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RNS
UBM PLC  -  UBM   

Results for the twelve months ended 31.12.17

Released 07:00 28-Feb-2018

RNS Number : 1533G
UBM PLC
28 February 2018
 



 

28 February 2018: for immediate release

 

UBM LEI: 213800KLMH5SP3247C87

Results for the twelve months ended 31 December 2017

 

Events First delivers accelerating organic

growth and margin expansion

 

 

·      Group revenue up 16.2% at £1,002.9m (+13.3% at constant currency)

·      Annual Events revenue growth of 5.3% on an adjusted underlying basis1 and 3.6% on an underlying basis (2016: +3.1% and +1.0% respectively)

·      Allworld performance ahead of business case and integration progressing well

·      Adjusted operating profit1 up 25.3% to £294.2m 

·      Adjusted operating profit margin1 up 2.1%pts to 29.3% (+1.7%pt excluding 2017 pension gain)

·      Effective tax rate of 16.0%; unchanged by US Tax Cuts and Jobs Act

·      Adjusted earnings1 up 27.7% to £212.3m

·      Diluted adjusted EPS1 up 34.5% to 53.4p

·      Free cash flow1 of £204.1m up 27.9% and cash conversion1 of 100%

·      Net debt1 at 1.6 times EBITDA1 (2016: 2.3x2)

·      Final dividend of 18.0p per share declared; full year 2017 dividend of 23.5p, up 6.8% 

 

Continuing Results only

1 See page 27 for definition of non-IFRS metrics 

2 Proforma for Allworld Exhibitions

 

 

Tim Cobbold, CEO of UBM plc said:

 

"Over the last three years, Events First has focused UBM on the attractive events market and the team has built a high-quality events business with geographic breadth and strong brands, serving a wide range of industry sectors. 

 

"In 2017 we delivered a strong financial performance with Annual Events adjusted underlying revenue growth accelerating to 5.3%, further margin expansion and strong cashflow. We saw excellent growth in Asia in particular and growth in all our major verticals bar Fashion.

 

"We enter 2018, a biennial 'down' year, with good momentum in the business as the Events First strategy translates into performance."

 

 

Key financial information

 

Continuing operations

                      Revenue

 

Adjusted operating profit*

 

2017

£m

Underlying* change %

 Adjusted underlying*

change %

 

2017
£m

Margin

%

Margin
change

%pt

Annual

780.6

3.6%

5.3%

 

259.1

33.2%

+0.9%pts

Biennial

85.8

3.7%**

3.7%**

 

36.5

42.5%

+13.2%pts

Events

866.4

 

 

 

295.6

34.1%

+1.9%pts

 

 

 

 

 

 

 

 

Online

83.2

-2.6%

4.8%

 

 

 

 

Print

53.3

-19.1%

-11.6%

 

 

 

 

OMS

136.5

-9.8%

-2.2%

 

19.4

14.2%

-1.8%pts

 

 

 

 

 

 

 

 

Corporate costs

 

 

 

 

(20.8)

 

 

 

 

 

 

 

 

 

 

Group

1,002.9

1.4%

4.1%

 

294.2

29.3%

2.1%pts

                   

 

Adjusted EPS*

 2017

2016

Change %

Continuing - Diluted3

53.4p

39.7p

34.5%

Continuing - Diluted, post share consolidation basis4

53.4p

41.9p

27.4%

Total - Diluted3

53.4p

45.9p

16.3%

*    See page 27 for definition of non-IFRS metrics 

**  CAGR compared to 2015 editions

3)  Uses weighted average number of shares over the period of 397.2m (2016: 419.2m)

4)  Uses post consolidation number of shares of 397.4m for 2016

 

Group IFRS results

 

 

 2017

2016

 Change %

 

£m

£m

Change %

Continuing operations

 

 

 

Revenue

1,002.9

863.0

16.2%

 

 

 

 

Operating profit

212.0

152.7

38.8%

% margin

21.1%

17.7%

 

 

 

 

 

Profit after tax

151.7

97.3

55.9%

 

 

 

 

Diluted EPS

34.8p

20.1p

73.1%

Diluted weighted average no. of shares

397.2m

419.2m

 

 

 

 

 

Total Group

 

 

 

Profit after tax

159.5

504.5

-

 

 

 

 

Diluted EPS

36.8p

117.3p

-

Diluted weighted average no. of shares

397.2m

419.2m

 

 

 

Informa Offer

 

On 30 January 2018 the Board of UBM recommended the offer from Informa plc. The Board believes that the terms of the offer are compelling for UBM shareholders in that it represents an attractive valuation for UBM and allows UBM shareholders to participate in ongoing value creation from the combination.

 

The expected timetable for the recommended offer is set out below:

 

14 March 2018

Publication of Circular, Prospectus and Scheme Document

17 April 2018

Shareholder meetings and vote

20 April 2018

Proposed record date for final dividends

Q2 2018

Anticipated completion date in Q2 2018

 

Notes to business and financial review

 

Unless otherwise stated:

·     Underlying revenue growth measures are adjusted for the effects of acquisitions, disposals, foreign exchange movements and peripatetic and biennial events

·     Adjusted underlying growth measures additionally remove the impact of portfolio rationalisation

·     'Major' events refer to annual events generating more than £1m revenue

·     Biennial events take place once every two years

·     Biennial CAGR adjusts for the effects of acquisitions, disposals, foreign exchange movements and rationalisation           

·     Adjusted operating profit excludes amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on joint ventures and associates

·     Strategic opex relates to Events First strategy implementation 

 

See page 27 for explanation of non-IFRS items.

 

Contacts

 

Kate Postans

Head of Investor Relations & Corporate Communications

investorrelations@ubm.com communications@ubm.com

+44(0) 20 7921 5023

Caroline Daniel

Craig Breheny

Imran Jina

Brunswick Group

ubm@brunswickgroup.com

+44(0) 20 7404 5959

 

UBM will host a presentation today at 10.15am at the London Stock Exchange. A live webcast of the results presentation will be made available via UBM's website. To access the webcast please go to www.ubm.com/investor/results-and-reports. A recording of the webcast will also be available on-demand on UBM's website after 4pm.

 

 

Notes to Editors 

 

UBM plc is the largest pure-play B2B Events organiser in the world.

 

In an increasingly digital world, the value of connecting on a meaningful, human level has never been more important. At UBM, our deep knowledge and passion for the industry sectors we serve allow us to create valuable experiences where people can succeed. At our events people build relationships, close deals and grow their businesses.

 

Our 3,900+ people, based in more than 20 countries, serve more than 50 different industry sectors - from fashion to pharmaceutical ingredients. Our global networks, skilled, passionate people and market-leading events provide exciting opportunities for business people to achieve their ambitions. For more information, go to www.ubm.com; for UBM corporate news, follow us on Twitter at @UBM.

 

Forward Looking Statements 

 

This announcement may contain certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of UBM plc ("UBM") and its subsidiaries (the "Group") are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although UBM believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.

 

This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.

 

END

 

 

 

BUSINESS REVIEW

For the twelve months ended 31 December 2017

 

Strategic progress

 

UBM's financial performance reflects the attractive characteristics of the Events industry with good organic growth, supported by acquisitions, high margins and strong cash generation. In 2017 the improvement in performance reflected good progress against our strategic objectives; 

 

Growth: In 2017 the adjusted underlying growth for the Group increased from 2.1% to 4.1% driven by strong growth in events in China, India, South East Asia and Continental Europe. Notwithstanding challenges in the Fashion sector, the adjusted underlying growth of the Annual Events portfolio was 5.3% with underlying growth at 3.6%. Biennial growth (on an underlying basis) was 3.7% CAGR versus the last edition.

 

Attractive margin: During 2017 the Group's adjusted operating margin increased from 27.2% to 29.3%. This was driven by improved portfolio mix and the drop through from stronger underlying growth together with procurement savings and the usual margin benefit of a biennial 'up' year. Operating cash conversion was 100%.

 

Best platform: The Sales Excellence (SX) programme to implement a common sales model enabled by Salesforce technology made good progress rolling out across EMEA and into Asia. The parallel process for the marketing model, enabled with Eloqua (a marketing automation tool), has begun in EMEA too. We continue to derive further benefit by leveraging the common Oracle financials platform with harmonised, standardised management information. The increasing maturity of our platform enables efficient integration of bolt-on acquisitions and our newly opened Asia Shared Service Centre will provide further support in this region. 

 

Central to the Events First strategy and to delivering the strategic objectives, is a focus on enhancing the quality of the portfolio: organically (through improving performance), inorganically (through acquisition) and by rationalising and/or disposing of underperforming events and non-aligned OMS activities. 

 

In January 2017 we completed the final piece of the Allworld acquisition.  Allworld has further strengthened our market-leading position in Asia and secured a leadership position in the high-growth ASEAN region. The integration is progressing well with performance ahead of the business case. The ROI of 6.3% in 2017 is slightly ahead of our expectations and we expect to deliver ROI greater than the risk-adjusted WACC in 2019, as set out when we announced the acquisition. 

 

We made four bolt-on acquisitions during 2017 for £13.6m, as detailed on page 44. The pipeline for further acquisitions remains good, and since the year-end we have completed two acquisitions, Creativity in China and Canal Energia in Brazil, for a combined initial consideration of £9.6m.

 

2017 was the final year of the three-year programme to dispose of or rationalise smaller, lower-margin, lower-growth events and OMS activities that are not well-aligned to events.  During the year we rationalised or disposed of 37 events and various OMS activities which had generated £21.5m of Events revenue and £18.5m of OMS revenue in 2016. This programme has enhanced the group operating margin and contributed to group operating profit. Since the year-end we have disposed of some additional small media assets serving the US Fashion and UK Construction sectors. In 2017 these contributed £7.5m of revenue to OMS and £0.9m to Events.

 

Other portfolio improvements derived from a focus on "spotlight" (underperforming) events, from the second iteration of our "Event Plan" process and from the introduction of a more structured process around new launches. During 2017 we launched 21 new events, the largest being CPhI North America which, exceptionally, reached Platinum status (>£5m p.a.) in its first year.

 

Following the portfolio improvements 89% of our Annual Events revenues are now derived from 'Major' events (>£1m p.a.) These Major events generally grow faster (2017 'Majors' adjusted underlying growth +6.0%) and are more profitable.    

 

We continue to work on improving the operational performance of the business by extending the adoption of the SX model in Asia and in planning for its roll out in the Americas during 2018. The roll out of the Salesforce CRM platform to support the new business model continues in parallel.  We are adopting a similar approach to enhance our marketing capabilities. During 2017 we completed the planning of the Marketing Excellence (MX) model and in February 2018 we started to roll it out together with Eloqua. In 2017 we also launched a Data Excellence (DX) project to focus on enhancing our processes for collecting, storing, cleansing, connecting and enriching our data for more actionable insight while respecting regulations and privacy, including GDPR. 

 

During the year the Board approved a new technology strategy based on standard platforms, partnering for non-critical applications and shifting spend towards Event technology. The new technology organisation has been designed and is now being implemented with the first outsourcing project to be completed in 2018. We extended the use of event technology in the business during 2017 too.  More events used Supplier Finder, Orbit, Touchplan and other tools which help to improve the customer experience whilst simultaneously providing our teams with valuable insight. 

 

The procurement programme generated further savings and secured another £3.7m of annualised savings during 2017 to bring total procurement savings (including synergies) to £10.3m per annum. 

 

A high performing, engaged and diverse team of people is key to delivering the Events First strategy.  During 2017 we made further progress in developing a High Performing Culture. We improved the organisational capability within the Group, providing specialist skills training and a much stronger focus on performance management. New commission plan structures and the revised Divisional and Executive LTIPs incentivise organic revenue growth performance. 

 

During 2017 strategic expenditure, which includes the costs of portfolio rationalisation, restructuring, strategy implementation and the development of the common Sales, Marketing and Data platforms was £15.9m. Of this £9.2m was capital expenditure and £6.7m opex. By the end of 2017, the Events First programme has delivered cumulative total savings of £15.8m at an annualised run rate of £17.0m. We remain confident of delivering annual savings of £20m by the end of 2019.

 

The Events First strategy is delivering value for shareholders and underpins the delivery of the goals we have articulated of underlying growth in line with the Events industry average and of a medium-term margin target of 30%.

 

 

Board and Management changes

 

It was with profound sadness that we learned that our Chairman, Dame Helen Alexander, had passed away on 5 August 2017 following a period of illness. Dame Helen was an exceptional leader and is deeply missed. She steered UBM through a time of significant change and we have continued to build on the strong foundations that she helped to lay. Shortly before Helen's passing, Greg Lock assumed the role of Acting Chairman, and on 30 January 2018, was appointed Non-Executive Chairman.  

 

There were additional changes to the UBM Board during 2017. In May, Alan Gillespie stepped down having served as a Non-Executive Director since 2008.  At that time Warren Finegold, the former Director of Strategy and Business Development for Vodafone, was appointed as a Non-Executive Director. On 30 January 2018, when Greg Lock was appointed Chairman, Warren Finegold was also appointed Senior Independent Director and Chairman of the Remuneration Committee.

 

There were also changes to the UBM Executive Committee. In October Lucy Dimes joined UBM as CEO of UBM EMEA.  As part of shifting the balance of resource towards the operating businesses both Jane Risby-Rose and John (JP) Petevinos left UBM in 2017. They leave with our sincere thanks for the contributions they have made to UBM in general and to the development and implementation of Events First in particular.

 

 

 

Events

 

 

2017

2016

Underlying*

Adjusted underlying*

 

£m

£m

change %

change %

Annual Events revenue

 

 

 

 

North America

325.6

295.3

-1.2

0.2

China (Mainland & HK)

227.9

207.0

8.2

9.4

Emerging Markets

112.3

71.7

5.4

6.5

UK

30.3

35.7

0.3

5.7

Continental Europe

64.3

59.0

6.3

10.2

RoW

20.2

14.8

24.8

24.8

 

780.6

683.5

3.6

5.3

Biennial Events revenue

85.8

28.1

 

 

Total Events revenue

866.4

711.6

3.6

5.3

 

Total Events revenue was £866.4m (2016: £711.6m), benefiting from good underlying growth in Annual Events, an FX tailwind of £22.7m, revenue from acquisitions (which in 2016 had generated £60.1m of Annual Events revenue) and the biennial 'up' year effect.  During the period we rationalised 29 events which had contributed £11.2m of Annual Event revenues in 2016 and we disposed of events which had contributed £10.3m of revenues in 2016. 

 

Adjusted underlying* revenue from Annual Events, which excludes the impact of portfolio rationalisation, grew 5.3% in 2017 (2016: 3.1%). Underlying* revenue from Annual Events grew 3.6% (2016: 1.0%). The overall growth of the events portfolio improved significantly during 2017, with strong growth from the existing portfolio (particularly in Asia), a good contribution from new launches (most notably CPhI North America) and growth in the Allworld events. This performance was tempered in part by the weaker North American Fashion portfolio.

 

Biennial Events contributed £85.8m of revenue (2016: £28.1m) reflecting the 'up' year portfolio and inclusion of revenue from Allworld biennial events, most notably HOFEX and Food & Hotel Indonesia. The existing UBM portfolio of biennial events showed 7.6% growth over their 2015 editions (3.7% CAGR) with good growth in Food Ingredients Europe partially offset by expected softness at Marintec China.

 

Unless otherwise stated, all commentary below relates to adjusted underlying* revenue growth for Annual Events. 

 

2017 - Annual Events Revenue

 

Food, Hospit. & Leisure

8%

Resources

1%

Pharma & BioPharm

12%

Lifestyle & Brands

15%

Transport & Logistics

2%

Technology

14%

Adv. Manuf.

10%

Business Services & Infra.

5%

Jewellery & Gem

9%

Fashion

20%

Life Sciences & Healthcare

4%

 

 

The 'Food, Hospitality & Leisure' events grew 15.3%, helped by the additional capacity created by running Hotelex and Fine Food over two phases.

 

'Pharma & BioPharm' was up 13.2% with double-digit growth at CPhI Worldwide and its co-located events, and strong growth at CPhI China and CPhI India coupled with the successful CPhI North America launch.

 

'Lifestyle & Brands' grew 12.5%, with particularly strong performances at Furniture China, Cosmoprof Asia and CBME China, which are being helped by the growing affluence and aspiration of the middle class in China.

 

'Technology' events grew by 7.6% with particularly strong growth at our cybersecurity event, Black Hat and CommunicAsia which more than offset the impact of the refresh of InteropITX into a smaller, more focused event.

 

The remaining sectors other than 'Fashion' and 'Life Sciences' all showed improvements in the rate of growth compared to 2016.  'Jewellery' returned to growth in 2017, up 1.8%, driven by a good performance at the flagship September Hong Kong Jewellery & Gem show.

 

'Fashion' revenues were down 4.9%, broadly in line with our expectations. We continue to invest in this important sector, in initiatives to improve our market penetration, to expand into adjacencies and to make the events "must-attend" for visitors by improving the educational and experiential content at the shows. During 2017 we successfully launched the IFF MAGIC Japan Spring and Fall editions.  Excluding these launches the revenue of Fashion was down 6.6%. We don't currently anticipate any improvement in performance in 2018. 

 

'Life Sciences' & 'Healthcare' events is a small US, mainly conference, business which keeps practitioners appraised of regulatory changes. It was down 6.4% reflecting US healthcare regulatory uncertainty in 2017.   

 

2017 - Annual Events Revenue

 

 

 

 

North America

£326m

 

China (Inc HK)

£228m

 

Other Emerging Markets

£112m

 

Continental Europe

£64m

 

UK

£30m

 

ROW

£20m

 

 

 

Inside pie chart

+5.3% Adj Underlying

 

 

 

In 2017, North America accounted for 41.7% of Annual Events revenue (2016: 43%), China (including HK) 29.2% (2016: 30%) and Emerging Markets 14.4% (2016: 10.5%). The increase in Emerging Markets principally relates to the addition of the Allworld events, the largest of which take place in Singapore, Indonesia and Malaysia.

 

During 2017 North American revenue grew 0.2% with good performances in the 'Technology', 'Pharma & BioPharm', 'Advanced Manufacturing' and 'Transport & Logistics' sectors offset by 'Fashion' and 'Life Sciences'. 

 

China (including HK) revenue grew 9.4% in 2017, with particularly strong growth in the 'Lifestyle & Brands', 'Food, Hospitality & Leisure' and 'Pharma & BioPharm' sectors. This strong growth was moderated slightly by the lower growth of 'Jewellery'.

 

Emerging Markets revenue grew 6.5%, principally driven by strong growth in South East Asia, which was partially offset by weakness in the much smaller businesses in Turkey and Brazil.

 

In Continental Europe revenue rose 10.2% principally driven by the strong performance in our 'Pharma & BioPharm' events. Revenues in the UK rose 5.7% driven by good growth in our 'Technology' and 'Lifestyle & Brand' events. The Rest of World events rose 24.8%, principally reflecting the successful launch of the two fashion events in Japan.

 

 

2017

2016

 

Events

£m

£m

 

Annual - adjusted operating profit*

259.1

220.8

 

Annual - adjusted operating profit margin*

33.2%

32.3%

 

 

 

 

 

Biennial - adjusted operating profit*

36.5

8.3

 

Biennial - adjusted operating profit margin*

42.5%

29.3%

 

 

 

 

 

Total adjusted operating profit*

295.6

229.1

 

Total adjusted operating profit margin*

34.1%

32.2%

 

 

Adjusted operating profit* was £295.6m, up from £229.1m in 2016. The Annual Events adjusted operating margin* was 33.2% (2016: 32.3%). This strong margin progression was driven by drop-through from the faster organic growth, further procurement savings, overhead recovery in the biennial 'up' year, and from the benefits from rationalising and disposing of lower-margin events. The FX tailwind added 0.2%pts of margin during the year while cost actions helped to reduce the negative margin impact of the revenue contraction in 'Fashion'.  

 

The Total Events adjusted operating margin* of 34.1% (2016: 32.2%) also benefited from the higher biennial margins in the 'up' year (2017: 42.5%; 2016: 29.3%) from the UBM portfolio together with the impact of including the Allworld biennials for the first time.

 

Other Marketing Services (OMS)

 

 

2017

2016

Underlying*

Adjusted underlying*

 

£m

£m

change %

change %

OMS - Online

83.2

88.2

-2.6

4.8

OMS - Print

53.3

63.2

-19.1

-11.6

Total OMS revenue

136.5

151.4

-9.8

-2.2

Adjusted operating profit*

19.4

24.1

 

 

Total adjusted operating profit margin*

14.2%

16.0%

 

 

 

OMS revenue declined by 2.2% on an adjusted underlying basis. We rationalised and disposed of various non-aligned activities which had generated £11.3m and £7.2m of OMS revenue respectively, in the 2016 comparative. 

 

The remaining online activities showed good adjusted underlying growth of 4.8%. However, our print business (which represents only 5.3% of total Group revenue) declined by 11.6%. This reflects the ongoing migration of the business from print into digital format but also, our Life Sciences business was specifically affected by market issues with the reduced level of mainstream drug approvals given uncertainties over healthcare reform in the US.  The business is well-positioned to manage the ongoing migration from print to digital. 

 

Adjusted operating profit* was £19.4m (2016: £24.1m), representing an operating margin* of 14.2% (2016: 16.0%). The reduction in the margin was driven by the decline in print revenues and, as a result, cost savings actions were taken towards the end of the year. 

 

FINANCIAL REVIEW

For the twelve months ended 31 December 2017

 

SUMMARY INCOME STATEMENT

 

 

Adjusted results*

Adjusting items

IFRS results

Adjusted results*

Adjusting items

IFRS results

£m

2017

2017

2017

2016

2016

2016

Continuing

 

 

 

 

 

 

Revenue

1,002.9

-         

1,002.9

863.0

-                     

863.0

Operating profit

294.2

(82.2)

212.0

234.8

(82.1)

152.7

Net financing expense

(25.4)

5.1

(20.3)

(26.3)

(6.3)

(32.6)

Profit before tax

268.8

(77.1)

191.7

208.5

(88.4)

120.1

Tax charge

(43.0)

3.0

(40.0)

(29.2)

6.4

(22.8)

Profit for the year continuing

225.8

(74.1)

151.7

179.3

(82.0)

97.3

Discontinued operations

 

 

 

 

 

 

Profit after tax

 -

 -

 -

26.3

-

26.3

Profit on disposal

-

7.8

7.8

-

380.9

380.9

Profit for the year total Group

225.8

(66.3)

159.5

205.6

298.9

504.5

Non-controlling interest

(13.5)

           -

(13.5)

(13.0)

-                  

(13.0)

Attributable profit

212.3

(66.3)

146.0

192.6

298.9

491.5

 

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

 

 

Continuing operations - basic

54.0

(18.9)

35.1

40.1

(19.8)

20.3

Continuing operations - diluted

53.4

(18.6)

34.8

39.7

(19.6)

20.1

Total Group - basic

54.0

(16.9)

37.1

46.4

72.1

118.5

Total Group - diluted

53.4

(16.6)

36.8

45.9

71.4

117.3

Share count (weighted average, m)

393.2

 

393.2

414.9

 

414.9

Share count

(fully diluted, weighted average, m)

397.2

 

397.2

419.2

 

419.2

 

All non-IFRS measures are noted with a '*' and additional information on these measures is set out on page 27

 

 

Revenue

 

£m

2016

863.0

Acquisitions and disposals

80.6

Product rationalisation

(22.5)

Annual events

34.8

OMS

(2.8)

Biennial events

24.0

FX

25.8

2017

1002.9

 

Revenue in 2017 was £1,002.9m, up 16.2% (2016: £863.0m) largely due to the Allworld acquisition, strong organic event growth, a biennial 'up' year and favourable FX movements.  This was partially offset by the impact of the final year of the product rationalisation programme under Events First.  On an adjusted underlying basis, revenue grew 4.1% with 5.3% growth in Annual Events offset in part by a 2.2% decline in OMS.   

 

 

Adjusted operating profit*

 

£m

2016

234.8

Acquisitions and disposals

28.7

Annual events

16.3

OMS

(5.0)

Biennial events

12.8

Corporate operations (inc. strategic opex)

(2.0)

FX

8.6

2017

294.2

 

Adjusted operating profit* rose by 25.3% to £294.2m (2016: £234.8m) reflecting the positive contribution from acquisitions, mainly Allworld, and from annual and biennial events offset in part by a reduction in OMS. The increase in Annual Events was delivered by growth across the portfolio with the exception of the 'Fashion' and 'Life Sciences' verticals which declined. Continued progress was made on the procurement programme with aggregate annual savings of £10.3m delivered by the end of 2017. 

 

The adjusted operating margin* grew to 29.3% (2016: 27.2%) with strong performances in Annual and Biennial Events together with the benefit of the biennial 'up' year and the FX tailwind.

 

On a reported basis, operating profit from operations of £212.0m increased 38.8% (2016: £152.7m) mainly due to the operating performance noted above whilst adjusting items of £82.2m (2016: £82.1m) were consistent with the prior year.

 

Diluted adjusted EPS* - continuing

 

 

pence

2016

39.7

Share consolidation

       2.2

Adjusted operating profit

       12.4

Net interest

       0.5

Tax

(3.2)

Minority interest

(0.1)

FX

       1.9

2017

     53.4

 

Continuing diluted adjusted EPS* increased by 34.5% to 53.4p (2016: 39.7p). The share consolidation in 2016 added 2.2p of benefit during the year. The earnings growth in the period was the main driver of the increase together with the benefit of FX, less the increase in the tax charge.

 

On a reported basis, diluted EPS from continuing operations of 34.8p increased 73.1% (2016: 20.1p) due to the factors explained above together with the impact of a lower level of adjusting items in the income statement compared with the prior year.

 

Corporate operations and strategic operating expense

 

£m

2017

2016

Ongoing corporate costs

21.5

21.3

Pension administration and service cost

1.0

1.1

Non-cash share-based payments

2.7

3.2

Income from JVs, associates and investments

(1.5)

(1.5)

Total

23.7

24.1

Non-recurring

 

 

Light Reading income

-

(0.7)

Restructuring

1.4

-

Pension credits

(4.3)

(5.0)

Total corporate costs

20.8

18.4

 

Total corporate costs increased to £20.8m (2016: £18.4m). Corporate costs before non-recurring items decreased by 1.7% to £23.7m (2016: £24.1m).

Non-recurring items included:

-    Pension credit in 2017 related to the finalisation of an initiative to allow members of the UBM Pension Scheme greater flexibility by exchanging future increases in return for a higher starting pension; and

-    Restructuring charges in relation to corporate functions.

 

£m

2017

2016

Strategic operating expenses

6.7

7.2

Strategic capital expenses

9.2

3.6

 

Strategic operating and capital expenses relate to the implementation of the Events First strategy.  Strategic opex of £6.7m included costs relating to CRM and Marketing system development; £5.8m in Events and £0.9m in OMS (2016: £6.1m in Events, £1.1m in OMS).  Strategic capital expenditure of £9.2m was invested in CRM platform development during the year, up from £3.6m in 2016.

 

Income statement adjusting items

 

The following table provides a summary of the income statement adjustments that have been excluded from the continuing adjusted operating profit* of £294.2m. The total charge to continuing operating profit for adjustments and exceptional items was £82.2m (2016: £82.1m).

 

£m

2017

2016

Amortisation - intangible assets on acquisition

64.5

45.1

Tax on share of profits from JVs and associates

0.6

0.5

Exceptional items

 

 

Advanstar and BJI integration costs

11.1

11.3

Allworld integration costs

5.1

-

Acquisition costs and earnout changes

1.1

7.1

Disposals

 

 

-       Non-core businesses

(2.6)

(9.2)

-       Investments and associates

-

(11.2)

-       Ecobuild

-

35.1

     Impairment

-

3.4

     Transaction costs

2.4

-

Total exceptional items

17.1

36.5

Total income statement adjustments

82.2

82.1

 

Acquisition exceptional items

·     Advanstar and BJI integration costs of £8.0m and £3.1m respectively were incurred during the year as the integrations were completed. Advanstar costs related to the concluding elements of the operational integration into the Americas business including alignment and migration of processes. BJI costs related mainly to venue contract break fees.

·     Allworld integration costs of £5.1m were incurred during the period primarily relating to restructuring costs and consultancy fees for the operations and finance integrations. Total integration costs of $20m are expected with the balance being incurred over the next two years.

·     Acquisition costs in the year of £2.2m related mainly to due diligence and professional fees for Allworld and bolt-on acquisitions. This was offset by a credit of £1.1m (2016: £0.4m charge) for changes in earnout estimates on prior year acquisitions.

·     Transaction costs of £2.4m relate to professional fees incurred in 2017 in respect of the Informa transaction.

 

Disposal gains and losses

·     Non-core businesses: the disposal of four events from the EMEA portfolio completed on 8 September 2017 resulting in a gain of £2.6m.

 

Net financing expense

 

The net interest expense of £25.4m (2016: £26.3m) represents interest payments on our US Dollar bond, US Private Placement Loan Notes, bank loans and pension interest, net of interest receipts on cash holdings. The net expense for the year is lower than the prior year primarily due to the beneficial interest charge on the US Private Placement Loan Notes and the $365m bridge facility during 2017. In the prior year, the £250m Sterling bond was in place until November 2016 which incurred a higher rate of interest.

 

Discontinued operations

 

The PR Newswire (PRN) disposal completed on 16 June 2016 and a gain on disposal was reported in 2016. During the year, the Group recognised an additional £7.8m gain primarily due to the release of expired provisions for warranties and indemnities which were originally recognised in accordance with specific clauses in the sale agreement.

 

TAX

 

Current tax

 

Our tax charge on adjusted operating profit* was £43.0m (2016: £29.2m), representing an effective tax rate* for the year of 16.0% (2016: 14.0%). The effective tax rate in the prior year benefited from certain one-off tax settlements which did not recur in 2017. A bridge showing the main factors affecting the 2017 effective tax rate is shown below:

 

Tax

 

%

UK tax rate

19.3

Higher tax rate on overseas earnings

8.9

Tax at statutory rates

28.2

US goodwill amortisation

-7.2

Effect of intragroup financing

-6.8

Other adjustments

2.4

Accruals and deferred tax

-0.6

2017 Adjusted tax rate

16.0

 

In December 2017 the US Tax Cuts and Jobs Act was enacted. This Act made significant changes to US tax rules, the most relevant to the Group being the reduction in the federal rate of tax to 21%, the reduction in the amount of interest that can be deducted for tax purposes and the introduction of other measures designed to combat base erosion. The combined effect of these changes will not have a material impact on the Group's adjusted tax rate.

 

The total cash paid in respect of income taxes in 2017 was £42.2m (2016: £39.1m).  The table below is a reconciliation of the 2017 expected tax charge to actual cash tax paid:

 

 

 

£m

 

 

Adjusted

Exceptional and other adjusting items

 

 

IFRS

Expected tax charge at UK rate

51.7

(14.8)

36.9

Different tax rate on overseas earnings

24.0

(8.5)

15.5

UBM tax charge at weighted average tax rate

75.7

(23.3)

52.4

 

 

 

 

US goodwill amortisation

(19.4)

-

(19.4)

Effects of intragroup financing

(18.2)

-

(18.2)

Accruals for uncertain tax positions and deferred tax

(1.6)

(19.0)

(20.6)

Exceptional deferred tax charge

-

16.6

16.6

Other adjustments

6.5

22.7

29.2

Tax charge

43.0

(3.0)

40.0

 

 

 

 

Exclude deferred tax and JVs and associates tax

(6.3)

3.0

(3.3)

Exclude accruals for uncertain tax positions

7.3

-

7.3

Tax paid in different period to charged

(1.8)

-

(1.8)

UBM actual tax paid

42.2

-

42.2

 

A breakdown of the main geographies in which we paid tax is as follows:

 

 

2017

£m

China

17.0

Europe

12.5

Emerging Markets

8.9

Rest of World

3.0

United States

0.8

Total

42.2

 

Our current tax liability as at 31 December 2017 was £52.6m (2016: £60.9m). 

 

Movements in the liability during 2017 were as follows:

 

 

£m

Current tax liability at 1 January 2017

60.9

Current tax charge

36.7

Tax paid

(42.2)

Currency translation and other movements

(2.8)

Current tax liability at 31 December 2017

52.6

 

The current tax liability includes £35.9m (2016: £45.6m) in respect of accruals for uncertain tax positions in various jurisdictions in which UBM operates. We have necessarily made judgements as to the outcome of tax matters not concluded. The current tax liability has been consistently classified as a short-term liability in accordance with our accounting policy. The current tax liability can be further analysed as follows:

 

By geography                                                          By year

 

%

 

 

%

China

30.5

 

Up to 2013

6.5

United States

25.1

 

2014

19.2

Europe

21.6

 

2015

14.8

Emerging Markets

20.0

 

2016

18.5

Rest of World

2.8

 

2017

41.0

Total

100.0

 

Total

100.0

 

Deferred tax

 

During the year deferred tax assets recognised in respect of tax losses and other temporary differences reduced by £7.1m, bringing the total assets recognised to £19.7m. These assets have been recognised because the Group expects to generate taxable profits against which they will be used in the future. In addition, at 31 December 2017 the Group had unrecognised deferred tax assets, including those relating to tax losses carried forward, further details of which are included in Note 3.2.

 

Our total tax contribution

 

Our contribution to the economies in which we operate is predicated on our ability to run successful, profitable businesses that generate employment, stimulate economic growth and contribute to tax revenues. This is particularly important in Emerging Markets where the taxes which we pay to, and collect on behalf of, governments is an important part of our economic footprint.

 

In the year ended 31 December 2017, our total tax contribution was £66.8m (2016: £61.0m), this includes corporate income tax on our profits, as well as employee taxes and any other taxes that we bear. The geographical split of our total tax contribution is as follows:

 

 

Emerging

Markets

 

US

Other

Total

Profit taxes borne

25.9

0.8

15.5

42.2

Employment taxes borne

3.8

8.0

7.4

19.2

Other taxes (e.g. business rates)

1.7

1.2

2.5

5.4

Total

31.4

10.0

25.4

66.8

 

In addition to the above, in 2017 we collected taxes on behalf of governments (e.g. employee taxes and sales taxes) amounting to £65.7m (2016: £56.2m).

 

 

CASH FLOW

 

Conversion of adjusted operating profit* into cash

 

The ability to turn profits into cash is a key focus for management, as it provides the funds necessary to invest in the business.  We track this using the cash conversion* measure which expresses our adjusted cash generated from operations* as a percentage of adjusted operating profit*. Cash conversion* varies in line with our biennial cycle and event phasing.

 

£m

2017

2016

Adjusted operating profit*

294.2

262.9

Depreciation

17.4

17.5

Capital expenditure

(20.9)

(11.7)

Movement in working capital and other non-operating items

4.3

(15.8)

Adjusted cash generated from operations*

295.0

252.9

Cash conversion*

100%

96%

 

Cash conversion* at 100% (2016: 96%) increased principally due to a positive working capital result in a biennial 'up' year.

 

Capital expenditure for the year was £20.9m (2016: £11.7m), and £9.2m of this expenditure related to the strategic spend on our new CRM platform.

 

Free cash flow*

 

Free cash flow* was £204.1m (2016: £159.6m).

 

£m

2017

2016

Adjusted cash generated from operations*

295.0

252.9

Payments for non-operating items

(16.2)

(13.8)

Payments against provisions

(5.4)

(11.9)

Pension deficit payments

(3.3)

(3.3)

Interest paid

(23.8)

(25.2)

Tax paid

(42.2)

(39.1)

Free cash flow*

204.1

159.6

 

Adjusted cash from operations* was £295.0m, whilst free cash flow* was £204.1m. Dividend payments and purchases of shares totalled £104.4m. 

 

Free cash flow* increased because of the cash generated by Allworld's operations and by the existing events portfolio in a biennial 'up' year, partially offset by higher levels of spend on non-operating items such as integration costs and tax. We completed the acquisition of the Bahrain business of Allworld and made four additional bolt-on acquisitions in the year as well as one disposal (consisting of four events), resulting in a £69.9m increase to net debt* offset by a favourable FX movement on US Dollar denominated debt. 

 

Free cash flow

 

£m

31 Dec 2016 Net Debt*

596.8

Adjusted cash generated from operations*

(295.0)

Non-operating items

16.2

Provisions & pensions

8.7

Interest & tax

66.0

Dividends & share purchases

104.4

Acquisitions net of disposals

69.9

FX/Fair value

(55.7)

31 Dec 2017 Net Debt*

511.3

 

Reconciliation of IFRS to adjusted cash generated from operations*

 

£m

2017

2016

Adjusted cash generated from operations*

295.0

252.9

Dividends from JVs and associates

-

(0.5)

Capital expenditure

20.9

11.7

Payments against provisions

(5.4)

(11.9)

Pension deficit payments

(3.3)

(13.3)

Acquisition and disposal cost payments

(8.4)

(30.3)

Other adjustments

(16.2)

(13.8)

Cash generated from operations (IFRS)

282.6

194.8

 

 

ACQUISITIONS

 

We invested £48.4m in the acquisition of Arabian Exhibition Management WLL (AEM), the Bahrain business of Allworld Exhibitions which completed in January 2017. Completion of the acquisition of AEM was the final piece of the Allworld Exhibitions transaction, the rest of which had completed in December 2016. In addition, we invested a total of £13.6m acquiring Marmara, AMA Research, Green Thinking Services and The Aesthetic Show.  We also acquired the remaining 20% shareholding of Rotaforte for cash consideration of £2.0m.  Payments for contingent and deferred consideration for acquisitions made in prior years totalled £8.0m.

 

The 2017 acquisitions (excluding AEM) contributed adjusted operating profit* of £0.2m in 2017 following acquisition. The combined return on investment from the bolt-on acquisitions in the past three years is 13.0% with 2017 acquisitions contributing 9.4% in their first year. Including the larger acquisitions the return on investment for the past three years is 8.8%. The return on investment target framework requires acquisition returns in excess of our cost of capital in the first full year of ownership. The framework adjusts the cost of capital used and the period over which the return target must be reached to take into account the risk resulting from the scale, country, sector and complexity of the acquisition.

 

The following table shows the performance of our acquisitions since 2015:

 

 

Consideration3

Return on investment*

 

£m

2015

2016

20174

2015 acquisitions

34.6

9.5%

11.2%

11.3%

2016 acquisitions

85.2

-

9.9%

13.9%

2017 acquisitions

6.4

-

-

9.4%

 

 

 

 

13.0%

2014 acquisitions - Advanstar

599.0

10.3%

10.7%

9.5%

2016 acquisitions - Allworld5

383.0

-

-

6.3%

Total - all acquisitions

1,108.2

 

 

8.8%

3 Excluding working capital adjustments and including the earned contingent consideration

4 2017 return on investment only includes acquisitions where an event has traded under UBM ownership

5 Includes Bahrain

 

CAPITAL STRUCTURE

 

Net debt*

 

Our net debt* at 31 December 2017 was £511.3m, a ratio of 1.6 times EBITDA* (Proforma 2016: 2.3 times).

 

Our Financial Policy targets a leverage ratio of between 1.5-2.0 times net debt/EBITDA* which provides flexibility for biennial cycles, capacity to invest in bolt-on acquisitions, and is consistent with investment grade metrics. There is flexibility to move outside the corridor (up to 2.5 times and down to 1.0 times), specifically due to M&A activity, with the intention of returning into the corridor within 12-18 months.  We have held investment grade ratings from each of Standard & Poor's and Moody's for over nine years. The Group continues to maintain a credit rating of BBB- for Standard and Poor's and a rating of Baa3 for Moody's, with Standard & Poor's outlook stable and Moody's having upgraded their outlook to stable during the year.

 

£m

2017

Proforma

20168

 

2016

Cash

(77.7)

(89.0)

(84.8)

Borrowings and associated derivatives

589.0

730.2

681.6

Net debt*6

511.3

641.2

596.8

EBITDA*7

311.6

275.8

252.3

Net debt to EBITDA ratio*

1.6 times

2.3 times

2.4 times

6 Includes fair value adjustments

7 2016 is continuing operations only

8 Includes Allworld proforma earnings of £23.5m, AEM consideration of £48.6m and cash acquired of £4.2m

 

Debt facilities

 

Our funding strategy is to maintain a balance between continuity of funding and flexibility through the use of capital markets, bank loans and overdrafts.

 

During the year, to replace the $365m bridge facility which was put in place in December 2016 to fund the Allworld acquisition, $370m US Private Placement Loan Notes were issued on 15 June 2017 in three tranches: $45m of five-year notes, $175m of seven-year notes and $150m of ten-year notes.

 

At 31 December 2017, we had drawn £57.5m from the revolving credit facility, leaving an un-utilised commitment of £342.5m available. Our debt facilities and maturities as at 31 December 2017 are summarised below:

 

£m

Facility

 Drawn

Undrawn

Maturity

Margin %

Fair value hedges

$45m US PP - tranche A

33.3

33.3

-

  Jun 22

LIBOR + 1.65%

 

$175m US PP- tranche B

129.5

129.5

-

Jun 24

4.45% fixed

Floating rate swap for $78m US LIBOR + 2.09%

$150m US PP- tranche C

111.0

111.0

-

Jun 27

4.68% fixed

 

$350m fixed rate Dollar bond

259.0

259.0

-

Nov 20

5.75% fixed

Floating rate swap for $100m US LIBOR + 2.65%

£400m revolving credit facility

400.0

57.5

342.5

Apr 22

LIBOR + 0.6%

 

Total

932.8

590.3

342.5

 

 

 

 

Pensions

 

UBM operates defined benefit and defined contribution schemes, based primarily in the UK. 2017 is a triennial valuation year for the UBMPS and UNEPS defined benefit schemes where the Pension Scheme Trustees review the level of funding and agree with UBM the future level of contributions to the scheme.

 

At 31 December 2017, the aggregate deficit under IAS 19 was £5.8m, a reduction of £44.8m compared to the deficit of £50.6m at the previous year end. This is primarily due to improved asset performance and updated mortality projections and member data following the triennial valuation. This has been offset in part by a reduction to the discount rate due to market movements.

 

RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE*)

 

ROACE* is defined as post tax adjusted operating profit* over average shareholders' funds plus net debt* (average capital employed). Capital employed has been adjusted for impairment charges from 1 January 2016 onwards.

 

£m

 

 2017

Adjusted 20169

Post tax adjusted operating profit* (£m)

 

251.2

205.6

Average capital employed (£m)

 

1,831.0

1,398.1

Return on average capital employed* (ROACE) (%)

 

13.7%

14.7%

         

9 Continuing operations and excluding Allworld capital employed at 31 December 2016

 

ROACE* has decreased since 2016 as the inclusion of Allworld's capital employed and respective earnings are incorporated into the measure.

 

RELATED PARTY TRANSACTIONS

 

Details of related party transactions in the 12 months ended 31 December 2017 are disclosed in Note 7.1.

 

FOREIGN CURRENCY

 

The Group closely monitors its exposure to foreign currencies, and seeks to match revenue and costs when possible. The revolving credit facility may be drawn in currencies other than Pound Sterling. We also hold cash and cash equivalents in Pound Sterling, the Renminbi and US Dollars and other currencies closely linked to the US Dollar. Given our large and diverse customer base, there are no significant concentrations of credit risk.

 

The following table outlines the currency profile of our revenues and adjusted operating profit* for 2017:

 

 

 

Revenue

Adjusted operating profit*

 

Average exchange rate

Year on year

FX movement

 

£m

£m

2017

2016

%

US Dollar10

444.8

139.4

1.28

1.35

-5.09%

Hong Kong Dollar10

Renminbi10

UK Pound Sterling

Euro

Indian Rupee

Singapore Dollar

Japanese Yen

Brazilian Real

Other

Total

131.1

127.8

67.0

81.0

22.5

23.3

24.7

14.4

66.3

1,002.9

61.2

38.9

(27.8)

43.5

8.6

5.1

7.1

2.1

16.1

294.2

10.34

8.82

1.00

1.13

85.75

1.76

143.34

4.20

-

10.15

8.85

1.00

1.15

86.61

1.85

148.20

4.87

-

1.87%

-0.27%

-

-1.77%

-1.00%

-4.69%

-3.28%

-13.86%

-

10 $ or quasi-$ pegged

 

Approximately 70% of UBM's revenues are generated in US Dollars or quasi-dollar pegged currencies, which has benefited the Group's reported financials given FX movements in 2017. The FX benefit added £25.8m to revenue and £8.6m to adjusted operating profit* during the year compared to 2016.

 

The income statement exposure to foreign exchange risk is shown for our most important foreign currency exposures in the sensitivity analysis below, based on 2017 operations:

 

 

Average exchange rate in 2017

Currency

value rises/

falls by

Effect on revenue

+ / - £m

Effect on adjusted operating profit*11

+ / - £m

US Dollar

1.28

1%

4.4

1.4

HK Dollar

10.34

1%

1.3

0.6

Renminbi

8.82

1%

1.3

0.4

Euro

1.13

1%

0.8

0.4

11 The actual impact of currency on Group profit may be different to that implied due to the timing of profit receipts, with financials translated on a monthly basis using the average for that month

 

 

DIVIDENDS

 

Our existing progressive dividend policy, which targets two times cover through economic and biennial cycles, is unchanged for 2017. The Board has declared a final dividend of 18.0p (2016: 16.6p) to give a full year dividend of 23.5p (2016: 22.0p), an increase of 6.8% on prior year and dividend cover of 2.3 times. The final dividend will be paid on 24 May 2018 to shareholders on the register at close of business on 20 April 2018.

 

The Board undertook a review of the dividend policy during 2017 and confirmed a new policy to take effect from 2018. The revised policy is to pay a progressive dividend centred around 2x cover through economic and biennial cycles and taking into consideration the impact from currency movements. The policy has also been revised so that the interim dividend will in future represent approximately one-third of the expected full year dividend.

 

STATEMENT OF GOING CONCERN AND DIRECTORS' RESPONSIBILITIES

 

After making enquiries, the Directors have a reasonable expectation that UBM has 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. In reaching this conclusion, the Directors have had due regard to the following:

 

•     After taking account of available cash resources and committed bank facilities, none of UBM's borrowings fall due within the next 12 months that require refinancing from resources not already available.

•     The cash generated from operations, committed facilities and UBM's ability to access debt capital markets, taken together, provide confidence that UBM will be able to meet its obligations as they fall due.

 

Further information on the financial position of UBM, its cash flows, financial risk management policies and available debt facilities are described in my review on the preceding pages. UBM's business activities, together with the factors likely to impact its future growth and operating performance are set out in the Strategic Report.

 

The Directors listed below (being all the Directors of UBM plc) confirm that the results in this preliminary announcement have been taken from the Group's 2017 Annual Report and Accounts which will be available on the Company's website in due course. The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as issued by the International Financial Reporting Interpretations Committee (IFRIC), give a true and fair view of the assets, liabilities, financial position and results of the Company and the undertakings included in the consolidation taken as a whole. The management report contains:

 

·      an indication of important events that have occurred during the year ended 31 December 2017 and their impact on the consolidated financial statements, and a description of the principal risks and uncertainties facing the Group; and

·      material related party transactions in the year ended 31 December 2017 and any material changes to the related party transactions described in the 2016 Annual Report and Accounts.

 

The basis of preparation and summary of accounting policies applicable to the Group's consolidated financial statements can be found in the Accounting policies sections of the 2017 Annual Report and Accounts. The preliminary announcement for the year ended 31 December 2017 does not constitute statutory accounts as defined by the Companies (Jersey) Law 1991 or the Companies Act 2006.

 

Signed on behalf of the Board by

 

 

Marina Wyatt

Chief Financial Officer

27 February 2018

 

UBM plc Board of Directors:

Executive Directors:

Tim Cobbold (Group Chief Executive)

Marina Wyatt (Chief Financial Officer)

Non-Executive Directors:

Greg Lock (Chairman)

Warren Finegold (appointed 19 May 2017)

John McConnell

Mary McDowell

Terry Neill

Trynka Shineman

David Wei

 

 

Summary of principal risks

 

Macro-economic slowdown, geopolitical instability and/or exchange rate fluctuations

-     The geo-political environment remains volatile and a subsequent slowdown in the global economy or a regional crisis could adversely impact the Company's revenue, as exhibitor, advertising, attendee, sponsorship and other discretionary revenue may decline. As an international business UBM is sensitive to this risk.

-     Foreign exchange rate fluctuations, particularly the US Dollar, could adversely affect our reported earnings and the strength of our balance sheet.

 

Acquisition risk

-     Acquisitions are an important part of our strategy. Acquisitions may not deliver their expected returns. Integration issues or failure to realise operating benefits or synergies may also impact expected returns.

 

Specific country risk and emerging market exposure

-     Our business operates in many geographies, particularly Emerging Markets such as Turkey, the Middle East and Russia which may present logistical and management challenges due to different business cultures, languages or unfavourable changes in applicable law or compliance requirements. Maintaining our reputation as a responsible corporate entity in the countries we operate in is a focus for the company.

-     Expansion through joint ventures reduces logistical and management issues but can create governance and control challenges.

 

Factors and incidents affecting our ability to stage an event

-     A disaster or natural catastrophe, terrorism, political instability or disease could affect people's willingness to attend our events, which could have an adverse effect on our revenues. There is a reputational risk based on how effective our response to these risks might be.

-     UBM utilises some of the largest global venues available creating the possibility of concentration where few or no alternatives exist.

-     UBM relies on suppliers to help deliver effective events. Risks to the integrity and suitability of these key relationships could undermine the effectiveness of these events.

-     A major incident at a venue during an event may give rise to significant contractual liabilities.

 

Changes in our business environment

-     We cannot predict all the changes and impacts that may affect the competitiveness of the business, such as changes in customer behaviour, or technological innovations which would increase competition or make some products or services less relevant. Social media platforms, search engines and other online technologies could all pose a competitive threat to our businesses, as could changes in legislation or compliance requirements where we operate.

 

Technological risk: execution, data breach and cyber security

-     The increasing threat from unauthorised access to our systems by external parties could lead to reputational damage and regulatory action.

-     As part of its strategy, UBM has continued to invest in the technology platforms of the business to ensure the data we hold remains protected despite the rapidly evolving cyber risk landscape.

-     System failure could have a significant impact on our business. The collapse of the Cloud on which various products and systems are hosted could have negative consequences for our operational activity.

 

Access to capital

-     With the changing macro-environment and currency changes, the availability or cost of financing may affect our acquisition strategy.

 

People recruitment and retention

-     Changes in the operating model and competitive external landscape could see an increase in staff turnover.

 

 

Explanation of non-IFRS measures

 

Financial Measure

How we define it

Why we use it

 

 

 

Underlying revenue and underlying operating profit

Underlying measures are adjusted for the effects of acquisitions, disposals, foreign exchange movements, phasing and peripatetic and biennial events. Adjusted underlying also removes the impact of portfolio rationalisation

Underlying growth rates provide insight into the organic growth of the business

 

 

 

Adjusted operating profit

Operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of taxation on joint ventures and associates

Provides insight into ongoing profit generation, individually and relative to other companies

 

 

Margin

Adjusted operating profit expressed as a percentage of revenue

 

 

 

EBITDA

Earnings before interest, tax, depreciation, amortisation and exceptional items

Measure of earnings and cash generative capacity

 

 

 

Adjusted profit before tax

Profit before tax before amortisation of intangible assets on acquisitions, exceptional items, share of taxation on profit from joint ventures and associates and net financing expense adjustments

Facilitates performance evaluation, individually and relative to other companies

 

 

Adjusted EPS

Adjusted basic EPS includes share of taxation on profit from joint ventures and associates but excludes movements on deferred tax balances recognised as a consequence of acquisition intangibles. Adjusted diluted EPS includes the impact of share options

 

 

 

Net debt

Net debt is current and non-current borrowings and derivatives associated with debt instruments, less cash and cash equivalents

Measure of indebtedness - includes benefit of current cash available to pay down debt

 

 

 

Free cash flow

Net cash provided by operating activities after meeting obligations for interest, tax, capital expenditure and pension deficit payments

Measure of cash available to repay debt, pay dividends and invest in acquisitions

 

 

 

Adjusted cash generated from operations

Adjusted to exclude non-operating movements in working-capital, such as expenditure against reorganisation and restructuring provisions and acquisition and disposal costs

Provides an understanding of our operating cash flows

 

 

Cash conversion

Cash conversion is the ratio of adjusted cash generated from operations to adjusted operating profit

 

 

 

Return on investment

Adjusted post tax incremental operating profit divided by the cost of acquisition calculated on a constant currency, biennial adjusted, pro forma basis, as if the business had been owned throughout the year

To assess returns on acquisitions relative to our cost of capital.  The measure adjusts for foreign exchange movements and incorporates the incremental operating result of the acquisition. This aligns the measure to our acquisition assessment criteria

 

 

 

Return on average capital employed (ROACE)

ROACE is post-tax adjusted operating profit over average capital employed.  Capital employed is shareholders' funds plus net debt. Shareholders' funds is adjusted for cumulative impairment charges from 1 January 2016

Provides a measure of the efficiency of our capital investment

 

 

 

Effective tax rate

The effective tax rate on adjusted profit before tax reflects the tax rate excluding movements on deferred tax balances recognised as a consequence of acquisition intangibles

Provides a more comparable basis to analyse our tax rate

 

 

 

 

Consolidated income statement

for the year ended 31 December 2017

 

 

 

 

 

 

 

 

 

 

Before

 

 

Before

 

 

 

 

exceptional

Exceptional

 

exceptional

Exceptional

 

 

 

items

items

Total

items

items

Total

 

 

2017

2017

2017

2016

2016

2016

Notes

 

£m

£m

£m

£m

£m

£m

 

Continuing operations

 

 

 

 

 

 

 

Revenue

1,002.9 

- 

1,002.9 

863.0 

863.0 

 

Other operating income

9.2 

- 

9.2 

6.9 

6.9 

 

Operating expenses

(719.9)

- 

(719.9)

(637.5)

(637.5)

3.1

Exceptional operating items

- 

(17.1)

(17.1)

(45.5)

(45.5)

 

Amortisation of intangible assets arising on acquisitions

(64.5)

- 

(64.5)

(45.1)

(45.1)

 

Share of post-tax results from joint ventures and associates

1.4 

- 

1.4 

1.9 

9.0 

10.9 

 

Group operating profit from continuing operations

229.1 

(17.1)

212.0 

189.2 

(36.5)

152.7 

 

 

 

 

 

 

 

 

5.2

Financing income

2.7 

5.1 

7.8 

3.1 

3.1 

5.2

Financing expense

(28.1)

- 

(28.1)

(28.6)

(7.1)

(35.7)

5.2

Net financing expense

(25.4)

5.1 

(20.3)

(25.5)

(7.1)

(32.6)

 

Profit before tax from continuing operations

203.7 

(12.0)

191.7 

163.7 

(43.6)

120.1 

 

 

 

 

 

 

 

 

3.2

Tax

(23.4)

(16.6)

(40.0)

(8.6)

(14.2)

(22.8)

 

Profit for the year from continuing operations

180.3 

(28.6)

151.7 

155.1 

(57.8)

97.3 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

6.4

Profit for the year from discontinued operations

- 

7.8 

7.8 

26.3 

380.9 

407.2 

 

Profit for the year

180.3 

(20.8)

159.5 

181.4 

323.1 

504.5 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of the parent entity

 

 

146.0 

 

 

491.5 

 

Non-controlling interests

 

 

13.5 

 

 

13.0 

 

 

 

 

159.5 

 

 

504.5 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

pence

 

 

pence

3.3

Continuing operations - basic

 

 

35.1 

 

 

20.3 

3.3

Continuing operations - diluted

 

 

34.8 

 

 

20.1 

3.3

Profit for the year - basic

 

 

37.1 

 

 

118.5 

3.3

Profit for the year - diluted

 

 

36.8 

 

 

117.3 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

 

£m

 

Group operating profit from continuing operations

 

 

212.0 

 

 

152.7 

3.1

Exceptional operating items

 

 

17.1 

 

 

36.5 

 

Amortisation of intangible assets arising on acquisitions

 

 

64.5 

 

 

45.1 

 

Share of tax on profit in joint ventures and associates

 

 

0.6 

 

 

0.5 

2

Continuing adjusted operating profit*

 

 

294.2 

 

 

234.8 

6.4

Discontinued adjusted operating profit*

 

 

- 

 

 

28.1 

2

Group adjusted operating profit*

 

 

294.2 

 

 

262.9 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

 

£m

 

Dividends

 

 

 

 

 

 

5.3

Interim dividend of 5.5p (2016: 5.4p)

 

 

21.6 

 

 

21.2 

5.3

Special dividend of £nil (2016: 55.3p)

 

 

- 

 

 

243.7 

5.3

Proposed final dividend of 18.0p (2016: 16.6p)

 

 

70.9 

 

 

65.3 

 

* Adjusted Group operating profit represents Group operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of tax on profit in joint ventures and associates.

 

 

 

Consolidated statement of comprehensive income

for the year ended 31 December 2017

 

 

 

 

 

 

 

2017

2016

Notes

 

£m

£m

 

 

 

 

 

Profit for the year

159.5 

504.5 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Other comprehensive income to be reclassified to profit or loss in subsequent periods

 

 

5.3

Currency translation differences on foreign operations - Group

(145.9)

203.9 

5.3

Net investment hedge

56.8 

(39.0)

5.3

Available-for-sale investment

13.6 

1.7 

5.3

Reclassification adjustment for foreign operations

- 

32.6 

3.2

Income tax relating to components of other comprehensive income

- 

 

 

(75.5)

199.2 

 

Currency translation differences on foreign operations - joint ventures and associates

- 

(0.3)

 

 

(75.5)

198.9 

 

 

 

 

 

Other comprehensive income not to be reclassified to profit or loss in subsequent periods

 

 

 

Remeasurement of defined benefit obligation

39.2 

(43.9)

 

Irrecoverable element of pension surplus

0.2 

(0.1)

3.2

Income tax relating to components of other comprehensive income

- 

 

 

39.4 

(44.0)

 

Remeasurement of defined benefit obligation of associates

(0.6)

(0.9)

 

 

38.8 

(44.9)

 

 

 

 

 

Other comprehensive (loss)/income for the year, net of tax

(36.7)

154.0 

 

 

 

 

 

Total comprehensive income for the year net of tax

122.8 

658.5 

 

 

 

 

 

Attributable to:

 

 

 

Owners of the parent entity

113.5 

639.1 

 

Non-controlling interests

9.3 

19.4 

 

 

122.8 

658.5 

 

 

 

Consolidated statement of financial position

at 31 December 2017

 

 

 

 

Restated

 

 

31 December

31 December

 

 

2017

2016

Notes

 

£m

£m

 

Assets

 

 

 

Non-current assets

 

 

4.1

Goodwill

1,533.0 

1,623.6 

 

Intangible assets

498.4 

578.8 

 

Property, plant and equipment

39.9 

40.6 

 

Investments in joint ventures and associates

17.3 

16.5 

 

Available-for-sale investments

38.1 

26.8 

 

Trade and other receivables

3.2 

1.7 

 

Derivative financial instruments

3.2 

5.4 

 

Retirement benefit surplus

4.8 

4.9 

3.2

Deferred tax asset

19.7 

26.8 

 

 

2,157.6 

2,325.1 

 

Current assets

 

 

 

Trade and other receivables

216.7 

228.9 

5.1

Cash and cash equivalents

77.7 

84.8 

 

Derivative financial instruments

- 

0.2 

 

 

294.4 

313.9 

 

 

 

 

 

Total assets

2,452.0 

2,639.0 

 

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

3.2

Current tax liabilities

52.6 

60.9 

 

Trade and other payables

483.5 

521.9 

 

Provisions

9.9 

21.4 

5.1

Borrowings

3.6 

0.5 

 

Derivative financial instruments

2.8 

3.1 

 

 

552.4 

607.8 

 

Non-current liabilities

 

 

3.2

Deferred tax liabilities

29.5 

33.3 

 

Trade and other payables

7.5 

9.2 

 

Provisions

9.6 

8.5 

5.1

Borrowings

588.3 

686.5 

 

Derivative financial instruments

4.8 

12.7 

 

Retirement benefit obligation

10.6 

55.5 

 

 

650.3 

805.7 

 

 

 

 

 

Total liabilities

1,202.7 

1,413.5 

 

 

 

 

 

Equity attributable to owners of the parent entity

 

 

5.3

Share capital

44.3 

44.3 

5.3

Share premium

536.0 

535.3 

5.3

Other reserves

(481.4)

(410.9)

 

Retained earnings

1,124.3 

1,029.5 

 

Put options over non-controlling interests

(6.6)

(7.8)

 

Total equity attributable to owners of the parent entity

1,216.6 

1,190.4 

 

Non-controlling interests

32.7 

35.1 

 

Total equity

1,249.3 

1,225.5 

 

 

 

 

 

Total equity and liabilities

2,452.0 

2,639.0 

 

These financial statements were approved by the Board of Directors and were signed on its behalf on 27 February 2018 by:

 

 

Marina Wyatt

Director

 

 

 

 

Consolidated statement of changes in equity

for the year ended 31 December 2017

 

 

 

 

 

 

 

 

Total equity

 

 

 

 

 

 

 

 

Put options

attributable

 

 

 

 

 

 

 

 

over non-

to owners

Non-

 

 

 

Share

Share

Other

Retained

controlling

of parent

controlling

Total

 

 

capital

premium

reserves

earnings

interests

 entity

interests

equity

Notes

 

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

44.3 

535.3 

(410.9)

1,029.5 

(7.8)

1,190.4 

35.1 

1,225.5

 

Profit for the year

146.0 

146.0 

13.5 

159.5

 

Other comprehensive (loss)/income

(71.3)

38.8 

(32.5)

(4.2)

(36.7)

 

Total comprehensive income for the year

(71.3)

184.8 

113.5 

9.3 

122.8

5.3

Equity dividends

(86.9)

(86.9)

(86.9)

 

Non-controlling interest dividends

(11.0)

(11.0)

6.2

Acquisition of non-controlling interests

(0.5)

1.2 

0.7 

(0.7)

-

5.3

Issued in respect of share option schemes and other entitlements

0.7 

0.7 

0.7

 

Share-based payments

5.4 

5.4 

5.4

5.3

Shares awarded by ESOP

14.7 

(14.7)

-

5.3

Own shares purchased by the Company

(13.9)

6.7 

(7.2)

(7.2)

 

At 31 December 2017

44.3 

536.0 

(481.4)

1,124.3 

(6.6)

1,216.6 

32.7 

1,249.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

44.3 

534.7 

(605.3)

927.6 

(17.5)

883.8 

30.3 

914.1

 

Profit for the year

491.5 

491.5 

13.0 

504.5

 

Other comprehensive income/(loss)

192.5 

(44.9)

147.6 

6.4 

154.0

 

Total comprehensive income for the year

192.5 

446.6 

639.1 

19.4 

658.5

5.3

Equity dividends

(336.7)

(336.7)

(336.7)

 

Non-controlling interest dividends

(12.2)

(12.2)

 

Non-controlling interest arising on business combinations

1.5 

1.5

6.2

Acquisition of non-controlling interests

(5.8)

9.7 

3.9 

(3.9)

-

5.3

Issued in respect of share option schemes and other entitlements

0.6 

0.6 

0.6

 

Share-based payments

6.1 

6.1 

6.1

5.3

Shares awarded by ESOP

26.3 

(26.3)

-

5.3

Own shares purchased by the Company

(24.4)

18.0 

(6.4)

(6.4)

 

At 31 December 2016

44.3 

535.3 

(410.9)

1,029.5 

(7.8)

1,190.4 

35.1 

1,225.5 

 

 

 

 

Consolidated statement of cash flows

for the year ended 31 December 2017

 

 

 

 

 

 

 

2017

2016

Notes

 

£m 

£m 

 

Cash flows from operating activities

 

 

 

Profit for the year from continuing operations

151.7 

97.3 

6.4

Profit for the year from discontinued operations

7.8 

407.2 

 

Profit for the year

159.5 

504.5 

 

Add back:

 

 

 

Exceptional operating items from continuing operations (excluding fair value adjustments below)

18.2 

36.1 

 

Fair value adjustments to contingent consideration

(1.1)

0.4 

6.4

Exceptional items relating to discontinued operations

(7.8)

(382.0)

3.2

Tax

40.0 

25.7 

 

Amortisation of acquired intangible assets

64.5 

45.1 

 

Amortisation of website development costs and internally generated software

8.7 

9.5 

 

Depreciation

8.7 

8.0 

 

Share of post tax results from joint ventures and associates

(1.4)

(2.1)

5.2

Net financing expense

20.3 

32.6 

 

Other non-cash items

1.1 

 

 

310.7 

277.8 

 

Payments against provisions

 

(5.4)

(11.9)

 

Pension deficit contributions

(3.3)

(13.3)

 

(Increase)/decrease in trade and other receivables

(1.1)

32.1 

 

Decrease in trade and other payables

(18.3)

(89.9)

 

Cash generated from operations

282.6 

194.8 

 

Interest and finance income received

1.8 

1.8 

 

Interest and finance costs paid

(25.6)

(27.0)

3.2

Tax paid

(42.2)

(39.1)

 

Dividends received from joint ventures and associates

- 

0.5 

 

Net cash flows from operating activities

216.6 

131.0 

 

Net cash flows from operating activities - continuing

216.6 

110.1 

 

Net cash flows from operating activities - discontinued

- 

20.9 

 

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

(9.8)

(5.4)

 

Expenditure on intangible assets

(11.1)

(6.3)

6.1

Acquisition of interests in subsidiaries, net of cash acquired

(62.6)

(416.2)

 

Proceeds from sale of investments, joint ventures and associates

- 

17.0 

 

Proceeds from repayment of vendor loan note

- 

8.7 

6.3

Proceeds from sale of businesses, net of cash disposed

3.3 

545.8 

 

Net cash flows from investing activities

(80.2)

143.6 

 

Net cash flows from investing activities - continuing

(80.2)

147.5 

 

Net cash flows from investing activities - discontinued

- 

(3.9)

 

 

 

 

 

Cash flows from financing activities

 

 

5.3

Proceeds from issuance of ordinary share capital

0.7 

0.6 

6.2

Acquisition of non-controlling interests

(2.2)

(5.8)

5.3

Dividends paid to shareholders

(86.9)

(336.7)

 

Dividends paid to non-controlling interests

(11.0)

(12.2)

5.3

Investment in own shares - ESOP

(7.2)

(6.4)

5.1

Proceeds from borrowings

283.5 

324.7 

5.1

Repayment of borrowings

(323.3)

(250.0)

 

Net cash flows from financing activities

(146.4)

(285.8)

 

Net cash flows from financing activities - continuing

(146.4)

(258.9)

 

Net cash flows from financing activities - discontinued

- 

(26.9)

 

 

 

 

 

Net decrease in cash and cash equivalents

(10.0)

(11.2)

 

 

 

 

 

Net foreign exchange difference

(0.2)

12.6 

 

Cash and cash equivalents including overdrafts at 1 January

84.3 

82.9 

 

Cash and cash equivalents including overdrafts at 31 December

74.1 

84.3 

 

 

 

 

 

 

 

 

Notes to the consolidated financial statements

at 31 December 2017

 

1.  Basis of preparation

 

UBM plc is a public limited company incorporated in Jersey under the Companies (Jersey) Law 1991.  The registered office is Ogier House, The Esplanade, St. Helier, JE4 9WG, Jersey.  UBM plc is tax resident in the United Kingdom.  The principal activities of the Group are described in Section 2. 

 

The preliminary announcement was approved by the Board of Directors on 27 February 2018.

 

The figures and financial information for the year ended 31 December 2017 do not constitute the statutory financial statements for that year.  Those financial statements have not yet been delivered to the Jersey Registrar of Companies but include the auditor's report which was unqualified.  The figures and financial information for the year ended 31 December 2016 included in the preliminary announcement do not constitute the statutory financial statements for that year.  Those financial statements have been delivered to the Registrar and included the auditor's report which was unqualified.

 

They are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).  The consolidated financial statements comply with the Companies (Jersey) Law 1991 and are prepared under the historical cost basis except for derivative financial instruments and hedged items which are measured at fair value.  The consolidated financial statements are presented in pounds sterling, which is the functional currency of the parent company, UBM plc. All amounts are rounded to the nearest £0.1m unless otherwise indicated.

 

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those used for the previous financial year, except for the adoption of the following new and amended IFRSs.

 

The following new and amended standards have been adopted but they do not impact the consolidated financial statements of the Group:

·     Amendments to IAS 12: Recognition of Deferred Tax Asset

·     Amendments to IAS 7: Disclosure Initiative

·     Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; and

·     Annual Improvements 2014-2016

-       IFRS 12: Disclosure of interests in other entities;

-       IFRS 1: First-time adoption of IFRS

-       IAS 28: Investments in associates and joint ventures

 

The Group will adopt IFRS 15 'Revenue from Contracts with Customers' as at 1 January 2018. The Group has performed an assessment of the impact of this standard and adoption of the standard will not have a material impact on the statement of comprehensive income. The impact on the net assets in the statement of financial position will not be material but will include a reclassification between deferred revenue and trade receivables.

 

The Group will also adopt IFRS 9 'Financial Instruments' as at 1 January 2018. Following adoption of the standard, increased disclosures on hedging will be required, otherwise implementation will not have a material impact.

 

The Group will adopt IFRS 16 'Leases' as at 1 January 2019. The Group is currently performing an assessment of this standard. It is expected to have a material impact on the statement of financial position as it will result in the Group recognising assets and lease liabilities.  The asset will be depreciated, and interest charged on the lease liabilities, which replaces the rental cost previously recognised in the income statement.

 

Refer to the statutory financial statements for full listing of the expected impact from adopting new accounting standards which have been issued but are not yet effective.

 

Discontinued operations

 

The disposed PR Newswire business was a discontinued operation during 2016. In the year ended 31 December 2017, the Group has recognised an additional £7.8m gain on disposal of PR Newswire primarily due to the release of warranties and indemnities which were originally recognised in accordance with specific clauses in the sale agreement. This gain has been recognised as an exceptional item for discontinued operations in the year ended 31 December 2017. The gain has a 2.0 pence impact on basic and diluted earnings per share and no cash flow effect.

 

Comparative information

 

The comparative information in the consolidated statement of financial position for the year ended 31 December 2016 has been restated for acquisition accounting adjustments in relation to the Allworld Exhibitions acquisition in accordance with IFRS 3 'Business Combinations' (2008). The impact of the restatement of the 31 December 2016 values is to increase intangible assets, property plant and equipment, provisions and deferred tax liability by £23.0m, £0.2m, £0.5m and £2.4m respectively with a corresponding decrease in goodwill, trade and other receivables, deferred tax asset, trade and other payables and current tax liability of £20.9m, £0.8m, £0.4m, £0.8m and £1.0m respectively. Refer to Note 6.1 for further details.

 

Going concern

 

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  The consolidated financial statements are therefore prepared on a going concern basis.

 

Basis of Consolidation

 

The consolidated financial statements comprise those of UBM plc (the Company) and its subsidiaries (together referred to as the Group) and include the Group's interests in joint ventures and associates. 

 

2.  Operating segments

 

The Group considers that operating segments presented on a products and services basis are the most appropriate way to demonstrate the performance of the Group.  This is consistent with the internal reporting provided to the Group Chief Executive Officer and the Group Chief Financial Officer, together the chief operating decision maker (CODM), and reflects the way in which resources are allocated.

 

The CODM considers there to be two operating segments:

·      Events which provide face-to-face interaction in the form of exhibitions, tradeshows, conferences and other live events; and

·      Other Marketing Services which publish magazines and trade press to specialist markets either online or in print; as well as providing sponsorships and banner advertising and online directory and data products.

 

The PR Newswire businesses which were disposed in June 2016 comprised the previously reported PR Newswire operating segment and have been reported as discontinued operations as at 31 December 2016.

 

Segment measures

 

The CODM assesses the performance of the operating segments and the allocation of resources using revenue and adjusted operating profit.  Adjusted operating profit is IFRS operating profit excluding amortisation of intangible assets arising on acquisitions, exceptional items and share of tax on results of joint ventures and associates. 

 

Finance income/expense and tax are not allocated to operating segments and are reported to the CODM only in aggregate. 

 

Segment assets and liabilities are not reported to the CODM. 

 

Transactions between segments are measured on the basis of prices that would apply to third-party transactions. 

 

Year ended 31 December 2017

 

 

Other

 

 

 

 

Marketing

Corporate

 

 

Events

Services

Costs

Total

 

£m

£m

£m

£m

Revenue

 

 

 

 

Total segment revenue

866.4 

136.5 

1,002.9 

Intersegment revenue

External revenue

866.4 

136.5 

1,002.9 

 

 

 

 

 

Result

 

 

 

 

Depreciation and amortisation of website development costs and internally generated software

(14.7)

(2.3)

(0.4)

(17.4)

Share of pre-tax results from joint ventures and associates

0.7 

1.3 

2.0 

Segment adjusted operating profit

295.6 

19.4 

(20.8)

294.2 

Amortisation of intangible assets arising on acquisitions

 

 

(64.5)

Exceptional operating items - continuing

 

 

(17.1)

Share of tax on profit in joint ventures and associates

 

 

 

(0.6)

Group operating profit

 

 

212.0 

Net financing expense

 

 

 

(25.4)

Exceptional items relating to net financing expense

 

 

5.1 

Profit before tax from continuing operations

 

 

191.7 

Tax

 

 

(40.0)

Exceptional operating items - discontinued

 

 

 

7.8 

Profit for the year

 

 

 

159.5 

 

Within Corporate Costs, non-recurring credits amount to £4.3m relating to pension credits (2016: £5.7m one-off credits in relation to the pension credits of £5.0m and £0.7m income from a disposed associate).

 

 

Year ended 31 December 2016

 

 

Other

 

 

PR Newswire

 

 

 

Marketing

Corporate

Continuing

discontinued

 

 

Events

Services

Costs

total

operations

Total

 

£m

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

 

Total segment revenue

712.6 

151.4 

864.0 

103.2 

967.2 

Intersegment revenue

(1.0)

(1.0)

(0.2)

(1.2)

External revenue

711.6 

151.4 

863.0 

103.0 

966.0 

 

 

 

 

 

 

 

Result

 

 

 

 

 

 

Depreciation and amortisation of website development costs and internally generated software

(13.9)

(2.9)

(0.7)

(17.5)

(17.5)

Share of pre-tax results from joint ventures and associates

0.2 

2.2 

2.4 

0.2 

2.6 

Segment adjusted operating profit

229.1 

24.1 

(18.4)

234.8

28.1 

262.9 

Amortisation of intangible assets arising on acquisitions

 

 

(45.1)

(45.1)

Exceptional operating items

 

 

(36.5)

382.0 

345.5 

Share of tax on profit in joint ventures and associates

 

 

 

(0.5)

(0.5)

Group operating profit

 

 

152.7 

410.1 

562.8 

Net financing expense

 

 

 

(25.5)

(25.5)

Exceptional items relating to net financing expense

 

 

(7.1)

(7.1)

Profit before tax

 

 

120.1 

410.1 

530.2 

Exceptional tax items

 

 

(14.2)

(1.1)

(15.3)

Tax

 

 

 

(8.6)

(1.8)

(10.4)

Profit for the year

 

 

 

97.3 

407.2 

504.5 

 

Geographic information

 

Revenue is allocated to countries based on the location where the products and services are provided.  Non-current assets are allocated to countries based on the location of the businesses to which the assets relate.

 

 

 

 

2017

2016

Continuing revenue

£m

£m

United Kingdom

61.4 

69.0 

Foreign countries

 

 

United States and Canada

419.1 

404.7 

Continental Europe

89.1 

66.6 

China (including Hong Kong)

257.5 

218.6 

Emerging Markets1

151.1 

83.6 

Rest of the world

24.7 

20.5 

 

941.5 

794.0 

External revenue

1,002.9 

863.0 

1 Emerging Markets comprise the non-G10 countries - most notably for the Group: Brazil, India, Indonesia, Malaysia, Mexico, Singapore, Thailand and Turkey.

 

There are no revenues derived from a single external customer which are significant.

 

 

2017

Restated

2016

Non-current assets

£m

£m

United Kingdom

333.5 

300.5 

Foreign countries

 

 

United States and Canada

1,289.6 

1,470.7 

Continental Europe

13.0 

12.5 

China (including Hong Kong)

127.2 

115.4 

Emerging Markets1

320.2 

382.3 

Rest of the world

43.2 

4.9 

 

1,793.2 

1,985.8 

Total non-current assets

2,126.7 

2,286.3 

 

Non-current assets for this purpose consist of goodwill, intangible assets, property, plant and equipment, investments in joint ventures and associates and available-for-sale investments. The following non-current assets are not included: deferred tax assets, pension benefit surplus, derivative financial instruments and non-current trade and other receivables.

 

3.  Income Statement

 

3.1  Exceptional operating items

 

Certain items are recognised as exceptional items since, due to their nature or infrequency, such presentation is relevant to an understanding of the Group's financial statements. These items are not part of the Group's normal ongoing operations and are excluded from the Group's adjusted operating profit measure. They typically relate to costs associated with acquisitions, gains or losses on disposal of investments, material restructuring costs and impairments. Exceptional items are considered individually and assessed each reporting period.

 

 

2017

2016

 

(Charged)/credited to continuing operating profit

£m

£m

 

Advanstar integration costs

(8.0)

(8.1)

Business Journals Inc integration costs

(3.1)

(3.2)

Allworld integration costs

(5.1)

Acquisition costs on Allworld Exhibitions

(1.9)

(4.7)

Acquisition costs on other business combinations

(0.3)

(2.0)

Changes in estimates of contingent consideration

1.1 

(0.4)

Exceptional items relating to acquisitions

(17.3)

(18.4)

 

 

 

Gain on disposal of investment and associate

11.2 

Loss on disposal of Ecobuild

(35.1)

Gain on disposal of non-core businesses (Note 6.3)

2.6 

9.2 

Exceptional items relating to disposal of investments

2.6 

(14.7)

 

 

 

Impairment of goodwill and intangible assets

(3.4)

Impairment charge

(3.4)

 

 

 

Transaction costs

(2.4)

Total charged to continuing operating profit

(17.1)

(36.5)

         

 

Total cash paid for exceptional expenses during the year amounted to £18.0m.

 

Advanstar and Business Journals Inc (BJI) integration costs

The integration costs incurred in 2017 related to operational and financial integration into the Americas business, alignment and migration of processes and termination of venue contracts. The transitions are complete and both Advanstar and BJI are integrated into the Americas division and no further costs are expected.

 

Allworld integration costs

Integration costs of £5.1m have been incurred in 2017 and primarily relate to restructuring costs and consultancy fees in preparation and execution of the operational and finance integrations. Total integration costs of $20m are expected to be incurred over the next two years.

 

Acquisition costs

Total acquisition costs of £2.2m have been expensed as exceptional items and relate mainly to due diligence and professional fees paid to various advisors. Of these, £1.9m relate to the acquisition of Allworld Exhibitions, and £0.3m relate to fees incurred for the acquisitions of Marmara, AMA Research, Green Thinking Services and The Aesthetic Show (Note 6.1).

 

Gain on disposal of business

Following the disposal of the Customer Tech and Care show businesses, the Group recognised a gain on disposal of £2.6m.

 

Transaction costs

The transaction costs were incurred in relation to the offer made by Informa Plc for the Group. Further costs are expected to be incurred during 2018.

 

There is no tax recognised in respect of the exceptional items reported above.

 

3.2  Tax

 

Income statement

 

 

2017

2016

Continuing

£m

£m

Current tax expense

36.7 

31.0 

Exceptional tax charge

16.6 

14.2 

Other deferred tax credit

(13.3)

(22.4)

Income tax expense

40.0 

22.8 

 

The exceptional tax charge of £16.6m relates to the unwind of the deferred tax asset recognised in 2014 as an exceptional tax credit.

 

 

Reconciliation of total tax expense to the accounting profit:

 

2017

2016

 

£m

£m

Profit before tax from continuing operations

191.7 

120.1 

Profit before tax from discontinued operations (Note 6.4)

7.8 

410.1 

Profit before tax

199.5 

530.2 

 

 

 

Profit before tax multiplied by UK rate of corporation tax of 19.25% (2016: 20.0%)

38.4 

106.0 

 

 

 

Effect of:

 

 

Different tax rates on overseas earnings

18.6 

15.2 

Non-taxable gain on disposal of discontinued operations

(1.5)

(74.2)

Expenses not deductible for tax purposes

3.0 

19.1 

Non-taxable income

(5.1)

(9.7)

Net movement in uncertain tax positions

(7.3)

(4.9)

Prior year adjustments

(1.4)

2.1 

Benefit of intragroup financing

(18.2)

(17.8)

Exceptional deferred tax charge

16.6 

13.1 

Movement in deferred tax assets recognised as a consequence of acquisition intangibles

(0.3)

(6.7)

Movement in other deferred tax assets recognised

(4.7)

(4.6)

Losses brought forward and utilised

(2.8)

(6.1)

Surplus losses carried forward

8.9 

12.5 

Deduction for amortisation

(19.6)

(18.8)

Effects of other unrecognised temporary differences

6.4 

(3.3)

Share of results from associates and joint ventures (after tax)

(0.3)

(0.4)

Effect of changes in tax rates

8.5 

- 

Other

0.8 

4.2 

Total tax expense

40.0 

25.7 

Tax expense reported in the consolidated income statement

40.0 

22.8 

Tax attributable to discontinued operations (Note 6.4)

- 

2.9 

 

40.0 

25.7 

 

The amount of £8.5m in relation to the effect of changes in tax rates is due to the impact on deferred tax of the reduction in the US Federal tax rate from 35% to 21% as part of the Tax Cuts and Jobs Act 2017.

 

Reconciliation to continuing adjusted tax charge

 

2017

2016

 

£m

£m

Income tax expense

40.0 

25.7 

Exceptional tax charge

(16.6)

(14.2)

Net deferred tax movement on acquisition intangibles

19.0 

20.1 

Share of tax on profit in joint ventures and associates

0.6 

0.5 

Tax attributable to discontinued operations

- 

(2.9)

Continuing adjusted tax charge (Note 3.3)

43.0 

29.2 

 

Other comprehensive income

 

No current or deferred tax relates to items reported in other comprehensive income (2016: nil).

 

Statement of financial position: current tax

 

2017

Restated

2016

 

£m

£m

Current tax liability at 1 January

60.9 

56.4 

Current tax expense - continuing

36.7 

32.1 

Current tax expense - discontinued operations

- 

1.1 

Acquisitions (Note 6.1)

- 

6.4 

Tax paid - continuing

(42.2)

(36.7)

Currency translation and other movements

(2.8)

1.6 

Current tax liability at 31 December

52.6 

60.9 

 

The current tax liability includes £35.9m (2016: £45.6m) in respect of accruals for uncertain tax positions.  On 26 October 2017 the European Commission announced that it would be opening a State Aid investigation into the UK's Controlled Foreign Company regime. The Group is monitoring developments but does not currently consider that any provision is required in relation to this matter.

 

 

During the year, tax has been paid in the following jurisdictions:

 

 

2017

 

 

£m

China (including Hong Kong)

 

17.0 

Europe

 

12.5 

US

 

0.8 

Emerging Markets

 

8.9 

Rest of the world

 

3.0 

Total

 

42.2 

 

Statement of financial position: deferred tax

Deferred tax liabilities

Consolidated statement of financial position

Consolidated income

statement

 

2017

Restated 2016

2017

2016

 

£m

£m

£m

£m

Intangibles

75.4 

100.2 

(18.8)

(0.7)

Accelerated capital allowances

1.6 

1.8 

- 

2.6 

Tax losses

(60.6)

(78.8)

12.7 

(19.0)

Other temporary differences

(6.6)

(16.7)

9.4 

7.8 

 

9.8 

6.5 

3.3 

(9.3)

 

The movement in deferred tax balance during the year is:

 

2017

Restated 2016

 

£m

£m

Net deferred tax liability/(asset) at 1 January

6.5 

(10.8)

Acquisitions (Note 6.1)

0.3 

28.6 

Amounts credited/(debited) to net profit - continuing

3.3 

(9.3)

Disposals (Note 6.3)

- 

(1.1)

Currency translation

(0.3)

(0.9)

Net deferred tax liability at 31 December

9.8 

6.5 

 

 

 

Analysed in the statement of financial position, after offset of balances within countries, as:

 

 

Deferred tax assets

(19.7)

(26.8)

Deferred tax liabilities

29.5 

33.3 

 

9.8 

6.5 

 

The deferred tax assets of £19.7m (2016: £26.8m) relate to tax losses and other temporary differences in the US of £17.1m (2016: £18.1m), Luxembourg of £2.0m (2016: £8.4m) and other countries of £0.6m (2016: £0.3m).  These have been recognised because the Group expects to generate taxable profits in the future against which these will be used.

 

The Group has the following unused tax losses for which no deferred tax assets have been recognised:

 

·      £329.5m (2016: £321.8m) in UK subsidiaries which are available to offset against future UK corporate tax liabilities;

·      £115.7m (2016: £189.2m) in US subsidiaries which are available to offset against future US federal tax liabilities.  Of these £115.7m expire between 2019 and 2037 (2016: £173.0m between 2019 and 2036).  In addition, there are unrecognised deferred tax assets in respect of US State losses of £15.2m (2016: £18.4m);

·      £251.6m (2016: £249.7m) of UK capital losses which are only available for offset against future capital gains;

·      £7.5bn (2016: £7.2bn) that have arisen in Luxembourg holding companies as a result of revaluations of those companies' investments for local GAAP purposes; and

·      £20.1m (2016: £7.4m) in respect of companies in other countries.

 

No deferred tax assets have been recognised in respect of any of these amounts as it is uncertain that these losses will be utilised.

 

In addition, the Group has unrecognised deferred tax assets in relation to other deductible temporary differences of £15.8m (£2.3m in relation to the UK, £7.5m in relation to the US, and £6.0m in relation to other countries) (2016: £20.7m (£13.6m, nil and £7.1m respectively)).  No deferred tax assets have been recognised in respect these assets as it is uncertain that they will be utilised.

 

At 31 December 2017, deferred tax liabilities of £4.5m (2016: £3.9m) have been recognised for taxes that would be payable on the unremitted earnings of the Group's subsidiaries. No other deferred tax liabilities have been recognised as the Group has determined that profits of subsidiaries will not be distributed in the foreseeable future.

 

The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognised amount in aggregate to £5.2bn (2016: £5.0bn). 

 

 

3.3  Earnings per share

 

Basic earnings per share is calculated by dividing net profit for the year attributable to owners of the parent entity by the weighted average number of ordinary shares outstanding during the year. 

 

Adjusted basic earnings per share excludes amortisation of intangible assets arising on acquisitions, movements on deferred tax balances recognised as a consequence of acquisition of intangibles, exceptional items and net financing expense adjustments (detailed in Note 5.2).

 

Diluted earnings per share is calculated by dividing net profit for the year attributable to owners of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.  The impact of dilutive securities in 2017 would be to increase weighted average shares by 4.0 million shares (2016: 4.3 million shares).

 

The weighted average number of shares used in the calculation of earnings per share for the year ended 31 December 2016 reflects the share consolidation on 27 June 2016 of eight for every nine shares owned. In accordance with IAS 33, the prior period weighted average number of shares has not been restated as the share consolidation was coupled with the payment of the special dividend (Note 5.3), which had the overall effect of a share repurchase at fair value.

 

The weighted average number of shares excludes ordinary shares held by the Employee Share Ownership Plan (the ESOP).

 

Continuing operations

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

average no.

Earnings

 

average no.

Earnings

 

Earnings

of shares

per share

Earnings

of shares

per share

 

2017

2017

2017

2016

2016

2016

 

£m

million

pence

£m

million

pence

Adjusted operating profit

294.2 

 

 

234.8 

 

 

Net interest expense

(24.1)

 

 

(25.7)

 

 

Pension schemes finance expense

(1.3)

 

 

(0.6)

 

 

Adjusted profit before tax

268.8 

 

 

208.5 

 

 

Adjusted tax (Note 3.2)

(43.0)

 

 

(29.2)

 

 

Non-controlling interests

(13.5)

 

 

(13.0)

 

 

Adjusted earnings per share

212.3 

393.2 

54.0 

166.3 

414.9 

40.1 

Adjustments

 

 

 

 

 

 

Amortisation of intangible assets arising on acquisitions

(64.5)

 

(16.4)

(45.1)

 

(10.9)

Net deferred tax movements on intangible assets

19.0 

 

4.8 

20.1 

 

4.8 

Exceptional items

(17.1)

 

(4.4)

(36.5)

 

(8.8)

Exceptional deferred tax charge

(16.6)

 

(4.2)

(14.2)

 

(3.4)

Net financing (expense)/income adjustments

5.1 

 

1.3 

(6.3)

 

(1.5)

Basic earnings per share

138.2 

393.2 

35.1 

84.3 

414.9 

20.3 

Options

- 

4.0 

(0.3)

4.3 

(0.2)

Diluted earnings per share

138.2 

397.2 

34.8 

84.3 

419.2 

20.1 

 

 

 

 

 

 

 

Adjusted earnings per share (as above)

212.3 

393.2 

54.0 

166.3 

414.9 

40.1 

Options

4.0 

(0.6)

4.3 

(0.4)

Diluted adjusted earnings per share

212.3 

397.2 

53.4 

166.3 

419.2 

39.7 

 

 

Total Group

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

average no.

Earnings

 

average no.

Earnings

 

Earnings

of shares

per share

Earnings

of shares

per share

 

2017

2017

2017

2016

2016

2016

 

£m

million

pence

£m

million

pence

Adjusted operating profit

294.2 

 

 

262.9 

 

 

Net interest expense

(24.1)

 

 

(25.7)

 

 

Pension schemes finance expense

(1.3)

 

 

(0.6)

 

 

Adjusted profit before tax

268.8 

 

 

236.6 

 

 

Adjusted tax (Note 3.2)

(43.0)

 

 

(31.0)

 

 

Non-controlling interests

(13.5)

 

 

(13.0)

 

 

Adjusted earnings per share

212.3 

393.2 

54.0 

192.6 

 

414.9 

46.4 

Adjustments

 

 

 

 

 

 

Amortisation of intangible assets arising on acquisitions

(64.5)

 

(16.4)

(45.1)

 

(10.9)

Net deferred tax movements on intangible assets

19.0 

 

4.8 

20.1 

 

4.8 

Exceptional items

(9.3)

 

(2.4)

344.4 

 

83.1 

Exceptional deferred tax charge

(16.6)

 

(4.2)

(14.2)

 

(3.4)

Net financing (expense)/ income adjustments

5.1 

 

1.3 

(6.3)

 

(1.5)

Basic earnings per share

146.0 

393.2 

37.1 

491.5 

414.9 

118.5 

Options

- 

4.0 

(0.3)

4.3 

(1.2)

Diluted earnings per share

146.0 

397.2 

36.8 

491.5 

419.2 

117.3 

 

 

 

 

 

 

 

Adjusted earnings per share (as above)

212.3 

393.2 

54.0 

192.6 

 

414.9 

46.4 

Options

4.0 

(0.6)

4.3 

(0.5)

Diluted adjusted earnings per share

212.3 

397.2 

53.4 

192.6 

419.2 

45.9 

 

 

4.  Statement of Financial position

 

4.1  Goodwill

 

Goodwill is allocated and monitored by management at a CGU level, consisting of the three business units operating across the Group's operating segments.  Not all business units are active in all segments; there are six CGUs at 31 December 2017 (2016: seven CGUs). During the year, Online and Print were merged into one CGU, "Other Marketing Services". This reflects the lowest level cash flows are monitored at as products are similar with shared revenue characteristics (subscriptions, advertising and directories) and shared cost bases. Following the acquisition of Allworld, a new CGU "UBM Allworld Events" was recognised, however, this will be merged into UBM Asia from 2018 onwards. For reporting purposes, the CGUs have been aggregated into the reportable segments, as shown in the tables below.  The CGUs are individually tested for impairment each year.

 

31 December 2017

 

 

 

Other

 

 

 

 

Marketing

 

 

 

Events

 Services

Total

 

 

£m

£m

£m

Cost

 

 

 

 

At 1 January 2017

 

1,565.1 

137.3 

1,702.4 

Acquisitions (Note 6.1)

 

31.5 

0.7 

32.2 

Disposals (Note 6.3)

 

(2.6)

- 

(2.6)

Currency translation

 

(116.1)

(6.6)

(122.7)

At 31 December 2017

 

1,477.9 

131.4 

1,609.3 

Impairment

 

 

 

 

At 1 January 2017

 

8.5 

70.3 

78.8 

Currency translation

 

(0.7)

(1.8)

(2.5)

At 31 December 2017

 

7.8 

68.5 

76.3 

Carrying amount

 

 

 

 

At 1 January 2017

 

1,556.6 

67.0 

1,623.6 

At 31 December 2017

 

1,470.1 

62.9 

1,533.0 

 

Within the Events segment, management considers the UBM Americas Events, UBM EMEA Events, UBM Asia Events and UBM Allworld CGUs to be significant.  The carrying amount of goodwill attributed to these CGUs at 31 December 2017 was £929.5m, £223.3m, £88.6m and £228.8m respectively. In 2016, UBM Americas Events (£1,007.5m), UBM EMEA Events (£225.5m) and UBM Asia Events (£344.5m) were considered significant.

 

 

5.  Capital structure and financial policy

 

5.1  Movements in net debt

 

Net debt reflects the Group's cash and cash equivalents, borrowings and derivatives associated with debt instruments.  This definition facilitates an accurate reflection of the estimated settlement at maturity.

 

 

1 January

Non-cash

 

Currency

31 December

 

2017

items

Cash flow

translation

2017

£m

£m

£m

£m

£m

Cash and cash equivalents

84.8

-

(6.9)

(0.2)

77.7

(0.5)

-

(3.1)

-

(3.6)

Net cash

84.3

-

(10.0)

(0.2)

74.1

 

 

 

 

 

 

Bank loans due in more than one year

(401.8)

-

323.3

21.0 

(57.5)

Bonds due in more than one year

(284.7)

1.0

-

24.7 

(259.0)

-

0.6

(283.5)

11.1 

(271.8)

Borrowings

(686.5)

1.6

39.8

56.8 

(588.3)

 

 

 

 

 

 

Derivative assets associated with borrowings

5.4

(1.8)

-

(0.4)

3.2

-

(0.3)

-

(0.3)

Net debt

(596.8)

(0.5)

29.8

56.2 

(511.3)

 

 

5.2  Net financing expense

 

Net financing expense

 

Before

 

 

Before

 

 

 

exceptional

Exceptional

 

exceptional

Exceptional

 

 

items

items

Total

items

items

Total

 

2017

2017

2017 

2016

2016

2016 

 

£m

£m

£m

£m

£m

£m

Financing expense

 

 

 

 

 

 

Borrowings and loans

(25.9)

- 

(25.9)

(27.5)

- 

(27.5)

Total interest expense for financial liabilities not classified at fair value through profit or loss

(25.9)

(25.9)

(27.5)

(27.5)

Pension schemes net finance expense

(1.3)

(1.3)

(0.6)

(0.6)

Foreign exchange loss on forward contract

(0.3)

(0.3)

Other fair value movements

(0.6)

(0.6)

(0.5)

(0.5)

Financing expense before exceptional items

(28.1)

(28.1)

(28.6)

(28.6)

 

 

 

 

 

 

 

Exceptional financing expense

 

 

 

 

 

 

Fair value movement on put options over non-controlling interests

(7.1)

(7.1)

 

 

 

 

 

 

 

Total financing expense

(28.1)

(28.1)

(28.6)

(7.1)

(35.7)

 

 

 

 

 

 

 

Financing income

 

 

 

 

 

 

Cash and cash equivalents

1.8 

- 

1.8 

1.5 

- 

1.5 

Vendor loan note

- 

- 

- 

0.3 

- 

0.3 

Total interest income

1.8 

1.8 

1.8 

1.8 

Fair value movement on interest rate swaps

(1.5)

- 

(1.5)

(5.1)

- 

(5.1)

Fair value movement on borrowings

2.4 

2.4 

6.2 

6.2 

Ineffective portion on fair value hedges

0.9 

0.9 

1.1 

1.1 

Foreign exchange gain on forward contract

0.2 

0.2 

Finance income before exceptional items

2.7 

2.7 

3.1 

3.1 

 

 

 

 

 

 

 

Exceptional financing income

 

 

 

 

 

 

 Fair value movement on put options over non-controlling interests

5.1

5.1 

 

 

 

 

 

 

 

Total financing income

2.7 

5.1 

7.8 

3.1 

3.1 

 

 

 

 

 

 

 

Net financing expense

(25.4)

5.1 

(20.3)

(25.5)

(7.1)

(32.6)

 

 

The ineffective portion on fair value hedges represents the difference between the fair value movement of the interest rate swaps designated as hedge instruments and the fair value movement of the hedged portions of the $370m US Private Placement Loan Notes due in 2024 and the $350m 5.75% dollar bonds due 2020. The ineffective portion on fair value hedges in 2016 represented the difference between the fair value movement of the interest rate swaps designated as hedge instruments and the fair value movement of the hedged portions of the $350m 5.75% dollar bonds and the £250m 6.5% sterling bonds which matured in November 2016.

 

The exceptional financing income on the fair value movement on put options over non-controlling interests is a result of a downward revision of future performance in the related businesses using updated forecast financial information.

 

5.3  Equity and dividends

 

Share capital

 

2017

2016

Authorised

£m

£m

1,081,888,657 (2016: 1,081,888,657) ordinary shares of 11.25 pence each

121.7 

121.7 

 

 

Ordinary

Ordinary

 

shares

Shares

Issued and fully paid

Number

£m

At 1 January 2016

442,977,538 

44.3 

 

Issued in respect of share option schemes and other entitlements prior to the share consolidation

Share consolidation

(49,219,727)

Issued in respect of share option schemes and other entitlements

 

151,042 

At 31 December 2016

393,908,858 

44.3 

 

Issued in respect of share option schemes and other entitlements

179,302 

- 

At 31 December 2017

394,088,160 

44.3 

 

The ESOP Trust owns 0.19% (2016: 0.21%) of the issued share capital of the Company in trust for the benefit of employees of the Group and their dependents.  The ESOP Trust waives its dividend entitlement and abstains from voting at general meetings.

 

On 27 June 2016, in conjunction with the special dividend of 55.3p per share, a share consolidation was carried out to convert nine existing ordinary shares with a nominal value of 10p each to eight new ordinary shares with a nominal value of 11.25p each.  The share consolidation converted the 442,997,543 existing issued and fully paid ordinary shares into 393,757,816 new issued and fully paid ordinary shares.  In accordance with IAS 33, the prior period weighted average number of shares has not been restated as the share consolidation was coupled with the payment of the special dividend.

 

Share premium

 

2017

2016

 

£m

£m

In issue at 1 January

535.3 

534.7 

Premium on shares issued, net of costs

0.7 

0.6 

In issue at 31 December

536.0 

535.3 

 

The Company received £0.7m (2016: £0.6m) on the issue of shares in respect of the exercise of options awarded under various share option plans.

 

Dividends

 

2017

2016

 

£m

£m

Declared and paid during the year

 

 

Equity dividends on ordinary shares

 

 

Final dividend for 2016 of 16.6p (2015: 16.3p)

65.3 

71.8 

Special dividend for 2016: 55.3p

243.7 

Interim dividend for 2017 of 5.5p (2016: 5.4p)

21.6 

21.2 

 

86.9 

336.7 

 

 

 

Proposed (not recognised as a liability at 31 December)

 

 

Equity dividends on ordinary shares

 

 

Final dividend for 2017 of 18.0p (2016: 16.6p)

70.9 

65.3 

 

There are no income tax consequences to the Group arising from the payment of dividends by the Company to its shareholders.

 

 

Other reserves

 

 

Foreign

 

 

 

 

 

 

currency

 

Available-

 

Total

 

Merger

translation

ESOP

for-sale

Other

other

 

reserve

reserve

reserve

reserve

reserves

reserves

 

£m

£m

£m

£m

£m

£m

Balance at 1 January 2016

(732.2)

9.4 

(7.8)

125.3 

(605.3)

Total comprehensive income for the year1

190.8 

1.7 

192.5 

Shares awarded by ESOP

26.3 

26.3 

Own shares purchased by the Company

(24.4)

(24.4)

Balance at 31 December 2016

(732.2)

200.2 

(5.9)

1.7 

125.3 

(410.9)

Total comprehensive income for the year2

- 

(84.9)

- 

13.6 

- 

(71.3)

Shares awarded by ESOP

- 

- 

14.7 

- 

- 

14.7 

Own shares purchased by the Company

- 

- 

(13.9)

- 

- 

(13.9)

Balance at 31 December 2017

(732.2)

115.3 

(5.1)

15.3 

125.3 

(481.4)

1The amount included in the foreign currency translation reserve for 2016 represents the currency translation difference on foreign operations on Group subsidiaries of £197.5m (excluding £6.4m relating to non-controlling interests), on net investment hedges of £(39.0)m, on joint ventures and associates of £(0.3)m and on the reclassification adjustment for foreign operations in period of £32.6m, relating to disposals (Note 6.3).

 

2The amount included in the foreign currency translation reserve for 2017 represents the currency translation difference on foreign operations on Group subsidiaries of £(141.7)m (excluding £(4.2)m relating to non-controlling interests), and on net investment hedges of £56.8m.

 

Merger reserve

The merger reserve is used to record entries in relation to certain reorganisations that took place in previous accounting periods.  The majority of the balance on the reserve relates to the capital reorganisation that took place in 2008 which created a new holding company which is UK-listed, incorporated in Jersey and with its tax residence in the Republic of Ireland.  The return of the Company's tax residency to the United Kingdom in November 2012 has had no impact on these balances. 

 

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.  It is also used to record the effect of hedging net investments of foreign operations.

 

ESOP reserve

The ESOP reserve records ordinary shares held by the ESOP Trust to satisfy future share awards.  The shares are recorded at cost. During the year ended 31 December 2017, 1,915,285 shares were purchased by the ESOP (2016: 3,787,951 shares) at a cost of £13.9m (2016: £24.4m). The Company received contributions of £6.7m (2016: £18.0m) from employees relating to the exercise price of share options and awards granted in prior years.

 

Available-for-sale reserve

The available-for-sale reserve is used to record fair value movements on the partnership units issued to the Group as part of the consideration for the disposal of the PR Newswire business.

 

6.  Acquisitions and disposals

 

6.1  Acquisitions

 

2017 acquisitions

 

The Group has acquired 100% of the voting rights in all cases where acquisitions involved the purchase of companies unless otherwise stated below.

 

 

 

 

Initial and

Maximum

 

2017

 

 

deferred

contingent

 

acquisition

 

 

consideration

consideration

Acquisition

date

Activity

Segment

£m

£m

Arabian Exhibition Management WLL (AEM)

13 January

Events operator in multiple industries

Events

48.4 

Marmara Tanitim Fuarcilik Organizasyon Reklam ve Ticaret A.S (Marmara)

2 February

LED & lighting exhibition

Events

0.7 

0.2 

AMA Research Limited (AMA)

3 April

Provider of market research, data and bespoke reports

OMS

1.4 

Green Thinking (Services) Limited (GTSL)

22 September

Renewable energy exhibition and conferences

Events

5.7 

10.0 

The Aesthetic Show

13 November

Healthcare exhibition and conference

Events

4.6 

 

 

 

 

60.8 

10.2 

The initial and deferred consideration amounts are after working capital adjustments.

 

Arabian Exhibition Management WLL (AEM)

On 13 January 2017, the Group acquired 100% of Arabian Exhibition Management WLL (AEM) for cash consideration of £48.4m. AEM is the Bahrain business of Allworld Exhibitions. The majority of the Allworld Exhibitions acquisition completed on 19 December 2016 and was reported as an acquisition in 2016. The Bahrain business was subject to separate close conditions and completed on 13 January 2017.

 

Acquired net assets

 

The fair value of the identifiable assets and liabilities acquired in respect of acquisitions (excluding equity transactions) made in 2017 and 2016 was:

 

 

AEM

Other acquisitions

All acquisitions

Restated

Allworld

BJI

Other acquisitions

Restated

All acquisitions

 

2017

2017

2017

2016

2016

2016

2016

 

£m

£m

£m

£m

£m

£m

£m

Intangible assets arising on acquisition

23.7 

5.2 

28.9 

168.8 

15.1 

13.1 

197.0 

Property, plant and equipment

0.4 

0.4 

Trade and other receivables

2.4 

1.4 

3.8 

11.9 

2.9

2.1 

16.9 

Deferred tax asset

0.2 

0.2 

Cash and cash equivalents

4.2 

0.7 

4.9 

28.9 

3.7 

1.1 

33.7 

 

30.3

7.5 

37.8 

210.0

21.7 

16.3 

248.0 

Trade and other payables

(4.9)

(2.6)

(7.5)

(23.5)

(5.4)

(3.1)

(32.0)

Current tax liability

(6.3)

(0.1)

(6.4)

Deferred tax liability

(0.5)

(0.5)

(27.5)

(1.1)

(28.6)

Provisions

(0.5)

(0.5)

 

(4.9)

(3.1)

(8.0)

(57.8)

(5.4)

(4.3)

(67.5)

Identifiable net assets

25.4 

4.4 

29.8 

152.2 

16.3 

12.0 

180.5 

Goodwill arising on acquisition

23.0 

9.2 

32.2 

227.5 

33.7 

22.2 

283.4 

Non-controlling interests

(1.5)

(1.5)

 

48.4 

13.6 

62.0 

379.7 

50.0 

32.7 

462.4 

 

The goodwill recognised on the acquisition of AEM is not expected to be deductible for tax purposes.

 

Trade and other receivables acquired have been measured at fair value which is the gross contractual amounts receivable.  All amounts recognised are expected to be collected. The intangible assets acquired as part of the acquisitions were:

 

 

AEM

Other acquisitions

All acquisitions

Restated

Allworld

BJI

Other acquisitions

Restated

All acquisitions

 

2017

2017

2017

2016

2016

2016

2016

 

£m

£m

£m

£m

£m

£m

£m

Brands

18.1 

2.7 

20.8 

121.7 

11.2 

6.0 

138.9 

Order backlog

4.4 

0.1 

0.8 

5.3 

Customer relationships

5.6 

2.3 

7.9 

40.0 

2.8 

4.0 

46.8 

Customer contracts and relationships

5.6 

2.3 

7.9 

44.4 

2.9 

4.8 

52.1 

Databases

0.2 

0.2 

2.7 

0.9 

2.3 

5.9 

Software

0.1 

0.1 

Total

23.7 

5.2 

28.9 

168.8 

15.1 

13.1 

197.0 

 

The total consideration transferred on acquisitions is as follows:

 

 

AEM

Other acquisitions

All acquisitions

 

Allworld

BJI

Other acquisitions

All acquisitions

 

2017

2017

2017

2016

2016

2016

2016

 

£m

£m

£m

£m

£m

£m

£m

Cash and cash equivalents

48.4 

11.1 

59.5 

376.1 

49.0 

24.0 

449.1 

Fair value of contingent consideration

1.2 

1.2 

7.6 

7.6 

Deferred consideration

1.3 

1.3 

3.6 

1.0 

1.1 

5.7 

Total consideration transferred

48.4 

13.6 

62.0 

379.7 

50.0 

32.7 

462.4 

 

Acquisition costs of £2.2m (2016: £6.7m) have been recognised as an exceptional operating item in the income statement and are included in operating cash flows in the statement of cash flows. £1.9m of these costs related to the acquisition of Allworld (2016: £4.7m and £0.7m related to Allworld and BJI respectively).

 

Acquisition performance

 

From their respective dates of acquisition to 31 December 2017, the acquisitions completed in 2017 contributed £13.7m to revenue and £3.3m to adjusted operating profit to the Group. If the acquisitions had taken place at the beginning of 2017, the acquisitions would have contributed £18.4m to revenue and £4.6m to adjusted operating profit of the Group.

 

Cash flow effect of acquisitions

 

The aggregate cash flow effect of acquisitions was as follows:

 

AEM

Other acquisitions

All

acquisitions

 

 

Allworld

BJI

Other acquisitions

All acquisitions

 

2017

2017

2017

2016

2016

2016

2016

 

£m

£m

£m

£m

£m

£m

£m

Net cash acquired

(4.2)

(0.7)

(4.9)

(28.9)

(3.7)

(1.1)

(33.7)

Cash paid to acquire

48.4 

11.1 

59.5 

376.1 

49.0 

24.0 

449.1 

Contingent consideration paid:

 

 

 

 

 

 

 

  2016 acquisitions

3.2 

3.2 

  2012 acquisitions

0.8 

0.8 

Deferred consideration paid:

 

 

 

 

 

 

 

  2016 acquisitions

4.7 

4.7 

  2015 acquisitions

0.1 

0.1 

Net cash outflow on acquisitions

44.2 

18.4 

62.6 

347.2 

45.3 

23.7 

416.2 

 

The Group paid £3.2m of contingent consideration during 2017 in relation to 2016 acquistions, of which £2.0m was in relation to the acquisition of CMI, and £1.2m related to The Battery Show.

 

The Group paid £4.7m of deferred consideration during 2017 in relation to 2016 acquisitions, of which £3.5m was in relation to the acquisition of Allworld, £1.0m related to CMI and the remaining £0.2m related to BJI and Secon. The Group paid £0.1m of deferred consideration during 2017 in relation to the 2015 acquisition of Shanghai International Printing Industry Expo (CSTPF).

 

 

6.2  Equity transactions

 

 

 

 

2017

2016

 

 

 

 

£m

£m

Cash paid

 

 

 

2.0 

5.8 

Deferred consideration

 

 

 

0.2 

Put option liability

 

 

 

(2.2)

(5.8)

Carrying amount of non-controlling interest at acquisition date

 

 

 

(0.7)

(3.9)

Recognised in equity

 

 

(0.7)

(3.9)

 

On 27 September 2017, the Group acquired the remaining 20% minority shareholding of Rotaforte International Trade Fairs and Media for initial consideration of £2.0m and deferred consideration of £0.2m. This equity purchase brings the Group's total shareholding in Rotaforte International Trade Fairs and Media to 100%.

 

On 29 February 2016, the Group acquired the remaining 25% minority shareholding of Sienna Interlink Comunicacoes Ltda for total cash consideration of £2.3m.  This equity purchase broought the Group's total shareholding in Sienna Interlink Comunicacoes Ltda to 100%.

 

On 9 June 2016, the Group acquired the remaining 25% minority shareholdings of Intermodal Organizacao de Eventos S.A. Ltda and UBM Brazil Feiras e Eventos Ltda for total cash consideration of £2.7m. This equity purchase brought the Group's total shareholdings in Intermodal Organizacao de Eventos S.A. and UBM Brazil Feiras e Eventos Ltda to 100%.

 

On 8 September 2016, the Group acquired a further 15% shareholding of UBM ICC Fuarcilik ve Organizasyon Ticaret A.Ş (ICC) for total cash consideration of £0.8m. This equity purchase brought the Group's total shareholding in ICC to 85%.

 

 

6.3  Disposals

 

2017 disposals

 

 

 

 

Initial and

 

 

2017

 

 

deferred

Gain

 

disposal

 

 

consideration

on disposal

Disposal

date

Activity

Segment

£m

£m

Customer Tech portfolio and Care & Dementia Show

8 September

Marketing and care shows

Events

3.3 

2.6 

 

 

 

 

3.3 

2.6 

 

On 15 May 2017, the Group disposed of its 100% owned subsidiary UBM Index Trade Fairs Private Limited (Index) for consideration of £1,000. The net assets disposed were impaired to their recoverable amount at 31 December 2016, resulting in no gain or loss on disposal. Index was not classified as a discontinued operation and the disposal had an immaterial effect on the Group's assets and liabilities.

 

Disposed net assets

 

The aggregate effect of the disposals on the Group's assets and liabilities were as follows:

 

 

 

 

 

 

 

 

Total

Total

 

 

 

2017

2016

 

 

 

£m

£m

Goodwill

 

 

2.6 

131.4 

Intangible assets

 

 

0.1 

13.1 

Property, plant and equipment

 

 

13.2 

Deferred tax assets

 

 

1.6 

Investment in joint ventures and associates

 

 

2.1 

Trade and other receivables

 

 

1.9 

50.8 

Cash and cash equivalents

 

 

5.2 

Total assets

 

 

4.6 

217.4 

Trade and other payables

 

 

(4.1)

(56.8)

Deferred tax liability

 

 

- 

(1.1)

Total liabilities

 

 

(4.1)

(57.9)

Identifiable net assets

 

 

0.5 

159.5 

Costs associated with disposal

 

 

0.2 

38.6 

Loss on deal contingent forward

 

 

20.4 

Cumulative exchange loss reclassified to profit and loss on disposal

 

 

32.6 

Profit on disposal

 

 

2.6 

363.2 

Consideration received

 

 

3.3 

614.3 

Less cash disposed and deferred consideration

 

 

(5.2)

Less preferred equity

 

 

(21.9)

Translation difference using deal contingent forward

 

 

(41.4)

Net cash inflow

 

 

3.3 

545.8 

 

 

6.4  Discontinued operations and assets held for sale

 

2016 discontinued operations

 

As disclosed in Note 1, the sale of the PR Newswire businesses was completed during 2016. PR Newswire was recognised as discontinued at 31 December 2016. During 2017, the Group has recognised an additional £7.8m gain on disposal of PR Newswire primarily due to the release of warranties and indemnities recognised in accordance with specific clauses in the sale agreement. This gain has been recognised as an exceptional item for discontinued operations for the year ended 31 December 2017. The gain has a 2.0 pence impact on basic and diluted earnings per share and no cash flow effect.

 

The results of the discontinued operations which have been included in the consolidated income statement in 2016 were as follows:

 

 

 

 

PR Newswire

 

 

 

2016

 

 

 

£m

Revenue

 

 

103.0 

Other operating income

 

 

0.1 

Operating expenses

 

 

(75.2)

Share of results from joint ventures and associates

 

 

0.2 

Adjusted operating profit from discontinued operations

 

 

28.1 

Amortisation of intangible assets arising on acquisitions

 

 

Exceptional operating items

 

 

390.2

Profit before tax from discontinued operations

 

 

418.3 

Attributable tax

 

 

(1.8)

Exceptional tax items

 

 

(1.1)

Profit for the year from discontinued operations

 

 

415.4 

 

 

 

 

Earnings per share for discontinued operations

 

 

 

Basic

 

 

98.2 

Diluted

 

 

97.2 

 

 

 

 

Net cash flows attributable to discontinued operations

 

 

 

Net cash from operating activities

 

 

20.9 

Net cash from investing activities

 

 

(3.9)

Net cash from financing activities

 

 

(26.9)

Net cash flows attributable to discontinued operations

 

 

(9.9)

 

The PR Newswire exceptional item was the profit on disposal of £389.1m which included:

-       £34.8m of disposal costs for services incurred relating to the disposal. The costs included broker fees, management transaction bonuses, legal advice and warranties and indemnities recognised in accordance with specific clauses in the sale agreement; and

-       £20.4m foreign exchange loss on the fair value measurement of a deal contingent forward used to fix the US dollar proceeds into sterling which was in addition to a £21.0m loss recognised in 2015. Consistent with the accounting treatment adopted for a similar instrument taken out for the Advanstar acquisition, hedge accounting was not applied.

 

In addition, included in discontinued operations was an £8.2m charge for the settlement of the Axio legal dispute in respect of the Delta disposal after specific provisions, recoveries and legal costs. The total net exceptional credit for discontinued operations in 2016 was £380.9m.

 

 

7.  Other notes

 

7.1  Related party transactions

 

Transactions with related parties are made at arm's length. Outstanding balances at year-end are unsecured and settlement occurs in cash.  There are no bad debt provisions for related party balances as at 31 December 2017, and no debts due from related parties have been written off during the year.  Unless otherwise stated, there are no amounts owed by or due to the Group at 31 December 2017. 

 

The Group entered into the following transactions with related parties during the year:

 

 

 

 

Balances

 

Balances

 

 

 

 

(owed by)/

 

(owed by)/

 

 

 

 

due to

 

due to

 

 

 

 

the Group at

Value of

the Group at

Value of

 

 

 

31 December

transactions

31 December

transactions

Related party and

 

 

2017

2017

2016

2016

Relationship

Nature of transactions

£m

£m

£m

£m

GML Exhibitions (Thailand) Co Limited - Joint Venture

Dividend income, advances and management fees

-1

-1

Guzhen Lighting Expo Company Limited - Joint Venture

Dividend income and marketing expenses

-

-2

0.5 

1The Group received a dividend of £37,000 from GML Exhibitions (Thailand) Co Limited and is owed nil as at 31 December 2017 (2016: £52,000).

2The Group was owed £7,000 by Guzhen Lighting Expo Company Limited at 31 December 2016.

 

Compensation of key management personnel of the Group

 

Key management personnel are the Group's Executive Directors and Non-Executive Directors and the following is the aggregate compensation of these Directors:

 

 

2017

2016

 

£m

£m

Short term employee benefits

2.9 

2.6 

Contributions to defined contribution plans

0.2 

0.2 

Share-based payments

2.2 

2.1 

 

5.3 

4.9 

 

7.2  Events after the reporting period

 

On 4 January 2018, the owners of the 15% non-controlling interest of UBM ICC Fuarcilik ve Organizasyon Ticaret A.Ş (ICC) issued a binding notice to exercise their put option. Consideration for this remaining 15% shareholding is in negotiation and will not be material to the Group. The equity purchase will take the Group's total shareholding in ICC to 100%.

 

On 26 January 2018, the Group completed the disposal of the Building, Building Design portfolio and venuefinder.com business for total consideration of £3.0m comprised of cash and vendor loan notes.

 

On 30 January 2018, Informa plc made a formal offer, which has been recommended by the UBM Board of Directors, to acquire the Group for a value of approximately £3.9bn.

 

On 12 February 2018, the Group acquired 65% of 博闻创意会展(深圳)有限公司, organiser of Shenzhen International Electronics Convention & Expo and the Shenzhen International e-Cig Expo, for initial consideration of £4.6m.

 

On 23 February 2018, the Group completed the disposal of the Accent, Forum and MR fashion media portfolios for consideration of $515,000.

 

On 27 February 2018, the Group acquired 100% of Centro De Treinamento E Estudos Em Energia Ltda, which owns a portfolio of renewable energy events and digital media in Brazil, for initial consideration of £5.0m.

 

 


This information is provided by RNS
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Results for the twelve months ended 31.12.17 - RNS