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Annual Financial Report 2019

5 Dec 2019 07:00

RNS Number : 7446V
Daily Mail & General Trust PLC
05 December 2019
 

 

 

5 December 2019

 

 

Daily Mail and General Trust plc ('DMGT')

Group results for the year ended 30 September 2019

 

Full Year results in line with expectations and good progress with Group transformation

 

·; Group underlying¹ growth achieved across revenue, cash flow and profit:

o Revenue +2%

o Cash operating income²+10%

o Adjusted³ operating profit +6%

·; Adjusted profit before tax +19% underlying; adjusted EPS down 8%

·; Full year dividend increased +3% to 23.9p

·; Statutory4 revenue £1,337m, statutory profit before tax £134m and statutory EPS 30.7p

·; £862m of capital returned to shareholders in April 2019, including £200m special dividend

·; Significantly increased portfolio focus during 2019:

o Distribution of DMGT's entire Euromoney stake to DMGT shareholders

o Sale of Genscape for US$364m; disposal of BuildFax, On-geo and RCA stake

·; Strong financial position: pro forma net cash £247m5, including Genscape proceeds and excluding £117m made available to pension schemes; statutory net cash £82m

·; Acquisition of the 'i' for £50m cash consideration post year end

 

 

Adjusted³ results

(from continuing and discontinued operations)

Statutory⁴ results

2019

2018

Change~

2019

2018

Reported

Underlying¹

Revenue

£1,411m

£1,426m

-1%

+2%

£1,337m

£1,341m

Cash operating income

£162m

£155m

+4%

+10%

 

Operating profit

£144m

£145m

0%

+6%

£67m

£168m

Profit before tax

£145m

£182m

-21%

+19%

£134m

£707m

Earnings per share

38.6p

42.2p

-8%

 

30.7p

194.7p

Dividend per share

 

23.9p

23.3p

 

Paul Zwillenberg, CEO, commented:

"DMGT has delivered a robust financial performance, achieving 2% underlying revenue growth and 10% underlying cash operating income growth. Consumer Media outperformed the market and there was a mixed performance across our B2B businesses, consistent with our expectations.

 

We have continued to deliver successfully against our three strategic priorities of increasing portfolio focus, improving operational execution and maintaining financial flexibility. Over the last three years, we have moved from ten sectors to five, from 40 operating companies to eight and from net debt of £679m and a debt:EBITDA ratio of 1.8 to pro forma net cash of nearly £250m. In April 2019, we returned almost £900m of capital to our shareholders in the form of Euromoney shares and a £200m special dividend.

 

We will continue with our active portfolio management approach, focusing on those assets that have the potential to drive good returns through strong cash flow generation and growth in capital value. We are now in the next phase of the Group's transformation, optimising our business through targeted and disciplined investment whilst maintaining significant financial flexibility to enhance shareholder value. The recent acquisition of the 'i' demonstrates the opportunities we have to invest in high quality, content-led businesses with a compelling strategic and financial rationale."

 

Full Year 2019 Financial Results Summary

 

Segmental performance:

 

Adjusted3 results

Statutory4 results

2019

£m

2018

£m

Change~

2019

£m

2018

£m

Reported

Underlying¹

Revenue:

 

 

 

 

 

 

B2B

738

773

-4%

+2%

665

687

Consumer Media

672

654

+3%

+2%

672

654

DMGT Group

1,411

1,426

-1%

+2%

1,337

1,341

Cash operating income²:

 

 

 

 

 

 

B2B

126

131

-4%

-4%

 

 

Consumer Media

78

77

+2%

+12%

 

 

Corporate costs

(43)

(53)

-20%

-20%

 

 

DMGT Group

162

155

+4%

+10%

 

 

Operating profit:

 

 

 

 

 

 

B2B

117

128

-9%

-8%

79

56

Consumer Media

67

64

+4%

+18%

66

46

Corporate costs

(40)

(47)

-16%

-17%

(49)

(52)

DMGT Group*

144

145

0%

+6%

96

50

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

* The DMGT Group statutory operating profit shown above excludes the share of operating profits from joint ventures and associates.

 

 

·; Revenue of £1,411m; underlying growth +2%: reflects growth from EdTech, Events and Exhibitions, Insurance Risk and Consumer Media partly offset by a decrease from Property Information and Energy Information.

 

·; Cash operating income (Cash OI)² £162m; underlying growth +10%: driven by improving operational execution across the portfolio of businesses partly offset by increased investment, notably in RMS, the Insurance Risk business.

 

·; Adjusted operating profit £144m; underlying growth +6%: reflects increase in Consumer Media profit and reduced Corporate Costs.

 

·; Statutory operating profit £67m: decreased from £168m in the prior year, primarily due to a £147m reduction in the share of profits from joint ventures and associates.

 

·; Income from JVs and associates: the share of adjusted operating profit reduced to £13m from £74m due to the disposal of DMGT's stake in ZPG Plc in July 2018, the distribution of DMGT's stake in Euromoney in April 2019 and increased losses from early-stage businesses.

 

·; Adjusted profit before tax (PBT) £145m: growth of +19% on an underlying basis, including underlying reduction in net finance costs of -46% to £12m. Statutory PBT was £134m (FY 2018 £707m) with the prior year benefitting from gains on disposals.

 

·; Tax: adjusted tax charge £29m (FY 2018 £33m); with the adjusted effective tax rate increasing to 20.3%. The statutory tax charge was £20m.

 

·; Earnings per share: adjusted EPS down -8% to 38.6p (FY 2018 42.2p) reflecting disposals and tax normalisation. Statutory EPS was 30.7p (FY 2018 194.7p) reflecting impairments in respect of Euromoney and On-geo.

 

·; Pro forma net cash5 was £247m as at 30 September 2019, adjusted for the US$364m gross proceeds on the disposal of Genscape in November 2019 and to exclude £117m expected to be made available to the pension schemes. The net cash:EBITDA ratio was 1.2 on this basis. Excluding the adjustments described above, the net cash and net cash:EBITDA ratio as at 30 September 2019 were £82m and 0.4 respectively.

 

·; Portfolio management: we have been very active in 2019 with several corporate transactions which has led to a more focused portfolio. In April, there was a £662m distribution of DMGT's c.49% stake in Euromoney to DMGT's shareholders. The disposal of Genscape, the Energy Information business, reduced the number of sectors that DMGT operates in from six to five and generated US$364m of proceeds. In Property Information, DMGT sold its German-based business, On-geo, in June; BuildFax, the early-stage US business, in October; and its c.40% stake in US-based Real Capital Analytics (RCA) for US$89m in May. M&A activity included Landmark's purchase of its conveyancing panel business, Optimus, and dmg events' acquisition of its local partner's stake in the Egyptian energy show, EGYPS. In Consumer Media, the 'i', the UK national newspaper and website, was acquired in November 2019.

 

·; Outlook: the reported financial performance in FY 2020 will reflect the significant portfolio changes over the past year. The revenue of the current portfolio of businesses was £1,344m in FY 20196. In FY 2020, Group revenues are expected to be broadly stable on an underlying basis and DMGT will continue to invest, in line with its long-term approach. The Group cash operating income margin is expected to exceed the adjusted operating profit margin, which is expected to be around 10%.

 

 

Enquiries

Investors:

Tim Collier, Group CFO

 

+44 20 3615 2902

Adam Webster, Head of Investor Relations

+44 20 3615 2903

 

Media:

Doug Campbell / Paul Durman, Teneo

 

+44 20 7260 2700

 

 Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 5 December 2019, at J.P. Morgan, 60 Victoria Embankment, London, EC4Y 0JP. There will also be a live webcast available at www.dmgt.com/webcastfy19.

 

Financial reporting calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 23 January 2020.

 

About DMGT

DMGT manages a portfolio of companies that provide businesses and consumers with compelling information, analysis, insight, events, news and entertainment. The Group takes a long-term approach to investment and has market-leading positions in consumer media, insurance risk, property information, education technology and events & exhibitions. In total, DMGT generates revenues of around £1.4bn.

 

 

Notes

 

1 Underlying growth rates are on a like-for-like basis, see pages 29 to 31. Underlying revenues, cash operating income2 and operating profits are adjusted for constant exchange rates, the exclusion of disposals and business closures, the inclusion of the year-on-year organic growth from acquisitions and for the consistent timing of revenue recognition. For events, the comparisons are between events held in the year and the same events held the previous time. The September 2019 Gastech event's revenues, cash operating income and profit are compared to two-thirds of the September 2018 event's, having changed from an 18-month to an annual cycle. For Consumer Media, underlying revenues exclude low margin newsprint resale activities. The underlying change in the share of operating profits from joint ventures and associates excludes ZPG Plc ('ZPG'), Euromoney Institutional Investor PLC ('Euromoney'), DailyMailTV and Real Capital Analytics, which have ceased to be associates, but includes the year-on-year organic growth from Yopa, which became an associate during 2018. The underlying net finance costs exclude the share of finance costs from ZPG and Euromoney and the underlying FY 2018 costs have also been adjusted to include an assumed £10m additional benefit from £642m proceeds on the disposal of ZPG.

 

2 Cash operating income (Cash OI) is calculated by adding back depreciation and amortisation expenses, which are non-cash items, to adjusted operating profit and then deducting capital expenditure.

 

3 Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results. The Board and management team use adjusted results, rather than statutory results, to give greater insight to the financial performance of the Group and the way that it is managed. Similarly, adjusted results are used in setting management remuneration. Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance credits and fair value adjustments. For reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 23 to 26.

 

4 The statutory results are IFRS figures before any adjustments. Statutory revenue, operating profit and profit before tax figures are for continuing operations only (excluding Genscape, the Energy Information business). The FY 2018 statutory results have been reclassified accordingly.

 

5 The actual net cash position as at 30 September 2019 was £82m and the net cash:EBITDA ratio was 0.4 but £117m has been made available to the pension schemes and £282m of gross proceeds from the disposal of Genscape, the Energy Information business, were received in November 2019. The pro forma net cash of £247m is stated after adjusting net cash to exclude the £117m and include the £282m. The pro forma net cash:EBITDA ratio was 1.2.

 

6 The pro forma FY 2019 revenues of £1,344m for the current portfolio of DMGT businesses exclude Genscape, On-geo and BuildFax, which were all sold during 2019, and include the revenues, for the 12 months to December 2018, of the 'i', which was acquired in November 2019.

 

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

 

The average £:US$ exchange rate for the year was £1:$1.28 (2018 £1:$1.35). The rate at the year end was $1.23 (2018 $1.30).

 

 

Daily Mail and General Trust plc

Northcliffe House, 2 Derry Street,

London W8 5TT

 

www.dmgt.co.uk

Registered in England and Wales No. 184594

 

Strategy Review Full Year 2019

 

Strategic priorities

We are encouraged by the good progress made across DMGT's three strategic priorities, supporting the transition to the next stage of our transformation:

 

·; Increasing portfolio focus: in April 2019, DMGT's c.49% stake in Euromoney was distributed directly to DMGT's shareholders. We also sold Genscape, the Energy Information business, for US$364m, demonstrating our ability to nurture and transform a business to generate compelling value. In Property Information, we simplified the business further with the sale of On-geo and BuildFax. The DMGT portfolio remains balanced and diversified across B2B and Consumer Media. It is well positioned for the future, with most of our businesses in markets with long-term growth characteristics that are well placed to benefit from digitisation.

 

·; Improving operational execution: as part of our focus on performance management culture, a number of initiatives were undertaken during the year that contributed to the Group's robust performance and increase in cash operating income. We are encouraged that improving operational execution is becoming embedded in the culture of all our businesses, as we move from 'fixing' to optimising operational performance. We are committed to ensuring that decisions are made with a clear ROI mindset and a focus on cash operating income.

 

·; Maintaining financial flexibility: following the payment of a £200m special dividend in April and an additional £117m being made available to the pension schemes, the balance sheet remains strong with pro forma net cash of £247m. We are able to take advantage of attractive opportunities as they arise, investing for the long term through both bolt-on acquisitions and organic investment.

 

The Group has transformed over the past three years into a more focused portfolio with significantly enhanced financial flexibility. In the next stage of DMGT's transformation, we will be driving value creation. This will be achieved by investing, both organically and through selective acquisitions, and with a continued focus on performance management.

 

Clear portfolio roles 

As a portfolio manager, DMGT owns businesses in different stages of their life cycles. The segmentation of our businesses, reflecting their financial characteristics, helps to frame our capital allocation decisions and determine each business's priorities. The three roles are:

 

·; Predictable performers: these form DMGT's economic bedrock, generating predictable cash flows to invest back into the Group or to support the payment of the dividend. They are typically more mature and include the Consumer Media Mail and Metro newspapers as well as Trepp and Landmark, two of our Property Information businesses. In FY 2019, cumulative revenues were £734m, an underlying decrease of 2% compared to last year. The cash operating income margin was 16%, compared to 17% in the prior year.

 

·; Growing and delivering: these businesses are well positioned in attractive markets with long runways for future growth. Over the longer term, they are expected to be the most significant driver of our revenue and profit growth. This category includes our Insurance Risk, EdTech and Events and Exhibitions businesses, as well as MailOnline, our Consumer Media digital business. Cumulative revenues were £656m, underlying growth of 5%, or 6% excluding the Energy Information business that was sold in November 2019. The cash operating income margin improved to 14%, compared to 13% in the prior year, with increases in EdTech and Energy Information more than offsetting increased investment in Insurance Risk. Future growth for these businesses is expected to be driven both organically and through bolt-on acquisitions.

 

·; Businesses for the future: a strength of DMGT is the ability to take a long-term approach to create the 'Growing and delivering' businesses of the future. These are start-up businesses where technological changes create opportunities for us. This group includes DailyMailTV, Yopa and Cazoo. dmg ventures, the early-stage investment division, is actively exploring additional growth opportunities and will play an important role in expanding investments in this area.

 

Capital allocation and dividends

Our approach to capital allocation remains unchanged. DMGT prioritises organic investment opportunities and takes a long-term approach, investing through the cycle and avoiding a focus on short-term EPS growth. DMGT is also committed to its policy of delivering dividend per share growth in excess of inflation.

 

The Group adopts a balanced and flexible approach to uses of capital for acquisitions and shareholder returns. DMGT has a disciplined approach to acquisitions and will prioritise bolt-on targets to complement its existing portfolio of businesses. The Group also aims to prioritise the allocation of capital towards growth opportunities, particularly those that can benefit from technological or market disruption.

 

Acquisition of the 'i'

In November 2019, DMGT acquired the 'i', the UK national newspaper and website, for £50m cash consideration. The 'i' has an established reputation for quality journalism and in 2018 generated £11m in cash operating income and operating profit from £34m of revenue. The acquisition is both strategically and financially compelling and there is scope for potential synergies in the future, notably from dmg media's existing infrastructure and in advertising sales. The 'i' will sit within DMGT's 'Predictable performers' category. The business will benefit from DMGT's long-term approach and commitment to investing in editorial content. It is anticipated that the acquisition will be reviewed by the UK Competition and Markets Authority.

 

 

Group Financial Review Full Year 2019

 

This review of the audited results for the year ended 30 September 2019 focuses principally on the adjusted3 results, to give a more comparable indication of the Group's business performance. The adjusted results are summarised below:

 

Adjusted results3

(from continuing and discontinued operations)

2019

£m

2018

£m

Change~

Revenue

1,411

1,426

-1%

 

 

 

 

Cash operating income²

162

155

+4%

 

 

 

 

Operating profit

144

145

0%

Income from JVs and associates

13

74

-83%

Net finance costs

(12)

(37)

-67%

Profit before tax

145

182

-21%

 

 

 

 

Tax charge

(29)

(33)

-11%

Minority interest

(1)

-

 

Group profit

115

149

-23%

 

 

 

 

Adjusted earnings per share

38.6p

42.2p

-8%

 

 

 

 

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

 

Revenue

Group adjusted revenue for the year, including discontinued operations, was £1,411m, a decrease of 1%, reflecting the effect of disposals. On an underlying¹ basis, revenue grew 2%. Underlying growth was delivered in subscriptions, digital advertising and events, but was partly offset by the anticipated decline in print advertising, circulation and transactions. The revenue performance for our B2B businesses and our Consumer Media business, on a reported and underlying basis, is summarised below.

 

Adjusted3 revenue

Year-on-year change

Reported

Underlying¹

H1

H2

Year

H1

H2

Year

DMGT Group

-3%

+1%

-1%

+1%

+2%

+2%

B2B

-7%

 -1%

-4%

+2%

+2%

+2%

Insurance Risk

+6%

+7%

+6%

0%

+2%

+1%

Property Information

-25%

-10%

-18%

0%

-2%

-1%

EdTech

+17%

+16%

+17%

+14%

+11%

+12%

Events and Exhibitions

+1%

 0%

+1%

+2%

+7%

+4%

Energy Information

-14%

-13%

-14%

0%

-4%

-2%

Consumer Media

+3%

+3%

+3%

+1%

+2%

+2%

 

Cash operating income

Cash operating income ('Cash OI') of £162m grew 10% on an underlying basis and 4% in absolute terms, reflecting the effect of disposals. The Board considers Cash OI to be a good indicator of the underlying performance of the businesses and it is a core element of the incentive plans for all senior management teams. Within B2B, good progress was made by EdTech and Energy Information, reflecting the strong focus on improving operational execution across those businesses. Cash OI was, however, affected by planned increased investment in B2B, notably in RMS, the Insurance Risk business. Consumer Media achieved strong underlying growth in Cash OI.

 

 

Cash operating income²

Cash operating income margin

2019

£m

2018

£m

Change~

2019

2018

Reported

Underlying¹

Insurance Risk

41

50

-18%

-24%

17%

22%

Property Information

44

48

-8%

-4%

20%

18%

EdTech

8

2

N/A*

N/A*

10%

3%

Events & Exhibitions

22

28

-21%

-14%

19%

24%

Energy Information

12

4

+208%

+112%

16%

4%

B2B Total

126

131

-4%

-4%

17%

17%

Consumer Media

78

77

+2%

+12%

12%

12%

Corporate costs

(43)

(53)

-20%

-20%

 

DMGT Group**

162

155

+4%

+10%

11%

11%

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

* EdTech cash operating income increased by £6m and by an underlying £7m.

 

Operating profit

Adjusted operating profit was in line with last year and grew 6% on an underlying basis. The underlying performance reflected profit growth from Consumer Media and, within B2B, from Insurance Risk, which benefitted from reduced amortisation costs, and Energy Information. Corporate costs decreased by 17% on an underlying basis, reflecting the Group's more focused portfolio and efficiencies. The proportion of technology expenditure expensed directly to the income statement, rather than being capitalised, increased during the year. The adjusted operating margin was 10%, in line with the prior year.

 

 

Adjusted3 operating profit

Adjusted operating margin

Statutory4 operating profit

2019

£m

2018

£m

Change~

2019

2018

2019

£m

2018

£m

Reported

UL¹

Insurance Risk

40

35

+17%

+6%

17%

15%

40

(24)

Property Information

41

58

-29%

-25%

19%

21%

15

48

EdTech

4

7

-41%

-34%

6%

11%

3

5

Events & Exhibitions

22

28

-19%

-12%

19%

24%

21

27

Energy Information

8

-

N/A*

N/A*

11%

0%

-

-

B2B Total

117

128

-9%

-8%

16%

17%

79

56

Consumer Media

67

64

+4%

+18%

10%

10%

65

46

Corporate costs

(40)

(47)

-16%

-17%

 

(50)

(52)

DMGT Group**

144

145

0%

+6%

10%

10%

95

50

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

* Energy Information adjusted operating profit increased by £8m and by an underlying £6m.

** The DMGT statutory operating profit shown above excludes the share of operating profits from joint ventures and associates.

UL: Underlying change

 

Excluding Corporate costs, the B2B businesses generated 64% of the adjusted operating profit in the year, with Consumer Media contributing the remainder. More than half of the Group's adjusted operating profit was generated from outside the UK, with over a third coming from North America.

 

Profit before tax

Adjusted profit before tax was £145m, a decrease of 21% in absolute terms but 19% growth on an underlying basis. The share of adjusted operating profits from joint ventures and associates decreased £61m, due to the disposal of ZPG Plc and distribution of DMGT's stake in Euromoney, although in line with the prior year on an underlying basis. This was offset by a £25m reduction in net finance costs, an underlying £11m decrease. The adjusted tax charge was £29m, a decrease of 11% on last year, due to an expected increase in the effective tax rate to 20.3% partly offsetting the reduction in profit before tax. Adjusted earnings per share of 38.6p decreased by 8%.

 

The statutory profit before tax for the year was £134m, a decrease of £573m on the prior year, due to the prior year benefitting from gains on disposals, including those made by associates. Statutory basic earnings per share were 30.7p, an 84% reduction on the prior year.

 

Dividend

The full year dividend increased by 3% to 23.9p, in line with our dividend policy of delivering real dividend growth. The Board's decision to recommend increasing the dividend reflects its confidence in DMGT's ability to deliver future long-term earnings growth and improving cash generation.

 

Statutory reconciliation

The table below sets out the reconciliation from statutory profit before tax to adjusted profit before tax. More detail and explanations are provided on pages 23 to 26.

 

 

2019

£m

2018

£m

Explanation

(as per pages 23 and 24)

Statutory profit before tax

134

707

 

Discontinued operations

(33)

(15)

1

Exceptional operating costs

36

25

2

Intangible impairment and amortisation

69

95

3

Profit on sale of assets

(67)

(658)

4

Pension finance credit

(7)

(2)

5

Other adjustments

13

30

6

Adjusted profit before tax

145

182

 

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

 

 

 

Detailed outlook for FY 2020

Group: the reported financial performance in FY 2020 will reflect the portfolio changes over the past year. The revenue of the current portfolio of businesses was £1,344m in FY 20196. In FY 2020, Group revenues are expected to be broadly stable on an underlying basis. The Group cash operating income margin is expected to exceed the adjusted operating profit margin, which is expected to be around 10%.

 

B2B: The revenue of the current portfolio of B2B businesses was £638m in FY 2019. In FY 2020, the B2B portfolio's revenues are expected to grow on an underlying basis. There will be significant organic investment, reflecting the opportunities to create value over time, but which will likely impact the cash operating income and operating margin in the short term. At a business level, we are anticipating the following dynamics:

·; Insurance Risk: RMS is expected to continue to deliver modest revenue growth over the next two years before a gradual acceleration as new products and services gain traction. We are encouraged by the level of customer engagement and in response to feedback will be accelerating elements of the product roadmap to align best with customers' priorities. The FY 2020 operating margin will reflect this investment and continue at a similar level to the H2 2019 run rate. Beyond FY 2020, profitability is expected to improve following the peak in investment and as revenue growth accelerates.

·; Property Information: there will be investment in the coming year, notably to support Trepp's expansion into the collateralised loan obligations (CLO) market. The challenging market conditions in the UK are expected to continue due to ongoing political uncertainty.

·; EdTech: Hobsons is well positioned to deliver continued revenue growth and improving cash generation.

·; Events and Exhibitions: market conditions in the Middle East remain challenging, exacerbated by political tension in the region. Big 5 Dubai and ADIPEC, two of the business's three largest events, occurred in November 2019 and, collectively, revenues were stable.

 

Consumer Media: digital advertising revenues are expected to grow, helping to offset anticipated underlying print advertising declines. The advertising market continues to lack visibility and conditions are likely to remain volatile. Circulation volumes are expected to continue to decline. The cash operating income margin and operating margin will reflect a mix of the expected underlying revenue reduction, the benefit of continued cost efficiencies within the newspapers and MailOnline's growing profitability. In November 2019, DMGT acquired the 'i' which, in 2018, generated £11m cash operating income and operating profit from £34m revenue.

 

JVs and Associates: will be affected by the absence of Euromoney which generated £23m of profit in FY 2019. Yopa and DMGT's other joint ventures and associates are primarily investment-stage businesses and DMGT does not fully control them, unlike subsidiaries. The current expectation is that they will generate cumulative net losses in excess of £10m in FY 2020.

 

Net finance costs: are expected to be in the £10m to £15m range in FY 2020.

 

Taxation: the effective tax rate is expected to reflect changes to the share of losses from associates, notably where a tax credit is not recognised, and to increase to around 22% in FY 2020.

 

IFRS 16: the lease accounting standard will apply to DMGT from 1 October 2019. Prior periods will not be restated and adoption of IFRS 16 will result in the Group recognising additional lease liabilities of c.£93m and right-of-use assets of c.£92m on the balance sheet as at 1 October 2019. The adoption of IFRS 16 is expected to impact FY 2020 results, reducing rental costs by c.£25m, increasing depreciation charges by c.£23m and increasing finance costs by c.£2m. There will be no impact on total cash flow.

 

 

Business Review

 

Business to Business (B2B)

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

738

773

-4%

+2%

Cash operating income²

126

131

-4%

-4%

Adjusted3 operating profit

117

128

-9%

-8%

Cash operating income² margin

17%

17%

 

 

Adjusted3 operating margin

16%

17%

 

 

 

B2B revenues totalled £738m, up 2% on an underlying basis. The performance reflects growth from EdTech, Insurance Risk and Events and Exhibitions partially offset by a decrease in Property Information, which continued to experience challenging market conditions in the UK, and Energy Information. Revenues decreased by 4% in absolute terms due to disposals within the Property Information and Energy Information sectors in 2018.

 

B2B cash operating income decreased by an underlying 4% to 126m, reflecting increased investment in product development, notably to take advantage of the attractive growth opportunities available to RMS, the Insurance Risk business. The overall B2B cash operating income margin remained at 17%, with improvements from Property Information, EdTech and Energy Information offset by lower margins in Insurance Risk and Events and Exhibitions.

 

B2B adjusted operating profits were £117m, down an underlying 8%, due to the growth from Insurance Risk and Energy Information being more than offset by reductions from the other sectors. The performance reflected a larger proportion of technology costs being expensed, not capitalised, and the overall B2B operating margin decreased to 16%.

 

Outlook: the B2B financial performance will be affected by the disposal of Genscape in November 2019 and On-geo and BuildFax, the Property Information businesses, in June and October 2019 respectively. The revenue of the current portfolio of B2B businesses was £638m in FY 2019. In FY 2020, the B2B portfolio's revenues are expected to grow on an underlying basis. There will be significant organic investment, reflecting the opportunities to create value over time, but which will likely impact the cash operating income and operating margin in the short term.

 

 

 

Insurance Risk: RMS

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

244

229

+6%

+1%

Cash operating income²

41

50

-18%

-24%

Adjusted3 operating profit

40

35

+17%

+6%

Cash operating income² margin

17%

22%

 

 

Adjusted3 operating margin

17%

15%

 

 

 

The Insurance Risk business, RMS, provides models and solutions that help insurers, reinsurers, brokers, financial markets and public agencies evaluate and manage catastrophe risks globally. Insurance Risk revenues grew by 1% on an underlying basis as the benefit of favourable contact renewals during the year more than offset the impact of industry consolidation and historic RMS(one) delivery issues. Reported revenues grew 6% to £244m including the benefit of the stronger US dollar.

 

The cash operating income margin decreased to 17% from 22% in the prior year as the business increased its investment in software, data, data analytics and applications, to drive future growth. RMS continued to expense development costs as they were incurred. The adjusted operating margin of 17% benefitted, however, from the absence of RMS(one) amortisation, which was £15m in the prior year, following the impairment of the asset in September 2018.

 

The substantial amount of product development that occurred in FY 2019 reflects the strengthening of the executive team over the past two years and the significant increase in the management team's collective experience of enterprise software.

 

In May 2019, RMS announced the launch of Risk Intelligence, an open and flexible platform to enable better risk management. Risk Intelligence is a modern, cloud-based, unified risk management platform. It enables higher performance model execution at a lower cost, as well as rich data analytics, and supersedes the RMS(one) platform which was retired during the year.

 

RMS also released two new analytics applications that are available on the Risk Intelligence platform. SiteIQ synthesises risk data across millions of global locations, at the level of a single location or a portfolio of locations, and allows underwriters to gain an immediate better understanding of property risk. ExposureIQ is aimed at exposure management. The applications are expected to facilitate RMS's entry into the large and high-growth Insurance Risk Analytics market as it expands beyond the natural catastrophe modelling market it serves today. Similarly, RMS Location Intelligence was launched in June 2019, making trillions of data points accessible to customers and marking RMS's entry into the Property Data market.

 

The business continues to invest in model development, reflecting an ongoing commitment to build upon RMS's market-leading position. The US Inland Flood high-definition (HD) model and US Wildfire HD model were both released on Risk Intelligence during the year.

 

Priorities in the year ahead: RMS continues with its disciplined approach to investing in its long-term growth opportunities. As outlined at the Investor Briefing event in July 2019, RMS expects to deliver modest revenue growth over the next two years before a gradual acceleration as new products and services gain traction. We are encouraged by the level of customer engagement and in response to the feedback will be accelerating elements of the product roadmap to align best with customers' priorities. The FY 2020 operating margin will reflect this investment and continue at a similar level to the H2 2019 run rate. Beyond FY 2020, profitability is expected to improve following the peak in investment and as revenue growth accelerates.

 

 

Property Information

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

222

272

-18%

-1%

Cash operating income²

44

48

-8%

-4%

Adjusted3 operating profit

41

58

-29%

-25%

Cash operating income² margin

20%

18%

 

 

Adjusted3 operating margin

19%

21%

 

 

 

The focus within the portfolio was further increased in 2019, with the disposal of On-geo, our German business, and BuildFax, the early-stage US business. The disposals followed those of EDR and SiteCompli in April 2018 and Xceligent's cessation of trading in December 2017.

 

Trepp is now our sole US business in Property Information. Trepp provides risk, valuation and data solutions for the commercial mortgage-backed securities market as well as tools, analytics and models for commercial real estate investors and lenders. In Europe, Landmark Information Group derives revenues from providing services that use technology, data and workflow to streamline and help reduce the risk associated with commercial and residential property transactions.

Property Information revenues decreased by 1% on an underlying basis. The revenue growth in the US was more than offset by the European business, which continued to face challenging conditions in the UK residential market. The 18% reported decrease in revenues reflected the reduced number of businesses in the portfolio, slightly offset by the stronger US dollar.

 

There was significant product development in the year. Notably, Trepp introduced new analytics for lending institutions in the commercial real estate market and made considerable progress with the development of TreppCLO, which will provide data analytics to the collateralised loan obligations (CLO) market.

 

There was an underlying decrease in cash operating income and adjusted operating profit as a result of the increased cost base of the remaining businesses and increased investment. Margins, however, benefitted from changes to the portfolio mix.

 

Landmark Information Group has expanded into conveyancing panel management services, following the acquisition of its Optimus business in July 2019. Optimus's technology integrates with conveyancers and introducers, such as mortgage brokers, to ensure a faster and more transparent residential property transaction process. The acquisition enables Landmark to work more closely with introducers while continuing to serve existing complementary markets such as legal conveyancing, estate agency and mortgage lending.

 

Priorities in the year ahead: the market in the UK is expected to remain challenging due to ongoing political uncertainty. There will be continued product development and investment in technology to strengthen Trepp and Landmark Information Group's market-leading positions and drive future revenue growth. Notably, there will be investment in launching TreppCLO early in the year and in further enhancing the product, which will affect margins in the short term.

 

 

EdTech: Hobsons

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

80

68

+17%

+12%

Cash operating income²

8

2

N/A*

N/A*

Adjusted3 operating profit

4

7

-41%

-34%

Cash operating income² margin

10%

3%

 

 

Adjusted3 operating margin

6%

11%

 

 

* Cash operating income increased by £6m and by an underlying £7m.

 

The EdTech business, Hobsons, is a leading provider of college and career readiness and student success solutions to the North American market. The business continues to perform strongly and revenues grew by an underlying 12%. There was continued growth from each of Hobsons' three product lines: Naviance, the K-12 college and career readiness solution; Intersect, the higher education match and fit business; and Starfish, the higher education student retention and success platform. Reported revenues grew 17% including the benefit of the stronger US dollar.

 

The improved operational execution delivered high cash conversion from revenue growth and a transformation in cash operating income and margin, which improved from 3% to 10%. The modernisation of the core EdTech product platforms and the addition of new client-facing features and functionality will help to drive revenue growth. In FY 2019, a larger proportion of expenditure on technology was expensed directly rather than capitalised, contributing to a decrease in the adjusted operating margin from 11% to 6%.

 

Intersect launched its improved search and match feature set, expanding the criteria students can use to find their 'best fit' institution. The enhanced search features are available to over 13 million students, including over 40% of US high school students, as over 13,000 schools subscribe to the Naviance platform. Additional enhancements were also made to the Naviance and Starfish product suites during the year. Over 1,100 US colleges and universities are now using Hobsons' higher education products, Intersect and Starfish.

 

Priorities in the year ahead: during FY 2020, there will be further investment to modernise the core EdTech product platforms and add new client-facing features and functionality. The business is well-positioned to deliver continued growth and improving cash generation, supported by a continued focus on operational execution.

 

 

 

Events and Exhibitions: dmg events

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

119

118

+1%

+4%

Cash operating income²

22

28

-21%

-14%

Adjusted3 operating profit

22

28

-19%

-12%

Cash operating income² margin

19%

24%

 

 

Adjusted3 operating margin

19%

 24%

 

 

 

The Events and Exhibitions business, dmg events, is an organiser of B2B exhibitions and conferences with industry-leading events in the energy, construction, interiors, hotel, hospitality and leisure sectors. Revenues grew by 4% on an underlying basis due to Gastech, one of the three largest events in the portfolio, successfully transitioning to an annual format having previously been held every eighteen months. Gastech grew absolute revenues and delivered particularly strong underlying growth. ADIPEC and Big 5 Dubai, the two other largest events, occurred in November 2018 and collectively delivered underlying growth, although market conditions in the Middle East have deteriorated since then. dmg events' reported revenues increased by 1% to £119m, including the benefit of the stronger US dollar.

 

The business continued to geo-clone existing shows by launching into new locations, including a Big 5 Nigeria construction exhibition and an INDEX Saudi interior design event. Other new events were successfully launched in Thailand and South Africa.

 

The cash operating income margin and operating profit margin were 19%, a reduction compared to the prior year. This reflected the impact of reduced revenues from most Middle East events as well as investment, to support the future growth of major events and new launches. As a result, operating profits decreased by an underlying 12%.

 

Priorities in the year ahead: market conditions in the Middle East remain challenging, exacerbated by political tension in the region. Big 5 Dubai and ADIPEC occurred in November 2019 and, collectively, revenues were stable. The business intends to continue to launch new events, including in Africa and the US. We also remain committed to the Middle East events, illustrating DMGT's appetite to invest to support longer term revenue growth.

 

 

Energy Information: Genscape

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue

74

86

-14%

-2%

Cash operating income²

12

4

+208%

+112%

Adjusted3 operating profit

8

-

N/A*

N/A*

Cash operating income² margin

16%

4%

 

 

Adjusted3 operating margin

11%

0%

 

 

* Adjusted operating profit increased by £8m and by an underlying £6m.

 

DMGT no longer operates an Energy Information division, following the disposal of Genscape for US$364m in November 2019. Revenues decreased by an underlying 2%, with growth from the oil and gas sectors more than offset by challenging market conditions in the power sector and the rationalisation of product lines. Revenues decreased by 14% in absolute terms following the merger of Genscape's solar business into AlsoEnergy in September 2018.

 

Significant progress was made during the year with the consolidation of the development team across the company, the removal of management layers and the streamlining of decision-making processes. The management's team focus on delivering efficiencies resulted in a transformation in cash generation, with the cash operating income margin increasing from 4% to 16% and cash operating income more than doubling on an underlying basis to £12m. Similarly, the adjusted operating margin increased from 0% to 11%.

 

The significant progress made with improving operational execution during the year resulted in a pleasing valuation for the business at disposal.

 

Priorities in the year ahead: Genscape ceased being a DMGT business in November 2019.

 

 

Consumer Media: dmg media

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Revenue:

 

 

 

 

Daily Mail / The Mail on Sunday

406

424

-4%

-4%

MailOnline

140

122

+14%

+13%

DailyMailTV

13

-

N/A

+61%

Mail Businesses

559

546

+2%

 +1%

Metro

79

71

+11%

+11%

Newsprint and other

35

37

-7%

 +3%

Total Revenue

672

654

+3%

+2%

 

 

 

 

 

Cash operating income2

78

77

+2%

+12%

Adjusted3 operating profit

67

64

+4%

+18%

Cash operating income2 margin

12%

12%

 

 

Adjusted3 operating margin

10%

10%

 

 

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

 

The Consumer Media portfolio includes two of the UK's most read paid-for newspapers, the UK's highest circulation weekday newspaper and MailOnline, one of the world's leading English language newspaper websites. Revenue grew by an underlying 2% to £672m, benefitting from relatively favourable conditions in the advertising market. The underlying growth from MailOnline and DailyMailTV more than offset a 3% decrease in circulation revenues and a 1% decline in print advertising revenues. Revenues grew 3% in absolute terms, benefitting from the inclusion of DailyMailTV, which became a wholly-owned business in October 2018.

 

Cash operating income and adjusted operating profit grew by an underlying 12% and 18% to £78m and £67m respectively. The growth reflected the continued focus on improving operational execution and the flow-through of revenue growth to profits. The cash operating income margin was 12% and the operating margin 10%, in line with the prior year.

 

Total combined advertising revenues across the dmg media portfolio grew by an underlying 4% to £329m. The 3% decrease in circulation revenues to £284m resulted from a continued decline in circulation volumes being partly offset by the benefit of a 5p cover price increase in September 2018 of the weekday editions of the Daily Mail to 70p. The Mail brands remain strong, which is reflected in the large and growing UK retail market shares held by the Daily Mail and The Mail on Sunday, averaging 25.5% and 22.8% for the year respectively7.

 

Revenues for the combined Mail newspaper, website and TV businesses (Daily Mail, The Mail on Sunday, MailOnline and DailyMailTV) grew by an underlying 1% to £559m, including £140m from MailOnline. Total advertising revenues across the Mail businesses grew by an underlying 2% to £253m, including an 8% decline in print advertising revenues, reflecting the continued structural and competitive challenges facing the UK national newspaper advertising market. MailOnline's advertising revenues grew by an underlying 12% and advertising on MailOnline and DailyMailTV accounted for 57% of total advertising across the combined Mail businesses.

 

MailOnline continues to focus on attracting traffic directly to its homepages on desktop and mobile or its apps. Indirect traffic, primarily via social media and search platforms, decreased year-on-year and resulted in total average daily global unique browsers during the year decreasing by 3% to 12.6m. Total minutes spent on the site decreased 4% to a daily average of 139m. The direct audience accounted for 79% of minutes spent, compared to 77% in the prior year, reflecting continued high levels of engagement with the direct audience. DailyMailTV, the US business, grew revenues by an underlying 61% to £13m. The show is currently in its third season and attracts an average of 1.1 million viewers a day.

 

Following the integration of the advertising operations of the Metro and Mail in April 2018, Metro delivered a strong performance. Revenues grew by an underlying 11% to £79m, a good achievement in the context of a declining advertising market. Revenues benefitted from the addition of two regional franchises in January 2018, one in July 2018 and a further one in January 2019. Metro has the largest circulation of any weekday newspaper in the UK, read by an average of 2.4m people each day, and has the largest Monday to Friday advertising market share by volume.

 

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

 

In November 2019, DMGT agreed to acquire the 'i', the UK national newspaper and website, which generated £11m cash operating income and operating profit from £34m revenue in 2018.

 

Outlook and Priorities in the year ahead

Digital advertising revenues are expected to grow, helping to offset anticipated underlying print advertising declines. The advertising market continues to lack visibility and conditions are likely to remain volatile. Circulation volumes are expected to continue to decline. The cash operating income margin and operating margin will reflect a mix of the expected underlying revenue reduction, the benefit of continued cost efficiencies within the newspapers, MailOnline's growing profitability and the inclusion of the 'i'.

 

 

 

Corporate costs

 

 

2019

£m

2018

£m

Change~

 

Underlying¹

Change~

Cash operating costs²

(43)

(53)

-20%

-20%

Adjusted operating costs³

(40)

(47)

-16%

-17%

 

As expected, Corporate costs reduced by an underlying 17% to £40m, reflecting the Group's more focused portfolio and achievement of further cost efficiencies.

 

 

Joint ventures and associates

 

Share of pre-tax operating profits3

2019

£m

2018

£m

Change~

 

Underlying¹ Change~

Euromoney Institutional Investor PLC

23

56

-59%

N/A

ZPG Plc

-

23

-100%

N/A

Other joint ventures and associates

(10)

(5)

+96%

-3%

Total joint ventures and associates

13

74

-83%

-3%

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

 

The Group's share of adjusted operating profits from joint ventures and associates was £13m, an 83% decrease on the prior year. In April 2019, all of the Euromoney shares held by DMGT were distributed to DMGT's shareholders and Euromoney ceased to be an associate. Consequently, DMGT's share of profits from Euromoney were only generated during the first six months of the year and were £23m, down 59% on last year. Similarly, DMGT's stake in ZPG was disposed of in July 2018 and consequently no profits were generated from the business in the year, compared to £23m last year.

 

In May 2019, the focus of the portfolio was further increased by the disposal of DMGT's c.40% stake in Real Capital Analytics (RCA), the US-based Property Information business, for US$89m.

 

The net share of operating losses from other joint ventures and associates in the year was £10m, notably from Yopa, a UK hybrid estate agent, which became an associate in August 2018. The year-on-year performance benefitted from the absence of DailyMailTV, another early-stage business which is now part of dmg media. On an underlying basis, excluding ZPG, Euromoney, DailyMailTV and RCA and including Yopa's year-on-year organic performance, the share of net losses were in line with the prior year. In August 2019, the Group's stake in Yopa was increased from c.26% to c.45%.

 

As well as joint ventures and associates, DMGT invests in and develops early-stage businesses in which the Group holds smaller stakes. As the percentage holdings are too small for the companies to be associates, the Group does not recognise a share of profits or losses from these investments. During the year, DMGT acquired a stake in Cazoo, which aims to change the way people buy used cars in the UK. DMGT's stake was reduced from c.21% to c.19% in November 2019, as a result of Cazoo issuing more shares, and Cazoo is now being accounted for as an investment.

 

Outlook: the financial performance in FY 2020 will be affected by the absence of Euromoney and, much less significantly, RCA. Yopa is expected to have the most significant impact on future financial performance as it continues to invest in disrupting its market and DMGT now holds a larger stake. Yopa and DMGT's other joint ventures and associates are primarily investment-stage businesses and DMGT does not fully control them, unlike subsidiaries. The current expectation is that they will generate cumulative net losses in excess of £10m in FY 2020.

 

 

Net finance costs

 

 

2019

£m

2018

£m

Change~

 

Underlying¹ Change~

Net interest payable and similar charges3

(12)

(37)

-67%

-46%

 

Net interest payable and similar charges, including DMGT's share of associates' interest costs, were £12m. The 67% decrease on the prior year was due to several factors, primarily the net cash position for the majority of the year, the maturing of £219m of bond debt in December 2018 and a reduced share of associates' interest payable. The decrease in net finance costs was 46% on an underlying basis, after adjusting for the disposal of the Euromoney and ZPG associates and for the benefit of the proceeds from the ZPG disposal.

 

The pension finance credit, which is excluded from adjusted results, was £7m. It was due to a pension surplus on an accounting basis and compared to £2m in the prior year.

 

Outlook: net finance costs in FY 2020 are expected to be in the £10m to £15m range.

 

 

 

Other income statement items

 

·; Exceptional items and amortisation

Following a significant reduction in exceptional operating costs in FY 2018, costs remain at low levels compared to previous years. The exceptional cash costs from continuing operations were £9m, compared to £3m in the prior year, reflecting the continued absence of exceptional severance and consultancy costs. There was also a £31m exceptional charge in the year to provide for potential costs in respect of an investigation into auditing services provided by Genscape's biofuels business in 2014. Total exceptional operating costs, including those of discontinued operations, joint ventures and associates, were £36m (FY 2018 £25m).

 

There were impairment charges of £49m in the year (FY 2018 £63m), including £24m in respect of the Euromoney associate and £19m in respect of On-geo. The carrying value of Euromoney included DMGT's share of the cumulative statutory profits since it became an associate and exceeded the market value when the Euromoney shares were distributed to DMGT's shareholders in April 2019. The carrying value of On-geo included an accounting gain on change in control in 2016 and the total cash returns from the investment are expected to be positive.

 

The charge for amortisation of intangible assets arising on business combinations, including those from discontinued operations, joint ventures and associates, was £20m (FY 2018 £32m). The Group recorded other net gains on disposal of businesses and investments, including discontinued operations, of £67m, primarily in respect of the disposal of the Group's stake in RCA, compared to a net gain of £658m in the prior year that largely related to the disposal of ZPG Plc. The gain on disposal of the Energy Information business, Genscape, will be recognised in FY 2020.

 

·; Taxation

The adjusted tax charge for the year, after adjusting for the effect of exceptional items, was £29m compared to £33m in the prior year. The adjusted tax rate was 20.3%, an increase on 18.2% in the prior year, due to the geographical mix of profits.

 

The statutory tax charge for the year was £20m. In addition, the statutory tax credit on discontinued operations was £10m and the share of associates' tax charges amounted to £6m. There were £13m of exceptional tax credits.

 

Outlook: the effective tax rate is expected to reflect changes to the share of losses from associates, notably where a tax credit is not recognised, and to increase to around 22% in FY 2020.

 

 

Pensions

The net surplus on the Group's defined benefit pension schemes increased from £244m at the start of the year to pro forma £332m at 30 September 2019, calculated in accordance with IAS 19 (Revised). The pro forma surplus includes £117m that has been made available to the pension schemes but which currently remains as cash on DMGT's balance sheet, as well as the statutory net surplus of £215m. During the year, the increase in the value of the assets, including the £117m made available, exceeded the increase in the value of the defined benefit obligation.

 

Excluding the £117m referred to above, funding payments into the main schemes were £13m in the year. The existing 2016 funding plan includes payments of £16m p.a. from FY 2020 to FY 2027, as well as requiring, in certain circumstances, that a contribution of up to 20% of any share buy-backs shall be contributed to the schemes. Contributions will be discontinued should the schemes' actuary agree the schemes are no longer in deficit, calculated on an actuarial basis.

 

An actuarial valuation of the pension schemes as at 31 March 2019 is in the process of being completed and is expected to conclude that the schemes remain in deficit on an actuarial basis. Potential revisions to the existing funding plan are currently being discussed with the Trustees. The defined benefit schemes are closed to new entrants and the next actuarial valuation is scheduled for 31 March 2022.

 

 

Net cash and cash flow

Pro forma net cash5 at the end of the year was £247m, a £14m increase compared to the £233m net cash position at the start of the year. Pro forma net cash is stated after adjusting to:

i) exclude £117m of cash that has been made available to the Group's pension schemes, in respect of the distribution of Euromoney shares and £200m special dividend, but which currently remains as cash on DMGT's balance sheet; and

ii) include £282m of gross proceeds received in November 2019 from the disposal of the Energy Information business, Genscape, which was agreed in August 2019.

 

The Group's cash operating income of £162m is stated after £30m of capital expenditure, a significant reduction on £50m in the prior year which reflects a larger proportion of technology costs being expensed directly. The Group remains committed to investing for the long term and organic investment was equivalent to 9% of revenues in the year. Other operating cash net outflows totalled £5m including the expected increase in trade debtors for dmg media, following the cessation of a trade finance arrangement. Group operating cash flow was £157m, a 109% conversion rate of operating profits to operating cash flow, compared to 80% in the prior year.

 

Pro forma net proceeds from disposals, including expenditure on acquisitions and investments, were £288m. These included the proceeds from Genscape described above and US$89m from the disposal of DMGT's c.40% stake in Real Capital Analytics. Dividend payments totalled £275m, including a £200m special dividend, and pro forma pension funding totalled £130m, including £117m made available to the defined benefit pension schemes. Other cash outflows included interest payments of £22m and taxation of £10m. The stronger US dollar at year end, relative to the prior year end, resulted in favourable net cash revaluation of £6m.

 

The Group's cash, cash equivalents and short-term deposits, net of overdrafts, totalled £289m at year end. On a pro forma basis, excluding £117m made available to the pension schemes and including £282m of cash gross proceeds from the disposal of Genscape, the Group's cash, cash equivalents and short-term deposits totalled £454m. At year end, bond debt was £203m, comprised of £1m of the 10.0% bonds, due 2021, and £202m of the 6.375% bonds, due 2027. There was also £5m of net debt in respect of loan notes, collateral and derivatives. The Group's committed bank facilities were £381m, which were completely unutilised.

 

In April 2019, Standard & Poor's revised its corporate credit rating for DMGT from BB+ to BB, following the distribution of Euromoney shares and £200m cash to shareholders. In February 2019, Fitch reaffirmed its BBB- investment grade rating. The Group's preferred upper limit for gearing remains a net debt to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) ratio of 2.0, below the requirements of the Group's bank covenants.

 

The Directors have a reasonable expectation that the Group will continue to operate and meet its liabilities as they fall due for at least one year. Accordingly, they are satisfied that it is appropriate to continue to adopt the going concern basis in preparing DMGT's accounts.

 

Financing

During the year, the Group acquired 0.4m 'A' Ordinary Shares for £3m in order to meet obligations to provide shares under its incentive plans. It utilised 0.7m shares, valued at £5m, and a further 0.8m shares from the Employee Benefit Trust, valued at £6m, to provide shares under various incentive plans. As at 30 September 2019, DMGT had 228.1m shares in issue, including 19.9 million Ordinary Shares, and a further 6.7m 'A' Ordinary Shares held in Treasury and the Employee Benefit Trust8.

 

Dividend

The Board is recommending the payment on DMGT's issued Ordinary Shares and 'A' Ordinary Non-Voting Shares of a final dividend of 16.6 pence per share for the year ended 30 September 2019 (2018 16.2 pence). This will make a total for the year of 23.9 pence (2018 23.3 pence per share). The final dividend will be paid on 7 February 2020 to shareholders on the register at the close of business on 13 December 2019.

 

 

 

 

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

 

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

 

The tables on pages 25 and 26 show the adjustments between statutory profit before tax and adjusted profit before tax, by business, for both FY 2019 and FY 2018.

 

The explanation for each type of adjustment is as follows:

1) Discontinued operations: the adjusted results include the pre-disposal results of discontinued operations, namely Genscape, the Energy Information business, whereas statutory results only include continuing operations.

2) Exceptional operating costs: businesses occasionally incur exceptional costs, including severance and consultancy fees, in respect of a reorganisation that is incremental to normal operations. These are excluded from adjusted results.

3) Intangible impairment and amortisation: when acquiring businesses, the premium paid relative to the net assets on the balance sheet of the acquired business is classified as either goodwill or as an intangible asset arising on a business combination and is recognised on DMGT's balance sheet. This differs to organically developed businesses where assets such as employee talent and customer relationships are not recognised on the balance sheet. Impairment and amortisation of intangible assets and goodwill arising on acquisitions are excluded from adjusted results as they relate to historical M&A activity and future expectations rather than the trading performance of the business during the year. Software, including products, is also recognised as an intangible asset on the balance sheet. Occasionally the carrying value of software is considered to be greater than the value in use or the fair value less costs to sell, as was the case for the Insurance Risk RMS(one) asset in FY 2018, and it is appropriate to impair it. The impairment charge is excluded from adjusted results since it is unrelated to the ongoing cost of doing business. The ongoing amortisation of software is, however, similar to the depreciation of tangible assets and is an everyday cost of doing business, so is included in both statutory and adjusted results.

4) Profit on sale of assets: the Group makes gains or losses when disposing of businesses, for example on the disposal of EDR, the US Property Information business, in FY 2018. These items are excluded from adjusted results as they reflect the value created since the business was formed or acquired rather than the operating performance of the business during the year. Similarly, the gains or losses made by joint ventures or associates when disposing of businesses are excluded from adjusted results.

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

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

 

 

 

Reconciliation: Statutory profit to adjusted profit - FY 2019

 

 

£ millions

Note

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

JV&AH

DMGT Group

 

Statutory operating profit

 

40

15

3

21

-

65

(50)

(28)

67

 

Discontinued operations

1

-

-

-

-

(26)

-

-

-

(26)

 

Exceptional operating costs

2

-

-

-

-

31

2

10

(7)

36

Intangible impairment and amortisation

4

-

26

2

1

3

-

-

36

69

Exclude JVs & Associates

 

 

 

 

 

 

 

 

1

(1)

 

Adjusted operating profit

 

40

41

4

22

8

67

(40)

 

144

 

 

 

£ millions

Note

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

JV&AH

FCI

DMGT Group

 

Statutory PBT

 

40

38

3

21

-

65

2

(28)

(6)

134

 

Discontinued operations

1

-

-

-

-

(33)

-

-

-

-

(33)

 

Profit on sale of assets

5

-

(23)

-

-

6

-

(52)

-

-

(67)

 

Operating profit adjustments (∞ above)

2, 4

-

26

2

1

35

2

10

29

-

105

Total ∞

Pension finance credit

6

-

-

-

-

-

-

-

-

(7)

(7)

 

Other adjustments

7

-

-

-

-

-

-

-

12

1

13

 

Adjusted PBT

 

40

41

4

22

8

67

(40)

13

(12)

145

 

 

Notes:

The figures in the Note column above correspond with explanations of the adjustments given on pages 23 and 24.

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

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

 

 

Reconciliation: Statutory profit to adjusted profit - FY 2018

 

£ millions

Note

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

JV&AH

DMGT Group

 

Statutory operating profit

 

(24)

48

5

27

-

46

(52)

118

168

 

Exceptional operating costs

2

-

2

-

-

(4)

18

5

5

25

Intangible impairment and amortisation

4

58

9

3

1

4

-

-

21

95

Associates' profit on sale of assets

5

 

 

 

 

 

 

 

(103)

(103)

 

Exclude JVs & Associates

 

 

 

 

 

 

 

 

41

(41)

 

Adjusted operating profit

 

35

58

7

28

-

64

(47)

 

145

 

 

 

£ millions

Note

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

JV&AH

FCI

DMGT Group

 

Statutory PBT

 

(24)

113

(4)

27

-

47

458

118

(29)

707

 

Discontinued operations

1

-

-

-

-

(12)

-

-

-

(3)

(15)

 

Profit on sale of assets

5

-

(65)

8

-

13

(1)

(510)

(103)

-

(658)

 

Operating profit adjustments (∞ above)

2, 4

58

10

3

1

-

18

5

26

-

120

Total ∞

Pension finance credit

6

-

-

-

-

-

-

-

-

(2)

(2)

 

Other adjustments

7

-

-

-

-

-

-

-

33

(3)

30

 

Adjusted PBT

 

35

58

7

28

-

64

(47)

74

(37)

182

 

 

 

 

Notes:

The figures in the Note column above correspond with explanations of the adjustments given on pages 23 and 24.

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

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

 

 

 

Reconciliation: Adjusted results including and excluding discontinued operations

 

 

 

Full Year 2019

 

£ million

Adjusted results including discontinued operations

 

 

 

Discontinued operations

Adjusted results excluding discontinued operations

 

 

 

 

 

 

Revenues

 

 

 

 

Continuing operations

1,337

-

1,337

 

Discontinued operations

74

74

-

 

Total Revenue

1,411

74

1,337

 

 

 

 

 

 

Operating Profit

 

 

 

 

Continuing operations

136

-

136

 

Discontinued operations

8

8

-

 

Total Operating Profit

144

8

136

 

 

 

 

 

 

Operating margin %

10%

11%

10%

 

 

Notes:

The discontinued operations refer to Genscape, the Energy Information business.

 

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

 

 

Cash operating income²

 

Full Year 2019

 

£ millions

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

DMGT Group

Adjusted operating profit

40

41

4

22

8

67

(40)

144

Depreciation of tangible fixed assets

5

2

-

-

3

14

1

25

Amortisation of intangible assets*

-

6

8

-

4

3

1

22

Purchase of tangible fixed assets

(5)

(2)

-

(1)

(2)

(6)

-

(16)

Expenditure on intangible fixed assets*

-

(4)

(4)

-

(2)

-

(4)

(14)

Cash operating income

41

44

8

22

12

78

(43)

162

 

Full Year 2018

 

£ millions

IRA

PIB

ETC

E&ED

EIE

CMF

CCG

DMGT Group

Adjusted operating profit

35

58

7

28

-

64

(47)

145

Depreciation of tangible fixed assets

5

3

1

-

3

15

-

27

Amortisation of intangible assets*

15

4

5

-

3

5

-

33

Purchase of tangible fixed assets

(5)

(10)

-

-

(2)

(8)

(6)

(30)

Expenditure on intangible fixed assets*

-

(7)

(11)

-

(1)

-

-

(20)

Cash operating income

50

48

2

28

4

77

(53)

155

 

Notes:

* Amortisation of intangible assets and expenditure on intangible assets refers to products and software, not assets acquired as part of business combinations.

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

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

 

Underlying¹ analysis - Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019

 

Full Year 2018

£ millions

%

 

Underlying

M&A

Other

Reported

 

Underlying

M&A

Exchange

Other

Reported

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Risk

+1%

 

244

-

-

244

 

241

-

12

-

229

Property Information

(1)%

 

202

(20)

-

222

 

204

(73)

5

-

272

EdTech

+12%

 

80

-

-

80

 

71

-

4

(1)

68

Events and Exhibitions

+4%

 

119

-

-

119

 

114

-

5

(8)

118

Energy Information

(2)%

 

73

-

-

74

 

75

(14)

4

-

86

B2B

+2%

 

718

(21)

-

738

 

705

(88)

29

(9)

773

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Media

+2%

 

640

-

(32)

672

 

629

8

2

(35)

654

 

 

 

 

 

 

 

 

 

 

 

 

 

DMGT Group

 +2%

 

1,358

(21)

(32)

1,411

 

1,334

(79)

31

(44)

1,426

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

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

 

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

 

 

 

 

 

Underlying¹ analysis - Adjusted³ operating profit and profit before tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019

 

Full Year 2018

 

£ millions

%

 

Underlying

M&A

Other

Reported

 

Underlying

M&A

Exchange

Other

Reported

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Risk

+6%

 

40

-

-

40

 

38

-

3

-

35

 

Property Information

(25)%

 

39

(2)

-

41

 

53

(6)

1

-

58

 

EdTech

(34)%

 

4

-

-

4

 

7

-

-

(1)

7

 

Events and Exhibitions

(12)%

 

22

-

-

22

 

25

-

1

(4)

28

 

Energy Information

N/A*

 

8

-

-

8

 

2

2

-

-

-

 

B2B

(8)%

 

114

(2)

-

117

 

124

(5)

6

(5)

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Media

+18%

 

67

-

-

67

 

57

(7)

-

-

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate costs

(17)%

 

(40)

-

-

(40)

 

(48)

-

(1)

-

(47)

 

Adjusted operating profit

+6%

 

142

(2)

-

144

 

134

(12)

6

(5)

145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from JVs and associates

(3)%

 

(9)

(22)

-

13

 

(10)

(84)

-

-

74

 

Net finance costs

(46)%

 

(12)

-

-

(12)

 

(23)

14

-

-

(37)

 

Adjusted profit before tax

+19%

 

120

(24)

-

145

 

101

(82)

6

(5)

182

 

                             

 

*Energy Information adjusted operating profit increased by an underlying £6m.

 

Notes:

M&A adjustments are for disposals and acquisitions. The underlying results include the post-acquisition organic growth from acquired entities. 'Other' includes adjustments for the timing of shows at Events and Exhibitions and for the consistent timing of revenue recognition. The underlying growth in the share of operating profits from joint ventures and associates excludes ZPG Plc, Euromoney, DailyMailTV and RCA but includes the year-on-year organic growth from Yopa. The underlying FY 2018 finance costs have been adjusted to include an assumed £10m benefit from £642m proceeds on the disposal of ZPG Plc in respect of the period pre disposal.

 

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

 

 

 

 

Underlying1 analysis - Cash operating income²

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019

 

Full Year 2018

 

£ millions

%

 

Underlying

M&A

Other

Reported

 

Underlying

M&A

Exchange

Other

Reported

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Risk

(24)%

 

41

-

-

41

 

54

-

4

-

50

 

Property Information

(4)%

 

43

(1)

-

44

 

45

(4)

1

-

48

 

EdTech

N/A*

 

8

-

-

8

 

1

-

-

(1)

2

 

Events and Exhibitions

(14)%

 

22

-

-

22

 

25

-

1

(4)

28

 

Energy Information

+112%

 

12

-

-

12

 

5

2

-

-

4

 

B2B

(4)%

 

125

(1)

-

126

 

130

(2)

6

(5)

131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Media

+12%

 

78

-

-

78

 

69

(7)

-

-

77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate cash operating costs

(20)%

 

(43)

-

-

(43)

 

(53)

-

(1)

-

(53)

 

Group cash operating income

+10%

 

160

(1)

-

162

 

146

(9)

6

(5)

155

 

 

*EdTech cash operating income increased by an underlying £7m.

 

 

                            

 

Notes:

M&A adjustments are for disposals and acquisitions. The underlying results include the post-acquisition organic growth from acquired entities. 'Other' includes adjustments for the timing of shows at Events and Exhibitions and for the consistent timing of revenue recognition.

 

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

 

 

 

 

 

Principal risks and uncertainties

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

 

 

 

 

Strategic Risks

Description and impact

Examples

Mitigation

Trend

Market disruption

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

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

 

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

·; Consumer Media: decline in print advertising revenue.

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

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

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

·; The Group's presence in different market segments reduces the overall Group impact of any single market disruption.

·; Organic investment initiatives across the Group to innovate our products and services and to remain competitive in the markets we serve. Organic investment was 9% of total revenues in FY 2019.

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

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

·; DMGT executive membership of operating company boards.

Success of new product launches and internal investments

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

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

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

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

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

·; Insurance Risk: launch of Risk Intelligence platform to take advantage of the growing benefits of new technology.

·; Property Information: Trepp's launch and development of Collateralized Loan Obligation analytics service.

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

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

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

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

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

·; Central Portfolio Solutions function partners with each operating company to support achievement of key milestones, KPIs and financial plans.

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

Portfolio management

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

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

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

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

·; Optimal value may not be achieved from divestments.

 

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

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

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

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

·; The Executive and Investment & Finance Committees supported by the Portfolio Solutions function monitor post-acquisition performance.

·; DMGT executive membership of operating company boards and the boards of associates and investments (e.g. Yopa, Cazoo).

Economic and geopolitical uncertainty

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

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

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

·; Political and economic uncertainty, particularly in the Middle East, could negatively impact the exhibitors and attendees of events and exhibitions.

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

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

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

The significance of this risk has increased given the imminent UK general election (December 2019).

Talent

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

 

 

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

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

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

·; Enterprise sales and operational execution expertise with market and product knowledge continue to be a strategic imperative.

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

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

·; Central Technology oversight of technology hire.

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

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

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

The decreased size of the portfolio may have a detrimental impact on the internal mobility of talent.

This, combined with the record low levels of unemployment in the UK, will result in an additional challenge to attracting the right calibre of talent.

While the above is not deemed enough to alter the trend of this risk, extra provisions will be assessed in order to help manage this trend.

 

 

Operational risks

Description and impact

Examples

Mitigation

Trend

Information security breach or cyberattack

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

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

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

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

·; Unavailability or disruption of online products and services.

·; Integrity of online products, services and data compromised.

·; Disruption to critical systems which support business operations.

·; Theft of intellectual property.

 

·; The Technology Council provides oversight of information security initiatives Group-wide.

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

·; Group Information Security Policy and detailed information security standards with regular reviews reported to the Technology Council. Periodic reviews of the standards themselves are performed to ensure they keep pace with best practice.

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

·; Cyber insurance policies in place.

·; Dedicated budget for information security investments.

While risk transference is mitigated by the way in which DMGT manages its IT architecture, the profile and prevalence of this type of risk has increased.

Reliance on key third parties

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

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

Key third parties include:

·; Data centre and cloud service providers.

·; Search engine traffic partners.

·; IT development support.

·; Data providers for core product.

·; Newsprint, flexographic plate and ink suppliers.

·; Newspaper distributors and wholesalers.

·; Event venues.

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

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

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

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

·; Event cancellation and business interruption insurance policies.

Compliance with laws and regulations

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

Increasing regulation also results in increasing costs of compliance.

Particular areas of focus for DMGT businesses are:

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

·; Competition and anti-trust legislation.

·; EU Market Abuse Regulation.

·; Libel legislation.

·; Tax compliance.

·; Trade sanctions.

·; Entering regulated markets or sectors.

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

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

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

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

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

Pension scheme deficit

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

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

Future pension costs and funding requirements could be increased by:

·; Adverse changes in investment performance.

·; Valuation assumptions and methodology.

·; Inflation and interest rate risks.

·; The agreed funding plan gives certainty over the financial commitment.

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

·; Company-appointed Trustees.

 

 

 

 

 

Statement of Directors' responsibilities

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

 

The Directors confirm that to the best of their knowledge:

 

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

 

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

 

By order of the Board of Directors

 

The Viscount Rothermere

Chairman

4 December 2019

 

 

 

 

Notes

 

1 Underlying growth rates are on a like-for-like basis, see pages 29 to 31. Underlying revenues, cash operating income2 and operating profits are adjusted for constant exchange rates, the exclusion of disposals and business closures, the inclusion of the year-on-year organic growth from acquisitions and for the consistent timing of revenue recognition. For events, the comparisons are between events held in the year and the same events held the previous time. The September 2019 Gastech event's revenues, cash operating income and profit are compared to two-thirds of the September 2018 event's, having changed from an 18-month to an annual cycle. For Consumer Media, underlying revenues exclude low margin newsprint resale activities. The underlying change in the share of operating profits from joint ventures and associates excludes ZPG Plc ('ZPG'), Euromoney Institutional Investor PLC ('Euromoney'), DailyMailTV and Real Capital Analytics, which have ceased to be associates, but includes the year-on-year organic growth from Yopa, which became an associate during 2018. The underlying net finance costs exclude the share of finance costs from ZPG and Euromoney and the underlying FY 2018 costs have also been adjusted to include an assumed £10m additional benefit from £642m proceeds on the disposal of ZPG.

 

2 Cash operating income (Cash OI) is calculated by adding back depreciation and amortisation expenses, which are non-cash items, to adjusted operating profit and then deducting capital expenditure.

 

3 Unless otherwise stated, all profit and profit margin figures in this Full Year Results Report refer to adjusted results and not statutory results. The Board and management team use adjusted results, rather than statutory results, to give greater insight to the financial performance of the Group and the way that it is managed. Similarly, adjusted results are used in setting management remuneration. Adjusted results are stated before exceptional items, other gains and losses, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, pension finance credits and fair value adjustments. For reconciliations of statutory profit before tax to adjusted profit before tax and supporting explanations, see pages 23 to 26.

 

4 The statutory results are IFRS figures before any adjustments. Statutory revenue, operating profit and profit before tax figures are for continuing operations only (excluding Genscape, the Energy Information business). The FY 2018 statutory results have been reclassified accordingly.

 

5 The actual net cash position as at 30 September 2019 was £82m and the net cash:EBITDA ratio was 0.4 but £117m has been made available to the pension schemes and £282m of gross proceeds from the disposal of Genscape, the Energy Information business, were received in November 2019. The pro forma net cash of £247m and net cash:EBITDA ratio of 1.2 are stated after adjusting net cash to exclude the £117m and include the £282m.

 

6 The pro forma FY 2019 revenues of £1,344m for the current portfolio of DMGT businesses exclude Genscape, On-geo and BuildFax, which were all sold during 2019, and include the revenues, for the 12 months to December 2018, of the 'i', which was acquired in November 2019.

 

7 The Daily Mail's market share of UK retail sales averaged 25.5% during the twelve months to 30 September 2019 (FY 2019), an increase from 24.8% in FY 2018, and The Mail on Sunday's UK retail market share averaged 22.8%, an increase from 21.9% in FY 2018. Circulation market share figures are calculated using ABC's National Newspapers Reports, excluding digital subscribers.

 

8 As at the end of 30 September 2019, there were 4,566,121 'A' Ordinary Shares held in Treasury and 2,157,613 'A' Ordinary Shares held by the DMGT Employee Benefit Trust. 

 

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

 

The average £:US$ exchange rate for the year was £1:$1.28 (2018 £1:$1.35). The rate at the year end was $1.23 (2018 $1.30).

 

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

 

 

For further information

 

Enquiries:

Investors:

Tim Collier, Group CFO

 

+44 20 3615 2902

Adam Webster, Head of Investor Relations

+44 20 3615 2903

 

Media:

Doug Campbell / Paul Durman, Teneo

 

+44 20 7260 2700

 

 

Full Year Results presentation

A presentation of the Full Year Results will be given to investors and analysts at 9.30am on 5 December 2019, at J.P. Morgan, 60 Victoria Embankment, London, EC4Y 0JP. There will also be a live webcast available at www.dmgt.com/webcastfy19.

 

Financial reporting calendar

The Group's next scheduled announcement of financial information is the first quarter trading update on 23 January 2020.

 

 

 

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

 

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

 

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

 

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

 

Condensed Consolidated Financial Statements

Condensed Consolidated Income Statement

 

For the year ended 30 September 2019

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

CONTINUING OPERATIONS

 

 

 

Revenue

3

1,337.0

1,340.9

 

 

 

 

Adjusted operating profit

3, (i)

135.8

144.6

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

3

(11.9)

(82.6)

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

3

(29.3)

(12.2)

 

 

 

 

Operating profit before share of results of joint ventures and associates

 

94.6

49.8

Share of results of joint ventures and associates

4

(28.1)

118.4

Total operating profit

 

66.5

168.2

Other gains and losses

5

73.7

565.5

Profit before investment revenue, net finance costs and tax

 

140.2

733.7

 

 

 

 

Investment revenue

6

11.5

4.8

 

 

 

 

Finance expense

7

(24.5)

(37.5)

Finance income

7

7.1

5.5

Net finance costs

 

(17.4)

(32.0)

 

 

 

 

Profit before tax

 

134.3

706.5

Tax

8

(20.4)

(7.6)

Profit after tax from continuing operations

 

113.9

698.9

 

 

 

 

DISCONTINUED OPERATIONS

16

 

 

Loss from discontinued operations

 

(22.6)

(10.7)

PROFIT FOR THE YEAR

 

91.3

688.2

 

 

 

 

Attributable to:

 

 

 

Owners of the Company

 

90.9

689.4

Non-controlling interests*

 

0.4

(1.2)

Profit for the year

 

91.3

688.2

 

 

 

 

Earnings/(loss) per share

11

 

 

From continuing operations

 

 

 

Basic

 

38.3p

197.7p

Diluted

 

37.8p

196.0p

From discontinued operations

 

 

 

Basic

 

(7.6)p

(3.0)p

Diluted

 

(7.5)p

(3.6)p

From continuing and discontinued operations

 

 

 

Basic

 

30.7p

194.7p

Diluted

 

30.3p

192.4p

Adjusted earnings per share

 

 

 

Basic

 

38.6p

42.2p

Diluted

 

38.1p

41.7p

 

 

 

 

 

*All attributable to continuing operations.

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

Condensed Consolidated Statement of Comprehensive Income

 

For the year ended 30 September 2019

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Profit for the year

 

91.3

688.2

 

 

 

 

Items that will not be reclassified to Consolidated Income Statement

 

 

 

Actuarial (loss)/gain on defined benefit pension schemes

24

(45.3)

183.6

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

 

(0.1)

0.2

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

 

7.7

(31.2)

Fair value movement of financial assets through other comprehensive income

 

(4.5)

-

 

 

 

 

Total items that will not be reclassified to Consolidated Income Statement

 

(42.2)

152.6

 

 

 

 

Items that may be reclassified subsequently to Consolidated Income Statement

 

 

 

Loss on hedges of net investments in foreign operations

 

(13.5)

(2.1)

Costs of hedging

 

(0.1)

-

Cash flow hedges:

 

 

 

Change in fair value of cash flow hedges

 

-

4.9

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

 

-

(4.9)

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

4

(0.7)

14.7

Translation reserves recycled to Consolidated Income Statement on disposals

5, 15, 16

(3.6)

(10.4)

Foreign exchange differences on translation of foreign operations

 

16.2

(8.9)

 

 

 

 

Total items that may be reclassified subsequently to Consolidated Income Statement

 

(1.7)

(6.7)

 

 

 

 

Other comprehensive (expense)/income for the year

 

(43.9)

145.9

 

 

 

 

Total comprehensive income for the year

 

47.4

834.1

 

 

 

 

Attributable to:

 

 

 

Owners of the Company

 

47.1

835.1

Non-controlling interests

 

0.3

(1.0)

 

 

47.4

834.1

 

 

 

 

Continuing operations

 

67.4

848.4

Discontinued operations

 

(20.0)

(14.3)

 

 

47.4

834.1

 

 

 

 

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

 

 

 

Owners of the Company

 

67.1

849.4

Non-controlling interests

 

0.3

(1.0)

 

 

67.4

848.4

 

Condensed Consolidated Statement of Changes in Equity

 

For the year ended 30 September 2019

 

 

Called-up

share

capital

Share

premium

account

Capital

redemption

reserve

Own

shares

Translation

reserve

Retained

earnings

Equity

attributable

to owners of

the Company

Non-controlling

interests

Total

equity

 

Note

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 30 September 2017

 

45.3

17.8

5.0

(64.3)

74.9

829.5

908.2

11.0

919.2

Profit/(loss) for the year

 

-

-

-

-

-

689.4

689.4

(1.2)

688.2

Other comprehensive income/(expense) for the year

 

-

-

-

-

(21.4)

167.1

145.7

0.2

145.9

Total comprehensive income/(expense) for the year

 

-

-

-

-

(21.4)

856.5

835.1

(1.0)

834.1

Dividends

9

-

-

-

-

-

(81.0)

(81.0)

(0.2)

(81.2)

Own shares acquired in the year

23

-

-

-

(14.3)

-

-

(14.3)

-

(14.3)

Own shares released on exercise of share options

 

-

-

-

21.4

-

-

21.4

-

21.4

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

 

-

-

-

-

-

-

-

3.7

3.7

Credit to equity for share-based payments

 

-

-

-

-

-

10.8

10.8

-

10.8

Settlement of exercised share options of subsidiaries

 

-

-

-

-

-

(13.8)

(13.8)

-

(13.8)

Corporation tax on share-based payments

 

-

-

-

-

-

2.3

2.3

-

2.3

Deferred tax on other items recognised in equity

 

-

-

-

-

-

(6.8)

(6.8)

-

(6.8)

At 30 September 2018

 

45.3

17.8

5.0

(57.2)

53.5

1,597.5

1,661.9

13.5

1,675.4

Adjustment for transition to IFRS 15

2

-

-

-

-

-

(2.4)

(2.4)

-

(2.4)

Adjustment for transition to IFRS 9

2

-

-

-

-

-

(2.9)

(2.9)

-

(2.9)

Restated at 1 October 2018

 

45.3

17.8

5.0

(57.2)

53.5

1,592.2

1,656.6

13.5

1,670.1

Profit for the year

 

-

-

-

-

-

90.9

90.9

0.4

91.3

Other comprehensive expense for the year

 

-

-

-

-

(1.0)

(42.8)

(43.8)

(0.1)

(43.9)

Total comprehensive income/(expense) for the year

 

-

-

-

-

(1.0)

48.1

47.1

0.3

47.4

Cancellation of A Ordinary Non-Voting Shares

23

(16.0)

-

16.0

-

-

-

-

-

-

Dividends

9

-

-

-

-

-

(74.1)

(74.1)

(1.0)

(75.1)

Euromoney dividend in specie

9

-

-

-

-

-

(661.8)

(661.8)

-

(661.8)

Euromoney impairment

 

-

-

-

-

-

(11.8)

(11.8)

-

(11.8)

Euromoney cash distribution

9

-

-

-

-

-

(200.0)

(200.0)

-

(200.0)

Own shares acquired in the year

23

-

-

-

(2.5)

-

-

(2.5)

-

(2.5)

Own shares released on exercise of share options

 

-

-

-

10.6

-

-

10.6

-

10.6

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

 

-

-

-

-

-

-

-

(12.8)

(12.8)

Credit to equity for share-based payments

 

-

-

-

-

-

21.1

21.1

-

21.1

Settlement of exercised share options of subsidiaries

 

-

-

-

-

-

(11.5)

(11.5)

-

(11.5)

Deferred tax on other items recognised in equity

 

-

-

-

-

-

0.6

0.6

-

0.6

At 30 September 2019

 

29.3

17.8

21.0

(49.1)

52.5

702.8

774.3

-

774.3

 

Condensed Consolidated Statement of Financial Position

 

At 30 September 2019

 

 

At 30 September 2019

At 30 September 2018

 

Note

£m

£m

ASSETS

 

 

 

Non-current assets

 

 

 

Goodwill

18

251.2

333.2

Other intangible assets

18

69.9

131.2

Property, plant and equipment

19

74.4

99.7

Investments in joint ventures

 

8.1

1.0

Investments in associates

 

90.9

769.5

Financial assets at fair value through other comprehensive income

 

33.8

-

Available for sale investments

 

-

20.4

Trade and other receivables

 

26.6

27.3

Other financial assets

21

12.0

18.4

Derivative financial assets

 

3.6

9.0

Retirement benefit assets

24

225.7

249.1

Deferred tax assets

 

54.9

49.5

 

 

851.1

1,708.3

Current assets

 

 

 

Inventories

 

26.8

31.5

Trade and other receivables

 

288.7

264.3

Current tax receivable

 

0.8

5.4

Other financial assets

21

15.4

245.3

Derivative financial assets

 

-

0.7

Cash and cash equivalents

 

299.1

437.8

Total assets of businesses held for sale

17

153.5

-

 

 

784.3

985.0

Total assets

 

1,635.4

2,693.3

 

 

 

 

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

(478.0)

(492.9)

Current tax payable

 

(3.5)

(6.1)

Acquisition put option commitments

 

-

(0.6)

Borrowings

20

(11.8)

(222.3)

Derivative financial liabilities

 

(18.7)

(6.6)

Provisions

 

(44.7)

(38.8)

Total liabilities of businesses held for sale

17

(72.6)

-

 

 

(629.3)

(767.3)

Non-current liabilities

 

 

 

Trade and other payables

 

(2.3)

(2.0)

Acquisition put option commitments

 

-

(7.6)

Borrowings

20

(202.8)

(205.7)

Derivative financial liabilities

 

(5.7)

(13.5)

Retirement benefit obligations

24

(10.7)

(5.6)

Provisions

 

(7.8)

(10.0)

Deferred tax liabilities

 

(2.5)

(6.2)

 

 

(231.8)

(250.6)

Total liabilities

 

(861.1)

(1,017.9)

Net assets

 

774.3

1,675.4

 

 

 

 

 

At 30 September 2019

 

 

At 30 September 2019

At 30 September 2018

 

Note

£m

£m

SHAREHOLDERS' EQUITY

 

 

 

Called-up share capital

23

29.3

45.3

Share premium account

 

17.8

17.8

Share capital

 

47.1

63.1

Capital redemption reserve

 

21.0

5.0

Own shares

23

(49.1)

(57.2)

Translation reserve

 

52.5

53.5

Retained earnings

 

702.8

1,597.5

Equity attributable to owners of the Company

 

774.3

1,661.9

Non-controlling interests

 

-

13.5

 

 

774.3

1,675.4

 

Approved by the Board on 4 December 2019.

 

Condensed Consolidated Cash Flow Statement

 

For the year ended 30 September 2019

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Cash generated by operations

12

165.0

137.3

Taxation paid

 

(20.0)

(27.1)

Taxation received

 

9.8

4.8

Net cash generated by operating activities

 

154.8

115.0

 

 

 

 

Investing activities

 

 

 

Interest received

 

7.4

0.9

Dividends received from joint ventures and associates

27

12.3

23.1

Dividends received from financial assets held at fair value through other comprehensive income

6

-

0.1

Purchase of property, plant and equipment

19

(15.9)

(30.4)

Expenditure on internally generated intangible fixed assets

18

(13.9)

(19.5)

Expenditure on other intangible assets

18

-

(0.2)

Purchase of financial assets held at fair value through other comprehensive income

 

(6.1)

-

Purchase of available for sale investments

 

-

(19.3)

Proceeds on disposal of property and plant and equipment

19

9.3

0.1

Proceeds on disposal of available for sale investments

 

-

1.0

Purchase of businesses and subsidiary undertakings

14

(27.6)

(19.1)

Settlements and collateral payments on treasury derivatives

 

(12.3)

7.7

Investment in joint ventures and associates

 

(39.4)

(1.8)

Loans advanced to joint ventures and associates

 

-

(8.4)

Loans to joint ventures and associates repaid

 

0.2

0.2

(Costs)/proceeds on disposal of businesses and subsidiary undertakings

15

(11.6)

146.3

Proceeds on disposal of joint ventures and associates

5

81.4

637.9

Sale/(purchase) of other financial assets

21

237.3

(237.3)

 

 

 

 

Net cash generated by investing activities

 

221.1

481.3

 

 

 

 

Financing activities

 

 

 

Equity dividends paid

9

(274.1)

(81.0)

Dividends paid to non-controlling interests

 

(1.0)

(0.2)

Purchase of own shares

23

(2.5)

(14.3)

Net (payment)/receipt on settlement of subsidiary share options

 

(0.8)

7.6

Interest paid

 

(28.7)

(37.7)

Bonds repaid

20

(218.5)

-

Bonds redeemed

20

(6.7)

-

Premium on redemption of bonds

7, 20

(0.9)

-

Loan notes repaid

13

(0.1)

(0.1)

Decrease in bank borrowings

13

-

(43.7)

 

 

 

 

Net cash used in financing activities

 

(533.3)

(169.4)

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

13

(157.4)

426.9

Cash and cash equivalents at beginning of year

13

435.9

7.4

Exchange gain on cash and cash equivalents

13

10.7

1.6

Net cash and cash equivalents at end of year

13

289.2

435.9

 

Condensed Consolidated Financial Statements 

Notes to the accounts

 

1 Basis of preparation

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

 

These financial statements have been prepared for the year ended 30 September 2019.

 

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

The information for the year ended 30 September 2019 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 2018 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. These accounts have been audited and finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

 

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

 

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

 

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

 

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

 

These Group Condensed Financial Statements have been prepared in accordance with the accounting policies set out in the 2018 Annual Report and Accounts, as amended, where appropriate by the application of certain new or amended accounting standards in the period, as described in Note 2.

 

These policies are followed in the preparation of the full financial statements for the financial year ending 30 September 2019.

 

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

 

 

 

2 Significant accounting policies

 

Annual improvements to International Financial Reporting Standards (IFRSs)

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

·; IFRS 9, Financial Instruments (effective 1 October 2018)

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

·; IFRIC 22, Foreign Currency Transactions and Advance Consideration (effective 1 January 2018)

 

IFRS 9, Financial Instruments replaced IAS 39, Financial Instruments: Recognition and Measurement. The key areas of IFRS 9 which affect the Group are those which relate to the recognition of impairment provisions against receivables, the treatment of available for sale investments and new hedging requirements.

 

In accordance with the transitional provisions of IFRS 9 the Group has adopted IFRS 9 on a modified retrospective basis such that comparative figures have not been restated and remain in line with the requirements of IAS 39.

 

IFRS 9 contains three principal classification categories for financial assets - Measured at Amortised Cost, Fair Value through Other Comprehensive Income (FVTOCI) and Fair Value through Profit and Loss (FVTPL) and eliminates the IAS 39 categories of held to maturity, loans and receivables and available for sale. The main effect resulting from this reclassification relates to the Group's equity investments which under IAS 39 were classified as available for sale whilst under IFRS 9 are now classified as Fair Value through Other Comprehensive Income. As a result, all fair value movements are now recorded in Other Comprehensive Income and gains and losses will not be recycled to the Consolidated Income Statement on disposal although dividend income will continue to be recorded in the Consolidated Income Statement. A fair value gain of £9.4 million has been recorded on transition to IFRS 9.

 

With regard to impairment provisions, IFRS 9 introduces the expected credit loss (ECL) model which requires an impairment provision to be made on initial recognition of the receivable which under IAS 39 was required only when a loss event occurred. IFRS 9 requires ECLs to be recognised by reference to historical recovery rates and forward-looking indicators. The Group has applied the simplified approach to trade receivables, contract assets and other receivables. The IFRS 9 ECL model has resulted in an ECL loss of £0.3 million on transition to IFRS 9 in relation to other receivables.

 

The IFRS 9 ECL model also applies to long-term receivables due from associates and joint ventures. The Group has recorded an ECL loss of £12.0 million on transition to IFRS 9 in relation to amounts due from its associates.

 

The Group has adopted the new general hedge accounting model in IFRS 9 which aligns hedge accounting with the Group's risk management strategy. All hedge relationships designated under IAS 39 are treated as continuing hedges under IFRS 9. Under the new standard, the Group has excluded the currency basis from its hedge designation retrospectively.

 

A summary of the transition impact of IFRS 9 is shown below:

 

 

 

Previously reported

As at 1 October 2018

IFRS 9 transition adjustment

Restated

 

 

£m

£m

£m

Financial assets at FVTOCI

 

 20.4

 9.4

 29.8

Non-current other receivables

 

 27.3

 (0.3)

 27.0

Other financial assets

 

 18.4

 (12.0)

 6.4

 

 

 66.1

 (2.9)

 63.2

 

IFRS 15 Revenue from Contracts with Customers replaced IAS 18 Revenue. In accordance with the transitional provisions of IFRS 15 the Group has adopted IFRS 15 on a modified retrospective basis such that comparative figures have not been restated and remain in line with the requirements of IAS 18.

 

The new revenue recognition standard introduced additional guidance surrounding performance obligations within sales contracts and the timing of revenue recognition. The standard introduces a five step model which will require judgement in their application, which are as follows:

 

·; Identify the contract(s) with the customer

·; Identify the separate performance obligations in the contract

·; Determine the contract price

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

·; Recognise revenue when each performance obligation has been satisfied

 

In addition to changes to the timing of revenue recognition IFRS 15 also introduces changes to the recognition of incremental costs incurred when obtaining a contract with a customer known as contract acquisition costs. These include commissions paid to employees. The standard requires such costs to be recognised as an asset, when the Group expects to recover them, and charge them to the Consolidated Income Statement on a systematic basis rather than being expensed immediately. Judgement is required to determine this period and whether this is the contract term or a longer period such as the estimated customer life for contracts which are expected to renew. Such deferred costs are de-recognised and charged immediately to the Consolidated Income Statement when no future economic benefits are expected.

 

The adoption of IFRS 15 resulted in a reduction in net assets of £2.4 million which is summarised as follows:

 

Segment

Increased contract acquisition costs

(Increased) / decreased deferred revenue and accruals

Increased / (decreased) deferred tax assets

IFRS 15 transition adjustment

 

£m

£m

£m

£m

Insurance Risk

 1.1

 1.2

 (0.6)

 1.7

Property Information

 1.0

 (1.1)

 -

 (0.1)

EdTech

 -

 (7.3)

 1.9

 (5.4)

Energy Information

 1.6

 -

 (0.2)

 1.4

 

 3.7

 (7.2)

 1.1

 (2.4)

 

The IFRS 15 transition adjustment represents the reversal of certain revenues which met the criteria for recognition under IAS 18 but do not so under IFRS 15 together with contract acquisition costs which were expensed immediately under IAS 18 and which are now deferred and recognised on a systemic basis under IFRS 15.

 

The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for the Group's accounting periods beginning on or after 1 October 2019. These new pronouncements are listed below:

 

·; IFRS 16, Leases (effective 1 January 2019)

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

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

 

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

 

IFRS 16, effective for the 2020 fiscal year, eliminates the distinction between operating and finance leases for lessees and requires lessees to recognise right of use assets and corresponding liabilities for all leases. The new standard replaces the operating lease expense with a depreciation charge included within operating costs on the underlying right of use asset and an interest expense included within finance costs on the lease liability.

 

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

 

As permitted by IFRS 16 the Group will apply the following practical expedients:

·; The Group has not brought onto the balance sheet short-term leases (those with 12 months or less to run as at 1 October 2019 including reasonably certain options to extend) or low-value assets. Costs for these items will therefore continue to be expensed directly in the Income Statement.

·; The Group has relied on its onerous lease assessments under IAS 37 to impair right of use assets in place of performing an impairment assessment on adoption of IFRS 16.

·; The Group has measured right of use assets at an amount equal to the lease liability on adoption of IFRS 16 as adjusted by existing lease accruals, prepayments and dilapidations and onerous lease provisions.

·; The Group also expects to separate non-lease components from lease components as part of the transition adjustment.

 

At 1 October 2019, on the adoption of IFRS 16 the Group will recognise right of use assets of approximately £91.6 million and lease liabilities of approximately £93.4 million. This includes right of use assets of approximately £7.3 million and lease liabilities of approximately £7.5 million relating to businesses held for sale. The additional lease liability will not equal the operating lease commitment largely because the lease liabilities are discounted under IFRS 16 and lease terms determined under IFRS 16 may be longer than under IAS 17.

 

The impact on the Consolidated Income Statement for the year to 30 September 2020 will depend on factors which may occur during that year including new leases entered into, changes to exchange rates and discount rates.

 

The operating lease charge for the year ended 30 September 2019 amounted to £43.7 million and this will be replaced with a depreciation charge and an interest charge, other than for those leases which are short-term and low-value assets which will continue to be charged to the Consolidated Income Statement.

 

From continuing operations for the year ended 30 September 2020, the Group estimates the depreciation charge on IFRS 16 right of use assets will be approximately £22.6 million and interest on additional IFRS 16 lease liabilities will be approximately £1.9 million. Lease rentals of approximately £25.2 million will no longer be charged to the Consolidated Income Statement.

 

In the Consolidated Cash Flow Statement there will be no impact in the total change in cash and cash equivalents. Under IFRS 16 the repayment of the lease liabilities will be included in financing activities and interest on IFRS 16 leases will be shown in operating activities whereas under IAS 17 lease rental payments were in operating activities.

 

Business combinations

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

 

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

 

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

 

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

 

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

 

Business combinations achieved in stages

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

 

Purchases and sales of shares in a controlled entity

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

 

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

 

Disposal of controlling interests where non-controlling interest retained

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

 

Contingent consideration receivable

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

 

Discontinued operations

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

 

Assets and liabilities of businesses held for sale

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

 

Accounting for subsidiaries

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

 

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

 

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

 

Non-controlling interests

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

 

Interests in joint ventures and associates

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

 

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

 

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

 

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

 

Foreign currencies

For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than sterling are translated into sterling using exchange rates prevailing on the period end date.

 

Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that operation is recognised in the Consolidated Income Statement as part of the gain or loss on sale.

 

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

 

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

 

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

 

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

 

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

 

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

 

Goodwill and intangible assets

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

 

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

 

Impairment of goodwill

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

 

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

 

When testing for impairment, the recoverable amounts for all of the Group's CGUs are measured at the higher of value in use or fair value less costs to sell. Value in use is calculated by discounting future expected cash flows. These calculations use cash flow projections based on Board-approved budgets and projections which reflect management's current experience and future expectations of the markets in which the CGU operates. Risk adjusted pre-tax discount rates used by the Group in its impairment tests range from 10.50% to 15.28% (2018 13.25% to 15.28%) the choice of rates depending on the risks specific to that CGU. The Directors' estimate of the Group's post tax weighted average cost of capital is 8.5% (2018 8.5%). The cash flow projections consist of Board-approved budgets for the following year, together with forecasts for up to two additional years and nominal long-term growth rates beyond these periods. The nominal long-term growth rates range between 2.0% and 3.0% (2018 nominal long-term growth rate of 3.0%) used varies with management's view of the CGU's market position, maturity of the relevant market and does not exceed the long-term average growth rate for the market in which the CGU operates.

 

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

 

Research and development expenditure

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

 

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

 

Licences

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

 

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

 

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

 

Other intangible assets

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

 

Publishing rights, mastheads and titles

 5 - 30 years

Brands

 3 - 20 years

Market and customer-related databases and customer relationships

 3 - 20 years

Computer software

 2 - 5 years

 

Amortisation of intangible assets not arising on business combinations are included within Adjusted Operating Profit in the Consolidated Income Statement.

 

The Group has no intangible assets with indefinite lives.

 

Impairment of intangible assets

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

 

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

 

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

 

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

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

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

 

Property, plant and equipment

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

 

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

 

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

 

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

Freehold buildings and long leasehold properties

50 years

Short leasehold premises

the term of the lease

Plant and equipment

3 - 25 years

Depreciation is not provided on freehold land

 

 

 

 

 

Inventory

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

 

Exhibitions, training and event costs

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

 

Pre-publication costs

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

 

Marketing costs

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

 

Cash and cash equivalents

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

 

Revenue

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

 

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

 

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

 

The principal revenue performance obligations are:

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

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

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

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

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

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

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

 

Adjusted measures

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

 

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

 

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

 

See Note 10 for a reconciliation of profit before tax to adjusted profit before and after tax.

 

The Group also presents a measure of net debt. In the judgement of the Directors this measure should include the currency gain or loss on derivatives entered into with the intention of economically converting the currency borrowings into an alternative currency. See Note 13 for further detail.

 

Other gains and losses

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

 

EBITDA

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

 

Leasing

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

 

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

 

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

 

Dividends

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

 

Borrowing costs

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

 

Retirement benefits

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

 

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

 

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

 

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

 

Taxation

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Financial instruments

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

 

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

 

Financial assets

Trade receivables

Trade receivables do not carry interest and are recognised initially at the value of the invoice sent to the customer i.e. amortised cost and subsequently reduced by allowances for estimated irrecoverable amounts.

 

Other receivables include loans which are held at the capital sum outstanding plus unpaid interest.

 

Estimates are used in determining the level of receivables that will not, in the opinion of the Directors, be collected. In the current period the Group applies the simplified approach permitted by IFRS 9, which requires the use of the lifetime expected loss provision for all receivables, including contract assets. These estimates are based on historic credit losses, macro-economic and specific country-risk considerations with higher default rates applied to older balances.

 

In addition if specific circumstances exist which would indicate that the receivable is irrecoverable a specific provision is made. A provision is made against trade receivables and contract assets until such time as the Group believes there to be no reasonable expectation of recovery, after which the trade receivable or contract asset balance is written off.

 

In the prior period, under IAS 39, impairment losses relating to trade receivables were recorded when a loss event occured.

 

Financial assets at fair value through other comprehensive income

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

 

In the current period, as permitted by IFRS 9, the Group classifies its equity investments at Fair Value through Other Comprehensive Income. All fair value movements are recorded in Other Comprehensive Income and gains and losses are not recycled to the Consolidated Income Statement on disposal.

 

Dividend income from Financial assets held at fair value through Other Comprehensive Income is recorded in the Consolidated Income Statement.

 

Unlisted equity investments are valued using a variety of techniques including comparable company valuation multiples and discounted cash flows. In extremely limited circumstances, where insufficient recent information is available to measure fair value or when there is a wide range of possible fair value measurements, cost is used since this represents the best estimate of fair value in the range of possible valuations.

 

The fair value of listed equity investments is determined based on quoted market prices.

 

Available for sale investments

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

 

The fair value of listed investments was determined based on quoted market prices. Unlisted investments were recorded at cost less provision for impairment with their recoverable amount determined by discounting future cash flows to present value using market interest rates.

 

Financial liabilities and equity instruments

Trade payables

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

 

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

 

Capital market and bank borrowings

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

 

Equity instruments

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

 

Derecognition

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

 

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

 

Derivative financial instruments and hedge accounting

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

 

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

 

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

 

Fair value hedges

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

 

Cash flow hedges

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

 

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

 

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

 

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

 

 

Net investment hedges

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

 

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

 

Provisions

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

 

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

 

Share-based payments

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

 

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

 

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

 

Investment in own shares

Treasury shares

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

 

Employee Benefit Trust

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

 

Critical accounting judgements and key sources of estimation uncertainty

In addition to the judgement taken by management in selecting and applying the accounting policies set out above, management has made the following judgements concerning the amounts recognised in the Condensed Consolidated Financial Statements:

 

Adjusted measures

Management believes that the adjusted profit and adjusted earnings per share measures provide additional useful information to users of the Condensed Consolidated Financial Statements on the performance of the business. Accordingly the Group presents adjusted operating profit and adjusted profit before tax by adjusting for costs and profits which management judge to be significant by virtue of their size, nature or incidence or which have a distortive effect on current year earnings.

 

In management's judgement such items would include, but are not limited to, costs associated with business combinations, gains and losses on the disposal of businesses and subsidiary undertakings, finance costs relating to premium on bond buy backs, fair value movements, exceptional operating costs, impairment of goodwill and amortisation and impairment of intangible assets arising on business combinations.

 

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

 

See Note 10 for a reconciliation of profit before tax to adjusted profit before and after tax. 

 

The Group also presents a measure of net debt. In the judgement of management this measure should include the currency gain on loss on derivatives entered into with the intention of economically converting the currency borrowings into an alternative currency. See Note 13 for further detail.

 

Investment in Euromoney

The Directors have considered factors which may indicate de facto control following the reduction in its shareholding to below 50.0% in a prior period.

 

The Directors have judged that it does not have de facto control over Euromoney since it cannot block any ordinary resolutions, which comprise the majority of corporate actions, has no control over the remuneration of Euromoney's directors and has no control over Euromoney's day-to-day operations nor budgets. In addition, the Group has no material trading activities or relationships which are critical for Euromoney to carry out its business. Accordingly, the Group has equity accounted for Euromoney during the year.

 

The Group's investment in Euromoney was distributed to shareholders by way of a dividend in specie on 2 April 2019, see Note 9 for further detail.

 

Retirement benefits

When a surplus on a defined benefit pension scheme arises, management are required to consider the rights of the Trustees in preventing the Group from obtaining a refund of that surplus in the future. Where the Trustees are able to exercise this right the Group would be required to restrict the amount of surplus recognised.

 

After considering the principles set out in IFRIC 14, the Directors have judged it appropriate to recognise a surplus of £225.7 million (2018 £249.1 million) and report a net surplus on its pension schemes amounting to £215.0 million (2018 £243.5 million).

 

The following represent key sources of estimation uncertainty that have the most significant effect on the amounts recognised in the financial statements:

Forecasting

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

 

Impairment of goodwill and intangible assets

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

 

The value in use calculation requires management to estimate the future cash flows expected to arise from the asset or CGU and calculate the net present value of these cash flows using a suitable discount rate. A key area of estimation is deciding the long-term growth rate and the operating cash flows of the applicable businesses and the discount rate applied to those cash flows. The carrying amount of goodwill and intangible assets as at 30 September 2019 was £321.1 million (2018 £464.4 million).

 

Acquisitions and intangible assets

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

 

Taxation

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

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

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

 

Retirement benefits

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

 

The fair value of the Group's pension scheme assets include quoted and unquoted investments. The value of unquoted investments are estimated as their values are not directly observable. Accordingly the assumptions used in valuing unquoted investments are affected by current market conditions and trends which could result in changes in their fair value after the measurement date. A 1.0% movement in the value of unquoted pension scheme assets is estimated to change the value of the Group's pension scheme assets by £23.4 million.

 

The carrying amount of the retirement benefit obligation at 30 September 2019 was a surplus of £215.0 million (2018 £243.5 million). The assumptions used can be found in Note 24.

 

Legal claim provision

DMGT and certain of its subsidiaries are involved in various lawsuits and claims which arise in the course of business. The Group records a provision for these matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated.

 

The amounts accrued for legal contingencies often result from complex judgments about future events and uncertainties that rely heavily on estimates and assumptions.

 

As disclosed in Note 16, Genscape has been involved in a dispute with the US Environmental Protection Agency (EPA) since 2016. In 2017 Genscape voluntarily paid a 2.0% liability cap associated with invalid Renewable Identification Numbers (RINs) at a cost of US$1.3 million, based on the then-prevailing market rates, subject to a reservation of rights. However, during 2019 the EPA ordered Genscape to replace 69.2 million RINs it had validated. By way of settlement Genscape has made an offer to replace 4.6 million RINs at a cost of approximately US$2.5 million but the EPA have not responded to this offer. Discussions with the EPA are ongoing but considering the uncertainties involved, the length of time involved and taking note of the order from the EPA, the Group, without admitting any wrongdoing, has made a provision for the potential maximum replacement RINs cost of US$40.0 million, including directly attributable costs. This estimate was based on the average two-year RIN price due to the liquidity and volatility of the market price of RINs. If the provision was made using the year end price of 41 cents, the potential maximum claim would be US$29.7 million, including directly attributable costs. This provision could change substantially over time as the dispute progresses and new facts emerge.

 

3 Segment analysis

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

 

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

 

The Group's revenues are disaggregated by major product line as follows:

 

 

 

Total and external revenue

Segment operating profit/(loss)

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

Adjusted operating profit/(loss)

Year ended 30 September 2019

Note

£m

£m

£m

£m

Insurance Risk

 

 244.3

 39.7

 (0.7)

 40.4

Property Information

 

 222.1

 41.9

 0.5

 41.4

EdTech

 

 79.7

 4.4

-

 4.4

Events and Exhibitions

 

 118.7

 22.3

-

 22.3

Energy Information

 

 73.6

 8.4

-

 8.4

Consumer Media

 

 672.2

 67.9

 0.8

 67.1

 

 

 1,410.6

 184.6

 0.6

 184.0

Corporate costs

 

-

 (27.8)

 12.0

 (39.8)

Discontinued operations

 16

 (73.6)

 (8.4)

-

 (8.4)

 

 

 1,337.0

 

 

 

Adjusted operating profit

 

 

 

 

 135.8

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

 

 

 

 

 (11.9)

Impairment of goodwill and acquired intangible assets arising on business combinations

18

 

 

 

 (19.1)

Amortisation of acquired intangible assets arising on business combinations

 

 

 

 

 (10.2)

Operating profit before share of results of joint ventures and associates

 

 

 

 

 94.6

Share of results of joint ventures and associates

4

 

 

 

 (28.1)

Total operating profit

 

 

 

 

 66.5

Other gains and losses

5

 

 

 

 73.7

Profit before investment revenue, net finance costs and tax

 

 

 

 

 140.2

Investment revenue

6

 

 

 

 11.5

Finance expense

7

 

 

 

 (24.5)

Finance income

7

 

 

 

 7.1

Profit before tax

 

 

 

 

 134.3

Tax

8

 

 

 

 (20.4)

Loss from discontinued operations

 16

 

 

 

 (22.6)

Profit for the year

 

 

 

 

 91.3

 

 

 

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

 

 

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Exceptional operating costs

 

 

(Note 18)

(Note 18)

(Note 18)

 

Year ended 30 September 2019

Note

£m

£m

£m

£m

Insurance Risk

 

 (0.1)

-

-

-

Property Information

 

 (6.3)

 (7.1)

 (19.1)

-

EdTech

 

 (7.7)

 (1.6)

-

 0.1

Events and Exhibitions

 

-

 (1.4)

-

-

Energy Information

 

 (4.1)

 (3.2)

-

 (31.3)

Consumer Media

 

 (3.0)

 (0.1)

-

 (2.0)

 

 

 (21.2)

 (13.4)

 (19.1)

 (33.2)

Corporate costs

 

 (0.8)

-

-

 (10.0)

 

 

 (22.0)

 (13.4)

 (19.1)

 (43.2)

Relating to discontinued operations

 16

 4.1

 3.2

-

 31.3

Continuing operations

 

 (17.9)

 (10.2)

 (19.1)

 (11.9)

 

 

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

 

 

LTIP

 

Pension past service cost

Property

Legal fees and claims

Others

Total

 

 

 

(i)

(Note 24)

(ii)

 

 

 

 

Year ended 30 September 2019

Note

£m

£m

£m

£m

£m

£m

EdTech

 

-

-

 0.1

-

-

 0.1

Energy Information

 

-

-

-

 (31.3)

-

 (31.3)

Consumer Media

 

 (1.5)

 (1.9)

 2.4

-

 (1.0)

 (2.0)

 

 

 (1.5)

 (1.9)

 2.5

 (31.3)

 (1.0)

 (33.2)

Corporate costs

 

 (8.1)

 (1.2)

-

-

 (0.7)

 (10.0)

 

 

 (9.6)

 (3.1)

 2.5

 (31.3)

 (1.7)

 (43.2)

Relating to discontinued operations

 16

-

-

-

 31.3

-

 31.3

Continuing operations

 

 (9.6)

 (3.1)

 2.5

-

 (1.7)

 (11.9)

 

The Group's tax charge includes a related credit of £9.1 million in relation to these exceptional operating costs of which £6.6 million relates to discontinued operations.

 

(i) During the prior period, the Group sold its investment in ZPG resulting in a profit on sale of £508.4 million and in the current period, the Group disposed of its investment in Euromoney. As a direct consequence of these disposals the value of the DMGT Long Term Incentive Plans (LTIPs) are estimated to have increased by £21.9 million. As the LTIPs include a service period condition, IFRS 2 Share Options requires the LTIP charge to be spread over the service period until the awards vest. The LTIP charge recognised in the period, which relates to the disposals of ZPG and Euromoney, amounts to £9.6 million. Since the profit on the sale of ZPG and the capital benefit of the Euromoney disposal are excluded from our adjusted profit measure we have treated the incremental increase in the LTIP charge as an adjusting item and will continue to do so until the awards vest.

 

(ii) The pension past service cost represents a non-cash charge. This follows a High Court ruling in the Lloyds Banking Group case to equalise benefits for the effect of unequal Guaranteed Minimum Pensions (GMP) between men and women for UK pension schemes which had contracted out of the State Earnings Related Pension Scheme.

 

 

 

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

 

 

 

Depreciation of property, plant and equipment

Research costs

Investment revenue

Finance Income

Finance expense

 

 

(Note 19)

 

(Note 6)

(Note 7)

(Note 7)

Year ended 30 September 2019

Note

£m

£m

£m

£m

£m

Insurance Risk

 

 (5.3)

 (39.7)

 0.4

-

-

Property Information

 

 (2.3)

 (0.1)

-

-

 (0.1)

EdTech

 

 (0.3)

-

 1.4

-

 (0.1)

Events and Exhibitions

 

 (0.3)

-

-

-

-

Energy Information

 

 (2.6)

 (5.2)

-

-

 (0.1)

Consumer Media

 

 (14.0)

 (0.5)

-

 7.1

 (0.3)

 

 

 (24.8)

 (45.5)

 1.8

 7.1

 (0.6)

Corporate costs

 

 (0.5)

-

 9.7

-

 (24.0)

 

 

 (25.3)

 (45.5)

 11.5

 7.1

 (24.6)

Relating to discontinued operations

 16

 2.6

 5.2

-

-

 0.1

Continuing operations

 

 (22.7)

 (40.3)

 11.5

 7.1

 (24.5)

 

 

 

 

Total and external revenue

Segment operating profit/(loss)

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

Adjusted operating profit/(loss)

 

 

 

 

 

 

Year ended 30 September 2018

Note

£m

£m

£m

£m

Insurance Risk

 

 229.4

 33.8

 (0.8)

 34.6

Property Information

 

 271.6

 58.0

-

 58.0

EdTech

 

 68.3

 7.4

-

 7.4

Events and Exhibitions

 

 117.8

 27.7

-

 27.7

Energy Information

 

 85.5

 0.3

-

 0.3

Consumer Media

 

 653.8

 83.6

 19.3

 64.3

 

 

 1,426.4

 210.8

 18.5

 192.3

Corporate costs

 

-

 12.0

 59.4

 (47.4)

Discontinued operations

 16

 (85.5)

 (0.3)

-

 (0.3)

 

 

 1,340.9

 

 

 

Adjusted operating profit

 

 

 

 

 144.6

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

 

 

 

 

 (82.6)

Impairment of goodwill and acquired intangible assets arising on business combinations

 

 

 

 

-

Amortisation of acquired intangible assets arising on business combinations

 

 

 

 

 (12.2)

Operating profit before share of results of joint ventures and associates

 

 

 

 

 49.8

Share of results of joint ventures and associates

4

 

 

 

 118.4

Total operating profit

 

 

 

 

 168.2

Other gains and losses

5

 

 

 

 565.5

Profit before investment revenue, net finance costs and tax

 

 

 

 

 733.7

Investment revenue

6

 

 

 

 4.8

Finance expense

7

 

 

 

 (37.5)

Finance income

7

 

 

 

 5.5

Profit before tax

 

 

 

 

 706.5

Tax

8

 

 

 

 (7.6)

Loss from discontinued operations

 16

 

 

 

 (10.7)

Profit for the year

 

 

 

 

 688.2

 

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

 

 

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

 

 

Amortisation of intangible assets not arising on business combinations

Amortisation of intangible assets arising on business combinations

Impairment of goodwill and intangible assets arising on business combinations

Impairment of internally generated and acquired computer software

Exceptional operating costs

 

 

(Note 18)

(Note 18)

 

(Note 18)

 

Year ended 30 September 2018

Note

£m

£m

£m

£m

£m

Insurance Risk

 

 (15.0)

-

-

 (58.3)

-

Property Information

 

 (3.9)

 (8.7)

-

-

 (1.5)

EdTech

 

 (5.2)

 (2.8)

-

-

-

Events and Exhibitions

 

 (0.1)

 (0.6)

-

-

-

Energy Information

 

 (3.4)

 (3.3)

 (0.3)

 (0.1)

 3.8

Consumer Media

 

 (5.2)

 (0.1)

-

-

 (18.2)

 

 

 (32.8)

 (15.5)

 (0.3)

 (58.4)

 (15.9)

Corporate costs

 

-

-

-

-

 (4.6)

 

 

 (32.8)

 (15.5)

 (0.3)

 (58.4)

 (20.5)

Relating to discontinued operations

 16

 3.4

 3.3

 0.3

 0.1

 (3.8)

Continuing operations

 

 (29.4)

 (12.2)

-

 (58.3)

 (24.3)

 

 

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

 

 

Severance costs

LTIP

Pension past service cost

Property

Legal fees

Total

 

 

 

 

(i)

(Note 24)

(ii)

 

 

(iii)

 

Year ended 30 September 2018

Note

£m

£m

£m

£m

£m

£m

Property Information

 

 0.1

-

-

-

 (1.6)

 (1.5)

EdTech

 

 0.2

-

-

 (0.2)

-

-

Energy Information

 

-

-

-

-

 3.8

 3.8

Consumer Media

 

 (0.1)

 (0.8)

 (17.3)

-

-

 (18.2)

 

 

 0.2

 (0.8)

 (17.3)

 (0.2)

 2.2

 (15.9)

Corporate costs

 

-

 (4.7)

-

-

 0.1

 (4.6)

 

 

 0.2

 (5.5)

 (17.3)

 (0.2)

 2.3

 (20.5)

Relating to discontinued operations

 16

-

-

-

-

 (3.8)

 (3.8)

Continuing operations

 

 0.2

 (5.5)

 (17.3)

 (0.2)

 (1.5)

 (24.3)

 

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

 

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

 

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

 

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

 

 

 

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

 

 

Depreciation of property, plant and equipment

Research costs

Investment revenue

Finance Income

Finance expense

 

 

 

 

 

 

 

 

 

(Note 19)

 

(Note 6)

(Note 7)

(Note 7)

Year ended 30 September 2018

Note

£m

£m

£m

£m

£m

Insurance Risk

 

 (4.9)

 (37.2)

 0.3

-

-

Property Information

 

 (2.8)

 (0.1)

-

-

-

EdTech

 

 (0.6)

-

 1.4

-

-

Events and Exhibitions

 

 (0.5)

-

-

-

-

Energy Information

 

 (3.3)

 (4.0)

-

-

 (2.5)

Consumer Media

 

 (14.9)

 (0.5)

-

 2.0

 (1.1)

 

 

 (27.0)

 (41.8)

 1.7

 2.0

 (3.6)

Corporate costs

 

 (0.2)

-

 3.1

 3.5

 (36.4)

 

 

 (27.2)

 (41.8)

 4.8

 5.5

 (40.0)

Relating to discontinued operations

 16

 3.3

 4.0

-

-

 2.5

Continuing operations

 

 (23.9)

 (37.8)

 4.8

 5.5

 (37.5)

 

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

 

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

 

Total

Under IFRS 15

Total

Point in time

Under IFRS 15

Total

Over time

Under IFRS 15

Discontinued operations

Total

Under IFRS 15

Discontinued operations

Point in time

Under IFRS 15

Discontinued operations

Over time

Under IFRS 15

Continuing operations

Total

Under IFRS 15

Continuing operations

Point in time

Under IFRS 15

Continuing operations

Over time

Under IFRS 15

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

Print advertising

 184.5

 184.5

-

-

-

-

 184.5

 184.5

-

Digital advertising

 145.1

 0.8

 144.3

-

-

-

 145.1

 0.8

 144.3

Circulation

 284.1

 284.1

-

-

-

-

 284.1

 284.1

-

Subscriptions and recurring licenses

 428.8

 7.7

 421.1

 72.6

 6.5

 66.1

 356.2

 1.2

 355.0

Events, conferences and training

 118.0

 118.0

-

-

-

-

 118.0

 118.0

-

Transactions and other

 250.1

 225.8

 24.3

 1.0

 1.0

-

 249.1

 224.8

 24.3

 

 1,410.6

 820.9

 589.7

 73.6

 7.5

 66.1

 1,337.0

 813.4

 523.6

 

 

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

 

Total

Total

Point in time

Total

Over time

Discontinued operations

Total

Discontinued operations

Point in time

Discontinued operations

Over time

Continuing operations

Total

Continuing operations

Point in time

Continuing operations

Over time

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

Print advertising

 187.0

 187.0

-

-

-

-

 187.0

 187.0

-

Digital advertising

 135.9

 1.3

 134.6

 1.2

 1.2

-

 134.7

 0.1

 134.6

Circulation

 291.4

 291.4

-

-

-

-

 291.4

 291.4

-

Subscriptions

 399.1

 9.6

 389.5

 73.2

 0.5

 72.7

 325.9

 9.1

 316.8

Events, conferences and training

 116.2

 116.2

-

-

-

-

 116.2

 116.2

-

Transactions and other

 296.8

 263.8

 33.0

 11.1

 8.0

 3.1

 285.7

 255.8

 29.9

 

 1,426.4

 869.3

 557.1

 85.5

 9.7

 75.8

 1,340.9

 859.6

 481.3

 

 

 

 

By geographic area

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

 

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

 

Total

Under IFRS 15

Total

Point in time

Under IFRS 15

Total

Over time

Under IFRS 15

Discontinued operations

Total

Under IFRS 15

Discontinued operations

Point in time

Under IFRS 15

Discontinued operations

Over time

Under IFRS 15

Continuing operations

Total

Under IFRS 15

Continuing operations

Point in time

Under IFRS 15

Continuing operations

Over time

Under IFRS 15

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

UK

 814.5

 674.2

 140.3

-

-

-

 814.5

 674.2

 140.3

North America

 467.6

 38.3

 429.3

 68.0

 7.2

 60.8

 399.6

 31.1

 368.5

Rest of the World

 128.5

 108.4

 20.1

 5.6

 0.3

 5.3

 122.9

 108.1

 14.8

 

 1,410.6

 820.9

 589.7

 73.6

 7.5

 66.1

 1,337.0

 813.4

 523.6

 

 

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

 

Total

Total

Point in time

Total

Over time

Discontinued operations

Discontinued operations

Point in time

Discontinued operations

Over time

Continuing operations

Continuing operations

Point in time

Continuing operations

Over time

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

UK

 812.0

 687.4

 124.6

-

-

-

 812.0

 687.4

 124.6

North America

 475.4

 66.0

 409.4

 78.9

 9.4

 69.5

 396.5

 56.6

 339.9

Rest of the World

 139.0

 115.9

 23.1

 6.6

 0.3

 6.3

 132.4

 115.6

 16.8

 

 1,426.4

 869.3

 557.1

 85.5

 9.7

 75.8

 1,340.9

 859.6

 481.3

 

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

 

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2019

 

Total

Under IFRS 15

Total

Point in time

Under IFRS 15

Total

Over time

Under IFRS 15

Discontinued operations

Total

Under IFRS 15

Discontinued operations

Point in time

Under IFRS 15

Discontinued operations

Over time

Under IFRS 15

Continuing operations

Total

Under IFRS 15

Continuing operations

Point in time

Under IFRS 15

Continuing operations

Over time

Under IFRS 15

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

UK

 748.0

 640.1

 107.9

 4.3

-

 4.3

 743.7

 640.1

 103.6

North America

 421.6

 48.1

 373.5

 58.1

 7.3

 50.8

 363.5

 40.8

 322.7

Rest of the World

 241.0

 132.7

 108.3

 11.2

 0.2

 11.0

 229.8

 132.5

 97.3

 

 1,410.6

 820.9

 589.7

 73.6

 7.5

 66.1

 1,337.0

 813.4

 523.6

 

 

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

Year ended 30 September 2018

 

Total

Total

Point in time

Total

Over time

Discontinued operations

Total

Point in time

Total

Over time

Continuing operations

Continuing operations

Point in time

Continuing operations

Over time

 

 

 

 

(Note 16)

(Note 16)

(Note 16)

 

 

 

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

UK

 772.4

 662.6

 109.8

 4.2

-

 4.2

 768.2

 662.6

 105.6

North America

 410.8

 63.3

 347.5

 71.3

 9.3

 62.0

 339.5

 54.0

 285.5

Rest of the World

 243.2

 143.4

 99.8

 10.0

 0.4

 9.6

 233.2

 143.0

 90.2

 

 1,426.4

 869.3

 557.1

 85.5

 9.7

 75.8

 1,340.9

 859.6

 481.3

 

 

 

4 Share of results of joint ventures and associates

 

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

 

£m

£m

Share of adjusted operating profits/(losses) from operations of joint ventures

 

 

 1.7

 (3.2)

Share of adjusted operating profits from operations of associates

(i)

 

 10.9

 77.2

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

12

 

 12.6

 74.0

Share of associates' other gains and losses

 10

 

-

 102.9

Share of exceptional operating income/(costs) of associates

 10

 

 7.0

 (4.9)

Share of amortisation of intangibles arising on business combinations of associates

 10

 

 (6.5)

 (16.7)

Share of associates' interest payable

 

 

 (0.1)

 (4.0)

Share of joint ventures' tax

8, 10

 

 (0.2)

 (0.1)

Share of associates' tax

8, 10

 

 (7.1)

 (31.2)

Share of impairment of goodwill in associates

 10

 

-

 (1.5)

Share of fair value movement of contingent consideration payable of associates

 10

 

-

 0.7

Impairment of carrying value of Euromoney

10, (ii)

 

 (27.7)

-

Share of Euromoney prior year tax exposures

10, (iii)

 (5.3)

 

-

Share of Euromoney tax on prior year tax exposures

8, 10, (iii)

 1.1

 

-

Adjustment to impairment of carrying value of Euromoney following Euromoney prior year tax exposures

10, (iii)

 4.2

-

-

Impairment of carrying value of other associates

10, (iv)

 

 (6.1)

 (0.8)

 

 

 

 (28.1)

 118.4

Share of associates' items of other comprehensive income

 

 

 (0.7)

 14.7

Share of results of joint ventures and associates

 

 

 (28.8)

 133.1

 

 

 

 

 

Share of results from operations of joint ventures

 

 

 1.5

 (3.3)

Share of results from operations of associates

 

 

-

 122.5

Impairment of carrying value of associates

 

 

 (29.6)

 (0.8)

 

 

 

 (28.1)

 118.4

Share of associates' items of other comprehensive income

 

 

 (0.7)

 14.7

Share of results of joint ventures and associates

 

 

 (28.8)

 133.1

 

(i) Share of adjusted operating profits from associates includes £23.0 million (2018 £55.9 million) from the Group's interest in Euromoney held centrally for the period to 2 April 2019.

 

(ii) At 31 March 2019 the Group's investment in Euromoney was transferred to Assets Held for Sale at the lower of carrying value and fair value less costs to sell. This resulted in an impairment charge of £27.7 million for the period to 31 March 2019 which was taken to the Consolidated Income Statement in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

 

(iii) During the period Euromoney engaged external advisors to undertake an audit of their compliance with the off-payroll working rules. As a result of the review Euromoney identified an underpayment of payroll taxes to HMRC for the six years to 30 September 2019 amounting to £8.2 million including interest and penalties.

 

During the period Euromoney also discovered a VAT exposure in the UK relating to the understatement of VAT on supplies made between entities within the Euromoney Group in respect of the four years ended 30 September 2018. Based on their current assessment Euromoney's exposure as at 30 September 2019 is £11.3 million including interest.

 

The total impact on Euromoney as at 30 September 2019 amounts to an understatement of taxes, penalties and interest of £17.0 million net of deferred and corporation taxes. Euromoney consider this to be material and have corrected these understatements of their prior period accounts in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

 

The DMGT Group disposed of its 49.9% interest in Euromoney on 2 April 2019 and the post-tax impact of these adjustments on DMGT at that date amounts to a charge of £4.2 million. This has been corrected in the current period since the Directors do not consider this to be material for DMGT. The charge against profits has been treated as an adjusting item due to its significance and non-recurring nature.

 

This adjustment has reduced the impairment charge booked in the first half in relation to the Group's investment in Euromoney from £27.7 million to £23.5 million.

 

(iv) Represents a £1.3 million write-down in the carrying value of Skymet Weather Services Pvt (Skymet), a £0.9 million write-down in the carrying value of Liases Foras, a £3.0 million write-down in the carrying value of Funcent, and a £0.9 million write-down in the carrying value of Propstack all held centrally. In the prior period, represents a £0.5 million write-down in the carrying value of Eatfirst UK Ltd held centrally and £0.3 million write-down in the carrying value of RLTO in the Property Information segment.

 

5 Other gains and losses

 

Note

Year ended 30 September 2019

Year ended 30 September 2018

 

 

£m

£m

Profit on disposal of available for sale investments

10

-

 1.0

Impairment of available for sale assets

10

-

 (1.8)

Profit on disposal of property, plant and equipment

 10

 1.1

-

(Loss)/profit on disposal and closure of businesses

10, 15, (i)

 (1.8)

 51.3

Recycled cumulative translation differences

 10, 15, (ii)

 (3.6)

 8.7

(Loss)/gain on dilution of stake in associate

10, (iii)

 (0.7)

 0.7

Loss on change in control

10, (iv)

 (0.8)

 (3.5)

Profit on disposal of joint ventures and associates

10, (v)

 79.5

 509.1

 

 

 73.7

 565.5

 

There is a tax charge of £15.0 million in relation to these other gains and losses (2018 £17.6 million).

 

(i) In the current period this principally relates to a loss of £2.3 million relating to the disposal of On-geo in the Property Information Segment.

 

In the prior period this principally relates to a £51.7 million profit on the sale of EDR in the Property Information segment, £6.3 million loss on the sale of Locus Energy, a £0.9 million profit on disposal of assets in acquiring an interest in Linevision and a £7.2 million loss on the disposal Digital H2O in the Energy segment, a £4.8 million loss on Hobsons Solutions and additional costs of £3.5 million on the sale of Hobsons Admissions and Edumate on in the EdTech segment. Additionally, a loss of £4.8 million was recognised on the closure of Xceligent, gains on various disposals amounting to £0.4 million recognised in the Consumer Media segment and £0.1 million in the Events segment.

 

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

(iii) In the current period this represents a loss on dilution of the Group's stakes in Skymet and Laundrapp Ltd (formerly known as Zipjet Ltd). In accordance with IAS 28, Investments in Associates and Joint Ventures, this dilution has been treated as a deemed disposal. The carrying value of these investments has decreased resulting in a loss on dilution of £0.7 million.

 

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

 

(iv) In the current period the Group reduced its interest in Trepp Port, LLC (TreppPort) in the Property Information segment. The remaining shareholding in TreppPort has been treated as a joint venture. In accordance with IFRS 3, Business Combinations, the difference between the fair value of the investment retained and the carrying value of £0.7 million is treated as a gain on change in control.

 

Additionally, in the current period the Group purchased the remaining 50.0% of Daily Mail On-Air LLC (DailyMailTV) in the Consumer Media segment, a joint venture in the prior period, increasing its existing shareholding from 50.0% to 100% and became a wholly owned subsidiary. The difference between the fair value of the joint venture and the net assets acquired of £1.5 million is treated as a loss on change in control.

 

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

 

(v) In the current period this principally represents a profit of £59.7 million on the sale of Real Capital Analytics, Inc. in the Corporate costs segment and profit of £27.2 million on disposal of SiteCompli in the Property information segment, offset by costs of £7.9 million incurred in relation to the Group's distribution of Euromoney to shareholders.

 

In the prior period this principally relates to the disposal of ZPG for gross proceeds of £641.7 million, resulting in a profit on disposal of £508.4 million.

 

6 Investment revenue

 

Year ended 30 September 2019

Year ended 30 September 2018

 

£m

£m

Dividend income

-

 0.1

Interest receivable from short-term deposits

 7.6

 1.7

Interest receivable on loan notes

 3.9

 3.0

 

 11.5

 4.8

 

7 Net finance costs

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

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

 

 (19.0)

 (35.8)

Premium on bond redemption

(i)

 (0.9)

-

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

 

 (3.5)

 (1.7)

Change in fair value of derivative hedge of bond

13

 2.8

 (2.3)

Change in fair value of hedged portion of bond

13

 (2.8)

 2.3

Finance charge on discounting of contingent consideration payable

(ii)

-

 (0.1)

Change in fair value of undesignated financial instruments

 10

 (0.9)

-

Change in fair value of contingent consideration payable

10, 22, (iii)

 (0.2)

 0.1

Finance expense

 

 (24.5)

 (37.5)

 

 

 

 

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

 

-

 0.4

Finance income on defined benefit pension schemes

10, 24

 7.1

 2.0

Change in fair value of undesignated financial instruments

 10

-

 3.1

Finance income

 

 7.1

 5.5

 

 

 

 

Net finance expense

 

 (17.4)

 (32.0)

 

(i) During the period the Company bought back £6.4 million nominal of its outstanding 2021 bonds incurring a premium of £0.9 million.

 

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

 

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

 

 

 

8 Tax

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

The charge on the profit for the period consists of:

 

 

 

UK tax

 

 

 

Corporation tax at 19.0% (2018 19.0%)

 

-

 (0.7)

Adjustments in respect of prior years

 

 0.3

 (0.2)

 

 

 0.3

 (0.9)

Overseas tax

 

 

 

Corporation tax

 

 (17.7)

 (24.3)

Adjustments in respect of prior years

 

 7.1

 (0.6)

 

 

 (10.6)

 (24.9)

Total current tax

 

 (10.3)

 (25.8)

Deferred tax

 

 

 

Origination and reversals of temporary differences

 

 0.3

 22.1

Adjustments in respect of prior years

 

 (0.4)

-

Total deferred tax

 

 (0.1)

 22.1

Total tax charge

 

 (10.4)

 (3.7)

Relating to discontinued operations

 16

 (10.0)

 (3.9)

 

 

 (20.4)

 (7.6)

 

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

 

Adjusted tax on profits before amortisation and impairment of intangible assets, restructuring costs and non-recurring items (adjusted tax charge) amounted to a charge of £29.4 million (2018 £33.2 million) and the resulting rate is 20.3% (2018 18.2%). The differences between the tax charge and the adjusted tax charge are shown in the reconciliation below:

 

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Total tax charge on the profit for the year

 

 (10.4)

 (3.7)

Share of tax in joint ventures and associates

4, 16

 (6.2)

 (31.3)

Deferred tax on intangible assets

 

 (3.8)

 (22.6)

Reassessment of temporary differences

 

 (13.5)

-

Tax on other gains and losses

 

 15.0

 17.6

Tax on exceptional operating costs

 

 (9.1)

 (4.3)

Tax on other adjusting items

 

 (2.7)

 11.1

Share of tax on associates other adjusting items

 

 1.3

-

Adjusted tax charge on the profit for the year

 10

 (29.4)

 (33.2)

 

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

 

Reassessment of temporary differences of £13.5 million mainly relates to recognition of tax losses agreed with HM Revenue & Customs.

 

Included in tax on other adjusting items are items arising from tax reform in the US comprising a deferred tax credit of £nil (2018 £12.5 million) relating to the re-measurement of US deferred tax balances following the reduction in the US corporate tax rate, a current tax charge of £nil (2018 £6.1 million) in respect of the transitional toll charge and a deferred tax charge of £nil (2018 £4.0 million) relating to the impact of the internal refinancing of the US group.

 

In April 2019 the EU Commission released its final decision on the State Aid investigation into the Group Financing Exemption (GFE) included within the UK's controlled foreign company (CFC) rules. The Commission ruled that the GFE constituted State Aid to the extent that non-trade finance profits of a CFC arose as a result of Significant People Functions (SPFs) in the UK. Up until 2018 the Group financed its US operations through a Luxembourg resident finance company which had received clearance from HM Revenue & Customs (HMRC) that it benefitted from the GFE. If the State Aid investigation ultimately leads to a reversal of the benefits that the Group has accrued through the GFE, the cost to the Group would be in the range from £nil to £7.5 million tax and interest. It is not currently possible to quantify the exposure of the Group as HMRC have not yet released guidance on how UK SPFs should be calculated. In October 2019 the Group lodged its appeal to the General Court of the EU against the Commission's decision. The Directors consider that the Group's appeal is more than likely to be successful, and accordingly have made no provision in these financial statements.

 

9 Dividends paid

 

 

Year ended 30 September 2019

Year ended 30 September 2019

Year ended 30 September 2018

Year ended 30 September 2018

 

Note

Pence per share

£m

Pence per share

£m

Amounts recognisable as distributions to equity holders in the year

 

 

 

 

 

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

 

 16.2

 3.2

 -

 -

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

 

 16.2

 54.2

 -

 -

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

 

 -

 -

 15.8

 3.1

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

 

 -

 -

 15.8

 52.8

 

 

 -

 57.4

 -

 55.9

Ordinary Shares - interim dividend for the year ended 30 September 2019

 

 7.3

 1.5

 -

 -

A Ordinary Non-Voting Shares - interim dividend for the year ended 30 September 2019

 

 7.3

 15.2

 -

 -

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

 

 -

 -

 7.1

 1.4

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

 

 -

 -

 7.1

 23.7

Euromoney cash distribution - B shares

(i)

 146.8

 183.0

 -

 -

Euromoney cash distribution - C shares

(i)

 647.0

 17.0

 -

 -

Euromoney dividend in specie

(i)

 691.3

 661.8

 -

 -

 

 

 -

 878.5

 -

 25.1

 

 

 -

 935.9

 -

 81.0

 

(i) During the period the Group disposed of its remaining stake in Euromoney by way of a dividend in specie together with a cash distribution to shareholders. The dividend in specie was distributed on 2 April 2019 and the cash distribution on 15 April 2019.

 

Before these distributions were made c46.4% of the A shares held by Fully Participating Shareholders were converted into a new class of B Shares and c4.0% of the A Shares held by Rothermere Affiliated Shareholders converted into a new class of C Shares.

 

The dividend in specie was paid to Fully Participating Shareholders and amounted to £661.8 million. This was based on the Euromoney share price of £12.38 at 8am on 2 April 2019.

 

The cash distribution of £183.0 million in cash was paid to Fully Participating Shareholders in respect of the B Shares and a restricted special dividend of £17.0 million in cash was paid to the Rothermere Affiliated Shareholders in respect of C Shares. Once these distributions were made the B Shares and the C Shares were converted into Deferred B Shares and Deferred C Shares respectively before being transferred to the Company for no valuable consideration and cancelled shortly thereafter.

 

The Board has declared a final dividend of 16.6 pence per Ordinary/A Ordinary Non-Voting Share (2018 16.2 pence) which will absorb an estimated £37.8 million (2018 £57.4 million) of shareholders' equity for which no liability has been recognised in these financial statements. It will be paid on 7 February 2020 to shareholders on the register at the close of business on 13 December 2019.

 

10 Adjusted profit

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Profit before tax - continuing operations

 3

 134.3

 706.5

Loss before tax - discontinued operations

 16

 (32.6)

 (14.6)

Adjust for:

 

 

 

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

3, 4, 16

 19.9

 32.2

Impairment of goodwill and intangible assets arising on business combinations

3, 16

 19.1

 0.3

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

 4

-

 1.5

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

3, 16

 43.2

 78.9

Share of exceptional operating costs and prior year tax exposures of joint ventures and associates

 4

 (1.7)

 4.9

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

 4

-

 (102.9)

Impairment of carrying value of joint ventures and associates

 4

 29.6

 0.8

Other gains and losses:

 

 

 

Impairment of available for sale assets

 5

-

 1.8

Profit on disposal of available for sale investments

 5

-

 (1.0)

Profit on disposal of property, plant and equipment

 5

 (1.1)

-

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

5, 16

 (66.2)

 (553.8)

Finance costs:

 

 

 

Finance income on defined benefit pension schemes

 7

 (7.1)

 (2.0)

Fair value movements including share of joint ventures and associates

4, 7, 16, (i)

 1.1

 (1.6)

Tax:

 

 

 

Share of tax in joint ventures and associates

4, 8

 6.2

 31.3

Adjusted profit before tax and non-controlling interests

 

 144.7

 182.3

Total tax charge on the profit for the year

 8

 (10.4)

 (3.7)

Adjust for:

 

 

 

Share of tax in joint ventures and associates

4, 8

 (6.2)

 (31.3)

Deferred tax on intangible assets

 8

 (3.8)

 (22.6)

Reassessment of temporary differences

 8

 (13.5)

-

Tax on other gains and losses

 8

 15.0

 17.6

Tax on exceptional operating costs

 8

 (9.1)

 (4.3)

Tax on other adjusting items

 8

 (2.7)

 11.1

Share of tax on associates other adjusting items

 8

 1.3

-

Non-controlling interests

(ii)

 (0.8)

 0.2

Adjusted profit after taxation and non-controlling interests

 

 114.5

 149.3

 

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

 

(ii) The adjusted non-controlling interests' share of profits for the year of £0.8 million (2018 losses of £0.2 million) is stated after eliminating a credit of £0.4 million (2018 £1.0 million), being the non-controlling interests' share of adjusting items.

 

11 Earnings per share

Basic earnings per share of 30.7 pence (2018 194.7 pence) and diluted earnings per share of 30.3 pence (2018 192.4 pence) are calculated, in accordance with IAS 33, Earnings per share, on Group profit for the financial year of £90.9 million (2018 £689.4 million) as adjusted for the effect of dilutive Ordinary Shares of £nil (2018 £nil) and losses from discontinued operations of £22.6 million (2018 £10.7 million) and on the weighted average number of Ordinary Shares in issue during the year, as set out below.

 

As in previous years, adjusted earnings per share have also been disclosed since the Directors consider that this alternative measure gives a more comparable indication of the Group's underlying trading performance. Adjusted earnings per share of 38.6 pence (2018 42.2 pence) are calculated on profit for continuing and discontinued operations before exceptional operating costs, impairment of goodwill and intangible assets, amortisation of intangible assets arising on business combinations, other gains and losses and exceptional financing costs after taxation and non-controlling interests associated with those profits, of £114.5 million (2018 £149.3 million), as set out in Note 10 and on the basic weighted average number of Ordinary Shares in issue during the year.

 

Basic and diluted earnings per share:

 

Year ended 30 September 2019 Diluted earnings

Year ended 30 September 2018 Diluted earnings

Year ended 30 September 2019 Basic earnings

Year ended 30 September 2018 Basic earnings

 

£m

£m

£m

£m

Earnings from continuing operations

 113.5

 700.1

 113.5

 700.1

Effect of dilutive Ordinary Shares

-

-

-

-

Losses from discontinued operations

 (22.6)

 (10.7)

 (22.6)

 (10.7)

 

 90.9

 689.4

 90.9

 689.4

 

 

 

 

 

 

 

 

 

 

Adjusted earnings from continuing and discontinued operations

 114.5

 149.3

 114.5

 149.3

Effect of dilutive Ordinary Shares

-

-

-

-

 

 114.5

 149.3

 114.5

 149.3

 

 

 

Year ended 30 September 2019 Diluted pence per share

Year ended 30 September 2018 Diluted pence per share

Year ended 30 September 2019 Basic pence per share

Year ended 30 September 2018 Basic pence per share

Earnings per share from continuing operations

 37.8

 196.0

 38.3

 197.7

Effect of dilutive Ordinary Shares

-

-

-

-

Earnings per share from discontinued operations

 (7.5)

 (3.6)

 (7.6)

 (3.0)

Earnings per share from continuing and discontinued operations

 30.3

 192.4

 30.7

 194.7

 

 

 

 

 

Adjusted earnings per share from continuing and discontinued operations

 38.1

 41.7

 38.6

 42.2

Effect of dilutive Ordinary Shares

-

-

-

-

Adjusted earnings per share from continuing and discontinued operations

 38.1

 41.7

 38.6

 42.2

 

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

 

 

Year ended 30 September 2019 Number

Year ended 30 September 2018 Number

 

m

m

Number of Ordinary Shares in issue

 303.5

 362.1

Own shares held

 (7.1)

 (8.0)

Basic earnings per share denominator

 296.4

 354.1

Effect of dilutive share options

 3.8

 4.3

Dilutive earnings per share denominator

 300.2

 358.4

 

 

 

12 EBITDA and cash generated by operations

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Continuing operations

 

 

 

Adjusted operating profit

 3

 135.8

 144.6

Non-exceptional depreciation charge

3

 22.7

 23.9

Amortisation of internally generated and acquired computer software not arising on business combinations

3

 17.9

 29.4

Operating profits from joint ventures and associates

 4

 12.6

 74.0

Share of charge of depreciation and amortisation of internally generated and acquired computer software not arising on business combinations of joint ventures and associates

 

 1.5

 8.7

Dividend income

 6

-

 0.1

Discontinued operations

 

 

 

Adjusted operating profit

 16

 8.4

 0.3

Non-exceptional depreciation charge

16

 2.6

 3.3

Amortisation of internally generated and acquired computer software not arising on business combinations

3, 16

 4.1

 3.4

EBITDA

 

 205.6

 287.7

Adjustments for:

 

 

 

Share-based payments

 

 21.1

 10.8

Loss on disposal of property, plant and equipment

 

 0.6

 1.4

Share of profits from joint ventures and associates

 4

 (12.6)

 (74.0)

Exceptional operating costs

 3

 (43.2)

 (20.5)

Non-cash pension past service cost

3, 24

 3.1

 17.3

Dividend income

 6

-

 (0.1)

Share of depreciation charge of joint ventures and associates

 

 (1.5)

 (8.7)

Decrease/(increase) in inventories

 

 5.9

 (5.7)

Increase in trade and other receivables

 

 (40.9)

 (46.5)

Increase/(decrease) in trade and other payables

 

 0.9

 (10.5)

Increase/(decrease) in provisions

 

 38.8

 (1.1)

Additional payments into pension schemes

 24

 (12.8)

 (12.8)

Cash generated by operations

 

 165.0

 137.3

 

 

 

13 Analysis of net debt

 

 

At 30 September 2018

Cash flow

Fair value hedging adjustments

Foreign exchange movements

Other non-cash movements (i)

At 30 September 2019

 

Note

£m

£m

£m

£m

£m

£m

Cash and cash equivalents

(iii)

 437.8

 (147.5)

-

 10.8

-

 301.1

Bank overdrafts

20

 (1.9)

 (9.9)

-

 (0.1)

-

 (11.9)

Net cash and cash equivalents

 

 435.9

 (157.4)

-

 10.7

-

 289.2

Debt due within one year

 

 

 

 

 

 

 

Bonds

 20

 (218.7)

 218.5

 0.7

-

 (0.5)

-

Loan notes

 20

 (1.7)

 0.1

-

-

-

 (1.6)

Debt due after one year

 

 

 

 

 

 

 

Bonds

 20

 (205.7)

 6.7

 (3.4)

-

 (0.4)

 (202.8)

Net cash before effect of derivatives

 

 9.8

 67.9

 (2.7)

 10.7

 (0.9)

 84.8

Effect of derivatives on debt

(ii)

 (22.4)

 7.1

 2.7

 (5.8)

 0.1

 (18.3)

Collateral deposits

 21

 8.0

 7.4

-

-

-

 15.4

Other financial assets

 21

 237.3

 (237.3)

-

-

-

-

Net cash at closing exchange rate

 

 232.7

 (154.9)

-

 4.9

 (0.8)

 81.9

 

 

 

 

 

 

 

 

Net cash at average exchange rate

 

 234.3

 

 

 

 

 76.2

 

The net cash outflow of £157.4 million (2018 inflow of £426.9 million) includes a cash inflow of £0.1 million (2018 £9.7 million) in respect of operating exceptional items.

 

(i) Other non-cash movements comprise the unwinding of bond issue discount amounting to £0.7 million (2018 £2.9 million) and amortisation of bond issue costs of £0.1 million (2018 £0.3 million).

 

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

 

(iii) Cash and cash equivalents include £117.0 million which the Company intends to make available for the benefit of the Group's defined benefit pension schemes following the distribution of its shareholding in Euromoney.

 

14 Summary of the effects of acquisitions

On 1 October 2018, the Consumer Media segment acquired a further 50.0% of Daily Mail-On-Air LLC (DailyMailTV), increasing its existing shareholding from 50.0% to 100%, for total consideration of £4.8 million. DailyMailTV produces a US TV entertainment news programme which airs for one hour every weekday across the US on various channels.

 

DailyMailTV contributed £13.1 million to the Group's revenue, reduced the Group's operating profit by £2.5 million and reduced the Group's profit after tax by £2.0 million for the period between the date of acquisition and 30 September 2019.

 

On 31 January 2018, the Consumer Media segment acquired 100% of the assets of Rcoaster.ie (RollerCoaster) for total consideration of £0.7 million. RollerCoaster is an Irish website providing information about pregnancy and parenting.

 

RollerCoaster contributed £0.1 million to the Group's revenue, £0.1 million to the Group's operating profit and £0.1 million to the Group's profit after tax for the period between the date of acquisition and 30 September 2019.

 

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

 

On 24 July 2019, the Property Information segment acquired the entire share capital of Aventria Limited for total consideration of £19.0 million. Aventria Limited was subsequently renamed Landmark Optimus Limited (Optimus). Optimus is a conveyancing panel management business.

 

Optimus contributed £0.2 million to the Group's revenue, reduced the Group's operating profit by £0.2 million and reduced the Group's profit after tax by £0.1 million for the period between the date of acquisition and 30 September 2019.

 

If the acquisition had been completed on the first day of the financial period, Optimus would have contributed £0.8 million to the Group's revenue, reduced the Group's operating profit by £0.2 million and reduced the Group's adjusted profit after tax by £0.1 million.

 

On 20 February 2019, the Events and Exhibitions segment acquired EGYPS for total consideration of £3.5 million. EGYPS is the largest oil and gas show in North Africa.

 

EGYPS contributed £nil to the Group's revenue, £nil to the Group's operating profit and £nil to the Group's profit after tax for the period between the date of acquisition and 30 September 2019.

 

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

 

Provisional fair value of net assets acquired with all acquisitions:

 

 

DailyMailTV

RollerCoaster

Optimus

EGYPS

Total

 

Note

£m

£m

£m

£m

£m

Goodwill

18, (i)

 3.0

 0.4

 17.4

 1.2

 22.0

Intangible assets

 18

-

-

 1.7

 2.3

 4.0

Property, plant and equipment

 19

-

-

 0.1

-

 0.1

Trade and other receivables

 

 2.5

 0.1

 0.6

-

 3.2

Cash and cash equivalents

 

 2.2

 0.2

-

-

 2.4

Trade and other payables

 

 (2.9)

-

 (0.5)

-

 (3.4)

Deferred tax

 

-

-

 (0.3)

-

 (0.3)

Group share of net assets acquired

 

 4.8

 0.7

 19.0

 3.5

 28.0

 

Cost of acquisitions:

 

 

DailyMailTV

RollerCoaster

Optimus

EGYPS

Total

 

Note

£m

£m

£m

£m

£m

Cash paid in current year

 

 4.8

 0.7

 15.7

 3.5

 24.7

Contingent consideration

 (ii)

-

-

 1.6

-

 1.6

Cash consideration payable

 

-

-

 1.7

-

 1.7

Total consideration at fair value

 

 4.8

 0.7

 19.0

 3.5

 28.0

 

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

 

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

 

(ii) The estimated range of undiscounted outcomes for contingent consideration relating to acquisitions in the year is £nil to £1.6 million.

 

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

 

All of the companies acquired during the period contributed £13.4 million to the Group's revenue and reduced the Group's profit after tax by £2.0 million for the period between the date of acquisition and 30 September 2019.

 

Acquisition-related costs, amounting to £0.4 million, have been charged against profits for the period in the Consolidated Income Statement.

 

If all acquisitions had been completed on the first day of the period, Group revenues for the period would have been £1,337.6 million and Group profit attributable to equity holders of the parent would have been a profit of £90.9 million. This information takes into account the amortisation of acquired intangible assets together with related income tax effects but excludes any pre-acquisition finance costs and should not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed on the first day of the period.

 

Reconciliation to purchase of businesses and subsidiary undertakings as shown in the Consolidated Cash Flow Statement:

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Cash consideration

 

 24.7

 5.0

Cash paid to settle contingent consideration in respect of acquisitions

 (i)

 4.7

 14.4

Cash paid to settle acquisition put options

 

 0.6

-

Cash and cash equivalents acquired with subsidiaries

 

 (2.4)

 (0.3)

Purchase of businesses and subsidiary undertakings

 

 27.6

 19.1

 

(i) Cash paid to settle contingent consideration in respect of acquisitions includes £0.2 million (2018 £1.5 million) within the Property Information segment, £0.4 million (2018 £0.2 million) within the EdTech segment, £4.1 million (2018 £12.5 million) in the Energy Information segment and £nil (2018 £0.2 million) within the Events and Exhibitions segment.

 

15 Summary of the effects of disposals

On 1 October 2018 the Property Information segment reduced its shareholding in Trepp Port, LLC (TreppPort) from 51.0% to 50.0% for cash consideration of £0.2 million before directly attributable costs of £0.3 million. Since the Group now has joint control of TreppPort the remaining shareholding has been treated as a joint venture.

 

On 12 June 2019 the Property Information segment disposed of the On-geo business for consideration of £6.9 million.

 

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

 

 

TreppPort

On-geo

Other

Total

 

Note

£m

£m

£m

£m

Goodwill

 18

 5.3

 3.3

-

 8.6

Intangible assets

 18

 3.7

 11.3

-

 15.0

Property, plant and equipment

 19

-

 0.9

-

 0.9

Investments in joint ventures

 

-

 0.5

-

 0.5

Trade and other receivables

 

 2.0

 11.0

 0.5

 13.5

Cash and cash equivalents

 

 4.4

 3.9

-

 8.3

Trade and other payables

 

 (2.8)

 (4.3)

 (0.2)

 (7.3)

Current tax payable

 

-

 0.2

-

 0.2

Deferred tax liabilities

 

 (1.0)

 (3.2)

-

 (4.2)

Net assets disposed

 

 11.6

 23.6

 0.3

 35.5

Non-controlling interest share of net assets disposed

 

 (3.3)

 (9.5)

-

 (12.8)

(Loss)/profit on sale of businesses including recycled cumulative exchange differences

 

 (0.5)

 (4.7)

 0.5

 (4.7)

 

 

 7.8

 9.4

 0.8

 18.0

 

 

 

 

 

 

Satisfied by:

 

 

 

 

 

Cash received

 

 0.2

 5.1

 0.9

 6.2

Directly attributable costs paid

 

 (0.3)

 (3.0)

 (0.1)

 (3.4)

Deferred consideration

 

-

 4.8

-

 4.8

Fair value of investment in joint venture

(i)

 6.8

-

-

 6.8

Recycled cumulative translation differences

 

 1.1

 2.5

-

 3.6

 

 

 7.8

 9.4

 0.8

 18.0

 

(i) The investment in the TreppPort joint venture involves an estimation of the fair value of the Group's equity holding in TreppPort. A 10.0% increase/(decrease) in the fair value of the Group's stake would decrease/(increase) the loss on change in control of TreppPort by £0.7 million.

 

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

 

Year ended 30 September 2019

Year ended 30 September 2018

 

£m

£m

Cash consideration net of disposal costs

 2.8

 143.8

Impact of cashflow hedges

-

 4.9

Cash consideration net of disposal costs - discontinued operations

 (5.2)

-

Working capital adjustment cash paid - discontinued operations

 (0.9)

 (3.7)

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

-

 0.7

Cash and cash equivalents disposed with subsidiaries

 (8.3)

 0.6

(Costs)/proceeds on disposal of businesses and subsidiary undertakings

 (11.6)

 146.3

 

All of the businesses and subsidiary undertakings disposed of during the period absorbed £15.0 million of the Group's net operating cash flows, paid £1.8 million in respect of investing activities and paid £nil in respect of financing activities.

 

The Group's tax charge includes £11.2 million in relation to these disposals.

 

16 Discontinued operations

On 26 August 2019, the Group announced that it had agreed the sale of its Energy Information segment to Verisk. The sale completed on 5 November 2019 following the completion of customary closing conditions. The results of the Energy Information segment for the full year are included in discontinued operations for the current and prior period.

 

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

 

 

 

Year ended 30 September 2019

Year ended 30 September 2018

 

Note

£m

£m

Revenue

 3

 73.6

 85.5

Expenses

 

 (58.5)

 (78.5)

Depreciation

 3

 (2.6)

 (3.3)

Amortisation of intangible assets not arising on business combinations

 3

 (4.1)

 (3.4)

Adjusted operating profit

 3

 8.4

 0.3

Exceptional operating costs

3, 10, (i)

 (31.3)

 3.8

Impairment of goodwill and intangible assets

 3

-

 (0.4)

Amortisation of intangible assets arising on business combinations

3, 10

 (3.2)

 (3.3)

Operating (loss)/profit

 

 (26.1)

 0.4

Other gains and losses

 10

 (6.4)

 (12.5)

Loss before net finance costs and tax

 

 (32.5)

 (12.1)

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

 

 (0.1)

 (0.1)

Finance charge on discounting of contingent consideration payable

 

-

 (0.1)

Change in fair value of contingent consideration payable

 10

-

 (2.3)

Finance costs

 3

 (0.1)

 (2.5)

Loss before tax

 

 (32.6)

 (14.6)

Tax credit

 8

 10.0

 3.9

Loss after tax attributable to discontinued operations

 

 (22.6)

 (10.7)

 

(i) The Group's Energy Information business (Genscape) provided a third-party auditor service verifying Renewable Identification Numbers (RINs) for renewable fuel production activities in the US, as part of the Renewable Fuel Standard Quality Assurance Program (Program), a regulatory program administered by the US Environmental Protection Agency (EPA). 

 

Following discovery and self-reporting to the EPA by Genscape of potential fraudulent RINs generated by two companies but verified by Genscape in 2014 under the Program, the EPA issued a notice of intent to revoke the ability of Genscape to verify RINs as a third-party auditor on 4 January 2017. Following the EPA investigation of the two companies in April 2016, the two companies pleaded guilty of fraud in connection with generating the RINs.

 

EPA regulations for the audit Program set a liability cap on replacement of invalid RINs of 2.0% of the RINs. In April 2017 Genscape voluntarily paid the 2.0% liability cap associated with the invalid RINs at a cost of US$1.3 million, based on the then-prevailing market rates, subject to a reservation of rights. The EPA regulations allow for situations where the cap does not apply - including fraud, auditor error and negligence.

 

The EPA has not formally alleged any fraud or intentional wrongdoing by Genscape, but in its May 2019 final determination letter, EPA did find grounds for auditor error and negligence by Genscape and ordered Genscape to replace 69.2 million RINs it had verified.

 

In July 2019, Genscape filed a petition for review with the Sixth Circuit Court of Appeals and a motion to stay the EPA's order to replace the 69.2 million RINs which was accepted for the duration of Genscape's petition for review.

 

Since RINs trade in a volatile range, averaging approximately 56 cents over the previous 24 months, this equates to a potential maximum claim of approximately US$38.4 million. Using the year end price of 41 cents the potential maximum claim would be US$28.1 million. Genscape continues to co-operate with EPA and in October 2019 Genscape made an offer to replace 4.6 million RINs at a cost of approximately US$2.5 million but the EPA have not responded to this offer. Discussions with the EPA are ongoing but considering the uncertainties involved, the length of time involved and taking note of the order from the EPA, the Group, without admitting any wrongdoing, has made a provision for the potential maximum replacement RINs cost of US$40.0 million (£31.3 million), including directly attributable costs. This estimate was based on the average two-year RIN price due to the liquidity and volatility of the market price of RINs. This provision could change substantially over time as the dispute progresses and new facts emerge.

 

A deferred tax credit of US$8.4 million arises on this provision.

 

In future periods, as new facts emerge and circumstances change in relation to this provision, any adjustment will be disclosed as an exceptional operating item within discontinued operations.

 

Cash flows associated with discontinued operations comprise operating cash flows of £11.9 million (2018 £3.5 million), investing cash flows of £13.3 million (2018 £12.4 million) and financing cash flows of £0.2 million (2018 £0.7 million).

 

17 Total assets and liabilities of businesses held for sale

At 30 September 2019, the assets and liabilities held for sale relate to the Group's Energy Information segment, together with BuildFax, Inc. and Inframation AG which are included in the Property segment. The main classes of assets and liabilities comprising the operations classified as held for sale are set out in the table below. The proceeds of disposal less costs to sell exceed the net carrying amount of the relevant assets and liabilities and, accordingly, no impairment loss has been recognised on the classification of these operations as held for sale.

 

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

 

 

 

At 30 September 2019

At 30 September 2018

 

Note

£m

£m

Goodwill

18

 83.3

 -

Intangible assets

 18

 32.0

 -

Deferred tax

 

 5.9

 -

Property, plant and equipment

 

 7.1

 -

Trade and other receivables

 

 

 

Trade receivables

 

 10.0

 -

Expected credit losses

 

 (0.4)

 -

Prepayments

 

 3.3

 -

Contract acquisition costs

 

 3.1

 -

Contract assets

 

 0.3

 -

Other receivables

 

 6.3

 -

Cash and cash equivalents

 

 2.0

 -

Current tax receivable

 

 0.6

 -

Total assets associated with businesses held for sale

 

 153.5

 -

 

 

 

 

Trade and other payables

 

 (36.7)

 -

Bank overdrafts

 20

 (0.1)

 -

Loan notes

 20

 (1.6)

 -

Provisions

 

 (34.2)

 -

Total liabilities associated with businesses held for sale

 

 (72.6)

 -

 

 

 

 

Net assets of the disposal group

 

 80.9

 -

 

 

 

18 Goodwill and other intangible assets

 

 

Goodwill

Other Intangibles

 

Note

£m

£m

Cost

 

 

 

At 30 September 2017

 

 506.2

 629.0

Additions

 

-

 2.6

Other additions

 

 3.2

 0.2

Internally generated

 

-

 19.5

Disposals

 

 (90.6)

 (63.3)

Exchange adjustment

 

 3.6

 10.3

At 30 September 2018

 

 422.4

 598.3

Additions from business combinations

 14

 22.0

 4.0

Internally generated

 

-

 13.9

Disposals

 15

 (27.7)

 (26.7)

Classified as held for sale

 17

 (145.2)

 (107.2)

Exchange adjustment

 

 8.1

 21.0

At 30 September 2019

 

 279.6

 503.3

 

 

 

 

Accumulated amortisation and impairment

 

 

 

At 30 September 2017

 

 143.1

 416.0

Amortisation

 

-

 48.3

Impairment

 

 0.3

 58.4

Disposals

 

 (54.8)

 (62.7)

Exchange adjustment

 

 0.6

 7.1

At 30 September 2018

 

 89.2

 467.1

Amortisation

 3

-

 35.4

Impairment

 3

 19.1

-

Disposals

 15

 (19.1)

 (11.7)

Classified as held for sale

 17

 (61.9)

 (75.2)

Exchange adjustment

 

 1.1

 17.8

At 30 September 2019

 

 28.4

 433.4

Net book value - 2017

 

 363.1

 213.0

Net book value - 2018

 

 333.2

 131.2

Net book value - 2019

 

 251.2

 69.9

 

The Group tests goodwill annually for impairment, or more frequently if there are indicators that goodwill might be impaired. Intangible assets, all of which have finite lives, are tested separately from goodwill only where impairment indicators exist.

 

Goodwill impairment losses recognised in the period amounted to £19.1 million relating to On-geo in the Property Information segment. There is a tax credit of £nil associated with this impairment charge.

 

In the prior year ended 30 September 2018, the Group recorded a goodwill impairment charge of £0.3 million relating to Genscape in the Energy Information segment. There was a tax credit of £nil associated with this impairment charge.

 

During the year ended 30 September 2019 the Group determined that no indicators of intangible asset impairment had arisen and accordingly the total impairment charge recognised in the period was £nil.

 

In the prior year ended 30 September 2018, the Group recorded an impairment charge of £58.4 million largely made up of RMS(one) in the Insurance Risk segment.

 

 

19 Property, plant and equipment

During the year the Group spent £15.9 million (2018 £30.4 million) on property, plant and equipment and disposed certain of its property, plant and equipment with a carrying value of £8.8 million (2018 £1.5 million) for proceeds of £9.3 million (2018 £0.1 million). In addition property, plant and equipment with a carrying value of £0.9 million was owned by subsidiaries disposed during the year (2018 £5.5 million).

 

20 Borrowings

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

 

 

At 30 September 2019

At 30 September 2018

 

 

£m

£m

Current liabilities

 

 

 

Bonds

 

-

 218.7

Bank overdrafts

 

 11.9

 1.9

Loan notes

 

 1.6

 1.7

 

 

 13.5

 222.3

Classified as held for sale

 

 (1.7)

-

 

 

11.8

222.3

 

 

 

 

Non-current liabilities

 

 

 

Bonds

 

 202.8

 205.7

 

 

202.8

205.7

 

Bonds

The Company's 2018 bonds matured during the period and were repaid in full. In addition the Company bought back £6.4 million nominal of its outstanding 2021 bonds incurring a premium of £0.9 million.

 

Committed borrowing facilities

During the current period the Group cancelled committed bank facilities amounting to US$77.0 million (£62.6 million), after which the Group's total committed bank facilities amount to £381.4 million (2018 £431.2 million). Of these facilities £205.0 million (2018 £205.0 million) are denominated in sterling and £176.4 million (US$217.0 million) (2018 £226.2 million (US$294.0 million)) are denominated in US dollars. Drawings are permitted in all major currencies.

 

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

 

Whilst the Group's internal target of a 12-month rolling net debt to EBITDA ratio is no greater than 2.0 times at any point, the limit imposed by its bank covenants is no greater than 3.50 times together with a minimum interest cover ratio of 3.0 times, measured in March and September. These covenants were met at the relevant testing dates during the year. The bank covenant ratio uses the average exchange rate in the calculation of net debt. Excluding cash deposits with an original maturity of three months or more amounting to £nil (2018 £237.3 million), the resultant net cash to EBITDA ratio is 0.37 times (2018 0.01 times net debt to EBITDA). Using a closing rate basis for the valuation of net cash, the net cash to EBITDA ratio is 0.40 times (2018 0.02 times net debt to EBITDA). The interest cover ratio for the year was 24.2 times (2018 9.2 times).

 

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

 

At 30 September 2019

At 30 September 2018

 

£m

£m

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

 381.4

-

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

-

 431.2

Total bank facilities

 381.4

 431.2

 

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

 

At 30 September 2019

At 30 September 2018

 

£m

£m

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

 381.4

-

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

-

 431.2

Total undrawn committed bank facilities

 381.4

 431.2

21 Other financial assets

 

 

At 30 September 2019

At 30 September 2018

 

Note

£m

£m

Current assets

 

 

 

Collateral

(i)

 15.4

 8.0

Cash deposits with original maturities of three months or more

(ii)

-

 237.3

 

 

 15.4

 245.3

Non-current assets

 

 

 

Loans to associates and joint ventures

 

 12.0

 18.4

 

 

 12.0

 18.4

 

(i) The Group deposits collateral with its bank counterparties with whom it has entered into a credit support annex to an ISDA (International Swaps and Derivatives Association) Master Agreement. This represents cash that cannot be readily used in operations.

 

(ii) Represents cash deposits held with the Group's bank counterparties with an original maturity date of three months or more. As required by IAS 7, Statement of Cash Flows, these have been classified within Other financial assets.

 

22 Financial instruments and risk management

The Group's financial instruments are classified into the following categories:

 

 

IFRS 9 measurement category

IAS 39 measurement category

Derivative instruments

(i)

FVTPL

FVTPL

Trade receivables, contract assets and other receivables

 

Amortised cost

Amortised cost

Trade payables

 

Amortised cost

Amortised cost

Overdrafts, loan notes, finance leases and bank loans

 

Amortised cost

Amortised cost

Bonds

(ii)

Amortised cost

Amortised cost

Equity investments

 

FVTOCI

Amortised cost

Acquisition put option commitments

 

FVTPL

FVTPL

Provision for contingent consideration payable

 

FVTPL

FVTPL

Loans to joint ventures and associates

 

Amortised cost

Amortised cost

Collateral

 

Amortised cost

Amortised cost

Cash and cash equivalents

 

Amortised cost

Amortised cost

Cash deposits with original maturities of three months or more

 

Amortised cost

Amortised cost

Provision for contingent consideration receivable

 

FVTPL

FVTPL

 

(i) To the extent that net investment hedges are effective, changes in fair value of the derivative are taken to the translation reserve through Other Comprehensive Income.

 

(ii) The Group's bonds are measured at amortised cost as adjusted for fair value hedging.

 

 

 

The Group's financial assets and liabilities are as follows:

 

 

At 30 September 2019

At 30 September 2018

 

 

Carrying value

Carrying value

 

Note

£m

£m

Financial assets

 

 

 

Fair value through profit and loss

 

 

 

Derivative instruments in designated hedge accounting relationships

 

3.2

2.6

Derivative instruments not in designated hedge accounting relationships

 

0.4

7.1

Provision for contingent consideration receivable

 

0.3

0.1

Fair value through Other Comprehensive Income

 

 

 

Financial assets

 

33.8

-

Amortised cost

 

 

 

Available for sale investments

 

-

20.4

Trade receivables, contract assets and other receivables

(i)

250.7

213.8

Collateral

(ii)

15.4

8.0

Cash deposits with original maturities of three months or more

(iii)

-

237.3

Loans to joint ventures and associates

(iv)

12.0

18.4

Cash and cash equivalents

 

299.1

437.8

 

 

614.9

945.5

 

 

 

 

Financial liabilities

 

 

 

Fair value through profit and loss

 

 

 

Derivative instruments in designated hedge accounting relationships

 

(24.4)

(20.1)

Provision for contingent consideration payable

 

(2.1)

(4.8)

Acquisition put option commitments

 

-

(8.2)

Amortised cost

 

 

 

Trade payables

 

(35.9)

(39.9)

Bank overdrafts

 

(11.8)

(1.9)

Bonds

(v)

(202.8)

(424.4)

Loan notes

 

-

(1.7)

 

 

(277.0)

(501.0)

 

(i) Other receivables include a 9.0% fixed rate unsecured loan note, repayable on 27 September 2022 with a carrying value of £16.3 million (30 September 2018 £15.4 million).

 

(ii)The Group deposits collateral with counterparties with whom it has entered into a credit support annex to an ISDA (International Swaps and Derivatives Association) Master Agreement. These collateral deposits, which represents cash that cannot be readily used in the Group's operations, are disclosed within other financial assets (Note 21).

 

(iii) As required by IAS 7, Statement of Cash Flows, cash deposits held with the Group's bank counterparties with an original maturity date of three months or more are classified within other financial assets (Note 21).

 

(iv) Loans to joint ventures and associates (included within other financial assets) include a 10.0% fixed rate unsecured loan note, repayable on 31 December 2025 with a carrying value of £12.0 million (30 September 2018 £17.3 million).

 

(v) The nominal, carrying and fair values of the Group's bonds and the coupons payable are as follows:

 

 

 

At 30 September 2019 Fair value

At 30 September 2018 Fair value

At 30 September 2019 Carrying value

At 30 September 2018 Carrying value

At 30 September 2019 Nominal value

At 30 September 2018 Nominal value

Maturity

Annual coupon %

£m

£m

£m

£m

£m

£m

7 December 2018

 5.75

-

 220.2

-

 218.7

-

 218.5

9 April 2021

 10.00

 0.8

 8.4

 0.8

 9.1

 0.8

 7.2

21 June 2027

 6.375

 237.1

 228.8

 202.0

 196.6

 200.0

 200.0

 

 

 237.9

 457.4

 202.8

 424.4

 200.8

 425.7

 

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:

 

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

 

 

Level 1

Level 2

Level 3

Total

At 30 September 2019 by valuation method under IFRS 9

Note

£m

£m

£m

£m

Financial assets

 

 

 

 

 

Financial assets at fair value through Other Comprehensive Income

(i)

-

25.7

8.1

33.8

Fair value through profit and loss

 

 

 

 

 

Derivative instruments not in designated hedge accounting relationships

(ii)

-

0.4

-

0.4

Provision for contingent consideration receivable

(iii)

-

-

0.3

0.3

Derivative instruments in designated hedge accounting relationships

(ii)

-

3.2

-

3.2

 

 

-

29.3

8.4

37.7

Financial liabilities

 

 

 

 

 

Fair value through profit and loss

 

 

 

 

 

Provision for contingent consideration payable

(iii)

-

-

(2.1)

(2.1)

Derivative instruments in designated hedge accounting relationships

(ii)

-

(24.4)

-

(24.4)

 

 

-

(24.4)

(2.1)

(26.5)

 

 

 

Level 1

Level 2

Level 3

Total

At 30 September 2018 by valuation method under IAS 39

Note

£m

£m

£m

£m

Financial assets

 

 

 

 

 

Available for sale investments

(i)

-

-

20.4

20.4

Fair value through profit and loss

 

 

 

 

 

Derivative instruments not in designated hedge accounting relationships

(ii)

-

7.1

-

7.1

Provision for contingent consideration receivable

(iii)

-

-

0.1

0.1

Derivative instruments in designated hedge accounting relationships

(ii)

-

2.6

-

2.6

 

 

-

9.7

20.5

30.2

Financial liabilities

 

 

 

 

 

Fair value through profit and loss

 

 

 

 

 

Provision for contingent consideration payable

(iii)

-

-

(4.8)

(4.8)

Derivative instruments in designated hedge accounting relationships

(ii)

-

(20.1)

-

(20.1)

 

 

-

(20.1)

(4.8)

(24.9)

 

Equity investments classified as available for sale in the prior year were considered level 3 fair value instruments in line with the requirements of IAS 39. These instruments have been classified as FVTOCI as of 30 September 2019 and transferred to the level 2 category as the observable market data used in the valuation became available during this reporting period.

 

(i) Unlisted equity investments are valued using a variety of techniques including comparable company valuation multiples and discounted cashflows. In extremely limited circumstances, where insufficient recent information is available to measure fair value or when there is a wide range of possible fair value measurements, cost is used since this represents the best estimate of fair value in the range of possible valuations.

 

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

 

(ii) The fair value of derivative instruments is determined using market rates of interest and exchange, and established estimation techniques such as discounted cash flow and option valuation models.

 

(iii) Contingent consideration is valued based on the future profitability of the businesses to which the contingent consideration relates, discounted at market rates of interest.

 

Reconciliation of level 3 fair value measurement of financial assets is as follows:

 

Note

£m

At 30 September 2017

 

30.9

Additions

 

20.8

Contingent consideration received

 

(0.2)

Transfer to investment in associates

 

(29.4)

Impairment charge

 

(1.8)

Exchange adjustment

 

0.2

At 30 September 2018

 

20.5

Adjustment for transition to IFRS 9

2

9.4

Transfer from Level 3 to Level 2 on transition to IFRS 9

 

(21.9)

Restated at 1 October 2018

 

8.0

Transfer from investment in associates

 

0.3

Fair value movement in financial assets at fair value through Other Comprehensive Income

 

(0.1)

Exchange adjustment

 

0.2

At 30 September 2019

 

8.4

 

Reconciliation of level 3 fair value measurement of financial liabilities is as follows:

 

Note

£m

At 30 September 2017

 

(17.0)

Cash paid to settle contingent consideration in respect of acquisitions

 

14.4

Change in fair value of contingent consideration

7, 16

(2.2)

Finance charge on discounting of contingent consideration

7, 16

(0.2)

Additions to contingent consideration

 

(0.2)

Contingent consideration owned by subsidiaries disposed

 

0.4

At 30 September 2018

 

(4.8)

Cash paid to settle contingent consideration in respect of acquisitions

 

4.7

Change in fair value of contingent consideration

7

(0.2)

Additions to contingent consideration

 

(1.6)

Exchange adjustment

 

(0.2)

At 30 September 2019

 

(2.1)

 

The key inputs into the significant level 3 financial liabilities are the future profitability of the businesses to which the contingent consideration relate and the discount rate. The estimated range of possible outcomes for the fair value of these liabilities is £nil to £2.9 million (2018 £nil to £19.4 million).

 

The increase in fair value of contingent consideration of £0.2 million (2018 increase of £2.2 million) and finance charge on discounting of contingent consideration of £nil (2018 £0.2 million) were charged to the Consolidated Income Statement within net finance costs (Note 7).

 

A one percentage point increase or decrease in the growth rate used in estimating the expected profits, results in the contingent consideration liability at 30 September 2019 increasing or decreasing by £nil and £nil respectively (2018 £0.4 million and £0.4 million), with the corresponding change to the value at 30 September 2019 charged or credited to the Consolidated Income Statement in future periods.

 

The rates used to discount contingent consideration range from 0.0% to 1.0% (2018 0.8% to 1.1%). A one percentage point increase or decrease in the discount rate used to discount the expected gross value of payments, results in the liability at 30 September 2019 decreasing or increasing by £nil and £nil respectively (2018 £0.1 million and £0.1 million), with the corresponding change to the value at 30 September 2019 charged or credited to the Consolidated Income Statement in future periods.

 

23 Share capital and reserves

Share capital at 30 September 2019 amounted to £29.3 million (2018 45.3 million).

 

During the year the Company utilised 1.5 million (2018 2.9 million) A Ordinary Non-Voting Shares in order to satisfy incentive schemes. This represented 0.7% (2018 0.9%) of the called-up A Ordinary Non-Voting Share capital at 30 September 2019.

 

The Company also purchased 0.4 million (2018 2.2 million) A Ordinary Non-Voting Shares having a nominal value of £0.1 million (2018 £0.3 million) to match obligations under incentive plans. The consideration paid for these shares was £2.5 million (2018 £14.3 million).

 

At 30 September 2019 options were outstanding under the terms of the Company's Executive Share Option Schemes, Long-Term Incentive Plans and nil-cost options, over a total of 2,728,139 A Ordinary Non-Voting Shares (2018 3,075,745 shares).

 

On 3 March 2019, the Group announced its intention to distribute all of the Euromoney Institutional Investor PLC (Euromoney) shares owned by the Group to certain holders of DMGT's A Ordinary Non-Voting Shares (A Shares), by way of a dividend in specie (the Euromoney Distribution), as well as a £200.0 million cash distribution (the Cash Distribution).

 

The terms were such that Fully Participating Shareholders would participate in the Euromoney Distribution and Cash Distribution whilst Rothermere Affiliated Shareholders would only participate in the Cash Distribution and on a limited basis.

 

The proposal was approved at a Class Meeting of the Fully Participating Shareholders on 26 March 2019. The Euromoney Distribution occurred at 8am on 2 April 2019 and the Cash Distribution on 15 April 2019.

 

Before these distributions were made c.46.4% of the A Shares held by Fully Participating Shareholders were converted into a new class of B Shares and c.4.0% of the A Shares held by Rothermere Affiliated Shareholders converted into a new class of C Shares.

 

The Euromoney Distribution and a special dividend of £183.0 million in aggregate in cash was then paid to the Fully Participating Shareholders in respect of the B Shares and a restricted special dividend of £17.0 million in aggregate in cash was paid to the Rothermere Affiliated Shareholders in respect of the C Shares.

 

Once these distributions were made the B Shares and the C Shares were converted into Deferred B Shares and Deferred C Shares respectively before being transferred to the Company for no valuable consideration and cancelled shortly thereafter. Consequently, these distributions resulted in a reduction in the share capital of DMGT. The voting Ordinary Shares did not participate in the distributions.

 

For each A Share held at 6.00pm on 29 March 2019, the conversion record time, the Fully Participating Shareholders received c.0.19933 of a Euromoney Share and c.68.13p in cash, and there was a reduction in their holding of c.0.46409 of an A Share. For each A Share held by the Rothermere Affiliated Shareholders, they received c.25.53p in cash and there was a reduction in their holding of c.0.03946 of an A Share.

 

The Rothermere Affiliated Shareholders' proportionate interest in the total number of A Shares in issue increased from 20.0% of the issued A Shares before the distributions to 30.0% after and their combined shareholding of A Shares and Ordinary Shares increased from 24.0% of the issued A Shares and Ordinary Shares before the distributions to 36.0% after.

 

24 Retirement benefit obligations

The Group operates a number of pension schemes under which contributions are paid by the employer and employees.

 

The schemes include a number of defined contribution pension arrangements, in addition to funded defined benefit pension arrangements which are closed to future accrual. The defined benefit schemes in the UK, together with some defined contribution plans, are administered by Trustees or Trustee Companies.

 

The total net pension charge of the Group for the year ended 30 September 2019 was £7.3 million (2018 £9.3 million).

 

In October 2018 the High Court ruled in the Lloyds Banking Group (LBG) case that UK pension schemes which had contracted out of the State Earnings Related Pension Scheme would need to equalise benefits for the effect of unequal Guaranteed Minimum Pensions (GMP) between men and women. Whilst it is possible that one or more of the interested parties may lodge an appeal against this ruling the Group has booked a non-cash past service charge of £3.1 million, which represents an estimate of the impact of this equalisation. This non-cash charge is included in the net pension charge of £7.3 million.

 

The defined benefit obligation is calculated on a year-to-date basis, using the latest actuarial valuation as at 30 September 2019. The assumptions used in the valuation are summarised below:

 

Year ended 30 September 2019

Year ended 30 September 2018

 

%

%

Price inflation

 3.10

 3.25

Pension increases

 3.00

 3.10

Discount rate

 1.80

 2.80

 

The net surplus as at the end of the period amounted to £215.0 million (2018 £243.5 million).

 

 

25 Contingent liabilities

The Group has issued standby letters of credit amounting to £2.9 million (2018 £3.3 million).

 

The Group is exposed to libel claims in the ordinary course of business and vigorously defends against claims received. The Group makes provision for the estimated costs to defend such claims and provides for any settlement costs when such an outcome is judged probable.

 

The Group's Energy Information business (Genscape) provided a third-party auditor service verifying Renewable Identification Numbers (RINs) for renewable fuel production activities in the US, as part of the Renewable Fuel Standard Quality Assurance Program (Program), a regulatory program administered by the US Environmental Protection Agency (EPA). 

 

Following discovery and self-reporting to the EPA by Genscape of potential fraudulent RINs generated by two companies but verified by Genscape in 2014 under the Program, the EPA issued a notice of intent to revoke the ability of Genscape to verify RINs as a third-party auditor on 4 January 2017. Following the EPA investigation of the two companies in April 2016, the two companies pleaded guilty of fraud in connection with generating the RINs.

 

EPA regulations for the audit Program set a liability cap on replacement of invalid RINs of 2.0% of the RINs. In April 2017 Genscape voluntarily paid the 2.0% liability cap associated with the invalid RINs at a cost of US$1.3 million, based on the then-prevailing market rates, subject to a reservation of rights. The EPA regulations allow for situations where the cap does not apply - including fraud, auditor error and negligence.

 

The EPA has not formally alleged any fraud or intentional wrongdoing by Genscape, but in its May 2019 final determination letter, EPA did find grounds for auditor error and negligence by Genscape and ordered Genscape to replace 69.2 million RINs it had verified.

 

In July 2019, Genscape filed a petition for review with the Sixth Circuit Court of Appeals and a motion to stay the EPA's order to replace the 69.2 million RINs which was accepted for the duration of Genscape's petition for review.

 

Since RINs trade in a volatile range, averaging approximately 56 cents over the previous 24 months, this equates to a potential maximum claim of approximately US$38.4 million. Using the year end price of 41 cents the potential maximum claim would be US$28.1 million. Genscape continues to co-operate with EPA and in October 2019 Genscape made an offer to replace 4.6 million RINs at a cost of approximately US$2.5 million but the EPA have not responded to this offer. Discussions with the EPA are ongoing but considering the uncertainties involved, the length of time involved and taking note of the order from the EPA, the Group, without admitting any wrongdoing, has made a provision for the potential maximum replacement RINs cost of US$40.0 million, including directly attributable costs. This estimate was based on the average two-year RIN price due to the liquidity and volatility of the market price of RINs. This provision could change substantially over time as the dispute progresses and new facts emerge.

 

26 Ultimate holding company

The Company's immediate parent Company is Rothermere Continuation Limited (RCL), a company incorporated in Bermuda.

 

Daily Mail and General Trust plc is the only company in the Group to prepare consolidated financial statements.

 27 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. The transactions between the Group and its joint ventures and associates are disclosed below.

 

For the purposes of IAS 24, Related Party Disclosures, executives below the level of the Company's Board are not regarded as related parties.

 

The remuneration of the Directors at the year end, who are the key management personnel of the Group, is set out in aggregate in the audited part of the Directors' Remuneration Report.

 

Ultimate controlling party

Rothermere Continuation Limited (RCL) is a holding company incorporated in Bermuda. The main asset of RCL is its 100% holding of DMGT's issued Ordinary Shares. RCL has controlled the Company for many years and as such is its immediate parent Company. RCL is controlled by a discretionary trust (the Trust) which is held for the benefit of Viscount Rothermere and his immediate family. The Trust represents the ultimate controlling party of the Company. Both RCL and the Trust are administered in Jersey, in the Channel Islands. RCL and its directors, and the Trust are related parties of the Company.

 

Transactions with Directors

During the period, Forsters LLP in which Mr A Lane, a Non-Executive Director of the Company, is a partner, provided legal services to the Company amounting to £nil (2018 £14,820).

 

Transactions with joint ventures and associates

Associated Newspapers Ltd (ANL) has a 50.0% (2018 50.0%) shareholding in Northprint Manchester Ltd, a joint venture. The net amount due to ANL of £5.8 million (2018 £5.8 million) has been fully provided.

 

Mail Media, Inc. had a 50.0% (2018 50.0%) shareholding in Daily Mail On Air LLC (DailyMailTV), a joint venture in the prior period. In the prior period, Mail Media, Inc. provided funding amounting to £4.9 million. At 30 September 2019, £nil (2018 £5.9 million) was owed by DailyMailTV. During the period, Mail Media, Inc. acquired the remaining 50.0% shareholding in DailyMailTV and DailyMailTV became a wholly-owned subsidiary.

 

DMG US Investments, Inc. had a 45.0% (2018 45.0%) shareholding in Truffle Pig LLC, an associate, which was disposed of during the period. Funding of £nil (2018 £0.2 million) remained outstanding at 30 September 2019.

 

DMGV Ltd (DMGV) has a 23.9% (2018 23.9%) shareholding in Excalibur Holdco Ltd (Excalibur), an associate. During the period, services provided to Excalibur amounted to £0.5 million (2018 £0.6 million). At 30 September 2019, amounts due from Excalibur amounted to £0.1 million (2018 £0.1 million), together with loan notes of £17.3 million (2018 £17.3 million). The loan notes carry a coupon of 10.0% and £6.5 million (2018 £4.0 million) was outstanding in relation to this coupon at 30 September 2019. At 30 September 2019, the Group had made an expected lifetime impairment allowance of £12.0 million (2018 on transition to IFRS 9 £12.0 million) in relation to amounts due from Excalibur.

 

DMGV has a 45.3% (2018 25.8%) shareholding in Yopa Property Ltd (Yopa), an associate. During the period, the Consumer Media segment provided services to Yopa amounting to £0.6 million (2018 £0.5 million). At 30 September 2019, £0.1 million (2018 £0.1 million) was owed by Yopa to the Consumer Media segment. During the period, Yopa provided services to the Property Information segment amounting to £0.1 million (2018 £nil).

 

DMGV has a 16.5% shareholding in Bricklane Technologies Ltd (Bricklane), an associate acquired during the period. During the period, the Consumer Media segment provided services to Bricklane amounting to £0.4 million. DMGV provided funding amounting to £1.2 million cash and £0.8 million of media credits.

 

DMGV has a 21.1% shareholding in Cazoo Ltd, an associate acquired during the period. DMGV provided cash funding amounting to £22.5 million and £5.0 million of media credits during the period.

 

DMGV has a 36.8% shareholding in Entale Media Ltd, an associate acquired during the period. DMGV provided cash funding amounting to £2.0 million during the period.

 

Daily Mail and General Trust plc (DMGT) had a 49.8% (2018 49.8% owned by DMGZ Ltd (DMGZ)) shareholding in Euromoney Institutional Investor PLC (Euromoney). During the period, services were recharged to Euromoney amounting to £0.1 million (2018 £0.1 million) and consortium relief losses were surrendered under an agreement between Euromoney and the Group amounting to a rebate of £nil (2018 £0.1 million). During the period, all of the Euromoney shares were distributed to certain shareholders by way of dividend in specie.

During the period, DMGZ received dividends of £11.9 million from Euromoney (2018 £17.1 million received by DMGZ and DMG Charles Ltd), an associate, prior to the shareholding in Euromoney being transferred from DMGZ to DMGT.

 

During the period, DMG World Media (2006) Ltd recharged costs amounting to £nil (2018 £0.3 million) to BCA Research, Inc., a Euromoney subsidiary.

 

During the period, ANL recharged costs amounting to £0.8 million (2018 £1.4 million) to Euromoney. At 30 September 2019, £nil (2018 £0.3 million) was owed by Euromoney.

 

During the period, Euromoney provided services to Risk Management Solutions Ltd amounting to £0.1 million (2018 £0.1 million).

 

DMGI Land & Property Europe Ltd (DMGILP), of which Landmark Information Group Ltd (Landmark) is a subsidiary undertaking, has a 50.0% (2018 50.0%) shareholding in Point X Ltd (Point X), a joint venture. During the period, Landmark charged management fees of £0.3 million (2018 £0.3 million) and recharged costs of £0.1 million (2018 £0.1 million) to Point X. Point X received royalty income from Landmark of £0.1 million (2018 £0.1 million). DMGILP received dividends of £0.2 million (2018 £nil) from Point X.

 

Decision Insight Information Group (UK) Ltd (DIIG UK) has a 50.0% (2018 50.0%) shareholding in Decision First Ltd (DF), a joint venture. During the period, DIIG UK recharged costs to DF amounting to £0.2 million (2018 £0.2 million) and charged management fees amounting to £0.1 million (2018 £0.1 million) and received dividends from DF of £nil (2018 £0.4 million).

 

On-Geo GmbH (On-geo) has a 50.0% (2018 50.0%) shareholding in HypoPort On-Geo (HypoPort), a joint venture. During the period, HypoPort made purchases from On-geo amounting to £4.6 million (2018 £9.1 million). During the period, On-geo received dividends of £nil (2018 £0.1 million) from HypoPort. At 30 September 2019, £nil (2018 £1.5 million) was owed by HypoPort. The Group disposed of On-geo in the Property Information segment during the period, and therefore, its shareholding in HypoPort was also disposed.

 

RMSI Ltd (RMSI), a company which shares a common director with the Landmark Group, invoiced sales amounting to £1.7 million (2018 £2.7 million). Costs were recharged by Landmark to RMSI amounting to £0.7 million (2018 £0.7 million). At 30 September 2019, £0.4 million (2018 £0.4 million) was owed to RMSI by Landmark.

Hobsons, Inc. (Hobsons) has a 50.0% (2018 50.0%) shareholding in Knowlura, a joint venture. At 30 September 2019, £0.2 million (2018 £0.3 million) was owed by Knowlura.

 

Risk Management Solutions, Inc. (RMS, Inc.) has a 20.0% (2018 20.0%) shareholding in OYO RMS Corporation (OYO), an associate. During the period, RMS, Inc. received a dividend of £nil (2018 £0.4 million) from OYO.

 

RMS, Inc. has a 26.6% (2018 25.9%) shareholding in Praedicat, Inc. (Praedicat), an associate. During the period, RMS, Inc. provided funding of £0.5 million (2018 £1.5 million) to Praedicat.

 

The Group has a 55.9% shareholding in LineVision, Inc. (LineVision). Since the Group's share of voting rights in LineVision is 49.0%, the Group does not have control but has significant influence, therefore the investment is treated as an associate. In the prior period, Genscape sold assets with a net book value of US$0.1 million to LineVision for their fair value of US$2.1 million for US$nil cash proceeds.

 

The Group reduced its shareholding in Trepp Port, LLC (TreppPort) on 1 October 2018 from 51.0% to 50.0% and TreppPort became a joint venture. During the period, Trepp, LLC. received dividends of £0.2 million (2018 £nil) from TreppPort.

 

Other related party disclosures

Under an agreement to guarantee the income generated from certain property assets held by the Harmsworth Pension Scheme which were purchased from the Group during a prior period, the Group was charged for rent and service charges in relation to the current period amounting to £0.2 million (2018 £0.3 million). At 30 September 2019, £0.1 million (2018 £0.1 million) was owed to the Harmsworth Pension Scheme by the Group.

 

At 30 September 2019, the Group owed £0.9 million (2018 £0.8 million) to the pension schemes which it operates. This amount comprised employees' and employer's contributions in respect of September 2019 payrolls.

 

The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during the period was £0.3 million (2018 £0.3 million).

 

In July 2012, the Group entered into a contingent asset partnership whereby a £150.0 million loan note, guaranteed by the Group, was used to commit £10.8 million funding p.a. to the Harmsworth Pension Scheme. Interest payable to DMG Pension Partnership LP in the period totalled £11.0 million (2018 £11.0 million).

 

ANL, which shares common control by Rothermere Continuation Limited, with DMGT Healthcare Trustees, paid contributions to the scheme totalling £0.8 million (2018 £0.7 million). At 30 September 2019, a total of £1.3 million (2018 £1.3 million) was owed to the scheme by ANL.

 

28 Post balance sheet events

Disposals

On 26 August 2019 the Group announced that it had agreed the sale of Genscape, its Energy Information business, to Verisk, a leading data analytics provider, for gross proceeds of US$364.0 million. Genscape will become part of Wood Mackenzie, a Verisk business, and will enhance Wood Mackenzie's existing and complementary sector intelligence business in short-term energy data and analytics. The sale completed on 5 November 2019 following the completion of customary closing conditions.

 

On 2 October 2019, the Group entered into a definitive agreement to dispose of Buildfax, a leading provider of property condition and history data, also to Verisk for gross proceeds of US$42.5 million. The sale completed on 11 October 2019 following completion of customary closing conditions.

 

On 29 November 2019 the Group's interest in Cazoo was diluted from 21.1% to 18.5%. The Group ceased to have significant influence over Cazoo and from that date will cease to equity account.

 

Acquisitions

On 29 November 2019 the Group acquired the entire share capital of the 'i', the UK national newspaper and website, from JPI Media Limited. Total cash consideration payable is £49.6 million.

 

The 'i' has an established reputation for quality journalism with retail sales of approximately 170,000 newspapers each weekday and over 190,000 copies of the iweekend each Saturday. The website, inews.co.uk, attracts approximately 300,000 daily unique browsers. It is anticipated that the acquisition will be reviewed by the UK Competition and Markets Authority. The 'i' reported pro-forma revenues of £34.4 million and pro-forma operating profits of £10.6 million for the 12 months to 31 December 2018.

 

The Group has not presented a fair value table of the net assets acquired since, given the timing of the announcement, it is impractical to do so.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR UGGBWPUPBUGA
Date   Source Headline
7th Jan 20227:00 amRNSUnconditional Final Offer Update
6th Jan 20224:00 pmRNSExtension of Offer Period
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15th Dec 202110:58 amEQSDirector/PDMR Shareholding
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15th Dec 202110:20 amBUSForm 8.3 - DAILY MAIL & GENERAL TRUST PLC
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15th Dec 20217:00 amRNSAcceptance level update
14th Dec 20215:29 pmEQSDeclaration of Special Dividend
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