20 Dec 2018 15:26
EUROMONEY INSTITUTIONAL INVESTOR PLC
ANNUAL REPORT AND ACCOUNTS 2018 ANDNOTICE OF ANNUAL GENERAL MEETING 2019
20 December 2018
Euromoney Institutional Investor PLC ("Euromoney") the international business information and events group, has published the following documents on its website www.euromoneyplc.com:
Document | Location |
Annual Report and Accounts 2018 | www.euromoneyplc.com/investor-relations/reports-and-presentations |
Notice of Annual General Meeting 2019 | www.euromoneyplc.com/investor-relations/shareholder-services/agm-information |
The Annual Report and Accounts 2018, together with the Notice of Annual General Meeting 2019 and Form of Proxy have been posted or otherwise made available to shareholders. These documents have been uploaded to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.
The Company's Annual General Meeting 2019 is scheduled to be held at 9.30am on 1 February 2019 at 8 Bouverie Street, London, EC4Y 8AX.
The information set out below, which is extracted from the Annual Report and Accounts 2018, is provided solely for the purpose of complying with DTR 6.3.5R. The information should be read in conjunction with the Preliminary Statement announcement made on 22 November 2018.
Statement of Directors' responsibilities in respect of the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Company Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently
· state whether applicable IFRSs as adopted by the European Union have been followed for the Group Financial Statements and United Kingdom Accounting Standards, comprising FRS 102, have been followed for the Company Financial Statements, subject to any material departures disclosed and explained in the Financial Statements
· make judgements and accounting estimates that are reasonable and prudent and
· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Financial Statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Each of the Directors confirm that to the best of their knowledge:
· the Company's Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company
· the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position, profit and cash flows of the Group and
· the Strategic Report and the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a
description of the principal risks and uncertainties that it faces.
Principal risks and uncertainties
The principal risks and uncertainties the Group faces vary across its different businesses. Management of significant risk is the responsibility of the Board and during the year was overseen by the Risk Committee. For the year ahead, the Risk Committee will continue to operate as a management committee, reporting into our reconstituted Audit and Risk Committee which will result in management providing the Board with a more regular and detailed review of the management of the Group's principal risks. In tandem with this, the Group plans to review the controls in place across the business and update its risk management framework. The Group's principal risks and uncertainties are summarised below.
Downturn in key geographic region or market sector (cyclical downturn)
Key factors | Mitigation | Risk appetite |
· Concentration of customers in financial services sector makes this exposure acute · Global economic and geopolitical risk has further increased this year driven by continuing uncertainty in the UK and Europe over the UK's EU exit and the increasingly protectionist trade policies of the US and China · Headwinds in the asset management market including the shift towards passive portfolio management, new technologies and the impact of MiFID II continue to affect clients in the sector
| · The Group actively manages cyclical risk through its strategic framework · The Group continues to carry out comprehensive risk reviews of its asset management businesses resulting in detailed mitigation plans for each business and continuous tracking of effective risk management · A significant restructuring exercise has been carried out to 'right-size' our BCA and NDR businesses and ensure focus on core products · The Group operates in many geographical markets · Some diversification in sector mix · Ability to cut some costs temporarily and quickly
| Risk tolerant Prior years (relative position) 2017: Risk tolerant 2016: Risk tolerant 2015: Risk tolerant
Post-mitigation risk trend
This risk is increasing
Description of risk change
Global economic and geopolitical uncertainty is increasing following the US election, US and Chinese protectionism, limited progress of the UK's EU exit negotiations and disruption in a sector with concentrated Group revenues
|
Board's view There are limited options to mitigate impact of a significant cyclical downturn in the short and medium term. The residual risk will remain high. The Board also wishes to continue to serve the Asset Management segment because it considers it to be sufficiently attractive over the medium term. | ||
Product and market transformation/disruption (structural change)
Key factors | Mitigation | Risk appetite |
· Competition from existing competitors, new disruptive players and new entrants · New technologies change how customers access and use our products · Changing demographics can affect customer needs and opportunities · Structural pressure on customer business models will affect demand for the Group's products and services, particularly in financial services · Regulations such as MiFID II creating both challenges and opportunities in asset management sector · Free content available via the internet increases the threat to paid subscription model · Lower barriers to entry for new entrants · Not acquiring the types of assets that the Group's strategy requires
| · Strategy designed to appraise and evaluate structural risks and respond to them, taking advantage of opportunities where identified · Regular CEO-led reviews across all divisions · Entrepreneurial approach · Effective management reporting with regular forecast reviews · Portfolio spreads risk to some degree · Portfolio management allows the Group to sell structurally challenged businesses and to buy structurally strong ones · Cyclical review of divisional activities by the Risk Committee | Risk tolerant Prior years (relative position) 2017: Risk tolerant 2016: Risk tolerant 2015: Risk tolerant
Post- mitigation risk trend
This risk is unchanged
Description of risk change
As an entrepreneurial business, the Group is experienced at managing this risk
|
Board's view Controls are in place but exposure to this risk will remain moderate. | ||
Exposure to US dollar exchange rate
Key factors | Mitigation | Risk appetite |
· Approximately two-thirds of revenues and profits are generated in US dollars, including approximately 40% of the revenues in the UK-based businesses. This gives significant exposure to movements in the US dollar for both UK revenues and the translation of results of foreign subsidiaries · A significant strengthening of sterling against the US dollar could reduce profits and dividends · The Group also undertakes transactions in many other currencies, although none currently provides a significant risk to the results · The UK's exit from the EU may result in significant currency fluctuations depending on the terms of the exit
| · US dollar forward contracts are used to hedge 80% of UK based US dollar revenues for the coming 12 months and 50% of these revenues for a further six months · Exposure from the translation of US dollar-denominated earnings is not directly hedged but is partially offset by US dollar costs and the use of US dollar-denominated debt when debt is required · Sensitivity analysis is performed regularly to assess the impact of currency risk and is reviewed by the Tax & Treasury Committee · Given heightened volatility, the Group hedging strategy is under frequent review and includes regular impact analysis of various exchange rate scenarios together with internal risk mitigations such as natural hedging of non-sterling earnings
| Risk tolerant
Prior years (relative position) 2017: Risk tolerant 2016: Risk tolerant 2015: Risk tolerant
Post-mitigation risk trend
This risk is unchanged
Description of risk change
The Group is experienced at managing risks related to its exposure to the US dollar and this risk remains unchanged
|
Board's view Although the Group considers this risk unchanged, the increased volatility and uncertainty of sterling against the US dollar after the UK's exit from the EU is expected to continue for some time. | ||
Information security breach resulting in challenge to data integrity
Key factors | Mitigation | Risk appetite |
· Integrity of data products is fundamental to the success of the business · The Group relies on large quantities of data including customer, employee and commercial data · Increasing number of cyber-attacks affecting organisations globally · The Group has many websites and is reliant on distributed technology, increasing exposure to threats · A successful cyber-attack could cause considerable disruption to business operations, lost revenue, regulatory fines and reputational damage · The EU General Data Protection Regulation increases regulatory scrutiny and penalties · Technological innovations in mobile working, cloud-based technologies and social media introduce new information security risks · Threats such as ransomware and cryptomining require the Group to adapt to a continually shifting landscape · Phishing remains one of the most serious threats to network security
| · Governance provided by Risk Committee and Information Security Steering Group · Approved information security standards and policies which are reviewed on a regular basis · Continuing education and awareness programmes for all staff · Active information security programme (including access management and cyber-resilience planning) to align all parts of the Group with its information security standards · Crisis management and business continuity frameworks cover all businesses including disaster recovery planning for IT systems · Multi-layered defence strategy · New, more robust IT security due diligence framework for acquisitions · Access to key systems and data is restricted, monitored and logged with auditable data trails in place · Comprehensive backups for IT infrastructure, systems and business data · Increase in number of dedicated IT security roles in Central Technology · Professional indemnity insurance provides cover for cyber risks including cyber-attack and data breach incidents · Information security is reviewed as part of our internal audit process · Regular information security training for employees, contractors and freelancers · Incident response playbook
| Risk averse Prior years (relative position) 2017: Risk averse 2016: Risk averse 2015: Risk neutral Post-mitigation risk trend
This risk is increasing
Description of risk change
Most industry information security analysts agree that this risk is increasing and warn that companies will continue to face more regular and sophisticated cyber-attacks
|
Board's view The use of technology creates this inherent risk. The Group strives to balance the need to innovate through the use of technology while responsibly managing risk, including through the use of third party expertise. Controls to prevent an information security breach or cyber-attack are reviewed regularly and, where required, enhanced. However, the rising number of cyber-attacks affecting organisations globally, the Group's greater dependency on technology and the growing threat from cyber-crime are increasing this risk. | ||
Reputational damage from a legal, regulatory or behavioural issue arising from operational activities
Key factors | Mitigation | Risk appetite |
· The Group operates in many jurisdictions and must be compliant with all applicable laws and regulations · The Group's businesses publish, market and license increasingly complex content and data which in some cases is data on which its customers may choose to rely when executing transactions · Success of the Group is dependent on client confidence in integrity of products and brands · Claimants can forum shop when determining where to litigate or threaten legal proceedings · Compliance risk is increasing for information providers as price, benchmark and index reporting activities are coming into scope of new regulations being introduced as a result of the financial crisis of 2008 and LIBOR scandal · Risk or reputational damage can arise from errors in underlying data or content, failures of data integrity, failure to educate customers on appropriate usage of data, inappropriate reliance on third party data or content to create proprietary content or errors in content creation, or a failure to comply with applicable law or regulation
| · Processes and methodologies for assessing commodity prices and calculating benchmarks and indices are clearly defined and documented · Compliance staff appointed in key positions · Compliance with International Organization of Securities Commissions (IOSCO) standards achieved for relevant pricing products · Code of conduct and other key policies in place for price assessment, benchmark and index reporting activities · Refreshed anti-bribery and corruption training and awareness programme rolled out globally in 2018 · A review and update of the Group's trade sanctions controls and policy was completed · Review processes for operation of events and awards undertaken in 2018 · Specialist training in publishing law issues provided to relevant staff · Company-wide speak up policy in place · Comprehensive legal disclaimers in place · Professional indemnity insurance
| Risk averse
Prior years (relative position) 2017: Risk averse 2016: Risk averse 2015: Risk averse
Post-mitigation risk trend
This risk is unchanged
Description of risk change
Information providers face increased compliance risks as a result of the complexity of data they publish which customers may rely on for certain business decisions
|
Board's view We have a zero-tolerance approach to certain legal and regulatory risks such as bribery. At the same time, the publication of data and content in digital businesses inevitably exposes the Group to global legal and regulatory risk. The manner in which we conduct our businesses can also result in risk if policies are not complied with. Our divisions have access to the Group's central functions such as legal, risk and internal audit, which provide more specialist resource to raise awareness of, manage and mitigate risk. Legal and regulatory compliance risk for the Group is unchanged. | ||
Disruption to operations from a business continuity failure
Key factors | Mitigation | Risk appetite |
· Significant reliance on third-party technology hosting services · Many products are dependent on specialist, technical and editorial expertise · A significant incident affecting one or more of the Company's key offices (London, New York, Montreal or Hong Kong) could lead to disruption to Group operations and reputational damage · Potential impact of the UK's exit from the EU without a deal in place could cause disruption to global business travel. This could affect both our employees' and customers' ability to travel · Information security breach impacting wider business operations | · Crisis management and business continuity framework covers all businesses including disaster recovery planning for IT systems · Crisis management exercise programme for the senior management team · Group-wide IT disaster recovery testing conducted every six months and business continuity testing conducted every 12 months · Clear responsibilities for business continuity planning established across divisions · Substantial central and business group investment in cloud-based platforms and software · Risk assessments for new suppliers and technologies consider operational and financial resilience · Disposal of a number of businesses this year has reduced the number of office locations globally · Migration of the Group's websites to cloud hosting solution
| Risk averse
Prior years (relative position) 2017: Risk averse 2016: Risk averse 2015: Risk averse
Post-mitigation risk trend
This risk is unchanged
Description of risk change
The Group recognises that business continuity events will arise from time to time and remains committed to active management of this risk |
Board's view Business disruption is an unavoidable risk but can be mitigated if business continuity plans are well developed and managed. In spite of challenges such as extreme weather in Asia and the US and unplanned technology downtime, all businesses maintained operations successfully throughout the year which demonstrated that effective controls are in place. However, regular IT and business continuity planning and testing will continue to be an important control.
| ||
Catastrophic or high impact incident affecting key events or wider business
Key factors | Mitigation | Risk appetite |
· The Group has a number of large events which are exposed to one-off risks including natural hazards and security incidents · Risk affects customers as well as staff and revenue, and can also adversely impact brand reputation · Prolonged interruption to business travel will harm event revenues and disrupt management and sales operations · The Group operates in regions with higher risk of natural hazards | · A new event risk management framework is being rolled-out in 2019 · Divisional Directors with responsibility for events sit on the Risk Committee · Crisis management and business continuity framework requires all businesses to plan for high impact events · Specialist security and medical assistance services engaged to support all staff working away from the office · Mandatory security and risk management training programme for event staff and business travellers · Close co-ordination between central functions such as risk and information risk with events teams to ensure robust approach to risk management · With sufficient notice, events can be moved to non-affected regions · Cancellation insurance for the Group's largest events | Risk averse
Prior years (relative position)
2017: Risk averse
2016: Risk averse
2015: Risk neutral
Post-mitigation risk trend
This risk is unchanged
Description of risk change
The Group recognises that international events businesses are exposed to this risk and the introduction of its event risk management framework will enable further mitigation of this risk in 2019
|
Board's view The Group continues to invest in training and resources to keep staff safe when travelling and to improve event/conference resilience. | ||
Acquisition or disposal fails to generate expected returns
Key factors | Mitigation | Risk appetite |
· Active portfolio management means the Group continues to make strategic acquisitions and disposals · Significant growth has been M&A related, through both acquired profit and growth in acquired businesses · Failure to successfully acquire either the right businesses (meaning businesses in our top-right quadrant or which can be developed and moved into our top-right quadrant), or a failure to successfully make acquisitions at all, will negatively impact our ability to deliver the Group strategy · Increasingly high multiples and competitive auction processes for high quality assets can favour private equity buyers · Failure to integrate as intended may mean an acquired business does not generate the expected returns · Risk of impairment loss if an acquired business does not generate the expected returns · Disposal risks arise from failing to identify the time at which businesses should be sold or failing to achieve optimal price · Group strategy relies on successful recycling of capital and therefore M&A execution impacts core strategy
| · M&A strategy and execution is a regular topic of Board focus · Investment Committee established enabling quicker decision-making and detailed Board oversight of M&A transactions · CEO and CFO closely involved in M&A execution · Active portfolio management with a clear framework and operating in line with agreed strategy · Development of key objective criteria against which acquisition or disposal decisions are tested · Appropriate approvals process in place for transactions · Investment in a larger Corporate Development team · Emphasis on and investment in carrying out external, independent commercial due diligence at an early stage
| Risk neutral
Prior years (relative position)
2017: Risk neutral
2016: Risk neutral
2015: Risk neutral
Post-mitigation risk trend
This risk is unchanged
Description of risk change
A need to execute successful M&A in a competitive market combined with robust risk management and controls means this risk is unchanged
|
Board's view The Board's focus on M&A combined with management's experience enables the Group to remain disciplined in its approach, minimising the risk of unsuccessful execution or a failure to make the right acquisitions, or any acquisitions at all.
| ||
Unforeseen tax liabilities
Key factors | Mitigation | Risk appetite |
· The Group operates within many increasingly complex tax jurisdictions · Changes in legislation and interpretation
| · Audit Committee and Tax and Treasury Committee oversight · New Global Head of Tax and Treasury recruited in 2018 to lead dedicated Tax and Treasury team · The disposal of a number of businesses in 2018 has reduced the number of office locations globally · Making financial provisions where appropriate · Policy to comply with tax laws in a responsible manner · Appropriate care taken to protect the Group's reputation and have open and constructive relationships with fiscal authorities · Internal audit programme covers tax
| Risk averse
Prior years (relative position)
2017: Risk averse
2016: Risk averse
2015: Risk averse
Post-mitigation risk trend
This risk is increasing
Description of risk change
The Group is experienced at managing the tax risks arising from its international business portfolio. However, uncertainty over the terms of the UK's exit from the EU means this risk is increasing
|
Board's view Effective controls are in place but the Group cannot eliminate this risk entirely due to the complexity of the Group's structure and the number of jurisdictions in which it operates. The Group has made appropriate provisions for historical potential liabilities in line with advice from external advisors.
| ||
Failure to implement the strategy effectively due to a loss of key staff
Key factors | Mitigation | Risk appetite |
· The strategy is embedded across the Group and is having a positive impact on financial performance. Its implementation is partially dependent on the retention and performance of key staff · Our segments and divisions have individual strategies dependent on divisional staff with specific skills, expertise and industry knowledge · An inability to recruit, retain and train for critical roles will adversely impact our ability to deliver the strategy successfully
| · Significant investment in staff budgeted for 2019 across a range of areas, including salary benchmarking and training · Ensuring compensation for critical staff including a balance of short-term and long-term incentives · Remuneration Committee oversight of Group Management Board rewards · Investment in training such as Leadership 3.0 and Management 3.0 programmes · Plan to launch an employee forum during the year, allowing for improved employee engagement · Proactive relationship management of recruitment search companies to ensure our hiring needs are met · New recruitment policy, process and training to be rolled out in 2019 · Maintaining the Group's reputation for an entrepreneurial approach, making it an attractive place to work · There are sufficient businesses within each segment within the Group to mitigate the impact of 'business-as-usual' departures of critical staff · Succession planning accelerated in 2018. Plans are now in place for most key staff and our new succession planning framework will help businesses identify and manage key staff · Contractual notice periods are designed to manage the risk of critical staff leaving on short notice · Culture survey results have led to a number of employee initiatives across the Group, designed to improve career progression and staff retention | Risk neutral: becoming more averse
Prior years (relative position) 2017: Risk neutral
Post-mitigation risk trend
This risk is unchanged
Description of risk change
Successful implementation of the Group's strategy remains dependent on hiring and retaining key staff. The Group has invested in the recruitment and training of staff and accelerated succession planning |
Board's view The Board recognises the importance of retaining critical staff to ensure effective delivery of Group, segmental and divisional strategies. A range of approaches are used to manage this risk effectively, and succession planning accelerated in 2018.
| ||
Impact on people and operations of the UK exiting the EU
Key factors | Mitigation | Risk appetite |
· The UK is scheduled to leave the European Union (EU) in March 2019 and the potential consequences of that are unknown · The terms on which the UK will exit the EU are unknown · The length of any transition period following the UK's EU exit is unknown · There is no precedent data or facts on which to model the likely consequences of an EU exit, in particular without agreed terms in place · The Group, its staff, customers, suppliers and other stakeholders are unable to plan with precision for the uncertainty resulting from the above factors
| · Contingency plans seek to address the key risks and leverage opportunities we identify · The Group is assessing the potential impact on affected staff · The Group has a global geographical footprint · Hedging is in place to partially offset the impact of US dollar exchange rate risk in the UK · A small percentage of Group revenue is generated in the EU outside of the UK · Small number of EU nationals in our workforce · Potential travel disruption can be mitigated by using international locations and planning longer lead-time for travel · We use geographically diverse technology suppliers
| Risk averse
This is a new risk
Post-mitigation risk trend
This risk is increasing
Description of risk change
The possibility of a 'nodeal' exit is increasing, leading to increased economic uncertainty, therefore this risk is increasing
|
Board's view The Board notes that this risk is increasing for all UK companies. The Company is carrying out contingency planning in a range of areas in light of likely continued uncertainty in the UK market during 2019.
| ||
Ends
For further information, please contact:
Euromoney Institutional Investor PLC
Tim Bratton, General Counsel & Company Secretary: +44 (0)20 7779 8288;
About Euromoney Institutional Investor PLC
Euromoney is a global, multi-brand information business which provides critical data, price reporting, insight, analysis and must-attend events to financial services, commodities, telecoms and legal markets. Euromoney is listed on the London Stock Exchange and is a member of the FTSE 250 share index.
www.euromoneyplc.com
LEI number: 213800PZU2RGHMHE2S67