Preliminary Results 2009
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Thursday 26 November 2009
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Daily Mail and General Trust plc ('DMGT')
Group unaudited preliminary results for the year ended 4th October, 2009.
| Adjusted results * | Statutory results | ||||
| 2009 | 2008 | + Change | 2009 | 2008 | |
|---|---|---|---|---|---|
| Revenue | £2,118m | £2,312m | -8% | £2,118m | £2,312 m |
| Operating profit / (loss) | £278m | £317m | -12% | £(257)m | £27m |
| Profit/(loss) before tax | £201m | £262m | -23% | £(401)m | £(68)m |
| Earnings/(loss) per share | 37.2p | 47.9p | -22% | (80.1)p | 0.0 p |
| Dividend per share | 14.7p | 14.7p | 0% | ||
*(before exceptional items and amortisation and impairment of intangible assets; see Consolidated Income Statement and reconciliation in Note 9).
Statutory results reflect amortisation, impairments and exceptional items.
B2B RESILIENCE AND SIGNIFICANT COST SAVINGS
- Continued growth from business to business operations, including currency gains.
- Improvement in profitability* of UK consumer operations since March due to cost initiatives.
- Strong focus on cash generation with net debt down by £178 million since half year.
- Statutory results reflect restructuring actions taken and impairment charges.
- Sale of 50% interest in DMG Radio Australia.
- Final dividend maintained.
Martin Morgan, Chief Executive, said
"We have actively managed the business to defend profitability during unprecedented trading conditions with a clear focus on fundamentals. Revenue and cost initiatives of £150 million have been delivered and we have taken action on various underperforming assets across the Group. We remain focused on cash generation, debt reduction and cost efficiency.
Our B2B operations have demonstrated their resilience, growing their profits*, including currency gains. Our UK consumer businesses have achieved a sharp improvement in profitability* in the second half of the year reflecting more stable conditions and a lower cost base.
Our strategy of creating a diversified international portfolio of market-leading businesses in both B2B and consumer markets is proving to be effective in the current environment and leaves us well positioned for 2010 and
beyond."
A live webcast of the presentation of the Preliminary Results to City analysts will be available for viewing from 9.30 a.m. on 26th November, 2009 at http://www.dmgt.co.uk.
Enquiries
Peter Williams, Finance Director Tel: 020 7938 6631
Nicholas Jennings, Company Secretary Tel: 020 7938 6625
Andrew Honnor/ Tom Rayner, Tulchan Communications Tel: 020 7353 4200
Daily Mail and General Trust plc
Contents
- Management report
- Condensed Consolidated Income Statement
- Condensed Consolidated Statement of Recognised Income and Expenses
- Condensed Consolidated Statement of Changes in Equity
- Condensed Consolidated Balance Sheet
- Condensed Consolidated Cash Flow Statement
- Notes to the Condensed Consolidated Financial Statements
Management report
This management report focuses principally on the adjusted results to give a more comparable indication of the Group's underlying business performance. A discussion of restructuring and impairment charges and other items included in the statutory results is given after the divisional performance review and is set out in the segmental note. The adjusted results are summarised below:
Adjusted results* | 2009 £m | 2008 £m | Change |
|---|---|---|---|
| Revenue | 2,118 | 2,312 | - 8% |
| Operating profit | 278 | 317 | -12% |
| Income from joint ventures and associates | (1) | - | |
| Net finance costs | (76) | (55) | -36% |
| Profit before tax | 201 | 262 | -23% |
| Tax charge | (44) | (63) | +29% |
| Minority interest | (16) | (18) | +12% |
| Group profit | 141 | 181 | -22% |
| Adjusted earnings per share | 37.2p | 47.9p | -22% |
Summary and Outlook
Group revenue for the year was £2,118 million compared with £2,312 million for the prior year, a fall of 8%. Operating profit* was 12% lower at £278 million. Adjusted profits* before tax were £201 million, down 23% on the equivalent figure for last year, with all divisions, except Northcliffe Media, maintaining or increasing operating margins*.
The Group's B2B operations increased their overall profit* by 7%, benefiting from a 21% reduction in the average sterling: US dollar exchange rate over the year. The underlying# result was a fall of around 5%. The profits* of A&N Media were significantly lower for the year although the second half saw a large improvement in profitability. As a consequence, 73% of this year's operating profit* was generated from outside the Group's consumer operations, up from 60% last year.
Business to Business
Risk Management Solutions
- solid growth, despite higher than usual level of cancellations.
- now seeing more favourable insurance and related capital market conditions.
DMG Information
- Property businesses hit by significant falls in property transactions, recently seeing limited improvement in the UK.
- Non-property businesses continuing to grow well, with benefit from innovative new product lines.
Euromoney
- resilience of increased subscription revenues, now 47% of total revenues, although weakening into new year;
- partly protected by exposure to better performing emerging markets;
- excellent management of costs and margins*;
- expect tough first quarter, but has stepped up investment to take advantage of recovery when it comes.
DMG World Media
- softer bookings in second half, after good first half;
- more recently, encouraging attendances and booking trends, but yet to convert into revenues.
Business to Consumer
Associated Newspapers
- strength of Daily Mail brand produced maintained profits*, the second highest in its history;
- Sunday and free markets more challenged;
- nearly £80 million of cost savings achieved.
- advertising revenue trends improving in new year, but still down year on year, and with little forward visibility;
- will benefit this year from elimination of loss-making entities over last year and of expected lower newsprint costs.
Northcliffe Media
- suffered from substantial falls in core revenue categories;
- led to complete re-engineering of business, leading to £50 million of cost reductions which are still continuing;
- advertising revenues stable since February/March;
- reducing costs leading to improved profits* and margins.*
DMG Radio Australia
- good increase in profits* despite reduction in market revenue;
- improved revenue share and reduced costs;
- advertising market recently improved, so profit* growth expected for this year.
Net debt and financing
- after significant cash outflow in first half, net debt reduced by £ 178 million in second half;
- small increase in debt over year accounted for by movements in exchange rates;
- net debt ratios comfortably within covenants and £200 million of unused facilities at end of year;
- next maturity of £180 million of facilities not till September 2011;
- continued focus on debt reduction.
Statutory results
- statutory accounts loss of £401 million;
- includes charges for amortisation and impairment of assets (regional media, exhibitions, radio principally) of £443 million;
- also includes other exceptional items (mainly redundancy and reorganisation costs) and a tax credit of £138 million.
Divisional Review
Business to business
Risk Management Solutions
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 137 | 98 | +39% |
| Operating profit* | 42 | 31 | +37% |
| Operating margin* | 31% | 31% |
RMS produced solid growth with an increase in underlying# revenue of 7% and underlying# operating profit* of 9%, despite challenging market conditions worldwide. The reported results benefited significantly from the stronger dollar in which currency the majority of revenues are billed.
In spite of difficult economic and trading conditions, RMS achieved solid new sales bookings in the year. More than 80% of new sales were in its core modelling business with the rest in specific growth initiatives including Data Solutions. Growth was slowed to some extent in the first three quarters of 2009 by client cost cutting initiatives or by client withdrawal from certain lines of business leading to product swaps and partial reductions in annual licence fees. Industry merger activity also resulted in reductions.
Growth in its earlier stage capital markets business was hampered by those markets being virtually shut down for the first half of the year, which had a significant impact on RMS's efforts in this small but growing sector of its business. Catastrophe bond issuance was down more than 60% in fiscal 2009 as compared to fiscal 2008.
Prudent cost controls were initiated in response to a slower growth rate in revenues. RMS nevertheless maintained its investment programme to drive future growth. RMS added more than 60 new headcount in North America and Europe during the year. Investments were focused on the multi-year development effort on its next generation software platform and within its Emerging Risk Solutions group.
dmg information
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 230 | 217 | +6% |
| Operating profit* | 46 | 44 | +5% |
| Operating margin* | 20% | 20% |
In a year of turbulence for dmgi's markets, the robustness of our portfolio has been demonstrated and overall performance has been resilient with underlying improvement coming through in the second half.
In aggregate, dmgi's underlying# revenue and operating profit* (which now exclude RMS) reduced by 6% and 7% respectively. The businesses comprising dmgi are primarily US based and therefore the reported results benefit from year-on-year exchange rate movements.
Property
Operating profit* from the property information companies fell by 23% to £18 million, with revenues being 9% lower at £84 million. Despite this, margins* were still around 20% due to tight cost control. Underlying# revenues and operating profits* reduced by 19% and 36% respectively.
The volume of housing transactions in the UK was at all-time low levels throughout the year, having plunged dramatically in early 2008, and, whilst we saw some positive signs of recovery towards the end of the financial year, at times the monthly volumes were less than half of their historical norm. This affected Landmark Information Group revenues, albeit its market position is as
strong as ever.
The commercial property market volumes also declined significantly in both the U.S. and U.K. affecting Environmental Data Resources and Landmark respectively. Both companies continue to be innovative and expand their product offerings, whilst managing costs effectively in the current conditions.
Other markets
63% of dmgi's revenues comes from its companies operating in the financial, education, energy and geospatial markets. Revenue in these other markets was 17% higher year-on-year at £146 million and they contributed operating profits* of £32 million representing 26% growth. The underlying# revenue and operating profits were higher by 3% and 16% respectively.
In the financial information market, Trepp is the market leader of information to the Commercial Mortgage-backed Securities (CMBS) market and, in turbulent market conditions, the value of its data and analytics has been proven by the increasing frequency of use and growing revenues. Trepp was also selected by the Federal Reserve Bank of New York as the collateral monitor for CMBS as part of the Term Asset-Backed Securities Loan Facility (TALF). Trepp grew its underlying# revenues by 17%. Lewtan Technologies, also serving the financial information market, had a good year too, with record profits* and significant product enhancements in its offerings to the ABS investor market.
Hobsons, the education information business, grew underlying# revenues by 6% and improved margins*. Hobsons continues to pursue an aggressive growth strategy, focused on providing products to education professionals to assist in the preparation, recruitment, management and advancement of students. Naviance, the Hobsons' company providing solutions in the U.S. high school segment, grew particularly strongly.
Genscape, the leading provider of real-time information to the energy trading markets, grew its underlying# revenues by 12%. Whilst continuing to expand its geographic coverage of electricity supply data in the U.S. and continental Europe, the company also successfully launched new offerings to traders in the oil market and, during the forthcoming year, will grow products serving the natural gas markets.
Sanborn's revenues are primarily sourced from U.S. local, state and municipal budgets where funding has tightened significantly. Sanborn has performed well in the circumstances, and remains both profitable and in a market-leading position.
Throughout all the companies, costs have been managed aggressively and effectively as circumstances have demanded.
Dmgi is well placed to benefit in particular from a recovery in property transaction volumes and has used these tougher economic conditions to strengthen its market positions through continuing to enhance and develop products across all its markets.
dmg world media
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 175 | 202 | -13% |
| Operating profit* | 37 | 38 | -3% |
| Operating margin* | 21% | 19% |
Dmg world media, like the rest of the exhibition industry, experienced softer bookings for many of its shows which translated into lower revenues. Actions taken in the year on cost initiatives, together with the continued divestment of non-core business lines, enabled its full year operating profit* to be only slightly below that of last year with an increased margin*. Underlying# revenues, adjusted for non-annual events, decreased by 9% and operating profit* by 5%.
Business to business (B2B)
Revenues were down 10% to £149 million and profits* down 12% to £36 million. Underlying# revenues and profits* were down 8% and 9%, respectively. The Dubai sector, comprising construction, interior design and hospitality shows, reported a 19% increase in revenues and a 20% increase in profits*. Performance in the Oil and Gas portfolio was driven by one of its largest
shows, the biennial ADIPEC, which more than doubled its profits from its previous show. However, a decline in the profits of its BMI and Australasia businesses had a detrimental effect on the B2B profits. The BMI business was sold in September. During the year, dmg world media divested its West Coast gift shows, which had underperformed.
Business to Consumer (B2C)
As a result of disposals in the last two years, B2C is now a small part of the division, with all publications fully divested and only a small number of remaining exhibitions. Overall, the B2C division, driven by a decline in the UK consumer business and certain Art & Antiques businesses now divested, performed poorly, with revenues down 24% to £26 million and losses* unchanged at £3 million.
Euromoney Institutional Investor
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 318 | 332 | -4% |
| Operating profit* | 77 | 76 | +1% |
| Operating margin* | 24% | 23% |
Euromoney announced its preliminary results last week. Operating profit* rose by 1% despite a 4% fall in revenues due to cost savings and the benefit of foreign exchange movements.
These results continue to highlight the success of Euromoney's strategy to build a more resilient and better focused global information business. Subscription revenues increased by 24%, in sharp contrast to the declines in other revenue streams, and now account for 47% of total revenues against 37% in 2008. Similarly, the profits* from databases and information services, which include some of the highest margin products in Euromoney and are derived mostly from subscription products, accounted for 36% of its operating profits*, compared to 21% a year ago.
The performance of Euromoney's various revenue streams reflects the timing of the reaction of its customers to the global credit crisis in reducing their costs. For the past three quarters, the year-on-year declines in advertising and sponsorship (-20%) and delegate revenues (-30%) have been running at similar rates. In contrast, subscription revenues grew by a third in the first
half, and have continued to grow in the second half, although the rate of growth has slowed rapidly.
Euromoney's activities outside finance are in sectors traditionally less volatile, and which follow different cycles. Among these sectors, metals, minerals and mining under the Metal Bulletin brand, telecoms and legal publishing all achieved good growth; only the energy sector was weak. Within Databases and Information Services, demand for BCA's high quality, independent
macro-economic research has proved robust despite the shrinking of the asset management industry.
Emerging markets, which account for nearly half of Euromoney's revenues, were less exposed to the excess leverage and complex financial products that have characterised the credit problems in North America and Europe, and have come through the credit crisis well.
Tight control of costs and focus on high quality, high margin products was critical to Euromoney's success in 2009. Operating margin* improved as cost cuts were implemented early in the year, leading to exceptional restructuring costs of £11 million, low margin products were eliminated quickly, and continued product investment ensured the growth in higher margin electronic
publishing products was maintained.
Consumer media
A&N Media
Given the unprecedented trading conditions, A&N Media took decisive action on costs and achieved its cost reduction target in September. Headcount (excluding the Evening Standard) fell by over 1,600 (16%) in the year, including the job losses from the closure of three regional printing plants at Grimsby, Leicester and Bristol. As a consequence, an exceptional restructuring charge of £101 million was made. As expected, the benefit of significantly lower costs came through in the second half of the year.
The results of Associated and Northcliffe benefited from the inclusion of an extra week's trading, but all underlying# year on year comparisons are on a like-for-like basis, comparing 52 weeks with 52 weeks and, for Associated, exclude the Evening Standard.
Associated Newspapers
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 876 | 988 | -11% |
| Operating profit* | 62 | 73 | -15% |
| Operating margin* | 7% | 7% |
In the face of extremely challenging economic conditions throughout the financial year and continued competitive activity in the London evening newspaper market, Associated achieved a very satisfactory result. This was largely due to another strong performance by the Daily Mail, which produced the second highest profit* in its history, maintained from last year. Total revenues were down £112 million, despite stable circulation revenues, due to a 14% fall in underlying# advertising revenues and to the sale of the Evening Standard. However, the cost reduction programme, together with the sale of the Evening Standard, restricted the fall in operating profit* to £11 million and year on year profits* increased in the second half of the year.
Newspaper operations
Circulation revenue at £366 million was down an underlying# 2%. The circulation of both the Daily Mail and The Mail on Sunday fell marginally more than the market, reflecting the decision to direct promotional activity away from CD and DVD giveaways towards a sustained direct marketing campaign to recruit more long term loyal purchasers. In consequence, circulations have
been stable in recent months.
Total advertising revenues were £350 million, down an underlying# 15%. Display advertising was down by an underlying# 16% to £281 million. By sector, all categories were lower, but retail, our largest category, was the best performer. The Daily Mail's readership remains extremely attractive particularly to retail advertisers. Underlying# classified advertising, which is not dependent on property and jobs, fell by only 12% to £60 million. Underlying# digital revenue from the newspaper titles' companion sites was up 11% in a competitive market, buoyed by the success of the MailOnline brand. London Lite traded in line with last year, with advertising only an underlying# 4% down, but, following the decision of the Evening Standard to go free, it was closed on 13th November after consultation with its employees.
The reported profits* are stated after charging losses made by the Evening Standard for the first five months of the year, prior to its sale.
Associated Northcliffe Digital
AND's portfolio of digital businesses continued to build market share amidst difficult economic conditions. Revenue fell by an underlying# 20% to £70 million as a result of the economic slowdown across all of AND's core vertical markets. The Jobs and Property businesses were particularly affected, though both of these companies outperformed the decline in transaction volumes in their respective markets. Profitability was further reduced by the strategic investments in Jobsite's marketing campaign, including TV and Portsmouth FC sponsorship and overall was down £5 million.
Teletext's operating loss* increased by £1 million to £4 million due to the continuing decline in television revenues, despite further significant actions on cost reduction. In July we announced the planned closure of the majority of Teletext's television business in early 2010. The remaining businesses, which are profitable and show good profit growth potential, now form AND's travel and television divisions, focusing around the company's online travel activities.
Northcliffe Media
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 328 | 420 | -22% |
| Operating profit* | 24 | 68 | -65% |
| Operating margin* | 7% | 16% |
Northcliffe's portfolio of titles in the UK and in central Europe were badly affected by weak advertising markets. All categories were under pressure but particularly recruitment, property and motors. The company responded by initiating a range of significant restructuring activities. Overall, Northcliffe's underlying# operating profit was down £45 million, with revenues
down £98 million, offset by cost reductions of £53 million.
UK
UK operating profits* fell by £40 million (67%) to £20 million. Revenues were down by £89 million (24%) to £285 million with underlying# advertising revenues down by 30% to £201 million in unprecedented trading conditions for local newspapers. Newspaper sales were also affected by the recession, as households scaled back on discretionary expenditure.
By category, the increase in unemployment levels took its toll on recruitment advertising revenues, both print and digital. Underlying# recruitment revenues declined by 49%. In the property category, the weak residential market continued as estate agents and new home builders continued to scale back advertising spend. Underlying# revenues fell by 46%. The rate of year-on-year decline slowed to 18% in the month of September. Underlying# motors advertising fell by 24% in 2009. Retail advertising, Northcliffe's largest category in 2009, fell by an underlying# 20%. All other categories combined contracted by an underlying# 11%.
Newspaper circulation revenues fell by an underlying# 7% to £70 million. Only a handful of cover price increases were implemented during the year. For the January to June 2009 ABC period, our dailies were down 9% compared with an
industry average of 8%. The weekly titles recorded a fall of 8%, which was in line with the industry average decline.
This loss of print circulation contrasts with the rise in our digital audience. The number of visitors across our entire digital network rose by 31% in September 2009, compared to September 2008. Digital advertising revenue of £17 million was in line with last year despite a decline in recruitment revenues of 35%. Growth was achieved across all other categories, particularly property
where our improved digital property offering continued to gain estate agent support. Progress was also made by motors.co.uk. Retail and leisure digital advertising also recorded impressive growth.
The scale of revenue attrition forced a radical review of our cost base and operating model with Northcliffe embarking upon a major restructuring programme which delivered savings across all departments. This review also resulted in some rationalisation of the product portfolio.
Central Europe
Profits* for the year of £4.3 million were £4 million (49%) below last year. Underlying# revenues fell by £5.5 million (11%) as a result of weak markets in printed media for recruitment, motors and retail advertising. Print advertising revenues declined by 24% while online revenues were down 1% in the year. Circulation revenues were in line with last year.
After growth of 29% in the first quarter, underlying# digital revenues deteriorated and by September were 22% below the prior year. Digital recruitment revenue declines have been offset partially by online revenue growth from the expansion of the digital network in the Czech Republic and Hungarian classified and property websites.
Cost saving measures were implemented to mitigate the revenue shortfalls. Headcount reductions of 132 (15%), were achieved, alongside pagination and promotional spending cuts.
DMG Radio Australia
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Revenue | 55 | 55 | +1% |
| Operating profit* | 4 | 2 | +85% |
| Operating margin* | 7% | 4% |
DMG Radio Australia significantly outperformed the radio market, which experienced a decline of 4.6% on the prior year. Underlying# profitability increased by 21% reflecting the resilient performance in attaining revenue across the eastern states as well as a successful cost reduction programme.
Network performance
The Nova network results were driven by strong performance in Sydney where Nova 969 increased its revenue share for the year from 14.4% to 15.3% in a market which declined 10.4% and also performed strongly in national revenues from Sydney on to other Nova stations.
The Nova Network achieved the number one ranking for 18-39 in every market for the critical breakfast timeslot in Survey 6, 2009 and held the number two position overall for 18-39 for the year. Nova Brisbane continued its dominance of the Brisbane market, achieving the No 1 overall position for 18-39 in every survey across the year.
Vega FM stations in Sydney and Melbourne experienced strong growth in revenues of 12.4%, also significantly outperforming the market. Vega Sydney held its overall share of its target demographic of 40-54 for the year, with Vega Melbourne significantly increasing its share to the number two FM position in August.
Subsequent event
DMGT has today announced that Illyria, the private investment vehicle of Mr Lachlan Murdoch, has acquired a 50% interest in DMGRA, which will therefore be a 50:50 joint venture between DMGT and Illyria. Mr Murdoch will become chairman of DMGRA. Net proceeds to DMGT from the transaction are estimated to be A$112 million (£63 million). We do not expect there to be a material profit or loss arising from this transaction.
Other income statement items
Net finance costs
| 2009 £m | 2008 £m | Movement % | |
|---|---|---|---|
| Net interest payable and similar charges | (77) | (75) | -2% |
| Swap premia income | 1 | 20 | - 96% |
| (76) | (55) | -36% |
Net interest payable and similar charges (excluding swap premia but including deemed finance charges and interest receivable) rose by £2 million to £77 million with the higher sterling value of interest on fixed US$ liabilities offset by lower interest rates on floating rate debt.
Income from tax equalisation swap premia fell by £19 million. The tax equalisation swap premia structure includes foreign exchange hedges which generate foreign exchange movements with an equal and opposite movement in the Group's tax position. This resulted in a £28 million exceptional charge to net interest and an equal credit to taxation (2008 £68 million).
Other items
The Group's share of the results* of its joint ventures and associates fell by £1.5 million to a loss of £1.1 million. The profits of DMG Radio Australia's joint ventures were offset by our share of the losses of India Today.
The Group has charged £99 million as exceptional operating costs. This charge comprised reorganisation, restructuring and closure costs mainly within Associated, Northcliffe and DMG World Media, offset by pension curtailments of £25 million. Of this, £50 million represents expenditure during the year and a further £37 million will be spent during 2009/10; the balance represents
non-cash items.
The charge for amortisation of intangible assets fell by £1 million to £89 million. The Group also made an impairment charge of £347 million, principally relating to assets acquired in recent years by Northcliffe (£94 million), DMG Radio (£93 million) and DMG World Media (£89 million).
The Group recorded other net losses of £24 million, compared to net gains of £ 28 million in the prior period. This comprised mainly exceptional losses on the sale of consumer businesses and write offs of investments, offset partly by exceptional profits on the sale of properties. There were also £36 million of exceptional finance charges which included foreign exchange hedges.
Taxation After allowing for the effect of exceptional and other items that are not expected to recur, the underlying tax rate fell from 24.0% to 22.1%. The continued low rate reflects tax reductions from tax-efficient financing and tax deductible amortisation in the US that are expected to recur.
There were net exceptional credits of £139 million, being the deferred tax credits on goodwill and intangible assets, (£52 million), tax credits on exceptional items (£24 million), the write back of provisions arising from the agreement of certain prior year open issues with tax authorities (£35 million) and the £28 million credit on foreign exchange hedges.
Pensions The deficit on the Group's defined benefit pension schemes has increased from £ 41 million last year end to £430 million at 4th October, 2009 (calculated in accordance with IAS 19). This change is primarily due to an increase in the value attributed to its liabilities because of lower bond yields, augmented by a fall in the market value of the schemes' assets. The funding agreement with the trustees remains in place until replaced by a new agreement reflecting the results of the 2010 triennial valuation.
Net debt and cash flow Net debt has fallen by £178 million since the half year, but rose marginally during the full year from £1,015 million to £1,049 million, principally due to an increase of £50 million from the depreciation of sterling against the US dollar. The Group generated trading cash flow of £296 million and disposal proceeds of £28 million. These funded acquisitions of £73 million, capital expenditure of £40 million, taxation (including related tax equalisation payments) of £83 million, interest of £42 million and dividends totalling £65 million.
Acquisitions were largely pre-contracted earn-out payments and other deferred consideration. Disposals were of properties and businesses, principally the sale of the Antiques Trade Gazette in October 2008.
As expected, net debt was reduced sharply in the second half of the year and we intend to reduce it further. Most of the Group's debt remains in long-term bonds, the earliest of which is not repayable until 2013. At the year end, the Group had £839 million of Bonds due for repayment in 2013, 2018, 2021 and 2027. It also had £180 million of committed banking facilities available to it until September 2011 and £240 million until September 2013. Consequently, the Group has sufficient committed debt facilities to meet its foreseeable requirements. It had surplus committed facilities of £200 million at the year end.
The Group's ratio of year end net debt to adjusted profits* before interest, depreciation and amortisation (EBITDA) was 3.1 times, above the Group's target of 2.5 times but is comfortably within the requirements of the Group's bank covenants. The Group's interest cover, calculated as the ratio of EBITDA to net interest payable (excluding swap premia), was 4.5 times this year, down from 5.8 in 2008, but well above the required 3 times.
Other financing The Group utilised 10,184,237 'A' Ordinary Non-Voting shares out of treasury in order to meet obligations to provide shares under various incentive plans valued at £29 million. It also acquired 1,626,058 such shares in treasury for £ 5.6 million. Following these transfers, DMGT has 382.9 million shares in issue (excluding shares held in treasury).
DMGT took its share of dividends from Euromoney in the form of a scrip. This enabled it to mitigate the dilutive effect of the vesting of the second tranche of Euromoney's CAP, thereby maintaining its equity interest at just under 67%. It is the Board's current intention also to take Euromoney's forthcoming final dividend in the form of a scrip.
Dividend The Board is recommending payment on the issued Ordinary and 'A' Ordinary Non-Voting shares of the Company of a final dividend of 9.90 pence per share for the year ended 4th October, 2009 (2008 9.90 pence). This will make a total for the year of 14.70 pence (2008 14.70 pence per share). The final dividend will be paid on 12th February 2010 to shareholders on the register at close of business on 4th December 2009.
Principal risks and uncertainties The principal risks and uncertainties the Group faces vary across the different businesses and are the focus of the Risk Committee. These risks are identified in the DMGT Group Risk Register. The materiality of each risk is assessed against a framework to determine its significance and likelihood of occurrence. The Risk Register is used to determine the agenda and activity of the Risk Committee. The most material risks identified in the Risk Register, together with the steps taken to mitigate them, are described below.
The geographic spread and diverse portfolio of businesses within the Group help to dilute the impact of some of the Group's key risks. Certain of these risks are interdependent and should not be considered in isolation.
Exposure to changes in the economy and customer spending patterns The current economic climate, especially in the UK and US economies, continues to represent a significant risk to the Group. A significant (although decreasing) proportion of our revenue is derived from advertising, which has historically been cyclical, and has reduced as a result of the downturn in the global economy. A similar effect has been seen in our businesses that rely on non-advertising revenues in the financial and property markets. Despite the difficult trading conditions in these businesses, our long term strategy of diversifying the Group's portfolio, especially into business information and subscription revenue streams, and our commitment to invest in our core brands, puts us in a strong position both now and when growth returns. The impact of technological and market changes on our competitive advantage Our businesses operate in highly competitive environments that can be subject to rapid change. Our products and services, and their means of delivery, are affected by technological innovations, changing legislation, competitor activity or changing customer behaviour. A structural change in the advertising markets resulting in significant advertising moving away from our traditional products to the internet has affected our results both positively and negatively. We have developed an internet strategy for each of our main segments of advertising revenue.
The decentralised autonomous culture of the Group encourages an entrepreneurial approach to the development of new opportunities in response to these threats and we must continue to invest and adapt to remain competitive. Our strategy of diversification and willingness to take a long-term view helps us to react to these challenges and opportunities. Pension scheme shortfalls We operate defined benefit pension schemes for our newspaper divisions and certain senior executives. Reported earnings may be adversely affected by changes in our pension costs and funding requirements due to lower than expected investment returns, demographic changes and increased life expectancy. Recent turmoil in global equity markets and reduced bond yields has increased this risk, which is considered with the scheme trustees as part of discussions around the three yearly actuarial valuation. A funding approach and a revised asset allocation strategy, designed to reduce and diversify the risk inherent in the investment portfolios, have been agreed and implemented. The cash flow of the main defined benefit scheme is broadly neutral so the trustees have not needed to sell assets to any material extent in these depressed markets. The next valuation will be undertaken as at 31st March, 2010. These actions have been supplemented by the recently announced closure of the scheme to new employees, changes to benefits and further proposals to be introduced next year that are designed to deal with the ongoing risk to the balance sheet created by defined benefit pension liabilities. By next year a programme to install updated, consistent defined contribution pension plans in all divisions will be complete, a further measure to control pension liabilities and costs incurred by the Group.
Impact of a major disaster or outbreak of disease The first wave of the H1N1 influenza pandemic was not as severe as first predicted and had only a limited impact on DMGT. It is, however, possible that there will be a further wave in the northern hemisphere coinciding with the 2009/10 winter flu season. At present the virus is at the low end of the virulence spectrum; however it is impossible to predict whether the virus will mutate into a more virulent and severe form. A second wave could affect the Group's ability to produce and deliver its products, reduce the demand for them, or affect our cost base. Some of our events businesses are more sensitive to a pandemic as the success of certain events can depend on confidence in global travel.
Business continuity plans including specific pandemic planning measures have been implemented across the Group. We have called upon specific pandemic modelling expertise within RMS to give us the best available insight into the likely spread of the pandemic and issued regular communications to senior divisional management and staff members. In addition we have implemented a pandemic influenza management scheme that includes provision of anti-viral medication to our staff. Our planning in advance of the recent events and since have allowed our businesses to be well prepared and to respond quickly as new information becomes available to protect our staff, brands and reputation.
Reliance on key management and staff retention In order to pursue our strategy, we are reliant on key management and staff across all our businesses. We cannot predict with certainty that we will enjoy continued success in our recruitment and retention of high quality management and creative talent.
Our Group Human Resources Director has worked with divisional and executive management across the DMGT divisions to implement a formal approach to talent management and succession planning. This includes payment of competitive rewards, employee performance and turnover monitoring and a variety of approaches to staff communication.
Commercial Relationships including: volatility of newsprint DMGT is reliant on a number of commercial relationships with key suppliers and third parties. A significant change to the commercial terms under which we trade or a loss of any of these key relationships could have a material impact on the Group's financial results and ability to trade.
An example of this is newsprint which represents a significant proportion of our costs within the newspaper divisions. Newsprint prices are subject to volatility arising from variations in supply and demand. Generally, these variations are not large, but from time to time changes are significant. In response to this, significant time and resources are committed to developing these relationships to ensure they continue to operate satisfactorily. The Group's newsprint requirements are also monitored by the board of Harmsworth Printing (to which the duties of the Newsprint Committee were transferred in October 2009) and, where possible, long term arrangements are agreed with suppliers to limit the potential for volatility. Acquisition and disposal risk There are risks to our ability to achieve optimal value from disposals including the incorrect timing of any sale, the inability to identify and agree a deal with a purchaser, the unsuccessful separation of a business and management of any related costs, as well as the failure to realise any other anticipated benefits of a disposal. This risk is particularly pertinent, given the current economic climate.
As well as launching and building new businesses, an integral part of our success has, and will continue to be, the acquisition of businesses that complement our existing products or expand the scope of our expertise into new markets. A number of risks are inherent within any strategy to acquire. The Group generally acquires businesses with a high potential for growth in related markets. The majority of acquisitions considered are smaller add-on acquisitions, which reduces the size of the risk of each acquisition to the Group.
Reliance on IT infrastructure All of our businesses are dependent on technology to some degree. Information systems are critical for the effective management and provision of services around the Group. Disruption to our information technology infrastructure or failure to implement new systems effectively could result in lost revenue and damage our reputation. Dedicated project management teams are used to manage the risk in any change project and business continuity plans are in place in each division to protect existing systems. Information security Information security has become an important issue in recent years as a result of several high profile losses of data. Any future breach in our data security could have a harmful impact on our business and reputation. A Group-wide policy has been set and the Risk Committee have overseen the implementation of this policy in all divisions.
Climate change The risks associated with climate change include the introduction of or increase in legislation and regulation of the environmental impact of our operations. In the longer term, the physical impact of climate change could affect our business locations, distribution routes or third party suppliers. A Group wide review of the impact of climate change was performed in 2008 to identify the key risks and opportunities for the Group presented by future climate change.
Legal and regulatory DMGT businesses are subject to varying legislation and regulation across several jurisdictions including health and safety and employment law as well as more specific regulations such as from the Office of Fair Trading and the Audit Bureau of Circulation. The impact of this legislation or regulations could adversely affect the results and future trading of the business. Whilst employees need to be responsible for their own health and safety, they are made aware of health and safety and of employment rights through the employee handbook. A Group-wide code of conduct highlighting key legal and regulatory issues affecting our businesses and working practices has been developed and distributed in the year. Controls are also in place surrounding compliance with the ABC's regulations and other regulatory bodies to which we adhere. Treasury Risk There are a number of risks arising from the Group's Treasury operations including currency exchange rate fluctuations impacting on the Group's reported earnings, liquidity risk, interest rate risk and debt levels. The current problems in global financial markets as a result of the credit crunch and banking crisis heighten the risk in this area. In addition the treasury function within DMGT undertakes high value transactions and therefore there is inherently a risk of treasury fraud or error. These risks are as follows:
(a) Liquidity Risk It is the Group's policy to have sufficient surplus borrowing headroom such that its development is not constrained. The Group is funded by a mixture of equity, debt and retained profits. Debt consists mainly of committed bank facilities and bonds. The bank facilities provide the Group with flexibility for operational requirements and acquisitions. Overdraft facilities are also utilised. The bonds currently in issue consist of four sterling Eurobonds. Maturities of debt are maximised and spread in order to avoid the requirement for significant repayments at any point in time. In September, the Group raised a further £25 million of funding through a sale and hire purchase back amortising over eight years. Surplus funds are generally used to pay down bank debt. If temporary surpluses arise, they are generally deposited in money market accounts with banks that provide bilateral credit lines. Covenants on debt instruments are kept to a minimum, even if this results in marginally higher interest costs. External finance is unsecured and is usually an obligation of the Company or its immediate subsidiary, rather than of trading subsidiaries. This gives operating management maximum flexibility to run the business without the distraction of meeting short-term financing requirements. Although the Group's bank facilities are multicurrency, the limit to total drawings available is denominated in sterling. During the year the increase in value of the Group's US dollar drawings reduced the unutilised committed facilities below the Group's £100m target. This liquidity risk was eliminated through normal cash inflow and by increasing the Groups borrowing facilities, releasing facilities used for Letters of Credit and by using medium term forward sales of US$ as an alternative to borrowing in US dollars. (b) Foreign Exchange Risk
(i) Transaction Risk Most of the Group's businesses do not transact cross-border: hence multi-currency transaction risk is not substantial. The main exception is Euromoney which has net receipts in US dollars and Euros and net payments in sterling and Canadian dollars. Euromoney has a series of US dollar and Euro forward sale contracts in place up to two years forward to meet its sterling and Canadian dollar outgoings. Other than in Euromoney, there were no significant foreign currency forward contracts in existence that hedge revenues or costs. Major items of capital expenditure in foreign currency are fixed using forward currency purchases.
Tax on non-trading exchange rate movements is hedged, using cross currency swaps and forward currency contracts. The Group's internal financing structures give rise to foreign exchange gain or losses which are either taxable or tax deductible. Where appropriate, the Group enters into market derivatives to hedge this exposure in economic terms through Tax Equalisation Swaps (TES). However, IAS 12 prohibits TES gains and losses from being shown net in the tax line and as a result increased volatility is introduced in the income statement. This year's profit before taxation has been reduced by £32 million (2008 £68 million) in relation to these structures and tax payable has been reduced by a similar amount. Both have been removed in arriving at adjusted profits*. These transactions are unlikely to continue at the same level in the near future.
(ii) Translation Exposure Borrowings are principally incurred in sterling, with lesser amounts in US dollars and other currencies. Generally, the proportion of foreign currency debt (after allowing for any hedging instruments) to total net debt is managed to be approximately equal to the proportion of foreign EBITA, compared to total Group EBITA. During 2009 this policy was suspended and US$ liabilities were below this target and they remain so. This was to ensure that the Group minimised both liquidity risk and the risk of failing bank covenants. As the financial position is now clearer the Group will move back to its policy stated above. A substantial proportion of non-sterling debt liabilities are created through the use of foreign exchange derivatives which are treated as net investment hedges. The consequence of this policy is that the Group's significant foreign earnings are not hedged back to sterling.
(iii) Economic Exposure A substantial proportion of the Group's value relates to foreign subsidiaries, in the US in particular. The foreign currency debt described above is only a partial hedge of this economic exposure.
(iv) Netting The Group may offset currency risks on trading, capital expenditure, tax and borrowings and only hedge the net exposure. This may result in not obtaining IFRS hedge accounting.
© Interest Rate Risk The Group aims to have approximately 70% of forecast net debt to 80% of target net debt as fixed interest rate liabilities. It aims to achieve this ratio over the medium term and it is applied to each of the Group's main currencies. During 2009 the currency policy was suspended and US$ liabilities were below this target and they remain so. This was to ensure that the Group minimised both liquidity risk and the risk of failing bank covenants. As the financial position is now clearer the Group will move back to its policy stated above.
The predictability of interest costs is deemed to be more important than the possible opportunity cost foregone of achieving lower interest rates. Borrowings are made in either fixed or floating rates. Interest rate swaps, cross currency swaps, and options are used to help attain the Group's target level of fixed interest rate debt. The maturity dates are spread in order to avoid interest rate basis risk and also to negate short-term changes in interest rates. At the year end, fixed interest rate debt represented approximately 80% of total net debt (including options which are not treated as effective hedges under IFRS).
(d) Counterparty Risk Counterparties and their credit ratings are regularly reviewed by Group Treasury. The Group has counterparty limits for banks with long term credit ratings of 'AA' or better, and a lower limit for single 'A' rated banks. Typically this is banks that extend credit facilities to the Group. The Group does not expect any counterparties to be unable to meet their obligations. Tax risk The Group operates within many jurisdictions; our earnings are therefore subject to taxation at differing rates across these jurisdictions. Whilst we endeavour to manage our tax affairs in an efficient manner, due to an ever more complex international tax environment there will always be a level of uncertainty when provisioning for our tax liabilities. There is also a risk of tax laws being amended by authorities in the different jurisdictions in which we operate which would have an adverse effect on our financial results. Working with divisional management and external experts we have a team of in-house specialists who review all tax arrangements within the Group and keep abreast of changing legislation. The Viscount Rothermere Chairman
- References to operating profit or loss or share of the results of joint ventures and associates in the narrative above are to adjusted operating profit or loss or adjusted share of the results of joint ventures and associates before amortisation and impairment of intangible assets and exceptional items); see notes 2 and 3.
- Underlying revenue or profit is revenue or profit on a like for like basis, adjusted for acquisitions and disposals made in the current and prior year and at constant exchange rates. In the case of A& N Media, the underlying percentage movements compare 52 weeks with 52 weeks.
The average £: US$ exchange rate for the year was £1: $1.55 (against £1:$1.97 last year). The rate at the year end was $1.59 (2008 $1.84).
For further information
For analyst and institutional enquiries:
Peter Williams, Finance Director Tel: 020 7938 6631
Nicholas Jennings, Company Secretary Tel: 020 7938 6625
For media enquiries:
Andrew Honnor/ Tom Rayner, Tulchan Communications Tel: 020 7353 4200
Analysts' presentation and webcast
A presentation of the Preliminary Results will be given to investors and analysts at 9.30 a.m. on 26th November, 2009 at the City Presentation Centre, 4 Chiswell Street, Finsbury Square, London EC1Y 4UP. There will also be a live webcast available on our website: http://www.dmgt.co.uk.
Next trading update
The Group's next scheduled announcement of financial information will be its first quarter interim management statement on 10th February 2010.
DMGT plc
Condensed consolidated income statement
for the 53 weeks ending 4th October, 2009
| Unaudited 53 weeks ending 4th October 2009 £m | Audited 52 weeks ending 28th September 2008 £m | |
|---|---|---|
| CONTINUING OPERATIONS | ||
| Revenue | 2,117.5 | 2,311.7 |
| Operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets | 277.6 | 316.9 |
| Exceptional operating costs | (99.2) | (31.8) |
| Amortisation and impairment of goodwill and intangible assets | (435.7) | (258.1) |
| Operating (loss)/profit before share of results of joint ventures and associates | (257.3) | 27.0 |
| Share of results of joint ventures and associates | (8.7) | 3.5 |
| Total operating (loss)/profit | (266.0) | 30.5 |
| Other gains and losses | (23.5) | 27.7 |
| (Loss)/profit before net finance costs and tax | (289.5) | 58.2 |
| Investment revenue | 2.2 | 3.0 |
| Finance costs | (113.8) | (129.3) |
| Net finance costs | (111.6) | (126.3) |
| Loss before tax | (401.1) | (68.1) |
| Tax | 94.5 | 84.7 |
| (Loss)/profit after tax from continuing operations | (306.6) | 16.6 |
| DISCONTINUED OPERATIONS | ||
| Profit from discontinued operations | 1.2 | 0.2 |
| (LOSS)/PROFIT FOR THE YEAR | (305.4) | 16.8 |
| Attributable to: | ||
| Equity shareholders | (303.4) | - |
| Minority interests | (2.0) | 16.8 |
| (Loss)/profit for the year | (305.4) | 16.8 |
| (Loss)/earnings per share | ||
| From continuing operations | ||
| Basic | (80.1)p | 0.0p |
| Diluted | (80.1)p | (0.2)p |
| From discontinued operations* | ||
| Basic | 0.3p | 0.1p |
| Diluted | 0.3p | 0.1p |
| From continuing and discontinued operations * | ||
| Basic | (79.8)p | 0.1p |
| Diluted | (79.8)p | (0.1)p |
| Adjusted earnings per share* | ||
| Basic | 37.2p | 47.9p |
| Diluted | 37.2p | 47.7p |
DMGT plc
Condensed consolidated statement of recognised income and expense
for the 53 weeks ending 4th October, 2009
| Unaudited 53 weeks ending 4th October 2009 £m | Audited 52 weeks ending 28th September 2008 £m | |
|---|---|---|
| (Loss)/profit for the year | (305.4) | 16.8 |
| Foreign exchange differences on translation of foreign operations | 39.8 | 58.8 |
| Fair value movements on available-for-sale investments | 1.4 | - |
| Losses on cash flow hedges | (4.5) | (17.5) |
| Change in value of net investment hedges recorded in equity | (41.9) | (45.3) |
| Actuarial loss on defined benefit pension schemes | (424.5) | (110.4) |
| Deferred tax on actuarial movement | 118.9 | 30.9 |
| Deferred tax on other items recognised directly in equity | 1.7 | 9.1 |
| Current tax on items recognised in equity | - | 1.0 |
| Share of associates items recognised in equity | (2.4) | - |
| Net deficit recognised directly in equity | (311.5) | (73.4) |
| Transfers | ||
| Translation reserves recycled to income statement on disposals | 0.9 | (0.1) |
| Transfer of gain/(loss) on cash flow hedges from translation reserve to income statement | 3.5 | (2.9) |
| 4.4 | (3.0) | |
| Total recognised income and expense for the year | (612.5) | (59.6) |
| Attributable to : | ||
| Equity shareholders | (613.9) | (75.0) |
| Minority interests | 1.4 | 15.4 |
| (612.5) | (59.6) |
DMGT plc
Condensed consolidated reconciliation of movements in equity
for the 53 weeks ending 4th October, 2009
Unaudited Audited
52 weeks
ending
53 weeks ending 28th
4th October September
2009 2008
£m £m
Total recognised income and expense for the year (612.5) (59.6)
Dividends paid (55.3) (56.3)
Initial recording of put options granted to - (0.5)
minority interests in subsidiaries
Exercise of acquisition option commitments 27.1 7.0
Movement in losses attributable to minorities - -
which are borne by the Group
Transactions with minorities (8.2) (12.2)
Settlement of exercised share options of subsidiary (43.2) (20.2)
Credit to equity for share-based payments 12.4 16.6
Shares purchased to be held in treasury (5.6) (88.3)
Own shares released on vesting of share options 52.3 21.0
Revaluation of previously held interest in - 27.0
associate on acquisition of control
Adjustment to equity following increased (3.1) (6.4)
stake in controlled entity
Total movement in equity for the year (636.1) (171.9)
Equity at the beginning of year 548.6 720.5
Equity at the end of year (87.5) 548.6
DMGT plc
Condensed consolidated cash flow statement
for the 53 weeks ending 4th October, 2009
Unaudited Audited
53 weeks
ending 4th 52 weeks ending
October 28th September
2009 2008
£m £m
Operating (loss)/profit before share of
results of joint ventures and associates - (257.3) 27.0
continuing operations
Adjustments for :
Share-based payments 12.5 16.6
Pension curtailments (27.4) -
Depreciation 61.7 63.1
Impairment of property, plant and equipment 25.4 7.4
Amortisation of intangible assets 89.1 90.3
Impairment of goodwill and intangible assets 346.6 167.8
Operating cash flows before 250.6 372.2
movements in working capital
Decrease in inventories 5.8 0.6
Decrease/(increase) in trade 109.4 (3.9)
and other receivables
Decrease in trade and other payables (88.0) (6.3)
Increase in provisions 24.2 5.4
Additional payment into pension schemes (4.2) -
Cash generated by operations 297.8 368.0
Taxation paid (32.3) (24.3)
Taxation received 18.3 11.2
Net cash from operating activities 283.8 354.9
Investing activities
Interest received 0.9 1.6
Dividends received from 2.1 3.1
joint ventures and associates
Dividends received from 0.2 0.3
available-for-sale investments
Purchase of property, plant and equipment (39.6) (64.5)
Expenditure on internally (17.8) (18.7)
generated intangible fixed assets
Purchase of available-for-sale investments (2.5) (15.9)
Proceeds on disposal of 20.5 15.4
property, plant and equipment
Proceeds on disposal of 1.3 55.1
available-for-sale investments
Purchase of subsidiaries (22.0) (104.3)
Purchase of additional interests (24.1) (36.3)
in controlled entities
Treasury derivative activities (58.7) (37.2)
Investment in joint ventures (5.4) (13.5)
and associates
Loans to joint ventures and 0.4 4.8
associates repaid
Proceeds on disposal of businesses 4.7 58.5
Proceeds on disposal of associates - 7.2
Net cash used in investing activities (140.0) (144.4)
Financing activities
Equity dividends paid (55.3) (56.3)
Dividends paid to minority interests (9.3) (10.3)
Issue of shares by Group companies 0.2 0.2
to minority interests
Purchase of own shares (5.6) (88.3)
Receipt/(payment) on exercise/settlement 5.2 (0.6)
of subsidiary share options
Interest paid (77.0) (64.8)
Loan notes repaid (14.4) (26.0)
Sale and lease back finance receipts 25.0 -
Decrease/(Increase) in bank borrowings (16.1) 10.7
Net cash used in financing activities (147.3) (235.4)
Net decrease in cash and cash equivalents (3.5) (24.9)
Cash and cash equivalents at beginning of year 44.3 64.0
Exchange gain on cash and cash equivalents 6.1 5.2
Net cash and cash equivalents at end of year 46.9 44.3
DMGT plc
Condensed consolidated balance sheet
as at 4th October, 2009
Unaudited Audited
As at 4th As at 28th
October September
2009 2008
£m £m
ASSETS
Non-current assets
Goodwill 734.2 873.5
Other intangible assets 460.9 630.0
Property, plant and equipment 440.4 501.9
Investments
Joint ventures 24.3 22.0
Associates 11.3 10.6
35.6 32.6
Available-for-sale investments 18.1 11.3
Trade and other receivables 4.2 8.3
Derivative financial assets 5.5 0.9
Retirement benefit assets - 2.5
Deferred tax assets 164.6 31.1
1,863.5 2,092.1
Current assets
Inventories 23.6 27.6
Trade and other receivables 377.5 456.9
Current tax receivable 12.8 -
Derivative financial assets 17.9 13.6
Cash and cash equivalents 47.4 45.3
479.2 543.4
Total assets 2,342.7 2,635.5
LIABILITIES
Current liabilities
Trade and other payables (640.1) (650.2)
Current tax payable (97.0) (119.2)
Acquisition put option commitments (11.2) (29.5)
Borrowings (20.5) (26.0)
Derivative financial liabilities (9.5) (33.8)
Provisions (38.7) (27.4)
(817.0) (886.1)
Non-current liabilities
Trade and other payables (0.6) (1.1)
Acquisition put option commitments (0.7) (7.6)
Borrowings (1,040.7) (1,004.2)
Derivative financial liabilities (82.2) (38.6)
Retirement benefit obligations (430.4) (43.7)
Provisions (34.4) (31.6)
Deferred tax liabilities (24.2) (74.0)
(1,613.2) (1,200.8)
Total liabilities (2,430.2) (2,086.9)
Net (liabilities)/assets (87.5) 548.6
SHAREHOLDERS' EQUITY
Called up share capital 49.1 49.1
Share premium account 12.4 12.4
Share capital 16 61.5 61.5
Capital redemption reserve 1.1 1.1
Revaluation reserve 4.1 39.5
Shares held in treasury (46.8) (93.5)
Translation reserve 9.8 22.2
Retained earnings (164.0) 479.1
Equity shareholders' funds (134.3) 509.9
Equity minority interests 46.8 38.7
(87.5) 548.6
Approved by the Board on 25 November 2009.
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 53 weeks ending 4th
October, 2009. The Group, and its National and Local media divisions, prepare
financial statements for a 52 or 53 week financial period ending on a Sunday
near to the end of September. The Group has prepared the 2009 financial
statements on the basis of a 53 week financial year to 4th October 2009 in
order to ensure that the Group's year end remains close to the end of September
in the current and forthcoming financial years. As the current financial year
is 53 weeks, the comparative figures for the 52 weeks ended 28th September,
2008 are not entirely comparable with the amounts presented for the current
financial year as the comparative figures include the results of the National
and Local media divisions for 52 weeks.
The Group's remaining divisions prepare financial statements for a financial
year to 30th 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. As a result, the financial statements are
comparable in relation to those elements of the comparatives that relate to the
Group's other divisions. The Group considers whether there have been any
significant transactions or events between the end of the financial year of the
other divisions and the end of the Group's financial year and makes any
material adjustments as appropriate.
The information for the 52 weeks ended 28th September, 2008 does not constitute
statutory accounts for the purposes of section 240 of the Companies Act 1985. A
copy of the accounts for the 52 weeks ended 28th September, 2008 has been
delivered to the Registrar of Companies. The auditors' report on those accounts
was not qualified and did not contain statements under section 237 (2) or (3)
of the Companies Act 1985.
The audit of the statutory accounts for the 53 weeks ended 4th October, 2009 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. The Group's funding arrangements are set out the balance sheet and
notes 11, 14 and 15.
As highlighted in notes 14 and 15, 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 2 to 4 years. The 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 existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements.
The principal accounting policies used in preparing this information are set
out below.
These financial statements have also been prepared in accordance with the
accounting policies set out in the 2008 Annual Report and Accounts, as amended
by the following new accounting standards.
Impact of new accounting standards
In the current year, the Group has adopted the following accounting standards:
The Group has adopted IFRS8, Operating Segments in advance of its effective
date with effect from 29th September, 2008. IFRS 8 sets out disclosure
requirements concerning an entity's operating segments, products, services,
geographical areas in which it operates and its major customers and replaces
IAS 14, Segmental Reporting. IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that
are regularly reviewed by the DMGT Board to allocate resources to the segments
and to assess their performance. Adoption of this standard did not change the
analysis of the Group's results and performance significantly. In addition the
following IRFICs were adopted which had no significant impact on the Group's
financial statements.
IFRIC 12 Service Concession Agreements (effective for periods beginning on or
after 1st January, 2008)
IFRIC 13 Customer Loyalty Programmes (effective for periods beginning on or
after 1st July, 2008)
IFRIC 14 The Limit on a Defined Benefit Asset Minimum Funding Requirements and
their Interaction (effective for periods beginning on or after 1st January,
2008)
At the date of authorisation of this preliminary announcement, the following
standards have been issued but not applied to the information in these
financial statements since they do not apply to this reporting period :
Amendment to IAS 1, Presentation of Financial Statements (effective for periods
commencing on or after 1st January, 2009). This amendment introduces changes to
the way in which movements in equity must be disclosed and requires an entity
to disclose each component of other comprehensive income not recognised in
profit or loss. The amendment also requires disclosure of the amount of income
tax relating to each component of other comprehensive income as well as several
other minor disclosure amendments.
Amendment to IAS 23, Borrowing Costs (effective for periods commencing on or
after 1st January, 2009). This standard requires all borrowing costs which are
directly attributable to an acquisition construction or production of a
qualifying asset to form part of the cost of that asset. The Group does not
expect a significant impact from the adoption of this standard.
Amendment to IAS 27, Consolidated and Separate Financial Statements (effective
for periods commencing on or after 1st July, 2009). The amendment introduces
changes to the accounting for partial disposals of subsidiaries, associates and
joint ventures. Adoption of these amendments is not expected to significantly
impact the measurement, presentation or disclosure of future disposals.
Amendments to IAS 32, Puttable financial instruments and obligations arising on
liquidation (effective for periods beginning on or after 1st January, 2009).
The amendments are relevant to entities that have issued financial instruments
that are (i) puttable financial instruments or (ii) instruments, or components
of instruments that impose on the entity an obligation to deliver to another
party a pro-rata share of the net assets on liquidation only. As a result of
the amendments, some financial instruments that currently meet the definition
of a financial liability will be classified as equity because they represent
the residual interest in the net assets of the entity. The amendments set out
extensive detailed criteria to be met in order to be able to classify these
instruments as equity. The impact of these amendments is restricted to specific
cases and no analogies can be made. The Group does not expect a significant
impact from the adoption of this standard.
Amendments to IAS 39, Financial instruments: Recognition and Measurement
(effective for periods commencing on or after 1st July, 2009). The amendments
clarify treatment of inflation in a financial hedged item and one-sided risks
in a hedged item. The Group does not expect a significant impact from the
adoption of this standard.
Amendment to IFRS 2, Share-based Payment (effective for periods commencing on
or after 1st January, 2009). The amendments clarifies that vesting conditions
are service conditions and performance conditions only. Other features of a
share-based payment are not vesting conditions. It also specifies that all
cancellations, whether by the entity or by other parties, should receive the
same accounting treatment. The Group does not expect a significant impact from
the adoption of this standard.
Amendment to IFRS 3, Business Combinations (effective for periods commencing on
or after 1st July, 2009). The amendment introduces changes that will require
acquisition related costs (including professional fees previously capitalised)
to be expensed and adjustments to contingent consideration to be recognised in
income and will allow the full goodwill method to be used when accounting for
non-controlling interests. This will result in a change to the Group's
accounting policy for purchases of stakes in controlled entities.
Amendment to IFRS 7, Improving Disclosures about Financial Instruments
(effective for periods commencing on or after 1st January, 2009). The amendment
clarifies and enhances existing disclosure requirements about the nature and
extent of liquidity risk arising from financial instruments. The Group does not
expect a significant impact from the adoption of this standard.
2008 Annual Improvements (the majority of changes will effect periods beginning
on or after 1st January, 2009). The standard makes 41 amendments to 25 IFRSs as
part of the first annual improvements project. The amendments include :
restructuring IFRS 1, mainly to remove redundant transitional provisions; an
amendment to bring property under construction or development for future use as
for future use as an investment property within the scope of IAS 40. Such
property currently falls within the scope of IAS 16; and an amendment to
clarify the circumstances in which an entity can recognise a prepayment asset
for advertising or promotional expenditure. Recognition of an asset would be
permitted up to the point at which the entity has access to the goods purchased
or up to the point of receipt of services. The standard is not expected to have
a significant impact on the Group. In relation to the amendment to IAS 38
regarding prepayments for advertising or promotional expenditure, the Group
will be required to reassess its accounting approach to reflect the
requirements of the standard. The Group has followed the guidance of the
amendments to IFRS 8 in relation to segment assets.
2009 Annual Improvements (the majority of changes will effect periods beginning
on or after 1st January, 2010). The IASB has issued several improvements to
IFRSs - a collection of amendments to twelve International Financial Reporting
Standards - as part of its program of annual improvements to its standards. The
Group does not expect a significant impact following these changes.
The following interpretations have been issued which are not applicable to the
Group since they are only effective for accounting periods beginning on or
after 4th October, 2009. The adoption of these interpretations is not expected
to have any significant impact on the Group's financial statements.
IFRIC 15, Agreements for the Construction of Real Estate (effective for periods
beginning on or after 1st January, 2009)
IFRIC 16, Hedges of a Net Investment in a Foreign Operation (effective for
periods beginning on or after 1st October, 2008)
IFRIC 17, Distributions of non-cash assets (effective for periods beginning on
or after 1st July, 2009)
IFRIC 18, Transfers of assets from customers (effective for periods beginning
on or after 1st July, 2009)
2 SEGMENT ANALYSIS
2009 2009 2009 2009 2009 2009
External Inter-segment Total Segment Less Group profit
revenue revenue revenue result operating before
profit of exceptional
joint operating
ventures costs and
and amortisation
associates and
impairment
of goodwill
and
intangible
assets
£m £m £m £m £m £m
RMS 136.5 1.8 138.3 42.2 - 42.2
Business information 229.8 0.3 230.1 46.4 0.2 46.2
Exhibitions 174.6 - 174.6 37.1 - 37.1
Euromoney 317.6 - 317.6 77.3 0.3 77.0
National media 876.0 61.1 937.1 57.9 (3.8) 61.7
Local media 327.9 2.7 330.6 24.5 0.5 24.0
Radio 55.1 - 55.1 5.6 1.9 3.7
2,117.5 65.9 2,183.4 291.0 (0.9) 291.9
Corporate costs (14.3)
Total revenue 2,183.4
Operating profit before exceptional operating costs and amortisation 277.6
and impairment of goodwill and intangible assets
Exceptional operating costs including impairment of property plant and (99.2)
equipment
Impairment of goodwill and intangible assets (346.6)
Amortisation of intangible assets (89.1)
Operating loss before share of results of joint ventures and associates (257.3)
Share of result of joint ventures and associates (8.7)
Total operating loss (266.0)
Other gains and losses (23.5)
Loss before net finance costs and tax (289.5)
Investment revenue 2.2
Finance costs (113.8)
Loss before tax (401.1)
Tax 94.5
Profit from discontinued operations 1.2
Loss for the year (305.4)
By activity
The Group's business activities are split into seven operating divisions - RMS,
business information, Euromoney, exhibitions, national media, local media and
radio. These divisions are the basis on which information is reported to 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.
Consistent with disclosures made in the Group's Financial Report for the six
months ended 29th March, 2009 the Group has separately disclosed the results of
RMS which meet the criteria of a reportable segment under IFRS 8, Operating
Segments. In prior periods the results of RMS were included within the business
information segment.
Details of the types of products and services from which each segment derives
its revenues are included within the management report.
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 from the national media to the local media division which is at
cost. The amount of newsprint sold during the year amounted to £28.2 million
(2008 £35.1 million).
Operating profit before exceptional operating costs and amortisation and
impairment of goodwill and intangible assets within the national media division
comprised £85.1 million from newspapers, £0.3 million from digital offset by a
loss of £4.3 million from television and unallocated divisional central costs
of £19.4 million.
Included within unallocated central costs is a credit of £4.6 million which
adjusts the pensions charge recorded in each operating segment from a cash rate
to actuarial accrual rate in accordance with IAS 19, Employee benefits.
An analysis of the amortisation and impairment of goodwill and intangible
assets, depreciation and impairment of property, plant and equipment,
exceptional operating costs, investment income and finance costs by segment is
as follows:
2009 2009 2009 2009 2009 2009 2009
Amortisation Impairment Exceptional Impairment Depreciation Investment Finance
of of operating of of property, income costs
intangible goodwill costs property, plant and
assets and plant and equipment
intangible equipment
assets
£m £m £m £m £m £m £m
RMS (1.9) - - - (3.3) 0.2 (0.3)
Business information (12.1) (0.5) (1.2) 0.0 (8.1) - (1.1)
Exhibitions (13.2) (88.8) (10.0) 0.0 (1.8) 0.5 -
Euromoney (17.1) (21.9) (9.8) (1.2) (2.5) 0.3 (30.7)
National media (26.5) (48.1) (63.2) (21.9) (29.1) 1.0 (0.3)
Local media (7.1) (94.2) (13.8) (1.7) (13.0) - -
Radio (11.2) (93.1) (0.2) 0.0 (2.2) - -
Segment result (89.1) (346.6) (98.2) (24.8) (60.0) 2.0 (32.4)
Corporate costs - - 24.4 (0.6) (1.7) 0.2 (81.4)
Group total (89.1) (346.6) (73.8) (25.4) (61.7) 2.2 (113.8)
The Group's exceptional operating costs represent reorganisation costs of £83.3
million, charges relating to a rationalisation of the Group's property
portfolio of £3.7 million together with exceptional provisions of £10.5 million
in the national media division and £1.0 million in the local media divisions
for a bad debt offset by pension curtailments of £24.7 million in corporate
costs. There is a related current tax credit of £5.1 million associated with
the total exceptional operating costs.
2008 2008 2008 2008 2008 2008
External revenue Inter-segment Total Segment Less Group profit
revenue revenue result operating before
profit of exceptional
joint operating costs
ventures and
and amortisation
associates and impairment
of goodwill and
intangible
assets
£m £m £m £m £m £m
RMS 97.9 3.2 101.1 30.7 - 30.7
Business information 217.4 0.2 217.6 44.5 0.3 44.2
Exhibitions 201.6 - 201.6 38.3 - 38.3
Euromoney 332.0 - 332.0 76.7 0.4 76.3
National media 987.7 77.0 1,064.7 69.5 (3.1) 72.6
Local media 420.4 6.6 427.0 68.9 0.5 68.4
Radio 54.7 - 54.7 4.1 2.1 2.0
Segment result 2,311.7 87.0 2,398.7 332.7 0.2 332.5
Corporate costs (15.6)
Total revenue 2,398.7
Operating profit before
exceptional operating costs
and amortisation and 316.9
impairment of goodwill
and intangible assets
Exceptional operating costs including (31.8)
impairment of property, plant and equipment
Impairment of goodwill (167.8)
Amortisation and impairment (90.3)
of intangible assets
Operating profit before share of results 27.0
of joint ventures and associates
Share of results of joint ventures and associates 3.5
Total operating profit 30.5
Other gains and losses 27.7
Profit before net finance costs and tax 58.2
Investment revenue 3.0
Finance costs (129.3)
Loss before tax (68.1)
Tax 84.7
Profit from discontinued operations 0.2
Profit for the year 16.8
Operating profit before exceptional operating costs and amortisation and
impairment of goodwill and intangible assets within the national media division
comprised £88.6 million from newspapers, £6.0 million from digital offset by a
loss of £3.0 million from television and unallocated divisional central costs
of £19.0 million.
Included within unallocated central costs is a credit of £15.2 million which
adjusts the pensions charge recorded in each operating segment from a cash rate
to actuarial accrual rate in accordance with IAS 19, Employee Benefits.
An analysis of the amortisation and impairment of goodwill and intangible
assets, depreciation and impairment of property, plant and equipment,
exceptional operating costs, investment income and finance costs by segment is
as follows:
2008 2008 2008 2008 2008 2008 2008
Amortisation Impairment Exceptional Impairment Depreciation Investment Finance
of of operating of of property, income costs
intangible goodwill costs property, plant and
assets and plant and equipment
intangible equipment
assets
£m £m £m £m £m £m £m
RMS (1.4) - - - (2.3) 0.2 -
Business information (9.0) - - - (6.3) 0.2 (1.2)
Exhibitions (13.7) (81.3) (4.5) - (2.2) 0.5 (0.1)
Euromoney (14.8) (5.7) - - (2.8) 0.6 (11.9)
National media (28.2) (9.0) (13.2) (5.5) (32.9) 0.2 (1.9)
Local media (13.1) (71.8) (6.8) (1.8) (12.5) - -
Radio (10.1) - - - (2.4) 0.2 -
Segment result (90.3) (167.8) (24.5) (7.3) (61.4) 1.9 (15.1)
Corporate costs - - - - (1.7) 1.1 (114.2)
Group total (90.3) (167.8) (24.5) (7.3) (63.1) 3.0 (129.3)
The Group's exceptional operating costs comprised local media restructuring
costs totalling £4.5 million, together with reorganisation costs of £18.7
million within national media and £8.6 million within local media.
The Group's revenue comprises sales excluding value added tax, less discounts
and commission where applicable and is analysed as follows :
2009 2009 2009 2008 2008 2008
Total Inter-segment Continuing Total Inter-segment Continuing
£m £m £m £m £m £m
Sale of goods 727.4 - 727.4 670.4 - 670.4
Rendering of services 1,456.0 (65.9) 1,390.1 1,728.3 (87.0) 1,641.3
2,183.4 (65.9) 2,117.5 2,398.7 (87.0) 2,311.7
The Group includes circulation and subscriptions revenue within sales of goods.
Revenue from investment revenue is shown in note 5.
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:
2009 2008
Total and continuing Total and continuing
£m £m
UK 1,369.2 1,614.1
Rest of Europe 56.9 71.3
North America 530.0 486.5
Australia 65.7 70.8
Rest of the World 95.7 69.0
2,117.5 2,311.7
The closing net book value of goodwill, intangible assets and property, plant
and equipment is analysed by geographic area as follows :
Closing Closing Closing Closing Closing Closing Total Total
net book net book net book net book net book net book
value of value of value of value of value of value of
goodwill goodwill intangible intangible property, property,
assets assets plant and plant and
equipment equipment
2009 2008 2009 2008 2009 2008 2009 2008
£m £m £m £m £m £m £m £m
UK 294.4 342.4 114.3 176.1 374.9 440.2 783.6 958.7
Rest of Europe 3.9 10.4 15.2 17.8 19.9 17.8 39.0 46.0
North America 413.4 479.1 263.3 277.5 25.2 24.7 701.9 781.3
Australia 1.9 1.9 57.2 146.8 15.6 14.4 74.7 163.1
Rest of the World 20.6 39.7 10.9 11.8 4.8 4.8 36.3 56.3
734.2 873.5 460.9 630.0 440.4 501.9 1,635.5 2,005.4
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 period was £
346.6 million (2008 £167.8 million). Of the impairment charge for the period, £
88.8 million relates to the exhibitions division in relation to their gift
sector businesses following a further downturn in the gift sector markets they
serve, £21.9 million relates to Euromoney, mostly in connection with its
structured finance event businesses where its main customers are experiencing a
fall in demand and its Asia-based conference organiser and training business
which has suffered a decline in its customers spending on training, £48.1
million relates to the national media division, £94.2 million relates to the
local media division and £93.1 million relates to the radio division following
a continued decline in advertising revenues in these segments. There is a
current tax credit of £19.8 million and a deferred tax credit amounting to £
38.9 million in relation to these impairment charges.
In the prior period Euromoney re-assessed the recoverability of tax losses
acquired with Metal Bulletin and as a result recognised a deferred tax asset of
£2.8 million. In accordance with IAS 12, Income Taxes, the Group is required to
reduce its previously capitalised goodwill to offset this deferred tax asset.
Additionally in the prior period, included within the gift sector charge is an
amount of £41.4 million relating to George Little Management LLC (GLM). GLM was
an associate on 3rd October, 2004, the Group's transition date to IFRS. On
transition to IFRS, the Group elected not to apply IFRS 3, Business
Combinations, retrospectively to past business combinations and the carrying
value of goodwill, intangible assets and other assets and liabilities
associated with the Group's stakes in its subsidiaries, associates and joint
ventures. As a result of the application of IFRS 3 on acquiring control of GLM
a double count of goodwill in respect of the Group's acquisition of its initial
25% stake has occurred as under UK GAAP the majority of this stake was
attributed to goodwill and no separately identifiable assets were recorded. As
a result of this double count the Group was required to record an impairment
charge of £14.4 million immediately following acquisition of control in 2008
and this is included in the charge for that period.
The balance of the gift sector charge reflected a downturn in the gift sector
markets they support.
When testing for impairment, the recoverable amounts for all the Group's
cash-generating units (CGUs) are measured at the higher of value in use and
fair value less costs to sell. Value in use by discounting future expected cash
flows. These calculations use cash flow projections based on management
approved budgets and projections which reflect management's current experience
and future expectations of the markets in which the CGU operates. Risk adjusted
discount rates used by the Group in its impairment tests range from 9.5% to
12.0 %, the choice of rates depending on the market and maturity of the CGU.
The Group's estimate of the weighted average cost of capital has increased from
the previous year and the 2009 half year results reflecting principally a 2%
increase in equity premium. The growth rates used in the projections range
between 0 % and 5.0 % and vary with management's view of the CGU's market
position, maturity of the relevant market and do not exceed the long-term
average growth rate for the market in which it operates.
3 SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES
Unaudited Audited
2009 2008
£m £m
Share of profits from operations of joint ventures 0.4 0.5
Share of losses from operations of associates (1.3) (0.3)
Operating (losses)/profits from joint ventures and associates (0.9) 0.2
Share of associates' other gains and losses - 9.8
Before amortisation, impairment of (0.9) 10.0
goodwill, interest and tax
Share of amortisation of intangibles of joint ventures (0.8) (0.6)
Share of associates' interest (payable)/receivable (0.2) 0.2
Share of joint ventures' tax (0.6) (0.8)
Share of associates' tax (0.2) (0.5)
Impairment of carrying value of joint venture (2.4) -
Impairment of carrying value of associate (3.6) (4.8)
(8.7) 3.5
Share of associates items (2.4) -
recognised in equity
(11.1) 3.5
Share of results from (1.0) (0.9)
operations of joint ventures
Share of results from operations of associates (1.7) 9.2
Impairment of carrying value of joint ventures (2.4) -
Impairment of carrying value of associates (3.6) (4.8)
(8.7) 3.5
Share of associates items recognised in equity (2.4) 0.0
(11.1) 3.5
(i) In the prior year this represents the Group's share of Centurion Holiday
Group Limited's (formerly Indigo Holidays Limited) profit on disposal of
Hotels4u.com.
(ii) Represents a write down in the carrying value of the Group's investment in
Mail Today Newspapers Pvt. Limited.
(iii) Represents a write down in the carrying value of the Group's investment
in Inview Interactive Limited. In the prior year Centurion Holidays Group
Limited was liquidated following the period end. The Group's carrying value was
written down to the proceeds received on liquidation.
4 OTHER GAINS AND LOSSES
Unaudited Audited
2009 2008
£m £m
Profit on sale of available-for-sale investments - 7.6
Impairment of available-for-sale assets (8.7) (10.1)
Profit on sale of property, plant and equipment 1.5 6.8
Amounts provided against deferred (5.6) -
consideration receivable on disposal
(Loss)/profit on sale of businesses (8.3) 23.4
Loss on deemed part disposal of (2.4) -
Euromoney Institutional Investor plc
(23.5) 27.7
(i) The impairment of available-for-sale assets represents a
further impairment charge for the Group's investment in Spot Runner Inc., an
advertising services company, in light of its continued trading performance.
(ii) The (loss)/profit on sale of businesses mainly comprises a
loss of £5.0m on the national media division's sale of a 75.1% interest in the
Evening Standard offset by a £2.7 million curtailment gain, a profit of £2.4m
within the business information division on its disposal of Property Portfolio
Research and net losses of £9.1m in the exhibitions division in relation to a £
6.2 million profit on sale of Metropress and losses of £15.3 million in
relation to various consumer event businesses. There is a deferred tax charge
of £2.4 million in relation to these profits and losses.
Following the disposal of the 75.1% interest in the Evening Standard, the Group
has no Board representation and no influence over the day to day management of
this business the Group's remaining 24.9% interest has been accounted for as an
available for sale asset (note 20).
In the prior year the profit on sale of businesses mainly comprises the sale of
Consumer North American Home Shows in the exhibitions division, Dolphin and the
European business of Hobsons within business information and British Pathe
within national media. No tax charge is due on the sale of Hobsons and British
Pathe due to the availability of a statutory exemption. A tax charge of £1.9
million arose on the sale of Consumer North American Home Shows and a tax
charge of £2.4 million arose on the sale of Dolphin.
5 INVESTMENT REVENUE
Unaudited Audited
2009 2008
£m £m
Dividend income 0.2 0.3
Interest receivable from 2.0 2.7
short term deposits
2.2 3.0
6 FINANCE COSTS
Unaudited Audited
2009 2008
£m £m
Interest, arrangement and commitment fees (76.1) (78.3)
payable on bonds, bank loans and loan notes
Loss on derivatives, or portions thereof, not (28.0) (45.6)
designated for hedge accounting
Finance charge on discounting of deferred (1.7) (2.4)
consideration
Other (8.0) (3.0)
(113.8) (129.3)
Analysed as follows :
Interest, arrangement and commitment fees (76.1) (78.3)
payable on bonds, bank loans and loan notes
Finance charge on discounting of (1.7) (2.4)
deferred consideration
Change in fair value of non designated
portion of derivatives designated as (2.0) 2.6
net investment hedges
Change in fair value of interest rate - (0.2)
caps not designated for hedge accounting
Change in fair value of derivative hedge of bond 9.0 1.1
Change in fair value of hedged portion of bond (9.0) (1.1)
(79.8) (78.3)
Tax equalisation swap income 0.8 14.5
Non foreign exchange gain on 1.1 5.3
tax equalisation options
1.9 19.8
Foreign exchange loss on (27.9) (67.8)
tax equalisation arrangements
Foreign exchange loss on (6.2) -
restructured hedging arrangements
Change in fair value of (1.8) (3.0)
acquisition put options
(35.9) (70.8)
(113.8) (129.3)
(i) The finance charge on the discounting of contingent
consideration arises from the requirement under IFRS 3, Business Combinations
to discount contingent consideration back to current values.
(ii) Tax equalisation swap income and the gain from tax
equalisation options totalling £1.9 million (2008 £19.8 million) arises from
the economic hedging of tax on foreign exchange movements. The foreign exchange
loss on tax equalisation arrangements of £27.9 million (2008 £67.8 million) is
excluded from adjusted profit since it is equal to a reduced tax charge (see
note 9). In addition, the foreign exchange loss on intra group financing,
premium on repurchase of bonds, on restructured hedging arrangements and the
change in fair value of acquisition put options are also excluded from adjusted
profits.
(iii) The foreign exchange losses on restructured hedging
arrangements of £6.2 million (2008 £nil) arise from forward contracts
classified as ineffective under IAS 39, Financial instruments, following the
directors' review of the Group's US dollar revenue capacity in its UK based
businesses.
7 TAX
Unaudited Audited
2009 2008
£m £m
The credit on the loss for the year consists of :
UK tax
Corporation tax at 28% (2008 29%) - 18.0
Adjustments in respect of prior years 25.4 28.2
25.4 46.2
Overseas tax
Corporation tax (1.0) (18.4)
Adjustments in respect of prior years 1.4 (0.8)
Total current tax 25.8 27.0
Deferred tax
Origination and reversals of timing differences 64.7 60.6
Adjustments in respect of prior years 4.0 (2.9)
Total deferred tax 68.7 57.7
Total Tax 94.5 84.7
(i) The net prior year credit of £30.8 million (2008 £24.5
million) arose largely from the agreement of certain prior year open issues
with tax authorities and a reassessment of the level of tax provisions
required.
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.
Adjusted tax on profits before amortisation and impairment of intangible
assets, restructuring costs and non-recurring items (adjusted tax charge)
amounted to £44.3 million (2008 £62.8 million) and the resulting rate is 22.1%
(2008 24.0%). The differences between the tax credit and the adjusted tax
charge are shown in the reconciliation below:
Unaudited Audited
2009 2008
£m £m
Total tax credit on the 94.5 84.7
loss for the year
Deferred tax on intangible assets (52.4) (37.2)
and goodwill
Current tax on foreign exchange (27.9) (67.8)
on tax equalisation contracts
Agreement of open issues (34.4) (23.8)
with tax authorities
Tax on other exceptional items (24.1) (18.7)
Adjusted tax charge on the (44.3) (62.8)
loss for the period
In calculating the adjusted tax rate, the Group excludes the potential future
deferred tax effects of intangible assets and goodwill as it prefers to give
the readers of its accounts a view of the tax charge based on the current
status of such items.
A credit of £27.9 million relating to tax on foreign exchange losses (2008 £
67.8 million) has been treated as exceptional as it matches foreign exchange
losses of £27.9 million (2008 £67.8 million) on tax equalisation swaps included
within finance costs (see note 6).
8 DIVIDENDS PAID
2009 2009 2008 2008
Pence Pence
per share £m per share £m
Amounts recognisable as distributions to
equity holders in the period
Ordinary shares - final dividend for the year 9.9 2.0 - -
ended 28th September, 2008
'A' Ordinary Non-Voting shares -
final dividend for the year 9.9 35.1 - -
ended 28th September, 2008
Ordinary shares - final dividend - - 9.9 2.0
for the year ended 30th September, 2007
'A' Ordinary Non-Voting shares -
final dividend for the year - - 9.9 36.4
ended 30th September, 2007
9.9 37.1 9.9 38.4
Ordinary shares - interim dividend for 4.8 1.0 - -
the year ended 4th October, 2009
'A' Ordinary Non-Voting shares - interim dividend 4.8 17.2 - -
for the year ended 4th October, 2009
Ordinary shares - interim dividend for the year - - 4.8 1.0
ended 28th September, 2008
'A' Ordinary Non-Voting shares - interim dividend - - 4.8 16.9
for the year ended 28th September, 2008
4.8 18.2 4.8 17.9
14.7 55.3 14.7 56.3
The Board has declared a final dividend of 9.90p per Ordinary / 'A' Ordinary
Non-Voting share (2008 9.90p) which will absorb an estimated £37.9 million of
shareholders' funds for which no liability has been recognised in these
financial statements. Subject to shareholder approval it will be paid on 12th
February, 2010 to shareholders on the register at the close of business on 4th
December, 2009.
9 ADJUSTED PROFIT (BEFORE EXCEPTIONAL OPERATING COSTS AND
AMORTISATION AND IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS,
OTHER GAINS AND LOSSES AND EXCEPTIONAL FINANCING COSTS,
AFTER TAXATION AND MINORITY INTERESTS)
Unaudited Audited
2009 2008
£m £m
Loss before tax - (401.1) (68.1)
continuing operations
Profit before tax - 1.2 0.2
discontinued operations
Add back :
Amortisation of intangible
assets in Group profit from 89.9 90.9
operations and in joint ventures
and associates
Impairment of goodwill 346.6 167.8
and intangible assets
Exceptional operating costs 99.2 31.8
Share of associates' other gains - (9.8)
Impairment of carrying 2.4 -
value of joint venture
Impairment of carrying value of associate 3.6 4.8
Other gains and losses :
Profit on sale of - (7.6)
available-for-sale investments
Profit on sale of property, (1.5) (6.8)
plant and equipment
Amounts provided against deferred 5.6 -
consideration receivable on disposal
(Loss)/profit on sale of businesses 8.3 (23.4)
Impairment of available-for-sale assets 8.7 10.1
Loss on deemed part disposal of 2.4 -
Euromoney Institutional Investor plc
Profit on sale of (1.2) (0.2)
discontinued operations
Finance costs :
Foreign exchange loss on tax 27.9 67.8
equalisation arrangements
Foreign exchange loss on restructured 6.2 3.0
hedging arrangements
Change in fair value of 1.8 -
acquisition put options
Tax :
Share of tax in joint ventures 0.8 1.3
and associates
Profit before exceptional operating
costs, amortisation and impairment
of goodwill and intangible assets, 200.8 261.8
other gains and losses and exceptional
financing costs, taxation and
minority interests
Total tax credit on the profit for the period 94.5 84.7
Adjust for :
(52.4) (37.2)
Deferred tax on intangible assets and goodwill
Current tax on foreign exchange on tax (27.9) (67.8)
equalisation arrangements
(34.4) (23.8)
Agreed open issues with tax authorities
(24.1) (18.7)
Tax on other exceptional items
Interest of minority shareholders (15.8) (18.1)
Adjusted profit before exceptional
operating costs, amortisation and
impairment of goodwill and intangible 140.7 180.9
assets, other gains and losses and
exceptional financing costs after
taxation and minority interests
The adjusted minority share of profits for the year of £15.8 million (2008 £
18.1 million) is stated after eliminating a credit of £17.8 million (2008 £1.2
million), being the minority share of exceptional items.
10 (LOSS)/EARNINGS PER SHARE
Basic loss per share of 80.1p (2008 0.0p) and diluted loss per share of 80.1p
(2008 0.0p) are calculated, in accordance with IAS 33, Earnings per share, on
Group loss for the financial year of £303.4 million (2008 £nil) 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 37.2p (2008 47.9p) are calculated on profit before
exceptional operating costs, amortisation and impairment of goodwill and
intangible assets, after charging the taxation and minority interests
associated with those profits, of £140.7 million (2008 £180.9 million), as set
out in Note 13 above, and on the basic weighted average number of ordinary
shares in issue during the year.
Unaudited Unaudited Audited Audited
2009 2009 2008 2008
Basic Diluted Basic Diluted
pence pence pence pence
per share per share per share per share
Loss per share from (80.1) (80.1) - (0.2)
continuing operations
Adjustment to exclude
earnings of discontinued 0.3 0.3 0.1 0.1
operations
Basic (loss)/earnings
per share from continuing (79.8) (79.8) 0.1 (0.1)
and discontinued operations
Add back:
Amortisation of intangible
assets in Group profit from 23.7 23.7 24.1 24.1
operations and in joint
ventures and associates
Impairment of goodwill and 91.5 91.5 44.4 44.4
intangible assets
Exceptional operating costs 26.2 26.2 8.4 8.4
Share of associates' other - - (2.6) (2.6)
gains
Impairment of carrying 0.6 0.6 - -
value of joint ventures
Impairment of carrying 1.0 1.0 1.3 1.3
value of associate
Other gains and losses :
Profit on sale of
available-for-sale - - (2.0) (2.0)
investments
Profit on sale of property, (0.4) (0.4) (1.8) (1.8)
plant and equipment
Amounts provided
against deferred 1.5 1.5 - -
consideration receivable
on disposal
(Loss)/profit on sale 2.2 2.2 (6.2) (6.2)
of businesses
Impairment of 2.3 2.3 2.7 2.7
available-for-sale assets
Loss on deemed part
disposal of Euromoney 0.6 0.6 - -
Institutional Investor plc
Profit on sale of discontinued (0.3) (0.3) (0.1) (0.1)
operations
Finance costs :
Foreign exchange loss on 7.4 7.4 18.0 18.0
tax equalisation arrangements
Foreign exchange loss on 1.6 1.6 - -
restructured hedging arrangements
Change in fair value of acquisition put options 0.5 0.5 0.8 0.8
Tax :
Share of tax in joint ventures 0.2 0.2 0.3 0.3
and associates
Profit before exceptional
operating costs, amortisation
and impairment of goodwill
and intangible assets, 78.8 78.8 87.4 87.2
other gains and losses and
exceptional financing costs,
taxation and minority interests
Adjust for:
Deferred tax on intangible (13.9) (13.9) (9.9) (9.9)
assets and goodwill
Current tax on foreign
exchange on tax equalisation (7.4) (7.4) (18.0) (18.0)
arrangements
Agreed open issues with tax (9.1) (9.1) (6.3) (6.3)
authorities
Tax on other (6.4) (6.4) (5.0) (5.0)
exceptional items
Interest of minority (4.8) (4.8) (0.3) (0.3)
shareholders
Adjusted earnings per share
(before exceptional operating
costs, amortisation and
impairment of goodwill and 37.2 37.2 47.9 47.7
intangible assets, other gains
and losses and exceptional
financing costs after taxation
and minority interests)
The weighted average number of ordinary shares in issue during the year for the
purpose of these calculations is as follows :
Unaudited Audited
2009 2008
Number Number
m m
Number of ordinary 392.6 395.3
shares in issue
Shares held in Treasury (14.0) (17.7)
Basic earnings per share denominator 378.6 377.6
Effect of dilutive share options 0.1 -
Dilutive earnings per 378.7 377.6
share denominator
11 ANALYSIS OF NET DEBT
Unaudited Audited
2009 2008
£m £m
Net debt at start (1,014.6) (950.4)
Cashflow 20.0 (45.5)
Foreign exchange movements (49.5) 4.8
Other non-cash movements (4.5) (23.5)
Net debt at year end (1,048.6) (1,014.6)
Analsyed as :
Cash and cash equivalents 47.4 45.3
Unsecured bank overdrafts (0.5) (1.0)
Cash and cash equivalents 46.9 44.3
in the cash flow statement
Debt due within one year
Bank loans (0.5) -
Loan notes (14.8) (25.0)
Hire purchase obligations (4.7) -
Debt due in more than one year
Bonds (847.1) (838.9)
Hire purchase obligations (20.3) -
Loans (173.3) (165.3)
Net debt at year end (1,013.8) (984.9)
Effect of derivatives on bank loans (34.8) (29.7)
Net debt including derivatives (1,048.6) (1,014.6)
12 PROPERTY, PLANT AND EQUIPMENT
During the period the Group spent £39.6 million (2008 £64.5 million) on
property, plant and equipment.
The Group also disposed of certain of its property, plant and equipment with a
carrying value of £21.5 million (2008 £8.6 million) for proceeds of £20.5
million (2008 £15.4 million).
13 ACQUISITION PUT OPTION COMMITMENTS
Unaudited Audited
2009 2008
£m £m
Current 11.2 29.5
Non-current 0.7 7.6
11.9 37.1
14 OTHER FINANCIAL LIABILITIES
Unaudited Audited
2009 2008
£m £m
Current liabilities
Bank overdrafts 0.5 1.0
Bank loans 0.5 -
Hire purchase obligations 4.7 -
Loan notes 14.8 25.0
20.5 26.0
Non-current liabilities
Bonds 847.1 838.9
Bank loans 173.3 165.3
Hire purchase obligations 20.3 -
1,040.7 1,004.2
15 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. These
covenants were met at the relevant test dates during the period.
The Group's facilities and their maturity dates are as follows :
Unaudited Audited
2009 2008
£m £m
Expiring in one year or less - -
Expiring in more than one year 180.0 70.0
but not more than two years
Expiring in more than two years 30.0 180.0
but not more than three years
Expiring in more than four years 210.0 240.0
but not more than five years
Total bank facilities 420.0 490.0
The following undrawn committed
borrowing facilities were available
to the Group in respect of which all
conditions precedent had been met :
Unaudited Audited
2009 2008
£m £m
Expiring in one year or less - -
Expiring in more than one year 105.7 5.7
but not more than two years
Expiring in more than two years 30.0 84.5
but not more than three years
Expiring in more than four years 68.2 157.3
but not more than five years
Total undrawn committed bank facilities 203.9 247.5
16 SHARE CAPITAL AND RESERVES
Share capital as at 4th October, 2009 amounted to £49.1 million, which was
unchanged during the period.
The Company disposed of 10,184,237 'A' Ordinary Non-Voting shares representing
2.73% of the called up 'A' Ordinary Non-Voting share capital, in order to
satisfy incentive schemes.
The Company also purchased 1,626,058 'A' Ordinary Non-Voting shares having a
nominal value of £203,257 to match obligations under incentive plans. The
consideration paid for these shares was £5.6 million. Shares repurchased
during the period represented 0.44% of the called up 'A' Ordinary Non-Voting
share capital at 4th October, 2009.
At 4th October, 2009 options were outstanding under the terms of the Company's
1997 and 2006 Executive Share Option Schemes over a total of 6,380,067 (2008
6,978,245) 'A' Ordinary Non-Voting shares.
17 SUMMARY OF THE EFFECTS OF ACQUISITIONS
Notable acquisitions completed during the period, the percentage of voting
rights acquired, the dates of acquisition and the goodwill arising was as
follows:
Name of acquisition Segment % voting Date of Business Consideration Intangible Goodwill
rights acquisition description paid fixed arising
acquired assets
acquired
£m £m £m
Supplier of
Metropix Business 100% December floor-plan 4.3 2.5 2.4
Information 2008 drawing
services
Event
organiser
November and
Reflex Publishing Exhibitions 100% 2008 publisher 1.6 1.6 -
in the
energy
sector
Multiple
job posting
Broadbean Technology National 100% October and 7.8 4.8 4.1
Media 2008 application
tracking
solutions
Provisional fair value of net assets acquired with acquisitions :
Book Provisional fair Provisional
value value adjustments fair value
Note £m £m £m
Goodwill - 6.5 6.5
Intangible assets - 8.9 8.9
Property, plant and equipment 0.2 - 0.2
Current assets 2.1 - 2.1
Cash and cash equivalents 0.7 - 0.7
Trade creditors and other payables (2.6) - (2.6)
Deferred tax - (2.2) (2.2)
Group share of net 0.4 13.2 13.6
(liabilities)/assets acquired
Cost of acquisitions:
Cash paid in current
Non-cash period Total
Note £m £m £m
Deferred consideration 6.0 - 6.0
Loan notes - - -
Cash - 7.3 7.3
Consideration at fair value 6.0 7.3 13.3
Directly attributable costs - 0.3 0.3
Total cost of acquisition 6.0 7.6 13.6
If all acquisitions had been completed on the first day of the financial year,
Group revenues for the year would have been £2,117.7 million and Group loss
attributable to equity holders of the parent would have been £303.1 million.
This information takes into account the amortisation of acquired intangible
assets for a full year, 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 profit attributable to equity holders of the parent since the date of
acquisition for companies acquired during the period amounted to £0.8 million.
The aggregate consideration for these and other businesses was £13.3 million,
of which £7.3 million was paid in cash during the year, and an estimated amount
of £6.0 million payable in the form of contingent consideration, depending upon
trading results. This 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.
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
2009 2008
£m £m
Cash consideration (including acquisition 24.1 36.3
expenses of £0.1 million (2008 £nil))
During the period the Group acquired additional shares in controlled entities
amounting to £24.1 million (2008 £36.3 million). This includes £13.7 million
acquiring a further 1.8% of the issued ordinary share capital of Euromoney.
Under the Group's accounting policy for the purchase of shares in controlled
entities, no adjustment has been recorded to the fair value of assets and
liabilities already held on the balance sheet. The difference between the cost
of the additional shares, goodwill arising and the carrying value of the
minority share of net assets is adjusted directly in equity. The adjustment to
equity in the period was a charge of £3.1 million.
In the prior year this includes £26.7 million acquiring a further 5.4% of the
issued ordinary share capital of Euromoney. The adjustment to equity in the
prior period was a charge of £6.4 million.
GLM owns and manages tradeshows for consumer goods in the US, serving
industries as diverse as giftware, social stationery, home textiles, tabletop,
gourmet house wares, contemporary furniture and wellness. GLM is involved in
the production of nearly 40 tradeshows in 15 cities across the US and Canada.
Reconciliation to purchase of subsidiaries as shown in the cash flow statement:
2009 2008
£m £m
Cash consideration including acquisition GLM - 78.8
expenses of £nil (2008 £0.2 million)
Cash consideration including acquisition Others 7.6 14.8
expenses of £0.3 million (2008 £0.5 million)
Cash paid to settle deferred consideration 15.1 14.2
in respect of acquisitions
Cash and cash equivalents acquired (0.7) (3.5)
with subsidiaries
22.0 104.3
18 SUMMARY OF THE EFFECTS OF DISPOSALS
On 21st January 2009, the national media division sold a 75.1% interest in the
Evening Standard for cash proceeds of £8.3 million. Following disposal the
Group has no Board representation and no influence over the day to day
management of the title. The remaining 24.9% investment has therefore been
treated as an available-for-sale investment.
The impact of the disposal on net assets was as follows :
£m
Property, plant and equipment 1.0
Total net assets disposed 1.0
Loss on sale of businesses (2.3)
(1.3)
Satisfied by :
Cash received 8.3
Directly attributable costs (4.0)
Cash reinvested (8.3)
Pension curtailment gain 2.7
(1.3)
During the period the Evening Standard absorbed £11.4 million of the Group's
net operating cashflows, paid £nil in respect of investing activities and paid
£nil in respect of financing activities.
The other principal disposals completed during the period, the proceeds
received and date of disposal were as follows :
Name of disposal Segment Date of disposal Disposal
proceeds
Metro Press Exhibitions October 2008 6.4
Mayhill Exhibitions September 2009 4.6
At various dates
Various consumer shows between March 2009
Exhibitions and September 2009 2.2
Property Portfolio Research Business to business July 2009 13.8
The proceeds on disposal of Property, Portfolio Research were received in the
form of shares in CoStar, Inc., a leading provider of information, marketing
and analytic services to commercial real estate professionals in the United
States and the United Kingdom (note 22).
The impact of disposals of businesses on net assets was :
Note £m
Goodwill 18.7
Intangible assets 3.2
Property, plant and equipment 2.2
Trade and other receivables 2.3
Cash at bank and in hand 0.8
Trade creditors and other payables (5.1)
Deferred tax 1.6
Net assets disposed 23.7
Profit on disposal of businesses (6.0)
17.7
Satisfied by:
Cash received 13.6
Investment in CoStar, Inc. 13.8
Liabilities assumed (3.5)
Recycled cumulative translation differences (0.9)
Directly attributable costs (5.3)
17.7
Reconciliation to disposal of businesses as shown in the cash flow statement :
£m
Cash consideration net of disposal costs 12.6
Cash consideration net of disposal costs - discontinued operations 1.2
Cash reinvested (8.3)
Cash and cash equivalents disposed with subsidiaries (0.8)
3.5
The businesses disposed of during the year contributed £0.1 million to the
Group's net operating cash flows, £nil attributable to investing and £nil
attributable to financing activities.
19 RETIREMENT BENEFITS
The Group operates a number of pension schemes covering most major Group
companies under which contributions are paid by the employer and employees.
The schemes include funded defined benefit pension arrangements, providing
service-related benefits, based on final pensionable salary in addition to a
number of defined contribution pension arrangements. The defined benefit
schemes in the UK and some defined contribution plans are administered by
trustees or trustee companies.
The assets of all the pension schemes and plans are held independently from the
Group's finances.
The total net pension costs of the Group for the year ended 4th October, 2009
were £28.8 million (2008 £20.5 million).
The defined benefit obligation is calculated on a year-to-date basis, using the
latest actuarial valuation as at 29th March, 2009. The assumptions used in the
valuation are summarised below:
Unaudited Audited
2009 2008
%pa %pa
Price inflation 3.1 3.7
Salary increases 3.0 4.2
Pension increases 3.0 3.7
Discount rate for scheme liabilities 5.4 7.0
Expected overall rate of return on assets 7.0 7.5
During the period the Group recognised pension curtailment gains arising from
the remeasurement of pension liabilities of £2.7 million in relation to the
disposal of the Evening Standard and £24.7 million in relation to the Group's
reorganisation and restructuring programmes.
20 CONTINGENT LIABILITIES
As set out in note 31 the Group has issued stand by letters of credit in favour
of the Trustees of the Group's defined benefit pension fund amounting to £37.8
million (2008 £64.3 million).
The Group is exposed to libel claims in the ordinary course of business and
vigorously defends against claims received. The Group makes provision for the
estimated costs to defend such claims when incurred and provides for any
settlement costs when such an outcome is judged probable.
Four writs claiming damages for libel have been issued in Malaysia against
Euromoney Institutional Investor and three of its employees in respect of an
article published in one of Euromoney's magazines, International Commercial
Litigation, in November 1995. The writs were served on Euromoney on 22nd
October, 1996. Two of these writs have been discontinued. The total outstanding
amount claimed on the two remaining writs is 82.0 million Malaysian ringgits (£
15.1 million). No provision has been made in these accounts since the Directors
do not believe that Euromoney has any material liability in respect of these
writs.
21 ULTIMATE HOLDING COMPANY
The Company's ultimate holding company and immediate parent company is
Rothermere Continuation Limited, a company incorporated in Bermuda.
22 RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The transactions between the Group and its joint ventures and associates
are disclosed below.
The following transactions and arrangements are those which are considered to
have had a material effect on the financial performance and position of the
Group for the period.
Ultimate Controlling Party
The Company's ultimate controlling party is the Viscount Rothermere, the
Company's Chairman. Transactions relating to the remuneration and shareholdings
of the Viscount Rothermere are given in the Remuneration Report.
Transactions with Directors
There were no material transactions with Directors of the Company during the
year, except for those relating to remuneration and shareholdings, disclosed in
the Remuneration Report.
For the purposes of IAS 24, Related Party Disclosures, Executives below the
level of the Company's Board are not regarded as related parties.
The remuneration of the Directors at the year end, who are the key management
personnel of the Group, is set out below in aggregate for each of the
categories specified in IAS 24. Further information about the individual
Directors' remuneration is provided in the audited part of the Directors'
Remuneration Report.
Transactions with joint ventures and associates
Associated Newspapers Limited has a 45% shareholding in Fortune Green Limited.
During the period the Group received revenue for newsprint, computer and office
services of £0.9 million (2008 £0.9 million). Amounts due from Fortune Green
Limited at 4th October, 2009 were £0.2 million (2008 £0.3 million).
Associated Newspapers Limited has a 20% share in the Newspapers Licensing
Agency (NLA) from which royalty revenue of £2.5 million was received (2008 £3.0
million). Commissions paid on this revenue total £0.3 million (2008 £0.5
million). The amount due from the NLA on 4th October, 2009 was £0.1 million
(2008 £0.2 million due to the NLA).
Daily Mail and General Holdings Limited has a 15.8% share holding in The Press
Association. During the period the Group received services amounting to £1.3
million (2008 £1.8 million) and the net amount due from the Press Association
as at 4th October, 2009 was £33,000 (2008 £0.1 million).
During the period, the Company received services from companies in which
Directors have an interest totalling £6.9 million (2008 £7.9 million) and
received revenue of £0.6 million (2008 £0.6 million). The net amount owed by
these companies at 4th October, 2009 was £0.6 million (2008 £0.1 million).
In January, 2009 the Group sold 75.9% of the Evening Standard. Since this date
the Group has received revenue of £5.6 million (2008 £nil) and paid for
services of £13.3 million (2008 £nil). The net amount due from the Group at
4th October, 2009 was £1.0 million (2008 £nil).
During the period, Landmark charged management fees of £0.3 million (2008 £0.3
million) to Point X Ltd, and recharged costs of £0.1 million (2008 £0.1
million). Point X received royalty income from Landmark of £77,000 (2008 £
43,000) and owed £39,000 to Landmark (2008 £0.1 million) at the period end.
During the period, Landmark recharged costs totalling £0.2 million (2008 £nil)
to Financial Asset Search Ltd and at the period end was due £0.2 million (2008
£nil).
During the period, DMG Radio Australia Pty Ltd invoiced DMG Radio Perth Pty Ltd
AU$2.8 million (2008 AUS$2.8 million).
Other related party disclosures
During the period, two loans of £33,263 and £3,732 made to an officer of the
Company were repaid in full. The loans bore interest at 5% and 6.25%
respectively per annum. The maximum principal amount outstanding during the
period was £33,263 and £3,732.
At 4th October, 2009, the Group owed £1.6 million (2008 £1.5 million) to the
pension schemes which it operates. This amount comprised employees' and
employer's contributions in respect of September 2009 payrolls which were paid
to the pension schemes in October 2009.
The Group recharges its principal pension schemes with costs of investment
management fees. The total amount recharged during the year was £0.7 million
(2008 £0.7 million).
Post Balance Sheet Events
Details of material post balance sheet events are given in the management
report.