Information  X 
Enter a valid email address

Daily Mail & General (DMGT)

  Print      Mail a friend

Thursday 21 November, 2013

Daily Mail & General

DMGT Preliminary Results 2012/2013

RNS Number : 5799T
Daily Mail & General Trust PLC
21 November 2013
 



 

21 November 2013


Daily Mail and General Trust plc ('DMGT')

Group unaudited preliminary results for the year ended 30 September 2013

 

DMGT delivers another year of growth

 


Adjusted Results*

(from continuing and discontinued operations)

Statutory Results


2013

2012

 

Reported

Change~

Underlying#

Change~

2013

2012

(restated)

Revenue

£1,802m

 £1,960m

-8%

+2%

£1,753m

 £1,747m

Operating profit

 £300m

 £300m

0%

+6%

 £210m

 £144m

Profit before tax

 £282m

 £255m

+10%


 £203m

 £203m

Earnings per share

53.0p

49.4p

+7%


50.1p

66.3p

Dividend per share


19.2p

18.0p

 

 

Preliminary Full Year Financial Highlights:

 

·      DMGT underlying# revenue up 2%; underlying# operating profit* up 6%; margin up to 17%

 

·      Adjusted profit* before tax of £282m, up 10%

 

·      Good performance from B2B; underlying# revenue up 6% and underlying# profit* up 4%

 

·      Resilient dmg media performance; underlying# revenue decline of 1%, with cost efficiencies driving underlying profit* growth of 10%

 

·      Active portfolio management; targeted acquisitions and non-core asset disposals

 

·      Good progress on the £100 million share buy back programme, £69 million to date

 

·      Net debt reduced by £40 million to £573 million; net debt/EBITDA ratio of 1.5

 

·      Earnings per share* up 7% to 53.0p

 

·      Full year dividend increased by 7% to 19.2p

 



Martin Morgan, Chief Executive, said:

 

"DMGT has again delivered a good set of results. Group adjusted pre-tax profits* rose by 10% despite the disposal of Northcliffe Media at the end of the first quarter, reflecting good underlying profit growth from both our B2B and consumer operations. Our international B2B companies have increased their revenues and profits* by 6% and 4% respectively on an underlying# basis. Our UK consumer business, dmg media, grew its underlying# profits* by 10%, reflecting greater productivity as the business continues its digital transition. 

 

We continued to refine and optimise our portfolio of businesses during the year with further strategic bolt-on acquisitions, notably within dmg information and Euromoney, and disposals, including Northcliffe Media and dmg media's central and eastern European consumer assets.  We believe these changes have improved the overall quality and growth prospects of the Group and we look forward to another year of good progress."

 

 

 

 

 

For further information

 

For analyst and institutional enquiries:

Stephen Daintith, Finance Director

Adam Webster, Head of Management Information and Investor Relations

 

 

+44 20 3615 2902 

 
+44 20 3615 2903 

 

For media enquiries:

Kim Fletcher/Charlie Potter, Brunswick Group

 

 

+44 20 7404 5959

 

Preliminary Results presentation

A presentation of the Preliminary Results will be given to investors and analysts at 9.30am on 21 November 2013, at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.  There will also be a live webcast available on our website, http://www.dmgt.com.

 

Next trading update

The Group's next scheduled announcement of financial information will be the first quarter interim management statement on 5 February 2014.

 

About DMGT

DMGT is an international business built on entrepreneurship and innovation.  We bring together leading companies and talented people to provide businesses and consumers with high-quality analysis & insight, information, news and entertainment.

 

 

 

 

Notes

 

* Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. For a reconciliation of Group profit to adjusted Group profit, see Note 11.  These adjusted results, including revenue and operating profit, are for total operations, including those treated as discontinued, namely Northcliffe Media and the dmg radio Australia joint venture.  Northcliffe Media contributed operating profit of £7 million (2012: £26 million) from revenues of £49 million (2012: £213 million) and is included in the adjusted results.  Excluding Northcliffe Media, revenues of £1,753 million are in line with £1,747 million last year, whilst operating profit of £293 million is 7% higher than last year's £274 million.  A reconciliation of adjusted results including discontinued operations to adjusted results excluding discontinued operations is shown on page 21.

 

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

 

# Underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for constant exchange rates, disposals, closures, acquisitions and, with the exception of Euromoney, non-annual events occurring in the current and prior year; see pages 22 and 23. For dmg information the underlying results include the post-acquisition organic growth from acquisitions.  For dmg events, the comparisons are between events held in the year and the same events held the previous time, and exclude Evanta, which was disposed of in September 2012. For Euromoney, underlying comparisons exclude current year acquisitions and underlying profit excludes the benefit in both FY 2012 and FY 2013 of the historic acceleration of its CAP incentive plan charge. For dmg media, underlying comparisons exclude low margin contract printing revenue, which ceased during the year, the effects of the sale of Teletext Holidays and motors.co.uk last year, the disposal of the central and eastern European businesses this year, and the merger of the Digital Property Group and Zoopla at the end of May 2012, and include the organic growth from Jobrapido.  Northcliffe Media is excluded from the DMGT Group underlying comparisons.

 

† These statutory highlights are for continuing operations only (excluding the disposed of Northcliffe Media and dmg radio Australia joint venture), other than earnings per share which is the total statutory figure.  In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) clarified the accounting treatment of contingent consideration contained within IFRS 3 "Business Combinations" and as a result prior year deferred consideration payments of £3.4 million have been re-stated as exceptional operating costs; see Note 2.

 

 

 

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 focuses principally on the adjusted results to give a more comparable indication of the Group's underlying business performance.  All year-on-year comparisons are on a like-for-like basis.  The reported results include Northcliffe Media until its disposal on 30 December 2012.

 

An explanation of restructuring and impairment charges and other items included in the statutory results is set out after the divisional performance review and in the segmental note (Note 4). The adjusted results are summarised below:

 

Adjusted results*

(from continuing and discontinued operations)

2013

£m

2012

£m

Change~

Revenue

1,802

1,960

-8%





Operating profit

300

300

0%

Income from joint ventures and associates

22

13

+68%

Net finance costs

(40)

(57)

-30%

Profit before tax

282

255

+10%





Tax charge

(52)

(39)

+33%

Minority interest

(30)

(27)

+8%

Group profit

200

189

+6%





Adjusted earnings per share

53.0p

49.4p

+7%

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

 

Notes

* Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. For a reconciliation of Group profit to adjusted Group profit, see Note 11.  These adjusted results, including revenue and operating profit, are for total operations, including those treated as discontinued, namely Northcliffe Media and the dmg radio Australia joint venture.  Northcliffe Media contributed operating profit of £7 million (2012: £26 million) from revenues of £49 million (2012: £213 million) and is included in the adjusted results.  Excluding Northcliffe Media, revenues of £1,753 million are in line with £1,747 million last year, whilst operating profit of £293 million is 7% higher than last year's £274 million.  A reconciliation of adjusted results including discontinued operations to adjusted results excluding discontinued operations is shown on page 21.

 

# Underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for constant exchange rates, disposals, closures, acquisitions and, with the exception of Euromoney, non-annual events occurring in the current and prior year; see pages 22 and 23. For dmg information the underlying results include the post-acquisition organic growth from acquisitions.  For dmg events, the comparisons are between events held in the year and the same events held the previous time, and exclude Evanta, which was disposed of in September 2012. For Euromoney, underlying comparisons exclude current year acquisitions and underlying profit excludes the benefit in both FY 2012 and FY 2013 of the historic acceleration of its CAP incentive plan charge. For dmg media, underlying comparisons exclude low margin contract printing revenue, which ceased during the year, the effects of the sale of Teletext Holidays and motors.co.uk last year, the disposal of the central and eastern European businesses this year, and the merger of the Digital Property Group and Zoopla at the end of May 2012, and include the organic growth from Jobrapido.  Northcliffe Media is excluded from the DMGT Group underlying comparisons.

 

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

 

† In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) clarified the accounting treatment of contingent consideration contained within IFRS 3 "Business Combinations" and as a result prior year deferred consideration payments of £3.4 million have been re-stated as exceptional operating costs; see Note 2.

 

The average £: US$ exchange rate for the year was £1:$1.56 (2012 £1:$1.58).  The rate at the year end was $1.62 (2012: $1.62).

 

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

 

Summary

Group performance: DMGT has delivered another good set of results.  Group revenue for the year was £1,802 million, compared with £1,960 million for the prior year. The decrease of 8% on a reported basis was largely driven by the disposal of Northcliffe; on an underlying# basis, revenues increased by 2%.  There was good underlying growth in several revenue categories, particularly subscriptions and digital advertising, with print advertising and circulation revenues declining as expected.

 

Revenue performance across our B2B businesses and our consumer business, dmg media, on a reported and underlying basis is summarised below.

 

Revenue growth

Year-on-year change

Reported

Underlying#

H1

H2

Year

H1

H2

Year

Group revenue

-6%

-10%

-8%

+2%

+3%

+2%

B2B

+7%

+7%

+7%

+5%

+7%

+6%

RMS

+4%

+11%

+7%

+5%

+7%

+6%

dmg information

+14%

+17%

+16%

+11%

+12%

+12%

dmg events

+27%

-31%

-2%

+12%

+11%

+12%

Euromoney

-1%

+6%

+3%

-1%

+2%

+1%

dmg media

-7%

-6%

-6%

-1%

-2%

-1%

Reported Group revenue includes Northcliffe Media.

 

Operating profit* of £300 million was in line with FY 2012, despite the disposal of Northcliffe at the end of the first quarter.  Operating profit increased by 6% on an underlying# basis.

 

The Group's B2B companies' operating profits* were up 6% on a reported basis, an underlying increase of 4%.  The operating profits* of dmg media were up 4% on a reported basis and up 10% on an underlying# basis.  B2B businesses generated 77% of this year's operating profit* with 23% generated by consumer media, compared to 73% and 27% for the prior year.  These percentages have all been calculated after allocating head office costs on the basis of revenues.  Nearly two thirds of the Group's operating profits* were again derived from outside the UK.

 

Adjusted profit* before tax increased by 10% to £282 million.  This reflected the changes in operating profit* described above, increased income from joint ventures and associates, notably Zoopla Property Group and Local World, and reduced net finance costs due to lower average net debt levels and the absence of a one-off £6 million early bond redemption charge incurred in the first half of the prior year. Adjusted Group profit* after tax and minority interests was up 6% to £200 million and adjusted earnings per share* rose by 7% to 53.0p.  The full year dividend increased by 7% to 19.2p.

 

The statutory profit before tax, excluding discontinued operations, for the year was £203 million after £43 million of amortisation and impairment charges and £40 million of net exceptional charges. Statutory profit after tax was £213 million, down from £277 million†, reflecting the profits on disposal made in the prior year, and statutory earnings per share declined from 66.3p to 50.1p. 

 

Net debt: fell by £40 million to £573 million due to continued strong cash flow generation.  At the year end, most of the Group's debt remained in the form of long-term bonds, with a cash balance of £88 million.  The Group's ratio of year end net debt to EBITDA was 1.5 times, well below the Group's preferred level of around 2.0 times and significantly below the requirements of the Group's bank covenants.

 

Active portfolio management: has continued throughout the year with acquisitions totalling £93 million and disposals totalling £88 million.  The principal acquisitions during the year were strategic bolt-ons for dmg information and Euromoney. 

 

Within dmg information, Environmental Data Resources (EDR) acquired FirstSearch, Genscape acquired Vessel Tracker and Hobsons acquired Beat the GMAT, Edumate and National Transcript Center. 

 

Euromoney acquired Insider Publishing, TTI/Vanguard, the Centre for Investor Education and HSBC's Quantitative Techniques operation.

 

During the year, Northcliffe Media was sold to Local World, a newly formed entity in which the Group has acquired a 38.7% stake, and dmg media disposed of its central and eastern European print and digital consumer businesses.

 

Active portfolio management has continued in the new financial year and, in October 2013, dmg information acquired DIIG(E), the UK based property information business, for £75 million.

 

Outlook

Group: we have entered the new financial year with our businesses performing well and in line with our expectations.  All our B2B businesses are expected to make good progress in the year ahead.  On the consumer side, revenue progress will be largely dependent on the advertising environment, balanced against further growth in digital areas.  First quarter consumer trading to date has been satisfactory but we remain cautious about the medium term outlook, given continuing external uncertainties, particularly for UK advertising.  A continued focus on cost efficiencies should provide margin* stability.

 

RMS: has started the year with the core catastrophe modelling business performing well.  There has been encouraging progress with the development of RMS(one), with 30 clients currently beta testing the new platform ahead of the launch scheduled for Spring 2014.  The revenue of the existing core business is expected to grow by a mid-single digit percentage.  In addition, RMS(one) is expected to deliver between £15 million and £25 million of revenues in FY 2014, with significant long-term growth potential.  There will, however, be a significant step up in RMS's cost base as a result of product amortisation, investment in data centres and other costs associated with the launch and delivery of RMS(one).  RMS as a whole is consequently expected to deliver good revenue growth but with a reduced margin* of around 25% in FY 2014.

 

dmg information: is expected to deliver underlying# revenue growth of between 10% and 15% as the portfolio of businesses continues to benefit from new product initiatives and strong customer demand. The Property, Education and Energy businesses will continue to be key drivers of overall growth and we expect operating margins* to be in the high teens. 

 

dmg events: will benefit from all four of its largest events taking place in FY 2014, compared to three during FY 2013, with the increased frequency of the ADIPEC and Gastech events helping to enhance revenues.  Reported and underlying revenue is expected to grow by between 10% and 15% and operating margins* are expected to be around 25%.

 

Euromoney: while sentiment in financial markets remains reasonably positive, there is usually a lag between improved profitability and the appetite of financial institutions to increase their spending on marketing, training and information buying.  The outlook for events and training is more robust than for advertising, which is expected to have a weak first quarter, while subscription revenues should continue to grow.

 

dmg media: underlying# advertising revenues in the first seven weeks of the new financial year were up 1% on last year, with the absolute growth in digital advertising revenues more than offsetting the decline in print advertising revenues, although, as usual, there remains limited visibility on future trends. We expect our circulation revenues will continue to be impacted by declining volumes despite market share gains. Overall, dmg media expects to maintain stable underlying# revenues, underpinned by continued strong growth in the digital businesses. Operating margins are expected to be around 10%, with cost efficiencies helping to protect profitability. 

 

Joint ventures and associates: will benefit from a full year of Local World, the continued growth of Zoopla, and the loss making Xceligent becoming a subsidiary of dmg information in October 2013.  DMGT's share of pre-tax profits from joint ventures and associates is expected to be in excess of £30 million.

 

Net debt and capital allocation: the year end net debt:EBITDA ratio of 1.5 times is well below our preferred level of 2.0 times and the Board remains confident in the overall outlook for the Group and its operating cash flows.  We believe that the creation of shareholder value over the long term requires a balanced approach to investing in growth and returning capital to shareholders while maintaining a strong balance sheet.  We continue to look for attractive acquisitions and actively manage our business portfolio while maintaining our dividend policy.  Subject to the share price, the Board has decided to complete the remaining £31 million of the £100 million share buy back programme announced in November 2012 although DMGT's M&A requirements will remain the priority for investment.  The Board will review further share repurchase programmes on an on-going basis, in the context of its balanced approach to investing in growth and returning capital to shareholders.

 

 

 



Business Review

 

Business to business (B2B)

 

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

960

899

+7%

+6%

Operating profit*

232

218

+6%

+4%

Operating margin*

24%

24%



These results are stated after allocating Group corporate costs on the basis of B2B's share of Group revenues. 

 

Revenues from the B2B group totalled £960 million, up 6% on the prior year on an underlying basis.  Operating profits* were 6% higher at £232 million and were up 4% on an underlying basis, with increases from each division, most notably dmg information.  Following the disposal of Northcliffe Media, a higher proportion of Group corporate costs are allocated to B2B group.  This adversely impacted operating profit* and the overall B2B margin* remained at 24%.

 

 

Risk Management Solutions (RMS)

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

175

163

+7%

+6%

Operating profit*

57

56

+1%

0%

Operating margin*

32%

34%



 

RMS delivered another year of growth, increasing its revenues by 7%, on a reported basis, and by 6% on an underlying basis, adjusting for constant exchange rates.  Operating profit* rose by 1%, in line with the previous year on an underlying basis. The operating margin of 32% was lower than last year, reflecting the increase in operating costs ahead of the launch of the new platform, RMS(one), scheduled for Spring 2014.The majority of the underlying revenue increase came from the Natural Catastrophe and Underwriting Solutions businesses through contract renewal increases as a result of continuing strong demand. 

 

The development of RMS(one) has progressed well and in line with expectations.  The new platform offers clients a real-time, cloud based environment for managing their risk exposure and will represent a new core system within their operation.  Clients will continue to subscribe to the existing models but clients will also pay for access to and usage of the RMS(one) environment.  They will be able to access and run their own, RMS's and third party models, and also to integrate those models into enterprise-wide business processes.  RMS(one) should enable clients to make better decisions as a result of real-time access and analytics, and has the potential to double RMS's addressable market over time.

 

Traction with existing clients is encouraging with thirty companies involved in beta testing RMS(one) to date.  These are thirty existing RMS clients who are joint development partners or early access partners for RMS(one) and who represent approximately 50% of RMS's existing revenues from subscriptions to models.

 

Outlook

Revenues from the core business were £173 million in FY 2013 and the percentage growth in FY 2014 is expected to be in the mid-single digits.  Revenues from RMS(one) have significant long-term potential but will take time to build, particularly given the usage based fee model in place.  RMS(one) revenues are expected to be between £15 million and £25 million in FY 2014.  As planned, the development of the RMS(one) platform has been a significant capital investment and there will be associated amortisation costs following the launch of RMS(one).  The robust infrastructure underpinning the hybrid cloud environment must meet clients' expectations of security and data integrity standards and these new data centre costs will also be a significant operating expense for the business.  The cost base associated with RMS(one) will therefore adversely impact RMS's profitability in FY 2014, with the overall profit margin expected to be approximately 25%.

 

 

 

dmg information

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

293

253

+16%

+12%

Operating profit*

58

48

+21%

+14%

Operating margin*

20%

19%



 

dmg information (dmgi) had another very good year, with underlying revenues up by 12%, 16% on a reported basis.  The Property Information, Education and Energy businesses all delivered double digit underlying growth. Underlying operating profit increased by 14%, 21% on a reported basis, with growth being driven by the Property Information companies, partially offset by the planned investment in the Education and Energy businesses.

 

Property Information

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

125

106

+18%

+13%

Operating profit*

34

24

+41%


Operating profit* is stated before charging central dmg information costs.

 

Our Property Information companies grew underlying revenues by 13%.  In the US, EDR acquired FirstSearch, a provider of environmental contamination risk assessment products to the commercial real estate market, in December 2012. The integration of the business has progressed smoothly and the acquisition has enhanced EDR's product suite, provided opportunities to sell additional services to the two businesses' existing client bases and is delivering cost synergies.  The US commercial real estate market continues to show signs of modest improvement.

 

In Europe, Landmark also delivered double digit underlying revenue growth and margin improvement.  The German business, OnGeo, grew particularly strongly and contributed over a quarter of Landmark's revenues.  Market conditions in the UK commercial real estate and housing markets were reasonable, though the volumes of UK housing transactions remain significantly below the levels experienced before the financial crisis.

 

BuildFax, a provider of planning consent and property information to the US insurance and financial services markets, remains a small, early stage business with good growth potential over the long-term. 

 

Xceligent, one of only two companies in the US that provides fully researched property and listing information to the commercial real estate community, performed well.  It is engaged in building out a national database of information.  Xceligent was an associate during the year and so was excluded from dmgi's results.  The stake in Xceligent was increased from an average of 49% during FY 2013 to 52% in October 2013.  The business is therefore now a subsidiary and its losses will be included in dmgi's FY 2014 results.

 

In October 2013, dmgi acquired DIIG(E) for £75 million.  This UK based business provides legal professionals, who conduct property transactions, with an electronic search service for residential and commercial property information and is complementary to dmgi's existing businesses in the property sphere.  In the year to December 2012, DIIG(E) earned £6 million operating profit from £69 million of revenues.

 

Education, Energy and Financial

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

167

147

+14%

+10%

Operating profit*

31

28

+8%


Operating profit* is stated before charging central dmg information costs.

 

Underlying revenues grew by 10%, with each of the three sectors (Education, Energy and Financial) contributing positively to the growth in the period.

Hobsons, serving the Education sector, continued its strong growth with underlying revenues increasing by 12%, driven by good performance both in the domestic US market and progressively in its international operations. Hobsons successfully completed three bolt-on acquisitions during the year: Beat the GMAT, the world's largest social network for MBA applicants; Edumate, an Australian provider of student management technologies for the schools market; and the National Transcript Center, the world's largest e-transcript exchange provider, serving more than 137,000 institutions representing over 14 million students. During the year, Hobsons invested in a new service, enabling universities to completely outsource the marketing, enrolment and student service management functions of their online programmes and this had a negative impact on Hobsons' margin.

Our Energy information company, Genscape, increased underlying revenues by 17% as a result of its expansion into the natural gas and biofuel markets and the development of new products which increased its addressable market.  As expected, this growth strategy has required an increase in operating costs, which reduced operating margins for the year. 

In April, Genscape acquired Vessel Tracker, a German based business which, by monitoring ship movements at ports and using satellite tracking, provides real-time tracking of around 100,000 vessels at any given time.  The movements of maritime cargoes impact the trading prices of oil, gas and agricultural commodities and this acquisition enables Genscape to further develop its product suite for energy traders.  In October and November 2013 Genscape acquired Energytics, a Texan provider of information services to energy traders, and invested in Petrotranz, a Canadian software as a service company that automates the planning and transfer of crude oil and natural gas liquids into pipeline networks.

The Financial information market continues to experience considerable change, as participants enter and exit the Commercial Mortgage-Backed Securities (CMBS) market served by Trepp and the broader Asset-Backed Securities (ABS) market served by Lewtan. In a challenging environment we are pleased that both Trepp and Lewtan were able to increase underlying revenues and profits.

Outlook

For FY 2014, dmgi expects to achieve underlying revenue growth of between 10% and 15% and will also benefit from the acquisition of DIIG(E) in October 2013.  The operating margin* is expected to be in the high teens, adversely impacted by the inclusion of the loss making Xceligent business.

 

 

 

dmg events

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

87

89

-2%

+12%

Operating profit*

21

21

+1%

+14%

Operating margin*

24%

24%



 

dmg events had a very good year with underlying revenues increasing by 12% and underlying profits* by 14%.  Reported revenues declined following the disposal of Evanta in September 2012.  Two of the three biennial events, ADIPEC and Gastech, took place in the year compared to just one, the Global Petroleum Show, in FY 2012.  Both events delivered strong performances.

 

Underlying revenue growth for the Middle East and Asia business, which includes the Big 5 construction events and ADIPEC, was 18% while the Global Energy business, which includes Gastech and the Global Petroleum Show, grew underlying revenues by 17%.  The Digital Marketing business had a more challenging year and experienced a 5% decline in underlying revenues, reflecting the adverse impact of Superstorm Sandy on the New York ad:tech event.  All three businesses are pursuing a strategy of launching geo-cloned versions of existing events in new geographies.

 

Outlook

The frequency of the historically biennial events is increasing with all three events occurring during FY 2014.  ADIPEC and the Global Petroleum Show are moving to an annual cycle whilst Gastech is moving to an 18 month cycle.  The increased frequency is expected to generate good incremental revenues overall, although it will have some adverse impact on the size of the individual events.  Reported and underlying revenue growth is expected to be between 10% and 15% and the operating margin* relatively stable at approximately 25% in FY 2014.

 

 

Euromoney Institutional Investor

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

405

394

+3%

+1%

Operating profit*

119

112

+6%

+1%

Operating margin*

29%

28%



 

Euromoney released its preliminary results on 14 November.  Revenue increased by 3% on a reported basis and by 1% on an underlying basis, after adjusting for acquisitions and exchange rates.  Subscriptions, which accounted for 51% of revenue in the year, grew by 2% on an underlying basis.  The Financial Publishing, Business Publishing, Conferences & Seminars and Research & Data businesses all delivered revenue growth in the year and only the smallest business, Training, experienced a revenue decline.

 

Operating profit* rose 6% to £119 million, including the cost of Euromoney's management incentive Capital Appreciation Plan (CAP). An additional accelerated charge in respect of the CAP was recognised in 2011, and both last year's and this year's profits benefit from the earlier acceleration of that charge.  Excluding this benefit, and excluding acquisitions, underlying operating profit* is up 1% on last year. Costs, particularly headcount, have been tightly controlled, and Euromoney has continued to invest in technology and new products as part of its global online growth strategy.

 

During the year Euromoney acquired Insider Publishing, a leading information source and events provider for the international insurance and reinsurance markets, and TTI/Vanguard, the California-based private membership organisation for executives who lead technology innovation.  It also acquired the Centre for Investor Education (CIE), Australia's leading provider of investment forums for senior executives of superannuation funds and asset management firms, and HSBC's Quantitative Techniques operation, giving Euromoney the opportunity to establish a significant footprint in the attractive index compilation market.

 

Outlook

The profitability of banks and asset managers improved during 2013, particularly in the US, although there is usually a lag between improved profitability and the appetite for financial institutions to increase their spending on marketing, training and information buying.  Most customer budgets are calendar year driven so it is too early to determine whether this lag will translate into increased spend in 2014.  The outlook for events and training is more robust than for advertising, while subscription revenues should continue to grow.  Euromoney's strategy of investing in new products and technology and acquiring attractive bolt-on businesses, is expected to continue to drive further growth.

 

 

 

Consumer media

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue

842

1,060

-21%

-1%

Operating profit*

68

81

-17%

+13%

Operating margin*

8%

8%



These results are stated after allocating Group corporate costs on the basis of Consumer media's share of Group revenues. 

 

The reported results for the Consumer businesses were impacted by the disposal of Northcliffe Media, effective 30 December 2012.  Following the disposal, the Group's remaining consumer media businesses sit within dmg media, formerly known as Associated Newspapers.

 

Operating profits* were favourably impacted by a lower proportion of Group corporate cost being allocated to the Consumer businesses, following the disposal of Northcliffe Media, and underlying operating profits were up 13%.

 

The Group owns stakes in Zoopla Property Group, the digital property business, and Local World, the local media publisher.  DMGT's share of profits of these businesses is included within joint ventures and associates.

 

 

 

dmg media

 

 

 

2013

£m

2012

£m

Change~

 

Underlying#

Change~

Revenue:





 Daily Mail / The Mail on Sunday

562

590

-5%


 MailOnline

41

28

+48%


  Mail Businesses

603

618

-2%


  Metro, 7 Days

80

89

-10%


  Evenbase

78

58

+35%


  Wowcher

14

5

+184%


  Other

18

78



  Total Revenue

793

848

-6%

-1%






Operating profit*

80

78

+4%

+10%

Operating margin*

10%

9%



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

 

Summary

Underlying revenues declined by 1% compared to the prior year, a good performance given the challenging trading environment.  Reported revenues declined by 6%, due to the creation of the Zoopla Property Group in May 2012, which is now accounted for as a joint venture, the disposal of dmg media's central and eastern European operations during the first half of the year and the cessation of low margin contract printing activity.

There was a significant inflection point for the business in the first nine months of the financial year, with the underlying increase in digital advertising revenues across the dmg media portfolio∞ exceeding the ongoing decline in print advertising revenues.  In the final quarter of the year, advertising comparisons were adversely impacted by the Olympics and Paralympics taking place during 2012, resulting in underlying advertising revenues for the full year being in line with last year.  Circulation volumes continued to decline and underlying circulation revenues were down 3%.

Operating profit* for the year increased by 4% to £80 million.  The underlying increase was 10% with lower costs, notably production and newsprint more than offsetting increased digital investment in MailOnline, Mail Plus, Metro and Wowcher, contributing to the increase in operating margin* from 9% to 10%.

The investment of £53 million in the purpose built printing plant at Thurrock, which is now fully operational, has resulted in one of the most efficient newspaper production facilities in the country, and completes the rationalisation from eight plants in 2008 to just two in 2013.

Mail Newspapers / MailOnline

Revenue for the combined newspapers and website businesses (Daily Mail, The Mail on Sunday and MailOnline) declined by 2% to £603 million due to a 8% decline in print advertising revenue and a 3% decline in circulation revenue.  This was mitigated in part by revenue growth for MailOnline of 48%. The Daily Mail's circulation volumes continued to decline, partly due to reductions in high production cost foreign copies.  The strength of the Mail brand, however, enabled a continued increase in the Daily Mail's market share to a record average of 22.0% for the year, despite the increase in the weekday cover price from 55p to 60p in February 2013.The Mail on Sunday's market share was 20.9%.

 

MailOnline continues to grow strongly, with 146 million monthly unique browsers and 9.5 million average daily unique browsers in September 2013, increases of 44% and 48% respectively on September 2012, reflecting higher levels of engagement with the site.  MailOnline continues to focus on increasing the size and engagement level of its global audience and, in particular, is investing in its US editorial and sales presence.

 

Metro (including 7 Days)

Revenue at Metro declined 10% to £80 million, reflecting the benefit the Olympics had on last year's results.  Metro remains the UK's third largest daily newspaper, read by 3.4 million people every weekday.  The business continues to invest in its digital strategy and growing its digital audience.Metro's website attracted 17 million monthly unique browsers in September 2013, more than double September 2012, with 49% of its audience accessing via a mobile device.  Digital advertising revenue increased by 44% compared to last year.

 

Evenbase

Evenbase, the international digital recruitment business, benefited from the acquisition of Jobrapido in April 2012 and delivered a revenue increase of 35% to £78 million.  Underlying revenue growth was 11%, with strong organic growth from Jobrapido and Broadbean; international revenues now represent 39% of the total revenues. 

 

Wowcher

Wowcher has grown rapidly since its launch in April 2011 and has grown its database to 3.7 million customers, notably affluent, urban women.  Wowcher's net revenue nearly trebled from last year to £14 million.Wowcher remains in investment phase and operating losses were £10 million, an increase of £2 million on last year. The business is targeting to achieve a break-even run-rate by the end of FY 2014.

 

Other dmg media businesses

Reported revenues from other businesses were £60 million lower than last year.  This was partly due to the merger of the Digital Property Group into Zoopla Property Group, which is reported as a joint venture, the disposals of the Teletext and Motors businesses taking place last year and the cessation of low margin contract printing activity.  In addition, the central and eastern European publishing businesses only contributed revenues of £7 million in the year, compared to £28 million in the previous year.  This was because they were disposed of in the year, increasing the focus of the dmg media portfolio on higher growth businesses.

 

Outlook

For FY 2014, dmg media expects to deliver stable underlying revenues, in the -2% to +2% range, with digital advertising growth across the portfolio offsetting circulation and print advertising declines.  Operating margins are expected to be around 10% with cost efficiencies helping to protect profitability.  Trading during the seven weeks since the year end has seen underlying advertising revenue growth of 1% and circulation revenues down 2%.

 

 

 

Northcliffe Media

 

 

 

2013

£m

2012

£m

Change~

 


Revenue

49

213

-77%


Operating profit*

7

26

-72%


Operating margin*

15%

12%



 

Northcliffe Media was sold to Local World, a company in which the Group now owns a 38.7% stake, at the end of December 2012.  Consequently the full year results only include three months' trading. 

 

 

 



Joint Ventures & Associates

 

Share of pre-tax operating profits*

 

2013

£m

2012

£m

Change~

 

dmg radio Australia

-

10


Zoopla Property Group

15

4


Local World

11

-


Xceligent

(3)

(1)


Other joint ventures and associates

(1)

-


Total joint ventures and associates

22

13

+68%

 

The Group's share of the results* of its joint ventures and associates increased by £9 million to £22 million.  The share of Zoopla Property Group's operating profits* for the year was £15 million, compared to £4 million for the four months to September 2012.  DMGT owns a 50.8% stake in Zoopla Property Group and the business continues to deliver encouraging growth and generate a high number of sales leads to its clients.

 

Local World delivered an encouraging performance for its first nine months of trading to September 2013, with DMGT's 38.7% share of operating profits being £11 million.  Xceligent is still in its investment phase and DMGT's share of losses, from its average stake of 49% for the year, was £3 million.

 

Outlook

The FY 2014 share of operating profits form joint ventures and associates is expected to exceed £30 million and will benefit from the continued growth of Zoopla Property Group and the inclusion of a full year's trading at Local World.  The stake in Xceligent increased to 52% in October 2013 and so its FY 2014 losses will be included as a subsidiary in dmg information's results.

 

 

 

Other income statement items

 

·      Net finance costs

 

 

 

2013

£m

2012

£m

Change~

 

Net interest payable and similar charges

(57)

(61)

-6%

Premium on bond buy back

-

(6)


Pension finance item

15

9


Investment income

2

1


Total

(40)

(57)

-30%

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

 

Net finance costs decreased by £17 million to £40 million, partly due to last year's charge including a £6 million premium charge on the early redemption of bonds.  There was also a £6 million increase in the pension finance credit to £15 million due to the reduction in the IAS19 pension fund deficit over the year to 30 September 2012. 

 

Net interest payable and similar charges (including deemed finance charges and interest receivable) fell by 6% to £57 million, largely due to the repayment of bonds.  Other investment income increased by £1 million, partly due to a dividend from the Press Association.

 

A revision to International Accounting Standard 19 - Employee Benefits [IAS19 (R)] will first apply to DMGT in its financial year ending 30 September 2014.  This will not impact cash flows but will change the methodology for calculating the finance element of the net charge or credit associated with DMGT's defined benefit pension schemes.  DMGT intends to exclude the pension finance income or expense from adjusted earnings as the calculation under the new standard will not necessarily reflect the underlying economics associated with the relevant pension assets and liabilities.  If IAS19 (R) were to be applied retrospectively to the current financial year, the estimated expense would be £13 million, rather than the finance income of £15 million reported this year.

 

·      Other items

The Group has charged £41 million as exceptional operating costs, of which £28 million were cash items. The cash items include £6 million in respect of earn-out costs for acquisitions, which historically would not have been recognised in the income statement but which now are recognised in it, following the clarification by the International Financial Reporting Standards Interpretations Committee in January 2013 in respect of the accounting treatment of contingent consideration, contained within IFRS3, "Business Combinations".  The cash items also include reorganisation, redundancy and consultancy costs of £22 million, principally at dmg media.

 

Exceptional operating costs include accelerated depreciation and impairment of property, plant and equipment of £17 million, largely relating to the closure of the printing facilities in Stoke and Surrey Quays and the move to Thurrock. There was also a £4 million non-cash benefit within exceptional operating costs in respect of the curtailment of the Northcliffe defined benefit pension plan.

 

The charge for amortisation of intangible assets increased by £1 million to £40 million. The Group also made an impairment charge of £16 million, including £6 million relating to dmg information's remaining investment in Sanborn.

 

The Group recorded other net gains on disposal of businesses and investments of £58 million, compared to a net gain of £158 million last year.  The gains primarily related to the disposals of Northcliffe Media and dmg media's central and eastern European businesses.

 

·      Taxation

The adjusted tax charge of £52 million is stated after adjusting for the effect of exceptional items and was £13 million more than last year.  The adjusted tax rate for the year rose to 18.4% from 15.2% in FY 2012, primarily due to an increasing level of profits in the US and other higher tax rate jurisdictions. The continued relatively low rate reflects tax reductions from tax-efficient financing and tax deductible amortisation in the US.  Given the current mix of growing US based businesses and existing tax rates, the effective tax rate is expected to increase to around 22% over the next three years, as a greater proportion of profits will be subject to the high US tax rate.

 

There were net exceptional tax credits of £17 million (2012: £49 million) arising on disposals, assets held for sale, operating exceptional costs, the accelerated depreciation of fixed assets and the net recognition of tax losses.

 

 

 

Pensions

The Group's defined benefit pension schemes provide retirement benefits for existing and former UK staff, largely of dmg media and Northcliffe Media.  The deficit in these schemes decreased from £324 million at the beginning of the year to £208 million at 30 September 2013 (calculated in accordance with IAS 19), with the increase in the value of assets exceeding the increase in the discounted value of the pension obligations.  Additional funding payments into the main schemes during the year were £31 million, in accordance with a funding schedule agreed with the Trustees, including £17 million following the disposal of Northcliffe Media, for which a further £13 million will be paid into the schemes in January 2014.  Since the end of the financial year, the Group has agreed, in principle, to a revised schedule of additional funding payments to the main schemes totalling approximately £30 million per annum to 2020 and £24 million per annum thereafter until 2026, or until the schemes' actuary agrees the schemes are no longer in deficit, if shorter. The defined benefit pension schemes are closed to new entrants. There has been no significant change in the allocation of the schemes' investments.

 

 

 

Net debt and cash flow 

Net debt fell by £40 million during the year from £613 million to £573 million and by £151 million since the half year.  The Group generated operating cash flows of £376 million, a 125% conversion rate of operating profits*.  During the year, commercial and financial changes to the terms and collections of some of dmg media's newspapers' trade debtors resulted in an one-off reduction in working capital of approximately £60 million.  Excluding this benefit, operating cash flows were approximately £315 million, a conversion rate of operating profits* of approximately 105%.  Operating cash flows are stated after capital expenditure of £52 million, excluding £43 million of expenditure in respect of RMS(one) and Thurrock, and exceptional operating items of £22 million.  These funded £69 million spent on the share buy back programme, taxation of £37 million, interest payments of £57 million, pension funding of £31 million and dividends totalling £79 million.  Net expenditure on acquisitions, including proceeds from disposals, was £5 million.

 

The Group's principal debt remains in long-term bonds.  During the year £47 million of 7.5% Bonds matured and were redeemed using available cash funds.  At the year end, the Group had £674 million of Bonds with repayments due in 2018 (£309 million), 2021 (£169 million) and 2027 (£196 million).  The Group had unutilised committed facilities of £300 million at the year end and surplus cash of £88 million.

 

The Group's ratio of year end net debt to adjusted profits* before interest, depreciation and amortisation (EBITDA) was 1.5 times, comfortably below the Group's preferred level of around 2.0 times, and well within the requirements of the Group's bank covenants.  The Group's corporate credit ratings are BBB- from Fitch, and BB+ from Standard & Poor's.

 

The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing its accounts.

 

Capital allocation and share buy back

The Board continues to believe that the creation of shareholder value over the long term requires a balanced approach to investing in growth and returning capital to shareholders while maintaining a strong balance sheet.  We continue to look for attractive acquisitions and actively manage our business portfolio while maintaining our policy of dividend growth, in real terms.  Subject to the share price, the Board has decided to complete the remaining £31 million of the £100 million share buy back programme announced in November 2012 although DMGT's M&A requirements will remain the priority for investment.  The Board will review further share repurchase programmes on an on-going basis, in the context of its balanced approach to investing in growth and returning capital to shareholders.

 

Financing

During the year, the Group acquired 10.4 million 'A' Ordinary Shares for £69 million under a share buy back programme.  The Group acquired a further 4.7 million 'A' Ordinary Shares for £31 million in order to meet obligations to provide shares under its incentive plans and utilised 4.8 million shares out of Treasury, valued at £27 million, to provide shares under various incentive plans.  As at 15 November 2013 DMGT had 373.2 million shares in issue, including 19.9 million Ordinary Shares, and a further 20.4 million 'A' Ordinary Shares held in Treasury.

 

During the year, DMGT acquired 1.2 million Euromoney shares at a cost of £11 million.  This action was taken in order to offset the dilutive effect of the vesting of Euromoney's CAP.

 

Dividend

The Board is recommending payment on DMGT's issued Ordinary Shares and 'A' Ordinary Shares of a final dividend of 13.3 pence per share for the year ended 30 September 2013 (2012 12.4 pence).  This will make a total for the year of 19.2 pence (2012 18.0 pence per share).  The final dividend will be paid on 7 February 2014 to shareholders on the register at the close of business on 29 November 2013.

 

Ordinary Shares

On 29 October 2013, the Court Approved Scheme of Arrangement was filed at Companies House and therefore was effective from that date.  As a result, Rothermere Continuation Limited (RCL) has acquired the remaining Ordinary Shares not previously held and is now the registered holder of all of DMGT's 19.9 million Ordinary Shares.  The DMGT Ordinary Shares were cancelled from listing on the London Stock Exchange on 30 October 2013.  The status of the 'A' Ordinary Shares is not impacted.

 

 

 


Reconciliation: Adjusted results including and excluding discontinued operations

 

 

 


FY 2012/13


FY 2011/12

£ million

Adjusted results including discontinued operations

Discontinued operations

Adjusted results excluding discontinued operations


Adjusted results including discontinued operations

Discontinued operations

Adjusted results excluding discontinued operations









Revenues








Continuing operations

1,753

-

1,753


1,747

-

1,747

Discontinued operations

49

49

-


213

213

-

Total Revenue

1,802

49

1,753


1,960

213

1,747









Operating Profit








Continuing operations

293

-

293


274

-

274

Discontinued operations

7

7

-


26

26

-

Total Operating Profit

300

7

293


300

26

274









Operating margin %

17%

15%

17%


15%

12%

16%

 

 

 

 

 

 

 

 



Underlying analysis - Revenues

















FY 2012/13


FY 2011/12

£ millions

%


Underlying

M&A

Other

Reported


Underlying

M&A

Exchange

Other

Reported














B2B













RMS

+6%


175

-

-

175


165

-

2

-

163

dmg information

+12%


295

3

-

293


265

10

2

-

253

dmg events

+12%


85

-

(2)

87


76

(18)

-

5

89

Euromoney

+1%


399

(6)

-

405


396

-

2

-

394


+6%


954

(3)

(2)

960


903

(8)

7

5

899

Consumer













dmg media

-1%


785

(7)

(2)

793


795

(41)

-

(11)

848

Northcliffe Media



-

(49)

-

49


-

(213)

-

-

213


-1%


785

(56)

(2)

842


795

(254)

-

(11)

1,060



























DMGT Group

+2%


1,739

(59)

(4)

1,802


1,698

(262)

7

(6)

1,960














 

Notes:                     M&A adjustments are for disposals, including Evanta, Teletext Holidays and dmg media's central and eastern European operations; the merger of The Digital Property Group to form the Zoopla Property Group; and acquisitions, including Jobrapido,  FirstSearch and Insider Publishing.  Acquisitions are excluded from Euromoney's underlying results whereas dmg information and dmg media's underlying growth rates include the post-acquisition organic growth from acquired entities.

 

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

 

 

 

 

Underlying analysis - Adjusted operating profit*

















FY 2012/13


FY 2011/12

£ millions

%


Underlying

M&A

Other

Reported


Underlying

M&A

Exchange

Other

Reported














B2B













RMS

0%


57

-

-

57


57

-

1

-

56

dmg information

+14%


58

1

-

58


52

4

-

-

48

dmg events

+14%


21

-

(1)

21


18

(6)

-

3

21

Euromoney

+1%


112

(3)

(4)

119


112

-

1

(1)

112


+4%


248

(2)

(5)

255


238

(2)

1

2

237

Consumer













dmg media

+10%


79

(1)

-

80


72

(6)

-

-

78

Northcliffe Media



-

(7)

-

7


-

(26)

-

-

26


+10%


79

(8)

-

88


72

(32)

-

-

104














Corporate costs

-5%


(43)

-

-

(43)


(41)

-

-

-

(41)

Operating profit

+6%


285

(10)

(5)

300


269

(34)

1

2

300














Notes:                     B2B and Consumer underlying figures are stated pre the allocation of Corporate costs.  Including Corporate costs, the underlying growth rates for B2B and Consumer were +4% and +13% respectively.  'Other' includes adjustments for the timing of events, the acceleration of Euromoney's CAP costs, the premium on the redemption of bonds and the pension finance credit.

 

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

 

 



Principal risks and uncertainties

Risk is a part of doing business, but understanding the risks and, just as importantly, the opportunities that impact DMGT businesses is vital. Effective risk and opportunity management saves time and money, and gives assurance to management, the DMGT executive team, Risk Committee and the Board.

 

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 operating businesses. 

 

Strategic Risks

Description

Impact

Strategic priority

Mitigation

Change

New or disruptive technologies or competitors and changing behaviour

·  The impact of new technology and competitors (e.g. mobile, tablet, cloud and big data)

·  Changing behaviours (e.g. online adoption and social media usage)

·  Falling newspaper readership and advertising spend

 

New technologies or competitor products can impact the demand for our products with a resultant direct impact on Group results.

 

 

·  Application of state of the art technology

·  Fostering innovation to deliver organic growth

 

 

 

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

·  The Leadership team monitors markets, the competitive landscape and technological developments

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

 

Increase

Management of portfolio and allocation of capital

·  Failure to identify or successfully develop organic growth opportunities

·  Acquisitions fail to yield expected value

·  Failure to identify acquisition targets

·  Failure to dispose of non-core businesses early enough

 

Underperformance of the Group and/or impairment losses.  Potential synergies and growth opportunities lost by failure to identify acquisition targets. Diversion of management time from other operational matters. Optimal value from disposals is not realised.

 

 

·  Rigorous and active portfolio management

·  Fostering innovation to deliver organic growth

·  Driving international growth

 

 

 

·  Adherence to our investment criteria and approval by the Investment and Finance Committee

·  Acquisitions in related markets with a high potential for growth.

·  Detailed due diligence performed

·  Retention of key employees in the acquired business

·  Board level monitoring is performed post-acquisition

·  Disposals overseen by the Board and the Strategy Development Director

Constant

Securing and retaining the right people for senior and business critical roles

The inability to recruit and retain talented people could impact the Group's ability to maintain its performance and deliver growth.

 

When key staff leave or retire, there is a risk that knowledge or competitive advantage is lost.

 

·  Attracting and developing entrepreneurial talent

 

·  Formal approach to talent management and succession planning

·  Investment in Leadership Development Programme and related programmes

·  Payment of competitive rewards

·  Employee performance and turnover monitoring

·  Staff communication

Decrease

Economic downturn

·  UK advertising revenue is impacted by fluctuations in the wider economy

·  Property and financial markets in the UK and US are similarly affected

·  Lack of growth in key markets, including financial markets

 

Advertising revenues have been heavily affected by the downturn in the UK economy. 

 

Risk of not achieving revenue and profit targets.

 

Certain sectors, including financial and property sectors have experienced slow growth rates impacting growth prospects and revenue generation.

·  Fostering innovation to deliver organic growth

·  Driving international growth

 

 

 

·  Diversifying into business information and subscription revenue streams

·  Investment in strong brands

·  Cross geography and sector approach

 

Constant

US Dollar Earnings

·  An increasing portion of group profits arise in US dollars

·  The Group's functional currency is Sterling.

A weakening of the dollar could directly impact on the value of US dollar earnings when translated into sterling.

·  Driving international growth

 

 

·  The Investment and Finance Committee approve Group treasury policies

·  Debt is held in proportion to currency of earnings as far as possible

Constant

 



 

Operational risks

Description

Impact

Divisions most affected

Mitigation

Change

Information security breach or cyber attack

·  Loss of confidential or personal information

·  Unavailability or corruption of key data

 

·  Challenge to the integrity of a DMGT product resulting in reputational damage.

·  Unavailability of online products leading to loss of revenue and reputational damage.

·  Operational and regulatory challenges, fines, reputational damage and costs of remediation.

 

All

·  Group information security policy and detailed security standards

·  Group policy on business continuity planning including IT system disaster recovery

·  Regular reviews by the Risk Committee and Risk & Assurance

·  Security is reviewed as part of every internal audit

 

Increase

Failure of a major change project

·  The most significant change project is currently RMS(one)

 

Increased costs or lost revenues as a result of delays, unforeseen problems, loss of access to systems and data or production and delivery issues.

 

RMS

·  Approval by the Investment and Finance Committee for significant projects

·  Rigorous planning process

·  On-going project management

·  Monitoring by the local board

·  Significant projects are monitored by the Risk Committee

 

Decrease

Pension scheme deficit

·  The UK newspaper business operates defined benefit pensions schemes

·  Deficits in the schemes are ultimately funded by the sponsoring company

 

Reported earnings may be affected by funding requirements that result from pension deficits as a result of lower than expected investment returns or changes made to the risk profile of our investment portfolio.

 

 

dmg media

·  The Pensions Sub-Committee reviews proposals to reduce volatility and overall cost

 

Decrease

Reliance on third parties - Key commercial relationships

Key third parties include:

·  Data centre and cloud software and service providers

·  Data providers

·  Event venues

·  Newsprint suppliers

·  Newspaper distribution and wholesale

 

An operational or financial failure of a key supplier could affect the ability of DMGT to deliver products, services or events with a direct impact on financial results and management time.

 

Newsprint represents a significant cost and prices are subject to volatility arising from variations in supply and demand.

 

RMS; dmg media; dmg information; dmg events

·  Significant time dedicated to managing relationships

·  Operational and financial due diligence is undertaken for key suppliers

·  Newsprint requirements are managed by a dedicated team

·  Where possible, long-term arrangements are agreed with suppliers to limit the potential for volatility

Increase

 

 


 

 

 

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

20 November 2013

 

 

For further information

 

For analyst and institutional enquiries:

Stephen Daintith, Finance Director, DMGT

Adam Webster, Head of Management Information and Investor Relations, DMGT

 

 

+44 20 3615 2902 

 
+ 44 20 3615 2903

 

For media enquiries

Kim Fletcher / Charlie Potter, Brunswick Group

 

 

+44 20 7404 5959

                                                                                                                                          

Analysts' presentation and webcast

A presentation of the Preliminary Results will be given to investors and analysts at 9.30am on 21 November 2013 at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. There will also be a live webcast available on our website:  http://www.dmgt.com.

 

Next trading update

The Group's next scheduled announcement of financial information will be its first quarter interim management statement on 5 February 2014.

 

 

Notes

 

* Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations. For a reconciliation of Group profit to adjusted Group profit, see Note 11.  These adjusted results, including revenue and operating profit, are for total operations, including those treated as discontinued, namely Northcliffe Media and the dmg radio Australia joint venture.  Northcliffe Media contributed operating profit of £7 million (2012: £26 million) from revenues of £49 million (2012: £213 million) and is included in the adjusted results.  Excluding Northcliffe Media, revenues of £1,753 million are in line with £1,747 million last year, whilst operating profit of £293 million is 7% higher than last year's £274 million.  A reconciliation of adjusted results including discontinued operations to adjusted results excluding discontinued operations is shown on page 21.

 

# Underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for constant exchange rates, disposals, closures, acquisitions and, with the exception of Euromoney, non-annual events occurring in the current and prior year; see pages 22 and 23. For dmg information the underlying results include the post-acquisition organic growth from acquisitions.  For dmg events, the comparisons are between events held in the year and the same events held the previous time, and exclude Evanta, which was disposed of in September 2012. For Euromoney, underlying comparisons exclude current year acquisitions and underlying profit excludes the benefit in both FY 2012 and FY 2013 of the historic acceleration of its CAP incentive plan charge. For dmg media, underlying comparisons exclude low margin contract printing revenue, which ceased during the year, the effects of the sale of Teletext Holidays and motors.co.uk last year, the disposal of the central and eastern European businesses this year, and the merger of the Digital Property Group and Zoopla at the end of May 2012, and include the organic growth from Jobrapido.  Northcliffe Media is excluded from the DMGT Group underlying comparisons.

 

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

 

† In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) clarified the accounting treatment of contingent consideration contained within IFRS 3 "Business Combinations" and as a result prior year deferred consideration payments of £3.4 million have been re-stated as exceptional operating costs; see Note 2.

 

∞ Underlying print advertising includes revenue from the Daily Mail, The Mail on Sunday and Metro, while underlying digital advertising includes revenue from MailOnline, Evenbase (excluding Broadbean and including the year-on-year organic growth from Jobrapido), Wowcher, Metro's digital assets, Villarenters and other smaller revenue streams. Zoopla Property Group is a joint venture and consequently its revenues are excluded from dmg media's revenues.

 

The average £: US$ exchange rate for the year was £1:$1.56 (2012 £1:$1.58).  The rate at the year end was $1.62 (2012: $1.62).

 

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

 

Certain statements in this announcement are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward looking statements contained in this announcement regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward looking statements, which apply only as of the date of this announcement.  This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company.  Past performance cannot be relied upon as a guide to future performance.

 

 

 

DMGT plc

CONSOLIDATED INCOME STATEMENT

for the year ending 30 September 2013

 



Unaudited

Audited



Year ending 30 September 2013

Year ending 30 September 2012




Restated

(note 2)


Note

£m

£m

CONTINUING OPERATIONS




Revenue

4

 1,752.6

1,746.8





Operating profit before exceptional operating costs, amortisation and impairment of goodwill and acquired intangible assets

4

  292.5

273.7

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

4

(40.3)

(76.5)

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

4

(42.5)

(53.6)





Operating profit before share of results of joint ventures and associates

4

209.7

143.6

Share of results of joint ventures and associates

5

5.3

(1.8)

Total operating profit


215.0

141.8

Other gains and losses

6

27.6

114.4

Profit before net finance costs and tax


242.6

256.2

Investment revenue

7

18.0

10.8

Finance costs

8

(58.1)

(64.1)

Net finance costs


(40.1)

(53.3)





Profit before tax


202.5

202.9

Tax

9

(37.8)

18.8

Profit after tax from continuing operations


164.7

221.7





DISCONTINUED OPERATIONS




Profit from discontinued operations

22

47.9

54.8

PROFIT FOR THE YEAR


212.6

276.5





Attributable to:




Owners of the Company


189.2

253.8

Non-controlling interests*


23.4

22.7

Profit for the year


212.6

276.5





Earnings per share

12



From continuing operations




Basic


37.4p

52.0p

Diluted


36.5p

50.5p

From discontinued operations




Basic


12.7p

14.3p

Diluted


12.4p

13.9p

From continuing and discontinued operations




Basic


50.1p

66.3p

Diluted


48.8p

64.2p

Adjusted earnings per share




Basic


53.0p

49.4p

Diluted


51.7p

47.9p

*All attributable to continuing operations




 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ending 30 September 2013

 


Unaudited

Audited


Year ending 30 September 2013

Year ending 30 September 2012



Restated

(note 2)


£m

£m

Profit for the year

212.6

276.5




Items that will not be reclassified to Consolidated Income Statement



Actuarial gain/(loss) on defined benefit pension schemes

  66.5

(61.8)

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

(27.6)

5.6




Total items that will not be reclassified to Consolidated Income Statement

  38.9

(56.2)




Items that may be reclassified subsequently to Consolidated Income Statement

Gains on hedges of net investments in foreign operations

 2.4

 31.3

Cash flow hedges:



  (Losses)/gains arising during the year

(3.4)

3.1

  Transfer of loss on cash flow hedges from translation reserve to Consolidated Income Statement

 2.2

3.6

Translation reserves recycled to Consolidated Income Statement on disposals

(2.5)

(0.9)

Foreign exchange differences on translation of foreign operations

(4.4)

(26.4)




Total items that may be reclassified subsequently to Consolidated Income Statement

(5.7)

10.7




Other comprehensive income/(expense) for the year

33.2

(45.5)




Total comprehensive income for the year

245.8

231.0




Attributable to:



Owners of the Company

223.3

208.4

Non-controlling interests

22.5

22.6




 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ending 30 September 2013

 


Called-up share capital

Share premium account

Capital redemption reserve

Revaluation reserve

Shares held in treasury

Translation reserve

Retained earnings

Total

Non-controlling interests

Total equity








Restated

(note 2)

Restated

(note 2)


Restated

(note 2)


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 2 October 2011 restated (note 2) (audited)

 49.1

  12.7

  1.1

3.3

(46.3)

(42.5)

49.6

 27.0

80.3

  107.3

Profit for the year restated (note 2)

  -

  -

  -

  -

  -

  -

 253.8

 253.8

 22.7

  276.5

Other comprehensive income for the year restated (note 2)

  -

  -

  -

  -

  -

9.9

(55.3)

(45.4)

(0.1)

(45.5)

Total comprehensive income for the year restated (note 2)

  -

  -

  -

  -

  -

9.9

  198.5

 208.4

22.6

  231.0

Issue of share capital

  -

0.8

  -

  -

  -

  -

  -

0.8

 1.5

2.3

Dividends

  -

  -

  -

  -

  -

  -

(66.2)

(66.2)

(9.6)

(75.8)

Own shares acquired in the year

  -

  -

  -

  -

(30.1)

  -

  -

(30.1)

  -

(30.1)

Own shares released on vesting of share options

  -

  -

  -

  -

32.6

  -

  -

32.6

  -

32.6

Transfer to retained earnings on disposal of revalued properties

  -

  -

  -

(3.3)

  -

  -

3.3

  -

  -

  -

Other transactions with non-controlling interests

  -

  -

  -

  -

  -

  -

  -

  -

0.9

0.9

Adjustment to equity following increased stake in controlled entity

  -

  -

  -

  -

  -

  -

(13.5)

(13.5)

(0.6)

(14.1)

Adjustment to equity following decreased stake in controlled entity

  -

  -

  -

  -

  -

  -

 0.1

 0.1

(0.1)

  -

Credit to equity for share-based payments

  -

  -

  -

  -

  -

  -

  12.5

  12.5

0.7

 13.2

Settlement of exercised share options of subsidiaries

  -

  -

  -

  -

  -

  -

(15.6)

(15.6)

  -

(15.6)

Corporation tax on share-based payments

  -

  -

  -

  -

  -

  -

0.4

0.4

0.2

0.6

Deferred tax on other items recognised in equity

  -

  -

  -

  -

  -

  -

  -

  -

(0.6)

(0.6)

At 30 September 2012 (audited)

 49.1

  13.5

  1.1

  -

(43.8)

(32.6)

169.1

  156.4

 95.3

251.7

Profit for the year

  -

  -

  -

  -

  -

  -

 189.2

 189.2

23.4

 212.6

Other comprehensive income for the year

  -

  -

  -

  -

  -

(4.4)

  38.5

34.1

(0.9)

  33.2

Total comprehensive income for the year

  -

  -

  -

  -

  -

(4.4)

 227.7

223.3

  22.5

245.8

Issue of share capital

  0.1

 2.8

  -

  -

  -

  -

  -

 2.9

 2.3

 5.2

Expenses incurred in relation to scheme of arrangement (note 28)

  -

  -

  -

  -

  -

  -

(1.5)

(1.5)

  -

(1.5)

Dividends

  -

  -

  -

  -

  -

  -

(69.6)

(69.6)

(9.1)

(78.7)

Own shares acquired in the year

  -

  -

  -

  -

(94.6)

  -

  -

(94.6)

  -

(94.6)

Own shares released on vesting of share options

  -

  -

  -

  -

21.8

  -

  -

21.8

  -

21.8

Other transactions with non-controlling interests

  -

  -

  -

  -

  -

  -

  -

  -

  1.4

1.4

Adjustment to equity following increased stake in controlled entity

  -

  -

  -

  -

  -

  -

(16.1)

(16.1)

0.6

(15.5)

Adjustment to equity following decreased stake in controlled entity

  -

  -

  -

  -

  -

  -

(0.7)

(0.7)

 0.7

  -

Credit to equity for share-based payments

  -

  -

  -

  -

  -

  -

12.5

12.5

 0.3

12.8

Settlement of exercised share options of subsidiaries

  -

  -

  -

  -

  -

  -

(11.0)

(11.0)

  -

(11.0)

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

  -

  -

  -

  -

  -

  -

(3.0)

(3.0)

(1.3)

(4.3)

Corporation tax on share-based payments

  -

  -

  -

  -

  -

  -

  1.4

  1.4

 0.7

  2.1

Deferred tax on other items recognised in equity

  -

  -

  -

  -

  -

  -

  1.3

  1.3

 0.2

  1.5

At 30 September 2013 (unaudited)

  49.2

16.3

  1.1

  -

(116.6)

(37.0)

 310.1

 223.1

 113.6

336.7












 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 September 2013

 



Unaudited

Audited

Audited



At 30 September 2013

At 30 September 2012

At 2 October 2011




Restated

(note 2)

Restated

(note 2)


Note

£m

£m

£m

ASSETS





Non-current assets





Goodwill


731.5

687.1

746.1

Other intangible assets


325.3

281.4

288.2

Property, plant and equipment

14

208.6

238.1

305.4

Investment property

15

5.4

6.8

 21.6

Investments in joint ventures


134.9

137.3

16.3

Investments in associates


50.7

11.5

13.0

Available-for-sale investments


2.7

1.5

4.2

Trade and other receivables


11.2

14.6

 30.7

Derivative financial assets


  21.2

24.6

8.6

Deferred tax assets


 170.9

204.7

200.6



 1,662.4

1,607.6

1,634.7

Current assets





Inventories


  25.2

28.3

23.1

Trade and other receivables


 302.8

328.7

347.4

Current tax receivable


9.5

3.6

9.1

Derivative financial assets


  18.9

8.9

1.1

Cash and cash equivalents


  87.9

104.7

174.3

Total assets of businesses held-for-sale

23

 9.1

  71.7

  -



 453.4

545.9

555.0






Total assets


 2,115.8

2,153.5

2,189.7






LIABILITIES





Current liabilities





Trade and other payables


(711.9)

(656.8)

(655.2)

Current tax payable


(17.2)

(20.8)

(53.2)

Acquisition put option commitments

16

(0.8)

(4.5)

(1.1)

Borrowings

17

(2.0)

(49.9)

(29.3)

Derivative financial liabilities


(0.9)

(14.1)

(5.9)

Provisions


(55.3)

(34.2)

(49.7)

Total liabilities of businesses held-for-sale

23

(4.2)

(33.6)

  -



(792.3)

(813.9)

(794.4)

Non-current liabilities





Trade and other payables


(4.1)

(8.1)

(11.9)

Acquisition put option commitments

16

(15.0)

(4.1)

(10.7)

Borrowings

17

(674.3)

(678.1)

(832.0)

Derivative financial liabilities


(23.9)

(34.9)

(60.9)

Retirement benefit obligations

24

(207.7)

(324.4)

(336.2)

Provisions


(40.0)

(14.4)

(12.5)

Deferred tax liabilities


(21.8)

(23.9)

(23.8)



(986.8)

(1,087.9)

(1,288.0)






Total liabilities


(1,779.1)

(1,901.8)

(2,082.4)






Net assets


336.7

251.7

107.3






 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

at 30 September 2013

 



Unaudited

Audited

Audited



At 30 September 2013

At 30 September 2012

At 2 October 2011




Restated

(note 2)

Restated

(note 2)


Note

£m

£m

£m

SHAREHOLDERS' EQUITY





Called-up share capital

19

49.2

49.1

49.1

Share premium account


16.3

13.5

12.7

Share capital


65.5

62.6

61.8

Capital redemption reserve


1.1

1.1

1.1

Revaluation reserve


  -

  -

3.3

Shares held in treasury


(116.6)

(43.8)

(46.3)

Translation reserve


(37.0)

(32.6)

(42.5)

Retained earnings


310.1

169.1

49.6

Equity attributable to owners of the company


223.1

156.4

27.0

Non-controlling interests


 113.6

  95.3

 80.3



336.7

251.7

107.3

 

Approved by the Board on 20 November 2013.

 

 

CONSOLIDATED CASH FLOW STATEMENT

for the year ending 30 September 2013

 



Unaudited

Audited



Year ending 30 September 2013

Year ending 30 September 2012



Restated

(note 2)


Note

£m

£m

Operating profit before share of results of joint ventures and associates - continuing operations


209.7

143.6

Operating profit before share of results of joint ventures and associates - discontinued operations

22

10.8

15.3

Adjustments for:




Share-based payments


13.3

  13.2

Negative goodwill


(4.4)

  -

Loss on disposal of fixed assets


  1.0

  -

Pension curtailment


(3.8)

  -

Pension charge less than cash contributions


(0.4)

(1.3)

Depreciation

4

49.4

  83.4

Impairment of property, plant and equipment and investment property


  1.5

 7.2

Impairment of goodwill and intangible assets

4

8.3

19.4

Amortisation of intangible assets not arising on business combinations


16.9

20.4

Amortisation of intangible assets arising on business combinations

4

34.2

34.5

Operating cash flows before movements in working capital


336.5

335.7





Decrease/(increase) in inventories


3.1

(7.6)

Decrease/(increase) in trade and other receivables


36.3

(9.6)

Increase in trade and other payables


31.0

40.0

Increase/(decrease) in provisions


8.7

(7.2)

Additional payments into pension schemes


(31.1)

(63.8)

Cash generated by operations


384.5

287.5

Taxation paid


(38.0)

(37.8)

Taxation received


  0.7

4.3

Net cash from operating activities


347.2

254.0

Investing activities




Interest received


2.2

1.5

Dividends received from joint ventures and associates


  5.6

4.3

Dividends received from available-for-sale investments


  1.8

0.8

Purchase of property, plant and equipment

14

(27.7)

(60.2)

Expenditure on internally generated intangible fixed assets


(66.7)

(37.8)

Purchase of available-for-sale investments


(2.1)

(0.2)

Proceeds on disposal of property, plant and equipment

14

  6.3

33.1

Proceeds on disposal of available-for-sale investments


  0.7

2.0

Purchase of subsidiaries

20

(64.9)

(48.8)

Treasury derivative activities


(28.7)

(7.3)

Investment in joint ventures and associates


(4.9)

(11.5)

Loans advanced to joint ventures and associates


(5.7)

  -

Loans to joint ventures and associates repaid


  -

  -

Proceeds on disposal of businesses

21

96.4

57.6

Proceeds on disposal of joint ventures and associates


  -

  54.4





Net cash used in investing activities


(87.7)

(12.1)

 

CONSOLIDATED CASH FLOW STATEMENT (continued)


for the year ending 30 September 2013




 



Unaudited

Audited



Year ending 30 September 2013

Year ending 30 September 2012


Note

£m

£m

Financing activities




Purchase of additional interests in controlled entities

20

(15.8)

(14.8)

Equity dividends paid

10

(69.6)

(66.2)

Dividends paid to non-controlling interests


(9.1)

(9.6)

Issue of share capital


  2.9

 0.8

Issue of shares by Group companies to non-controlling interests


  2.3

1.5

Receipt from non-controlling interests


  -

 1.8

Purchase of own shares


(94.6)

(30.1)

Net receipt on exercise/settlement of subsidiary share options


10.9

16.1

Interest paid


(57.5)

(64.0)

Proceeds on issue of bonds


  -

  -

Premium on redemption of bonds


  -

(6.1)

Bonds redeemed


(46.4)

(110.0)

Bond issue costs


  -

  -

Loan notes repaid


(0.6)

(0.7)

Sale and lease back receipts under hire purchase agreements


  -

  -

Repayments of obligations under hire purchase agreements


  -

  -

Decrease in bank borrowings


  -

(23.4)





Net cash used in financing activities


(277.5)

(304.7)





Net decrease in cash and cash equivalents


(18.0)

(62.8)

Cash and cash equivalents at beginning of year


107.3

171.7

Exchange loss on cash and cash equivalents


(0.8)

(1.6)

Net cash and cash equivalents at end of year


88.5

107.3

 

 


NOTES

1

BASIS OF PREPARATION


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


This financial information has been prepared for the year ending 30 September 2013 (2012 52 weeks ending 30 September 2012).

 


Other than the Daily Mail, The Mail on Sunday, Metro and Wowcher businesses, the Group prepares accounts for a 52 week period ending 30 September. The Daily Mail, The Mail on Sunday, Metro and Wowcher 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 ending 30 September 2013 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ending 30 September 2012 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. The audit of the statutory accounts for the year ending 30 September 2013 is not yet complete. These accounts will be 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 on pages 5 to 20.  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 April 2016. Current economic conditions create uncertainty particularly over the future performance of those parts of the business that derive a significant proportion of revenue from advertising. 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 2012 Annual Report and Accounts, with the exception of the change in accounting policy described below and as amended by the new accounting standards set out below.


The Group's financial statements incorporate the financial statements of the Company and all of its subsidiaries together with the Group's share of all of its interests in joint ventures and associates. The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments.


The principal accounting policies used in preparing this information are set out below.

2

SIGNIFICANT ACCOUNTING POLICIES


Restatement of results


In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) clarified the accounting treatment of contingent consideration contained within IFRS 3 "Business Combinations". Following this clarification, contingent consideration for acquired subsidiaries, where the selling shareholders continue to be employed by the Group, but which is automatically forfeited upon termination of employment, is now required to be classified as remuneration for post-combination services. Prior to this revised guidance, the contingent consideration could be treated for accounting purposes as either consideration or remuneration depending on the substance of the transaction. The Group reached an overall conclusion based on a balanced assessment of all indicators, including whether payments were dependent on continuing employment and in two such instances determined that these amounts were consideration in nature rather than remuneration. Nevertheless the Group has now changed its accounting policy to conform with the revised guidance, and the full year comparatives have been restated. Since the Group considers these payments in substance to be an element of the cost of the investment they are excluded from adjusted profit.

This change of accounting treatment has been reflected in the Group's Consolidated Financial Statements retrospectively and the impact on the Condensed Consolidated Income Statement for the year ending 30 September 2012 and 2 October 2011 and Condensed Consolidated Statement of Financial Position at 30 September 2012 and at 2 October 2011 is as follows :

 



Year ending 30 September 2012

Year ending 2 October 2011



£m

£m


Impact on Consolidated Income Statement




Reduction in operating profit

(3.4)

(0.7)


Reduction in profit after tax

(3.4)

(0.7)



p

p


Reduction in earnings per share from continuing operations




Basic

(0.9)

(0.2)


Diluted

(0.9)

(0.2)


Adjusted

  -

  -



£m

£m


Impact on Consolidated Statement of Financial Position




Reduction in goodwill

(17.5)

(0.9)


Increase in creditors due in less than one year

1.7

1.0


Decrease in provisions due in more than one year

(14.9)

(1.0)

 


Change to year end date


Following the disposal of its local media segment the Group has changed the period end date to which it prepares consolidated financial statements from a 52 or 53 week financial period ending on a Sunday near to the end of September to a 52 week period ending on 30 September. Only the weekly cyclical businesses of the Daily Mail, The Mail on Sunday, Metro and Wowcher report to the Sunday closest to the end of September.


For the prior period, the Daily Mail, The Mail on Sunday, Metro and Wowcher businesses financial period end coincided with that of the Group's remaining businesses and consequently no adjustments were necessary.




Impact of new accounting standards


Standards not affecting the reported results or the financial position:


IAS 1 Clarifies that an entity may present the analysis of other comprehensive income by item in the Statement of Changes in Equity or in the notes to the financial statements. The Group currently reflects this analysis in the notes to the financial statements.


Standards affecting the reported results or the financial position:


IAS 19 (Revised) Employee Benefits has not been applied in these consolidated financial statements, since it is not yet effective. IAS 19 (Revised), will impact the measurement of various components in the defined benefit pension obligation and associated disclosures, but not the Group's total obligation. It is likely that following the replacement of expected returns on plan assets with a net finance cost in the Consolidated Income Statement, the profit for the period will be reduced and accordingly other comprehensive income increased.

3

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:


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 assets are impaired or whether a reversal of an impairment of intangible assets should be recorded requires an estimation of the value in use of the relevant cash generating units. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash generating unit and compare the net present value of these cash flows using a suitable discount rate to determine if any impairment has occurred. A key area of judgement is deciding the long-term growth rate of the applicable businesses and the discount rate applied to those cash flows. The carrying amount of goodwill and intangible assets at the period end date was £1,056.8 million (2012 £968.5 million, 2011 £1,034.3 million) after a net impairment charge of £8.3 million (2012 charge of £19.4 million, 2011 charge of £24.4 million) was recognised during the year.


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, are often used. The Group recognises intangible assets acquired as part of a business combination at fair values at the date of the acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future cash flows generated by the assets and the selection of an appropriate discount rate. Additionally, management must estimate the expected useful economic lives of intangible assets and charge amortisation on these assets accordingly.


Contingent consideration payable


Estimates are required in respect of the amount of contingent consideration payable on acquisitions, which is determined according to formulae agreed at the time of the business combination, and normally related to the future earnings of the acquired business. The Directors review the amount of contingent consideration likely to become payable at each period end date, the major assumption being the level of future profits of the acquired business. The Group has outstanding contingent consideration payable amounting to £26.2 million (2012 £6.6 million, 2011 £10.8 million).


Contingent consideration payable is discounted to its fair value in accordance with applicable International Financial Reporting Standards. For acquisitions completed prior to 4 October, 2009, the difference between the fair value of these liabilities and the actual amounts payable is charged to the Consolidated Income Statement as notional finance costs with remeasurement of the liability being recorded against goodwill. For acquisitions completed in the current period, movements in the fair value of these liabilities are recorded in the Consolidated Income Statement in Financing.


Contingent consideration receivable


Estimates are required in respect of the amount of contingent consideration receivable on disposals, which is determined according to formulae agreed at the time of the disposal and is normally related to the future earnings of the disposed business. The Directors review the amount of contingent consideration likely to be receivable at each period end date, the major assumption being the level of future profits of the disposed business. The Group has outstanding contingent consideration receivable amounting to £0.9 million (2012 £1.2 million, 2011 £1.6 million). During the year the Group has recovered £6.1 million of previously unrecognised consideration.


Contingent consideration receivable is discounted to its fair value in accordance with applicable International Financial Reporting Standards. 


Adjusted profit


The Group presents adjusted earnings by making adjustments for costs and profits which management believes to be exceptional in nature by virtue of their size or incidence or have a distortive effect on current year earnings. Such items would include costs associated with business combinations, one-off gains and losses on disposal of businesses, properties and similar items of a non-recurring nature together with reorganisation costs and similar charges, tax and by adding back impairment of goodwill and amortisation and impairment of intangible assets arising on business combinations. See note 11 for a reconciliation of profit before tax to adjusted profit. 


Share-based payments


The Group makes share-based payments to certain employees. These payments are measured at their estimated fair value at the date of grant, calculated using an appropriate option pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of the number of shares that will eventually vest. The key assumptions used in calculating the fair value of the options are the discount rate, the Group's share price volatility, dividend yield, risk free rate of return, and expected option lives. Management regularly performs a true-up of the estimate of the number of shares that are expected to vest; this is dependent on the anticipated number of leavers.


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 is often dependent on the efficiency of legal processes. 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. As described above, 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, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. The assumptions and the resulting estimates are reviewed annually and, when appropriate, changes are made which affect the actuarial valuations and, hence, the amount of retirement benefit expense recognised in the Consolidated Income Statement and the amounts of actuarial gains and losses recognised in the Consolidated Statement of Changes in Equity. The carrying amount of the retirement benefit obligation at 30 September 2013 was a deficit of £207.7 million (2012 £324.4 million, 2011 £336.2 million). Further details are given in note 24.

 

4

SEGMENT ANALYSIS


The Group's business activities are split into six operating divisions: RMS, business information, events, Euromoney, national media and local 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 and impairment charges, other gains and losses, net finance costs and taxation.

 


Details of the types of products and services from which each segment derives its revenues are included within the business review on pages 9 to 20.

 


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 note 2.

 


Inter-segment sales are charged at prevailing market prices other than the sale of newsprint and related services from the national media to the local media division which is at cost to the Group plus a margin where relevant. The amount of newsprint sold between segments during the year amounted to £4.3 million (2012 £20.7 million).

 

 

Year ending 30 September 2013 (Unaudited)

Note

External revenue

Inter-segment revenue

Total revenue

Segment result

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

Operating profit before exceptional operating costs, amortisation and impairment of goodwill and acquired intangible assets




£m

£m

£m

£m

£m

£m

RMS



 175.4

 1.1

176.5

 56.5

(0.2)

  56.7

Business information

 292.5

 0.1

292.6

 54.6

(3.2)

  57.8

Events


87.0

  -

  87.0

 21.3

  -

  21.3

Euromoney

 404.7

  -

404.7

  119.4

0.4

119.0

National media

 793.0

 9.0

802.0

 94.3

14.0

  80.3

Local media

48.9

  -

  48.9

 18.0

 10.8

 7.2

Radio


  -

  -

  -

  -

  -

  -




 1,801.5

  10.2

1,811.7

364.1

21.8

342.3

Corporate costs


(42.6)

Discontinued operations

 22

(48.9)





(7.2)




 1,752.6






Operating profit before exceptional operating costs, amortisation and impairment of goodwill and acquired intangible assets

292.5

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

(40.3)

Impairment of goodwill and intangible assets

(8.3)

Amortisation of acquired intangible assets arising on business combinations

(34.2)

Operating profit before share of results of joint ventures and associates

209.7

Share of results of joint ventures and associates

5






5.3

Total operating profit

215.0

Other gains and losses

6






27.6

Profit before net finance costs and tax

242.6

Investment revenue

7






  18.0

Finance costs

8






(58.1)

Profit before tax


202.5

Tax


9






(37.8)

Profit from discontinued operations

 22






  47.9

Profit for the year


212.6










 


Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division comprised £111.7 million from newspapers, a loss of £12.0 million from digital assets and unallocated divisional central costs of £19.4 million.


Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division included £1.2 million from operations in central Europe.


Included within corporate costs is a credit of £0.4 million which adjusts the pensions charge recorded in each operating segment from a cash rate to the net service cost in accordance with IAS 19, Employee Benefits.

 

4

SEGMENT ANALYSIS CONTINUED


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

 

Year ending 30 September 2013 (Unaudited)

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets

Exceptional operating costs, impairment of investment property and impairment of property, plant and equipment

Exceptional depreciation of property, plant and equipment

Depreciation of property, plant and equipment

Investment revenue

Finance

costs








Note 7

Note 8

Note

£m

£m

£m

£m

£m

£m

£m

£m

RMS

(1.1)

  -

  -

  -

  -

(5.7)

0.1

  -

Business information

(8.3)

(10.4)

  -

(0.8)

  -

(5.9)

0.9

(1.4)

Events

  -

(3.8)

  -

  -

  -

(0.4)

0.3

  -

Euromoney

(0.3)

(16.8)

  -

2.2

  -

(3.9)

0.2

(8.3)

National media

(7.2)

(3.2)

(8.3)

(25.0)

(14.2)

(17.2)

  -

(0.4)

Local media

  -

  -

  -

3.6

  -

  -

  -

  -

Radio

  -

  -

  -

  -

  -

  -

  -

  -


(16.9)

(34.2)

(8.3)

(20.0)

(14.2)

(33.1)

1.5

(10.1)

Corporate costs

  -

  -

  -

(1.5)

(1.0)

(1.1)

 16.5

(48.0)


(16.9)

(34.2)

(8.3)

(21.5)

(15.2)

(34.2)

 18.0

(58.1)

Relating to discontinued operations  22

  -

  -

  -

(3.6)

  -

  -

  -

  -

Continuing operations

(16.9)

(34.2)

(8.3)

(25.1)

(15.2)

(34.2)

18.0

(58.1)










 


The Group's exceptional operating costs in the business information segment of £0.8 million relate to contingent consideration required to be treated as remuneration.

 

In Euromoney, exceptional charges comprise acquisition costs of £1.5 million and redundancy costs of £1.0 million offset by a credit of £0.3 million following the release of previously accrued restructuring costs and an exceptional credit for negative goodwill of £4.4 million the result of a gain on the bargain purchase of Quantitative Techniques following the valuation of the acquired intangibles.

 

In the national media segment reorganisation and restructuring charges of £19.6 million together with a charge amounting to £5.4 million relating to contingent consideration required to be treated as remuneration.

 

In the local media segment the £3.6 million credit largely relates to a pension curtailment gain following the disposal of Northcliffe Media.

 

The Group's tax charge includes a related credit of £3.7 million in relation to these items.

 

4

SEGMENT ANALYSIS CONTINUED

 

Year ending 30 September 2012

External revenue

Inter-segment revenue

Total revenue

Segment result

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

Operating profit before exceptional operating costs, amortisation and impairment of goodwill and acquired intangible assets



Note

£m

£m

£m

£m

£m

£m

RMS



 163.2

 0.3

163.5

 55.9

(0.2)

  56.1

Business information

 253.2

  -

253.2

 47.1

(0.8)

  47.9

Events


88.8

  -

  88.8

 21.2

0.1

  21.1

Euromoney

 394.1

 0.1

394.2

  112.5

0.6

111.9

National media

 847.5

  33.4

880.9

 81.3

3.8

  77.5

Local media

 212.7

 0.1

212.8

 26.0

  -

  26.0

Radio


  -

  -

  -

9.5

9.5

  -




 1,959.5

  33.9

1,993.4

353.5

13.0

340.5

Corporate costs


(40.8)

Discontinued operations

 22

(212.7)





(26.0)




 1,746.8






Operating profit before exceptional operating costs, amortisation and impairment of goodwill and acquired intangible assets

273.7

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

(76.5)

Impairment of goodwill and intangible assets

(19.4)

Amortisation of acquired intangible assets arising on business combinations

(34.2)

Operating profit before share of results of joint ventures and associates

143.6

Share of results of joint ventures and associates

5






(1.8)

Total operating profit

141.8

Other gains and losses

6






114.4

Profit before net finance costs and tax

256.2

Investment revenue

7






  10.8

Finance costs

8






(64.1)

Profit before tax


202.9

Tax


9






  18.8

Profit from discontinued operations

 22






54.8

Profit for the year


276.5










 


Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division comprised £109.8 million from newspapers, £3.2 million from digital and unallocated divisional central costs of £35.5 million.

 


Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the national media division included £3.9 million from operations in central Europe.

 


Included within corporate costs is a credit of £1.3 million which adjusts the pensions charge recorded in each operating segment from a cash rate to the net service cost in accordance with IAS 19, Employee Benefits.

 

4

SEGMENT ANALYSIS CONTINUED


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

 

Year ending 30 September 2012

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets

Exceptional operating costs, impairment of investment property and impairment of property, plant and equipment

Exceptional depreciation of property, plant and equipment

Depreciation of property, plant and equipment

Investment revenue

Finance

costs





Restated

(note 2)

Note 7

Note 8

Note

£m

£m

£m

£m

£m

£m

£m

£m

RMS

(1.2)

  -

  -

  -

  -

(5.2)

  -

  -

Business information

(8.2)

(8.8)

(16.0)

(1.4)

  -

(5.9)

0.1

(0.1)

Events

  -

(5.5)

  -

(0.9)

  -

(0.5)

1.2

  -

Euromoney

(0.3)

(15.7)

  -

(1.6)

(0.1)

(3.3)

0.2

1.0

National media

(10.7)

(4.2)

(3.4)

(25.2)

(38.4)

(22.0)

0.1

  -

Local media

  -

(0.3)

  -

(9.9)

(0.5)

(1.8)

  -

  -

Radio

  -

  -

  -

  -

  -

  -

  -

  -


(20.4)

(34.5)

(19.4)

(39.0)

(39.0)

(38.7)

1.6

0.9

Corporate costs

  -

  -

  -

(8.9)

  -

(5.7)

9.2

(65.0)


(20.4)

(34.5)

(19.4)

(47.9)

(39.0)

(44.4)

 10.8

(64.1)

Relating to discontinued operations22

  -

0.3

  -

 9.9

 0.5

1.8

  -

  -

Continuing operations

(20.4)

(34.2)

(19.4)

(38.0)

(38.5)

(42.6)

10.8

(64.1)










 


The Group's exceptional operating costs represent closure and reorganisation costs in the national and local media segments amounting to £25.6 million, £2.7 million relating to contingent consideration required to be treated as remuneration and an impairment charge of £6.5 million on the closure of a print site.

 

In Euromoney, restructuring costs amount to £1.6 million following the reorganisation of certain group functions and recently acquired businesses.

 

Included in corporate costs is a charge of £8.2 million relating to consultancy services and an impairment charge of £0.7 million relating to investment property.

 

The Group's tax charge includes a related credit of £19.4 million in relation to these items.

 

4

SEGMENT ANALYSIS CONTINUED


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

 


Unaudited

Unaudited

Unaudited

Unaudited

Audited

Audited

Audited

Audited


Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012

Year ending 30 September 2012

Year ending 30 September 2012


Total

Discontinued operations (note 22)

Inter-segment

Continuing operations

Total

Discontinued operations (note 22)

Inter-segment

Continuing operations


£m

£m

£m

£m

£m

£m

£m

£m

Sale of goods

  740.0

(48.9)

  -

691.1

786.0

(212.7)

  -

573.3

Rendering of services

  1,071.7

  -

(10.2)

1,061.5

1,207.4

  -

(33.9)

1,173.5


  1,811.7

(48.9)

(10.2)

1,752.6

1,993.4

(212.7)

(33.9)

1,746.8










 


The Group includes circulation and subscriptions revenue within sales of goods, the remainder of the Group's revenue, excluding investment revenue is included within rendering of services. Investment revenue is shown in note 7.


By geographic area


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


The geographic analysis below is based on the location of companies in these regions. Export sales and related profits are included in the areas from which those sales are made. Revenue in each geographic market in which customers are located is not disclosed as there is no material difference between the two.


Revenue is analysed by geographic area as follows:

 




Unaudited

Unaudited

Unaudited

Audited

Audited

Audited

 

Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012

Year ending 30 September 2012




Total

Discontinued operations (note 22)

Continuing operations

Total

Discontinued operations (note 22)

Continuing operations




£m

£m

£m

£m

£m

£m

UK



 1,047.3

(48.9)

998.4

  1,234.9

(212.7)

1,022.2

Rest of Europe

66.1

  -

  66.1

 68.2

  -

  68.2

North America

 573.7

  -

573.7

  556.4

  -

556.4

Australia

15.6

  -

15.6

 13.5

  -

13.5

Rest of the World

98.8

  -

  98.8

 86.5

  -

  86.5




 1,801.5

(48.9)

1,752.6

  1,959.5

(212.7)

1,746.8










 


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

 




Unaudited

Audited

Audited

Unaudited

Audited

Audited

 

Closing net book value of goodwill

Closing net book value of goodwill

Closing net book value of goodwill

Closing net book value of intangible assets

Closing net book value of intangible assets

Closing net book value of intangible assets





Restated

(note 2)

Restated

(note 2)




At 30 September 2013

At 30 September 2012

At 2 October 2011

At 30 September 2013

At 30 September 2012

At 2 October 2011




£m

£m

£m

£m

£m

£m

UK



230.3

212.2

258.1

70.9

57.8

76.3

Rest of Europe

13.2

  15.3

  10.5

 27.0

 26.7

 4.7

North America

 460.2

439.8

457.2

  221.5

  191.2

199.8

Australia

  9.6

 1.5

 1.5

2.0

0.7

 0.8

Rest of the World

18.2

  18.3

  18.8

3.9

5.0

 6.6




731.5

687.1

746.1

  325.3

  281.4

288.2













Unaudited

Audited

Audited

Unaudited

Audited

Audited




Closing net book value of property, plant and equipment (note 14)

Closing net book value of property, plant and equipment (note 14)

Closing net book value of property, plant and equipment (note 14)

Closing net book value of investment property (note 15)

Closing net book value of investment property (note 15)

Closing net book value of investment property (note 15)




At 30 September 2013

At 30 September 2012

At 2 October 2011

At 30 September 2013

At 30 September 2012

At 2 October 2011




£m

£m

£m

£m

£m

£m

UK



178.2

207.1

258.3

5.4

6.8

  21.6

Rest of Europe

1.6

1.1

14.8

  -

  -

  -

North America

26.9

27.7

30.1

  -

  -

  -

Australia

0.3

0.3

0.2

  -

  -

  -

Rest of the World

1.6

1.9

2.0

  -

  -

  -




208.6

238.1

305.4

5.4

6.8

  21.6










 


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. The total impairment charge recognised for the year was £8.3 million (2012 £19.4 million). Of the impairment charge for the year, £0.4 million relates to Villarenters in the national media segment and £7.9 million relates to computer software and related IT assets no longer in use in the national media segment. There is a deferred tax credit of £0.7 million and a current tax credit of £1.0 million in relation to these impairment charges (2012 deferred tax credit of £nil, current tax credit of £0.8 million).

 

5

SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012







Note

£m

£m

Share of profits from operations of joint ventures

13.6

3.2

Share of profits from operations of associates

8.2

0.3

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

21.8

3.5

Share of exceptional operating costs of joint ventures

  -

(1.9)

Share of exceptional operating costs of associates

(0.6)

(0.5)

Share of amortisation of intangibles of joint ventures

(3.2)

(1.2)

Share of amortisation of intangibles of associates

(2.4)

(0.3)

Share of joint ventures' interest receivable

0.2

  -

Share of associates' interest payable

(0.6)

(0.1)

Share of joint ventures' tax

(1.5)

  -

Share of associates' tax

(0.9)

  -

Impairment of carrying value of joint ventures

(i)

(7.2)

  -

Impairment of carrying value of associates

(ii)

(0.3)

(1.3)








5.3

(1.8)

Share of associates items recognised in equity

  -

  -








5.3

(1.8)










Share of results from operations of joint ventures

9.1

0.1

Share of results from operations of associates

3.7

(0.6)

Impairment of carrying value of joint venture

(7.2)

  -

Impairment of carrying value of associates

(0.3)

(1.3)








5.3

(1.8)










 

(i)

Represents a £5.5 million write down in the carrying value of The Sanborn Map Company in the business information segment together with a £1.7 million write down in the value of Mail Today in the national media segment.

 

(ii)

Represents a write down in the carrying value of the Group's investment in Posvanete AD in the national media segment.  In the prior year represents a write down in the carrying value of Social Metrix in the national media segment.











6

OTHER GAINS AND LOSSES

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012







    Note

£m

£m

Loss on disposal of available-for-sale investments

(i)

  -

(0.6)

Impairment of available-for-sale assets

  -

(0.3)

Profit on disposal of property, plant and equipment

1.4

 2.0

Profit on disposal of businesses

(ii)

23.7

113.3

Recycled cumulative translation differences

2.5

  -








27.6

114.4










 

(i)

In the prior year represents the loss on disposal of the Group's investment in Herald Ventures.

 

(ii)

Largely represented by the profit on sale of Central and Eastern European print and digital assets by the national media segment amounting to £14.5 million together with proceeds from previously unrecognised deferred consideration following the sale of North American home shows of £6.2 million in the events segment. In the prior year represented by the £78.2 million profit on sale of The Digital Property Group in the national media segment and £34.6 million profit on sale of Evanta in the business information segment.

 


There is a tax charge of £nil (2012 £11.8 million) in relation to these items.

 

7

INVESTMENT REVENUE

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012








£m

£m

Expected return on defined benefit pension scheme assets less interest on defined benefit pension scheme liabilities

 14.9

 8.5

Dividend income

1.8

0.8

Interest receivable from short-term deposits

1.3

1.5








18.0

10.8










 

8

FINANCE COSTS



 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012







Note

£m

£m

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

(57.1)

(59.5)

Premium on bond redemption

(i)

  -

(6.1)

Change in fair value of derivative hedge of bond

(6.6)

2.2

Change in fair value of hedged portion of bond

6.6

(2.2)

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

0.6

(0.4)

Finance charge on discounting of contingent consideration

(ii)

(1.1)

(0.3)

Fair value movement of contingent consideration

(5.0)

0.2

Fair value movement of undesignated financial instruments

7.4

  -

Change in fair value of acquisition put options

(2.9)

2.0








(58.1)

(64.1)










 

(i)

In the prior year the Group bought back £110.0 million of its 7.5 % bonds due 2013, incurring a premium of £6.1 million.

 

(ii)

The finance charge on the discounting of contingent consideration arises from the requirement under IFRS 3 (2008), Business Combinations, to record contingent consideration at fair value using a discounted cash flow approach.

 

9

TAX

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012







Note

£m

£m

 

The (charge)/credit on the profit for the year consists of:

UK tax








Corporation tax at 23.5 % (2012 25.0 %)

(7.2)

(4.3)

Adjustments in respect of prior years

(i)

(1.5)

43.0








(8.7)

38.7

Overseas tax




Corporation tax

(19.7)

(31.9)

Adjustments in respect of prior years

(i)

(0.6)

(12.4)

Total current tax

(29.0)

(5.6)

Deferred tax





Origination and reversals of temporary differences

(3.2)

(24.0)

Adjustments in respect of prior years

(i)

(2.2)

39.1

Total deferred tax

(5.4)

15.1

Total Tax





(34.4)

9.5

Relating to discontinued operations

22

(3.4)

9.3








(37.8)

18.8

 

(i)

The net prior year charge of £4.3 million (2012 credit £69.7 million), arose largely from the agreement of certain prior year issues with tax authorities and a reassessment of the level of tax provisions required, and a reassessment of temporary differences.

 


Being a multinational Group with tax affairs in many geographic locations inherently leads to a highly complex tax structure. The tax charge is reviewed and measured on a Group total basis only.

 


Adjusted tax on profits before amortisation and impairment of intangible assets, restructuring costs and non-recurring items (adjusted tax charge) amounted to a charge of £51.8 million (2012 £39.0 million) and the resulting rate is 18.4 % (2012 15.2 %). The differences between the tax credit and the adjusted tax charge are shown in the reconciliation below:

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012









Restated

(note 2)








£m

£m

Total tax (charge)/credit on the profit for the year

(34.4)

9.5

Deferred tax on intangible assets and goodwill

(6.9)

(2.8)

Agreement of open issues with tax authorities

  -

(41.6)

Tax on other exceptional items

(10.5)

(4.1)

Adjusted tax charge on the profit for the year

(51.8)

(39.0)










 


In calculating the adjusted tax rate, the Group excludes the potential future deferred tax effects of intangible assets and goodwill (other than internally generated and acquired computer software) as it prefers to give the users of its accounts a view of the tax charge based on the current status of such items.

 


Tax on other exceptional items includes a net charge of £0.8 million (2012 £1.9 million) relating to the derecognition of further tax losses and the reassessment of other temporary differences which are treated as exceptional due to their material impact on the Group's adjusted  tax charge.

 


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

 







Unaudited

Audited

Audited







At 30 September 2013

At 30 September 2012

At 2 October 2011







£m

£m

£m

UK






 43.9

39.6

56.2

Rest of Europe

1.4

  -

  -

North America

 78.7

75.0

62.4

Australia




12.7

5.4

6.8







136.7

120.0

125.4

 


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 none have an expiry date.

 


A deferred tax charge of £27.6 million (2012 credit £5.6 million) was recognised directly in the statement of comprehensive income. A deferred tax credit of £1.5 million (2012 charge £0.6 million) and a current tax credit of £2.1 million (2012 credit £0.6 million) was recognised directly to equity.











10

DIVIDENDS PAID



 






Unaudited

Unaudited

Audited

Audited






Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012






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 2012

12.40

2.5

  -

  -

'A' Ordinary Non-Voting shares - final dividend for the year ended 30 September 2012

12.40

 45.0

  -

  -

Ordinary shares - final dividend for the year ended 2 October 2011

  -

  -

  11.70

 2.5

'A' Ordinary Non-Voting shares - final dividend for the year ended 2 October 2011

  -

  -

  11.70

  42.3







 47.5


  44.8

Ordinary shares - interim dividend for the year ended 30 September 2013

  5.90

1.2

  -

  -

'A' Ordinary Non-Voting shares - interim dividend for the year ended 30 September 2013

  5.90

 20.9

  -

  -

Ordinary shares - interim dividend for the year ended 30 September 2012

  -

  -

 5.60

 1.1

'A' Ordinary Non-Voting shares - interim dividend for the year ended 30 September 2012

  -

  -

 5.60

  20.3







 22.1


  21.4






18.30

 69.6

  17.30

  66.2

 

 


The Board has declared a final dividend of 13.3 p per Ordinary/'A' Ordinary Non-Voting share (2012 12.4 p) which will absorb an estimated £49.6 million (£47.5 million) of shareholders' funds for which no liability has been recognised in these financial statements. It will be paid on 7 February 2014 to shareholders on the register at the close of business on 29 November 2013.











11

ADJUSTED PROFIT AND ADJUSTED EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA)

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012









Restated

(note 2)








£m

£m

Profit before tax - continuing operations

  202.5

202.9

Profit before tax - discontinued operations

 10.8

21.1

Profit on disposal of discontinued operations

 33.7

  43.0

Add back:






Amortisation of intangible assets in Group profit from operations arising on business combinations - continuing operations

 34.2

34.2

Amortisation of intangible assets in Group profit from operations arising on business combinations - discontinued operations

  -

0.3

Amortisation of intangible assets in joint ventures and associates arising on business combinations - continuing operations

5.6

1.5

Amortisation of intangible assets in joint ventures and associates arising on business combinations - discontinued operations

  -

3.2

Impairment of goodwill and intangible assets arising on business combinations - continuing operations

8.3

19.4

Exceptional operating costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment - continuing operations

 40.3

76.5

Exceptional operating (gains)/costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment - discontinued operations

(3.6)

10.4

Share of exceptional operating costs of joint ventures

  -

 1.9

Share of exceptional operating costs of associates

0.6

 0.5

Impairment of carrying value of joint venture - continuing operations

7.2

  -

Impairment of carrying value of associate - continuing operations

0.3

 1.3

Impairment of carrying value of associate - discontinued operations

  -

 0.3

Other gains and losses:


Loss on disposal of available-for-sale investments

  -

0.6


Profit on disposal of property, plant and equipment

(1.4)

(2.0)


Profit on disposal of businesses

(26.2)

(113.3)


Impairment of available-for-sale assets

  -

 0.3


Loss on disposal of businesses within discontinued operations

  -

0.1

Finance costs:





Fair value movement of undesignated financial instruments

(7.4)

  -


Change in fair value of acquisition put options

2.9

(2.0)


Fair value movement of contingent consideration

5.0

(0.2)

Tax:










Share of tax in joint ventures and associates - continuing operations

2.4

  -


Share of tax in joint ventures and associates - discontinued operations

  -

(1.6)

Profit from discontinued operations:


Profit on disposal of discontinued operations

(33.7)

(43.0)

Adjusted profit before tax and non-controlling interests

  281.5

255.4

Total tax (charge)/credit on the profit for the year

(34.4)

9.5

Adjust for:







Deferred tax on intangible assets and goodwill

(6.9)

(2.8)


Agreed open issues with tax authorities

  -

(41.6)


Tax on other exceptional items

(10.5)

(4.1)

Non-controlling interests

(29.6)

(27.3)

Adjusted profit after taxation and non-controlling interests

  200.1

189.1










 


The adjusted non-controlling interests' share of profits for the year of £29.6 million (2012 £27.3 million) is stated after eliminating a credit of £6.2 million (2012 £4.6 million), being the non-controlling interests' share of adjusting items.

 

12

EARNINGS PER SHARE


Basic earnings per share of 50.1 p (2012 66.3 p) and diluted earnings per share of 48.8 p (2012 64.2 p) are calculated, in accordance with IAS 33, Earnings per share, on Group profit for the financial year of £141.3 million (2012 £199.0 million) as adjusted for the effect of dilutive ordinary shares of £0.3 million (2012 £0.6 million) and earnings from discontinued operations of £47.9 million (2012 £54.8 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 53.0 p (2012 49.4 p) 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 £200.1 million (2012 £189.1 million), as set out in note 11 above, and on the basic weighted average number of ordinary shares in issue during the year.

 


Basic and diluted earnings per share

 






Unaudited

Unaudited

Audited

Audited






Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012






Basic earnings

Diluted earnings

Basic earnings

Restated (Note 2)

Diluted earnings

Restated (Note 2)






£m

£m

£m

£m

Earnings from continuing operations

141.3

  141.3

  199.0

199.0

Effect of dilutive ordinary shares

  -

(0.3)

  -

(0.6)

Earnings from discontinued operations

  47.9

 47.9

54.8

54.8






189.2

  188.9

  253.8

253.2

 






Unaudited

Unaudited

Audited

Audited






Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012






Basic

Diluted

Basic

Diluted






pence

pence

pence

pence






per share

per share

per share

per share








Restated

(note 2)

Restated

(note 2)

Earnings per share from continuing operations

37.4

36.5

52.0

50.5

Effect of dilutive ordinary shares

  -

(0.1)

  -

(0.2)

Earnings per share from discontinued operations

  12.7

 12.4

14.3

13.9

Basic earnings per share from continuing and discontinued operations

50.1

48.8

66.3

64.2

 

Adjusted earnings per share

 






Unaudited

Unaudited

Audited

Audited






Year ending 30 September 2013

Year ending 30 September 2013

Year ending 30 September 2012

Year ending 30 September 2012






Basic

Diluted

Basic

Diluted






pence

pence

pence

pence






per share

per share

per share

per share








Restated

(note 2)

Restated

(note 2)

Profit before tax - continuing operations

  53.6

 52.4

53.0

51.5

Effect of dilutive ordinary shares

  -

(0.1)

  -

(0.2)

Profit before tax - discontinued operations

 2.9

2.8

5.5

5.4

Profit on disposal of discontinued operations

 8.9

8.7

 11.2

  10.9

Add back:






Amortisation of intangible assets in Group profit from operations arising on business combinations - continuing operations

 9.1

8.8

8.9

8.7

Amortisation of intangible assets in Group profit from operations arising on business combinations - discontinued operations

  -

  -

0.1

0.1

Amortisation of intangible assets in joint ventures and associates arising on business combinations - continuing operations

 1.5

1.4

0.4

0.4

Amortisation of intangible assets in joint ventures and associates arising on business combinations - discontinued operations

  -

  -

0.8

0.8

Impairment of goodwill and intangible assets arising on business combinations - continuing operations

 2.2

2.2

5.1

4.9

Exceptional operating costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment - continuing operations

  10.7

 10.4

20.0

19.5

Exceptional operating (gains)/costs, impairment of internally generated and acquired computer software, investment property and property, plant and equipment - discontinued operations

(1.0)

(0.9)

2.7

2.6

Share of exceptional operating costs of joint ventures

  -

  -

0.5

 0.5

Share of exceptional operating costs of associates

 0.2

0.2

0.1

 0.1

Impairment of carrying value of joint venture - continuing operations

 1.9

1.9

  -

  -

Impairment of carrying value of associate - continuing operations

0.1

0.1

0.3

0.3

Impairment of carrying value of associate - discontinued operations

  -

  -

0.1

 0.1

Other gains and losses:


Loss on disposal of available-for-sale investments

  -

  -

0.2

0.2


Profit on disposal of property, plant and equipment

(0.4)

(0.4)

(0.5)

(0.5)


Amounts provided against contingent consideration receivable on disposal

  -

  -

  -

  -


Profit on disposal of businesses

(6.9)

(6.8)

(29.6)

(28.8)


Impairment of available-for-sale assets

  -

  -

0.1

 0.1

Finance costs:





Fair value movement of undesignated financial instruments

(2.0)

(1.9)

  -

  -


Change in fair value of acquisition put options

0.8

0.7

(0.5)

(0.5)


Fair value movement of contingent consideration

1.3

1.3

(0.1)

(0.1)

Tax:










Share of tax in joint ventures and associates - continuing operations

0.6

0.6

  -

  -


Share of tax in joint ventures and associates - discontinued operations

  -

  -

(0.4)

(0.4)

Profit from discontinued operations:


Profit on disposal of discontinued operations

(8.9)

(8.6)

(11.2)

(10.9)

Adjusted profit before tax and non-controlling interests

  74.6

 72.8

66.7

64.7

Total tax (charge)/credit on the profit for the year

(9.1)

(8.9)

2.5

2.4

Adjust for:







Deferred tax on intangible assets and goodwill

(1.8)

(1.8)

(0.7)

(0.7)


Agreed open issues with tax authorities

  -

  -

(10.9)

(10.6)


Tax on other exceptional items

(2.8)

(2.7)

(1.1)

(1.0)

Non-controlling interests

(7.9)

(7.7)

(7.1)

(6.9)

Adjusted profit after taxation and non-controlling interests

53.0

51.7

49.4

47.9










 


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

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012








Number

Number








m

m

Number of Ordinary shares in issue

  393.3

392.7

Shares held in Treasury

(15.8)

(9.9)

Basic earnings per share denominator

  377.5

382.8

Effect of dilutive share options

9.3

  10.9

Dilutive earnings per share denominator

  386.8

393.7










 

13

ANALYSIS OF NET DEBT

 








Unaudited

Audited








At 30 September 2013

At 30 September 2012







Note

£m

£m

Net debt at start including derivatives

(613.0)

(719.6)

Cash flow



(i)

(0.2)

63.4

Foreign exchange movements

(ii)

 42.1

44.4

Other non-cash movements

(iii)

(1.9)

(1.2)

Net debt at year end including derivatives

(573.0)

(613.0)










Analysed as:





Cash and cash equivalents

 87.9

107.3

Cash and cash equivalents included within assets held for resale

0.6

  -

Cash and cash equivalents in the cash flow statement

 88.5

107.3

Debt due within one year

Bonds






  -

(47.3)

Loan notes




(2.0)

(2.6)

Debt due in more than one year

Bonds






(674.3)

(678.1)

Net debt at year end

(587.8)

(620.7)

Effect of derivatives on debt

(ii)

14.8

7.7

Net debt including derivatives

(573.0)

(613.0)










 

(i)

The net cash outflow includes a cash outflow of £21.5 million (2012 £40.5 million) in respect of operating exceptional items.

 

(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 of borrowings into an alternative currency.

 











14

PROPERTY, PLANT AND EQUIPMENT


During the year the Group spent £27.7 million (2012 £60.2 million) on property, plant and equipment.

 


The Group also disposed of certain of its property, plant and equipment with a carrying value of £1.6 million (2012 £31.1 million) for proceeds of £6.3 million  (2012 £33.1 million).











15

INVESTMENT PROPERTY


During the year a number of the Group's freehold properties ceased to be owner occupied and became subject to letting activity. In accordance with the Group's accounting policy these properties with a net book value of £4.6 million have been transferred out of property, plant and equipment into investment property.

 


The fair value of the Group's investment properties as at 30 September 2013 was £6.3 million (2012 £7.6 million). This was arrived at by reference to market evidence for similar properties and was carried out by an officer of the Group's property department. Property rental income earned by the Group from its investment properties amounted to £0.7 million (2012 £0.8 million). Direct operating expenses arising on the investment properties in the year amounted to £0.3 million (2012 £0.4 million). The leases have an expiry date of between 1 and 5 years.

 

16

ACQUISITION PUT OPTION COMMITMENTS

 








Unaudited

Audited

Audited








At 30 September 2013

At 30 September 2012

At 2 October 2011








£m

£m

£m


Current





0.8

4.5

1.1


Non-current


15.0

4.1

10.7








15.8

8.6

11.8











 

17

BORROWINGS




 







Unaudited

Audited

Audited







At 30 September 2013

At 30 September 2012

At 2 October 2011







£m

£m

£m

Current liabilities



Bonds





  -

47.3

  -

Bank overdrafts

  -

  -

2.6

Other short term debt

  -

  -

  23.4

Loan notes



2.0

2.6

3.3







2.0

49.9

29.3










Non-current liabilities

Bonds





674.3

678.1

832.0

 

18

BANK LOANS





The Group's bank loans bear interest charged at LIBOR plus a margin based on the Group's ratio of net debt to EBITDA. Additionally each facility contains a covenant based on a minimum interest cover ratio. EBITDA for these purposes is defined as the aggregate of the Group's consolidated operating profit before 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 calculated in note 11. These covenants were met at the relevant test dates during the year.

 


The Group's interim internal target of Net Debt to EBITDA cover is 2.0 to 2.5 times whilst the limit imposed by its bank covenants is no greater than 3.75 times. On a bank covenant basis the ratio uses the average exchange rate in the calculation of net debt. The resultant Net Debt to EBITDA ratio is 1.56 times (2012 1.65 times, 2011 1.96 times). Using a closing rate basis for the valuation of net debt, the ratio was 1.53 times (2012 1.62 times, 2011 1.99 times).

 


The Group's facilities and their maturity dates are as follows:

 







Unaudited

Audited

Audited







At 30 September 2013

At 30 September 2012

At 2 October 2011







£m

£m

£m

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

  -

  -

  90.0

Expiring in more than two years but not more than three years

  300.3

  -

  -

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

  -

  300.7

  -

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

  -

  -

300.0

Total bank facilities

  300.3

  300.7

390.0










 

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

 







Unaudited

Audited

Audited







At 30 September 2013

At 30 September 2012

At 2 October 2011







£m

£m

£m

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

  -

  -

  36.4

Expiring in more than two years but not more than three years

  299.8

  -

  -

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

  -

  298.3

  -

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

  -

  -

291.1

Total undrawn committed bank facilities

  299.8

  298.3

327.5










 











19

SHARE CAPITAL AND RESERVES


The Group issued 'A' Ordinary Non-Voting shares during the year with a nominal value of £0.1 million. Share capital at 30 September 2013 amounted to £49.2 million.

 


During the year the Company disposed of 4.8 million  'A' Ordinary Non-Voting shares, in order to satisfy incentive schemes.  This represented 1.3 % of the called up 'A' Ordinary Non-Voting share capital at 30 September 2013.

 


The Company also purchased 4.7 million 'A' Ordinary Non-Voting shares having a nominal value of £0.6 million to match obligations under incentive plans. The consideration paid for these shares was £31.0 million.

 


At 30 September 2013 options were outstanding under the terms of the Company's 1997 and 2006 Executive Share Option Schemes, together with nil cost options, over a total of 3,507,058 (2012 4,929,968  2011 5,399,633) 'A' Ordinary Non-Voting shares.











20

SUMMARY OF THE EFFECTS OF ACQUISITIONS


In December 2012, the business Information segment acquired FirstSearch, a provider of environmental reports.

 


Provisional fair value of net assets acquired with FirstSearch:

 







Book value

Provisional fair value adjustments

Provisional fair value







£m

£m

£m

Goodwill 

  -

 16.1

  16.1

Intangible assets 

  -

7.6

 7.6

Trade and other receivables

0.7

  -

 0.7

Cash and cash equivalents

0.1

  -

 0.1

Trade and other payables

(0.2)

  -

(0.2)

Deferred tax


  -

(1.8)

(1.8)

Group share of net assets acquired

0.6

 21.9

  22.5










Cost of acquisition:









Cash paid in current year









£m

Cash








  22.5

Total consideration at fair value

  22.5










 

In March 2013, Euromoney acquired Insider Publishing Limited, a provider of international insurance and reinsurance.

 

Provisional fair value of net assets acquired with Insider Publishing Limited:

 







Book value

Provisional fair value adjustments

Provisional fair value







£m

£m

£m

Goodwill                                                                                                                   

  -

                    15.3

                     15.3

Intangible assets                                                                                                       

  -

                    10.7

                     10.7

Trade and other receivables

                           0.6

  -

                        0.6

Cash and cash equivalents

                           3.5

  -

                        3.5

Trade and other payables  

(2.8)

  -

(2.8)

Deferred tax



0.0

(2.3)

(2.3)

Net assets acquired                                                                                                              

1.3

23.7

25.0

 

Cost of acquisition:

 









Cash paid in current year









£m

Contingent consideration

                        8.3

Cash








                     16.7

Total consideration at fair value

25.0










 

Insider Publishing Limited contributed £3.1 million to the Group's revenue, £1.5 million to the Group's operating profit and £2.4 million to the Group's profit before tax for the period between the date of acquisition and 30 September 2013.

If the above acquisition had been completed on the first day of the financial year, Insider Publishing Limited would have contributed £5.3 million to the Group's revenue for the year and £2.1 million to the Group's adjusted profit before tax for the year.

 


A summary of notable acquisitions completed during the year were as follows:

 

Name of acquisition

Segment

% voting rights acquired

Business description

Date of acquisition

Consideration

Intangible assets acquired

Goodwill arising







paid

paid

paid







£m

£m

£m

TTI Technologies, LLC

Euromoney

87%

Private membership organisation for executives leading technology innovation in  global businesses

December 2012

5.1

2.9

2.9

Insider Publishing Limited

Euromoney

100%

International insurance and reinsurance

March 2013

25.0

10.7

15.3

Beat the GMAT, LLC

Business information

100%

Forum for on line business school applicants

October 2012

1.6

0.6

1.0

Renaissance Environment Limited

Business information

100%

Environmental risk management service provider

November 2012

0.9

0.3

0.6

Excido Pty Limited (Edumate)

Business information

100%

Provider of an on line student learning and management system

February 2013

3.8

2.0

 2.4

FirstSearch

Business information

100%

Provider of environmental reports

December 2012

22.5

7.6

16.1

Vessel Tracker

Business information

100%

Provider of marine vessel tracking data

April 2013

6.1

2.5

4.1










 


Provisional fair value of net assets acquired with all acquisitions:

 







Book value

Provisional fair value adjustments

Provisional fair value







£m

£m

£m

Goodwill 

  -

 52.2

  52.2

Intangible assets 

  -

 38.6

  38.6

Property, plant and equipment

0.1

  -

 0.1

Trade and other receivables

4.1

  -

 4.1

Cash and cash equivalents

7.0

  -

 7.0

Trade and other payables

(10.6)

  -

(10.6)

Corporation tax

(0.3)

  -

(0.3)

Deferred tax


  -

(5.5)

(5.5)

Net assets acquired

0.3

85.3

  85.6

Non-controlling interest share of net assets acquired

-

-

(1.4)

Group share of net assets acquired

0.3

 85.3

  84.2










Cost of acquisitions:







Non-cash

Cash paid in current year

Total







£m

£m

£m

Contingent consideration

 14.8

  -

  14.8

Cash






  -

 65.0

  65.0

Negative goodwill

4.4

  -

 4.4

Total consideration at fair value

 19.2

 65.0

  84.2










 


The amount of goodwill which is deductible for the purposes of calculating the Group's tax charge amounts to £nil.

 


The contingent consideration is based on future business valuations and profit multiples and has been estimated on an acquisition by acquisition basis using available data forecasts. The range of undiscounted outcomes for contingent consideration relating to acquisitions in the year is £nil to £26.8 million.  Certain contingent consideration arrangements are not capped since they are based on future business performance.

 


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.

 


If all acquisitions had been completed on the first day of the financial year, Group revenues for the year would have been £1,760.3 million and Group profit attributable to equity holders of the parent would have been £192.9 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 financial year.

 


Total profits attributable to equity holders of the parent since the date of acquisition for companies acquired during the year amounted to £3.3 million.

 


Goodwill arising on the 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.

 


Purchase of additional shares in controlled entities

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012








£m

£m

Cash consideration excluding acquisition expenses

 15.8

  14.8










 


During the year, the Group acquired additional shares in controlled entities amounting to £15.8 million (2012 £14.8 million). In addition, the Group opted to receive a scrip dividend from Euromoney Institutional Investor PLC (Euromoney) amounting to £nil (2012 £16.0 million) thereby acquiring a further nil % (2012 0.6 %) of the issued ordinary share capital of Euromoney. Under the Group's accounting policy for the acquisition of shares in controlled entities, no adjustment has been recorded to the fair value of assets and liabilities already held on the Consolidated Statement of Financial Position. The difference between the cost of the additional shares and the carrying value of the non-controlling interests share of net assets is adjusted in retained earnings. The adjustment to retained earnings in the year was a charge of £16.1 million (2012 £13.5 million).

 


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

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012








£m

£m

Cash consideration excluding acquisition expenses

 65.0

  47.7

Cash paid to settle contingent consideration in respect of acquisitions

6.9

 7.7

Cash and cash equivalents acquired with subsidiaries

(7.0)

(6.6)

Purchase of subsidiaries

 64.9

  48.8










 


Cash paid in respect of contingent consideration relating to prior year acquisitions includes £1.4 million within Business information and £2.6 million within Euromoney.

 


The businesses acquired during the year absorbed £5.6 million of the Group's net operating cash flows, £nil attributable to investing and £nil attributable to financing activities.

 

21

SUMMARY OF THE EFFECTS OF DISPOSALS


In November 2012 the Group announced it had reached agreement to sell its local media segment to Local World, a newly formed media group that combined the Group's local media titles with those of Iliffe News and Media Limited. The Group received consideration of £52.5 million and a 38.7 % share in Local World together with a working capital adjustment of £16.4 million.

 


The net assets disposed were as follows:

 









£m

Goodwill






 6.0

Intangible assets

 3.5

Property, plant and equipment

 6.5

Trade and other receivables

  23.7

Trade and other payables

(8.7)

Deferred tax



(0.2)

Net assets disposed

  30.8

Profit on sale of businesses

33.7









64.5










Satisfied by:




Cash received

  52.5

Cash received re working capital adjustment

  16.4

Fair value of 38.7 % investment in Local World

  27.5

Provision for directly attributable costs

(18.2)

Directly attributable costs paid

(13.7)









  64.5










 


During the period the local media segment absorbed £8.0 million of the Group's net operating cash flows, paid £nil in respect of investing activities and paid £nil in respect of financing activities.

 


A summary of other notable disposals completed during the year were as follows:

 

Name of disposal

Segment

Date of disposal

Fair value of consideration









£m

Central and Eastern European print and digital businesses

National media

November 2012

37.2










 


The impact of all disposals of businesses on net assets was:

 









Total










Goodwill






12.6

Intangible assets

4.0

Property, plant and equipment

18.0

Interests in joint ventures

1.1

Interests in associates

0.5

Inventories





 0.8

Trade and other receivables

26.9

Cash at bank and in hand

1.2

Trade and other payables

(15.4)

Deferred tax




(0.1)

Net assets disposed

49.6

Profit on disposal of discontinued operations

33.7

Profit on disposal of businesses

26.2









109.5










Satisfied by:





Cash received



97.2

Cash received re working capital adjustment

16.4

Fair value of 38.7% investment in Local World

27.5

Provision for directly attributable costs

(18.1)

Recycled cumulative translation differences

2.5

Directly attributable costs paid

(16.0)









109.5










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









£m

Cash consideration net of disposal costs

97.6

Cash and cash equivalents disposed with subsidiaries

(1.2)

Proceeds on disposal of businesses

96.4










 


The Group's tax charge includes £0.2 million (2012 £11.8 million) in relation to these disposals.

 


In addition, the Group's interest in Euromoney was diluted during the year by 0.2 % (2012 0.1 %). Under the Group's accounting policy for the disposal of shares in controlled entities, no adjustment has been recorded to the fair value of assets and liabilities already held on the Condensed Consolidated Statement of Financial Position. The difference between the Group's share of net assets before and after this dilution is adjusted in retained earnings. The adjustment to retained earnings in the year was a charge of £0.7 million (2012 credit £0.1 million).

 


All of the businesses disposed of during the year absorbed £9.2 million of the Group's net operating cash flows, had £nil attributable to investing and £nil attributable to financing activities.

 

22

DISCONTINUED OPERATIONS


In August 2012 the Group disposed of its 50.0 % joint venture investment in DMG Radio Investments Pty Ltd for proceeds of A$86.2 million (£56.1 million). This business was one of the Group's operating segments and represented the only operation in the radio segment.

 


In November 2012 the Group announced that it had reached an agreement to sell its local media segment to Local World, a newly formed media group that will combine the Group's local media titles with those of Iliffe News and Media Limited. The Group received consideration of £52.5 million and a 38.7% share in Local World together with a working capital adjustment of £16.4 million.

 


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

 








Unaudited

Audited








Year ending 30 September 2013

Year ending 30 September 2012








£m

£m

Revenue





 48.9

212.7

Expenses





(41.7)

(184.9)

Depreciation



  -

(1.8)

Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets

7.2

  26.0

Exceptional operating income/(costs)

3.6

(10.4)

Amortisation of intangible assets

  -

(0.3)

Operating profit before share of results of joint ventures and associates

 10.8

15.3

Share of profits from operations of joint ventures

  -

9.5

Share of amortisation of intangibles of joint ventures

  -

(3.2)

Share of joint ventures' interest receivable

  -

(1.7)

Share of joint ventures' tax

  -

1.6

Impairment of carrying value of associate

  -

(0.3)

Total operating profit

 10.8

21.2

Other gains and losses

  -

(0.1)

Profit before tax

 10.8

21.1

Tax charge



(1.5)

(9.3)

Profit after tax attributable to discontinued operations

9.3

11.8

Profit on disposal of discontinued operations

 33.7

  43.0

Tax credit on profit on disposal of discontinued operations

4.9

  -

Profit attributable to discontinued operations

 47.9

54.8










 


Cash flows associated with discontinued operations comprises operating cash flows of £7.9 million (2012 £27.8 million), investing cash flows of £nil (2012 £nil)  and financing cash flows of £nil (2012 £nil).











23

TOTAL ASSETS AND LIABILITIES OF BUSINESSES HELD-FOR-SALE


The Group has agreed to dispose certain businesses in the national newspaper 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 values with all losses taken to the Consolidated Income Statement.

 


In November 2012 the Group announced it had reached an agreement to sell its local media segment to Local World, a newly formed media group that will combine the Group's local media titles with those of Iliffe News and Media Limited. DMGT will receive consideration of £52.5 million and a 38.7 % share in Local World. The transaction is expected to complete in early 2013. In addition, several of the Group's Central European businesses were sold following the year end. Accordingly the assets and liabilities of these businesses were disclosed separately on the face of the Consolidated Statement of Financial Position in the prior year.

 








Unaudited

Audited








At 30 September 2013

At 30 September 2012








£m

£m

Goodwill




4.6

  12.2

Intangible assets

  -

 3.8

Deferred tax



  -

 6.4

Property, plant and equipment

1.9

17.7

Interests in joint ventures

  -

 1.1

Interests in associates

  -

 0.4

Inventories




  -

 0.6

Trade and other receivables

2.0

26.9

Cash at bank and in hand

0.6

2.6

Total assets associated with businesses held-for-sale

9.1

71.7










Trade and other payables

4.0

31.4

Provisions



0.2

2.2

Total liabilities associated with businesses held-for-sale

4.2

33.6










Net assets of the disposal group

4.9

38.1










 

24

RETIREMENT BENEFIT OBLIGATIONS


The Group