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RNS

Full Year Results

Released 07:00 29-Nov-2018

RNS Number : 8393I
Daily Mail & General Trust PLC
29 November 2018
 

 

29 November 2018

 

Daily Mail and General Trust plc ('DMGT')

Group results for the year ended 30 September 2018

 

Good progress with strategic priorities and Full Year results in line with expectations

 

Highlights:

·     Successful execution against strategic priorities; active portfolio management continued

·     Strong financial position, net cash1 of £233m; disposal of ZPG Plc stake realised £642m

·     Underlying2 revenue stable, performance in line with expectations

Good B2B performance: underlying revenues +3% with margin improvement

Challenging Consumer Media conditions: underlying revenues -4%, margin 10%

·     Adjusted3 profit before tax down pro forma4 -16%; adjusted EPS down pro forma -23% to 42.2p reflecting the reduced portfolio of businesses following capital realisation

·     Statutory5 operating profit £169m (FY 2017 loss £(129)m); statutory profit before tax £692m (FY 2017 loss £(112)m); statutory EPS 194.7p (FY 2017 97.8p)

·     Full year dividend increased +3% to 23.3p

 

 

Adjusted Results3

(from continuing and discontinued operations)

Statutory Results5

2018

2017

Change~

2018

2017

Pro forma4

Underlying2

Revenue

£1,426m

£1,660m

-9%

0%

£1,426m

£1,564m

Operating profit/(loss)

£145m

£198m

-19%

-17%

£169m

£(129)m

Profit/(loss) before tax

£182m

£226m

-16%

 

£692m

£(112)m

Earnings per share

42.2p

55.6p

-23%

 

194.7p

97.8p

Dividend per share

 

23.3p

22.7p

Statutory results5 are stated before any adjustments. Adjusted results3 exclude exceptional costs and other items and are used to give greater insight to financial performance. Pro forma4 growth rates treat Euromoney as an associate for all of FY 2017, consistent with FY 2018, and underlying2 growth rates are on a like-for-like basis, adjusting for disposals and other items.

 

Paul Zwillenberg, CEO, commented:

"We have made good progress against our three strategic priorities of increasing portfolio focus, improving operational execution and enhancing our financial flexibility.  The focus of our portfolio was significantly increased by the disposals of EDR and our stake in ZPG Plc, clearly demonstrating DMGT's long-term approach to value creation.  As a result, our balance sheet has strengthened considerably, to a net cash position, enhancing our financial flexibility for balanced capital allocation.  We have also continued to implement a series of operational initiatives across the Group that is starting to gain traction.

 

DMGT's performance during the year was in line with our expectations despite some challenging trading conditions.  Our B2B businesses delivered broad-based underlying growth and Consumer Media continued to outperform its markets. MailOnline continues to perform well and has reached an important milestone with digital advertising revenue now exceeding the Mail's print advertising revenues.  As we move into FY 2019, our vision for DMGT's future remains unchanged; we seek to deliver profitable growth across a diversified portfolio, driven by our long-term approach to investment and increased focus on innovative technologies.  The Board remains confident that the Group's strategy, supported by our strong balance sheet, will over the medium term, deliver consistent earnings growth to underpin DMGT's long-standing commitment to sustainable annual real dividend growth."

 

Full Year Financial Results:

 

Revenue of £1,426m; stable underlying performance: reflects broad-based underlying growth from EdTech, Energy Information, Insurance Risk and Events and Exhibitions, offset by a decrease from Property Information and Consumer Media.

 

 

Adjusted operating profit of £145m; underlying decrease -17%: the growth from Insurance Risk and EdTech was more than offset by the expected decrease from the rest of the Group, notably Consumer Media, and the increase in Corporate costs.  Group adjusted operating margin of 10% delivered compared to a pro forma margin of 11% in the prior year.

 

 

Statutory operating profit of £169m compared to a loss of £(129)m in the prior year, due to reduced exceptional operating costs and reduced impairment charges.  There was a £58m impairment charge in respect of historic RMS(one) development costs.

 

 

Income from JVs and Associates: the share of adjusted operating profit decreased -6% on a pro forma basis to £74m, reflecting investment in the DailyMailTV joint venture and the disposal of DMGT's stake in ZPG Plc (ZPG) in July 2018, which resulted in the exclusion of the share of ZPG's profits for the last three and a half months of the year.

 

 

Profit before tax (PBT): adjusted PBT decreased -16% on a pro forma basis to £182m, including finance charges of £37m (FY 2017 £41m pro forma) and the adverse effect of the weaker US dollar.  Statutory PBT was £692m (FY 2017 loss £(112)m) including the gain on the ZPG disposal.  

 

 

Tax: the adjusted tax charge was £33m (FY 2017 £27m pro forma) and the adjusted effective tax rate increased to 18.2%, as expected, whilst statutory tax was a charge of £4m. 

 

 

Earnings per share: adjusted EPS decreased -23% on a pro forma basis to 42.2p (FY 2017 54.8p).  Statutory EPS was 194.7p (FY 2017 97.8p).

 

 

Net cash1 was £233m as at 30 September 2018, an improvement of £697m compared to net debt of £464m at the start of the year. 

 

 

Portfolio management: the portfolio is now significantly more focused following Xceligent's cessation of trading; the disposal of EDR and Hobsons' Solutions business; the partial sale of SiteCompli, which is now classified as an associate rather than a subsidiary; and the merger of Genscape's solar business into AlsoEnergy.  DMGT's disposal of its stake in ZPG completed in July 2018 and generated £642m proceeds.  The Events and Exhibitions business made two small acquisitions during the year and DailyMailTV became a wholly-owned subsidiary in October 2018. 

 

 

Full Year 2018 - segmental performance:

 

Revenue

Adjusted operating profit3

Statutory operating profit5

2018

£m

2017

£m

Change~

2018

£m

2017

£m

Change~

2018

£m

2017

£m

Rep

UL

Rep

UL

Insurance Risk

229

233

-2%

+5%

35

33

+5%

+16%

(24)

30

Property Information

272

328

-17%

-2%

58

52

+12%

-8%

48

(39)

EdTech

68

115

-41%

+9%

7

16

-55%

+205%

5

(3)

Energy Information

86

88

-3%

+7%

-

2

-83%

-64%

-

(154)

Events & Exhibitions

118

117

+1%

+5%

28

31

-9%

-8%

27

28

B2B Total*

773

881

-12%

+3%

128

133

-4%

-1%

56

(138)

Consumer Media

654

683

-4%

-4%

64

77

-17%

-22%

46

26

Corporate costs

 

(47)

(32)

+50%

+25%

(52)

(33)

DMGT Group*

1,426

1,564

-9%

0%

145

179

-19%

-17%

50

(145)

*  2017 figures exclude Euromoney, so revenues and adjusted operating profit are on a pro forma4 basis.  The DMGT Group statutory operating profit shown above excludes the share of operating profits from joint ventures and associates.

Rep: Reported change

UL: Underlying change

 

 

For further information

 

For analyst and institutional enquiries:

 

 

Tim Collier, Chief Financial Officer

+44 20 3615 2902

 

Adam Webster, Head of Management Information and Investor Relations

+44 20 3615 2903

For media enquiries:

Paul Durman / Doug Campbell, Teneo

 

+44 20 7260 2700

 

Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 29 November 2018, at The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.  There will also be a live webcast available at http://www.dmgt.com/webcastfy18.

 

Financial reporting calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 24 January 2019.

 

About DMGT

DMGT manages a diverse, multinational portfolio of companies, with total revenues of around £1.4 bn, that provide businesses and consumers with compelling information, analysis, insight, events, news and entertainment.  DMGT is also a founding investor and the largest shareholder of Euromoney Institutional Investor PLC.

 

 

 

 

Notes

1 Net cash includes £237m of short-term deposits maturing in December 2018.

 

2 Underlying revenue or profit is revenue or operating profit on a like-for-like basis, see pages 28 and 29.  Underlying results are adjusted for constant exchange rates, the exclusion of disposals and closures, the inclusion of the year-on-year organic growth from acquisitions and for the consistent timing of revenue recognition.  For events, the comparisons are between events held in the year and the same events held the previous time.  For Consumer Media, underlying revenues exclude low margin newsprint resale activities.  For FY 2017, central dmg information costs allocated to Property Information, EdTech and Energy Information are reclassified to Corporate costs, consistent with all US central costs being included in Corporate costs in FY 2018.

 

3 Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results.  The Board and management team use adjusted results, rather than statutory results, to give greater insight to the financial performance of the Group and the way that it is managed.  Similarly, adjusted results are used in setting management remuneration.  Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges or credits and fair value adjustmentsFor reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 22 to 25.  Adjusted results include results from discontinued operations, specifically the Euromoney subsidiary during the first three months of Full Year 2017.

 

4 Euromoney ceased to be a subsidiary at the end of December 2016.  Pro forma Full Year 2017 figures have been restated to treat Euromoney as a c.49% owned associate for the whole year, consistent with the ownership profile during Full Year 2018.  See page 21.

 

5 The statutory results are IFRS figures before any adjustments.  They are for continuing operations only (excluding the discontinued operations, Euromoney, from the first three months of Full Year 2017), other than basic earnings per share since the statutory figure includes discontinued operations.

 

 

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

 

The average £:US$ exchange rate for the year was £1:$1.35 (2017 £1:$1.27). The rate at the year end was $1.30 (2017 $1.34).

 

 

Daily Mail and General Trust plc

Northcliffe House, 2 Derry Street,

London W8 5TT

 

www.dmgt.co.uk

Registered in England and Wales No. 184594

 

Management Report

This management report, on the audited results for the year ended 30 September 2018, focuses principally on the adjusted results to give a more comparable indication of the Group's business performance. 

 

Explanations of exceptional operating costs, impairment charges and other items included in the statutory results are set out after the divisional performance review and in the segmental note (Note 3).  Reconciliations between the statutory and adjusted results for both FY 2018 and FY 2017, as well as supporting explanations, are set out on pages 22 to 25. 

 

The adjusted results are summarised below, with the pro forma4 Full Year 2017 comparatives.

 

Adjusted results3

(from continuing and discontinued operations)

2018

£m

2017

£m

(Pro forma4)

Change~

Revenue

1,426

1,564

-9%

 

 

 

 

Operating profit

145

179

-19%

Income from JVs and associates

74

79

-6%

Net finance costs

(37)

(41)

-11%

Profit before tax

182

216

-16%

Tax charge

(33)

(27)

+22%

Minority interest

-

4

-95%

Group profit

149

194

-23%

 

 

 

 

Adjusted earnings per share

42.2p

54.8p

-23%

 

 

 

 

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

 

Group revenue for the year was £1,426m, a decrease of 9% on both a statutory and pro forma basis, reflecting the effect of disposals and the weaker US dollar relative to sterling.  On an underlying2 basis, however, revenue was in line with the prior year.  Underlying growth was delivered in subscriptions, events and digital advertising, but was offset by the anticipated decline in print advertising and circulation.  The revenue performance for our B2B businesses and our Consumer Media business, on a reported and underlying basis, is summarised below.

 

Adjusted3 revenue

Year-on-year change

Reported

Underlying2

H1

H2

Year

H1

H2

Year

DMGT Group*

-6%

-12%

-9%

+1%

-1%

0%

B2B*

-7%

-17%

-12%

+4%

+2%

+3%

Insurance Risk

-4%

0%

-2%

+6%

+4%

+5%

Property Information

-6%

-28%

-17%

+0%

-4%

-2%

EdTech

-40%

-41%

-41%

+10%

+8%

+9%

Energy Information

-1%

-4%

-3%

+6%

+7%

+7%

Events and Exhibitions

+5%

-5%

+1%

+3%

+7%

+5%

Consumer Media

-4%

-4%

-4%

-3%

-5%

-4%

* 2017 figures exclude Euromoney, so are on a pro forma4 basis.

 

Adjusted operating profit of £145m decreased 19% on a pro forma basis and by 17% on an underlying basis.  The underlying performance reflected broadly stable profits from the B2B businesses, with growth from Insurance Risk and EdTech, a decrease from Consumer Media and, as expected, an increase in Corporate costs due to planned investment in central functions to support the implementation of our strategy.  These factors resulted in a Group adjusted operating margin of 10%, compared to a pro forma margin of 11% in the prior year.

 

Excluding Corporate costs, the B2B businesses generated 67% of the adjusted operating profit in the year, with Consumer Media contributing the remainder.  More than half of the Group's adjusted operating profit was generated from outside the UK, with over a third coming from North America.

 

Adjusted profit before tax was £182m, a 16% decrease on a pro forma basis.  The share of adjusted operating profits from joint ventures and associates was £74m, a decrease of 6%, reflecting investment in DailyMailTV and the disposal of DMGT's stake in ZPG in July 2018, hence the exclusion of the share of ZPG's profits for the last three and a half months of the year. Finance charges, including DMGT's share of associates' interest costs, were £37m, down 11% on the prior year on a pro forma basis, reflecting the benefit of the stronger balance sheet.  As expected, the effective tax rate increased due to new restrictions on the use of historic UK losses and the adjusted tax charge was £33m, up 22% on the prior year on a pro forma basis.  Adjusted Group profit after tax and minority interests was £149m, down 23% on a pro forma basis.  Adjusted earnings per share of 42.2p also decreased 23% on a pro forma basis. 

 

The full year dividend increased by 3% to 23.3p, in line with our dividend policy of delivering real dividend growth.  The Board's decision to recommend increasing the dividend reflects its confidence in DMGT's ability to deliver future long-term earnings growth.

 

The statutory profit before tax for the year was £692m after £95m of amortisation and impairment charges in respect of goodwill and intangible assets and £25m of exceptional costs, including a £5m share of associates' exceptional charges.  The statutory profit before tax benefited from £658m of profit on the sale of assets and compared to a £(112)m loss before tax in the prior year, which included £231m of impairment charges against goodwill and intangible assets.  Statutory profit for the year was £688m, compared to £342m in the prior year, which benefited from a £509m gain on the Euromoney transaction, and basic earnings per share of 194.7p were up 99% on the prior year.

 

The table below sets out the reconciliation from statutory profit before tax to adjusted profit before tax.  More detail and explanations are provided on pages 22 to 25.

 

 

 

 

2018

£m

2017

£m

Explanation

(as per pages 22 and 23)

Statutory profit/(loss) before tax

692

(112)

 

Discontinued operations

-

523

1

Exceptional operating costs

25

50

2

Impairment of plant

-

42

3

Intangible impairment and amortisation

95

282

4

Profit on sale of assets

(658)

(530)

5

Pension finance (credit)/charge

(2)

5

6

Other adjustments

30

(33)

7

Adjusted profit before tax

182

226

 

Euromoney pro forma4 adjustment

-

(10)

 

Adjusted profit before tax (pro forma4)

182

216

 

 

Strategy

The strategic decisions taken over the past year are enhancing our business model and underpin our commitment to delivering profitable growth across a diversified portfolio.  We are encouraged by the good progress made across DMGT's three strategic priorities:

 

·    Improving operational execution: the Performance Improvement Programme includes operating initiatives for each company which are aligned with the business's clear role within the Group.  Good progress was made during the year, with initiatives across all five categories of product, commercial, operations, people and technology.  Notable examples included revised commercial policies in respect of pricing and the grouping of products at Genscape, Landmark, Hobsons and RMS; the application of machine learning at Genscape and Trepp; and the strengthening of technology talent centrally and across the Group.   

 

·     Increasing portfolio focus: significant steps were taken during the year to increase the focus of DMGT's portfolio.  In the US Property Information sector, Xceligent ceased trading in December 2017, and the disposal of EDR and partial sale of SiteCompli occurred in April 2018.  Hobsons, the EdTech company, sold its Solutions business in October 2017 and is now entirely focused on the faster-growing Naviance, Intersect and Starfish businesses. In September 2018, Genscape, the Energy Information company, merged Locus Energy into AlsoEnergy, in which it retains a minority stake, driving consolidation in the sector.  DMGT sold its c.30% stake in ZPG in July 2018, further increasing portfolio focus. 

 

·    Enhancing financial flexibility: DMGT's financial flexibility has improved significantly over the year.  The net cash1 position was £233m at year end, an improvement of £697m compared to £464m of net debt at the start of the year, and benefited from disposals, notably from DMGT's holding in ZPG which generated £642m of proceeds.  Given the progress made strengthening the balance sheet during the course of the year, this strategic priority has now been revised to 'Maintaining financial flexibility'. This will ensure that DMGT has sufficient financial strength to continue investing organically across the Group, support the commitment to real dividend growth and have the ability to take advantage of attractive asset valuations as they arise.

 

Clear portfolio roles have been identified for each of our businesses, reflecting their financial characteristics.  The segmentation helps to frame our capital allocation decisions and determine each business's priorities and performance improvement initiatives.  The three roles are:

·     Operating at scale: strong, predictable cash contributors.  This category includes Trepp and Landmark, two of our Property Information businesses, the Events and Exhibitions business and the Consumer Media Mail and Metro print newspapers.  Excluding EDR, which was sold during the year, cumulative revenues were £881m, an underlying decrease of 3% compared to last year.  The cash operating income margin was 18%, compared to 21% in the prior year.  Cash operating income, 'Cash OI', is adjusted EBITDA less capital expenditure and the margin reflects the cash generation of the businesses as a percentage of revenues.

·     Focused growth: large businesses that have the ability to deliver revenue growth with an improving margin and are expected to develop into strong cash generators in the future.  This category includes our Insurance Risk, EdTech and Energy Information businesses, as well as MailOnline, our Consumer Media digital business.  Cumulative revenues were £492m, underlying growth of 6%.  The cash operating income margin improved to 11%, compared to 9% in the prior year.

·   Early bets: businesses and minority stake holdings in early-stage companies which will require incremental investment to grow into businesses of the future.  This category includes BuildFax, a US Property Information company, and included Locus Energy prior to its merger into AlsoEnergy.  Excluding businesses that were sold, closed or became associates during the year, these businesses delivered a break-even performance in the year from revenues of £5m.  Since becoming a subsidiary in October 2018, DailyMailTV is now classified as an Early bet business.  In addition, dmg ventures, DMGT's early stage investment division, manages a portfolio of minority investments with a focus on disruptive technology start-ups, including Yopa, the hybrid estate agent.

 

Capital allocation framework

DMGT prioritises organic investment opportunities and takes a long-term approach, investing through the cycle.  DMGT is committed to its policy of delivering real dividend growth.  The Group adopts a balanced and flexible approach to capital allocation across the two remaining categories of acquisitions and shareholder returns. 

 

DMGT is committed to its disciplined approach to acquisitions, including the application of its investment criteria, and will prioritise bolt-on targets to complement its existing portfolio of businesses.  The Group also aims to prioritise the allocation of capital towards growth opportunities, particularly those that can benefit from technological or market disruption. 

 

Maintaining financial flexibility is a key strategic priority, enabling DMGT to continue with its approach to balanced capital allocation, including having the ability to be acquisitive as opportunities arise.  Returning capital to shareholders is considered by the Board in light of the acquisition pipeline and the strength of the balance sheet.

 

Outlook - 2019

B2B: the financial performance will be affected by the portfolio changes that have taken place since October 2017.  FY 2018 B2B revenues, restated based on the current portfolio of businesses, were £725m.  In FY 2019, the B2B businesses are collectively expected to deliver underlying revenue growth in the low-single digits.  The adjusted operating margin is expected to be in the mid-teens, benefiting from the flow-through of operational efficiencies and the absence of RMS(one) amortisation charges offset by the continued investment to support our long-term growth, notably in RMS.  At a business level, we are anticipating the following dynamics:

·     Insurance Risk: RMS will be increasing its investment in software, data, data analytics and applications.  Revenues are expected to grow in FY 2019 and the adjusted operating profit margin will reflect the absence of RMS(one) amortisation charges offset by the increased platform investment, with development costs continuing to be expensed as incurred.

·    Property Information: the European businesses are expected to continue to experience subdued conditions, with uncertainty in the UK market, and the remaining US businesses to continue to deliver underlying revenue growth. 

·     EdTech: Hobsons is expected to continue to deliver underlying growth. 

·     Energy Information: Genscape is expected to continue to deliver underlying growth.

·    Events and Exhibitions: dmg events is expected to continue to deliver underlying revenue growth with a marginally reduced operating margin, reflecting increased investment and Gastech changing to an annual format.

 

Consumer Media: digital advertising revenues are expected to grow, helping to offset anticipated print advertising declines, with advertising market conditions likely to remain volatile.  Circulation volumes are expected to continue to decline, although revenues will benefit from the September 2018 cover price increase of the Monday to Friday editions of the Daily Mail, from 65p to 70p.  FY 2018 Consumer Media revenues, restated for the current portfolio of businesses, were £663m and the underlying rate of decline in FY 2019 is expected to be in the mid-single digits.  The operating margin is expected to be in the high-single digits in FY 2019, reflecting the anticipated revenue decline, increased newsprint costs and investment in DailyMailTV being partly offset by the benefit of continued cost efficiencies within the newspapers and by an improving contribution from the rest of MailOnline. 

 

Corporate costs: are expected to be less than £45m in FY 2019, compared to £47m in FY 2018, and to be reduced further in FY 2020.

 

JVs and Associates: will be affected by the absence of ZPG, following the disposal of DMGT's stake in the business.  Consequently, the share of adjusted operating profits from joint ventures and associates in FY 2019 is expected to be at least £40m compared to £74m in FY 2018.

 

Net finance costs: are expected to benefit from the maturing of £219m of bonds in December 2018 and the strength of DMGT's balance sheet.  Consequently costs are expected to be around £15m in FY 2019, a reduction on the £37m charge in FY 2018. 

 

Taxation: is expected to be affected by the changing geographical mix of profits.  The effective tax rate is expected to increase to around 20% in FY 2019 and gradually increase further over the next few years.

 

 

 

 

Business Review

 

Business to Business (B2B)

 

 

2018

£m

2017

£m

(Pro forma4)

Change~

 

Underlying2

Change~

Revenue

773

881

-12%

+3%

Adjusted3 operating profit

128

133

-4%

-1%

Adjusted3 operating margin

17%

15%

 

 

 

B2B revenues totalled £773m, up 3% on an underlying basis, with growth from EdTech, Energy Information, Insurance Risk and Events and Exhibitions partially offset by Property Information, which experienced weakness in the UK.  Revenues decreased by 12% on a pro forma basis, following disposals of Property Information and EdTech businesses and reflecting the weaker US dollar. 

 

B2B profits were £128m, down an underlying 1%, due to the growth from Insurance Risk and EdTech being more than offset by reductions from Property Information, Energy Information and Events and Exhibitions.  The overall B2B operating margin increased to 17% and included the benefit of a stronger Property Information margin following the closure of Xceligent in December 2017.  Despite the £5m reduction in operating profit, B2B cash operating income increased £11m to £131m, reflecting the improved operational execution through the Performance Improvement Programme.

 

Outlook: the B2B financial performance will be affected by the disposal of EDR, which occurred in April 2018.   FY 2018 B2B revenues, restated for the current portfolio of businesses, were £725m.  In FY 2019, the B2B businesses are collectively expected to deliver underlying revenue growth in the low-single digits and the adjusted operating margin is expected to be in the mid-teens, reflecting the benefits of the Performance Improvement Programme offset by the continued investment to support our long-term growth.

 

 

Insurance Risk: RMS

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue

229

233

-2%

+5%

Adjusted3 operating profit

35

33

+5%

+16%

Adjusted3 operating margin

15%

14%

 

 

 

Insurance Risk revenues increased by 5% on an underlying basis, mainly benefiting from one-off project revenues as well as subscription revenues across the core modelling, software and data businesses.  Reported revenues decreased 2% to £229m due to the weaker US dollar.  Adjusted operating profit grew by 5%, despite the impact of the weaker US dollar, and by 16% on an underlying basis, with the adjusted operating margin increasing to 15%.

 

RMS continues to invest in model development, reflecting an ongoing commitment to build upon the business's market-leading position.  RiskLink18 was released in July 2018 and included updates to the North American Hurricane-Storm Surge model as well as new and updated earthquake and typhoon models that have expanded coverage across the Asia Pacific region.  The third-generation model for the cyber risk market was also released in the year.

 

In line with the Performance Improvement Programme, the management team's enterprise software experience was significantly enhanced during the year, notably with the appointment of Karen White as RMS CEO in March 2018.  RMS also strengthened its executive team and reorganised its software development, sales, account management and customer success teams to improve delivery of its full suite of products across the client base.  

 

RMS has recently made an important change to enhance its strategy to deliver long-term growth.  Earlier investments in the RMS(one) platform, dating back to 2011 when RMS(one) was conceived, reflected available technologies and the market's attitude to the cloud at that time. The platform was also relatively narrowly focused on natural catastrophe risk management for the property insurance sector.  Since then, technology and the insurance sector's acceptance of cloud computing have evolved considerably. There is also demand from RMS's customer base for a broader set of solutions to deliver greater strategic value, across more areas of risk.

 

Consequently, the decision has been taken to re-architect the RMS(one) platform to take advantage of the growing benefits of cloud technology, better matching capacity to demand. This development is expected to reduce significantly the running costs for customers whilst also improving performance, facilitating more modular delivery and enabling new products and solutions starting in 2019. Throughout 2019 and beyond, RMS will be incorporating modern and innovative technologies, such as artificial intelligence and machine learning, to deliver a platform that will be scalable, secure, flexible and extensible, thereby addressing the evolving and future market for risk.

 

Since August 2016, all RMS(one) development costs have been expensed as incurred.  Historic development costs prior to then were capitalised.  Given the decision to re-architect the platform, the historically capitalised development costs incurred prior to August 2016 have been fully impaired, resulting in a charge of £58m.

 

Priorities in the year ahead: during FY 2019, RMS, one of DMGT's Focused growth businesses, will be increasing its investment in software, data, data analytics and applications.  The investment will deliver new strategic benefits to customers and position the business for the long term, by opening up adjacent market opportunities to catastrophic modelling, such as data analytics.  Future releases of high-definition (HD) models will be made exclusively on the new RMS(one) platform, starting with US Inland Flood in spring 2019 and North America Wildfire HD later in the year.  Revenues are expected to grow in FY 2019 and the adjusted operating margin will reflect the absence of RMS(one) amortisation charges offset by the increased platform investment, with development costs continuing to be expensed as incurred.

 

 

Property Information

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue

272

328

-17%

-2%

Adjusted3 operating profit

58

52

+12%

-8%

Adjusted3 operating margin

21%

16%

 

 

 

The focus within the US Property Information portfolio was significantly increased during the year.  Xceligent ceased trading in December 2017 and the disposal of EDR was completed in April 2018.  Also in April 2018, DMGT reduced its stake in SiteCompli to c.49%, with the founding management team now holding a majority stake; SiteCompli is now classified as an associate rather than a DMGT subsidiary. 

 

The US Property Information portfolio now comprises Trepp, a leading provider of data, analytics and technology solutions to the global securities and investment management industries, and one of DMGT's Operating at scale businesses; and BuildFax, an early stage but leading provider of property condition and history data.  The European Property Information portfolio continues to consist of the Landmark Information Group, including Landmark and SearchFlow in the UK and On-geo in Germany.

 

Property Information revenues decreased by 2% on an underlying basis.  Revenue growth in the US was more than offset by the European business, which continued to face challenging conditions in the UK residential market where mortgage approval volumes were down 4% on the prior year.  The 17% reported decrease in revenues reflected the reduced US portfolio and the weaker US dollar.  Adjusted operating profit decreased by 8% on an underlying basis, including the cost of initiatives to extend Trepp's product offering and reflecting the challenges in the UK market.  The adjusted operating margin increased to 21%, benefiting from the absence of loss-making Xceligent for nine months of the year and from central US costs, that were historically allocated to dmg information's cost base, being included in Group Corporate costs in FY 2018.

 

During the year, as part of the Performance Improvement Programme, SearchFlow launched a new search ordering platform that significantly improves the customer experience.  Trepp continued to build-out its TreppLoan platform by enhancing portfolio and workflow capabilities and expanding the breadth of data.  The product benefits from the extension of Trepp's existing data and intellectual property, making it relevant to a broader customer segment.  BuildFax, the Early bets business, significantly reduced its sales cycle, better positioning it to grow quickly in the future.

 

Priorities in the year ahead: the existing market dynamics are expected to remain broadly unchanged with notable weakness in the UK market.  There will be continued product development at the Operating at scale businesses, Trepp and Landmark Information Group, to enhance their market-leading positions and help generate future growth, and continued strong revenue growth is expected from BuildFax, the Early bets business. 

 

 

EdTech: Hobsons

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue

68

115

-41%

+9%

Adjusted3 operating profit

7

16

-55%

+205%

Adjusted3 operating margin

11%

14%

 

 

 

EdTech revenues grew by an underlying 9%, with continued growth from each of Hobsons' three product lines: Naviance, the K-12 college and career readiness solution; Intersect, the higher education matching business; and Starfish, the higher education student retention and success platform.  The disposal of the Admissions and Solutions businesses, in September and October 2017 respectively, resulted in reported revenues decreasing to £68m.  Similarly, adjusted operating profit decreased to £7m although this reflected a £5m improvement on an underlying basis.    

During the year, the business delivered a new Naviance Student product, which increases end-user engagement, by providing students and parents with an intuitive mobile-friendly experience.  Over 11 million students now have access to Naviance, including over 40% of high school students in the US, with the product being used by over 13,000 schools.  Enhancements were also made to the Intersect and Starfish product suites during the year, including an improved mobile experience and the full integration of analytics into Starfish.  Over 1,000 US colleges and universities are now using Hobsons' higher education products, Intersect and Starfish.

 

Priorities in the year ahead: during FY 2019, investment will be made to modernise the core EdTech product platforms and add new client-facing features and functionality.  The business will continue to focus on delivering the combination of underlying revenue growth and improving cash generation, with the Performance Improvement Programme helping to support its progress as one of DMGT's Focused growth businesses. 

 

 

Energy Information: Genscape

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue

86

88

-3%

+7%

Adjusted3 operating profit

-

2

-83%

-64%

Adjusted3 operating margin

0%

2%

 

 

 

Energy Information revenues grew by an underlying 7%, with continued growth from the core oil, power and gas sectors.  Including Locus Energy and the adverse effect of the weaker US dollar, total reported revenue decreased slightly to £86m.  In September 2018, Locus Energy was merged into AlsoEnergy, in which Genscape retains a minority stake.  The combined business benefits from greater scale and an improved ability to innovate on behalf of its clients.

 

The new management team has been implementing the Performance Improvement Programme to deliver operational efficiencies as well as increasing the focus within the business: several sub-scale business lines were divested or closed to increase focus on growth opportunities; the technology team was reorganised to bring additional scale and expertise to top priorities; a new process, the Product Launch Pad, was introduced for developing products from concept through to commercial launch, ensuring consistent vetting and a more co-ordinated approach for opportunities that can have a significant impact; and the pricing policy was revised to reflect customer value.

 

The elimination of peripheral products and the streamlining of support functions resulted in some restructuring costs that are included in adjusted profit.  Also, a larger proportion of payroll costs were expensed directly, with reduced capitalisation.  These two factors resulted in adjusted operating profit declining by an underlying £3m, although the cash operating income of the business improved by £7m.

 

Priorities in the year ahead: Genscape will continue to invest in product, sales and service in its core power, oil and gas businesses.  As one of DMGT's Focused growth businesses, Genscape is expected to continue to deliver underlying revenue growth during FY 2019 and is well-positioned to grow its profits.

 

 

Events and Exhibitions: dmg events

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue

118

117

+1%

+5%

Adjusted3 operating profit

28

31

-9%

-8%

Adjusted3 operating margin

24%

26%

 

 

 

Events and Exhibitions revenues grew by 5% on an underlying basis.  Big 5 Dubai and ADIPEC, two of the business's three large events, were held in November 2017 and collectively delivered mid-single digit underlying growth.  Gastech, the other large event, occurred in Barcelona in September 2018 and, as expected, revenues decreased as a result of moving from the larger Japanese market where it was held in 2017.  Reported revenues grew by 1% to £118m despite the impact of the weaker US dollar.

 

The business continued to geo-clone existing shows by launching into new locations, including a Big 5 Construct Egypt event, and to launch spin-off events, including a Global Power & Energy Exhibition event that ran in parallel with Gastech.  Two small businesses were also acquired in the year, with events in the construction and hotel interior design sectors.

 

The operating profit margin was 24%, a reduction compared to the prior year, due to expected increased costs for the major shows, notably ADIPEC, and holding two separate Index events in Dubai to accommodate the timing of Ramadan.  As a result, operating profits decreased by 9%, including the adverse effect of the weaker US dollar, and by an underlying 8%.

 

During the year, as part of the Performance Improvement Programme, dmg events strengthened its technology team and invested in technology to improve the overall experience for attendees, including the efficiency of attendee time at events.

 

Priorities in the year ahead: Gastech is changing to an annual format, having previously been held approximately every eighteen months, with the greater frequency expected to deliver an increase in cumulative revenues and profits over time.  The reduced interval between shows is, however, expected to have an adverse effect on the absolute revenues and operating margin of the individual event in Houston in September 2019, relative to the September 2018 event. 

 

Big 5 Dubai and ADIPEC, two of the three large events of the year, occurred in November 2018 and are expected to collectively deliver a stable performance, reflecting increasingly challenging conditions in the Middle East, notably the UAE construction market.  In addition, the six launches planned for FY 2019 in Africa, the Middle East, South East Asia and Spain illustrate DMGT's willingness to invest to support longer-term revenue growth.

 

 

 

Consumer Media: dmg media

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Revenue:

 

 

 

 

 

Daily Mail / The Mail on Sunday

424

455

-7%

-7%

 

MailOnline

122

119

+3%

+5%

 

Mail Businesses

546

574

-5%

-5%

 

Metro

71

68

+4%

+4%

 

Newsprint and other continuing

37

36

+3%

0%

 

Sub-total

654

678

-4%

-4%

 

Elite Daily and 7 Days

-

5

-100%

 

 

Total Revenue

654

683

-4%

-4%

 

 

 

 

 

 

 

Adjusted3 operating profit

64

77

-17%

-22%

 

Adjusted3 operating margin

10%

11%

 

 

 

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

 

In the Consumer Media sector, dmg media's revenues decreased by an underlying 4% to £654m.  As expected, the underlying growth from MailOnline of 5% was more than offset by a 5% decrease in circulation revenues and a 5% decline in print advertising revenues.  The decrease in reported revenues, including the impact of the weaker US dollar and the disposal of Elite Daily during the prior year, was also 4%.

 

Total combined advertising revenues across the dmg media portfolio decreased by an underlying 1% to £308m.  The 5% decrease in circulation revenues to £291m resulted from a continued decline in circulation volumes being partly offset by the benefit of the cover price increase of The Mail on Sunday from £1.70 to £1.80 in October 2017.  The Mail brand remains strong, which is reflected in the growing UK retail market shares held by the Daily Mail and The Mail on Sunday of 24.8% and 21.9% respectively6.  In September 2018, the cover price of the Monday to Friday editions of the Daily Mail increased from 65p to 70p.

 

Revenues for the combined Mail newspaper and website businesses (Daily Mail, The Mail on Sunday and MailOnline) decreased by an underlying 5% to £546m, including £122m from MailOnline.  Total advertising revenues across the Mail businesses decreased by an underlying 3% to £239m, including a 9% decline in print advertising revenues, reflecting the continued structural and competitive challenges facing the UK national newspaper advertising market.  MailOnline's advertising revenues grew by an underlying 5% and accounted for 51% of total advertising across the combined Mail businesses.  

 

MailOnline continues to focus on attracting traffic directly to its homepages on desktop and mobile or its apps.  Indirect traffic, notably via social media and search platforms, has reduced and resulted in total average daily global unique browsers during the year decreasing by 13% to 12.9m.  Total minutes spent on the site, however, increased 2% to a daily average of 145m of which 77% came from direct traffic, compared to 74% in the prior year, reflecting growing engagement with its core target audience. 

 

MailOnline continues to increase the engagement with its direct audience in the US and this has been supported by the success of DailyMailTV, which is currently in its second season.  In October 2018, DailyMailTV became a wholly-owned subsidiary having previously been a joint venture and will therefore be included within Consumer Media's results in FY 2019.

 

Metro delivered a robust revenue performance in the context of a declining print advertising market, growing revenues by an underlying 4% to £71m, including the benefit of taking on four franchises from Trinity Mirror (now Reach plc) in January 2017, a further two in January 2018 and one in July 2018.  Metro has the largest circulation of any weekday newspaper in the UK, read by an average of 2.8m people each day, and has the largest Monday to Friday advertising market share by volume.

 

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

 

Adjusted operating profit for the year decreased by 17% to £64m, including the benefit from disposing of the loss-making Elite Daily in April 2017.  Profits decreased by 22% on an underlying basis, as the reduction in the Mail Newspapers' cost base and improved contribution from MailOnline only partially offset the adverse effect of decreasing circulation and print advertising revenues.  The operating margin was 10% as expected, down from 11% in the prior year.

 

During the year, as part of the Performance Improvement Programme, the advertising operations of the Metro and Mail were integrated to deliver improved service to customers and to take advantage of dmg media's scale to reduce costs.  The cost base of the newspaper businesses continues to be further reduced, albeit in a measured approach that ensures the quality of the content is not compromised, consistent with DMGT's strategy of supporting the longevity of the newspapers' strong cash generation.  

 

Outlook and Priorities in the year ahead

The Consumer Media business is expected to benefit, despite the recent challenging market conditions, from digital advertising growth and to experience circulation volume and print advertising declines, with advertising revenues likely to remain volatile.  FY 2018 Consumer Media revenues, restated for the current portfolio of businesses, were £663m and the underlying rate of decline in FY 2019 is expected to be in the mid-single digits.  The operating margin is expected to be in the high-single digits in FY 2019, reflecting the revenue reduction, increased newsprint costs and investment in DailyMailTV being partly offset by the benefit of continued cost efficiencies within the newspapers and by an improving contribution from the rest of MailOnline. 

 

 

Corporate costs

 

 

2018

£m

2017

£m

Change~

 

Underlying2

Change~

Corporate costs²

(47)

(32)

+50%

+25%

 

Corporate costs were £47m, an underlying increase of 25% after adjusting for US based costs previously within dmg information's cost base.  The increase was largely due to payroll costs, given the strengthening of central functions, including strategy and technology, to support our revised strategy and assess potential capital allocation decisions. 

 

Outlook: reflecting the Group's more focused portfolio, Corporate costs are expected to be reduced to less than £45m in FY 2019, with further reductions expected in FY 2020.

 

 

Joint ventures and associates

 

Share of pre-tax operating profits3

2018

£m

2017

£m

(Pro forma4)

Change~

 

Euromoney Institutional Investor PLC

56

56

0%

ZPG Plc

23

25

-5%

Other joint ventures and associates

(5)

(2)

+130%

Total joint ventures and associates

74

79

-6%

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

 

The Group's share of adjusted operating profits from joint ventures and associates was £74m, a 6% pro forma decrease on the prior year. 

 

DMGT holds a c.49% stake in Euromoney, which released its Full Year 2018 results on 22 November 2018 and reported underlying revenue growth of 3% and a 3% increase in adjusted profit before tax.  Results were adversely affected by the disposal of its Global Markets Intelligence Division, which completed in April 2018, and DMGT's share of adjusted operating profits was in line with the prior year on a pro forma basis.  Euromoney ended the year with £78m of net cash on its balance sheet.

 

ZPG was acquired by Silver Lake in July 2018 and DMGT's proceeds from the disposal of its c.30% stake were £642m.  DMGT's share of profits, however, only included results for the eight and a half months to 18 June 2018, the date that ZPG's shareholders approved the transaction.  Consequently, the share of adjusted operating profits from ZPG decreased 5% to £23m.

 

The share of operating profits and losses from other joint ventures and associates, which are mainly early stage businesses, was a net loss of £5m (FY 2017 £2m).  The increase was largely due to investment in consumer businesses, notably DailyMailTV, which is currently in its second season following its successful launch in September 2017.  In October 2018, DailyMailTV became a wholly-owned subsidiary within the Consumer Media division.  In August 2018, DMGT increased its stake in Yopa, the early-stage UK hybrid estate agent, from c.17% to c.26% and the business is now accounted for as an associate. 

 

Outlook: the share of adjusted operating profits from joint ventures and associates will be affected by the disposal of ZPG, by Euromoney's disposal of its Global Markets Intelligence Division and the inclusion of DMGT's share of Yopa's losses.  The share of operating profits from joint ventures and associates in FY 2019 will benefit from DailyMailTV now being a subsidiary and, in the absence of any significant acquisitions and disposals, is expected to be at least £40m.

 

 

Net finance costs

 

 

2018

£m

2017

£m

(Pro forma4)

Change~

 

Net interest payable and similar charges3

(37)

(41)

-11%

 

Net interest payable and similar charges, including DMGT's £4m share of associates' interest costs, was £37m, a 11% pro forma decrease on the prior year.  DMGT benefited from lower average debt levels during the year.

 

The pension finance credit, which is excluded from adjusted results, was £2m, compared to a £5m charge in the prior year. 

 

Outlook: net finance costs in FY 2019 are expected to be around £15m, reflecting the benefit of DMGT's 5.75% December 2018 bonds maturing, the strength of the balance sheet and reduced trade finance charges.

 

 

 

Other income statement items

 

·      Exceptional items and amortisation

The exceptional cash costs in the year were £3m, a significant reduction compared to the £43m in the prior year, reflecting the absence of exceptional severance and consultancy costs.  Total exceptional operating costs, including those of joint ventures and associates, were £25m (FY 2017 £50m) and included £17m in respect of a non-cash past service charge, following a change to the scheme rules of one of the Group's pension plans.

 

The charge for amortisation of intangible assets arising on business combinations, including the share from joint ventures and associates, was £32m (FY 2017 £50m).  Following the decision to re-architect the RMS(one) platform, the carrying value of the RMS(one) asset, which related to costs incurred prior to August 2016, was fully impaired, resulting in a charge of £58m. Total impairment charges in the year were £63 million, including DMGT's share of associates' charges.  This was a significant reduction compared to the prior year, when the Group incurred £231m of impairment charges against goodwill and intangible assets of its Energy Information and Property Information businesses and a £41m impairment charge in respect of the closure of the Didcot printing plant.

 

The Group recorded other net gains on disposal of businesses and investments of £658m, including DMGT's share of associates' gains, compared to a net gain of £530m in the prior year.  DMGT recognised a £508m gain on the disposal of its stake in ZPG and a £52m gain on the disposal of EDR, the US Property Information business.

 

·      Taxation

The adjusted tax charge of £33m (FY 2017 £27m pro forma4) is stated after adjusting for the effect of exceptional items.  As expected, the adjusted tax rate for the year was 18.2%, an increase on the pro forma basis 12.6% in FY 2017, due to new legislation substantively enacted at the start of the year restricting the use of historic UK losses. 

 

The statutory tax charge for the year was £4m. This excludes the share of joint ventures' and associates' tax charges of £31m, which included £18m of charges on exceptional items.  There were tax credits of £23m in respect of amortisation and impairment of intangible fixed assets, tax charges of £18m on the sale of businesses, a one-off credit of £12m on the revaluation of the Group's deferred tax liabilities as a result of the reduction in the US federal tax rate, one-off tax charges of £10m as a result of US tax reform and tax credits of £9m on other adjusting items.

 

Outlook: the US 'Tax Cuts and Jobs Act' was enacted during the year, reducing the federal tax rate but also introducing various measures to fund that reduction, including restrictions to the deductibility of interest costs and amendments to the taxation of non-US subsidiaries.  Overall, we assess the impact of tax changes in the US to be largely neutral for DMGT in the short term, but to be beneficial over time as the Group's US-generated profits increase.  Due to the geographical mix of profits, the effective tax rate is expected to increase to around 20% in FY 2019 and gradually increase further over the next few years.

 

 

Pensions

The net surplus on the Group's defined benefit pension schemes increased from £62m at the start of the year to £244m at 30 September 2018, calculated in accordance with IAS 19 (Revised).  During the year, the value of the assets increased and there was a reduction in the value of the defined benefit obligation.

 

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

 

 

Net cash and cash flow 

Net cash1 at the end of the year was £233m, an improvement of £697m compared to the £464m net debt position at the start of the year.  The Group's operating cash flow was £117m, including £50m of capital expenditure.   The conversion rate of operating profits to operating cash flow was 80% compared to the 87% pro forma4 rate in the prior year.  Operating cash flow was adversely affected by the timing of payments for newsprint. 

 

The Group's adjusted cash operating income, which is calculated by adding back depreciation and amortisation and by deducting capital expenditure from adjusted operating income, was £155m.  This metric, a Group key performance indicator, reflects the cash generation of the Group's subsidiary businesses and decreased by £26m on a pro forma basis, from £181m in the prior year, due to the £34m pro forma reduction in operating profit and £17m reduction in depreciation and amortisation being partly offset by a £25m reduction in capital expenditure.  

 

Net proceeds from disposals, including expenditure on acquisitions and investments, were £738m and included £642m gross proceeds from the disposal of DMGT's stake in ZPG and £152m from the disposal of EDR.  Cash out-flows included dividends of £81m, interest payments of £37m, taxation of £22m and pension funding of £13m.  The Group broadly matches the profile of its net debt by currency to the components of its operating cash flow by currency.  The stronger US dollar at year end, relative to the prior year end, resulted in an adverse debt revaluation of £4m.

 

At the year end, the Group's cash, cash equivalents and short term deposits totalled £675m. Bond debt was £424m and comprised £219m of the 5.75% bonds, due December 2018, £9m of the 10.0% bonds, due 2021, and £197m of the 6.375% bonds, due 2027.  There was also £18m of net debt in respect of loan notes, collateral and derivatives. The Group's committed bank facilities were £431m, which were completely unutilised.

 

In December 2017, Standard & Poor's revised its corporate credit rating for DMGT from BBB- to BB+, following the reduction in DMGT's profit margin due to the deconsolidation of Euromoney.  In January 2018, Fitch reaffirmed its BBB- investment grade rating.  The Group's preferred upper limit for gearing remains a net debt to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) ratio of 2.0, below the requirements of the Group's bank covenants.

 

Since FY 2013, when there was a £60m one-off reduction in working capital as a result of changes to the terms and collection of some of dmg media's trade debtors, DMGT has incurred trade finance charges.  During the second quarter of FY 2019, dmg media will revert to the original terms and collection and this is reflected in the guidance of DMGT's reduced net finance charges but will also result in a one-off increase in working capital.

 

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

 

Financing

During the year, the Group acquired 2.2m 'A' Ordinary Shares for £14m in order to meet obligations to provide shares under its incentive plans.  It utilised 2.2m shares, valued at £14m, and a further 0.7m shares from the Employee Benefit Trust, valued at £4m, to provide shares under various incentive plans.  As at 30 September 2018, DMGT had 354.3m shares in issue, including 19.9 million Ordinary Shares, and a further 7.8m 'A' Ordinary Shares held in Treasury and the Employee Benefit Trust7.

 

Dividend

The Board is recommending the payment on DMGT's issued Ordinary Shares and 'A' Ordinary Non-Voting Shares of a final dividend of 16.2 pence per share for the year ended 30 September 2018 (2017 15.8 pence).  This will make a total for the year of 23.3 pence (2017 22.7 pence per share).  The final dividend will be paid on 8 February 2019 to shareholders on the register at the close of business on 7 December 2018.

 

 

 

 

Pro forma Full Year 2017 adjusted results

 

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

  

Group summary

Adjusted results3

(from continuing and

Full Year

2017

£m

 

discontinued operations)

 

 

Reported

Revision

Pro forma4

 

Revenue

1,660

(95)

1,564

 

 

 

 

 

 

Operating profit

198

(19)

179

 

Income from JVs and associates

69

9

79

 

Net finance costs

(42)

-

(41)

 

Profit before tax

226

(10)

216

 

 

 

 

 

 

Tax charge

(29)

2

(27)

 

Minority interests

(1)

5

4

 

Group profit

196

(3)

194

 

 

 

 

 

 

Earnings per share

55.6p

(0.8)p

54.8p

 

Operating profit margin

12%

 

11%

 

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

 

 

Business to business (B2B)

Adjusted results3

(from continuing and

Full Year

2017

£m

 

discontinued operations)

 

Reported

Revision

Pro forma4

 

Revenue

976

(95)

881

 

Operating profit

152

(19)

133

 

Operating margin

16%

 

15%

 

 

 

Euromoney Institutional Investor

Adjusted results3

(from continuing and

Full Year

2017

£m

 

discontinued operations)

 

Reported

Revision

Pro forma4

 

Revenue

95

(95)

-

 

Operating profit

19

(19)

-

 

Operating margin

20%

 

N/A

 

 

 

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

 

The Board and management team use adjusted results, rather than statutory results, as the primary basis for providing insight into the financial performance of the Group and the way it is managed.  Similarly, adjusted results are used in setting management remuneration.  Adjusted results exclude certain items which, if included, could distort the understanding of the comparative performance of the business during the year.

 

The tables on pages 24 and 25 show the adjustments between statutory profit before tax and adjusted profit before tax, by business, for both FY 2018 and FY 2017. 

 

The explanation for each type of adjustment is as follows:

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

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

3)   Impairment of plant: occasionally the carrying value of an asset in the balance sheet is considered to be greater than the value in use or the fair value less costs to sell and it is appropriate to impair it.  The associated charge is excluded from adjusted results since it is unrelated to the ongoing cost of doing business.  The ongoing depreciation and amortisation of tangible assets and software, including products, is, however, an everyday cost of doing business and is included in both statutory and adjusted results.  A reorganisation may also result in the write-off of the carrying value of tangible fixed assets, as was the case during FY 2017 when the Consumer Media division closed its Didcot printing plant, and this expense is excluded from adjusted results. 

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

5)   Profit on sale of assets: the Group makes gains or losses when disposing of businesses, for example on the disposal of EDR, the US Property Information business.  These items are excluded from adjusted results as they reflect the value created since the business was formed or acquired rather than the operating performance of the business during the year.  Similarly, the gains or losses made by joint ventures or associates when disposing of businesses are excluded from adjusted results.

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

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

 

Reconciliation: Statutory profit to adjusted profit - FY 2018

 

 

£ millions

Note

IRA

PIB

ETC

EID

E&EE

CMF

CCG

JV&AH

DMGT Group

 

Statutory operating profit

 

(24)

48

5

-

27

46

(52)

118

169

 

Exceptional operating costs

2

-

2

-

(4)

-

18

5

5

25

Intangible impairment and amortisation

4

58

9

3

4

1

-

-

21

95

Exclude JVs & Associates

 

 

 

 

 

 

 

 

144

(144)

 

Adjusted operating profit

 

35

58

7

-

28

64

(47)

 

145

 

 

 

£ millions

Note

IRA

PIB

ETC

EID

E&EE

CMF

CCG

JV&AH

FCI

DMGT Group

 

Statutory PBT

 

(24)

113

(4)

(12)

27

47

458

118

(32)

692

 

Profit on sale of assets

5

-

(65)

8

13

-

(1)

(510)

(103)

-

(658)

 

Operating profit adjustments (∞ above)

2, 4

58

10

3

-

1

18

5

26

-

120

Total ∞

Pension finance credit

6

-

-

-

-

-

-

-

-

(2)

(2)

 

Other adjustments

7

-

-

-

-

-

-

-

33

(3)

30

 

Adjusted PBT

 

35

58

7

-

28

64

(47)

74

(37)

182

 

 

Notes:

The figures in the Note column above correspond with explanations of the adjustments given on pages 22 and 23.

A IR = Insurance Risk, B PI = Property Information, C ET = EdTech, D EI = Energy Information, E E&E = Events and Exhibitions, F CM = Consumer Media, G CC = Corporate costs, H JV&A = Joint ventures and Associates, I FC = Financing costs

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

 

 

Reconciliation: Statutory profit to adjusted profit - FY 2017

 

£ millions

Note

IRA

PIB

ETC

EID

E&EE

ERMF

CMG

CCH

JV&AI

DMGT Group

 

Statutory operating profit

 

30

(39)

(3)

(154)

28

-

26

(34)

17

(129)

 

Discontinued operations

1

-

-

-

-

-

13

-

-

(1)

12

 

Exceptional operating costs

2

3

12

8

7

3

1

9

2

7

50

Impairment of plant

3

-

-

-

-

-

-

42

-

-

42

Intangible impairment and amortisation

4

-

79

12

149

-

5

1

-

36

282

Exclude JVs & Associates

 

 

 

 

 

 

 

 

 

59

(59)

 

Adjusted operating profit

 

33

52

16

2

31

19

77

(32)

 

198

 

 

 

£ millions

Note

IRA

PIB

ETC

EID

E&EE

ERMF

CMG

CCH

JV&AI

FCJ

DMGT Group

 

Statutory PBT

 

30

(39)

(9)

(154)

28

-

27

(33)

35

2

(112)

 

Discontinued operations

1

-

-

-

-

-

525

-

-

(1)

(1)

523

 

Profit on sale of assets

5

-

-

1

-

-

(512)

(1)

(1)

(18)

-

(530)

 

Operating profit adjustments (∞ above)

2, 4

3

91

20

155

3

6

5

2

43

-

374

Total ∞

Pension finance charge

6

-

-

-

-

-

-

-

-

-

5

5

 

Other adjustments

7

-

-

4

-

-

-

-

-

10

(48)

(33)

 

Adjusted PBT

 

33

52

16

2

31

19

77

(32)

69

(42)

226

 

 

Notes:

The figures in the Note column above correspond with explanations of the adjustments given on pages 22 and 23.

A IR = Insurance Risk, B PI = Property Information, C ET = EdTech, D EI = Energy Information, E E&E = Events and Exhibitions, F ERM = Euromoney, G CM = Consumer Media, H CC = Corporate costs, I JV&A = Joint ventures and Associates, J FC = Financing costs

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

 

 

 

Reconciliation: Adjusted results including and excluding discontinued operations

 

 

 

Full Year 2017

 

£ million

Adjusted results including discontinued operations

 

 

 

Discontinued operations

Adjusted results excluding discontinued operations

 

 

 

 

 

 

Revenues

 

 

 

 

Continuing operations

1,564

-

1,564

 

Discontinued operations

95

95

-

 

Total Revenue

1,660

95

1,564

 

 

 

 

 

 

Operating Profit

 

 

 

 

Continuing operations

179

-

179

 

Discontinued operations

19

19

-

 

Total Operating Profit

198

19

179

 

 

 

 

 

 

Operating margin %

12%

20%

11%

 

 

Notes:

The discontinued operations refer to Euromoney.

 

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

 

 

Cash operating income

 

 

 

Full Year 2017

 

£ million

Reported

Revision

Pro forma

Full Year 2018

 

 

 

 

 

Adjusted Group operating profit

198

(19)

179

145

Add: Depreciation of tangible fixed assets

35

(1)

34

27

Add: Amortisation of intangible assets (e.g. products and software)

44

(1)

43

33

Less: Purchase of tangible fixed assets

(21)

3

(18)

(30)

Less: Expenditure on intangible fixed assets (e.g. products and software)

(58)

1

(57)

(20)

Add: Disposal proceeds from tangible fixed assets

1

-

1

-

DMGT Cash operating income

199

(18)

181

155

 

 

 

 

 

 

 

Notes:

The Pro forma revision is to exclude Euromoney, consistent with Full Year 2018.

 

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

 

 

Underlying analysis - Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2018

 

Full Year 2017

£ millions

%

 

Underlying

M&A

Other

Reported

 

Underlying

M&A

Exchange

Other

Reported

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Risk

+5%

 

229

-

-

229

 

219

-

(14)

-

233

Property Information

(2)%

 

237

(34)

-

272

 

242

(83)

(3)

-

328

EdTech

+9%

 

68

-

-

68

 

63

(45)

(4)

(4)

115

Energy Information

+7%

 

72

(13)

-

86

 

68

(17)

(3)

-

88

Events and Exhibitions

+5%

 

118

-

-

118

 

112

1

(5)

-

117

Euromoney

N/A

 

-

-

-

-

 

-

(95)

-

-

95

B2B

+3%

 

725

(48)

-

773

 

704

(239)

(30)

(4)

976

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Media

-4%

 

619

-

(35)

654

 

642

(5)

(3)

  (34)

683

 

 

 

 

 

 

 

 

 

 

 

 

 

DMGT Group

 0%

 

1,344

(48)

(35)

1,426

 

1,346

(244)

(32)

(38)

1,660

 

 

 

 

 

 

 

 

 

 

 

 

 

                                 

 

Notes:   M&A adjustments are for disposals and acquisitions.  The underlying results include the post-acquisition organic growth from acquired entities whilst sold and closed businesses are excluded from the underlying growth rates.  'Other' includes adjustments for the timing of shows at Events and Exhibitions, for the consistent timing of revenue recognition and for the gross-up, equivalent to the cost of sales, on the low margin resale of newsprint activities.

 

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

 

 

 

 

 

Underlying analysis - Adjusted operating profit3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2018

 

Full Year 2017

 

 

£ millions

%

 

Underlying

M&A

Other

Reported

 

Underlying

M&A

Exchange

Other

Reported

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Risk

+16%

 

35

-

-

35

 

30

-

(3)

-

33

 

 

Property Information

-8%

 

57

(1)

-

58

 

63

7

(1)

5

52

 

 

EdTech

+205%

 

7

-

-

7

 

2

(11)

-

(3)

16

 

 

Energy Information

-64%

 

2

2

-

-

 

5

3

-

1

2

 

 

Events and Exhibitions

-8%

 

27

-

-

28

 

30

-

(2)

-

31

 

 

Euromoney

N/A

 

-

-

-

-

 

-

(19)

-

-

19

 

 

B2B

-1%

 

129

1

-

128

 

130

(20)

(6)

3

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Media

-22%

 

64

-

-

64

 

82

5

-

-

77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate costs

+25%

 

(47)

-

-

(47)

 

(38)

-

-

(6)

(32)

 

 

Operating profit

-17%

 

146

1

-

145

 

174

(15)

(6)

(3)

198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

M&A adjustments are for disposals and acquisitions.  The underlying results include the post-acquisition organic growth from acquired entities whilst sold and closed businesses are excluded from the underlying growth rates.  'Other' includes adjustments for the timing of shows at Events and Exhibitions, for the consistent timing of revenue recognition and for the gross-up, equivalent to the cost of sales, on the low margin resale of newsprint activities.  For FY 2017, central dmg information costs allocated to Property Information, EdTech and Energy Information are reclassified to Corporate costs, consistent with all US central costs being included in Corporate costs in FY 2018; this adjustment is also included in 'Other'.

 

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

 

 

                                                             

 

 

Principal risks and uncertainties

The Directors confirm that they have completed a robust assessment of the Group's Principal Risks and a thorough review of risk management processes.  The Group's risks are categorised as either strategic or operational.  Strategic risks are linked to the Group's strategic priorities and impact the whole Group.  Operational risks are those arising from the execution of the business functions and typically impact on one or more of the principal businesses. 

 

 

 

 

Strategic Risks

Description and impact

Examples

Mitigation

Trend

Market disruption

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

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

 

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

·    Consumer Media: decline in print advertising revenue.

·    Consumer Media: changes in algorithms and strategies of tech giants materially impacting traffic and digital advertising revenue across properties, demanding constant oversight and agility.

·    Insurance Risk: structural decline in client markets and consolidation in insurance industry. Changing consumer expectations of insurers' utilisation of technology.

·    EdTech: declining foreign student enrolment pressuring higher education budgets.

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

·    Organic investment initiatives across the Group to innovate our products and services and to remain competitive in the markets we serve. Organic investment was 8% of total revenues in FY 2018.

·    The Executive Committee, supported by the Performance Management and Strategy function and operating companies' management teams, monitor markets, the competitive landscape and technological developments; regular dialogue and in person meetings ensure proactive, coordinated responses.

·    Performance Improvement Programme sets business-specific priorities and actively monitors improvements.

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

·    DMGT executive membership of operating company boards.

Success of new product launches and internal investments

A lack of innovation or failure to successfully evolve our products and services may compromise their appeal.

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

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

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

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

·    Insurance Risk: re-architecture of RMS(one) platform to take advantage of the growing benefits of new technology.

·    Events and Exhibitions: innovation within and expansion of events and launches across new locations.

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

·    Central capital allocation ensures focused investment in quality business cases.

·    A new innovation or business line is ring-fenced where required, to ensure it receives autonomous execution, dedicated talent, budget and undiluted management focus.

·    Direct engagement from DMGT functional leads and DMGT Board Directors contribute relevant expertise and guidance.

·    Performance Management and Strategy team partner with each operating company to support achievement of key milestones, KPIs and financial plans.

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

Portfolio management

Increasing portfolio focus is key to the Group's strategy. This could be compromised by portfolio changes not delivering expected benefits, failure to deliver acquisition or operating targets, and/or delay or delinquency in divesting from non-core businesses at the right time.

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

·    Lost acquisitions may allow competitors to gain footholds in key markets.

·    Underperforming acquisitions and investments may lead to reduced return on capital and/or impairment losses, as well as diversion of management time and bandwidth.

·    Optimal value may not be achieved from divestments.

 

·      The Executive Committee continues to evaluate the Group's portfolio in order to optimise resource allocation according to portfolio roles, business opportunities and risk-adjusted execution.

·     Investments and divestments are approved by the Investment & Finance Committee and, where warranted, the Board.

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

·     Proactive, detailed divestment roadmaps, including sell-side narrative, seller due diligence and talent incentives/retention.

·     The Executive and Investment & Finance Committees supported by the Performance Management and Strategy function monitor post-acquisition performance.

·     DMGT executive membership of operating business boards and associate boards (Euromoney, Yopa, Wowcher, WellAware, TreppPort).

Economic and geopolitical uncertainty

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

·    Uncertainty surrounding the conditions of Brexit directly impacts the UK macroeconomic climate (Consumer Media) and UK property transaction volumes (Property Information).

·    Fluctuations in the global energy and commodity markets could impact revenue for both Genscape (Energy Information) and associated trade shows (Events and Exhibitions).

·    Political and economic uncertainty, particularly in the Middle East, could negatively impact Genscape's customers, as well as the exhibitors and attendees of Events and Exhibitions.

·    Sustained global low interest rate environment will continue to impact margins for global investors, including in insurance (Insurance Risk) and property (Property Information).

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

·    Quarterly Emerging Risk papers provided to the Audit & Risk Committee ensure both DMGT and operating company management consider and remain vigilant regarding emerging risks and their potential impact.

This risk has increased over FY 2018 due to the uncertainty created as a result of Brexit in the UK, as well as the challenging political and economic climate in the Middle East.

Talent

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

 

 

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

·    Technology and software development skills remain crucial to many of our businesses where there is a significant investment in software platforms and technology infrastructure to support next-generation product development.

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

·     Enterprise sales and operational execution expertise with market and product knowledge are vital.

·    Local HR specialists focused on recruitment, critical skills planning, identifying and developing internal talent combined with central oversight of reward.

·    Central technology function with specialised expertise in artificial intelligence, machine learning, data architecture and management, platform development and scaling.

·    Technology Council oversight of technology hires.

·    Central Strategy and Performance Management function partners with operating companies' management advising on critical skills to improve operational and commercial performance, including pricing and packaging strategies, go-to-market and sales execution and business case development and planning.

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

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

 

 

 

 

Operational risks

Description and impact

Examples

Mitigation

Trend

Information security breach or cyberattack

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

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

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

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

·    Unavailability or disruption of online products and services.

·    Integrity of online products, services and data compromised.

·    Disruption to critical systems which support business operations.

·    Theft of intellectual property.

 

·    Information Security Steering Committee led by the DMGT CEO, providing oversight of information security initiatives in the Group.

·    The newly appointed Group Chief Information Security Officer is responsible for reviewing and recommending actionable roadmaps to improve information security procedures and protections at each operating company.

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

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

·    Cyber insurance policies in place.

·    Dedicated budget for information security investments.

This risk increased over FY 2018 as the inherent threat of an information security breach or cyberattack continues to increase, as does the sophistication of potential cyberattack methods. This is partially offset by continuous improvement in information security controls.

Reliance on key third parties

Certain third parties are critical to the operations of our businesses. A failure of one of our critical third parties may cause disruption to business operations, impact our ability to deliver products and services and result in financial loss.

The reputation of our businesses may be damaged by poor performance or a regulatory breach by critical third parties, particularly outsourced service providers.

Key third parties include:

·    Data centre and cloud service providers.

·    Search engine traffic partners.

·    IT development support.

·    Data providers for core product.

·    Newsprint, flexographic plate and ink suppliers.

·    Newspaper distributers and wholesalers.

·    Event venues.

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

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

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

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

·    Event cancellation and business interruption insurance policies.

Compliance with laws and regulations

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

Increasing regulation also results in increasing costs of compliance.

Particular areas of focus for DMGT businesses are:

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

·    Competition and anti-trust legislation.

·    EU Market Abuse Regulation.

·    Libel legislation.

·    Tax compliance.

·    Trade sanctions.

·    Entering regulated markets or sectors.

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

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

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

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

·    Monitoring and management of tax risks is performed by the DMGT Tax Sub Committee.

Pension scheme deficit

Defined benefit pension schemes, although now closed to new entrants, remain ultimately funded by DMGT, with Pension Fund Trustees (Trustees) controlling the investment allocation.

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

Future pension costs and funding requirements could be increased by:

·    Adverse changes in investment performance.

·    Valuation assumptions and methodology.

·    Inflation and interest rate risks.

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

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

·    Company appointed Trustees.

This risk has decreased over FY 2018 as the Group's defined benefit schemes' accounting surplus increased and exposure to future investment and inflation risk was further reduced.

Statement of Directors' responsibilities

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

 

The Directors confirm that to the best of their knowledge:

 

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

 

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

 

By order of the Board of Directors

 

The Viscount Rothermere

Chairman

28 November 2018

 

 

 

 

Notes

1 Net cash includes £237m of short-term deposits maturing in December 2018.

 

2 Underlying revenue or profit is revenue or operating profit on a like-for-like basis, see pages 28 and 29.  Underlying results are adjusted for constant exchange rates, the exclusion of disposals and closures, the inclusion of the year-on-year organic growth from acquisitions and for the consistent timing of revenue recognition.  For events, the comparisons are between events held in the year and the same events held the previous time.  For Consumer Media, underlying revenues exclude low margin newsprint resale activities.  For FY 2017, central dmg information costs allocated to Property Information, EdTech and Energy Information are reclassified to Corporate costs, consistent with all US central costs being included in Corporate costs in FY 2018.

 

3 Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results.  The Board and management team use adjusted results, rather than statutory results, to give greater insight to the financial performance of the Group and the way that it is managed.  Similarly, adjusted results are used in setting management remuneration.  Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance charges or credits and fair value adjustmentsFor reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 22 to 25.  Adjusted results include results from discontinued operations, specifically the Euromoney subsidiary during the first three months of Full Year 2017.

 

4 Euromoney ceased to be a subsidiary at the end of December 2016.  Pro forma Full Year 2017 figures have been restated to treat Euromoney as a c.49% owned associate for the whole year, consistent with the ownership profile during Full Year 2018.  See page 21.

 

5 The statutory results are IFRS figures before any adjustments.  They are for continuing operations only (excluding the discontinued operations, Euromoney, from the first three months of Full Year 2017), other than basic earnings per share since the statutory figure includes discontinued operations. 

 

6 Since late December 2017, dmg media has stopped making multiple copy sales of the Daily Mail and the Mail on Sunday; for example, to airlines to give to their customers free of charge.  Multiple copy sales previously accounted for approximately 5% of both the Daily Mail's and The Mail on Sunday's circulation volumes.  Despite this impact, the Daily Mail's 23.3% average market share during FY 2018 was broadly in line with the 23.4% market share during FY 2017 and The Mail on Sunday's 21.9% average market share during FY 2018 was broadly in line with the 22.1% average during FY 2017. The Daily Mail's market share of UK retail sales averaged 24.8% during FY 2018, an increase from 24.2% in FY 2017, and The Mail on Sunday's UK retail market share averaged 21.9%, an increase from 21.6% in FY 2017.  Circulation market share figures are calculated using ABC's National Newspapers Reports and National Newsbrands Reports for each month from October 2016 to September 2018 inclusive and exclude digital subscribers.

 

7 As at the end of 30 September 2018, there were 4,812,419 'A' Ordinary Shares held in Treasury and 2,981,109 'A' Ordinary Shares held by the DMGT Employee Benefit Trust. 

 

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

 

The average £: US$ exchange rate for the year was £1:$1.35 (2016 £1:$1.27).  The rate at the year end was $1.30 (2017: $1.34).

 

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

 

 

For further information

 

For analyst and institutional enquiries:

 

 

Tim Collier, Chief Financial Officer

+44 20 3615 2902

Adam Webster, Head of Management Information and Investor Relations

+44 20 3615 2903

For media enquiries:

Paul Durman / Doug Campbell, Teneo

 

+44 20 7260 2700

 

 

Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 29 November 2018, at The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT.  There will also be a live webcast available at http://www.dmgt.com/webcastfy18.

 

Financial Reporting Calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 24 January 2019. 

 

 

 

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

 

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

 

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

 

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

 

 

 

Consolidated Income Statement

 

For the year ended 30 September 2018

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

CONTINUING OPERATIONS

 

 

 

Revenue

3

1,426.4

1,564.3

 

 

 

 

Adjusted operating profit

3, (i)

144.9

179.0

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

3

(78.9)

(166.2)

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

3

(15.8)

(158.2)

 

 

 

 

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

 

50.2

(145.4)

Share of results of joint ventures and associates

4

118.4

16.9

Total operating profit/(loss)

 

168.6

(128.5)

Other gains and losses

5

553.0

14.0

Profit/(loss) before investment revenue, net finance costs and tax

 

721.6

(114.5)

Investment revenue

6

4.8

2.5

Finance expense

7

(40.0)

(43.8)

Finance income

7

5.5

43.5

Net finance costs

 

(34.5)

(0.3)

 

 

 

 

Profit/(loss) before tax

 

691.9

(112.3)

Tax

8

(3.7)

(64.7)

Profit/(loss) after tax from continuing operations

 

688.2

(177.0)

 

 

 

 

DISCONTINUED OPERATIONS

16

 

 

Profit from discontinued operations

 

-

519.3

PROFIT FOR THE YEAR

 

688.2

342.3

 

 

 

 

Attributable to:

 

 

 

Owners of the Company

 

689.4

345.3

Non-controlling interests*

 

(1.2)

(3.0)

Profit for the year

 

688.2

342.3

Earnings/(loss) per share

11

 

 

From continuing operations

 

 

 

Basic

 

194.7p

(49.3)p

Diluted

 

192.4p

(48.5)p

From discontinued operations

 

 

 

Basic

 

-

147.1p

Diluted

 

-

144.8p

From continuing and discontinued operations

 

 

 

Basic

 

194.7p

97.8p

Diluted

 

192.4p

96.3p

Adjusted earnings per share

 

 

 

Basic

 

42.2p

55.6p

Diluted

 

41.7p

54.7p

 

 

 

 

*Continuing operations

 

(1.2)

(6.4)

Discontinued operations

 

-

3.4

 

 

(1.2)

(3.0)

 

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

 

Consolidated Statement of Comprehensive Income

 

For the year ended 30 September 2018

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Profit for the year

 

688.2

342.3

 

 

 

 

Items that will not be reclassified to Consolidated Income Statement

 

 

 

Actuarial gain on defined benefit pension schemes

24

183.6

299.1

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

 

-

(5.5)

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

 

0.2

11.4

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

 

(31.2)

(49.3)

 

 

 

 

Total items that will not be reclassified to Consolidated Income Statement

 

152.6

255.7

 

 

 

 

Items that may be reclassified subsequently to Consolidated Income Statement

 

 

 

(Losses)/gains on hedges of net investments in foreign operations

 

(2.1)

4.5

Cash flow hedges:

 

 

 

     Gains/(losses) arising during the year

 

4.9

(0.6)

     Transfer of (gains)/losses on cash flow hedges from translation reserve to Consolidated Income Statement

 

(4.9)

1.1

Share of joint ventures' and associates' items of other comprehensive income/(expense)

4

14.7

(9.7)

Translation reserves recycled to Consolidated Income Statement on disposals

5, 15

(10.4)

49.4

Foreign exchange differences on translation of foreign operations

 

(8.9)

8.7

 

 

 

 

Total items that may be reclassified subsequently to Consolidated Income Statement

 

(6.7)

53.4

 

 

 

 

Other comprehensive income for the year

 

145.9

309.1

 

 

 

 

Total comprehensive income for the year

 

834.1

651.4

 

 

 

 

Attributable to:

 

 

 

Owners of the Company

 

835.1

645.7

Non-controlling interests

 

(1.0)

5.7

 

 

834.1

651.4

 

 

 

 

Continuing operations

 

834.1

51.7

Discontinued operations

 

-

599.7

 

 

834.1

651.4

 

 

 

 

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

 

 

 

Owners of the Company

 

835.1

54.2

Non-controlling interests

 

(1.0)

(2.5)

 

 

834.1

51.7

 

 

Consolidated Statement of Changes in Equity

 

For the year ended 30 September 2018

 

 

Called-up

share

capital

Share

premium

account

Capital

redemption

reserve

Own

shares

Translation

reserve

Retained

earnings

Equity

attributable

to owners of

the Company

Non-controlling

interests

Total

equity

 

Note

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 30 September 2016

 

45.3

17.8

5.0

(88.7)

11.9

359.8

351.1

178.2

529.3

Profit/(loss) for the year

 

-

-

-

-

-

345.3

345.3

(3.0)

342.3

Other comprehensive income for the year

 

-

-

-

-

63.0

237.4

300.4

8.7

309.1

Total comprehensive income for the year

 

-

-

-

-

63.0

582.7

645.7

5.7

651.4

Issue of share capital

 

-

-

-

-

-

-

-

0.5

0.5

Dividends

9

-

-

-

-

-

(78.3)

(78.3)

-

(78.3)

Own shares acquired in the year

 

-

-

-

(28.6)

-

-

(28.6)

-

(28.6)

Disposal of Euromoney treasury shares held by Euromoney

 

-

-

-

14.1

-

-

14.1

-

14.1

Own shares transferred on exercise of share options

23

-

-

-

38.9

-

-

38.9

-

38.9

Changes in non-controlling interests following disposal of Euromoney

 

-

-

-

-

-

-

-

(171.1)

(171.1)

Other transactions with non-controlling interests

 

-

-

-

-

-

-

-

(0.1)

(0.1)

Adjustment to equity following increased stake in controlled entity

 

-

-

-

-

-

0.4

0.4

(2.6)

(2.2)

Adjustment to equity following decreased stake in controlled entity

 

-

-

-

-

-

(0.3)

(0.3)

0.3

-

Credit to equity for share-based payments

 

-

-

-

-

-

4.0

4.0

0.1

4.1

Settlement of exercised share options of subsidiaries

 

-

-

-

-

-

(38.4)

(38.4)

-

(38.4)

Deferred tax on other items recognised in equity

 

-

-

-

-

-

(0.4)

(0.4)

-

(0.4)

At 30 September 2017

 

45.3

17.8

5.0

(64.3)

74.9

829.5

908.2

11.0

919.2

Profit/(loss) for the year

 

-

-

-

-

-

689.4

689.4

(1.2)

688.2

Other comprehensive income/(expense) for the year

 

-

-

-

-

(21.4)

167.1

145.7

0.2

145.9

Total comprehensive income/(expense)  for the year

 

-

-

-

-

(21.4)

856.5

835.1

(1.0)

834.1

Dividends

9

-

-

-

-

-

(81.0)

(81.0)

(0.2)

(81.2)

Own shares acquired in the year

23

-

-

-

(14.3)

-

-

(14.3)

-

(14.3)

Own shares transferred on exercise of share options

23

-

-

-

21.4

-

-

21.4

-

21.4

Changes in non-controlling interests following disposal and closure of businesses

 

-

-

-

-

-

-

-

3.7

3.7

Credit to equity for share-based payments

 

-

-

-

-

-

10.8

10.8

-

10.8

Settlement of exercised share options of subsidiaries

 

-

-

-

-

-

(13.8)

(13.8)

-

(13.8)

Corporation tax on share-based payments

 

-

-

-

-

-

2.3

2.3

-

2.3

Deferred tax on other items recognised in equity

 

-

-

-

-

-

(6.8)

(6.8)

-

(6.8)

At 30 September 2018

 

45.3

17.8

5.0

(57.2)

53.5

1,597.5

1,661.9

13.5

1,675.4

 

Consolidated Statement of Financial Position

 

At 30 September 2018

 

 

At 30 September 2018

At 30 September 2017

 

Note

£m

£m

ASSETS

 

 

 

Non-current assets

 

 

 

Goodwill

18

333.2

363.1

Other intangible assets

18

131.2

213.0

Property, plant and equipment

19

99.7

103.3

Investments in joint ventures

 

1.0

0.2

Investments in associates

 

769.5

735.2

Available-for-sale investments

22

20.4

30.6

Trade and other receivables

 

27.3

20.5

Other financial assets

21

18.4

15.5

Derivative financial assets

22

9.0

4.6

Retirement benefit assets

24

249.1

73.4

Deferred tax assets

 

49.5

75.9

 

 

1,708.3

1,635.3

Current assets

 

 

 

Inventories

 

31.5

26.6

Trade and other receivables

 

264.3

236.8

Current tax receivable

 

5.4

9.6

Other financial assets

21

245.3

14.5

Derivative financial assets

22

0.7

3.0

Cash and cash equivalents

13

437.8

14.6

Total assets of businesses held for sale

17

-

107.8

 

 

985.0

412.9

Total assets

 

2,693.3

2,048.2

 

 

 

 

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

(492.9)

(502.7)

Current tax payable

 

(6.1)

(1.7)

Acquisition put option commitments

 

(0.6)

(0.6)

Borrowings

20

(222.3)

(9.4)

Derivative financial liabilities

22

(6.6)

(0.4)

Provisions

 

(38.8)

(43.6)

Total liabilities of businesses held for sale

17

-

(29.0)

 

 

(767.3)

(587.4)

Non-current liabilities

 

 

 

Trade and other payables

 

(2.0)

(2.9)

Acquisition put option commitments

 

(7.6)

(7.4)

Borrowings

20

(205.7)

(470.3)

Derivative financial liabilities

22

(13.5)

(18.8)

Retirement benefit obligations

24

(5.6)

(11.0)

Provisions

 

(10.0)

(19.1)

Deferred tax liabilities

 

(6.2)

(12.1)

 

 

(250.6)

(541.6)

Total liabilities

 

(1,017.9)

(1,129.0)

Net assets

 

1,675.4

919.2

 

At 30 September 2018

 

 

At 30 September 2018

At 30 September 2017

 

Note

£m

£m

SHAREHOLDERS' EQUITY

 

 

 

Called-up share capital

23

45.3

45.3

Share premium account

23

17.8

17.8

Share capital

 

63.1

63.1

Capital redemption reserve

23

5.0

5.0

Own shares

23

(57.2)

(64.3)

Translation reserve

 

53.5

74.9

Retained earnings

 

1,597.5

829.5

Equity attributable to owners of the Company

 

1,661.9

908.2

Non-controlling interests

 

13.5

11.0

 

 

1,675.4

919.2

 

Approved by the Board on 28 November 2018.

 

Consolidated Cash Flow Statement

For the year ended 30 September 2018

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Cash generated by operations

12

137.3

232.7

Taxation paid

 

(27.1)

(18.1)

Taxation received

 

4.8

4.9

Net cash generated by operating activities

 

115.0

219.5

 

 

 

 

Investing activities

 

 

 

Interest received

 

0.9

2.4

Dividends received from joint ventures and associates

 

23.1

35.9

Dividends received from available-for-sale investments

6

0.1

0.1

Purchase of property, plant and equipment

 

(30.4)

(21.1)

Expenditure on internally generated intangible fixed assets

18

(19.5)

(57.7)

Expenditure on other intangible assets

18

(0.2)

(0.2)

Purchase of available-for-sale investments

 

(19.3)

(19.4)

Proceeds on disposal of property and plant and equipment

 

0.1

0.7

Proceeds on disposal of available-for-sale investments

 

1.0

-

Purchase of subsidiaries

14

(19.1)

(26.7)

Settlements and collateral payments on treasury derivatives

 

7.7

2.8

Investment in joint ventures and associates

 

(1.8)

(2.3)

Loans advanced to joint ventures and associates

 

(8.4)

(2.7)

Loans to joint ventures and associates repaid

 

0.2

8.6

Proceeds on disposal of subsidiaries

15

146.3

215.8

Proceeds on disposal of joint ventures and associates

 

637.9

2.4

Purchase of other financial assets

 

(237.3)

-

 

 

 

 

Net cash generated by investing activities

 

481.3

138.6

 

 

 

 

Financing activities

 

 

 

Purchase of additional interests in controlled entities

14

-

(2.1)

Equity dividends paid

9

(81.0)

(78.3)

Dividends paid to non-controlling interests

 

(0.2)

-

Issue of shares by Group companies to non-controlling interests

 

-

0.5

Purchase of own shares

23

(14.3)

(28.6)

Net receipt on settlement of subsidiary share options

 

7.6

0.5

Interest paid

 

(37.7)

(34.7)

Loan notes repaid

13

(0.1)

(0.6)

Repayments of obligations under finance lease agreements

 

-

(0.7)

Inception of finance leases

 

-

0.5

Decrease in bank borrowings

13

(43.7)

(224.9)

 

 

 

 

Net cash used in financing activities

 

(169.4)

(368.4)

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

13

426.9

(10.3)

Cash and cash equivalents at beginning of year

13

7.4

17.5

Exchange gain on cash and cash equivalents

13

1.6

0.2

Net cash and cash equivalents at end of year

 

435.9

7.4

                                                                                                  

Notes

 

1 Basis of preparation           

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

These financial statements have been prepared for the year ended 30 September 2018.

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

The information for the year ended 30 September 2018 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 30 September 2017 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. These accounts have been audited and finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the management report. The Company has long term financing in the form of Eurobonds and meets its day-to-day working capital requirements through bank facilities which expire in March 2023. The Board's forecasts and projections, after taking account of reasonably possible changes in trading performance, show that the company is expected to operate within the terms of its current facilities. After making enquiries, the Directors have a reasonable expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

This financial information has been prepared in accordance with the accounting policies set out in the 2018 Annual Report and Accounts, as amended, where appropriate, by new or amended International Financial Reporting Standards (IFRS) described below.

 

The Group's financial statements incorporate the financial statements of the Company and all of its subsidiaries together with the Group's share of all of its interests in joint ventures and associates. The financial statements have been prepared on the historical cost basis, except for derivative financial instruments, hedged items, contingent consideration, put options and the pension scheme surplus/(deficit) which are measured at fair value.

 

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

 

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and notes. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least one year from the date of the preliminary announcement. Accordingly, they continue to adopt the going concern basis in preparing the preliminary announcement.

 

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

 

These Group Condensed Financial Statements have been prepared in accordance with the accounting policies set out in the 2017 Annual Report and Accounts, as amended, where appropriate by the application of certain new or amended accounting standards in the period, described below. These policies are followed in the preparation of the full financial statements for the financial year ending 30 September 2018.

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

 

2 Significant accounting policies

 

Annual improvements to International Financial Reporting Standards (IFRSs)

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

·     Amendments to IAS 7, Statement of Cash Flows (effective 1 January 2017),

·     Amendment to IAS 12, Recognition of Deferred Tax assets for Unrealised Losses (effective 1 January 2017) and

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

 

The above amendments have not had any significant impact on the Group's Consolidated Financial Statements.

 

The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for the Group's accounting periods beginning on or after 1 October 2018. These new pronouncements are listed below:

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

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

·     IFRS 9, Financial Instruments (effective 1 January 2018)

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

·     IFRS 16, Leases (effective 1 January 2019)

·     Amendment to IFRS 2 Share Based Payments - benefits (effective 1 January 2019 but not yet endorsed by the EU)

·     IFRIC 22, Foreign Currency Transactions and advance consideration (effective 1 January 2019 but not yet endorsed by the EU)

·     IFRIC 23, Uncertainty over Income Tax Treatments (effective 1 January 2019 but not yet endorsed by the EU)

 

Other than IFRS 16, the adoption of standards, amendments and interpretations which have been issued but are not yet effective is not expected to have a material impact on the Group's Consolidated Financial Statements.

IFRS 9, effective for the 2019 fiscal year, replaces IAS 39, Financial Instruments: Recognition and Measurement.

The new standard introduces changes to three key areas- the classification and measurement of financial instruments; a new impairment model based on expected credit losses (ECL) and a simplified hedge accounting process through closer alignment with risk management methodology. We have considered the implications of these changes and our findings are as follows:

·      Since the Group's available for sale investments are not held for trading, only qualifying dividends will be recognised in the income statement, with changes in fair value recognised in other comprehensive income. We have reviewed the values of our available for sale unlisted investments currently held at cost less provision for impairment and other financial assets and have concluded that the application of IFRS 9 is not expected to have a material impact on the value of these investments.

·      The Group will recognise a loss allowance from the point of initial recognition for all financial assets based on ECL. This will result in the earlier recognition of bad debt provisions. We have reviewed the impact of this change and do not expect the impact of the ECL model to have a material impact on the carrying values of our financial assets.

·      Since IFRS 9 is more closely aligned with our risk management activities, we do not expect any change to the effectiveness of our hedge derivatives. We do expect a change to the designation and hedge accounting treatment of our cross currency interest rate swaps. Accordingly, following our review of IFRS 9, we have decided to exclude currency basis from hedge designation retrospectively. This will result in an opening adjustment to reserves on transition representing a re-classification from translation reserves to retained earnings. The estimated impact on opening retained earnings at 1 October 2018 is not expected to be material.

The Group expects to adopt IFRS 9 on a modified retrospective basis such that the Group will recognise the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings i.e. as at 1 October 2018 with no restatement of prior periods. Following adoption of the standard we do not expected any significant adjustment required on the measurement, presentation or disclosure of financial assets and liabilities in the Group's Consolidated Financial Statements.

 

 

2 Significant accounting policies continued

 

IFRS 15, is effective for the 2019 fiscal year. The standard introduces additional guidance surrounding performance obligations within sales contracts and the timing of revenue recognition. The standard introduces a five-step model that will require judgement in their application. These steps are as follows:

 

·      Identify the contract(s) with a customer

·      Identify the separate performance obligations in the contract

·      Determine the contract price

·      Allocate the transaction price to the performance obligations in the contract

·      Recognise revenue when each performance obligation has been satisfied

 

 

The adoption of the new standard is not expected to have a material impact on the Group's reported revenues nor will the standard change the cashflows associated with our revenue streams.

 

We have identified a small number of contracts across our businesses which have been impacted by the new standard, leading to a difference in the timing of revenue recognition. The majority of this change is due to revenues being recorded over a period of time rather than a point in time.

In addition to changes in the timing of revenue recognition, IFRS 15 also introduces changes to the recognition of incremental costs incurred when obtaining a contract with a customer known as contract acquisition costs. These include sales commissions paid to employees. The standard requires such costs to be recognised as an asset, when the Group expects to recover them, and charged to the Consolidated Income Statement on a systematic basis - rather than being expensed immediately.

 

Judgement is required to determine this period and whether this is the contract term or a longer period such as the estimated customer life for contracts which are expected to renew. Such deferred costs are de-recognised and charged immediately to the Consolidated Income Statement when no future economic benefits are expected.

 

The preliminary results of our assessment of the impact of IFRS 15 on the Consolidated Income Statement for the year ended 30 September 2018 is set out in the table below:

 

Segment

Increase/(decrease) in Revenue £m

Increase/(decrease) in Operating profit £m

Insurance Risk

 (0.4)

 (1.8)

Property Information

 0.1

 -

EdTech

 (0.4)

 (0.4)

Energy Information

 -

 0.3

Events and Exhibitions

 -

 -

Consumer Media

 -

 -

Total

 (0.7)

 (1.9)

 

The preliminary results of our assessment of the corresponding impact on receivables and payables as at 30 September 2018 is set out in the table below:

 

 

£m

 

Prepayments

 3.4

Increased prepayments

Deferred Revenue

 (6.6)

Increased deferred revenue and accruals

 

 

 

 

The Group will adopt IFRS 15 on a modified retrospective basis such that the Group will recognise the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings ie as at 1 October 2018 with no restatement of prior periods.

 

An adjustment to brought forward retained earnings of £3.2 million will be recognised in the Statement of Changes in Equity. This represents the reversal of certain revenues which met the criteria for recognition under previously applicable accounting standards but does not do so under IFRS 15 together with contract acquisition costs which were expensed immediately under previously applicable accounting standards which are now deferred and recognised on a systematic basis under IFRS 15.

 

 

IFRS 16, effective for the 2020 fiscal year, eliminates the distinction between operating and finance leases for lessees. The standard requires lessees to recognise right of use assets and corresponding liabilities for all leases, unless the lease term is 12 months or less or the underlying asset has a low value. The new standard replaces the operating lease expense with a depreciation charge on the underlying asset and an interest expense on the liability.

 

Lessors will continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting largely unchanged from its predecessor, IAS 17. The Group expects to adopt IFRS 16 on a modified retrospective basis such that the Group will recognise the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings i.e. as at 1 October 2019 with no restatement of prior periods.

 

The Group is in the process of quantifying the impact of this standard although based on the undiscounted operating lease commitments there will be a large increase in total assets - largely in the land and buildings category, together with an increase in financial liabilities as liabilities relating to current operating leases are recognised.

 

Since existing operating lease charges will be replaced with a depreciation and finance charge, EBITDA will increase. These changes will also have an impact on the Group's tax charge. The standard will also require the Group to make key accounting judgements in particular around lease renewal assumptions and discount rates.

 

Since the financial impact is dependent on circumstances at the date of transition, it is not yet practicable to determine a reliable estimate of the financial impact on the Group.

 

Business combinations    

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

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

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

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

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

 

Business combinations achieved in stages

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

 

Purchases and sales of shares in a controlled entity               

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

 

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

 

Disposal of controlling interests where non-controlling interest retained

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

 

 

2 Significant accounting policies continued

 

Contingent consideration receivable

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

 

Discontinued operations 

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

 

Assets and liabilities of businesses held for sale

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

 

Accounting for subsidiaries

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

 

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

 

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

 

Non-controlling interests               

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

 

Interests in joint ventures and associates 

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

 

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

 

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

 

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

 

 

Foreign currencies

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Goodwill and intangible assets      

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

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rates on the period end date.  On disposal of a subsidiary, associate or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the Consolidated Income Statement on disposal.

 

Impairment of goodwill

The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired.

 

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

 

When testing for impairment, the recoverable amounts for all of the Group's CGUs are measured at the higher of value in use or fair value less costs to sell. Value in use is calculated by discounting future expected cash flows. These calculations use cash flow projections based on Board-approved budgets and projections which reflect management's current experience and future expectations of the markets in which the CGU operates. Risk adjusted pre-tax discount rates used by the Group in its impairment tests range from 13.25% to 15.28% (2017 11.45% to 19.20%) the choice of rates depending on the risks specific to that CGU. The Directors' estimate of the Group's weighted average cost of capital is 8.5% (2017 8.0%). The cash flow projections consist of Board-approved budgets for the following year, together with forecasts for up to two additional years and nominal long-term growth rates beyond these periods. The nominal long-term growth rate of 3.0% (2017 between 1.5% and 3.0%) varies with management's view of the CGU's market position, maturity of the relevant market and does not exceed the long-term average growth rate for the market in which the CGU operates.

 

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

 

 

2 Significant accounting policies continued

 

Research and development expenditure

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

 

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

 

Licences

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

 

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

 

Computer software which is integral to a related item of hardware equipment is accounted for as property, plant and equipment. Costs associated with maintaining computer software programs are recognised as an expense as incurred.

 

Other intangible assets    

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

 

Publishing rights, mastheads and titles

 5 - 30 years

Brands                                             

 3 - 20 years

Market and customer-related databases and customer relationships

 3 - 20 years

Computer software

 2 - 5 years

 

Amortisation of intangible assets not arising on business combinations are included within Operating Profit in the Consolidated Income Statement. The Group has no other intangible assets with indefinite lives.

 

Impairment of intangible assets

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

 

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

 

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

 

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

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

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

 

 

 

Property, plant and equipment

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

 

Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use. Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

 

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

 

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

                       

Freehold buildings and long leasehold properties

50 years

Short leasehold premises

the term of the lease

Plant and equipment

3 - 25 years

Depreciation is not provided on freehold land

 

 

Inventory

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

 

Exhibitions, training and event costs

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

 

Pre-publication costs

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

 

Marketing costs

Marketing and promotional costs are charged to the Consolidated Income Statement in the period in which they are incurred. Direct event costs are charged to the Consolidated Income Statement within Direct Event Costs.

 

Cash and cash equivalents

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

 

 

 

2 Significant accounting policies continued

 

Revenue

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

 

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

 

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

 

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

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

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

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

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

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

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

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

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

 

Adjusted measures

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

 

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

 

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

 

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

 

See Note 10 for a reconciliation of profit before tax to adjusted profit before and after tax. The Group also presents a measure of net debt, see Note 13 for further detail.

 

Other gains and losses

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

 

EBITDA

The Group discloses EBITDA, being adjusted operating profit before depreciation of property, plant and equipment and investment property. EBITDA is broadly used by analysts, rating agencies, investors and the Group's banks as part of their assessment of the Group's performance.  A reconciliation of EBITDA from operating profit is shown in Note 12 and the ratio of net debt to EBITDA is disclosed in Note 20.

 

 

Leasing 

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

 

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

 

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

 

Dividends            

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

 

Borrowing costs

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

 

Retirement benefits

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

 

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

 

Other movements in the net surplus or deficit are recognised in the Consolidated Income Statement, including the current service cost, any past service cost and the effect of any curtailment or settlements. The net finance income/(charge) is also charged to the Consolidated Income Statement within net finance costs.

 

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

 

 

2 Significant accounting policies continued

 

Taxation

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Financial instruments

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

 

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

 

 

Financial assets

Trade receivables

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

 

Available-for-sale investments

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

 

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

 

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

 

Financial liabilities and equity instruments

Trade payables

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

 

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

 

Capital market and bank borrowings

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

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of transaction costs.        

 

Derecognition

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

 

Financial liabilities are derecognised when the liability has been settled, has expired or has been extinguished.

 

Derivative financial instruments and hedge accounting

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

 

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

 

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

 

Fair value hedges

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

 

 

2 Significant accounting policies continued

 

Cash flow hedges

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

 

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

 

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

 

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

 

Net investment hedges

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

 

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

 

Provisions

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

 

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

 

Share-based payments

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

 

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

 

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

 

Investment in own shares

Treasury shares

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

 

Employee Benefit Trust

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

 

Critical accounting judgements and key sources of estimation uncertainty

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

 

Adjusted measures

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

 

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

 

Exceptional operating costs include reorganisation costs and similar items of a significant and a non-recurring nature. In addition, the Group presents an adjusted profit after tax measure by making adjustments for certain tax charges and credits which management believe to be significant by virtue of their size, nature or incidence or which have a distortive effect. The Group uses these adjusted measures to evaluate performance and as a method to provide shareholders with clear and consistent reporting.

 

See Note 10 for a reconciliation of profit before tax to adjusted profit before and after tax. The Group also presents a measure of net debt, see Note 13 for further detail.

 

Investment in Euromoney                                                                                                                                                                                  

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

 

Retirement benefits

After considering the principles set out in IFRIC 14, the Group has recognised a net surplus on its pension schemes amounting to £243.5 million (2017 £62.4 million).

 

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

                                                                                                                                               

Forecasting

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

 

Impairment of goodwill and intangible assets

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

 

The value in use calculation requires management to estimate the future cash flows expected to arise from the asset or CGU and calculate the net present value of these cash flows using a suitable discount rate. A key area of estimation is deciding the long-term growth rate and the operating cash flows of the applicable businesses and the discount rate applied to those cash flows (Note 18). The carrying amount of goodwill and intangible assets at the year end was £301.8 million  (Note 18).

 

 

 

2 Significant accounting policies continued

 

Acquisitions and intangible assets

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

 

Taxation

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

                                                                                                                                                                       

The Group accounts for unresolved issues based on its best estimate of the final outcome, however the inherent uncertainty regarding these items means that the eventual resolution could differ significantly from the accounting estimates and, therefore, impact the Group's results and future cash flows. In situations where uncertainties exist, provision is made for contingent tax liabilities and assets when it is more likely than not that there will be a cash impact. These provisions are made for each uncertainty individually on the basis of management estimates following consideration of the available relevant information. The measurement basis adopted represents the best predictor of the resolution of the uncertainty which is usually based on the most likely cash outflow. The company reviews the adequacy of these provisions at the end of each reporting period and adjusts them based on changing facts and circumstances. In the current period, the Group's uncertain tax positions relate mainly to Euromoney, further detail is provided in Note 8.

                                                                       

In addition, the Group makes estimates regarding the recoverability of deferred tax assets relating to losses based on forecasts of future taxable profits which are, by their nature, uncertain.                                                                                                                  

 

Retirement benefit obligations

The cost of defined benefit pension plans is determined using actuarial valuations prepared by the Group's actuaries. This involves making certain assumptions concerning discount rates, future salary increases and mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. The assumptions and the resulting estimates are reviewed annually and, when appropriate, changes are made which affect the actuarial valuations and, hence, the amount of retirement benefit expense recognised in the Consolidated Income Statement and the amounts of actuarial gains and losses recognised in the Consolidated Statement of Changes in Equity.

 

The fair value of the Group's pension scheme assets include quoted and unquoted investments. The value of unquoted investments require more judgement as their values are not directly observable. Accordingly the assumptions used in valuing unquoted investments are affected by current market conditions and trends which could result in changes in their fair value after the measurement date. A 1.0% movement in the value of unquoted pension scheme assets is estimated to change the value of the Group's pension scheme assets by £21.0 million.

 

The carrying amount of the retirement benefit obligation at 30 September 2018 was a surplus of £243.5 million (2017 £62.4 million). The assumptions used and the associated sensitivity analysis can be found in Note 24.

3 Segment analysis


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

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

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

Year ended 30 September 2018

 

Total and external revenue

Segment operating profit/(loss)

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

Adjusted operating profit/(loss)

 

Note

£m

£m

£m

£m

Insurance Risk

 

 229.4

 33.8

 (0.8)

 34.6

Property Information

 

 271.6

 58.0

-

 58.0

EdTech

 

 68.3

 7.4

-

 7.4

Energy Information

 

 85.5

 (0.5)

 (0.8)

 0.3

Events and Exhibitions

 

 117.8

 27.7

-

 27.7

Consumer Media

 

 653.8

 83.6

 19.3

 64.3

 

 

 1,426.4

 210.0

 17.7

 192.3

Corporate costs

 

-

 12.8

 60.2

 (47.4)

 

 

 1,426.4

 

 

 

Adjusted operating profit

 

 

 

 

 144.9

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

18

 

 

 

 (78.9)

Impairment of goodwill and acquired intangible assets arising on business combinations

18

 

 

 

 (0.3)

Amortisation of acquired intangible assets arising on business combinations

 18

 

 

 

 (15.5)

Operating profit before share of results of joint ventures and associates

 

 

 

 

 50.2

Share of results of joint ventures and associates

4

 

 

 

 118.4

Total operating profit

 

 

 

 

 168.6

Other gains and losses

5

 

 

 

 553.0

Profit before investment revenue, net finance costs and tax

 

 

 

 

 721.6

Investment revenue

6

 

 

 

 4.8

Finance expense

7

 

 

 

 (40.0)

Finance income

7

 

 

 

 5.5

Profit before tax

 

 

 

 

 691.9

Tax

8

 

 

 

 (3.7)

Profit for the year

 

 

 

 

 688.2

 

3 Segment analysis continued

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

Year ended 30 September 2018

 

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Impairment of internally generated and acquired computer software

Exceptional operating costs

 

 

(Note 18)

(Note 18)

(Note 18)

(Note 18)

 

 

 

£m

£m

£m

£m

£m

Insurance Risk

 

 (15.0)

-

 0.1

 (58.3)

-

Property Information

 

 (3.9)

 (8.7)

-

-

 (1.5)

EdTech

 

 (5.2)

 (2.8)

-

-

-

Energy Information

 

 (3.4)

 (3.3)

 (0.4)

 (0.1)

 3.8

Events and Exhibitions

 

 (0.1)

 (0.6)

-

-

-

Consumer Media

 

 (5.2)

 (0.1)

-

-

 (18.2)

 

 

 (32.8)

 (15.5)

 (0.3)

 (58.4)

 (15.9)

Corporate costs

 

-

-

-

-

 (4.6)

Total and continuing operations

 

 (32.8)

 (15.5)

 (0.3)

 (58.4)

 (20.5)

 

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

Year ended 30 September 2018

Severance costs

LTIP

 

Pension past service cost

Property

Legal fees

Total

 

 

(i)

(ii)

 

(iii)

 

 

£m

£m

£m

£m

£m

£m

Property Information

 0.1

-

-

-

 (1.6)

 (1.5)

EdTech

 0.2

-

-

 (0.2)

-

-

Energy Information

-

-

-

-

 3.8

 3.8

Consumer Media

 (0.1)

 (0.8)

 (17.3)

-

-

 (18.2)

 

 0.2

 (0.8)

 (17.3)

 (0.2)

 2.2

 (15.9)

Corporate costs

-

 (4.7)

-

-

 0.1

 (4.6)

Total and continuing operations

 0.2

 (5.5)

 (17.3)

 (0.2)

 2.3

 (20.5)

 

The Group's tax charge includes a related credit of £4.3 million in relation to these exceptional operating costs.

(i)           During the period, the Group sold its investment in ZPG resulting in a profit on sale of £508.4 million. As a direct consequence of this disposal, the value of the DMGT 2017 Long Term Incentive Plan (the LTIP) is estimated to have increased by £16.5 million. As the LTIP includes a service period condition, IFRS 2, Share Options requires the LTIP charge to be spread over the service period until the award vests. The LTIP charge recognised in the period which relates to the disposal of ZPG amounts to £5.5 million which is anticipated to be repeated for the following two years. Since the profit on sale of ZPG is excluded from our adjusted profit measure we have treated the incremental increase in the LTIP charge as an adjusting item and will continue to do so until the award vests.
 

(ii)         The pension past service cost represents a non-cash charge. This follows a change to the scheme rules in one of the Group's defined benefit (DB) pension plans capping future pension increases at 5.0%. This aligns the pension increases of this scheme with all other Group DB pension plans. 
 

(iii)        Exceptional charges in the Property Information segment relate to fees paid to the Group's lawyers in defence of various claims brought against businesses in this segment. The exceptional credit in the Energy Information segment relates to a release of provisions no longer required.

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

Year ended 30 September 2018

 

Depreciation of property, plant and equipment

Research costs

Investment revenue

Finance Income

Finance expense

 

 

 

 

(Note 6)

(Note 7)

(Note 7)

 

 

£m

£m

£m

£m

£m

Insurance Risk

 

 (4.9)

 (37.2)

 0.3

-

-

Property Information

 

 (2.8)

 (0.1)

-

-

-

EdTech

 

 (0.6)

-

 1.4

-

-

Energy Information

 

 (3.3)

 (4.0)

-

-

 (2.5)

Events and Exhibitions

 

 (0.5)

-

-

-

-

Consumer Media

 

 (14.9)

 (0.5)

-

 2.0

 (1.1)

 

 

 (27.0)

 (41.8)

 1.7

 2.0

 (3.6)

Corporate costs

 

 (0.2)

-

 3.1

 3.5

 (36.4)

Total and continuing operations

 

 (27.2)

 (41.8)

 4.8

 5.5

 (40.0)

 

 

 

3 Segment analysis continued

Year ended 30 September 2017

 

Total and external revenue

Segment operating profit

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

Adjusted operating profit/(loss)

 

 

 

 

 

 

 

Note

£m

£m

£m

£m

Insurance Risk

 

 233.2

 32.0

 (0.8)

 32.8

Property Information

 

 328.0

 52.0

 0.1

 51.9

EdTech

 

 114.9

 16.1

 (0.2)

 16.3

Energy Information

 

 87.8

 1.1

 (0.7)

 1.8

Events and Exhibitions

 

 117.0

 30.6

-

 30.6

Euromoney

(i)

 95.2

 67.3

 48.0

 19.3

Consumer Media

 

 683.4

 99.2

 22.0

 77.2

 

 1,659.5

 298.3

 68.4

 229.9

Corporate costs

 

-

-

 0.9

 (31.6)

Discontinued operations

 16

 (95.2)

 (67.3)

 (48.0)

 (19.3)

 

 1,564.3

 

 

 

 

 

 

 

 179.0

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

18

 

 

 

 (166.2)

Impairment of goodwill and acquired intangible assets arising on business combinations

18

 

 

 

 (131.7)

Amortisation of acquired intangible assets arising on business combinations

 18

 

 

 

 (26.5)

4

 

 

 

 (145.4)

Share of results of joint ventures and associates

 

 

 

 

 16.9

 

 

 

 

 (128.5)

Other gains and losses

5

 

 

 

 14.0

 

 

 

 

 (114.5)

Investment revenue

6

 

 

 

 2.5

Finance expense

7

 

 

 

 (43.8)

7

 

 

 

 43.5

Loss before tax

 

 

 

 

 (112.3)

Tax

8

 

 

 

 (64.7)

 16

 

 

 

 519.3

Profit for the year

 

 

 

 

 342.3

 

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

 

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

Year ended 30 September 2017

 

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Impairment of internally generated and acquired computer software

Exceptional operating costs

Impairment of property, plant and equipment

(i)

 

 

(Note 18)

(Note 18)

(Notes 18)

(Note 18)

 

 

 

 

£m

£m

£m

£m

£m

£m

Insurance Risk

 

 (17.8)

-

-

-

 (2.8)

-

Property Information

 

 (5.7)

 (13.6)

 (31.6)

 (33.7)

 (11.8)

-

EdTech

 

 (8.5)

 (4.3)

 (2.2)

 (5.3)

 (7.9)

-

Energy Information

 

 (6.4)

 (8.2)

 (97.9)

 (42.4)

 (6.8)

-

Events and Exhibitions

 

 (0.1)

 (0.2)

-

-

 (2.6)

-

Euromoney

 

 (0.9)

 (5.4)

-

-

 (0.9)

-

Consumer Media

 

 (4.8)

 (0.2)

-

 (0.3)

 (8.8)

 (42.0)

 

 

 (44.2)

 (31.9)

 (131.7)

 (81.7)

 (41.6)

 (42.0)

Corporate costs

 

-

-

-

-

 (1.8)

-

 

 

 (44.2)

 (31.9)

 (131.7)

 (81.7)

 (43.4)

 (42.0)

Relating to discontinued operations

 16

 0.9

 5.4

-

-

 0.9

-

Continuing operations

 

 (43.3)

 (26.5)

 (131.7)

 (81.7)

 (42.5)

 (42.0)

 

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

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

Year ended 30 September 2017

Severance costs

Consultancy charges

Other restructuring costs

Legal fees

Total

 

 

 

 

(i)

 

 

£m

£m

£m

£m

£m

Insurance Risk

 0.5

 (3.3)

-

-

 (2.8)

Property Information

 (4.8)

-

-

 (7.0)

 (11.8)

EdTech

 (5.5)

 (1.9)

 (0.5)

-

 (7.9)

Energy Information

 (0.9)

-

-

 (5.9)

 (6.8)

Events and Exhibitions

-

-

 (2.6)

-

 (2.6)

Euromoney

-

 (0.1)

-

 (0.8)

 (0.9)

Consumer Media

 (4.0)

-

 (4.8)

-

 (8.8)

 

 (14.7)

 (5.3)

 (7.9)

 (13.7)

 (41.6)

Corporate costs

 (1.8)

-

-

-

 (1.8)

Total and continuing operations

 (16.5)

 (5.3)

 (7.9)

 (13.7)

 (43.4)

Relating to discontinued operations

-

 0.1

-

 0.8

 0.9

Continuing operations

 (16.5)

 (5.2)

 (7.9)

 (12.9)

 (42.5)

 

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

 

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

 

3 Segment analysis continued

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

Year ended 30 September 2017

 

Depreciation of property, plant and equipment

Research costs

Investment revenue

Finance Income

Finance expense

 

 

 

 

 

 

 

 

 

 

 

(Note 6)

(Note 7)

(Note 7)

 

 

£m

£m

£m

£m

£m

Insurance Risk

 

 (5.9)

 (40.3)

 0.3

-

 (0.1)

Property Information

 

 (4.5)

 (0.1)

 0.5

 11.5

 (0.1)

EdTech

 

 (1.8)

 (0.6)

-

 1.4

-

Energy Information

 

 (4.0)

 (1.1)

-

 25.9

 (0.2)

Events and Exhibitions

 

 (0.5)

-

-

-

-

Euromoney

 

 (0.8)

 (2.5)

-

-

 (0.7)

Consumer Media

 

 (16.8)

 (1.4)

 1.5

-

 (3.5)

 

 

 (34.3)

 (46.0)

 2.3

 38.8

 (4.6)

Corporate costs

 

 (0.2)

-

 0.2

 4.7

 (39.9)

 

 

 (34.5)

 (46.0)

 2.5

 43.5

 (44.5)

Relating to discontinued operations

 16

 0.8

 2.5

-

-

 0.7

Continuing operations

 

 (33.7)

 (43.5)

 2.5

 43.5

 (43.8)

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

 

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2017

Year ended 30 September 2017

 

Total and continuing operations

Total

Discontinued operations

Continuing operations

 

 

 

(Note 16)

 

 

£m

£m

£m

£m

Print advertising

 187.0

 203.6

 7.1

 196.5

Digital advertising

 135.9

 142.7

 2.0

 140.7

Circulation

 291.4

 307.8

-

 307.8

Subscriptions

 399.1

 517.4

 63.5

 453.9

Events, conferences and training

 116.2

 140.9

 24.7

 116.2

Transactions and other

 296.8

 347.1

 (2.1)

 349.2

 

 1,426.4

 1,659.5

 95.2

 1,564.3

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

 

By geographic area

The majority of the Group's operations are located in the United Kingdom, North America, rest of Europe, and Australia. The analysis below is based on the location of companies in these regions.

 

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2017

Year ended 30 September 2017

 

Total and continuing operations

Total

Discontinued operations

Continuing operations

 

 

 

(Note 16)

 

 

£m

£m

£m

£m

UK

 812.0

 873.8

 30.9

 842.9

North America

 475.4

 615.5

 50.6

 564.9

Rest of Europe

 40.1

 43.0

 4.4

 38.6

Australia

 8.7

 22.6

 0.4

 22.2

Rest of the World

 90.2

 104.6

 8.9

 95.7

 

 1,426.4

 1,659.5

 95.2

 1,564.3

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

 

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2017

Year ended 30 September 2017

 

Total and continuing operations

Total

Discontinued operations

Continuing operations

 

 

 

(Note 16)

 

 

£m

£m

£m

£m

UK

 772.4

 808.1

 9.1

 799.0

North America

 410.8

 557.9

 43.9

 514.0

Rest of Europe

 143.2

 155.7

 18.6

 137.1

Australia

 10.2

 23.3

 2.0

 21.3

Rest of the World

 89.8

 114.5

 21.6

 92.9

 

 1,426.4

 1,659.5

 95.2

 1,564.3

 

3 Segment analysis continued

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

 

 

 

Closing net book value of property, plant and equipment

Closing net book value of property, plant and equipment

Closing net book value of goodwill

Closing net book value of goodwill

Closing net book value of intangible assets

Closing net book value of intangible assets

 

 

 

 

(Note 18)

(Note 18)

(Note 18)

(Note 18)

 

 

2018

2017

2018

2017

2018

2017

 

 

£m

£m

£m

£m

£m

£m

UK

 

 76.1

 79.1

 94.1

 92.0

 44.6

 47.4

North America

 

 20.3

 19.3

 204.2

 231.2

 72.0

 145.7

Rest of Europe

 

 2.5

 3.3

 22.5

 25.7

 12.6

 18.2

Rest of the World

 

 0.5

 1.0

 12.4

 11.9

 2.0

 1.7

 

 

 99.7

 103.3

 333.2

 363.1

 131.2

 213.0

 

 

 

Property, plant and equipment

Property, plant and equipment

Goodwill

Goodwill

Intangible assets

Intangible assets

 

 

 

 

(Note 18)

(Note 18)

(Note 18)

(Note 18)

 

 

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2018

Year ended 30 September 2017

 

 

£m

£m

£m

£m

£m

£m

Insurance Risk

 

 4.7

 2.5

-

-

 0.1

-

Property Information

 

 9.8

 6.6

-

 0.4

 7.4

 26.6

EdTech

 

 0.2

 1.0

-

-

 10.9

 17.0

Energy Information

 

 2.0

 2.6

 0.2

-

 1.3

 13.1

Events and Exhibitions

 

 0.2

 0.4

 3.0

-

 2.6

 0.2

Euromoney

 

-

 2.8

-

-

-

 0.5

Consumer Media

 

 7.9

 4.7

-

-

-

 1.2

 

 

 24.8

 20.6

 3.2

 0.4

 22.3

 58.6

Corporate costs

 

 5.6

 0.5

-

-

-

-

 

 

 30.4

 21.1

 3.2

 0.4

 22.3

 58.6

 

 

4 Share of results of joint ventures and associates

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Share of adjusted operating losses from operations of joint ventures

 

 (3.2)

 (0.1)

Share of adjusted operating profits from operations of associates

(i)

 77.2

 68.6

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

 

 74.0

 68.5

Share of associates' other gains and losses

 

 102.9

-

Share of exceptional operating costs of associates

 

 (4.9)

 (6.7)

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

 

-

 (0.1)

Share of amortisation of intangibles arising on business combinations of associates

 

 (16.7)

 (17.1)

Share of associates' interest payable

 

 (4.0)

 (4.5)

Share of joint ventures' tax

8, 10

 (0.1)

-

Share of associates' tax

8, 10

 (31.2)

 (5.2)

Share of impairment of intangibles arising on business combinations of associates

 10

-

 (13.7)

Share of impairment of goodwill in associates

 

 (1.5)

-

Share of fair value movement of contingent consideration payable of associates

 

 0.7

-

Impairment of carrying value of joint ventures

10, (ii)

-

 (3.3)

Impairment of carrying value of associates

10, (iii)

 (0.8)

 (1.0)

 

 

 118.4

 16.9

Share of associates' items of other comprehensive income

 

 14.7

 (9.7)

Share of results of joint ventures and associates

 

 133.1

 7.2

 

 

 

 

Share of results from operations of joint ventures

 

 (3.3)

 (0.2)

Share of results from operations of associates

 

 122.5

 21.4

Impairment of carrying value of joint ventures

 

-

 (3.3)

Impairment of carrying value of associates

 

 (0.8)

 (1.0)

 

 

 118.4

 16.9

Share of associates' items of other comprehensive income

 

 14.7

 (9.7)

Share of results of joint ventures and associates

 

 133.1

 7.2

 

(i)           Share of adjusted operating profits from associates includes £55.9 million (2017 £47.2 million) from the Group's interest in Euromoney and £23.4 million (2017 £27.4 million) from the Group's interest in ZPG Plc (ZPG) in the Consumer Media segment.
 

(ii)          In the prior period, represents a £3.0 million write-down in the carrying value of Knowlura in the EdTech segment and a £0.3 million write-down in the carrying value of Artirix in the Consumer Media segment.
 

(iii)         Represents a £0.3 million write-down in the carrying value of RLTO Ltd in the Property Information segment and a £0.5 million write-down in the carrying value of Eatfirst UK Ltd held centrally. In the prior period, represents a £0.5 million write-down in the carrying value of Carspring in the Consumer Media segment and £0.5 million write-down in the carrying value of iProf Learning Solutions in the EdTech segment.

 

5 Other gains and losses

 

Note

Year ended 30 September 2018

Year ended 30 September 2017

 

 

£m

£m

Profit on disposal of available-for-sale investments

10

 1.0

-

Impairment of available-for-sale assets

10

 (1.8)

 (0.5)

Impairment of held-for-sale-assets

 10

-

 (4.1)

Profit/(loss) on disposal and closure of businesses

10, 15, (i)

 37.1

 (6.5)

Recycled cumulative translation differences

10, 15, (ii)

 10.4

 4.7

Gain on dilution of stake in associate

 (iii)

 0.7

 18.0

Loss on change in control

10, (iv)

 (3.5)

-

Profit on disposal of joint ventures and associates

10, (v)

 509.1

 2.4

 

 

 553.0

 14.0

 

There is a tax charge of £17.6 million in relation to these other gains and losses (2017 £0.2 million).

 

(i)       In the current period this principally relates to a £64.1 million profit on the sale of EDR in the Property Information segment, £6.3 million loss on the sale of Locus Energy, a £0.9 million profit on disposal of assets in acquiring an interest in LineVision and a £9.0 million loss on the disposal Digital H2O in the Energy segment, a £4.8 million loss on Hobsons Solutions and additional costs of £3.5 million on the sale of Hobsons Admissions and Edumate in the EdTech segment. 
 

Additionally a loss of £4.8 million was recognised on the closure of Xceligent, gains on various disposals amounting to £0.4 million recognised in the Consumer Media segment and £0.1 million in the Events and Exhibitions segment.

 

In the prior period this principally relates to a £6.2 million profit on disposal of Elite Daily in the Consumer Media segment offset by a loss of £6.5 million representing an adjustment to the net assets sold with Wowcher in the Consumer Media segment and a loss of £4.4 million on sale of various businesses in the EdTech segment.

 

(ii)      Represents cumulative translation differences required to be recycled through the Consolidated Income Statement on disposals.
 

(iii)     This represents a gain on dilution of the Group's stakes in Praedicat and Skymet. In accordance with IAS 28, Investments in Associates and Joint Ventures, this dilution has been treated as a deemed disposal. The carrying value of these investments has increased resulting in a gain on dilution of £0.7 million. In the prior period, this represents a gain on dilution of the Group's investment in ZPG.
 

(iv)   During the period the Group reduced its interest in SiteCompli in the Property Information segment and SiteCompli became an associate. In accordance with IFRS3, Business Combinations, the difference between the fair value of the investment retained less a capital contribution and the carrying value is treated as a loss on change in control.

 

(v)      Principally relates to the disposal of ZPG for gross proceeds of £641.7 million, resulting in a profit on disposal of £508.4 million. During the prior period, this principally relates to the disposal of the Group's holding in Fortunegreen and Spaceway Storage Services in the Consumer Media segment and Clipper Data in the Energy Information segment.

 

 

 

6 Investment revenue

 

Year ended 30 September 2018

Year ended 30 September 2017

 

£m

£m

Dividend income

 0.1

 0.1

Interest receivable from short-term deposits

 1.7

 1.0

Interest receivable on loan notes

 3.0

 1.4

 

 4.8

 2.5

 

 

7 Net finance costs

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Interest, arrangement and commitment fees payable on bonds, bank loans and loan notes

 

 (35.9)

 (37.2)

Loss on derivatives, or portions thereof, not designated for hedge accounting

 

 (1.7)

 (1.7)

Finance charge on defined benefit pension schemes

10, 24

-

 (4.9)

Change in fair value of derivative hedge of bond

10

 (2.3)

 (4.7)

Change in fair value of hedged portion of bond

10

 2.3

 4.7

Finance charge on discounting of contingent consideration payable

(ii), 22

 (0.2)

-

Fair value movement of contingent consideration payable

(i), 22

 (2.2)

-

Finance expense

 

 (40.0)

 (43.8)

 

 

 

 

Profit on derivatives, or portions thereof, not designated for hedge accounting

 

 0.4

-

Finance income on defined benefit pension schemes

 24

 2.0

-

Fair value movement of contingent consideration payable

(i), 10, 22

-

 28.6

Fair value movement of undesignated financial instruments

 10

 3.1

 7.5

Change in present value of acquisition put options

10

-

 7.4

Finance income

 

 5.5

 43.5

 

 

 

 

Net finance costs

 

 (34.5)

 (0.3)

 

(i)            The fair value movement of contingent consideration arises from the requirement of IFRS 3, Business Combinations, to measure such consideration at fair value with changes in fair value taken to the Income Statement.
 

(ii)           The finance charge on the discounting of contingent consideration arises from the unwinding of the discount following the requirement under IFRS 3, Business Combinations, to record contingent consideration at fair value using a discounted cash flow approach.

 

 

 

 

 

8 Tax

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

The charge on the profit for the period consists of:

 

 

 

UK tax

 

 

 

Corporation tax at 19.0% (2017 19.5%)

 

 (0.7)

-

Adjustments in respect of prior years

 

 (0.2)

 0.3

 

 

 (0.9)

 0.3

Overseas tax

 

 

 

Corporation tax

 

 (24.3)

 (12.0)

Adjustments in respect of prior years

 

 (0.6)

-

 

 

 (24.9)

 (12.0)

Total current tax

 

 (25.8)

 (11.7)

Deferred tax

 

 

 

Origination and reversals of temporary differences

 

 22.1

 (62.4)

Adjustments in respect of prior years

 

-

 5.4

Total deferred tax

 

 22.1

 (57.0)

Total tax charge

 

 (3.7)

 (68.7)

Relating to discontinued operations

 16

-

 4.0

 

 

 (3.7)

 (64.7)

 

In December 2017 the Tax Cuts and Jobs Act was enacted in the US which included a broad range of tax changes. One key provision was a reduction in the corporate tax rate from 35.0% to 21.0% from 1 January 2018. US deferred tax balances have been re-measured to reflect this reduced rate as this is the rate that will apply on reversal. The other key provision impacting the Group was a one off toll charge arising from the deemed mandatory repatriation of previously undistributed earnings and profits of non-US corporations owned by the Group's US subsidiaries.

 

The current and deferred tax implications of Brexit on the Group have been considered by management and are not expected to have any material impact.

 

The EU Commission has opened a State Aid investigation into the Group Financing Exemption included within the UK's controlled foreign company (CFC) rules. The Group finances its US operations through a Luxembourg resident finance company which has received clearance from HM Revenue & Customs that it benefits from this exemption. If the State Aid investigation leads to a reversal of the benefits that the Group has accrued through the exemption, the tax cost to the Group would be approximately £7.4 million. The Directors do not assess this outcome as more than likely and accordingly have made no provision in these financial statements.

 

A deferred tax credit of £31.2 million (2017 £49.3 million) relating to the actuarial movement on defined benefit pension schemes was recognised directly in the Consolidated Statement of Comprehensive Income. A deferred tax charge of £6.8 million (2017 £0.4 million) and a current tax credit of £2.3 million (2017 £nil) were recognised directly in equity.

 

Legislation was enacted in September 2016 to reduce the UK corporation tax rate to 17.0% from 1 April 2020. UK deferred tax balances therefore have been measured at 17.0% as this is the tax rate that will apply on reversal unless the timing difference is expected to reverse before April 2020, in which case the appropriate tax rate has been used.

 

 

The tax charge for the year is lower than the standard rate of corporation tax in the UK of 19.0% (2017 19.5%) representing the weighted average annual corporate tax rate for the full financial year. The differences are explained below:

 

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Total tax charge on the profit for the year

 

 (3.7)

 (68.7)

Share of tax in joint ventures and associates

4, 16

 (31.3)

 (4.9)

Deferred tax on intangible assets

 

 (22.6)

 (29.6)

Reassessment of temporary differences

 

-

 108.9

Tax on other adjusting items

 

 24.4

 (34.7)

Adjusted tax charge on the profit for the year

 10

 (33.2)

 (29.0)

 

In calculating the adjusted tax rate, the Group excludes the potential future impact of the deferred tax effects of intangible assets (other than internally generated and acquired computer software), as the Group prefers to give users of its accounts a view of the tax charge based on the current status of such items. Deferred tax would only crystallise on a sale of the relevant businesses, which is not anticipated at the current time, and such a sale, being an exceptional item, would result in an exceptional tax impact.

 

Reassessment of temporary differences includes  £nil (2017 charge of £100.4 million ) relating to the derecognition of overseas tax losses and a net charge of £nil (2017 charge of £8.5 million) relating to the derecognition of UK tax losses which are treated as exceptional due to their distortive impact on the Group's adjusted tax charge.

 

Included in tax on other adjusting items are items arising from tax reform in the US comprising a deferred tax credit of £12.5 million (2017 £nil) relating to the re-measurement of US deferred tax balances following the reduction in the US corporate tax rate, a current tax charge of £6.1 million (2017 £nil) in respect of the transitional toll charge and a deferred tax charge of £4.0 million relating to the impact of the internal refinancing of the US group.

 

At 30 September 2018 the Group's 49.8% associate, Euromoney held provisions for uncertain tax of £12.9 million (2017 £10.2 million) relating to permanent establishment risk and challenges by tax authorities. The maximum potential additional exposure to Euromoney in relation to challenges by tax authorities not provided for is approximately £20.0 million which is for the challenge by the Canadian Revenue Agency (CRA) and Quebec Tax Authorities (Revenu Quebec) on a foreign currency trade in 2009. On 23 October 2017, the CRA issued a Notice of Reassessment to BCA Research Inc. (BCA) based on the CRA view that the loss sustained by BCA on an intra-group derivative transaction cannot be deducted in computing income. Euromoney are confident that they will be able to set aside these reassessments through the normal litigation process, which has already begun. Nonetheless, BCA has provided satisfactory security for payment to both the CRA and Revenu Quebec for 50.0% of the tax owing which amounted to £3.5 million and £3.2 million respectively.

The Group has previously disclosed a potential exposure of £11.0 million relating to an HMRC enquiry into Euromoney's investment in Dealogic of which £2.8 million had been provided in prior periods.  Following receipt of a closure notice from HMRC confirming that the tax being pursued is £10.7 million, the associated provision has been increased for accounting purposes to £10.7 million at 30 September 2018.  A notice of appeal was filed with HMRC.

The net deferred tax asset disclosed in the Consolidated Statement of Financial Position in respect of deferred interest, tax losses and tax credits is analysed as follows:

 

 

At 30 September 2018

At 30 September 2017

 

£m

£m

UK

 40.1

 41.2

Rest of Europe

 1.2

 1.5

North America

 15.7

 18.8

 

 57.0

 61.5

 

These losses have been recognised on the basis that the Directors are of the opinion, based on recent and forecast trading, that sufficient suitable taxable profits will be generated in the relevant territories in future accounting periods, such that it is considered probable that these assets will be recovered. Of these assets £5.0 million (2017 £18.9 million) have expiry dates between 2033 and 2038.

 

There is an unrecognised deferred tax asset of £49.7 million (2017 £75.4 million) which relates to revenue losses and £96.1 million (2017 £131.4 million ) which relates to deferred interest where there is insufficient certainty that these losses will be utilised in the foreseeable future. There is an additional unprovided deferred tax asset relating to capital losses carried forward of £113.9 million  (2017 £127.4 million). Of these assets £0.8 million (2017 £40.1 million) have expiry dates between 2033 and 2038.

 

 

8 Tax continued

No deferred tax liability is recognised on temporary differences of £74.6 million (2017 £58.8 million) relating to the unremitted earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The temporary differences at 30 September 2018 represent only the unremitted earnings of those overseas subsidiaries where remittance to the UK of those earnings may still result in a tax liability, principally as a result of dividend withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate.

 

 

9 Dividends paid

 

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2017

Year ended 30 September 2017

 

Pence per share

£m

Pence per share

£m

Amounts recognisable as distributions to equity holders in the year

 

 

 

 

Ordinary Shares - final dividend for the year ended 30 September 2017

 15.8

 3.1

 -

 -

A Ordinary Non-Voting Shares - final dividend for the year ended 30 September 2017

 15.8

 52.8

 -

 -

Ordinary Shares - final dividend for the year ended 30 September 2016

 -

 -

 15.3

 3.0

A Ordinary Non-Voting Shares - final dividend for the year ended 30 September 2016

 -

 -

 15.3

 50.9

 

 -

 55.9

 -

 53.9

Ordinary Shares - interim dividend for the year ended 30 September 2018

 7.1

 1.4

 -

 -

A Ordinary Non-Voting Shares - interim dividend for the year ended 30 September 2018

 7.1

 23.7

 -

 -

Ordinary Shares - interim dividend for the year ended 30 September 2017

 -

 -

 6.9

 1.4

A Ordinary Non-Voting Shares - interim dividend for the year ended 30 September 2017

 -

 -

 6.9

 23.0

 

 -

 25.1

 -

 24.4

 

 -

 81.0

 -

 78.3

 

The Board has declared a final dividend of 16.2 pence per Ordinary/A Ordinary Non-Voting Share (2017 15.8 pence) which will absorb an estimated £57.3 million (2017 £55.8 million) of shareholders' equity for which no liability has been recognised in these financial statements. It will be paid on 8 February 2019 to shareholders on the register at the close of business on 7 December 2018.

10 Adjusted profit

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Profit/(loss) before tax - continuing operations

 3

 691.9

 (112.3)

Profit before tax - discontinued operations

 16

-

 14.0

Profit on disposal of discontinued operations including recycled cumulative translation differences

 16

-

 509.3

Adjust for:

 

 

 

Amortisation of intangible assets in Group profit, including joint ventures and associates, arising on business combinations

3, 4, 16

 32.2

 50.3

Impairment of goodwill and intangible assets arising on business combinations

3, 16

 0.3

 131.7

Impairment of goodwill and intangible assets arising on business combinations of joint ventures and associates

 4

 1.5

 13.7

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

3, 16

 78.9

 167.1

Share of exceptional operating costs of joint ventures and associates

4, 16

 4.9

 6.7

Share of joint ventures' and associates' other gains and losses

 4

 (102.9)

-

Impairment of carrying value of joint ventures and associates

 4

 0.8

 4.3

Other gains and losses:

 

 

 

Impairment of available-for-sale assets

 5

 1.8

 0.5

Impairment of held-for-sale-assets

 5

-

 4.1

Profit on disposal of available-for-sale investments

 5

 (1.0)

-

Profit on disposal of businesses, joint ventures, associates, change of control and recycled cumulative translation differences

5, 16

 (553.8)

 (21.0)

Profit on disposal of discontinued operations including recycled cumulative translation differences

 16

-

 (509.3)

Finance costs:

 

 

 

Finance (income)/charge on defined benefit pension schemes

 7

 (2.0)

 4.9

Fair value movements including share of joint ventures and associates

(i), 7, 16

 (1.6)

 (42.8)

Tax:

 

 

 

Share of tax in joint ventures and associates

4, 8

 31.3

 4.9

Adjusted profit before tax and non-controlling interests

 

 182.3

 226.1

Total tax charge on the profit for the year

 8

 (3.7)

 (68.7)

Adjust for:

 

 

 

Share of tax in joint ventures and associates

 4

 (31.3)

 (4.9)

Deferred tax on intangible assets

 8

 (22.6)

 (29.6)

Reassessment of temporary differences

 8

-

 108.9

Current tax on foreign exchange tax equalisation contracts

 8

-

-

Agreement of open issues with tax authorities

 8

-

-

Tax on other adjusting items

 8

 24.4

 (34.7)

Non-controlling interests

(ii)

 0.2

 (0.8)

Adjusted profit after taxation and non-controlling interests

 

 149.3

 196.3

 

(i)         Fair value movements include movements on undesignated financial instruments, contingent consideration payable and receivable and change in value of acquisition put options.

 

(ii)         The adjusted non-controlling interests' share of losses for the year of £0.2 million (2017 £0.8 million share of profit) is stated after eliminating a credit of £1.0 million (2017 £3.8 million), being the non-controlling interests' share of adjusting items.

 

 

11 Earnings per share

Basic earnings per share of 194.7 pence (2017 97.8 pence) and diluted earnings per share of 192.4 pence (2017 96.3 pence) are calculated, in accordance with IAS 33, Earnings per share, on Group profit for the financial year of £689.4 million (2017 £345.3 million) as adjusted for the effect of dilutive Ordinary Shares of £nil (2017 £0.1 million) and earnings from discontinued operations of £nil (2017 £519.3 million) and on the weighted average number of Ordinary Shares in issue during the year, as set out below.

 

As in previous years, adjusted earnings per share have also been disclosed since the Directors consider that this alternative measure gives a more comparable indication of the Group's underlying trading performance. Adjusted earnings per share of 42.2 pence (2017 55.6 pence) are calculated on profit for continuing and discontinued operations before exceptional operating costs, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, other gains and losses and exceptional financing costs after taxation and non-controlling interests associated with those profits, of £149.3 million (2017 £196.3 million), as set out in Note 10 and on the basic weighted average number of Ordinary Shares in issue during the year.

 

Basic and diluted earnings per share:

 

 

Year ended 30 September 2018 Diluted earnings

Year ended 30 September 2017 Diluted earnings

 

Year ended 30 September 2018 Basic earnings

Year ended 30 September 2017 Basic earnings

 

 

£m

£m

£m

£m

Earnings/(losses) from continuing operations

 689.4

 (174.0)

 689.4

 (174.0)

Effect of dilutive Ordinary Shares

-

 (0.1)

-

-

Earnings from discontinued operations

-

 519.3

-

 519.3

 

 689.4

 345.2

 689.4

 345.3

 

 

 

 

 

Adjusted earnings from continuing and discontinued operations

 149.3

 196.3

 149.3

 196.3

Effect of dilutive Ordinary Shares

-

 (0.1)

-

-

 

 149.3

 196.2

 149.3

 196.3

 

 

Year ended 30 September 2018 Diluted pence per share

Year ended 30 September 2017 Diluted pence per share

Year ended 30 September 2018 Basic pence per share

Year ended 30 September 2017 Basic pence per share

Earnings/(losses) per share from continuing operations

 192.4

 (48.5)

 194.7

 (49.3)

Effect of dilutive Ordinary Shares

-

-

-

-

Earnings per share from discontinued operations

-

 144.8

-

 147.1

Earnings per share from continuing and discontinued operations

 192.4

 96.3

 194.7

 97.8

 

 

 

 

 

Adjusted earnings per share from continuing and discontinued operations

 41.7

 54.7

 42.2

 55.6

Effect of dilutive Ordinary Shares

-

-

-

-

Adjusted earnings per share from continuing and discontinued operations

 41.7

 54.7

 42.2

 55.6

 

 

 

The weighted average number of Ordinary Shares in issue during the year for the purpose of these calculations is as follows:

 

 

Year ended 30 September 2018 Number

Year ended 30 September 2017 Number

 

m

m

Number of Ordinary Shares in issue

 362.1

 362.1

Own shares held

 (8.0)

 (9.0)

Basic earnings per share denominator

 354.1

 353.1

Effect of dilutive share options

 4.3

 5.5

Dilutive earnings per share denominator

 358.4

 358.6

 

12 EBITDA and cash generated by operations

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Continuing operations

 

 

 

Adjusted operating profit

 3

 144.9

 179.0

Non-exceptional depreciation charge

3

 27.2

 33.7

Amortisation of internally generated and acquired computer software

3, 18

 32.8

 43.3

Operating profits from joint ventures and associates

 4

 74.0

 68.5

Share of charge of depreciation and amortisation of internally generated and acquired computer software of joint ventures and associates

 

 8.7

 4.0

Dividend income

 6

 0.1

 0.1

Discontinued operations

 

 

 

Adjusted operating profit

 16

-

 19.3

Non-exceptional depreciation charge

 16

-

 0.8

Amortisation of internally generated and acquired computer software

 16

-

 0.9

Share of profits from operations of joint ventures and associates

 16

-

 0.8

EBITDA

 

 287.7

 350.4

Adjustments for:

 

 

 

   Share-based payments

23

 10.8

 4.1

   Loss on disposal of property, plant and equipment

 

 1.4

-

   Share of profits from joint ventures and associates

4, 16

 (74.0)

 (69.3)

   Exceptional operating costs

 3

 (20.5)

 (43.4)

   Non-cash pension past service cost

 

 17.3

-

   Dividend income

 6

 (0.1)

 (0.1)

   Share of depreciation charge of joint ventures and associates

 

 (8.7)

 (4.0)

(Increase)/decrease in inventories

 

 (5.7)

 3.6

(Increase)/decrease in trade and other receivables

 

 (46.5)

 8.0

(Decrease)/increase in trade and other payables

 

 (10.5)

 0.4

Decrease in provisions

 

 (1.1)

 (3.9)

Additional payments into pension schemes

 24

 (12.8)

 (13.1)

Cash generated by operations

 

 137.3

 232.7

 

 

 

13 Analysis of net debt

 

 

At 30 September 2017

Cash flow

Fair value hedging adjustments

On disposal of subsidiaries

Foreign exchange movements

Other non-cash movements (i)

At 30 September 2018

 

Note

£m

£m

£m

£m

£m

£m

£m

Cash and cash equivalents                         

 

 14.6

 421.6

-

-

 1.6

-

 437.8

Bank overdrafts

20

 (7.2)

 5.3

-

-

-

-

 (1.9)

Net cash and cash equivalents

 

 7.4

 426.9

-

-

 1.6

-

 435.9

Debt due within one year

 

 

 

 

 

 

 

 

Bonds

 20

-

-

-

-

-

 (218.7)

 (218.7)

Loan notes

 20

 (1.8)

 0.1

-

-

-

-

 (1.7)

Finance lease obligations

 20

 (0.4)

-

-

 0.4

-

-

-

Debt due after one year

 

 

 

 

 

 

 

 

Bonds

 20

 (423.5)

-

 2.3

-

-

 215.5

 (205.7)

Bank loans

 20

 (46.3)

 43.7

-

-

 2.6

-

-

Finance lease obligations

 20

 (0.5)

-

-

 0.5

-

-

-

Net cash/(debt) before effect of derivatives

 

 (465.1)

 470.7

 2.3

 0.9

 4.2

 (3.2)

 9.8

Effect of derivatives on debt

(ii)

 (13.7)

 (6.2)

 (2.3)

-

 (0.2)

-

 (22.4)

Collateral deposits

21

 14.5

 (6.5)

-

-

-

-

 8.0

Other financial assets

 21

-

 237.3

-

-

-

-

 237.3

Net cash/(debt) at closing exchange rate                                            

 

 (464.3)

 695.3

-

 0.9

 4.0

 (3.2)

 232.7

 

 

 

 

 

 

 

 

 

Net cash/(debt) at average exchange rate

 

 (482.2)

 

 

 

 

 

 234.3

 

The net cash inflow of £426.9 million (2017 £10.3 million) includes a cash outflow of £9.7 million (2017 £45.8 million) in respect of operating exceptional items.

 

(i)       Other non-cash movements comprise the unwinding of bond issue discount amounting to £2.9 million (2017 £2.6 million), amortisation of bond issue costs of £0.3 million (2017 £0.3 million) together with the inception of new finance leases of £nil (2017 £0.5 million). Also included is the reclassification of bonds maturing December 2018 of £218.7 million between due within one year and due after more than one year.

 

(ii)     The effect of derivatives on debt is the net currency gain or loss on derivatives entered into with the intention of economically converting the currency borrowings into an alternative currency.

 

14 Summary of the effects of acquisitions

On 31 October 2017, the Events and Exhibitions segment acquired 100% of Atticus Events Ltd and Atticus Events MEA Ltd for total consideration of £3.3 million (Atticus). Atticus runs three Hotel Interior Design forum events which take place annually in Europe, Asia and the Middle East.

 

Atticus contributed £1.9 million to the Group's revenue, £0.7 million to the Group's operating profit and £0.6 million to the Group's profit after tax for the period between the date of acquisition and 30 September 2018.

 

If the acquisition had been completed on the first day of the financial period, Atticus would have contributed £1.9 million to the Group's revenue, £0.7 million to the Group's operating profit and £0.6 million to the Group's adjusted profit after tax.

 

On 21 December 2017, the Events and Exhibitions segment acquired 100% of the assets of the following assets, African Construction Expo held annually in Johannesburg, Cape Construction Expo held annually in Cape Town, KwaZulu Natal Construction Expo held annually in Durban, African Ports Evolution Forum held annually in Durban, African Ports Evolution West held annually in Nigeria and Concrete Trends Publication and Concrete TV (Hypenica) for total consideration of £1.3 million.

 

Hypenica contributed £0.8 million to the Group's revenue, £0.1 million to the Group's operating profit and £0.1 million to the Group's profit after tax for the period between the date of acquisition and 30 September 2018.

 

If the acquisition had been completed on the first day of the financial period, Hypenica would have contributed £1.1 million to the Group's revenue, £0.1 million to the Group's operating profit and £0.1 million to the Group's adjusted profit after tax.

 

On 20 May 2018, the Events and Exhibitions segment acquired 50.0% of Plastex and the controlling voting rights for total consideration of £0.4 million. Plastex is the leading international trade fair dedicated to the plastics and rubber machinery, components, raw materials and chemicals in Africa. The next show will take place in Egypt in January 2020.

 

Plastex contributed £nil to the Group's revenue, £nil to the Group's operating profit and £nil to the Group's profit after tax for the period between the date of acquisition and 30 September 2018.

 

If the acquisition had been completed on the first day of the financial period, Plastex would have contributed £0.9 million to the Group's revenue, £0.6 million to the Group's operating profit and £0.6 million to the Group's adjusted profit after tax.

 

Provisional fair value of net assets acquired with all acquisitions:

 

 

Atticus

Hypenica

Plastex

Other

Total

 

Note

£m

£m

£m

£m

£m

Goodwill

18, (i)

 2.2

 0.8

Intangible assets

 18

 1.5

 0.7

Trade and other receivables

 

 0.7

-

Cash and cash equivalents

 

 0.3

-

Trade and other payables  

 

 (1.0)

-

Corporation tax

 

 (0.1)

-

Deferred tax

 

 (0.3)

 (0.2)

Group share of net assets acquired

 

 3.3

 1.3

 0.4

 0.2

 5.2

 

Cost of acquisitions:

Cash paid in current year

 

 3.3

1.1

0.4

 0.2

5.0

Contingent consideration

(ii)

-

0.2

Total consideration at fair value

 

 3.3

1.3

0.4

 0.2

 5.2

 

(i)           The amount of goodwill which is deductible for the purposes of calculating the Group's tax charge is £nil.

Goodwill arising on these acquisitions is principally attributable to the anticipated profitability relating to the distribution of the Group's products in new and existing markets and anticipated operating synergies from the business combinations.

 

(ii)       The contingent consideration recognised during the period is based on future business valuations and profit multiples and has been estimated using available data forecasts. It is expected to fall due within one year.

The estimated range of undiscounted outcomes for contingent consideration relating to acquisitions in the year is £nil to £0.2 million.

The contingent consideration has been discounted back to current values in accordance with IFRS 3, Business Combinations. In each case, the Group has used acquisition accounting to account for the purchase.

All of the companies acquired during the period contributed £2.7 million to the Group's revenue and £0.6 million to the Group's profit after tax for the period between the date of acquisition and 30 September 2018.

Acquisition-related costs, amounting to £0.1 million, have been charged against profits for the period in the Consolidated Income Statement.

If all acquisitions had been completed on the first day of the period, Group revenues for the period would have been £1,430.3 million and Group profit attributable to equity holders of the parent would have been a profit of £690.6 million. This information takes into account the amortisation of acquired intangible assets together with related income tax effects but excludes any pre-acquisition finance costs and should not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed on the first day of the period.

 

14 Summary of the effects of acquisitions continued

Purchase of additional shares in controlled entities:              

 

Year ended 30 September 2018

Year ended 30 September 2017

 

£m

£m

Cash consideration

-

 2.1

 

During the year, the Group acquired additional shares in controlled entities amounting to £nil (2017 £2.1 million).

 

Reconciliation to purchase of subsidiaries as shown in the Consolidated Cash Flow Statement:

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Cash consideration

 

 5.0

 0.5

Cash paid to settle contingent consideration in respect of acquisitions

(i)

 14.4

 8.2

Cash paid to settle acquisition put options

 

-

 18.0

Cash and cash equivalents acquired with subsidiaries

 

 (0.3)

-

Purchase of subsidiaries

 

 19.1

 26.7

 

(i)           Cash paid to settle contingent consideration in respect of acquisitions includes £1.5 million (2017 £0.3 million) within the Property Information segment, £0.2 million (2017 £0.2 million) within the EdTech segment, £12.5 million (2017 £7.0 million) in the Energy Information segment, £0.2 million (2017 £0.2 million) within the Events and Exhibitions segment and £nil (2017 £0.5 million) in the Euromoney  segment.

 

15 Summary of the effects of disposals

In October 2017, the EdTech segment disposed of the Hobsons Solutions business for total consideration of £1.6 million. This was recognised as held-for-sale in the prior year.

In December 2017, Xceligent, in the property segment, filed for Chapter 7 liquidation. Under US law, a trustee with expertise in liquidating companies was appointed to distribute Xceligent's assets and this business has been treated as closed.

On 5 April 2018, the Property segment reduced its shareholding in SiteCompli to 49.9%, by a transfer of 6.1% of its shareholding to other shareholders pro rata for no consideration. The remaining shareholding has been treated as an associate.

On 20 September 2018, the Energy Information segment disposed of the Locus Energy business for consideration of £16.2 million.

On 13 March 2018, the Property segment disposed of the Environmental Data Resources (EDR) business for consideration of £166.7 million. This was recognised as held-for-sale in the prior year.

 

 

The impact of the disposal of businesses completed during the period on net assets is as follows:

 

 

Xceligent

SiteCompli

Locus Energy

Other

Sub Total

Prior year assets held for sale disposed in current year

Adjustment on sale of assets held for sale in current year

Total

 

Note

£m

£m

£m

£m

£m

£m

£m

£m

Goodwill

 18

 0.2

 0.1

 25.9

 9.2

 35.4

 70.9

 0.4

 106.7

Intangible assets

 18

-

-

 0.6

 0.1

 0.7

 8.6

 (0.1)

 9.2

Property, plant and equipment

 19

 1.6

 0.4

 0.1

-

 2.1

 8.7

 3.4

 14.2

Inventories

 

-

-

 1.4

-

 1.4

 0.1

-

 1.5

Trade and other receivables

 

 1.2

 3.5

 2.5

 0.6

 7.8

 19.5

 11.5

 38.8

Cash and cash equivalents

 

-

-

-

-

-

-

 (0.6)

 (0.6)

Trade and other payables  

 

 (5.7)

 (2.7)

 (10.4)

 (0.2)

 (19.0)

 (16.8)

 (11.5)

 (47.3)

Finance leases

 

 (0.9)

-

-

-

 (0.9)

-

-

 (0.9)

Current tax payable

 

-

-

 0.1

-

 0.1

 (5.3)

 6.8

 1.6

Provisions

 

-

 (0.4)

-

-

 (0.4)

-

-

 (0.4)

Deferred tax liabilities

 

 2.4

-

 2.3

-

 4.7

 (6.9)

 0.1

 (2.1)

Net assets/(liabilities) disposed

 

 (1.2)

 0.9

 22.5

 9.7

 31.9

 78.8

 10.0

 120.7

Non-controlling interest share of net assets disposed

 

 4.8

 (1.1)

-

-

 3.7

-

-

 3.7

Profit/(loss) on sale of businesses including recycled cumulative exchange differences

 

 (2.7)

 (0.5)

 (6.3)

 (8.9)

 (18.4)

-

 62.4

 44.0

 

 

 0.9

 (0.7)

 16.2

 0.8

 17.2

 78.8

 72.4

 168.4

 

 

 

 

 

 

 

 

 

 

Satisfied by:

 

 

 

 

 

 

 

 

 

Cash received

 

-

-

 3.0

 0.7

 3.7

 

 153.5

 157.2

Impact of cashflow hedges

 

-

-

-

-

-

 

 4.9

 4.9

Directly attributable costs paid

 

 (1.2)

 (3.7)

-

 (1.4)

 (6.3)

 

 (7.1)

 (13.4)

Fair value of investment in associate

(i)

-

-

 13.2

-

 13.2

 

-

 13.2

Working capital adjustment cash paid

 

-

-

-

-

-

 

 (3.7)

 (3.7)

Working capital adjustment

 

-

-

-

 (0.2)

 (0.2)

 

-

 (0.2)

Recycled cumulative translation differences

 5

 2.1

 3.0

-

 1.7

 6.8

 

 3.6

 10.4

 

 

 0.9

 (0.7)

 16.2

 0.8

 17.2

 

 151.2

 168.4

 

(i)         The investment in AlsoEnergy received as part of the consideration on sale of Locus Energy involves an estimation of the fair value of the Group's equity holding in AlsoEnergy. A 10.0% increase/(decrease) in the fair value of the Group's stake would decrease/(increase) the loss on sale of Locus Energy by £1.3 million.

 

 

15 Summary of the effects of disposals continued

Reconciliation to disposal of businesses as shown in the Consolidated Cash Flow Statement:

 

Year ended 30 September 2018

Year ended 30 September 2017

 

£m

£m

Cash consideration net of disposal costs

 143.8

 247.8

Impact of cashflow hedges

 4.9

-

Working capital adjustment cash paid

 (3.7)

-

Cash consideration received in the current year relating to businesses sold in the prior year

 0.7

-

Cash and cash equivalents disposed with subsidiaries

 0.6

 (32.0)

Proceeds on disposal of businesses

 146.3

 215.8

 

The Group's tax charge includes £17.6 million in relation to these disposals.

All of the businesses disposed of during the period absorbed £24.7 million of the Group's net operating cash flows, paid £3.7 million in investing activities and paid £nil in financing activities.

 

16 Discontinued operations

In the prior year, the Group announced its intention to reduce its holding in Euromoney from 67.9% to 49.9%, after which Euromoney ceased to be a subsidiary and became an associate. The results of Euromoney up to the point of disposal are included in discontinued operations for the prior year.

 

The Group's Consolidated Income Statement includes the following results from discontinued operations:

 

 

 

Year ended 30 September 2018

Year ended 30 September 2017

 

Note

£m

£m

Revenue

 3

-

 95.2

Expenses

 

-

 (74.2)

Depreciation

 3

-

 (0.8)

Amortisation of intangible assets not arising on business combinations

 3

-

 (0.9)

Adjusted operating profit

 3

-

 19.3

Exceptional operating costs

3, 10

-

 (0.9)

Amortisation of intangible assets arising on business combinations

3, 10

-

 (5.4)

Operating profit before share of results of joint ventures and associates

 

-

 13.0

Share of adjusted operating profits from operations of joint ventures and associates

 

-

 0.8

Share of amortisation of intangibles arising on business combinations of associates

 10

-

 (1.2)

Share of interest payable of associates

 

-

 (0.6)

Share of tax in associates

 10

-

 0.3

Total operating profit

 

-

 12.3

Other gains and losses

 10

-

 2.4

Profit before net finance costs and tax

 10

-

 14.7

Change in present value of acquisition put options

 

-

 (0.7)

Finance costs

 

-

 (0.7)

Profit before tax

 

-

 14.0

Tax charge

 8

-

 (4.0)

Profit after tax attributable to discontinued operations

 

-

 10.0

Profit on disposal of discontinued operations

10

-

 563.4

Recycled cumulative translation differences on disposal of discontinued operations

10

-

 (54.1)

Profit attributable to discontinued operations

 

-

 519.3

 

During the prior period as a subsidiary undertaking Euromoney generated £15.3 million of the Group's net operating cash flows, paid £3.0 million in respect of investing activities and paid £0.8 million in respect of financing activities.

 

17 Total assets and liabilities of businesses held for sale

At 30 September 2018 there were no assets and liabilities of businesses held for sale.

 

At 30 September 2017, the assets and liabilities held-for-sale principally related to EDR, in the Property Information segment and Hobsons Solutions, in the EdTech segment. The main classes of assets and liabilities comprising the operations classified as held for sale are set out in the table below. These assets and liabilities are recorded at their fair value with all losses taken to the Consolidated Income Statement.

 

 

 

At 30 September 2018

At 30 September 2017

 

Note

£m

£m

Goodwill

 18

 -

 70.9

Intangible assets

 18

 -

 8.6

Property, plant and equipment

 19

 -

 8.7

Inventories

 

 -

 0.1

Trade and other receivables

 

 -

 19.5

Total assets associated with businesses held for sale

 

 -

 107.8

 

 

 

 

Trade and other payables  

 

 -

 (16.8)

Current tax

 

 -

 (5.3)

Deferred tax

 

 -

 (6.9)

Total liabilities associated with businesses held for sale

 

 -

 (29.0)

 

 

 

 

Net assets of the disposal group

 

 -

 78.8

 

18 Goodwill and other intangible assets

 

 

Goodwill

Other Intangibles

 

 

£m

£m

Cost

 

 

 

At 30 September 2016

 

 1,073.9

 1,138.5

Additions

 

 0.4

 0.7

Other additions

 

-

 0.2

Internally generated

 

-

 57.7

Disposals

 

 (504.2)

 (504.4)

Classified as held-for-sale

 

 (72.7)

 (18.4)

Transfer from property, plant and equipment

 

-

 (47.1)

Exchange adjustment

 

 8.8

 1.8

At 30 September 2017

 

 506.2

 629.0

Additions from business combinations

 

-

 2.6

Other additions

 

 3.2

 0.2

Internally generated

 

-

 19.5

Disposals

 

 (90.6)

 (63.3)

Exchange adjustment

 

 3.6

 10.3

At 30 September 2018

 

 422.4

 598.3

 

 

 

 

Accumulated amortisation and impairment

 

 

 

At 30 September 2016

 

 92.3

 639.3

Amortisation

 

-

 76.1

Impairment

 

 117.0

 96.4

Disposals

 

 (63.6)

 (343.6)

Classified as held-for-sale

 

 (1.8)

 (9.8)

Transfer from property, plant and equipment

 

-

 (41.1)

Exchange adjustment

 

 (0.8)

 (1.3)

At 30 September 2017

 

 143.1

 416.0

Amortisation

 

-

 48.3

Impairment

 

 0.3

 58.4

Disposals                                                                                          

 

 (54.8)

 (62.7)

Exchange adjustment

 

 0.6

 7.1

At 30 September 2018

 

 89.2

 467.1

Net book value - 2016

 

 981.6

 499.2

Net book value - 2017

 

 363.1

 213.0

Net book value - 2018

 

 333.2

 131.2

 

 

The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired. Intangible assets, all of which have finite lives, are tested separately from goodwill only where impairment indicators exist. Goodwill impairment losses recognised in the year amounted to £0.3 million. The tax credit in respect of the impairment of goodwill amounted to £nil.

 

The goodwill impairment charge recognised in the prior year was £117.0 million relating to Genscape, Hobsons, SiteCompli and Xceligent in the dmg information segment. There was a £2.4 million tax credit associated with this impairment charge.

 

When testing for impairment, the recoverable amounts for all of the Group's CGUs are measured at the higher of value in use or fair value less costs to sell. Value in use is calculated by discounting future expected cash flows. These calculations use cash flow projections based on Board-approved budgets and projections which reflect management's current experience and future expectations of the markets in which the CGU operates. Risk adjusted pre-tax discount rates used by the Group in its impairment tests range from 13.25% to 18.25% (2017 11.45% to 19.20%) the choice of rates depending on the risks specific to that CGU. The Directors' estimate of the Group's weighted average cost of capital is 8.5% (2017 8.0%). The cash flow projections consist of Board-approved budgets for the following year, together with forecasts for up to two additional years and nominal long-term growth rates beyond these periods. The nominal long-term growth rate of 3.0% (2017 between 1.5% and 3.0%) varies with management's view of the CGU's market position, maturity of the relevant market and does not exceed the long-term average growth rate for the market in which the CGU operates.

 

19 Property, plant and equipment

During the year the Group spent £30.4 million (2017 £21.1 million) on property, plant and equipment and disposed certain of its property, plant and equipment with a carrying value of £1.5 million (2017 £0.6 million) for proceeds of £0.1 million (2017 £0.7 million). In addition property, plant and equipment with a carrying value of £5.5 million was owned by subsidiaries disposed of during the year (2017 £13.4 million).

 

20 Borrowings

The Group's borrowings are unsecured and are analysed as follows:

 

 

At 30 September 2018

At 30 September 2017

 

 

£m

£m

Current liabilities

 

 

 

Bonds

 

218.7

-

Bank overdrafts

 

1.9

7.2

Finance leases

 

-

0.4

Loan notes

 

1.7

1.8

 

 

222.3

9.4

 

 

 

 

Non-current liabilities

 

 

 

Bonds

 

205.7

423.5

Bank loans

 

-

46.3

Finance leases

 

-

0.5

 

 

205.7

470.3

 

Committed borrowing facilities

 

During the period, the Group renewed its committed bank facilities for a further five-year term. The terms of the new facilities are substantially the same as those of the previous facilities.

 

The Group's total committed bank facilities amount to £431.2 million. Of these facilities £205.0 million are denominated in sterling and £226.2 million (US$294.0 million) are denominated in US dollars. Drawings are permitted in all major currencies.

 

The Group's bank loans bear interest charged at LIBOR plus a margin. The margin varies by bank and is based on the Group's ratio of net debt to EBITDA or the Group's credit rating. EBITDA for these purposes is defined as the aggregate of the Group's consolidated operating profit including share of results of joint ventures and associates before deducting depreciation, amortisation and impairment of goodwill, intangible and tangible assets, before exceptional items and before interest and finance charges, and is shown in Note 12.

 

Whilst the Group's internal target of a 12-month rolling net debt to EBITDA ratio of no greater than 2.0 times at any point, the limit imposed by its bank covenants is no greater than 3.50 times together with a minimum interest cover ratio of 3.0 times measured in March and September. These covenants where met at the relevant testing dates during the year. The bank covenant ratio uses the average exchange rate in the calculation of net debt. Excluding cash deposits with an original maturity of more than three months amounting to £237.3 million, the resultant net debt to EBITDA ratio is 0.01 times (2017 1.38 times). Using a closing rate basis for the valuation of net cash, the ratio was 0.02 times (2017 1.33 times).

 

 

 

20 Borrowings continued

The Group's committed bank facilities analysed by maturity are as follows:

 

 

At 30 September 2018

At 30 September 2017

 

£m

£m

Expiring in more than one year but not more than two years

-

Expiring in more than four years but not more than five years

 431.2

Total bank facilities

 431.2

 611.4

 

The following undrawn committed borrowing facilities were available to the Group in respect of which all conditions precedent had been met:

 

 

At 30 September 2018

At 30 September 2017

 

£m

£m

Expiring in more than one year but not more than two years

-

Expiring in more than four years but not more than five years

 431.2

Total undrawn committed bank facilities

 431.2

 565.1

 

21 Other financial assets

 

 

 

At 30 September 2018

At 30 September 2017

 

Note

£m

£m

Current assets

 

 

 

Collateral

(i)

 8.0

 14.5

Cash deposits

(ii)

 237.3

-

 

 

 245.3

 14.5

Non-current assets