GlobalData Regulatory News (DATA)

29 July 2019

GlobalData Plc

Unaudited Interim Report For The Six Months Ended 30 June 2019

"Revenue growth drives further margin improvement"

Financial Highlights

·; Enhanced visibility on revenue, improved margin and strong operating cash flow.

·; Group revenue increased by 18% to £88.5m (2018: £75.0m).

·; Organic revenue growth (1) of 10%.

·; Deferred revenue (7) increased by 15% to £77.2m (30 June 2018 restated: £67.2m), which represented 13% organic growth.

·; Adjusted EBITDA(2) increased by 53% to £22.3m (2018: £14.6m), with margin of 25.2% (2018:19.4%).

·; Adjusted profit before tax(4) increased to £19.4m (2018: £12.6m). Statutory profit before tax of £5.2m (2018: loss £4.2m).

·; Cash flow from continuing operations increase of 97% to £34.1m (2018: £17.3m).

·; Interim dividend increase 43% to 5.0 pence per ordinary share (2018: 3.5 pence).

Operational Highlights

·; Our financial results demonstrate our progress towards becoming a world leading data and analytics business, with a proven business model.

·; Continued product investment has focused on an enhanced user interface and integration of additional data sets and tools within our multi-industry platform, to give our clients a richer experience with greater insight.

·; Integration of the Research Views businesses has been successful and our shift to a single product platform and centralised operating model is now complete.

Mike Danson, Chief Executive Officer of GlobalData Plc, commented:

"The first half results reflect the product development and integration since the acquisition of Research Views in April 2018. Our vision of creating a differentiated world-class product, that is integral to professionals across the world's largest industries, has been consistent throughout our development.

We look forward to the second half of 2019 in which we expect to further leverage the GlobalData platform, and we do so on the back of some very encouraging metrics in the first six months. Our results demonstrate the focus we have placed on our business model fundamentals and show the Group at an inflection point with further accelerated growth and margin improvement expected across the medium term.

Operating Review

The first half results reflect the product development and integration since the acquisition of Research Views, in April 2018. Our vision of creating a differentiated world-class product that is integral to professionals across the world's largest industries, has been consistent throughout our development.

The GlobalData platform has had significant investment over the past four years, which we accelerated in the past 18 months in advance of a re-launch of our Intelligence Centre products earlier in 2019. Our single, integrated platform, now spans over 15 of the world's largest industries, with each industry product built upon a core layer of high value, and proprietary, "Gold Standard" data and insights. The scale of our platform gives us the operational leverage and product development firepower to invest in a significant amount of additional content that is applicable across all of our industries, as well as advanced software solutions, tools and functionality which enhances the client experience.

Our platform-based business model allows us to innovate and enhance our product on a continual basis whilst maintaining a relatively fixed cost base in absolute terms. We have demonstrated our ability to achieve this with Adjusted EBITDA margin of 25% in the first half (19% in H1 2018). Whilst our second half costs are typically higher, which may limit further margin expansion in the second half, we are confident that the Group has reached an inflection point whereby revenue growth generates a significant incremental margin and as a result have expectations of expanding our margin to 30% in the medium term.

The GlobalData approach is based around experienced, motivated management and our four strategic priorities. Alongside our product enhancements, our continued focus on sales excellence, training and a targeted pipeline has driven our like for like organic revenue growth by 10%. Moreover, we enter the second half of the year with deferred revenues having grown organically by 13%, reflecting consistent renewal rates and good rates of new business (derived by increasing our return from existing clients and new client wins).

We look forward to the second half of 2019 in which we expect to further leverage the GlobalData platform; and we do so on the back of some very encouraging metrics in the first six months. Our results demonstrate the focus we have placed on our business model fundamentals and show the Group at an inflection point with further accelerated growth and margin improvement expected across the medium term.

Key Achievements

·; Revenue of £88.5 million: Group revenue has grown by 18% including the benefit from our acquisitions. Organic revenue growth was 10%.

·; Deferred revenue of £77.2m: Deferred revenue has grown by 15%, organically by 13%.

·; Adjusted EBITDA Margin: Achieved our margin target of 25% and whilst our costs are typically higher in the second half of the year, we look forward to further margin expansion across the medium term.

·; Re-launch of Intelligence Centre Product: The Group re-launched its enhanced Intelligence Centre product across all of our industries in April this year.

Mission

Through our data and analytics we help our clients to decode the future, to be more successful and innovative. Our services provide our clients with innovative solutions to complex issues delivered via a single integrated online platform. Clients leverage our Gold Standard data and expert analysis across multiple markets and geographies, which is key to their strategic planning, competitive intelligence and new product development, as well as identifying new sector trends, marketing opportunities and new sales channel prospects. At a time of increased uncertainty and ever-constant change we aim to provide our clients with a realisable competitive advantage.

Our Strategic Priorities

Our principal goal is to become a world leading data and analytics business operating across multiple industries and geographies. Fundamental to the GlobalData Approach are our four core strategic priorities as we look to execute our plans and achieve our goal:

·; World Class Products

·; Sales Excellence

·; Operational Agility

·; Client Centric 

World Class Products

The core of our products is our high value proprietary Gold Standard data, which industry leaders and professionals rely upon in their daily activities. As well as our unwavering focus on maintaining the high standards we set ourselves on data quality and reliability, we have invested significantly in software, platform functionalities and alternative content sets which accompany and complement our core data and are becoming ever more important in our offering.

The GlobalData Approach is one of continual improvement and enhancements and our operating structure and business model will allow us to explore other innovations to our products, which will drive further value for our clients.

Sales Excellence

We have a global sales team operating in key geographies around the world and our priority continues to be to ensure that all of our global salesforce understand their markets and the value proposition of our product and to help them find the right opportunity at the right time.

Once again, our revenues have grown across all of our regions reflecting our approach, however we recognise that managing a global sales force is challenging and we continue to work hard on all of the these key aspects.

Operational Agility

Our business model is a relatively simple one: create the content once and leverage sales from that content across multiple formats (subscriptions, reports, research engagements and events) and geographies. Indeed, controlling costs and seeking constant operational improvements gives us the capacity to redirect some of our cost base to targeted innovation and product development investments as well as progressing our margin.

In the first half, we achieved our stated medium term target of 25% Adjusted EBITDA margin. We believe that our revenue growth will continue to increase our margin to 30% in the medium term.

Client Centric

Outstanding client service is a key element of our performance. Our aim is to deliver best in class client service at every point of interaction with our clients.

Our approach to client service aligns account managers, analysts and client service partners across all time-zones in which we operate. As we continue to embed client centricity throughout the organisation, we will use technology and tools to continually enhance the overall client experience.

Looking forward we will continue to focus on our strategic priorities, which will drive revenue and earnings growth and ultimately maximise shareholder value.

Our Employees

A key part of the GlobalData Approach is the experienced management team and talented employees, who continually drive the business forward. I would like to thank all our global colleagues for their hard work and dedication through the course of the first half and look forward to sharing continued success in the second half of 2019 and beyond.

Dividend

The Group's policy is to pay a dividend that reflects the growth and cash generation of the business. The Board is pleased to announce an interim dividend of 5.0 pence per share (2018: 3.5 pence). The interim dividend will be paid on 3 October 2019 to shareholders on the register at the close of business on 30 August 2019.

Current Trading and Outlook

There continues to be significant uncertainty following the UK's vote to leave the European Union, however as a Board we do not believe our impact assessment has changed on the matter since our statement in the 2018 Annual Report. We continue to monitor the key aspects applicable to us.

We have started the year well and having regard for our deferred revenues we are confident that we will make further progress for the year as a whole.

Mike Danson

Chief Executive Officer

26 July 2019

Notes to the Operating review

·; Revenue

Revenues increased by 18% to £88.5m (2018: £75.0m), which reflects the benefit of our acquisitions and like for like underlying organic growth of 7% and a further benefit from currency fluctuations (particularly driven by USD) of 3% (total organic growth 10%). The organic revenue growth was driven by increased sales of our subscription products across all regions, which showed organic growth of 13% (10% excluding currency benefit). Recurring revenue now accounts for 76% of Group revenues (2018: 71%)

·; Adjusted EBITDA

Adjusted EBITDA increased by 53% to £22.3m (2018: £14.6m), which reflects revenue growth inclusive of acquisitions, as well maintaining a stable cost base. The result of which has seen an expansion of margin to 25% compared with 19%.

·; Profit Before Tax

Adjusted EBITDA has increased to £22.3m (2018: £14.6m) and Adjusted Profit Before Tax has increased from £12.6m to £19.4m. The Group incurred non-cash charges relating to amortisation of acquired intangibles of £8.2m (2018: £9.7m) reflecting our M&A activity over recent years, £4.5m of share based payments charge (2018: £3.0m) reflecting the accounting charge for our long term incentive plan and revaluation gain on derivatives (currency forward contracts) of £0.3m (2018: loss of £1.1m). Together with items relating to restructuring and acquisition fees of £0.7m and increased finance costs, statutory profit before tax was £5.2m (2018: £4.2m loss).

·; Deferred revenue 

Deferred revenue increased by 15% to £77.2m at 30 June 2019 (30 June 2018 restated: £67.2m), with underlying organic growth at 11% year on year, with 2% currency benefit (total organic growth 13%). See note 1 for details of 2018 restatement.

The majority of the Group's revenues are derived from annualised subscription contracts and deferred revenue is a key performance indicator for the Group. Growth in deferred revenue is monitored to assess current trading, client sentiment and visibility on future revenues.

·; Cash Generation

Cash generated from continuing operations increased to £34.1m (2018: £17.3m). Excluding cash costs associated with the acquisitions, underlying cash from operations represented 158% of Adjusted EBITDA representing the significant proportion of annual contracts that are invoiced in December each year, with the subsequent settlement from our clients being received in the first quarter of the year. Cash receipts reduce in the second half of the year.

·; Net Debt

Net Debt reduced by £6.8m to £57.3m (31 December 2018: £64.1m) principally due to the strong operational cash flows in the first half of the year, offset slightly by £8.2m spent on M&A activity.

·; Impact of Currency

We are a global business and as a result we incur revenue and costs in currencies other than our reporting currency of Sterling. Circa 65% of our revenues are in currencies other than Sterling, whereas only 40% of costs are non-Sterling. Therefore, whilst there is some natural hedge, the impact of currency movements does affect the Group's earnings. Generally a strong US Dollar in comparison to Sterling will benefit our revenues but has an adverse effect on costs and conversely, a weak US Dollar will have the opposite effect.

During the first half, the average US Dollar to Sterling conversion rate was 1.29 compared with 1.38 in 2018, therefore the weaker Sterling in 2019 has benefitted the Group's EBITDA by £0.3m in the first six months.

·; IFRS 16: Leases

IFRS 16: Leases came into effect on 1 January 2019, this is the first set of accounts which incorporates the adoption of the new standard.

The main impact of the standard is to capitalise the Group's rental leases as "right-of-use assets" within Property, Plant and Equipment on the Statement of Financial Position with corresponding liabilities representing the commitment to fulfil those lease obligations. The assets are then depreciated over the life of the lease and a notional interest charge is made against the liability.

The standard allows for different transition options and the Group has adopted the Modified Retrospective: Asset equals liability approach, resulting in the Group adopting the standard from 1 January 2019 with no adjustment to reserves or comparative numbers. On adoption, the Group's assets increased by £36.1m with liabilities increasing by the same value.

For the six months to 30 June 2019 reported EBITDA has increased by £1.3m as a result of rental costs no longer being charged to Administrative expenses. Additional depreciation and interest costs of £1.5m and £0.7m respectively have been incurred, and other income of £0.6m (representing the rental income on sub-lease contracts) has been recognised, giving an overall reduction in profit before tax of £0.3m.

The Group has removed the impact of IFRS 16 from Adjusted EBITDA to provide comparability and consistency for reporting purposes. A reconciliation of the impact on Reported EBITDA for the six months to 30 June 2019 is given on the face of the income statement. If the adoption had not taken place Reported EBITDA would have been £1.3m lower and Profit before tax would have been £0.3m higher. Further details on the impact of IFRS 16 are given in note 2 accompanying the financial statements.

26 July 2019

Independent review report to the members of GlobalData Plc

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of GlobalData Plc for the six months ended 30 June 2019 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated statement of cash flows. We have read the other information contained in the half yearly financial report which comprises the Interim Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion to the company on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Use of our report

This report is made solely to the company, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company as a body, for our review work, for this report, or for the conclusion we have formed.

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

London

26 July 2019

Consolidated Income Statement

The accompanying notes form an integral part of this financial report.

1 We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, restructuring of the Group, share based payments, impairment, unrealised operating exchange rate movements, impact of foreign exchange contracts and the impact of IFRS 16 (Leases). We present Adjusted EBITDA as additional information because we understand that it is a measure used by certain investors. However, other companies may present Adjusted EBITDA differently. EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS.

2 EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment. 

Consolidated Statement of Comprehensive Income

The accompanying notes form an integral part of this financial report.

Consolidated Statement of Financial Position

The accompanying notes form an integral part of this financial report.

Consolidated Statement of Changes in Equity

The accompanying notes form an integral part of this financial report.

Consolidated Statement of Cash Flows

The accompanying notes form an integral part of this financial report.

Notes to the Interim Financial Statements

1. General information

Nature of operations

The principal activity of GlobalData Plc and its subsidiaries (together 'the Group') is to provide business information in the form of high quality proprietary data and analytics to clients in multiple sectors.

GlobalData Plc ('the Company') is a company incorporated in the United Kingdom and listed on the Alternative Investment Market (AIM). The registered office of the Company is John Carpenter House, John Carpenter Street, London, EC4Y 0AN. The registered number of the Company is 03925319.

Basis of preparation

These interim financial statements are for the six months ended 30 June 2019. They have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted in the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with GlobalData Plc's audited financial statements for the year ended 31 December 2018.

The financial information for the year ended 31 December 2018 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2018 have been filed with the Registrar of Companies and can be found on the Group's website www.globaldata.com. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

These interim financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative financial instruments.

The interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the Company. These interim financial statements have been approved for issue by the Board of Directors.

Critical accounting estimates and judgements

When preparing the Interim Financial Statements, the Group makes a number of estimates, judgements and assumptions regarding the future. Estimates, judgements and assumptions are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions.

The judgements, estimates and assumptions applied in the Interim Financial Statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the year ended 31 December 2018. The only exceptions are the estimate of income tax liabilities which is determined in the Interim Financial Statements using the estimated average annual effective income tax rate applied to the pre-tax income of the interim period and within the introduction of IFRS 16 (Leases). More details on the adoption of IFRS 16 'Leases' can be found in note 2.

Going concern

The Group has closing cash of £16.6 million as at 30 June 2019 and net debt of £57.3 million (30 June 2018: net debt of £61.2 million), being cash and cash equivalents less short and long-term borrowings, excluding lease liabilities. The Group has outstanding loans of £73.9 million which are syndicated with The Royal Bank of Scotland, HSBC and Bank of Ireland. The Group has a further facility to draw upon of £12m working capital RCF and £3m overdraft.

The Group considers the current cash balance, cash flow projections and the existing financing facilities to be adequate to meet short-term commitments. The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue as a going concern. Accordingly, the Directors have prepared the interim financial statements on a going concern basis.

Prior period restatement

The Consolidated Statement of Financial Position as at 30 June 2018 has been restated to reflect the adoption of IFRS 15 (effective 1 January 2018) and the requirement to net down deferred income against trade receivables for amounts that have been invoiced but the service had not started at the 30 June 2018 and are not yet due. This adjustment has reduced trade and other receivables by £3.2m and reduced trade and other payables by the same value. There is no impact on the net assets of the Group.

Notes to the Interim Financial Statements (continued)

2. New Standards adopted as at 1 January 2019

IFRS 16 'Leases'

This note explains the impact of the adoption of IFRS 16 'Leases' on the Group's financial statements and discloses the new accounting policy that has been applied from 1 January 2019.

The new standard has been applied using the "modified retrospective" transition approach. There is no adjustment to the opening balance of retained earnings for the current period however reclassifications arising from the new standard have been recognised in the opening balances as at 1 January 2019. Prior periods have not been restated, as permitted under the specific transitional provisions in the standard.

For contracts in place at 1 January 2019, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as leases under IAS 17 and IFRIC 4.

The Group has elected to measure the right-of-use assets at 1 January 2019 at an amount equal to the lease liability, adjusted for any prepaid or accrued lease payments that existed at the date of transition. The liabilities were measured at the present value of the remaining lease payments, discounted using the weighted average incremental borrowing rate, ranging between 2.4% and 3.1% based on the length of the remaining lease.

The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease liabilities recognised at 1 January 2019:

At 1 January 2019 the recognised right-of-use assets all relate to Property with one onerous lease contract requiring an adjustment to the right-of-use asset at the date of initial application.

The Group sub-lets a number of properties, in accordance with the standard the head-lease and sub-lease are treated as two separate contracts, with the head-lease recognised as a full lease liability. When the terms of the sub-lease are consistent with those of the head-lease, the associated asset is recognised as a receivable balance - 'net investment in lease'. When the terms are not consistent, the Group has recognised the full right-of-use asset, with rental income arising from the sub-lease contract recognised as Other Income.

Notes to the Interim Financial Statements (continued)

The adoption of IFRS 16 has impacted the following items:

 (1)  Balances as at 30 June 2019 are inclusive of leases commencing in the six months to 30 June 2019.

The adoption of IFRS 16 on 1 January 2019 had a nil impact on the net assets of the Group due to applying the modified retrospective approach: assets = liabilities. As at 30 June 2019 lease liabilities of £36.4m are £0.2m higher than right-of-use assets due to the depreciation charge in the period being in excess of lease repayments (net of interest charges) and the allocation of rent prepayments and accruals to the liabilities.

A reconciliation of the value of right-of-use assets and lease liabilities from 1 January 2019 to 30 June 2019 is presented below:

Notes to the Interim Financial Statements (continued)

Prior to the adoption of IFRS 16 rental payments were charged to the income statement on a straight-line basis net of rental income received on sub-lease contracts. Under IFRS 16 rental charges in the income statement are replaced with depreciation on the right-of-use asset and interest charges on the lease liability. The adoption of IFRS 16 therefore gives rise to a net Profit before Tax charge of £0.3m in the six months to 30 June 2019, reflecting depreciation and interest charges of £2.2m being £0.3m higher than the gross rental charges which would have been incurred prior to the adoption of the new standard. At EBITDA the adoption of IFRS 16 gives a benefit of £1.3m being the elimination of the rental charges, net of the rental income.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

·; Reliance on historic assessments as to whether leases are onerous

·; Account for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short term leases and expense on a straight line basis over the remaining lease term

·; Account for leases of low value assets on a straight line basis and not recognise as a right-of-use asset

·; Exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application

·; The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

3. Accounting policies

This interim report has been prepared based on the accounting policies detailed in the Group's financial statements for the year ended 31 December 2018, and applied consistently, except for the effects of applying IFRS 16.

As described in Note 2, the Group has applied IFRS 16 using the modified retrospective approach with effect from 1 January 2019 and therefore comparative information has not been restated. Comparative information is therefore still reported under IAS 17 and IFRIC 4.

The Group leases offices around the world. Rental contracts are typically made for fixed periods but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease arrangements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Accounting policy applicable before 1 January 2019:

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership do not transfer to the lessee are charged to the income statement on a straight line basis over the period of the lease. Rental income from sub-leasing property space is recognised on a straight line basis over the period of the relevant lease.

Accounting policy applicable from 1 January 2019:

For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets the following criteria:

·; The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

Notes to the interim financial statements (continued)

·; The Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

·; The Group has the right to direct the use of the identified asset throughput the period of use.

At the lease commencement date, the Group recognises the lease as a right-of-use asset and a corresponding liability on the Statement of Financial Position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any restoration costs at the end of the lease and any lease payments made in advance of the lease commencement date (net of any incentives received).

The Group depreciates the right-of-use assets on a straight line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available, or the Group's incremental borrowing rate. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Payments associated with short term leases and leases of low-value assets are recognised on a straight line basis as an expense in profit or loss. Short term leases are leases with a term of 12 months or less. Low-value assets comprise IT and copying equipment.

Extension and termination options are included in a number of property leases across the Group. These options are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

The Group sub-leases a number of properties in the UK. The head-lease and sub-lease are accounted for as two distinct contracts. The Group measures the head-lease at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. When the terms of the head-lease are the same as those of the sub-lease the Group recognises the lease asset as a net investment in lease within receivables. When the terms are not consistent the Group recognises the associated lease asset as a right-of-use asset and recognises the rental income on the sub-lease contracts as other income.

4. Taxation

Income tax on the profit or loss for the period comprises current and deferred tax.

Current tax is the expected tax payable on the taxable income for the period, using rates substantively enacted at the reporting date, and any adjustments to the tax payable in respect of previous years.

Deferred taxation is provided in full on temporary differences between the carrying amount of the assets and liabilities in the financial statements and the tax base. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is determined using the tax rates that have been enacted or substantially enacted by the reporting date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised.

Tax is recognised in the income statement for interim reporting purposes based upon an estimate of the likely effective tax rate for the year. 

Notes to the interim financial statements (continued)

5. Segment analysis

The principal activity of GlobalData Plc and its subsidiaries (together 'the Group') is to provide business information in the form of high quality proprietary data and analytics to clients in multiple sectors.

IFRS 8 "Operating Segments" requires the segment information presented in the financial statements to be that which is used internally by the chief operating decision maker to evaluate the performance of the business and to decide how to allocate resources. The Group has identified the Executive Directors as its chief operating decision maker.

Business information is provided to customers through multiple channels by a dedicated content team that is centrally managed by Research Directors who report directly to the Executive Directors. Business information is therefore considered to be the operating segment of the Group.

The Group profit or loss is reported to the Executive Directors on a monthly basis and consists of earnings before interest, tax, depreciation, amortisation, central overheads and other adjusting items. The Executive Directors also monitor revenue within the operating segment.

A reconciliation of Adjusted EBITDA to profit/ (loss) before tax from continuing operations is set out below:

The adoption of IFRS 16: Leases has impacted the 2019 depreciation, finance costs and other income balances, see note 2 for details.

Notes to the interim financial statements (continued)

Geographical analysis

Our primary geographical markets are serviced by our global sales teams which are organised into Regions - Europe, US and Asia Pacific. The below disaggregated revenue is derived from the geographical location of our customers rather than the team structure we are organised by.

From continuing operations

1. Middle East & North Africa

6. Other expenses

The adjustments made are as follows:

·; The M&A costs relate to due diligence and corporate finance activity.

·; Restructuring costs relates to redundancies and other restructuring.

·; The share based payments charge relates to the share option scheme.

·; The revaluation of short and long-term derivatives relates to movement in the fair value of the short and long-term derivatives detailed in note 11.

·; Unrealised operating foreign exchange losses relate to non-cash exchange losses made on operating items.

Notes to the interim financial statements (continued)

7. Finance income and costs

8. Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders of the parent company divided by the weighted average number of shares in issue during the period. The Group also has a share options scheme in place and therefore the Group has calculated the dilutive effect of these options.

\* The share options are anti-dilutive in respect of the diluted loss per share calculation for the six months ending 30 June 2018 and year ending 31 December 2018, therefore the share options have not been included in the calculation for these periods.

Reconciliation of basic weighted average number of shares to the diluted weighted average number of shares:

Notes to the interim financial statements (continued)

9. Intangible assets

Notes to the interim financial statements (continued)

10. Property, plant and equipment

Included in the net carrying amount of property, plant and equipment as at 30 June 2019 are right-of-use assets as follows:

Notes to the interim financial statements (continued)

11. Derivative assets and liabilities

The Group uses derivative financial instruments in the form of currency forward contracts to reduce its exposure to fluctuations in foreign currency exchange rates.

Classification is based on when the derivatives mature. The fair values of derivatives are expected to impact the income statement over the next year, dependant on movements in the fair value of the foreign exchange contracts. The movement in the period was a gain of £299,000 to the income statement (2018: debit of £1,066,000).

12. Borrowings