ERM.L Regulatory News (ERM)

Euromoney Institutional Investor PLC

Preliminary Statement

22 November 2018

Euromoney Institutional Investor PLC (Euromoney), the global information business providing essential B2B information to global and specialist markets, announces results for the year ending 30 September 2018.

Strategic and operational highlights

· Encouraging overall performance

- A year of underlying growth

- Strong growth in Pricing, Data & Market Intelligence segment

- Good underlying revenue growth from events across all segments

- Action taken to mitigate headwinds in Asset Management segment

- Continued decline in advertising revenue, now accounting for only 9% of total revenue

· Active portfolio management in line with our strategy

- Three acquisitions and four disposals (additionally, Mining Indaba sold post year-end)

Financial highlights

· Underlying revenue up 3% (excluding Global Markets Intelligence Division which was sold in April 2018)

· Statutory revenue from continuing operations up 1%

· Underlying profit before tax up 8%, with Pricing, Data & Market Intelligence underlying profits up 18%

· Statutory profit before tax £161.2m, including one-off profits on disposals

· Adjusted operating profit margin improves from 25% to 27%

· Strong cash performance with 102% underlying cash conversion (2017: 118%)

· Net cash position of £78.3m supports continued investment in organic growth and acquisitions

· Final dividend per share up 2%

Andrew Rashbass, CEO, said:

"2018 was a successful year for Euromoney, delivering good growth in underlying revenue and profit as forecast at our March 2016 Investor Day. Our Pricing, Data & Market Intelligence segment recorded a very strong performance and there was good underlying growth in events across all segments.

Euromoney is making steady progress towards a 3.0 business model guided by our clear strategy: investing in semi-opaque markets where mission-critical information is hard to find; transforming our operating model; and actively managing our portfolio. This development, combined with our strong balance sheet underpins our confidence in further progress in the year ahead."

1Adjusted measures include the results of continuing and discontinued operations and exclude the impact of amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group's policy set out on pages 5 and 6.

2 Underlying measures reported in 2017 included the adjusted results of continuing and discontinued operations and are stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and excluding disposals and significant event timing differences. In 2018, the underlying measures are on the same basis but exclude discontinued operations. This means that the 2018 underlying measures only reflect the performance of the continuing businesses.

Strategy

Our strategy is to manage a portfolio of businesses in markets where information, data and convening market participants are valued. We deliver products and services that support our clients' critical activities. We look to serve markets which are semi-opaque; that is, where the information which organisations need in order to operate effectively is hard to find. 

Our strategy is designed to develop the businesses we own and deliver strategic, timely and well-executed acquisitions and disposals. We aim to allocate and recycle capital efficiently to good organic and inorganic opportunities via our 'best-of-both-worlds' operating model. Our ambition is to generate consistent and meaningful returns for our shareholders at relatively low risk.

Operating and Financial Review

On an underlying basis, it has been a year of growth for the Group despite the market headwinds affecting our Asset Management segment.

Revenue

Underlying revenue grew 3%, driven by a strong performance in our Pricing, Data & Market Intelligence segment as we continue to evolve towards a 3.0 business model. Total revenue for the year decreased by 3% to £414.1m largely because of the disposal of Global Markets Intelligence Division (GMID) in April 2018 and stronger sterling compared to the US dollar. Statutory revenue increased by 1% to £390.3m.

1 Percentages are underlying growth rates compared to last year. Underlying measures are detailed on page 7.

2 Sold/closed businesses include continued and discontinued operations

The Group's Pricing, Data and Market Intelligence businesses - focused on price discovery, data and market intelligence - performed strongly, with underlying operating profit growing 18%. Subscription revenues increased by an underlying 12%, mainly due to an excellent performance from Fastmarkets, our price reporting agency. In August 2018, we acquired Random Lengths, a wood-pricing provider and leading news source for the North American lumber industry for $18.8m, filling a gap in the Group's forest products price-reporting coverage.

Structural and cyclical industry issues facing investment research continued to have an impact on our Asset Management segment. This led to a decline in revenues and profits in the segment. The performance of Institutional Investor, where revenues are sourced from asset management marketing rather than research budgets, improved during the year. We have conducted a strategic review of our Asset Management segment to help our investment research businesses (BCA and NDR) adapt to this challenging business environment. This review has delivered significant cost savings of around £7m across the investment research businesses, which have been partly re-invested in sales and marketing, digital technology and product development. The outlook for our investment research businesses continues to be challenging, but management actions already taken should mitigate some of the revenue downsides in 2019. For example, we transitioned Institutional Investor magazine to digital-only during 2018. Institutional Investor is now largely a membership, events and research business, with publishing making up just 9% of its revenue.

The Commodity Events and Banking & Finance segments, which together accounted for 22% of total revenue, returned to growth following the strategic measures taken during 2017, which focused events revenues on large core events and eliminated low-margin events and training courses. In October 2018, we sold Mining Indaba as it did not align with our strategy. Following this disposal, the Commodity Events segment will be removed for reporting purposes, with the remaining Commodity Events being moved into the Pricing, Data & Market Intelligence segment, reflecting how they will be managed in future.

Underlying subscription revenues, which make up 56% of Group underlying revenues, increased by 2%, with strong growth in Pricing, Data & Market Intelligence more than offsetting the reduction in the Asset Management segment. Although underlying advertising revenues declined by 5%, the rate slowed from 2017 (a reduction of 8%), reflecting success in the investment in thought-leadership products and in directories. Advertising revenue now represents only 9% of total revenue. Underlying event revenues increased 7%, with the Banking & Finance and Commodity Events segments the most significant growth areas, but with all segments performing well. The strategic focus to build large, repeat, high-margin events is delivering strong results. Mining Indaba performed well during the year, with underlying revenue growth of 18%.

Active portfolio management

One of the Group's three pillars of strategic activity is active portfolio management, minimising investment in businesses where the market is weak and the business model structurally challenged and investing where businesses are structurally strong and supported by market tailwinds. During the year, the Group made three acquisitions and four disposals (additionally selling Mining Indaba just after the year end).

The acquisitions included investment in price discovery and asset management, in each case where the businesses are deeply embedded in the workflows of their customers and their product suite is complementary to existing businesses. The main disposal was of GMID, which although a good business was not strategic, and was sold to recycle capital towards our main investment themes. This portfolio management forms part of our evolution towards a 3.0 business model.

Profit

The adjusted operating profit margin increased by two percentage points to 27% largely due to our choices on allocation of capital, our focus on driving out costs and improving sales mix. 2018 saw significant investment in the Pricing, Data & Market Intelligence segment and the integration of RISI. The drag from our accelerated investment in central functions following the DMGT sell down in 2017 slowed in the second half of 2018, with that team now largely complete. Adjusted operating profit increased by 3% to £110.7m.

Adjusted profit before tax increased by 3% to £109.2m. Adjusted diluted earnings per share increased by 6% to 81.3p (2017: 76.4p), largely reflecting the combined benefit of the improvement in earnings and the reduced number of shares in issue following the share buyback. Underlying profit before tax grew by 8% reflecting operational gearing and cost control.

The statutory profit before tax of £161.2m is higher than the adjusted profit before tax mainly due to exceptional items of £81.4m offset by acquired intangible amortisation of £22.7m and a £6.6m contribution from discontinued operations. Statutory operating profit increased from £43.4m to £161.9m resulting in an improvement in the operating margin from 11% to 41%.

Exceptional items

The exceptional credit for continuing operations of £81.4m principally comprises £86.8m of profit on disposal of businesses. Full details are included in note 3. The discontinued operations exceptional item of £90.3m relates to the profit on disposal of GMID.

Tax

The adjusted effective tax rate is 20% (2017:19%) which is based on adjusted profit before tax and excludes deferred tax movements on intangible assets, tax on exceptional items, prior year items and other tax adjusting items as described further below. The tax rate in each year depends mainly on the geographic mix of profits and applicable tax rates. US tax reform did not have a material impact on the adjusted effective tax rate for 2018.

The Group's statutory effective tax rate increased to 32% compared to 8% in 2017. The increase in rate is driven by the tax on disposal of shares in GMID and non-recoverable foreign withholding tax on the payment of a $380m intercompany dividend from Canada to the UK in the year. 

Significant reconciling items between the adjusted and statutory effective tax expense include: a tax charge of £16.8m that arises from the disposal of GMID and Dealogic, non-recoverable withholding tax of £14.6m that arises from a $380m intercompany dividend and the impact of US tax reform including a deferred tax credit of £4.7m arising from the revaluation of the Group's US net deferred tax liabilities and a one-time deemed repatriation tax charge of £3.2m related to unremitted earnings. Prior year items primarily reflect an increase in a provision for an uncertain tax position in relation to an HMRC enquiry. These items are excluded from adjusted tax as they are significant and not in the ordinary course of business. Full details are included in note 5.

Following a review of the impact of US tax reform on the Group's debt profile, certain financing arrangements have partially been unwound during the year (and will be fully unwound by the end of the next financial year) and a dividend was paid from our Canadian subsidiary. The result is that the adjusted effective tax rate is now expected to remain at 20% in 2019 rather than 23% as previously guided. 

The Group continues to have a number of uncertain tax positions, primarily the Canadian and UK exposures which have been highlighted in previous periods, for which the maximum exposures are explained in note 5.

Dividend

The Group has a progressive dividend policy targeting a dividend pay-out ratio of 40% of adjusted diluted earnings per share. The Directors are recommending a final dividend of 22.3 pence per share, which subject to Shareholder approval at our AGM on 1 February 2019 and will be paid on 14 February 2019 to shareholders on the register at the close of business on 30 November 2018. Together with the interim dividend, this makes a total dividend for the year ended 30 September 2018 of 32.5 pence per share, a 6% increase on the 30.6 pence dividend for the year ended 30 September 2017.

Net cash/(debt) and cash flow

Net cash at 30 September 2018 was £78.3m compared with net debt of £37.0m at 31 March 2018 and net debt of £154.6m at 30 September 2017. The move to a net cash position follows receipt of net proceeds of £226.5m from disposals including Dealogic and GMID, as well as strong underlying operating cash flows of £113.3m. The increase in cash was partly offset by dividend payments of £34.8m and payments for acquisitions and increased subsidiary holdings of £30.8m.

Following large disposals and continued strong operating cash flows, in May 2018 the Group repaid its $100m and £40m term-loans and increased the size of its revolving credit facility to £240m. Cash used in financing activities was £213.7m (2017: cash generated £21.7m), principally from the repayment of borrowings of £167.7m and the purchase of additional interest in subsidiary undertakings of £10.1m.

The Group's underlying operating cash conversion for the 12 months to September was 102% (2017: 118%). The 2017 cash conversion included one-off improvements in working capital performance.

Currency

The Group generates approximately two-thirds of its revenues in US dollars, including approximately 40% of the revenues in its UK-based businesses, and approximately two-thirds of its operating profits are US dollar-denominated. The exposure to US dollar revenues in its UK businesses is partially hedged using forward contracts to sell US dollars, which delays the impact of movements in exchange rates for at least a year. However, the Group does not hedge the foreign exchange risk on the translation of overseas profits.

The average sterling-US dollar rate for the year to 30 September was $1.35 (2017: $1.27). This had a negative impact on headline revenue growth rates for the year by approximately two percentage points though benefited adjusted profit before tax by £1.5m. Each one cent movement in the US dollar rate has an impact on translated profits, net of UK revenue hedging, of approximately £0.7m on an annualised basis. The Group also translates its non-sterling denominated balance sheet items resulting in a loss in 2018 of £1.5m (2017: £0.4m). 

Outlook

The UK's exit from the EU may lead to foreign exchange volatility and general business uncertainty in the forthcoming year. The outlook for our Pricing, Data & Market Intelligence segment is broadly consistent with 2018, however, continuing the strong growth we had in events revenues through into 2019 will be a challenge. Euromoney is making steady progress towards a 3.0 business model guided by our clear strategy. Combined with our strong balance sheet, this underpins our confidence in further progress in the year ahead.

Further trading updates

Further coverage of these full-year results will be provided to analysts at a presentation starting at 9:30am on 22 November at the offices of UBS. The Group intends to provide a brief trading update on 1 February 2019.

Definitions

Total revenue - includes the revenues of continuing and discontinued operations.

Adjusted measures include the results of continuing and discontinued operations and exclude the impact of amortisation of acquired intangible assets, exceptional items and other adjusting items in accordance with the Group's policy set out in the Appendix to this Statement.

Underlying measures reported in 2017 included the adjusted results of continuing and discontinued operations and are stated at constant exchange rates, including pro forma prior year comparatives for acquisitions and excluding disposals and significant event timing differences. In 2018, the underlying measures are on the same basis but exclude discontinued operations. This means that the 2018 underlying measures reflect the performance of the continuing businesses.

The adjusted effective tax rate is based on the adjusted profit before tax and excluding deferred tax movements on intangible assets, prior year items, tax on exceptional items and other tax adjusting items including non-recoverable withholding tax and US Tax Reform.

END

For further information, please contact:

Euromoney Institutional Investor PLC

Wendy Pallot, Chief Financial Officer: +44 20 7779 8866; wendy.pallot@euromoneyplc.com

FTI Consulting

Charles Palmer / Jamie Ricketts / Amy Hurnell / Jamille Smith: +44 20 3727 1000; euromoney@fticonsulting.com 

NOTE TO EDITORS

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)

CAUTIONARY STATEMENT

This Preliminary Statement ('Statement') 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 Statement save as would arise under English law. Statements contained in this Statement 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 Company'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 Statement. 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 Statement. 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 Euromoney Institutional Investor PLC share for the current or future financial years would necessarily match or exceed the historical published earnings per Euromoney Institutional Investor PLC 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.

LEI Number: 213800PZU2RGHMHE2S67

Appendix to Preliminary Statement

Reconciliation of Consolidated Income Statement to adjusted results for the year ended 30 September 2018

The Directors believe that the adjusted measures provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These measures are used by management for budgeting, planning and monthly reporting purposes and are the basis on which executive management is incentivised. The non-IFRS measures also enable the Group to track more easily and consistently the underlying operational performance by separating out the following types of exceptional income, charges and non-cash items.

Total revenue represents the combined reported revenue from continuing and discontinued operations.

Adjusted results include continuing and discontinued operations. The discontinued operations for the Global Markets Intelligence Division (GMID) have been included in the adjusted results as it was owned and managed as part of the Group for the period to 30 April 2018.

Adjusted figures are presented before the impact of amortisation of acquired intangible assets (comprising trademarks and brands, databases and customer relationships); exceptional items; share of associates' and joint ventures' acquired intangibles amortisation and exceptional items; net movements in deferred consideration and acquisition commitments; related tax items and other adjusting items described below. 

The amortisation of acquired intangible assets is adjusted as 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 the Group'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 are balance sheet items that relate to historical M&A activity rather than the trading performance of the business.

Exceptional items are items of income or expense considered by the Directors as being significant, non-recurring and not attributable to underlying trading. It is Group policy to treat, as exceptional, significant earn-out payments required by IFRS to be recognised as a compensation cost. IFRS requires that earn-out payments to selling shareholders retained in the acquired business for a contractual time period are treated as a compensation cost. Given that these payments are in substance part of the cost of an investment and will not recur once the earn-out payments have been made, they have been excluded from adjusted profit.

In 2018, adjusted finance costs exclude a net gain realised on the close-out of interest rate swaps of £1.2m following the repayment of the Group's term-loan. The net gain has been excluded from adjusted finance costs as it would not have crystallised had the disposal of GMID not completed. In addition, interest of £0.6m on the £7.9m increase in uncertain tax provisions described below has also been excluded from adjusted finance costs.

Adjusted share of results in associates and joint ventures excludes the share of exceptional items that relates to restructuring and earn-out costs in Diamond TopCo Limited (Dealogic), which was sold in December 2017.

In respect of earnings, adjusted amounts reflect a tax rate that includes the current tax effect of goodwill and intangible assets. Many of the Group's acquisitions, particularly in the US, give rise to significant tax savings as the amortisation of goodwill and intangible assets on acquisition is deductible for tax purposes. The Group considers that the resulting adjusted effective tax rate is therefore more representative of its tax payable position. Since 30 September 2017, there have been changes to US tax rules as a result of US Tax Reform. The federal tax rate has reduced to 21% from 35% from 1 January 2018 and the US group has a blended federal tax rate for the year of 24.5%. As a consequence of this change, the revaluation of the Group's net US deferred tax liabilities has resulted in a one-off deferred tax credit of £4.7m that is excluded from adjusted tax. In addition, there is a one-time deemed repatriation tax charge of £3.2m related to unremitted foreign earnings. As a result of the change in attribution rules that dictate which entities are treated as a controlled foreign corporation (CFC) for US income tax purposes, the disposal of shares in Dealogic and GMID crystallised a gain that is subject to US tax. The tax charge on these exceptional gains is £16.8m. As a result of the disposal of GMID and other restructuring that took place during the year, a dividend payment of $380m was made in September 2018 from BCA Research Inc. to Euromoney Canada Limited, a UK Group entity. Canadian withholding tax of £14.6m arose on the dividend payment and was paid in full to the Canadian Revenue Authority in October 2018. Prior year items primarily reflect a further provision of £7.9m made in respect of uncertain tax positions in relation to an HMRC enquiry. These items are excluded from adjusted tax as they are significant and not in the ordinary course of business.

Further analysis of the adjusting items is presented in notes 2, 3, 4, 5, 8, 9 and 10.

The Group has consistently applied these principles in calculating adjusted measures, as it has reported on its financial performance in the past and it is the Group's intention to continue to consistently apply these principles in the future.

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

Underlying results

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

When calculating underlying growth, adjustments are made to give a like-for-like comparison. For example, the adjusted results in 2018 were adversely impacted by the weakening of the US dollar relative to sterling. To calculate underlying growth, the prior year comparatives are restated using 2018 exchange rates. Similarly, adjustments are made to exclude disposals from both years. In 2018, discontinued operations have been treated the same as a disposal, as the sale of GMID completed during the current financial year. This is a change from the treatment in 2017 where GMID was included in the underlying results. When businesses are acquired, the prior year comparatives are adjusted to include the acquisition. The timing of events can also be a distortion. To give a fair like-for-like comparison when calculating underlying growth, significant event timing differences are excluded from the year in which they were held. There were no significant event timing differences in the current or prior periods.

The Group's adjusted and underlying measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS. The adjusted and underlying measures used by the Group are not necessarily comparable with those used by other companies.

The following table sets out the reconciliation from statutory to underlying for revenues and profit before tax:

Cash conversion

Cash conversion measures the percentage by which cash generated from operations covers adjusted operating profit.

The underlying basis is after adjusting for significant timing differences affecting the movement on working capital and exceptional items. For the year ended 30 September 2018, exceptional items mainly consist of restructuring payments and cash payments for the legal and professional fees in relation to acquisitions and disposals net of the favourable settlement of a legal dispute. For the year ended 30 September 2017, exceptional items largely consist of cash payments for restructuring costs, legal and professional fees and share buyback costs. The other working capital movements in 2018 and 2017 are mainly the result of the landlord's contribution to the fit-out of the New York office which will be amortised over the period of the lease and the rent-free period of the London and New York offices.

As cash generated from operations in the Consolidated Statement of Cash Flows includes those from discontinued operations, the statutory cash conversion rate has not been provided as it would not give a fair indication of the Group's cash conversion performance.

Net cash/(debt)

On 15 May 2018, the Group repaid its term-loans of $100m and £40m, transferring the funding commitment into the existing £130m multi-currency revolving credit facility and increasing that facility to £240m. This facility was entirely undrawn at 30 September 2018 (2017: £55.2m). The committed facility is available until December 2021. There is a further uncommitted accordion facility of £130m should the Group wish to request it. Drawings under the revolving credit facility bear interest charged at LIBOR plus a margin, the applicable margin being based on the Group's ratio of adjusted net debt to EBITDA. The facility's covenant requires the Group's net debt to be no more than three times adjusted EBITDA and requires minimum levels of interest cover of three times on a rolling 12-month basis. The amounts and foreign exchange rates used in the covenant calculations are subject to adjustments as defined under the terms of the arrangement. On this basis, at 30 September 2018, the Group's adjusted net cash to EBITDA was (0.69) times. Management regularly monitors the covenants and prepares detailed cash flow forecasts to ensure that sufficient headroom is available and that the covenants are not at risk of a breach.

The bank covenant ratio uses an average exchange rate in the calculation of net debt and includes an annualised adjustment attributable to acquisitions and disposals in the calculation of adjusted EBITDA. When businesses are acquired after the beginning of the financial year, the calculation of adjusted EBITDA includes EBITDA attributable to the business as if the acquisition had been completed on the first day of the financial year. The calculation excludes the EBITDA of any businesses disposed of during the year.

Consolidated Income Statement

for the year ended 30 September 2018

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

During the year the Group disposed of Global Markets Intelligence Division. This division has met the recognition criteria of a discontinued operation under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and is therefore presented as such throughout this report (note 8). 

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2018

Consolidated Statement of Financial Position

as at 30 September 2018

Approved by the Board of Directors on 21 November 2018.

Consolidated Statement of Changes in Equity

for the year ended 30 September 2018

Consolidated Statement of Changes in Equity continued

for the year ended 30 September 2018

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

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

Consolidated Statement of Cash Flows

for the year ended 30 September 2018

Cash and cash equivalents include bank overdrafts. This statement includes discontinued operations (refer note 8).

Notes to the Preliminary Statement

1 Basis of preparation

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

The information for the year ended 30 September 2018 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 2017 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 30 September 2018 have been audited and finalised on the basis of the financial information presented by the Directors in this Preliminary Statement and will be delivered to the Registrar of Companies following the Annual General Meeting.

Accounting policies

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

The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Group's 2017 annual audited financial statements, except as described below.

· Amendments to IAS 12 'Income Taxes' - the mandatory effective date of implementation is 1 January 2017

· Amendments to IAS 7 'Statement of Cash Flows' - the mandatory effective date of implementation is 1 January 2017

The adoption of these new pronouncements from 1 October 2018 does not have a material impact on the consolidated financial statements. Additional disclosure has been given where relevant.

Relevant new standards, amendments and interpretations issued but effective subsequent to the year end:

· IFRS 9 'Financial Instruments' - the mandatory effective date of implementation is 1 January 2018

· IFRS 15 'Revenue from Contracts with Customers' - the mandatory effective date of implementation is 1 January 2018

· IFRS 16 'Leases' - the mandatory effective date of implementation is 1 January 2019

· Amendment to IFRS 2 'Share Based Payments' - the mandatory effective date of implementation is 1 January 2019

· IFRIC 22 'Foreign Currency Transactions and Advance Consideration' - the mandatory effective date of implementation is 1 January 2019

· IFRIC 23 'Uncertainty over Income Tax Treatments' - the mandatory effective date of implementation is 1 January 2019

· Amendments to IAS 28 'Investments in Associates' - the mandatory effective date of implementation is 1 January 2019

· Amendments to IAS 19 'Employee Benefits' - the mandatory effective date of implementation is 1 January 2019

· Amendment to definition of a business in IFRS 3 'Business Combinations' - the mandatory effective date of implementation is 1 January 2020

Other than IFRS 16, the adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group's financial statements. The Group adopted IFRS 9 and IFRS 15 on 1 October 2018 and will adopt IFRS 16 on 1 October 2019.

IFRS 9 'Financial Instruments'

IFRS 9 replaces the majority of IAS 39 and covers the classification, measurement and de-recognition of financial assets and financial liabilities, introduces a new impairment model for financial assets based on expected losses rather than incurred losses and provides a new hedge accounting model.

In the 2019 Annual Report and Accounts, the Group will adopt IFRS 9 retrospectively. The comparative periods will not be adjusted but there will be a cumulative adjustment to equity at 1 October 2018. The Group's assessment of the impact of adopting IFRS 9 is as follows:

Classification and measurement

The Group's available-for-sale financial investments which are currently being held at cost less any impairment will be recognised at fair value. For available-for-sale assets existing at 1 October 2018, the Group has elected the option to recognise all movements in fair value in other comprehensive income. Gains or losses realised on the subsequent sale of these financial assets will no longer be recycled through the profit and loss account. Based on the Group's assessment of its available-for-sale financial investments, the impact of the recognition of these assets at fair value at 1 October 2018 is not material. Trade receivables will continue to be measured at amortised cost. Derivative assets and liabilities will continue to be recognised at fair value with movements recognised in the Income Statement, unless the hedging strategy determines otherwise. In addition, money market funds and deferred consideration received will be measured at fair value through the Income Statement and not as amortised cost. This is not expected to lead to a material change.

Trade debt provisions

IFRS 9 introduces a new impairment model which requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses, as is the case under IAS 39. The Group expects this new impairment model will not lead to a material change in its provision for losses against trade debtors. The IFRS 9 impairment model recognises anticipated losses evidenced by both historical recovery rates and forward-looking indicators.

1 Basis of preparation continued

Hedge accounting

IFRS 9 introduces a new hedge accounting model with a principles-based approach designed to align the accounting result with the economic hedging strategy. The Group uses cash flow hedge relationships to hedge its exposure to US dollar and euro revenues in its UK businesses and the operation's Canadian dollar cost base in Canada. The Group has confirmed that its current hedge relationships will continue to qualify as hedges upon the adoption of IFRS 9.

IFRS 15 'Revenue from Contracts with Customers'

Management has evaluated the impact of IFRS 15 'Revenue from Contracts with Customers' across the Group to confirm the full impact of adopting the standard. The implementation analysis of the potential impact of IFRS 15 was complex due to the Group's large number and type of revenue streams, in particular bundled contracts, customised research, vote revenue, milestone revenue and membership groups.

Where multiple services are bundled within one contract, the new standard requires revenue to be allocated to the different performance obligations and recognised separately, which could drive differences in the timing of revenue recognition. Where this occurs, the Group's treatment under IAS 18 is consistent with IFRS 15 and allocates the revenue to the distinct services and recognises the related revenue separately.

IFRS 15 requires revenue to be recognised over time where research is unique to a specific customer and where the customer is obligated to pay for the work performed should it terminate the contract. Limited cases of customised research are performed across the Group whereby revenue is recognised according to milestones. An assessment of large customised research projects ongoing over the interim and year-end closes will be performed to ensure that revenue is recognised in the correct period.

Vote revenue is treated as variable consideration under IFRS 15. This would require the Group to recognise revenue when the service is performed to the extent that it is highly probable that the related revenue, if recognised, would not be reversed. Any incremental amounts would be recognised once the confirmation of the vote is given. The Group performed analysis of vote revenue confirming that the amount of revenue received from each customer was sufficiently volatile that it would not be appropriate to recognise any material amount of revenue over time as the service is delivered.

Based on the Group's analysis, there is no material impact on the timing of revenue recognition arising from the implementation of IFRS 15. The Group's revenue recognition policy has been updated to reflect IFRS 15 and to ensure consistent application across the Group. The Group will adopt the modified retrospective transition method. This method recognises the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance sheet in the period of initial application and comparative periods will not be adjusted. IFRS 15 also requires increased disclosure, which will be incorporated in the 2019 Annual Report and Accounts. 

IFRS 16 'Leases'

The new standard replaces IAS 17 'Leases' and related interpretations and details the requirements for the classification, measurement and recognition of lease arrangements. The key changes brought in by IFRS 16 are that it no longer distinguishes between operating and finance leases; all leases over a year in length will be recorded on the Statement of Financial Position. As these leases will be treated as fixed assets, their cost will be charged through the Income Statement as depreciation. In addition, there will be a finance charge in respect of the unwinding of discounts for future lease payments. The cost of short term leases will continue to be recognised through the Income Statement as rental expense. The Group plans to apply IFRS 16 using the modified retrospective approach. Under this approach, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the equity on 1 October 2019, with no restatement of comparative information.

Going concern

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

2 Segmental analysis

Segmental information is presented in respect of the Group's segments and reflects the Group's management and internal reporting structure. The Group is organised into four segments: Asset Management; Pricing, Data & Market Intelligence; Banking & Finance; and Commodity Events.

Revenues generated in the Asset Management and Pricing, Data & Market Intelligence segments are primarily from subscriptions. Banking & Finance revenues consist mainly of sponsorship income and delegates revenue. Commodity Events revenue is mainly delegates revenue. A breakdown of the Group's revenue by type is set out below.

During the year, the Group sold Global Markets Intelligence Division (GMID), Adhesion, World Bulk Wine and Institutional Investor Journals (note 11). As a result, segment information for these businesses has been reclassified as sold businesses and the comparative split of segmental revenues, revenue by type, operating profits, acquired intangible amortisation, exceptional items and depreciation and amortisation has been restated. GMID has been classified as discontinued operations (note 8) and therefore presented as such throughout this report.

In addition, the operating profit segments have been restated to reflect a change in the way unallocated corporate costs are recharged. From 1 October 2017, central costs over which a segment had no influence were not recharged to that segment. This restatement has no effect on the total Group results but reflects the operating profit of each segment as if the new recharge methodology had been applied from 1 October 2016. Central costs of £17.6m for 2017 were reallocated to unallocated corporate costs.

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

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

2 Segmental analysis continued