventures and associates.

 


EBITDA










The Group discloses EBITDA, being adjusted operating profit before depreciation of property, plant and equipment and investment property. EBITDA is broadly used by analysts, rating agencies, investors and the Group's banks as part of their assessment of the Group's performance. A reconciliation of EBITDA from operating profit is shown in note 11 and the ratio of net debt to EBITDA is disclosed in note 17.

 


Leasing










Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases.

 


Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the Consolidated Statement of Financial Position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the Consolidated Income Statement.

 


Rentals payable under operating leases are charged to the Consolidated Income Statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

 


Dividends










Dividend income from investments is recognised when the shareholders' rights to receive payment have been established. Dividends are recognised as a distribution in the period in which they are approved by the shareholders. Interim dividends are recorded in the period in which they are paid.

 


Borrowing costs










Unless capitalised under IAS 23, Borrowing Costs, all borrowing costs are recognised in the Consolidated Income Statement in the period in which they are incurred. Finance charges, including premia paid on settlement or redemption and direct issue costs and discounts related to borrowings, are accounted for on an accruals basis and charged to the Consolidated Income Statement using the effective interest method.

 

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Retirement benefits










Pension scheme assets are measured at market value at the period end date. Scheme liabilities are measured using the projected unit credit method and discounted at a rate reflecting current yields on high-quality corporate bonds having regard to the duration of the liability profiles of the schemes.

 


For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities is recognised as an asset or liability on the Consolidated Statement of Financial Position. Actuarial gains and losses arising in the year are taken to the Consolidated Statement of Comprehensive Income. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out triennially. In accordance with the advice of independent qualified actuaries in assessing whether to recognise a surplus, the Group has regard to the principles set out in IFRIC 14.

 


Other movements in the net surplus or deficit are recognised in the Consolidated Income Statement, including the current service cost, any past service cost and the effect of any curtailment or settlements. The interest cost less the expected return on assets is also charged to the Consolidated Income Statement within net finance costs.

 


Following the adoption of FRS 101 and FRS 102  in the prior year, the defined benefit pension schemes' deficits have been allocated to Group companies on a buy-out basis - that is an estimate of the liabilities and assets of the defined benefit schemes as at 30 September.

 


The Group's contributions to defined contribution pension plans are charged to the Consolidated Income Statement as they fall due.

 


Taxation










Income tax expense represents the sum of current tax and deferred tax for the year.

 





The current tax payable or recoverable is based on the taxable profit for the year. Taxable profit differs from profit as reported in the Consolidated Income Statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group's liability for current tax is calculated using the UK and foreign tax rates that have been enacted or substantively enacted by the period end date.

 


Current tax assets and liabilities are set off and stated net in the Consolidated Statement of Financial Position when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority or on the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.

 


Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition other than in a business combination of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 


Deferred tax liabilities are recognised for taxable temporary differences arising in investments in subsidiaries, joint ventures and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 


Goodwill arising on business combinations also includes amounts corresponding to deferred tax liabilities recognised in respect of acquired intangible assets. A deferred tax liability is recognised to the extent that the fair value of the assets for accounting purposes exceeds the value of those assets for tax purposes and will form part of the associated goodwill on acquisition.

 


The carrying amount of deferred tax assets is reviewed at each period end date, and is reduced or increased as appropriate to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered, or it becomes probable that sufficient taxable profits will be available.

 


Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the period end date, and is not discounted.

 


Deferred tax assets and liabilities are set off when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

 


Tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity.

 


Actual tax liabilities or refunds may differ from those anticipated due to changes in tax legislation, differing interpretations of tax legislation and uncertainties surrounding the application of tax legislation. In situations where uncertainties exist, provision is made for contingent tax liabilities and assets when it is more likely than not that there will be a cash impact. These provisions are made for each uncertainty individually on the basis of management judgement following consideration of the available relevant information. The measurement basis adopted represents the best predictor of the resolution of the uncertainty which is usually based on the most likely cash outflow.  The company reviews the adequacy of these provisions at the end of each reporting period and adjusts them based on changing facts and circumstances.

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Financial instruments










Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

 


Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position when there is a legally enforceable right to settle on a net basis, or realise the asset and liability simultaneously and where the Group intends to net settle.

 


Financial assets










Trade receivables










Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

 


Available-for-sale investments










Investments and financial assets are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are measured at fair value, including transaction costs.

 


Investments are classified as either fair value through profit or loss or available-for-sale. Where securities are held-for-trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period.

 


The fair value of listed securities is determined based on quoted market prices. Unlisted securities are recorded at cost less provision for impairment, as since there is no active market upon which they are traded, their fair values cannot be reliably measured. The recoverable amount is determined by discounting future cash flows to present value using market interest rates.

 


Financial liabilities and equity instruments









Trade payables










Trade payables are non-interest bearing and are stated at their nominal value.

 





Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below:

 


Capital market and bank borrowings









Interest bearing loans and overdrafts are initially measured at fair value (which is equal to net proceeds at inception), and are subsequently measured at amortised cost, using the effective interest rate method. A portion of the Group's bonds are subject to fair value hedge accounting as explained below and this portion is adjusted for the movement in the hedged risk to the extent hedge effectiveness is achieved. Any difference between the proceeds, net of transaction costs and the settlement or redemption of borrowings is recognised over the term of the borrowing.

 


Equity instruments










Derecognition










The Group derecognises a financial asset, or a portion of a financial asset, from the Consolidated Statement of Financial Position where the contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.

 


Derivative financial instruments and hedge accounting







Derivative financial instruments are used to manage exposure to market risks. The principal derivative instruments used by the Group are foreign currency swaps, interest rate swaps, foreign exchange forward contracts and options. The Group does not hold or issue derivative financial instruments for trading or speculative purposes.

 


Changes in the fair value of derivative instruments which do not qualify for hedge accounting are recognised immediately in the Consolidated Income Statement.

 


Where the derivative instruments do qualify for hedge accounting, the following treatments are applied:

 



Fair value hedges










Changes in the fair value of the hedging instrument are recognised in the Consolidated Income Statement for the year together with the changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. When the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting, hedge accounting is discontinued.

 


Cash flow hedges










Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the Consolidated Income Statement.

 


If a hedged firm commitment or forecast transaction results in the recognition of a non-financial asset or liability, then, at the time that the asset or liability is recognised, the associated gains and losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability.

 


For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the Consolidated Income Statement in the same period in which the hedged item affects the Consolidated Income Statement.

 


Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, revoked, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss previously recognised in equity is included in the Consolidated Income Statement for the period.

 


Net investment hedges










Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity in the translation reserve. Gains and losses arising from changes in the fair value of the hedging instruments are recognised in equity to the extent that the hedging relationship is effective. Any ineffectiveness is recognised immediately in the Consolidated Income Statement for the period.

 


Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Gains and losses accumulated in the translation reserve are included in the Consolidated Income Statement on disposal of the foreign operation.

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Provisions










Provisions are recognised when the Group has a present obligation, legal or constructive, as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the period end date, and are discounted to present value where the effect is material.

 


Onerous contract provisions are recognised for losses on contracts where the forecast costs of fulfilling the contract throughout the contract period exceed the forecast income receivable. The provision is calculated based on cash flows to the end of the contract. Vacant property provisions are recognised when the Group has committed to a course of action that will result in the property becoming vacant.

 


Share-based payments










The Group issues equity-settled share-based payments to certain Directors and employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.

 


Fair value is measured using a binomial pricing model which is calibrated using a Black-Scholes framework. The expected life used in the models has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.

 


A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each period end date for cash-settled share-based payments.

 


Investment in own shares










Treasury shares










Where the Company purchases its equity share capital as Treasury Shares, the consideration paid, including any directly attributable incremental costs (net of income taxes) is recorded as a deduction from shareholders' equity until such shares are cancelled, reissued or disposed of.  Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is recognised in equity, with any difference between the proceeds from the sale and the original cost being taken to retained earnings.

 


Employee Benefit Trust










The Company has established an Employee Benefit Trust (EBT) for the purpose of purchasing shares in order to satisfy outstanding share options and potential awards under long-term incentive plans.  The assets of the Trust comprise shares in DMGT plc and cash balances.  The Trust is administered by independent trustees and its assets are held separately from those of the Group. The Group bears the major risks and rewards of the assets held by the EBT until the shares vest unconditionally with employees.  The Group recognises the assets and liabilities of the Trust in the consolidated financial statements and shares held by the Trust are recorded at cost as a deduction from shareholders' equity.  Consideration received for the sale of shares held by the Trust is recognised in equity, with any difference between the proceeds from the sale and the original cost being taken to retained earnings.

 


Critical accounting judgements and key sources of estimation uncertainty






In addition to the judgement taken by management in selecting and applying the accounting policies set out above, the Directors have made the following judgements concerning the amounts recognised in the consolidated financial statements.

 


Adjusted measures










The Group presents adjusted operating profit and adjusted profit before tax by making adjustments for costs and profits which management believe to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings.

 


Such items would include, but are not limited to, closure costs, costs associated with business combinations, gains and losses on the disposal of businesses, finance costs relating to premia on bond buy backs, fair value movements, exceptional operating costs, impairment of goodwill and amortisation and impairment of intangible assets arising on business combinations.

 


The Board and management team believe these adjusted results, used in conjunction with statutory IFRS results, give a greater insight into the financial performance of the Group and the way it is managed.  Similarly, adjusted results are used in setting management remuneration. 

 


A description of each adjustment is set out in the Financial Review together with a reconciliation of operating profit to adjusted operating profit.

 


See note 10 for a reconciliation of adjusted profit before and after tax.

 






The following represent critical judgements, involving estimations, that have the most significant effect on the amounts recognised in the financial statements :


Investment in Euromoney










Following loss of control the Group has also considered factors which may indicate de facto control. The Group has determined that it does not have de facto control over Euromoney since it cannot block any ordinary resolutions, which comprise the majority of corporate actions, has no control over the remuneration of Euromoney's directors and has no control over Euromoney's day-to-day operations nor budgets. In addition, the Group has no material trading activities or relationships which are critical for Euromoney to carry out its business. The Group's relationship with Euromoney is monitored on an ongoing basis to ensure no change in this assessment.

 


Forecasting










The Group prepares medium-term forecasts based on Board-approved budgets and up to four-year outlooks. These are used to support judgements made in the preparation of the Group's financial statements including the recognition of deferred tax assets, going concern assessment and for the purposes of impairment reviews. Longer-term forecasts use long-term growth rates applicable to the relevant businesses.

 


Impairment of goodwill and intangible assets








Determining whether goodwill and intangible or other assets are impaired or whether a reversal of an impairment should be recorded requires a comparison of the balance sheet carrying value with the recoverable amount of the asset or CGU. The recoverable amount is the higher of the value in use and fair value less costs to sell.

 


The value in use calculation requires management to estimate the future cash flows expected to arise from the asset or CGU and calculate the net present value of these cash flows using a suitable discount rate. A key area of judgement is deciding the long-term growth rate and the operating cash flows of the applicable businesses and the discount rate applied to those cash flows (note 13). The carrying amount of goodwill and intangible assets at the year end was £576.1 million (2016 £1,480.8 million) after a net impairment charge of £213.4 million (2016 £53.6 million) was recognised during the year (note 13).

 


DMGT plc










NOTES









2

Significant accounting policies continued








 


Acquisitions and intangible assets










The Group's accounting policy on the acquisition of subsidiaries is to allocate purchase consideration to the fair value of identifiable assets, liabilities and contingent liabilities acquired with any excess consideration representing goodwill. Determining the fair value of assets, liabilities and contingent liabilities acquired requires significant estimates and assumptions, including assumptions with respect to cash flows and unprovided liabilities and commitments, including in respect to tax, to be used. The Group recognises intangible assets acquired as part of a business combination at fair value at the date of the acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future cash flows generated by the assets and the selection of an appropriate discount rate. Additionally, management must estimate the expected useful economic lives of intangible assets and charge amortisation on these assets accordingly.

 


Contingent consideration and put options payable








Estimates are required in respect of the amount of contingent consideration and put options payable on acquisitions, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The Directors review the amount of contingent consideration and put options likely to become payable at each period end date, the major assumption being the level of future profits of the acquired business. The Group has made a provision for outstanding contingent consideration amounting to £17.0 million (2016 £52.6 million) and put options payable amounting to £8.0 million (2016 £44.8 million).

 


Taxation










Being a multinational Group with tax affairs in many geographic locations inherently leads to a highly complex tax structure which makes the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Group and actual tax liabilities or refunds may differ from those anticipated due to changes in tax legislation, differing interpretations of tax legislation and uncertainties surrounding the application of tax legislation. Such issues can take several years to resolve.

 


The Group accounts for unresolved issues based on its best estimate of the final outcome, however the inherent uncertainty regarding these items means that the eventual resolution could differ significantly from the accounting estimates and, therefore, impact the Group's results and future cash flows. In situations where uncertainties exist, provision is made for contingent tax liabilities and assets when it is more likely than not that there will be a cash impact. These provisions are made for each uncertainty individually on the basis of management judgement following consideration of the available relevant information. The measurement basis adopted represents the best predictor of the resolution of the uncertainty which is usually based on the most likely cash outflow.  The company reviews the adequacy of these provisions at the end of each reporting period and adjusts them based on changing facts and circumstances.

 


In addition, the Group makes estimates regarding the recoverability of deferred tax assets relating to losses based on forecasts of future taxable profits which are, by their nature, uncertain. In the US there has been a significant reduction in forecast future profits since March 2017 and accordingly it is no longer estimated that the deferred tax asset in respect of US deferred interest will be recovered in the foreseeable future.  This has resulted in a significant exceptional write off of the deferred tax asset.  If the forecast future profits in the US increase in future periods then the level of the recognised deferred tax asset may increase.

 


Retirement benefit obligations










The cost of defined benefit pension plans is determined using actuarial valuations prepared by the Group's actuaries. This involves making certain assumptions concerning discount rates, future salary increases and  mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. The assumptions and the resulting estimates are reviewed annually and, when appropriate, changes are made which affect the actuarial valuations and, hence, the amount of retirement benefit expense recognised in the Consolidated Income Statement and the amounts of actuarial gains and losses recognised in the Consolidated Statement of Changes in Equity. The carrying amount of the retirement benefit obligation at 30 September 2017 was a surplus of £62.4 million (2016 deficit of £246.0 million). The assumptions used are given in note 24.

 


DMGT plc










NOTES









3

Segment analysis









 


The Group's business activities are split into four operating divisions: RMS, dmg information, dmg events and dmg media. These divisions are the basis on which information is reported to the Group's Chief Operating Decision Maker, which has been determined to be the Group Board. The segment result is the measure used for the purposes of resource allocation and assessment and represents profit earned by each segment, including share of results from joint ventures and associates but before exceptional operating costs, amortisation of acquired intangible assets arising on business combinations, impairment charges, other gains and losses, net finance costs and taxation.

 


The results from the Group's dmg events segment are impacted by the seasonality of exhibitions and conferences held in each accounting period. The impact of this seasonality and details of the types of products and services from which each segment derives its revenues are included within the business review.

 


The accounting policies applied in preparing the management information for each of the reportable segments are the same as the Group's accounting policies described in notes 1 and 2.

 


Year ended 30 September

2017




Note

Total and external revenue

Segment operating profit

Less operating profit/(loss) of joint ventures and associates

Adjusted operating profit







£m

£m

£m

£m


RMS





233.2

  32.0

(0.8)

  32.8


dmg information





530.7

  69.2

0.1

  69.1


dmg events





117.0

  30.6

  -

  30.6


Euromoney





  95.2

  67.3

48.0

  19.3


dmg media





683.4

  99.2

22.0

  77.2







  1,659.5

298.3

69.3

229.0


Corporate costs








(30.7)


Discontinued operations




 21, (i)

(95.2)

(67.3)

(48.0)

(19.3)







  1,564.3





Adjusted operating profit








179.0


Exceptional operating costs, impairment of internally generated and acquired computer software, property, plant and equipment

(166.2)


Impairment of goodwill and acquired intangible assets arising on business combinations


(131.7)


Amortisation of acquired intangible assets arising on business combinations



(26.5)


Operating loss before share of results of joint ventures and associates




(145.4)


Share of results of joint ventures and associates


 4




16.9


Total operating loss








(128.5)


Other gains and losses




 5




14.0


Loss before investment revenue, net finance costs and tax





(114.5)


Investment revenue




 6




  2.5


Net finance costs




 7




(0.3)


Loss before tax








(112.3)


Tax




 8




(64.7)


Profit from discontinued operations



  21




519.3


Profit for the year








342.3

 

(i)

Revenue and adjusted operating profit relating to the discontinued operations of Euromoney have been deducted in order to reconcile total segment result to Group profit before tax from continuing operations.

 


An analysis of the amortisation and impairment of goodwill and intangible assets, exceptional operating costs and impairment of property, plant and equipment and investment property by segment is as follows:

 


Year ended 30 September

2017



Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Impairment of internally generated and acquired computer software

Exceptional operating costs

Impairment of property, plant and equipment (i)














Note

£m

£m

£m

£m

£m

£m


RMS



(17.8)

  -

  -

  -

(2.8)

  -


dmg information



(20.6)

(26.1)

(131.7)

(81.4)

(26.5)

  -


dmg events



(0.1)

(0.2)

  -

  -

(2.6)

  -


Euromoney



(0.9)

(5.4)

  -

  -

(0.9)

  -


dmg media



(4.8)

(0.2)

  -

(0.3)

(8.8)

(42.0)





(44.2)

(31.9)

(131.7)

(81.7)

(41.6)

(42.0)


Corporate costs



  -

  -

  -

  -

(1.8)

  -





(44.2)

(31.9)

(131.7)

(81.7)

(43.4)

(42.0)


Relating to discontinued operations

  21

0.9

5.4

  -

  -

 0.9

  -


Continuing operations



(43.3)

(26.5)

(131.7)

(81.7)

(42.5)

(42.0)

 

(i)

Following continued declines in the UK printing market the Group has decided to close its Didcot print site, resulting in an impairment charge of £41.3 million.

 


The Group's exceptional operating costs are analysed as follows :






 


Year ended 30 September

2017




Severance costs

Consultancy charges

Other restructuring costs

Legal fees

Total









(i)







£m

£m

£m

£m

£m


RMS




0.5

(3.3)

  -

  -

(2.8)


dmg information




(11.2)

(1.9)

(0.5)

(12.9)

(26.5)


dmg events




  -

  -

(2.6)

  -

(2.6)


Euromoney




  -

(0.1)

  -

(0.8)

(0.9)


dmg media




(4.0)

  -

(4.8)

  -

(8.8)






(14.7)

(5.3)

(7.9)

(13.7)

(41.6)


Corporate costs




(1.8)

  -

  -

  -

(1.8)






(16.5)

(5.3)

(7.9)

(13.7)

(43.4)


Relating to discontinued operations



  -

0.1

  -

0.8

  0.9


Continuing operations




(16.5)

(5.2)

(7.9)

(12.9)

(42.5)

 


The Group's tax charge includes a related credit of £11.1 million in relation to these exceptional operating costs.

 

(i)

Exceptional charges in the dmg information segment include dispute settlements and fees paid to the Group's lawyers in defence of various claims brought against businesses in this segment.

 

The charge relates principally to a claim by Costar Inc. (CoStar) against Xceligent, Inc. (Xceligent) asserting, inter alia, misuse by Xceligent of CoStar's intellectual property. Xceligent has filed a motion to dismiss on the basis that CoStar's actions are contrary to a Federal Trade Commission (FTC) consent order which was put in place when Xceligent was spun out of CoStar's acquisition of LoopNet. The damages claimed have not been quantified and the Group has made no provision for any claim.

 


DMGT plc











NOTES










3

Segment analysis continued










 


An analysis of the depreciation of property, plant and equipment and investment property, research costs, investment revenue, and net finance costs by segment is as follows:

 


Year ended 30 September

2017






Depreciation of property, plant and equipment

Research costs

Investment revenue

Net finance

costs










Note 6

Note 7







Note

£m

£m

£m

£m


RMS






(5.9)

(40.3)

 0.3

(0.1)


dmg information






(10.3)

(1.8)

 0.5

38.5


dmg events






(0.5)

  -

  -

  -


Euromoney






(0.8)

(2.5)

  -

(0.7)


dmg media






(16.8)

(1.4)

 1.5

(3.5)








(34.3)

(46.0)

 2.3

34.2


Corporate costs






(0.2)

  -

 0.2

(35.2)








(34.5)

(46.0)

 2.5

(1.0)


Relating to discontinued operations




21

 0.8

 2.5

  -

  0.7


Continuing operations






(33.7)

(43.5)

2.5

(0.3)













Year ended 30 September

2016






Total and external revenue

Segment operating profit

Less operating profit/(loss) of joint ventures and associates

Adjusted operating profit







Note

£m

£m

£m

£m


RMS






 205.0

35.5

(0.5)

 36.0


dmg information






 498.2

76.3

(0.3)

 76.6


dmg events






 105.4

29.0

  -

 29.0


Euromoney






 403.1

 104.3

  4.3

  100.0


dmg media






 705.6

96.4

19.4

 77.0








 1,917.3

341.5

22.9

318.6


Corporate costs





 (i)




(41.6)


Discontinued operations





 21, (ii)

(403.1)

(104.3)

(4.3)

(100.0)








 1,514.2





Adjusted operating profit









  177.0


Exceptional operating costs, impairment of internally generated and acquired computer software, property, plant and equipment

(41.8)


Impairment of goodwill and acquired intangible assets arising on business combinations


(24.9)


Amortisation of acquired intangible assets arising on business combinations




(24.7)


Operating profit before share of results of joint ventures and associates




85.6


Share of results of joint ventures and associates



 4




4.9


Total operating profit









90.5


Other gains and losses





 5




130.8


Profit before investment revenue, net finance costs and tax





221.3


Investment revenue





 6




2.2


Net finance costs





 7




(21.8)


Profit before tax









201.7


Tax





 8




(19.9)


Profit from discontinued operations




  21




32.4


Profit for the year









214.2

 

(i)

Included within corporate costs is a credit of £0.9 million which adjusts the pensions charge recorded in each operating segment from a cash rate to the net service cost in accordance with IAS 19 (Revised), Employee Benefits.

 

(ii)

Revenue and adjusted operating profit relating to the discontinued operations of Euromoney businesses have been deducted in order to reconcile total segment result to Group profit before tax from continuing operations.

 


An analysis of the amortisation and impairment of goodwill and intangible assets, exceptional operating costs and impairment of property, plant and equipment and investment property by segment is as follows:

 


Year ended 30 September

2016





Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Exceptional operating costs

Impairment of property, plant and equipment






Note

£m

£m

£m

£m

£m


RMS





(6.2)

  -

  -

(2.7)

  -


dmg information





(13.3)

(23.7)

  -

(5.7)

  -


dmg events





  -

(0.7)

  -

(0.9)

  -


Euromoney





(3.7)

(17.6)

(28.7)

(12.9)

  -


dmg media





(4.4)

(0.3)

(24.9)

(23.6)

(0.2)







(27.6)

(42.3)

(53.6)

(45.8)

(0.2)


Corporate costs





  -

  -

  -

(8.7)

  -







(27.6)

(42.3)

(53.6)

(54.5)

(0.2)


Relating to discontinued operations



  21

 3.7

17.6

28.7

12.9

  -


Continuing operations





(23.9)

(24.7)

(24.9)

(41.6)

(0.2)

 


In Euromoney the impairment charge includes £12.9 million relating to Indaba, £8.2 million to Total Derivatives, £5.9 million to Hedge Fund Intelligence and £1.7 million to Euromoney Indices reflecting the challenging market conditions in the energy and financial sectors and weakness in the commodity markets .

 

In dmg media the impairment charge of £24.9 million relates to Elite Daily following continued poor performance in that business.

 

The Group's tax charge includes a related credit of £2.8 million in respect of impairment of goodwill and intangible assets.

 

 


Year ended 30 September

2016






Depreciation of property, plant and equipment

Research costs

Investment revenue

Net finance

costs










Note 6

Note 7







Note

£m

£m

£m

£m


RMS






(6.6)

(28.7)

  0.2

  -


dmg information






(9.5)

(7.2)

  0.2

27.0


dmg events






(0.5)

  -

  -

  -


Euromoney






(2.8)

(8.3)

0.3

(1.1)


dmg media






(16.8)

(1.8)

  1.8

(3.5)








(36.2)

(46.0)

2.5

22.4


Corporate costs






  -

  -

  -

(45.3)








(36.2)

(46.0)

  2.5

(22.9)


Relating to discontinued operations




  21

  2.8

  8.3

(0.3)

1.1


Continuing operations






(33.4)

(37.7)

2.2

(21.8)

 


DMGT plc










NOTES









3

Segment analysis continued










The Group's revenue comprises sales excluding value added tax, less discounts and commission where applicable and is analysed as follows:

 















Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2016

Year ended 30 September

2016

Year ended 30 September

2016





Total

Discontinued operations

(note 21)

Continuing operations

Total

Discontinued operations

(note 21)

Continuing operations





£m

£m

£m

£m

£m

£m


Print advertising



203.6

7.1

196.5

247.9

39.3

208.6


Digital advertising



142.7

2.0

140.7

131.6

  -

131.6


Circulation



307.8

  -

307.8

314.7

  -

314.7


Subscriptions



517.4

63.5

453.9

623.2

232.4

390.8


Events, conferences and training



140.9

24.7

116.2

233.9

127.8

106.1


Transactions and other



347.1

(2.1)

349.2

366.0

3.6

362.4





 1,659.5

95.2

 1,564.3

1,917.3

403.1

1,514.2

 


Investment revenue is shown in note 6, and finance income in note 7.

 






Transactions and other within discontinued operations include a £3.8 million foreign exchange loss on forward contracts in the Euromoney segment.

 


By geographic area










The majority of the Group's operations are located in the United Kingdom, North America, rest of Europe, and Australia.

 


The analysis below is based on the location of companies in these regions. Export sales and related profits are included in the areas from which those sales are made.

 












 



Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2016

Year ended 30 September

2016

Year ended 30 September

2016





Total

Discontinued operations

(note 21)

Continuing operations

Total

Discontinued operations

(note 21)

Continuing operations





£m

£m

£m

£m

£m

£m


UK



 873.8

 30.9

 842.9

1,023.0

156.6

866.4


North America



 615.5

 50.6

 564.9

714.9

203.4

511.5


Rest of Europe



 43.0

4.4

 38.6

  47.6

  11.9

  35.7


Australia



 22.6

0.4

 22.2

  17.5

 2.5

15.0


Rest of the World



 104.6

8.9

 95.7

114.3

  28.7

  85.6





 1,659.5

 95.2

 1,564.3

1,917.3

403.1

1,514.2

 


The analysis below is based on the geographic location of customers in these regions.




 















Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2017

Year ended 30 September

2016

Year ended 30 September

2016

Year ended 30 September

2016





Total

Discontinued operations

(note 21)

Continuing operations

Total

Discontinued operations

(note 21)

Continuing operations





£m

£m

£m

£m

£m

£m


UK



 808.1

9.1

 799.0

891.2

50.9

840.3


North America



 557.9

 43.9

 514.0

638.0

184.6

453.4


Rest of Europe



 155.7

 18.6

 137.1

193.0

  73.0

120.0


Australia



 23.3

2.0

 21.3

  24.2

 6.7

  17.5


Rest of the World



 114.5

 21.6

 92.9

170.9

  87.9

  83.0





 1,659.5

 95.2

 1,564.3

1,917.3

403.1

1,514.2

 


The closing net book value of goodwill, intangible assets, property, plant and equipment and investment property is analysed by geographic area as follows:

 















At 30 September 2017

At 30 September 2016

At 30 September 2017

At 30 September 2016

At 30 September 2017

At 30 September 2016


 



Closing net book value of goodwill

Closing net book value of goodwill

Closing net book value of intangible assets

Closing net book value of intangible assets

Closing net book value of property, plant and equipment

Closing net book value of property, plant and equipment





(note 13)

(note 13)

(note 13)

(note 13)

(note 14)

(note 14)





£m

£m

£m

£m

£m

£m


UK



92.0

234.4

47.4

122.5

79.1

132.8


North America



 231.2

687.7

 145.7

345.4

19.3

36.6


Rest of Europe



 25.7

  30.2

 18.2

  25.0

3.3

3.8


Australia



2.3

 5.1

  -

 1.3

0.6

0.7


Rest of the World



 11.9

  24.2

1.7

 5.0

1.0

2.2





363.1

981.6

 213.0

499.2

103.3

176.1

 


DMGT plc









NOTES








4

Share of results of  joint ventures and associates






 

















Year ended 30 September

2017

Year ended 30 September

2016







Note

£m

£m


Share of adjusted operating (losses)/profits from operations of joint ventures


(0.1)

0.6


Share of adjusted operating profits from operations of associates


(i)

68.6

18.0


Share of profits before exceptional operating costs, amortisation, impairment of goodwill, interest and tax

68.5

18.6


Share of exceptional operating costs of associates




(6.7)

(3.1)


Share of amortisation of intangibles arising on business combinations of joint ventures

(0.1)

  -


Share of amortisation of intangibles arising on business combinations of associates


(17.1)

(4.8)


Share of associates' interest payable






(4.5)

(1.1)


Share of joint ventures' tax






  -

(0.3)


Share of associates' tax






(5.2)

(3.0)


Share of impairment of intangibles arising on business combinations of associates


(13.7)

  -


Impairment of carrying value of joint ventures




(ii)

(3.3)

(0.1)


Impairment of carrying value of associates




(iii)

(1.0)

(1.3)








16.9

4.9


Share of associates' items of other comprehensive income




(9.7)

  -








7.2

4.9











Share of results from operations of joint ventures




(0.2)

0.3


Share of results from operations of associates





21.4

6.0


Impairment of carrying value of joint ventures




(ii)

(3.3)

(0.1)


Impairment of carrying value of associates




(iii)

(1.0)

(1.3)








16.9

4.9


Share of associates' items of other comprehensive income




(9.7)

  -








7.2

4.9

 

(i)

Share of adjusted operating profits from associates includes £47.2 million from the Group's interest in Euromoney and £24.7 million (2016 £21.4 million) from the Group's interest in ZPG Plc in the dmg media segment.

 

(ii)

Represents a £3.0 million write-down in the carrying value of Knowlura in the dmg information segment and a £0.3 million write down in the carrying value of Artirix in the dmg media segment. In the prior period, represents a write-down in the carrying value of Mail Today Newspapers Pte Ltd in the dmg media segment.

 

(iii)

Represents a £0.5 million write down in the carrying value of Carspring in the dmg media segment and £0.5 million write down in the carrying value of iProf Learning Solutions in the dmg information segment. In the prior period, represents a write-down in the carrying value of Spaceway Storage Services UK Ltd in the dmg media segment.

 

5

Other gains and losses








 

















Year ended 30 September

2017

Year ended 30 September

2016







Note

£m

£m


Impairment of available-for-sale assets





(0.5)

  -


Impairment of held-for-sale-assets






(4.1)

  -


Profit on disposal of property, plant and equipment




  -

0.5


(Loss)/profit on sale and closure of businesses




  (i)

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