Level 2

Company Announcements

Euromoney Preliminary Statement

RNS Number : 0045Q
Euromoney Institutional InvestorPLC
24 November 2016
 

 

 

 

                     

 

 

Euromoney

Institutional

Investor PLC

 

 

Preliminary Statement

September 30 2016

 

Euromoney Institutional Investor PLC

Preliminary Statement

 

November 24 2016

 

 

Headlines

2016

 

2015

 

Change

 

 

 

 

 

 

Total revenue

£403.1

m

£403.4

m

-

Adjusted results

 

 

 

 

 

• Adjusted operating profit

£101.4

m

£104.2

m

(3%)

• Adjusted profit before tax

£102.5

m

£107.8

m

(5%)

• Adjusted diluted earnings a share

66.5

p

70.1

p

(5%)

Statutory results

 

 

 

 

 

• Operating profit

£47.4

m

£123.1

m

 

• Profit before tax

£43.9

m

£123.3

m

 

• Diluted earnings a share

24.3

p

83.4

p

 

Net cash

£83.8

m

£17.7

m

£66.1m

Final dividend

16.4

p

16.4

p

-

 

 

 

A detailed reconciliation of the group's adjusted and underlying results are set out in the appendix to this statement.

 

Headlines

·      Strategy on track

·      Performance in line with Board's expectations despite continuing tough trading conditions for some businesses

·      Benefits from a strong dollar allowed accelerated investment in strategy

·      Strategy delivering a return to robust subscription growth

·      Total revenues flat on last year, underlying 4% down

·      Adjusted profit before tax down 5% to £102.5m

·      Decrease in statutory profit before tax due to exceptional charge of £37.3m (2015: exceptional gain £33.4m)

·      Underlying operating cash conversion of 105%. Net cash at September 30 of £83.8m.

·      Final dividend unchanged at 16.4p

 

Commenting on the results, Andrew Rashbass, CEO said: "The strategy we unveiled in March is working. It's a tough environment for our customers, and therefore for us, but we are beginning to see the results of the strategy, for instance in the acceleration in subscription growth, which constituted a record 58% of our business in 2016, and in the flow of successful product launches. Focusing the company on delivering growth through investing in areas of opportunity and disinvesting from areas that are structurally and cyclically challenged remains my priority. Our return to acquiring excellent businesses, like FastMarkets, after a break from acquisitions in 2015, also increases my optimism about the future. Despite lower year-on-year profits, our strong balance sheet means that we are recommending to shareholders that we maintain the dividend at 2015 levels. This is a mark of our measured confidence about the future."

Strategy

At the Investor Day in March 2016, we presented the new strategy for Euromoney. We categorise our businesses into four quadrants depending on the position in the business cycle of their customers and the strength of their business model and take necessary actions in each quadrant as follows:

 

 

 

Y axis = Structure

 

 

 

 

+

 

 

 

 

 

Top Left Quadrant ("Prepare for upturn")

Top Right Quadrant ("Invest")

 

 

 

 

● Protect and enhance competitive position

● New product development

 

● Careful, selective investment for when the cycle turns

● Sales and marketing

 

● Tight cost control

● Acquisition

 

● Fix any operational deficit

● Fix any operational deficit

 

● Opportunistic on revenue opportunities

 

 

 

 

 

 

 

X axis = Cycle

-

+

 

 

 

Bottom Left Quadrant ("Disinvest")

Bottom Right Quadrant ("Use the time wisely")

 

 

 

 

● Maximise shorter-term profit and cash

● Modest investment to move to top-right quadrant above

 

● Divest

● Maximise shorter-term profit and cash

 

● Prevent future build-up

● Fix any operational deficit

 

 

● Consider divestment

 

-

 

 

 

 

 

 

 

This leads to three pillars of strategic activity:

 

1.          Investing around big themes such as the information and services to support the asset management industry, price discovery and others.

 

2.          Ensuring an effective operating model that marries the best of the company's entrepreneurial culture (closeness to customers, passion for brands, knowledge of products and accountability for revenue and profit) with, for example, modern marketing techniques, group-wide talent management, seeking economies of, and opportunities from, scale and adopting a strategic approach to developing each business.

 

3.          Actively managing the portfolio, disinvesting in businesses where the market is weak and the business model structurally challenged and investing where the businesses are structurally strong and there are market tailwinds.

 

Progress with implementing the strategy has been good, partly because the organisation has adopted the strategy more effectively and more quickly than we had assumed and partly because we have been able to use the benefits of the strong dollar compared with sterling to accelerate investment while still delivering results in line with Board's expectations. This is despite tougher trading conditions than we had expected during the year and our bottom-left businesses performing worse than we had forecast 12 months ago.

 

Our three-pillar and four-quadrant strategy helped to identify the businesses that were dragging us backwards and the businesses where we have the greatest opportunities. We began to deal with the former and invest in the latter. We have removed the bottom-left profit drag from Gulf Publishing and Petroleum Economist (which we sold) and from Euromoney Learning Solutions (which we restructured). In addition, we began to reduce any operational deficit (as we call it) to get as many of our businesses as possible performing better (introducing, for example, sophisticated pricing policies and market-led product development techniques).

 

With this new focus on market-led product development, we launched numerous new products. Some examples:

 

·              BCA research reports and analysis on US equities, US Equity Trading strategy and US Technology sector strategy;

·              Institutional Investor RIA and European Alternative Investment Institutes created;

·              Institutional Investor Research All-America Trading Team survey and rankings;

·              Ned Davis Research research data solutions with access to all NDR's data and charts and Explorer which provides interactive content distribution; and

·              Airfinance database and fleet analysis tools for Airfinance Fleet Analyst.

 

As well as disposals, we have become more active once again in our search for excellent businesses to add to our existing ones but with a greater focus on their strategic fit than before. During the year, we acquired FastMarkets, a metals news and prices platform which becomes part of the Metal Bulletin Group and accelerates its strategy of becoming the leading metals price reporting agency. We also bought Reinsurance Security, which rates reinsurance companies, and which now sits alongside, and complements, Insurance Insider. We also acquired a fleet database which now sits at the heart of our fleet-valuation toolset.

 

The continuing strong cash generation - conversion of adjusted operating profit to cash in the year at 105% continues our decades-long record - shows that, in the face of tough market conditions, the business can be both strategic and tightly and effectively managed.

 

Priorities for 2017

In the year ahead we expect to continue to implement the strategy, investing in our big themes, making sure we have an effective operating model which combines Euromoney's entrepreneurial culture with a more strategic approach, sharing best practice and achieving economies of scale. We will continue to manage the portfolio actively, buying where we see value-creating and strategically sensible opportunities to do so and selling when we believe a business is more valuable to someone else than to us.

 

Outlook

We do not expect markets to improve in the year ahead and our plans are built around them not doing so. We said at the Investor Day, that our strategy would not change the trajectory in 2016; that we expected, subject to the usual caveats, to return to growth in 2018; and that 2017 would be a year of transition. This remains our view.

 

 

Operating and Financial Review

 

Trading and business review

Total revenue for the year of £403.1m was in line with 2015. The pressures on banking and finance and on commodity events, which together constituted 26% of revenue, continued to offset the improving performance in the group's businesses focused on price discovery, data and market intelligence and those serving the asset management sector. Trading conditions have remained challenging throughout the year, but the group is starting to reap the benefits from strategic initiatives focussed on new products, pricing and sales. On a reported basis, the drag from businesses in the disinvest quadrant has been offset by favourable exchange rates. Underlying revenue decreased by 4%.

 

 

Revenue (£m)*

Subscriptions/

Content

Advertising

Sponsorship

Delegates

Other

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset management

132.0

2%

14.3

(7%)

14.3

1%

3.7

6%

0.2

(25%)

164.5

1%

Pricing, data and market intelligence

89.9

2%

15.2

(10%)

11.1

(6%)

17.2

1%

1.4

-

134.9

-

Banking and finance

10.5

(6%)

9.8

(17%)

29.9

-

22.9

(22%)

1.5

(50%)

74.6

(13%)

Commodity events

N/A

 

N/A

 

5.7

(12%)

22.9

(19%)

0.6

(19%)

29.3

(18%)

 

232.4

1%

39.3

(11%)

61.0

(2%)

66.8

(14%)

3.7

(32%)

403.2

-

Sold/closed businesses

 

 

 

 

 

 

 

 

 

 

5.1

-

Foreign exchange losses on forward contracts

 

 

 

 

 

 

 

 

 

 

(5.2)

-

Total revenue

 

 

 

 

 

 

 

 

 

 

403.1

(4%)

 

 

* Figures are 2016 reported revenues and percentages are underlying growth rates.

 

Underlying subscriptions and content revenues increased by 1%. Asset management subscription revenues were up an underlying 2% largely from the strategic initiatives undertaken for new products, pricing and sales. Institutional Investor's subscription-based memberships performed strongly throughout 2016, while BCA and NDR ended the year on a positive note with Q4 performance showing encouraging signs of returning to growth. Pricing, data and market intelligence subscription revenues were up an underlying 2% reflecting strong performances from the group's insurance and financial data businesses together with the emerging market information and data provider, CEIC.

Underlying advertising revenues remained weak and declined by 11%. The largest decline was felt by the group's banking and finance businesses, reflecting the cost pressures on global investment banks.

Underlying event revenues fell by 9%, with the banking and finance and commodity events segments creating a significant drag on revenue growth due to the structural and cyclical headwinds in those markets. The steep first half decline of 13% was followed by a lower rate of decline of 4% in the second, reflecting easier comparatives after the commodities crisis in the first half of 2015. Underlying event sponsorship was down 2%. Large events, particularly in the structured finance and telecoms sectors, remained robust but smaller events fared less well. Underlying delegate revenues fell by 14%, largely due to weakness in the financial training business. Following a strategic review, the decision was taken to focus on in-house training and reduce significantly the number of public training courses held. Revenue from event delegates (excluding the drag from training) fell by an underlying 2% in the second half after a 13% decline in the first.

The adjusted operating margin fell from 25.8% to 25.2% due to the accelerated investment in the strategy. The drag from the bottom-left-quadrant businesses was offset by the favourable currency mix. Adjusted operating profit fell by £2.8m to £101.4m. 

Adjusted and statutory results

Adjusted profit before tax decreased by 5% to £102.5m, consistent with the fall in adjusted operating profit and the adjusted diluted earnings per share also fell by a similar amount. Underlying adjusted profit before tax fell by 13%.

The statutory profit before tax of £43.9m is lower than the adjusted profit before tax due to exceptional items of £37.3m and acquired intangible amortisation of £16.7m. The exceptional items mostly arise from goodwill impairment charges, an overseas sales tax dispute and restructuring costs associated with the group's strategic review in 2016, partly offset by profits realised on businesses sold during the period. A detailed reconciliation of the group's adjusted and statutory results is set out in the appendix to this statement.

Tax

The adjusted effective tax rate based on adjusted profit before tax and excluding deferred tax movements on intangible assets, prior year items and exceptional items is 18% (2015: 18%). The group continues to benefit from reductions in the UK corporate tax rate and the tax effects of acquisitions made prior to July 2015. The tax rate in each year depends mainly on the geographic mix of profits and applicable tax rates. The group's reported effective tax rate increased to 29% compared to 14% in 2015. A reconciliation is set out in note 5 to this statement.

Net cash, cash flow and dividend

Net cash at September 30 2016 was £83.8m compared with £55.9m at March 31 and £17.7m at last year end. This balance sheet position reflects the group's strong operating cash flows, as well as the £14.4m proceeds from the redemption of preference shares as part of the Dealogic transaction and the £10.8m cash consideration from the disposal of Gulf Publishing and Petroleum Economist.  This was offset by acquisition spend of £14.3m for FastMarkets and Reinsurance Security. The underlying operating cash conversion rate was 105% (2015: 104%). 

In April 2016, the group extended its $160m multi-currency borrowing facility from DMGT, the group's parent, to November 2018 (see Consolidated Statement of Cash Flows).  The group has no significant outstanding acquisition commitments payable in 2017.

The company's policy is to distribute a third of its adjusted after-tax earnings by way of dividends. Although adjusted earnings have declined, the company's strong balance sheet means the board is able to recommend an unchanged final dividend of 16.4p a share to be paid to shareholders on February 9 2017, giving a total dividend for the year of 23.4p a share (2015: 23.4p).

Currency

The group generates approximately two thirds of both its revenues, including approximately a third of its UK revenues, and profit before tax in US dollars.  The exposure to US dollar revenues in its UK businesses is hedged using forward contracts to sell US dollars, which delays the impact of movements in exchange rates for at least a year.  However, the group does not hedge the foreign exchange risk on the translation of overseas profits.     

The average sterling-US dollar rate for the year to September 30 was $1.41 (2015: $1.55).  This improved headline revenue growth rates for the year by approximately five percentage points and adjusted profit before tax by £6.7m.  Each one cent movement in the US dollar rate has an impact on profits on translation of approximately £0.6m on an annualised basis. The group also benefitted from the revaluation of non-sterling denominated balance sheet items resulting in a gain of £1.9m (2015: £2.5m loss). 

Further trading updates

Further coverage of these full-year results will be provided to analysts at a presentation starting at 9am on November 24 at the offices of UBS. The group intends to provide a brief 2017 first-quarter trading update on January 26.

 

END

For further information, please contact:

Euromoney Institutional Investor PLC

Colin Jones, Finance Director:                +44 20 7779 8666; cjones@euromoneyplc.com

FTI Consulting

Charles Palmer:                                       +44 20 3727 1400; charles.palmer@fticonsulting.com

 

NOTE TO EDITORS

Euromoney Institutional Investor PLC (www.euromoneyplc.com) is listed on the London Stock Exchange and is a member of the FTSE 250 share index. It is an international business-to-business media group focused primarily on the asset management, banking and commodities sectors under brands including Euromoney, Institutional Investor and Metal Bulletin. It is a leading provider of economic and investment research and data under brands including BCA Research, Ned Davis Research, and the emerging market information providers, EMIS and CEIC. The group also runs an extensive portfolio of events for the financial and commodities markets. Its main offices are in London, New York, Montreal, Hong Kong and Sofia, and more than a third of its revenues are derived from emerging markets. 

 

 

 

 

Appendix to Preliminary Statement

 

Reconciliation of Consolidated Income Statement to adjusted results for the year ended September 30 2016

The directors believe that the adjusted profit and earnings per share measures provide additional useful information for shareholders to evaluate the performance of the business. The group's non-IFRS measures are intended to remove from reported earnings volatility associated with the following types of one-off income and charges:

 

Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and customer relationships), exceptional items, share of associates and joint ventures' acquired intangibles amortisation, exceptional items and tax, and net movements in deferred consideration and acquisition commitments. In respect of earnings, adjusted amounts reflect a tax rate that includes the current tax effect of the goodwill and intangible assets.  Many of the group's acquisitions, particularly in the US, give rise to significant tax savings as the amortisation of goodwill and intangible assets on acquisition is deductible for tax purposes. The group considers that the resulting adjusted effective tax rate is therefore more representative of its tax payable position.  Further analysis of the adjusting items is presented in notes 3, 4, 5, 7, 9 and 10 to the Preliminary Statement.

 

The group has consistently applied this definition of adjusted measures as it has reported on its financial performance in the past and it is the group's intention to continue to consistently apply this definition in the future.

 

Underlying results

When assessing the performance of our businesses, the board considers the adjusted results. The year-on-year change in adjusted results may not, however, be a fair like-for-like comparison as there are a number of factors which can influence growth rates but which do not reflect underlying performance.

 

When calculating underlying growth, adjustments are made to give a like-for-like comparison. For example, the adjusted results in 2016 benefitted from the strengthening of the US dollar relative to sterling. To calculate underlying growth, the prior year comparatives are restated using 2016 exchange rates. Similarly, adjustments are made to exclude acquisitions and disposals from both years. The timing of events can also be a distortion. To give a fair like-for-like comparison when calculating underlying growth, biennial events are excluded from the year in which they were held.

 

The reconciliation below sets out the adjusted and underlying results of the group and the related adjustments to the statutory Income Statement that the directors consider necessary to provide useful information about the group's trading performance.

 

 

2016

 

Statutory

Adjusted

Underlying

 

 

 

Adjust-

 

Year-on

 

Timing

 

Year-on

 

 

 

ments

Adjusted

year

M&A

differences

Underlying

year

 

Notes

£m

£m

£m

%

£m

£m

£m

%

 

 

 

 

 

 

 

 

 

 

Total revenue

2

403.1

-

403.1

-

(5.5)

(4.5)

393.1

(4%)

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

2

101.4

-

101.4

(3%)

(0.2)

(2.2)

99.0

(11%)

Acquired intangible amortisation

9

(16.7)

16.7

-

 

-

-

-

 

Long-term incentive credit

 

-

-

-

 

-

-

-

 

Exceptional items

3

(37.3)

37.3

-

 

-

-

-

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

47.4

54.0

101.4

(5%)

(0.2)

(2.2)

99.0

(13%)

Share of results in associates and joint ventures

10

(1.8)

4.0

2.2

 

-

-

2.2

 

 

 

 

 

 

 

 

 

 

 

Finance income

4

0.7

-

0.7

 

-

-

0.7

 

Finance expense

4

(2.4)

0.6

(1.8)

 

-

-

(1.8)

 

Net finance (costs)/income

4

(1.7)

0.6

(1.1)

 

-

-

(1.1)

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

43.9

58.6

102.5

(5%)

(0.2)

(2.2)

100.1

(13%)

Tax expense on profit

5

(12.9)

(5.2)

(18.1)

 

 

 

 

 

Profit for the year

 

31.0

53.4

84.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

Equity holders of the parent

 

30.7

53.4

84.1

 

 

 

 

 

Equity non-controlling interests

 

0.3

-

0.3

 

 

 

 

 

 

 

31.0

53.4

84.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

7

24.29p

42.22p

66.51p

 

 

 

 

 

 

 

 

 

 

2015

 

Statutory

Adjusted

Underlying

 

 

 

Adjust-

 

 

Foreign

 

 

 

 

ments

Adjusted

M&A

exchange

Underlying

 

Notes

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

Total revenue

2

403.4

-

403.4

(13.7)

18.1

407.8

 

 

 

 

 

 

 

 

Adjusted operating profit

2

104.2

-

104.2

(4.4)

11.1

110.9

Acquired intangible amortisation

9

(17.0)

17.0

-

-

-

-

Long-term incentive credit

 

2.5

-

2.5

-

-

2.5

Exceptional items

3

33.4

(33.4)

-

-

-

-

 

 

 

 

 

 

 

 

Operating profit

 

123.1

(16.4)

106.7

(4.4)

11.1

113.4

Share of results in associates and joint ventures

10

(0.3)

2.7

2.4

-

-

2.4

 

 

 

 

 

 

 

 

Finance income

4

5.1

(4.7)

0.4

-

-

0.4

Finance expense

4

(4.6)

2.9

(1.7)

-

-

(1.7)

Net finance income/(costs)

4

0.5

(1.8)

(1.3)

-

-

(1.3)

 

 

 

 

 

 

 

 

Profit before tax

 

123.3

(15.5)

107.8

(4.4)

11.1

114.5

Tax expense on profit

5

(17.6)

(1.3)

(18.9)

 

 

 

Profit for the year

 

105.7

(16.8)

88.9

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the parent

 

105.5

(16.8)

88.7

 

 

 

Equity non-controlling interests

 

0.2

-

0.2

 

 

 

 

 

105.7

(16.8)

88.9

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

7

83.38

(13.26)

70.12

 

 

 

 

 

 

 

Cash conversion

2016

2015

 

£m

£m

 

 

 

Adjusted operating profit

101.4

104.2

 

 

 

Cash generated from operations

103.8

109.5

Exceptional items

3.7

3.2

Other working capital movements

(1.4)

(4.3)

Underlying cash generated from operations

106.1

108.4

 

 

 

Cash conversion %

102%

105%

Underlying cash conversion %

105%

104%

 

 

Cash conversion measures the percentage by which cash generated from operations covers adjusted operating profit. The underlying basis is after adjusting for significant timing differences affecting the movement on working capital and exceptional items. Exceptional items are the payments relating to the strategic review including one-off acquisition and integration costs, the major reorganisation of certain businesses and other professional fees relating to development of the group's new strategy. The other working capital movements relate to the favourable effect of the rent-free period in the London offices. The 2015 underlying cash conversion has been restated for the impact of exceptional items.

 

 

 

Consolidated Income Statement

for the year ended September 30 2016 

 

 

 

2016

2015

 

Notes

£000

£000

 

 

 

 

Total revenue

2

403,112

403,412

 

 

 

 

Operating profit before acquired intangible amortisation, long-term incentive credit and exceptional items

2

101,450

104,234

Acquired intangible amortisation

9

(16,733)

(17,027)

Long-term incentive credit

 

-

2,490

Exceptional items

3

(37,264)

33,421

 

 

 

 

Operating profit

 

47,453

123,118

Share of results in associates and joint ventures

10

(1,823)

(381)

 

 

 

 

Finance income

4

694

5,127

Finance expense

4

(2,402)

(4,579)

Net finance (costs)/income

4

(1,708)

548

 

 

 

 

Profit before tax

 

43,922

123,285

Tax expense on profit

5

(12,909)

(17,599)

Profit for the year

 

31,013

105,686

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

Equity holders of the parent

 

30,744

105,444

Equity non-controlling interests

 

269

242

 

 

31,013

105,686

 

 

 

 

Basic earnings per share

7

24.31p

83.42p

Diluted earnings per share

7

24.29p

83.38p

Adjusted basic earnings per share

7

66.57p

70.16p

Adjusted diluted earnings per share

7

66.51p

70.12p

Dividend per share (including proposed dividends)

6

23.40p

23.40p

 

 

A detailed reconciliation of the group's statutory results to the adjusted results is set out in the appendix to the Preliminary Statement on page 5.

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended September 30 2016

 

 

2016

2015

 

£000

£000

 

 

 

Profit for the year

31,013

105,686

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Change in fair value of cash flow hedges

(5,202)

(5,000)

Transfer of gains on cash flow hedges from fair value reserves to Income Statement:

 

 

   Foreign exchange (losses)/gains in total revenue

(819)

1,657

   Foreign exchange losses in operating profit

(1,214)

(375)

Net exchange differences on translation of net investments in overseas subsidiary undertakings

86,984

24,305

Net exchange differences on foreign currency loans

(43,401)

(8,788)

Translation reserves recycled to Income Statement

(636)

-

Tax on items that may be reclassified

1,437

581

 

 

 

Items that will not be reclassified to profit or loss:

 

 

Actuarial (losses)/gains on defined benefit pension schemes

(7,215)

2,421

Tax credit/(charge) on actuarial losses/gains on defined benefit pension schemes

1,227

(484)

 

 

 

Other comprehensive income for the year

31,161

14,317

 

 

 

Total comprehensive income for the year

62,174

120,003

 

 

 

Attributable to:

 

 

Equity holders of the parent

60,575

119,429

Equity non-controlling interests

1,599

574

 

62,174

120,003

 

 

 

 

 

Consolidated Statement of Financial Position

as at September 30 2016

 

 

 

 

2016

2015

 

£000

£000

Non-current assets

 

 

 

Intangible assets

 

 

 

Goodwill

396,105

381,993

Other intangible assets

155,034

149,386

Property, plant and equipment

10,472

9,171

Investment in associates

29,810

32,437

Investment in joint ventures

215

30

Available-for-sale investments

5,835

5,835

Deferred consideration

526

258

Deferred tax assets

3,886

20

Derivative financial instruments

9

9

 

601,892

579,139

Current assets

 

 

Trade and other receivables

73,491

69,840

Preference shares

-

13,546

Deferred consideration

-

331

Current income tax assets

7,112

7,712

Group relief receivable

121

515

Cash deposit with DMGT group company

73,639

9,799

Cash and cash equivalents (excluding bank overdrafts)

10,561

8,889

Derivative financial instruments

410

1,313

Total assets of businesses held for sale

5,013

-

 

170,347

111,945

Current liabilities

 

 

Acquisition commitments

(326)

-

Deferred consideration

(480)

-

Trade and other payables

(23,866)

(24,011)

Current income tax liabilities

(21,905)

(15,843)

Accruals

(73,375)

(55,743)

Deferred income

(113,446)

(106,165)

Loan notes

(185)

(267)

Bank overdrafts

(233)

(741)

Derivative financial instruments

(9,671)

(3,346)

Provisions

(353)

(835)

Total liabilities of businesses held for sale

(5,549)

-

 

(249,389)

(206,951)

Net current liabilities

(79,042)

(95,006)

Total assets less current liabilities

522,850

484,133

 

 

 

Non-current liabilities

 

 

Acquisition commitments

(11,445)

(9,171)

Other non-current liabilities

(486)

(641)

Preference shares

(10)

(10)

Deferred income

(5,340)

(5,964)

Deferred tax liabilities

(14,179)

(18,424)

Net pension deficit

(9,995)

(1,973)

Derivative financial instruments

(778)

(661)

Provisions

(3,116)

(2,345)

 

(45,349)

(39,189)

Net assets

477,501

444,944

Shareholders' equity

 

 

Called up share capital

321

320

Share premium account

102,835

102,557

Other reserve

64,981

64,981

Capital redemption reserve

8

8

Own shares

(21,005)

(21,582)

Reserve for share-based payments

37,334

37,169

Fair value reserve

(34,741)

(27,506)

Translation reserve

95,037

53,420

Retained earnings

224,218

228,823

Equity shareholders' surplus

468,988

438,190

Equity non-controlling interests

8,513

6,754

Total equity

477,501

444,944

 

 

Approved by the board on November 24 2016. 

 

 

Consolidated Statement of Changes in Equity

for the year ended September 30 2016

 

 

 

 

 

 

 

Reserve

 

 

 

 

 

 

 

 

 

 

 

 

for

 

 

 

 

 

 

 

 

 

 

Capital

 

share-

 

 

 

 

Non-

 

 

 

Share

 

redemp-

 

based

Fair

Trans-

 

 

control-

 

 

Share

premium

Other

tion

Own

pay-

value

lation

Retained

 

ling

Total

 

capital

account

reserve

reserve

shares

ments

reserve

reserve

earnings

Total

interests

equity

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

At September 30 2014

320

102,011

64,981

8

(21,582)

39,158

(22,259)

36,706

149,564

348,907

7,616

356,523

Profit for the year

-

-

-

-

-

-

-

-

105,444

105,444

242

105,686

Other comprehensive (expense)/income for the year

-

-

-

-

-

-

(5,247)

16,714

2,518

13,985

332

14,317

Total comprehensive income for the year

-

-

-

-

-

-

(5,247)

16,714

107,962

119,429

574

120,003

Derecognition of non-controlling interest

-

-

-

-

-

-

-

-

1,079

1,079

(1,079)

-

Adjustment arising from change in non-controlling interest

-

-

-

-

-

-

-

-

(226)

(226)

82

(144)

Credit for share-based payments

-

-

-

-

-

(1,989)

-

-

-

(1,989)

-

(1,989)

Cash dividend paid

-

-

-

-

-

-

-

-

(29,064)

(29,064)

(439)

(29,503)

Exercise of share options

-

546

-

-

-

-

-

-

-

546

-

546

Tax relating to items taken directly to equity

-

-

-

-

-

-

-

-

(492)

(492)

-

(492)

At September 30 2015

320

102,557

64,981

8

(21,582)

37,169

(27,506)

53,420

228,823

438,190

6,754

444,944

Profit for the year

-

-

-

-

-

-

-

-

30,744

30,744

269

31,013

Other comprehensive (expense)/income for the year

-

-

-

-

-

-

(7,235)

41,617

(4,551)

29,831

1,330

31,161

Total comprehensive income for the year

-

-

-

-

-

-

(7,235)

41,617

26,193

60,575

1,599

62,174

Recognition of acquisition commitments

-

-

-

-

-

-

-

-

(665)

(665)

-

(665)

Non-controlling interest recognised on acquisition

-

-

-

-

-

-

-

-

-

-

363

363

Exercise of acquisition option commitments

-

-

-

-

-

-

-

-

40

40

(40)

-

Adjustment arising from change in non-controlling interest

-

-

-

-

-

-

-

-

(356)

(356)

228

(128)

Credit for share-based payments

-

-

-

-

-

742

-

-

-

742

-

742

Cash dividend paid

-

-

-

-

-

-

-

-

(29,592)

(29,592)

(391)

(29,983)

Exercise of share options

1

278

-

-

577

(577)

 

-

-

279

-

279

Tax relating to items taken directly to equity

-

-

-

-

-

-

-

-

(225)

(225)

-

(225)

At September 30 2016

321

102,835

64,981

8

(21,005)

37,334

(34,741)

95,037

224,218

468,988

8,513

477,501

 

 

Consolidated Statement of Changes in Equity

for the year ended September 30 2016

 

The investment in own shares is held by the Euromoney Employees' Share Ownership Trust (ESOT) and Euromoney Employee Share Trust (EEST). The trusts waived the rights to receive dividends. Interest and administrative costs are charged to the profit and loss account of the trusts as incurred.

 

 

2016

2015

 

Number

Number

Euromoney Employees' Share Ownership Trust

58,976

58,976

Euromoney Employee Share Trust

1,700,777

1,747,631

Total

1,759,753

1,806,607

Nominal cost per share (p)

0.25

0.25

Historical cost per share (£)

11.94

11.95

Market value (£000)

19,516

17,163

 

The other reserve represents the share premium arising on the shares issued for the purchase of Metal Bulletin plc in October 2006.

               

 

 

Consolidated Statement of Cash Flows

for the year ended September 30 2016

 

 

2016

2015

 

£000

£000

Cash flow from operating activities

 

 

Operating profit

47,453

123,118

Long-term incentive expense/(credit)

1,198

(2,490)

Acquired intangible amortisation

16,733

17,027

Licences and software amortisation

3,675

2,680

Depreciation of property, plant and equipment

2,806

2,643

Profit on disposal of property, plant and equipment

(4)

(4,168)

Goodwill impairment

26,987

18,458

Intangibles impairment

1,652

-

Investment in associate impairment

111

-

Recognition of deficit on defined benefit scheme

1,249

-

Profit on disposal of associate

-

(2,921)

Profit on disposal of available-for-sale investment

-

(45,502)

Profit on disposal of business

(7,094)

(2,446)

Decrease in provisions

(387)

(1,757)

Operating cash flows before movements in working capital

94,379

104,642

Decrease in receivables

1,719

1,169

Increase in payables

7,666

3,641

Cash generated from operations

103,764

109,452

Income taxes paid

(17,242)

(13,670)

Group relief tax received/(paid)

549

(1,116)

Net cash generated from operating activities

87,071

94,666

 

 

 

Investing activities

 

 

Dividends received from associate

83

123

Interest received

699

401

Purchase of intangible assets

(2,402)

(1,760)

Purchase of property, plant and equipment

(3,231)

(6,487)

Proceeds from disposal of property, plant and equipment

20

15,837

Purchase of available-for-sale investments

-

(5,835)

Purchase of subsidiary undertaking, net of cash acquired

(14,092)

-

Proceeds from disposal of business

10,796

40

Purchase of associates and joint venture

(180)

(934)

Proceeds from disposal of associate and joint venture

-

2,912

Proceeds from redemption of preference share capital in investment

14,370

-

Net cash from investing activities

6,063

4,297

 

 

 

Financing activities

 

 

Dividends paid

(29,592)

(29,064)

Dividends paid to non-controlling interests

(391)

(439)

Interest paid

(1,121)

(904)

Issue of new share capital

279

546

Receipt/(payment) of deferred consideration

662

(11,558)

Purchase of additional interest in subsidiary undertakings

(367)

(252)

Redemption of loan notes

(82)

(223)

Deposit/loan repaid to DMGT group company

(62,326)

(56,735)

Net cash used in financing activities

(92,938)

(98,629)

Net increase in cash and cash equivalents

196

334

Cash and cash equivalents at beginning of year

8,148

8,571

Effect of foreign exchange rate movements

1,984

(757)

Cash and cash equivalents at end of year

10,328

8,148

 

 

Cash and cash equivalents include bank overdrafts.

 

 

 

 

Note to the Consolidated Statement of Cash Flows

 

 

Net cash

2016

2015

 

£000

£000

 

 

 

At October 1

17,680

(37,596)

Net increase in cash and cash equivalents

196

334

Deposit/loan repaid to DMGT group company

62,326

56,735

Redemption of loan notes

82

223

Effect of foreign exchange rate movements

3,498

(2,016)

At September 30

83,782

17,680

 

 

 

Net cash comprises:

 

 

Cash at bank and in hand

10,561

8,889

Bank overdrafts

(233)

(741)

Total cash and cash equivalents

10,328

8,148

Cash deposit with DMGT group company

73,639

9,799

Loan notes

(185)

(267)

Net cash

83,782

17,680

 

 

The group's access to debt funding is provided through a committed multi-currency revolving credit facility from Daily Mail and General Trust plc (DMGT). The total maximum borrowing capacity is US$160m (£123m).  The facility was extended during the financial year and is available to the group until November 28 2018.  Interest is payable on this facility at a variable rate of between 1.35% and 2.35% above LIBOR dependent on the ratio of adjusted net debt to adjusted EBITDA. The facility's covenant requires the group's net debt to be no more than three times adjusted EBITDA on a rolling 12 month basis. Failure to maintain the covenant requirement would result in the group being in breach of the facility, potentially resulting in the facility being withdrawn or impediment of management decision making by the lender. Management regularly monitors the covenant and prepares detailed forecasts to ensure that sufficient headroom is available and that the covenants are not close or potentially close to breach. At September 30 2016, the group's net cash to adjusted EBITDA was (0.76) times and the committed undrawn facility available to the group was £123m.

 

There is a risk that the undrawn portion of the facility, or that the additional funding, may be unavailable or withdrawn if DMGT experiences funding difficulties themselves. However, if DMGT were unable to fulfil its funding commitment to the group, the directors are confident that the group would be in a position to secure adequate external facilities, although at a higher cost of funding.

 

The group's strategy is to use excess operating cash to deposit with DMGT or pay down its debt. As at September 30 2016 the facility was undrawn and has not been utilised during the financial year (2015: £nil).  The group generally has an annual cash conversion rate (the percentage by which cash generated from operations covers adjusted operating profit before acquired intangible amortisation and exceptional items) of 100% or more due to much of its subscription, sponsorship and delegate revenue being paid in advance. The group's operating cash conversion rate was 102%. The underlying operating cash conversion rate is 105% compared to 104% in 2015.

 

Notes to the Preliminary Statement

 

1 Basis of preparation

While the financial information contained in this 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.

 

The information for the year ended 30 September 2016 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 30 September 2015 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. These accounts 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 directors have restated the segmental information to more accurately reflect the operations and the group strategy.  The group is organised into four business divisions: Asset management; Pricing, data and market intelligence; Banking and finance; and Commodity events.

 

Accounting policies

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

 

The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the group's 2015 annual audited financial statements, except as described below.

·     IFRS 9 'Financial Instruments' - subject to EU endorsement, the expected mandatory effective date of implementation is January 1 2018

·     IFRS 15 'Revenue from Contracts with Customers' - subject to EU endorsement, the expected mandatory effective date of implementation is January 1 2018

·     IFRS 16 'Leases - subject to EU endorsement, the expected mandatory effective date of implementation is January 1 2019

·     Amendments to IAS 38 on Intangible Assets

·     Annual Improvements 2012-2014 Cycle

 

Going concern 

Having assessed the principal risks and the other matters discussed in connection with the viability statement, the directors consider it appropriate to adopt the going concern basis of accounting in preparing this Preliminary Statement.

 

 

 

2 Segmental analysis

Segmental information is presented in respect of the group's business divisions and reflects the group's management and internal reporting structure. The directors have restated the segmental information to reflect the changes in the group's operations following the implementation of the new group strategy.  The group is organised into four business divisions: Asset management; Pricing, data and market intelligence; Banking and finance; and Commodity events.

 

Asset management and pricing, data and market intelligence consist primarily of subscription revenue. Banking and finance consists mainly of both sponsorship income and delegates revenue. Commodity events consists primarily of delegates revenue. A breakdown of the group's revenue by type is set out below.

 

In April 2016, the group disposed of 100% of the equity share capital of Gulf Publishing Company, Inc. (Gulf) and The Petroleum Economist Limited (PE). As a result segment information from the disposal of Gulf and PE has been reclassified as sold/closed businesses and the comparative split of divisional revenues, revenue by type and operating profits have been restated.

 

Analysis of the group's three main geographical areas is also set out to provide additional information on the trading performance of the businesses.

 

Inter-segment sales are charged at prevailing market rates and shown in the eliminations columns.

 

 

 

Subscriptions and content

Advertising

Sponsorship

Delegates

Other

Total revenue

2016

£000

£000

£000

£000

£000

£000

Revenue

 

 

 

 

 

 

by division and type:

 

 

 

 

 

 

Asset management

            131,991

        14,285

                14,282

           3,745

                232

   164,535

Pricing, data and market intelligence

              89,920

        15,166

                11,127

         17,247

             1,426

   134,886

Banking and finance

              10,456

          9,833

                29,895

         22,879

             1,500

     74,563

Commodity events

                     45

               10

                  5,739

         22,902

                565

     29,261

 

            232,412

        39,294

                61,043

         66,773

             3,723

   403,245

Sold/closed businesses

 

 

 

 

 

       5,085

Foreign exchange losses on forward contracts

 

 

 

 

 

(5,218)

Total revenue

 

 

 

 

 

403,112

 

 

 

 

 

Subscriptions and content

Advertising

Sponsorship

Delegates

Other

Total revenue

2015

£000

£000

£000

£000

£000

£000

Revenue

 

 

 

 

 

 

by division and type:

 

 

 

 

 

 

Asset management

            119,905

          14,159

                13,183

           3,266

               303

   150,816

Pricing, data and market intelligence

              84,538

          15,908

                11,004

         16,165

            1,377

   128,992

Banking and finance

              10,372

          11,153

                27,945

         28,213

            2,820

     80,503

Commodity events

                        -

                   -

                  6,363

         22,453

               733

     29,549

 

            214,815

          41,220

                58,495

         70,097

            5,233

   389,860

Sold/closed businesses

 

 

 

 

 

     12,929

Foreign exchange gains on forward contracts

 

 

 

 

 

          623

Total revenue

 

 

 

 

 

403,412

 

 

 

 

 

 

 

 

United Kingdom

North America

Rest of World

Total

 

 

 

2016

2015

2016

2015

2016

2015

2016

2015

 

 

 

£000

£000

£000

£000

£000

£000

£000

£000

Adjusted operating profit1

 

 

 

 

 

 

 

 

 

 

by division and source:

 

 

 

 

 

 

 

 

 

 

Asset management

 

 

1,697

1,055

53,579

50,298

672

611

55,948

51,964

Pricing, data and market intelligence

 

 

29,835

29,576

9,170

5,692

5,292

5,903

44,297

41,171

Banking and finance

 

 

3,012

8,432

7,538

7,830

313

1,065

10,863

17,327

Commodity events

 

 

5,583

8,938

-

(12)

2,433

40

8,016

8,966

Sold/closed businesses

 

 

(85)

1,536

261

2,692

-

(14)

176

4,214

Unallocated corporate costs

 

 

(12,386)

(15,138)

(3,782)

(2,535)

(1,682)

(1,735)

(17,850)

(19,408)

Operating profit before acquired intangible amortisation, long-term incentive credit and exceptional items

27,656

34,399

66,766

63,965

7,028

5,870

101,450

104,234

Acquired intangible amortisation2 (note 9)

(6,886)

(6,822)

(9,610)

(9,645)

(237)

(560)

(16,733)

(17,027)

Long-term incentive credit

-

1,269

-

757

-

464

-

2,490

Exceptional items (note 3)

 

 

(31,297)

36,781

(4,409)

1,752

(1,558)

(5,112)

(37,264)

33,421

Operating profit

 

 

(10,527)

65,627

52,747

56,829

5,233

662

47,453

123,118

Share of results in associates and joint ventures

 

 

 

 

 

 

 

 

(1,823)

(381)

Finance income (note 4)

 

 

 

 

 

 

 

 

694

5,127

Finance expense (note 4)

 

 

 

 

 

 

 

 

(2,402)

(4,579)

Profit before tax

 

 

 

 

 

 

 

 

43,922

123,285

Tax expense (note 5)

 

 

 

 

 

 

 

 

(12,909)

(17,599)

Profit for the year

 

 

 

 

 

 

 

 

31,013

105,686

 

 

1.    Operating profit before acquired intangible amortisation, long-term incentive credit and exceptional items (refer to the appendix to the Preliminary Statement).

2.    Acquired intangible amortisation represents amortisation of acquisition-related non-goodwill assets such as trademarks and brands, customer relationships and databases (note 9).

 

 

 

 

United Kingdom

North America

Rest of World

Eliminations

Total

 

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

Revenue

 

 

 

 

 

 

 

 

 

 

by division and source:

 

 

 

 

 

 

 

 

 

 

Asset management

11,327

12,598

151,532

136,571

2,531

2,767

(855)

(1,120)

164,535

150,816

Pricing, data and market intelligence

92,529

88,742

21,477

19,410

26,286

25,627

(5,406)

(4,787)

134,886

128,992

Banking and finance

43,584

49,523

26,828

25,369

5,434

6,886

(1,283)

(1,275)

74,563

80,503

Commodity events

20,206

24,525

-

-

9,055

5,024

-

-

29,261

29,549

Sold/closed businesses

1,070

3,561

4,122

9,700

-

-

(107)

(332)

5,085

12,929

Foreign exchange (losses)/gains on forward contracts

(5,218)

623

-

-

-

-

-

-

(5,218)

623

Total revenue

163,498

179,572

203,959

191,050

43,306

40,304

(7,651)

(7,514)

403,112

403,412

 

 

 

 

 

 

 

 

 

 

 

Revenue by destination

50,893

62,228

183,587

172,809

168,632

168,375

-

-

403,112

403,412

 

 

 

 

Acquired

Long-term

 

Depreciation

 

intangible

incentive

Exceptional

and

 

amortisation

credit

items

amortisation

 

2016

2015

2016

2015

2016

2015

2016

2015

 

£000

£000

£000

£000

£000

£000

£000

£000

Other segmental information

 

 

 

 

 

 

 

 

by division:

 

 

 

 

 

 

 

 

Asset management

(10,189)

(9,950)

-

324

(10,810)

(9,683)

(1,458)

(940)

Pricing, data and market intelligence

(3,862)

(4,470)

-

-

(9,222)

(989)

(323)

(275)

Banking and finance

(209)

(193)

-

-

(280)

(30)

(7)

(13)

Commodity events

(2,186)

(1,810)

-

-

(13,056)

(10,699)

(65)

(31)

Sold/closed businesses

-

-

-

-

7,094

2,429

(13)

(25)

Unallocated corporate (costs)/income

(287)

(604)

-

2,166

(10,990)

52,393

(4,615)

(4,039)

 

(16,733)

(17,027)

-

2,490

(37,264)

33,421

(6,481)

(5,323)

 

 

 

 

 

 

 

 

United Kingdom

North America

Rest of World

Total

 

2016

2015

2016

2015

2016

2015

2016

2015

 

£000

£000

£000

£000

£000

£000

£000

£000

Non-current assets (excluding derivative financial instruments, deferred consideration and deferred tax assets)

 

 

 

 

 

 

 

 

by location:

 

 

 

 

 

 

 

 

Goodwill

99,751

122,037

288,680

253,560

7,674

6,396

396,105

381,993

Other intangible assets

66,519

64,773

86,972

83,913

1,543

700

155,034

149,386

Property, plant and equipment

6,894

7,274

2,785

1,340

793

557

10,472

9,171

Investments

35,860

38,302

-

-

-

-

35,860

38,302

Non-current assets

209,024

232,386

378,437

338,813

10,010

7,653

597,471

578,852

Additions to property, plant and equipment

(993)

(5,622)

(2,275)

(493)

(494)

(372)

(3,762)

(6,487)

 

The group has taken advantage of paragraph 23 of IFRS 8 'Operating Segments' and does not provide segmental analysis of net assets as this information is not used by the directors in operational decision making or monitoring of business performance.

 

3 Exceptional items

Exceptional items are items of income or expense considered by the directors, either individually or if of a similar type in aggregate, as being significant and which require additional disclosure in order to provide an indication of the underlying trading performance of the group.

 

 

2016

2015

 

£000

£000

 

 

 

Profit on disposal of associate

-

2,921

Profit on disposal of available-for-sale investment

-

45,502

Profit on disposal of business and recycled cumulative translation differences

7,094

2,446

Profit on disposal of property, plant and equipment

-

4,181

 

7,094

55,050

Goodwill impairment

(26,987)

(18,458)

Intangibles impairment

(1,652)

-

Investment in associate impairment

(111)

-

Provision for overseas sales tax

(7,851)

-

Recognition of deficit on defined benefit scheme

(1,249)

-

Restructuring and other exceptional costs

(6,508)

(3,171)

 

(37,264)

33,421

 

 For the year ended September 30 2016 the group recognised an exceptional charge of £37.3m.

 

In April 2016, the group sold 100% of the equity share capital of Gulf Publishing Company, Inc. (Gulf) and The Petroleum Economist Limited (PE) which gave rise to a profit on disposal of £7.1m (note 11).

 

The group recognised a goodwill impairment charge of £12.9m (2015: £10.7m) relating to Mining Indaba in the half year results. This was due to the continued challenging market conditions and the depreciation of the South African Rand, having a significant impact on the long-term outlook for this business.  A goodwill impairment charge of £5.9m relates to HedgeFund Intelligence (HFI), the group's information and events business serving the hedge fund industry. The intangibles impairment charge of £1.7m relates to Euromoney Indices. HFI and Euromoney Indices have been classified as assets held for sale (note 8). The goodwill and intangibles have been valued at fair value less cost to sell resulting in the impairment. The remaining £8.2m charge for goodwill impairment relates to Total Derivatives, the prime source of real-time news and analysis of the global fixed income derivatives markets. The continued challenging market conditions for this sector has had a significant impact on the long-term outlook for this business.

 

During the year, the group acquired a further 17% of the equity share capital of World Bulk Wine increasing the group's equity shareholding to 57%. The transfer from associate to a subsidiary resulted in an impairment of associate of £0.1m (note 11).

 

The provision for overseas sales tax of £7.9m reflects the group's best estimate of the additional provision required for a potential sales tax exposure (including interest) following an adverse tax ruling in June 2016. The group is in the process of challenging this judgement.

 

At September 30 2016, the group recognised its share of the deficit in the Harmsworth Pension Scheme (HPS), a defined benefit scheme. This is the result of the change in accounting policy by the group's parent company, Daily Mail and General Trust plc (DMGT), to allocate the assets and liabilities of the DMGT group's defined benefit plan on a buy-out basis.

 

Restructuring and other exceptional costs mostly comprise one-off costs incurred as a result of the strategic review undertaken during the year and professional fees from the legal dispute with the previous owners of Centre for Investor Education (CIE). The costs relating to the strategic review include one-off acquisition and integration costs (note 11), the major reorganisation of certain businesses and other professional fees relating to development of the group's new strategy.

 

The group's tax charge includes a related tax credit on these exceptional items of £5.3m (note 5).

 

For the year ended September 30 2015 the group recognised an exceptional credit of £33.4m.

 

The group disposed of its interests in a number of assets generating a gain on sale of £55.1m. Most of this relates to the sale of group's interests in Capital DATA and Capital NET as part of the Dealogic transaction.

 

The goodwill impairment charge consists of HFI (£4.8m), CIE (£3.0m) and Mining Indaba (£10.7m).

 

Restructuring and other exceptional costs cover the major reorganisation of certain businesses, costs relating to the relocation of the group's London headquarters, and professional fees resulting from the CIE dispute.

 

The group's tax charge includes a related tax charge on these exceptional items of £1.0m (note 5).

 

4 Finance income and expense

 

 

2016

2015

 

£000

£000

Finance income

 

 

Interest on cash deposit with DMGT group company

391

-

Interest receivable from short-term investments

303

379

Movements in acquisition commitments (note 13)

-

4,748

 

694

5,127

Finance expense

 

 

Interest payable on committed borrowings with DMGT group company

(1,346)

(1,120)

Net interest expense on defined benefit liability

(66)

(170)

Movements in acquisition commitments (note 13)

(601)

-

Movements in deferred consideration (note 13)

-

(2,851)

Interest on tax

(389)

(438)

 

(2,402)

(4,579)

Net finance (costs)/income

(1,708)

548

 

 

 

2016

2015

 

£000

£000

Reconciliation of net finance (costs)/income in Income Statement to adjusted net finance costs

 

 

Total net finance (costs)/income in Income Statement

(1,708)

548

Add back:

 

 

Movements in acquisition commitments

601

(4,748)

Movements in deferred consideration

-

2,851

 

601

(1,897)

Adjusted net finance costs

(1,107)

(1,349)

 

The reconciliation of net finance (costs)/income in the Income Statement has been provided since the directors consider it necessary in order to provide an indication of the adjusted net finance costs.

 

 

 

5 Tax expense on profit

 

 

2016

2015

 

£000

£000

Current tax expense

 

 

UK corporation tax expense

2,350

7,989

Foreign tax expense

20,682

12,949

Adjustments in respect of prior years

(14)

(1,083)

 

23,018

19,855

Deferred tax expense

 

 

Current year

(11,076)

(1,764)

Adjustments in respect of prior years

967

(492)

 

(10,109)

(2,256)

Total tax expense in Income Statement

12,909

17,599

Effective tax rate

29%

14%

 

The adjusted effective tax rate for the year is set out below:

 

 

2016

2015

 

£000

£000

Reconciliation of tax expense in Income Statement to adjusted tax expense

 

 

Total tax expense in Income Statement

12,909

17,599

Add back:

 

 

Tax on acquired intangible amortisation

4,397

4,096

Tax on exceptional items

5,267

(983)

 

9,664

3,113

Tax on goodwill and intangible amortisation

(4,210)

(4,113)

Share of tax on profits of associates and joint ventures

656

716

Adjustments in respect of prior years

(953)

1,575

 

5,157

1,291

Adjusted tax expense

18,066

18,890

 

 

 

Adjusted profit before tax (refer to the appendix to the Preliminary Statement)

102,529

107,810

Adjusted effective tax rate

18%

18%

 

The group presents the above adjusted effective tax rate to help users of this report better understand its tax charge. In arriving at this rate, the group removes the tax effect of items which are adjusted for in arriving at the adjusted profit disclosed in the appendix to the Preliminary Statement. However, the current tax effect of goodwill and intangible items is not removed. The current tax benefit of tax deductible goodwill and intangibles is recognised in the adjusted effective tax rate as the group considers that this more accurately reflects its expected cash tax payable position as the deferred tax effect on the goodwill and intangible items is not expected to crystallise.  The deferred tax effect on goodwill and intangible items would only crystallise in the event of a disposal, and that is not expected. 

 

The actual tax expense for the year is different from 20% of profit before tax for the reasons set out in the following reconciliation:

 

 

2016

2015

 

£000

£000

 

 

 

Profit before tax

43,922

123,285

Tax at 20% (2015: 20.5%)

8,784

25,273

Factors affecting tax charge:

 

 

Different tax rates of subsidiaries operating in overseas jurisdictions

4,386

4,521

Share of tax on associates and joint ventures

365

(84)

Non-taxable income

(400)

(6,356)

Goodwill and intangibles

2,591

197

Disallowable expenditure

1,964

1,734

Other items deductible for tax purposes

(5,340)

(5,515)

Tax impact of consortium relief

(544)

(596)

Impact of change in rate

150

-

Adjustments in respect of prior years

953

(1,575)

Total tax expense for the year

12,909

17,599

 

The non-taxable income of £0.4m (2015: £6.4m) consists of a non-taxable gain on disposal of shares in a subsidiary.  This is a non-recurring item.  The prior year non-taxable income of £6.4m mainly consisted of a non-taxable gain on disposal of shares and gains on disposals of fixed assets covered by unrecognised capital losses brought forward partially offset by non-deductible goodwill impairment.  These were non-recurring items.

 

The goodwill and intangibles of £2.6m (2015: £0.2m) arises as a result of non-deductible goodwill impairment.  This is a non-recurring item.

 

The other items deductible for tax purposes of £5.3m (2015: £5.5m) arise as a result of financing arrangements that result in asymmetrical tax treatment in the territories involved. It arises primarily as a result of debt financing provided to US affiliates. These items are expected to recur in the short to medium term.  The other items deductible for tax purposes in the prior year of £5.5m arise from the same financing arrangements.

 

Adjustments in respect of prior years of £1.0m (2015: £1.6m) reflect several small items across numerous jurisdictions that mainly relate to changes in estimates.

 

In addition to the amount charged to the Income Statement, the following amounts relating to tax have been directly recognised in other comprehensive income and equity:

 

 

Other comprehensive income

Equity

 

2016

2015

2016

2015

 

£000

£000

£000

£000

 

 

 

 

 

Deferred tax

(2,664)

(97)

225

492

 

 

6 Dividends

 

 

2016

2015

 

£000

£000

Amounts recognisable as distributable to equity holders in year

 

 

Final dividend for the year ended September 30 2015 of 16.40p (2014: 16.00p)

21,033

20,501

Interim dividend for year ended September 30 2016 of 7.00p (2015: 7.00p)

8,981

8,977

 

30,014

29,478

Employee share trusts dividend

(422)

(414)

 

29,592

29,064

 

 

 

Proposed final dividend for the year ended September 30

21,043

21,033

Employee share trusts dividend

(289)

(296)

 

20,754

20,737

 

A final dividend of 16.40p per ordinary share (2015:16.40p) is proposed for the year ended September 30 2016. Subject to shareholder approval at the AGM on January 26 2017, this would be paid on Thursday February 9 2017 to shareholders on the register on Friday December 2 2016. It is expected that the shares will be marked ex-dividend on Thursday December 1 2016.

 

The proposed final dividend has not been included as a liability in these financial statements in accordance with IAS 10 'Events after the balance sheet date'.

 

 

7 Earnings per share

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Basic earnings attributable to equity holders of the parent

 

 

30,744

105,444

Adjustments (refer to the appendix to the Preliminary Statement)

 

 

53,450

(16,766)

Adjusted earnings

 

 

84,194

88,678

 

 

 

 

 

2016

2015

 

 

 

 

 

 

 

 

Number

Number

 

 

 

000

000

 

 

 

 

 

Weighted average number of shares

 

 

128,280

128,202

Shares held by the employee share trusts

 

 

(1,807)

(1,807)

Weighted average number of shares

 

 

126,473

126,395

Effect of dilutive share options

 

 

111

65

Diluted weighted average number of shares

 

 

126,584

126,460

 

 

 

 

 

 

 

 

Pence

Pence

Basic earnings per share

 

 

24.31

83.42

Adjustments per share

 

 

42.26

(13.26)

Adjusted basic earnings per share

 

 

66.57

70.16

 

 

 

 

 

Diluted earnings per share

 

 

24.29

83.38

Adjustments per share

 

 

42.22

(13.26)

Adjusted diluted earnings per share

 

 

66.51

70.12

 

 

The adjusted diluted earnings per share figure has been disclosed since the directors consider it provides additional useful information on evaluating the performance of the group.

 

8 Total assets and liabilities of business held for sale

Following the strategic review, a number of businesses met the IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' criteria to be classified as held for sale at September 30 2016.  These businesses are Institutional Investor Intelligence (II Intelligence), Euromoney Indices and HedgeFund Intelligence (HFI). The assets and liabilities of these businesses have been disclosed separately on the face of the Consolidated Statement of Financial Position.  The assets and liabilities held for sale were written down to their fair value less costs to sell. This is a non-recurring fair value which has been measured using indicative prices of other similar businesses, and is therefore within level 2 of the fair value hierarchy.  None of these businesses met the IFRS 5 criteria to be treated as discontinued operations due to their size and the fact that they do not constitute major lines of the group's business.

 

On October 31 2016, the group entered into an asset purchase agreement between Institutional Investor LLC and Pageant Media Limited for the sale of assets of II Intelligence for an initial cash consideration of US$0.7m, royalty consideration receivable of up to US$0.3m over a 24 month period from the completion date and will assume the expected deferred income on completion.  The deal is set for completion by the end of November 2016.  This has been disclosed as an event after the balance sheet date (note 15).

 

An intangibles impairment for Euromoney Indices of £1.7m is recognised as an exceptional item in the Income Statement for the year ended September 30 2016 (note 3).

 

For HFI, the group's information and events business serving the hedge fund industry, a goodwill impairment charge of £5.9m has been recognised as an exceptional item (note 3). 

 

The main classes of assets and liabilities comprising the businesses classified as held for sale are set out in the table below. These assets and liabilities are recorded at their fair values.

 

 

 

 

Euromoney

 

 

 

II Intelligence

Indices

HFI

Total

 

£000

£000

£000

£000

 

 

 

 

 

Book value

 

 

 

 

Goodwill

                            -

                            -

                    4,020

4,020

Intangible assets

-

313

-

313

Trade and other receivables

-

486

194

680

Total assets of businesses held for sale

-

799

4,214

5,013

 

 

 

 

 

Trade and other payables

-

-

(263)

(263)

Accruals

(31)

(533)

(173)

(737)

Deferred income

(1,751)

(601)

(2,197)

(4,549)

Total liabilities of businesses held for sale

(1,782)

(1,134)

(2,633)

(5,549)

 

 

 

 

 

Net (liabilities)/assets (100%)

(1,782)

(335)

1,581

(536)

 

 

 

 

9 Goodwill and other intangibles

 

 

 

Acquired intangible assets

 

 

 

 

 

 

 

 

Total

 

Intangible

 

 

 

 

Customer

 

acquired

 

assets in

 

 

 

Trademarks

relation-

 

intangible

Licences &

develop-

 

 

 

& brands

ships

Databases

assets

software

ment

Goodwill

Total

 

2016

2016

2016

2016

2016

2016

2016

2016

2016

£000

£000

£000

£000

£000

£000

£000

£000

Cost/carrying amount

 

 

 

 

 

 

 

 

At October 1 2015

171,861

102,777

12,616

287,254

15,165

-

429,272

731,691

Additions

3,834

6,874

886

11,594

1,445

957

8,919

22,915

Disposals

-

-

-

-

(69)

-

-

(69)

Balance at disposal of company

-

-

-

-

(33)

-

(7,217)

(7,250)

Exchange differences

19,387

10,477

1,271

31,135

1,207

23

45,155

77,520

Classified as held-for-sale

(1,203)

(3,369)

-

(4,572)

-

-

(11,816)

(16,388)

At September 30 2016

193,879

116,759

14,773

325,411

17,715

980

464,313

808,419

Amortisation and impairment

 

 

 

 

 

 

 

 

At October 1 2015

73,510

63,147

8,769

145,426

7,607

-

47,279

200,312

Amortisation charge

7,956

7,764

1,013

16,733

3,675

-

-

20,408

Impairment 

1,022

630

-

1,652

-

-

26,987

28,639

Disposals

-

-

-

-

(62)

-

-

(62)

Balance at disposal of company

-

-

-

-

(33)

-

(1,935)

(1,968)

Exchange differences

9,649

6,700

1,248

17,597

736

-

3,673

22,006

Classified as held-for-sale

(1,203)

(3,056)

-

(4,259)

-

-

(7,796)

(12,055)

At September 30 2016

90,934

75,185

11,030

177,149

11,923

-

68,208

257,280

Net book value/carrying amount at September 30 2016

102,945

41,574

3,743

148,262

5,792

980

396,105

551,139

                       

 

 

 

 

Acquired intangible assets

 

 

 

 

 

 

 

 

Total

 

Intangible

 

 

 

 

Customer

 

acquired

 

assets in

 

 

 

Trademarks

relation-

 

intangible

Licences &

develop-

 

 

 

& brands

ships

Databases

assets

software

ment

Goodwill

Total

 

2015

2015

2015

2015

2015

2015

2015

2015

2015

£000

£000

£000

£000

£000

£000

£000

£000

Cost/carrying amount

 

 

 

 

 

 

 

 

At October 1 2014

164,843

98,713

12,083

275,639

12,923

62

411,815

700,439

Additions

-

-

-

-

1,324

436

-

1,760

Transfer

-

-

-

-

498

(498)

-

-

Exchange differences

7,018

4,064

533

11,615

420

-

17,457

29,492

At September 30 2015

171,861

102,777

12,616

287,254

15,165

-

429,272

731,691

Amortisation and impairment

 

 

 

 

 

 

 

 

At October 1 2014

62,144

53,059

7,225

122,428

4,687

-

27,881

154,996

Amortisation charge

8,209

7,737

1,081

17,027

2,680

-

-

19,707

Impairment 

-

-

-

-

-

-

18,458

18,458

Exchange differences

3,157

2,351

463

5,971

240

-

940

7,151

At September 30 2015

73,510

63,147

8,769

145,426

7,607

-

47,279

200,312

Net book value/carrying amount at September 30 2015

98,351

39,630

3,847

141,828

7,558

-

381,993

531,379

 

 

 

10 Investments

 

 

 

 

Investment

Available-

 

 

Investment

in joint

for-sale

 

 

in associates

ventures

investments

Total

 

£000

£000

£000

£000

 

 

 

 

 

At October 1 2014

72

-

-

72

Additions

32,855

34

5,835

38,724

Disposals

10

-

-

10

Share of losses after tax retained

(377)

(4)

-

(381)

Dividends

(123)

-

-

(123)

At September 30 2015

32,437

30

5,835

38,302

Repayment/additions

(52)

180

-

128

Impairment (note 3)

(111)

-

-

(111)

Transfer to subsidiary (note 11)

(629)

-

-

(629)

Revaluation

-

12

-

12

Provision against investment losses

-

64

-

64

Share of losses after tax retained

(1,752)

(71)

-

(1,823)

Dividends

(83)

-

-

(83)

At September 30 2016

29,810

215

5,835

35,860

 

 

All of the above investments in associates and joint ventures are accounted for using the equity method in these consolidated financial statements.

 

 

2016

2015

 

£000

£000

Reconciliation of share of results in associates and joint ventures in Income Statement to adjusted share of results in associates and joint ventures

 

 

Total share of results in associates and joint ventures in Income Statement

(1,823)

(381)

Add back:

 

 

Share of tax on profits

656

716

Share of tax on acquired intangible amortisation and exceptional items

(1,437)

(632)

Share of acquired intangible amortisation

4,427

2,732

Share of exceptional items1

363

-

 

4,009

2,816

Adjusted share of results in associates and joint ventures

2,186

2,435

 

 

1 The share of exceptional items relates to one-off restructuring and earn-out costs in Dealogic. As required by IFRS, it is group policy to treat exceptional earn-out payments as a compensation cost. These payments are in substance part of the cost of an investment and are thus excluded from the share of adjusted profit.

 

The reconciliation of share of results in associates and joint ventures in the Income Statement has been provided since the directors consider it necessary in order to provide an indication of the adjusted share of results in associates and joint ventures.

 

Information on investment in associates, investment in joint ventures and available-for-sale investments:

 

 

 

Principal activity

Year

Date of

Type

Group

Country of

 

 

ended

acquisition

of holding

interest

incorporation

Investment in associates

 

 

 

 

 

 

Diamond TopCo Limited (Dealogic)

Capital market software solutions

Dec 31

Dec 2014

Ordinary

15.5%

UK

Investment in joint ventures

 

 

 

 

 

 

Institutional Investor Zanbato Limited (II Zanbato)

Hedge fund manager trading signals

Sept 30

Nov 2014

Ordinary

50.0%

UK

Sanostro Institutional AG (Sanostro)

Hedge fund manager trading signals

Dec 31

Dec 2014

Ordinary

50.0%

Switzerland

EIIZ Discovery LLC2

Private capital placement and workflow

Sept 30

Nov 2015

Ordinary

50.0%

Delaware, US

Available-for-sale investments

 

 

 

 

 

 

Estimize, Inc (Estimize)

Financial estimates platform

Dec 31

July 2015

Ordinary

10.0%

Delaware, US

Zanbato, Inc (Zanbato)

Private capital placement and workflow

Dec 31

Sept 2015

Ordinary

9.9%

California, US

 

 

The group interests in the above investments remained unchanged since their respective dates of acquisition.

 

In June 2016, the group acquired an additional 17% of the equity share capital of World Bulk Wine (note 11).  The group previously held an associate interest of 40% of the equity share capital.  The group disposed of its initial associate investment in World Bulk Wine of 40% and has disclosed its increased equity shareholding in World Bulk Wine of 57% as a subsidiary.  Prior to the transfer to subsidiary, a dividend of £83,000 was received from World Bulk Wine.

 

2 In November 2015 the group acquired 50% of the equity share capital of EIIZ Discovery LLC for a cash consideration of $0.3m (£0.2m). The group has joint control over the company.

 

 

11 Acquisitions and disposals

 

Purchase of new business

Reinsurance Security (Consultancy).Co.UK Limited (ReSec)

On August 1 2016, the group acquired 100% of the equity share capital of ReSec and extended its insurance portfolio into the high-value counterparty risk market, for a cash consideration of £1.7m.  ReSec is a provider of risks ratings for the reinsurance sector.  The acquisition of ReSec is consistent with the group's strategy of expanding its presence and analytics in the global insurance and reinsurance sectors. 

 

The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired:

 

 

 

 

Fair value

Provisional

 

Book value

adjustments

fair value

 

£000

£000

£000

Net assets:

 

 

 

Intangible assets

-

770

770

Trade and other payables

(209)

(131)

(340)

 

(209)

639

430

 

 

 

 

Net assets acquired (100%)

 

 

430

Goodwill

 

 

1,310

Total consideration

 

 

1,740

Consideration satisfied by:

 

 

 

Cash

 

 

1,740

 

 

 

 

Net cash outflow arising on acquisition:

 

 

 

Cash consideration

 

 

1,740

 

 

Intangible assets represent customer relationships of £0.8m, for which amortisation of £13,000 has been charged for the year. The customer relationships will be amortised over their useful economic lives of ten years.

 

Goodwill arises from the anticipated profitability and future operating synergies from integrating the acquired operations within the group. All of the goodwill recognised is expected to be deductible for income tax purposes.

 

ReSec contributed £74,000 to the group's revenue, £40,000 to the group's operating profit and £32,000 to the group's profit after tax for the period between the date of acquisition and September 30 2016. In addition, acquisition related costs of £67,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2016 (note 3). If the acquisition had been completed on the first day of the financial year, ReSec would have contributed £0.5m to the group's revenue and £0.2m to the group's operating profit (excluding exceptional costs above).

 

FastMarkets Limited (FastMarkets)

On September 2 2016, the group acquired 100% of the shares of FastMarkets, a leading provider of real-time metals market information, for a cash consideration of £13.3m and a deferred consideration of £0.5m (note 13).  The acquisition of FastMarkets is consistent with the group's strategy and it enhances the depth of information that Metal Bulletin can provide its clients across the metals and mining markets supply chain.

 

The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired:

 

 

 

 

 

 

Fair value

Provisional

 

Book value

adjustments

fair value

 

£000

£000

£000

Net assets:

 

 

 

Intangible assets

-

10,097

10,097

Property, plant and equipment

91

(91)

-

Trade and other receivables

680

(12)

668

Trade and other payables

(3,106)

(1,765)

(4,871)

Cash and cash equivalents

710

-

710

 

(1,625)

8,229

6,604

 

 

 

 

Net assets acquired (100%)

 

 

6,604

Goodwill

 

 

7,194

Total consideration

 

 

13,798

Consideration satisfied by:

 

 

 

Cash

 

 

13,318

Deferred consideration

 

 

480

 

 

 

13,798

Net cash outflow arising on acquisition:

 

 

 

Cash consideration

 

 

13,318

Less: cash and cash equivalent balances acquired

 

 

(710)

 

 

 

12,608

 

 

Intangible assets represent a brand of £3.7m, customer relationships of £5.5m and technology of £0.9m, for which amortisation of £77,000 has been charged for the year. The brand will be amortised over its useful life of 20 years. The customer relationships will be amortised over their useful economic lives of ten years. The technology will be amortised over its useful life of five years.

 

Goodwill arises from the anticipated profitability and future operating synergies from integrating the acquired operations within the group. All of the goodwill recognised is expected to be deductible for income tax purposes.

 

The fair value of the assets acquired includes net trade receivables of £0.5m, all of which are contracted and are expected to be collectable.

 

FastMarkets contributed £0.4m to the group's revenue, £24,000 to the group's operating profit and £19,000 to the group's profit after tax for the period between the date of acquisition and September 30 2016. In addition, acquisition related costs of £0.7m were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2016 (note 3).  If the acquisition had been completed on the first day of the financial year, FastMarkets would have contributed £4.5m to the group's revenue and £0.1m to the group's operating profit (excluding exceptional costs above).

 

Transfer to subsidiary

World Bulk Wine Exhibition, S.L (World Bulk Wine)

In June 2016, the group acquired an additional 17% of the equity share capital of World Bulk Wine, an event for the commercialisation of bulk wine, for a cash consideration of €0.3m (£0.3m). The group previously held an associate interest of 40% of the equity share capital.  The group disposed of its initial associate investment in World Bulk Wine of 40% and has disclosed its increased equity shareholding in World Bulk Wine of 57% as a subsidiary.  At the acquisition date, the non-controlling interest of 43% is measured using the proportion of net assets method.

 

The disposal resulted in an impairment of associate of £0.1m which is recognised as an exceptional item in the Income Statement for the year ended September 30 2016 (note 3).  The fair value of the associate when disposed of was £0.6m.

 

The acquisition accounting is set out below and is provisional pending final determination of the fair value of the assets and liabilities acquired:

 

 

 

 

 

Fair value

Provisional

 

Book value

adjustments

fair value

 

£000

£000

£000

Net assets:

 

 

 

Intangible assets

1,884

(1,157)

727

Property, plant and equipment

6

-

6

Trade and other receivables

89

-

89

Trade and other payables

(320)

(181)

(501)

Cash and cash equivalents

523

-

523

 

2,182

(1,338)

844

 

 

 

 

Net assets acquired (57%)

 

 

481

Goodwill

 

 

415

Total consideration

 

 

896

Consideration satisfied by:

 

 

 

Cash

 

 

267

Fair value of associate

 

 

629

 

 

 

896

Net cash inflow arising on acquisition:

 

 

 

Cash consideration

 

 

267

Less: cash and cash equivalent balances acquired

 

 

(523)

 

 

 

(256)

 

 

Intangible assets represent a brand of £0.3m and customer relationships of £0.4m, for which amortisation of £13,000 has been charged for the year. The brand will be amortised over its useful life of 20 years. The customer relationships will be amortised over their useful economic lives of ten years.

Goodwill arises from the anticipated profitability and future operating synergies from integrating the acquired operations within the group. All of the goodwill recognised is expected to be deductible for income tax purposes.

 

The fair value of the assets acquired includes trade receivables of £48,000, all of which are contracted and are expected to be collectable.

 

World Bulk Wine contributed £nil to the group's revenue, £2,000 loss to the group's operating profit and £1,000 loss to the group's profit after tax for the period between the date of acquisition and September 30 2016. The event takes place annually in November.  In addition, the World Bulk Wine impairment of associate of £0.1m and acquisition related costs of £4,000 were incurred and recognised as an exceptional item in the Income Statement for the year ended September 30 2016 (note 3).  If the acquisition had been completed on the first day of the financial year, World Bulk Wine would have contributed £0.9m to the group's revenue and £0.3m to the group's operating profit (excluding exceptional costs above).

 

Increase in equity holdings

Ned Davis Research (NDR)

In November 2015, the group acquired 0.47% of the equity of NDR for a cash consideration of $0.4m (£0.2m). The group's equity shareholding in NDR increased to 85.01%.

 

Euromoney Consortium 2 Limited

In May 2016, the group acquired 0.3% of the equity of Euromoney Consortium 2 Limited for a cash consideration of £0.1m. This transaction was enacted by purchasing 49,900 B ordinary shares of £1 each from DMG Charles Limited.  The group's equity shareholding in Euromoney Consortium 2 Limited increased to 100%.

 

Sale of business

Gulf Publishing Company, Inc. and The Petroleum Economist Limited

On April 19 2016, the group sold 100% of the equity share capital of Gulf Publishing Company, Inc. (Gulf) and The Petroleum Economist Limited (PE), part of the business publishing division, for a consideration of US$17.2m (£12.0m), offset by a working capital adjustment of US$1.3m (£1.0m). At the date of disposal deferred consideration of US$0.8m (£0.5m) was recognised (note 13). In September 2016 deferred consideration of US$0.3m (£0.2m) was paid in addition to an amount of US$0.3m (£0.2m) which was paid to adjust for the original working capital adjustment. The disposal of Gulf and PE gave rise to a profit on disposal of US$10.2m (£7.1m), after deducting disposal costs incurred, which was recognised as an exceptional item (note 3) in the Income Statement.

 

The net assets of Gulf and PE at the date of disposal were as follows:

 

 

 

 

 

 

Final

 

Gulf

PE

fair value

 

£000

£000

£000

Net assets:

 

 

 

Goodwill

5,046

236

5,282

Property, plant and equipment

27

-

27

Trade and other receivables

1,011

252

1,263

Bank overdraft

(21)

-

(21)

Trade and other payables

(252)

(126)

(378)

Deferred income

(646)

(760)

(1,406)

 

5,165

(398)

4,767

 

 

 

 

Net assets disposed (100%)

5,165

(398)

4,767

Directly attributable costs

268

77

345

Recycled cumulative translation differences

(636)

-

(636)

Profit on disposal (note 3)

5,360

1,734

7,094

Total consideration

10,157

1,413

11,570

Consideration satisfied by:

 

 

 

Cash

9,832

2,258

12,090

Working capital adjustments

(17)

(953)

(970)

Deferred consideration

342

108

450

 

10,157

1,413

11,570

Net cash inflow arising on disposal:

 

 

 

Cash consideration (net of working capital adjustments and directly attributable costs)

9,547

1,228

10,775

Less: cash and cash equivalent balances disposed

21

-

21

 

9,568

1,228

10,796

 

 

 

 

12 Called up share capital

 

 

2016

2015

 

£000

£000

Allotted, called up and fully paid

 

 

128,313,356 ordinary shares of 0.25p each (2015: 128,248,894 ordinary shares of 0.25p each)

321

320

 

During the year, 64,462 ordinary shares of 0.25p each (2015: 115,477 ordinary shares) with an aggregate nominal value of £161 (2015: £289) were issued following the exercise of share options granted under the company's share option schemes for a cash consideration of £0.3m (2015: £0.5m).

 

13 Acquisition commitments and deferred consideration

The group is party to contingent consideration arrangements in the form of acquisition commitments, acquisition deferred consideration payments and deferred consideration receipts on disposal. The group recognises the discounted present value of the contingent consideration. This discount is unwound as a notional interest charge to the Income Statement. The group regularly performs a review of the underlying businesses to assess the impact on the fair value of the contingent consideration. Any resultant change in these fair values is reported as a finance income or expense in the Income Statement.

 

 

 

Acquisition commitments

Deferred consideration payments

Deferred consideration receipts

 

2016

2015

2016

2015

2016

2015

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

At October 1

9,171

13,365

-

-

(589)

8,503

Reduction from disposals during the year

-

-

-

-

(450)

(269)

Receipt/(payment) during the year

-

-

-

-

662

(11,558)

Net movements in finance income and expense during the year (note 4)

601

(4,748)

-

-

-

2,851

Exercise of commitments

(239)

(109)

-

-

-

-

Additions from acquisitions during the year

665

-

480

-

-

-

Exchange differences to reserves

1,573

663

-

-

(149)

(116)

At September 30

11,771

9,171

480

-

(526)

(589)

 

 

 

 

 

 

 

Within one year

326

-

480

-

-

(331)

In more than one year

11,445

9,171

-

-

(526)

(258)

 

11,771

9,171

480

-

(526)

(589)

 

 

Exchange differences to reserves were recorded within net exchange differences on translation of net investments in overseas subsidiary undertakings in the Statement of Comprehensive Income.

 

Reconciliation of finance income and expense (note 4):

 

 

Acquisition commitments

Deferred consideration

 

2016

2015

2016

2015

 

£000

£000

£000

£000

 

 

 

 

 

Fair value adjustment during the year

(258)

(5,727)

-

2,617

Imputed interest

859

979

-

234

Net movements in finance income and expense during the year

601

(4,748)

-

2,851

 

 

The discounted acquisition commitments, acquisition deferred consideration payments and deferred consideration receipts on disposal are based on pre-determined multiples of future profits of the businesses, and have been estimated on an acquisition-by-acquisition basis using available performance forecasts. The directors derive their estimates from internal business plans and financial due diligence. At September 30 2016, the weighted average growth rates used in estimating the expected profits range was 13%.

 

A one percentage point increase or decrease in growth rate in estimating the expected profits, results in the acquisition commitment at September 30 2016 increasing or decreasing by £0.1m with the corresponding change to the value charged or credited to the Income Statement in future periods.

 

 

14 Related party transactions

The group has taken advantage of the exemption allowed under IAS 24 'Related Party Disclosures' not to disclose transactions and balances between group companies that have been eliminated on consolidation. Other related party transactions and balances are detailed below:

 

(i)   The group had a US$160m multi-currency facility with Daily Mail and General Holdings Limited (DMGH), a Daily Mail and General Trust plc (DMGT) group company:

 

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Fees on the available facility for the year

 

 

525

733

 

 

 

(ii)  On August 3 2015, the group entered into a deposit agreement with DMGH.  On May 25 2016, the group entered into a new agreement with DMGH and DMGB Limited, a DMGT group company:

 

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Deposits

 

 

73,639

9,799

 

 

(iii)  During the year, the group expensed services provided by DMGT, the group's parent, and other fellow group companies, as follows:

 

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Services expensed

 

 

960

849

 

 

(iv) During the year, DMGT group companies surrendered tax losses to Euromoney Consortium Limited under an agreement between the two groups.  These tax losses are relievable against UK taxable profits of the group under HMRC's consortium relief rules:

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Amounts payable

 

 

1,633

1,787

Tax losses with tax value

 

 

2,177

2,383

Amounts owed by DMGT group at September 30

 

 

(121)

(313)

 

(v)  DMGT group companies have an agreement to surrender tax losses to Euromoney Consortium 2 Limited. These tax losses are relievable against UK taxable profits of the group under HMRC's consortium relief rules:

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Amounts owed by DMGT group at September 30

 

 

-

(202)

 

(vi)   During the year, the group received dividends from its associate undertakings:

 

 

 

 

 

2016

2015

 

 

 

£000

£000

 

 

 

 

 

Capital NET Limited

 

 

                         -

                123

World Bulk Wine

 

 

83

-

 

 

(vii)   During the year, Estimize Inc provided services to BCA for US$25,000 (2015: £nil).

 

(viii)   NF Osborn serves as an advisor to the boards of both DMG Events and dmgi, fellow group companies, for which he received a combined fee of US$23,250 (2015: US$18,600).

 

(ix)    The directors who served during the year received dividends of £0.2m (2015: £0.2m) in respect of ordinary shares held in the company.

 

(x)     Gulf and PE was disposed of during the year for £10.8m (note 15) to Gulf Publishing Holdings LLC, in which the former president of Gulf and PE, John Royall, holds 11%.

 

  

15 Events after the balance sheet date

The directors propose a final dividend of 16.40p per share (2015: 16.40p) totalling £20.8m (2015: £20.7m) for the year ended September 30 2016. The dividend will be submitted for formal approval at the AGM to be held on January 26 2017. In accordance with IAS 10 'Events after the Reporting Period', these financial statements do not reflect this dividend payable but will be accounted for in shareholders' equity as an appropriation of retained earnings in the year ending September 30 2017.

 

On October 31 2016, the group entered into an asset purchase agreement between Institutional Investor LLC and Pageant Media Limited for the sale of assets of Institutional Investor Intelligence for an initial cash consideration of US$0.7m, royalty consideration receivable of up to US$0.3m over a 24 month period from the completion date and will assume the expected deferred income on completion.  The deal is set for completion by the end of November 2016. Given that the IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' criteria to be classified as held for sale have been met at September 30 2016, the assets and liabilities of Institutional Investor Intelligence have been disclosed separately on the face of the Consolidated Statement of Financial Position.  As such, the additional IAS 10 'Events after the Reporting Period' disclosures are not provided as the disposal was not completed at the time this report is authorised for issue.

 

There were no other events after the balance sheet date. 

 

 


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